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PETITIONER: THE HONORARY SECRETARY, SOUTH INDIA MILLOWNERS’ASSOCIATION A

       Vs.

RESPONDENT: THE SECRETARY, COIMBATORE DISTRICT TEXTILEWORKERS’ UNION[And

DATE OF JUDGMENT: 01/02/1962

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. WANCHOO, K.N.

CITATION:  1962 AIR 1221            1962 SCR  Supl. (2) 926  CITATOR INFO :  R          1964 SC 864  (13)  R          1964 SC1040  (6,8)  RF         1968 SC 538  (19,28,31)  D          1968 SC 963  (5,7,20)  RF         1972 SC1954  (23)  F          1973 SC 353  (39,41)  F          1974 SC1132  (12)

ACT:      Industrial  Dispute-Bonus-Rehabilitation-Life of  textile  machinery-Claim  in  respect  of  old machinery-Development   rebate-Deduction-Use    of depreciation     amount-Interest-Two      separate concerns-When constitute  one unit-Indian  Income- tax Act,  1922 (11  of  1922),  s.  10  (2)  (vi), Explanation (2), proviso (b).

HEADNOTE:      In  respect   of  the  disputes  which  arose between certain textile mills and their respective employees in  regard to  the bonus  for  the  year 1956, the  matter was  referred to  the Industrial Tribunal which  made its  award  on  September  5, 1958. The  Tribunal  held,  (1)  that  the  period allowed  for   rehabilitating  textile   machinery should be  25 years and not 15 as contended by the appellants, and  that some addition should be made to  the   estimated  life   of  the  machinery  by reference to 927 practical considerations  as to  when the employer would be  able to make rehabilitation in fact, (2) that in  the case of old machinery purchased, only half of  the claim  for rehabilitation  should  be normally allowed  and whether  more or less should be allowed  would  depend  upon  the  age  of  the machinery at  the time  of the  purchase, (3) that the amount  allowed in  respect of the development rebate could not be treated as a prior change, and (4) that  interest in  respect of  the  amount  of depreciation used  by way of working capital could not be allowed.

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^      Held :  (1) that  it is  well settled that in determining  the   aim   of   the   employer   for rehabilitation  two   factors  are   essential  to ascertain, viz., (1) the multiplier which has been determined by  reference to  the purchase price of the machinery  and the  price which has to be paid for rehabilitation  or replacement,  and (ii)  the divisor which has to be determined by deciding the probable life  of the  machinery. When determining the divisor, it is not open to the Tribunal to add to the  estimated life  of the  machinery  on  the ground that the employer may, in fact, not be able to rehabilitate or replace his machinery.      In finding out the life of the machinery in a particular case,  no rule can be laid down because the question  has to be determined on the evidence adduced by the parties.      The Mill  owners Association,  Bombay v.  The Rashtriya  Mill   Mazdoor  Sangh,  Bombay,  [1950] L.L.J. 1247  and Associated Industries Ltd. v. Its Workmen, (1958) 2 L.L.J. 138, considered.      (2) that it would not be right to insist that an employer  who purchases  second hand  machinery must rehabilitate  it by  purchasing  second  hand machinery  in   turn,  and  in  dealing  with  the question of  the  rehabilitation  of  second  hand machinery purchased  by an  employer it  would  be erroneous to  hold that only 50% of rehabilitation amount should be allowed.      (3) that the development rebate allowed is in part recognition  of the  claim for  depreciation, and proviso (b) to explanation (2) of s. 10(2)(vi) of the  Indian Income-tax Act, 1922, as introduced by the  Finance Act,  1958, cannot  be treated  as constituting a  bar against taking the said amount into consideration  in ascertaining  the available surplus. The  expression "distribution  by way  of profits"   in   the   said   proviso   means   the distribution of profits to the partners.      (4) that if an employer shows that the amount of depreciation was actually available and has, in fact, been  used as  working  capital  during  the relevant year,  he would  be entitled  to claim  a reasonable return on the said amount. 928      Petlad Turkey  Red Dye  Works Ltd.  v. Dyes & Chemical Workers’  Union, Petlad,  [1960] 2 S.C.R. 906 and  Mysore Kirloskar  Ltd.  v.  Its  Workmen, [1961] 2 L.L.J. 657, relied on.      The appellant  was running, two mills, one at Coimbatore and  the other  at Madurai,  the latter having been started later in 1956. The appellant’s contention before the Tribunal in dealing with the question of  bonus payable to the employees in the two respective  mills,  was  that  the  two  mills should be  treated as  separate units  and not  as one. The Tribunal took the view that the two mills constituted one  unit. The  facts showed  that the two mills  were situated  at places  separated  by nearly 200 miles, that they manufactured different counts of  yarn, that  the workers  working in the two mills were different ant were not transferable from one  mill to  the other  and  that  different accounts were  maintained. It  was also found that

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the profit and loss account for both the mills was one consolidated account.      Held. that  the finding  of the Tribunal that the two  mills constituted  one unit  could not be considered to be erroneous in law.      The question  as  to  whether  two  different concerns run  by the  same employer constitute one industrial unit for the purpose of bonus has to be determined in the light of the facts in each case.      Functional integrality  is a  very  important test but  it is not a decisive one. In the complex and  complicated  forms  which  modern  industrial enterprise assumes  it would  be  unreasonable  to suggest that  any one  of the  relevant  tests  is decisive; the  importance and  significance of the tests would  vary according  to the  facts in each case.  The  question  must  always  be  determined bearing in  mind all  the relevant  tests and  co- relating them to the nature of the enterprise.      Where two  concerns run  by the  employer are allied to  each other,  the question would have to be  considered   whether  they   are  functionally integrated or  mutually inter-dependent.  If  they are that would be an important factor in favour of the plea  that the  two  concerns  constitute  one unit.      Associated Cement  Companies  Ltd.  v.  Their Workmen [1960]1  S.C.R. 703  Pratap Press v. Their Workmen,  [1960]   1  L.L.J.  497  and  Pakshiraja Studios v.  Its  Workmen,  [1961]  2  L.L.J.  380, relied on.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION : Civil Appeals Nos. 419 of 1960, 302 of 1959 and 159 of 1961. 929      Appeals from  the Awards  dated September  5, 1958, September  15, 1958 and January 11, 1960, of the Industrial  Tribunal, Madras,  in I.D. Nos. 13 of 1958, 32 of 1957 and 47 of 1959 respectively.      A.V. Viswanatha Sastri and G. Gopalakrishnan, for the appellants.      B.R. Dolia and Rameshwar Nath, for respondent No. 1 (in Appeals Nos. 419 of 60 and 159 of 61).      M.K. Ramamurthy  and T.S.  Venkataraman,  for respondent No.  2 (in  C.A. No.  419  of  60)  and respondents Nos.  2 and  4 (in  C.A.  No.  159  of 1961).      M.K. Ramamurthy  and Rameshwar  Nath, for the respondent (in C.A. No. 302 of 59).      1962. February  1. The  Judgment of the Court was delivered by      GAJENDRAGADKAR, J.-These  three appeals arise out  of   an  industrial   dispute   between   the industrial employers  who are  the appellants  and their respective  workmen who  are the respondents in respect  of the  latters’ claim for bonus. They have been  heard together  because they raise some common questions  of general  importance. We would first set  out briefly  the material  facts in the three respective appeals.      The  Honorary   Secretary,  The  South  India Millowners’ Association,  and other  mills are the

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appellants in  Civil Appeal  No. 419/60. A dispute arose  between   44  mills  and  their  respective employees in  regard to  the bonus  for  the  year 1956. The said dispute was referred for industrial adjudication to  the Industrial  Tribunal, Madras, State Government  on the  13th March 1958. To this reference, the  different mills  and three  unions which represented the employees were made parties. It appears  that for the four years prior to 1956, the question  of bonus  had been  disposed of by a tripartite Board of Arbitration appointed for each year  by   the  Government.  For  the  year  1956, negotiations were 930 held   at   governmental   level   to   evolve   a satisfactory solution  by consent  but  since  the said negotiations  failed, the  parties agreed  on some interim  payment  leaving  the  rest  of  the dispute to  be adjudicated  upon by the Industrial Tribunal. That is the genesis of the reference.      On the  5th of  September, 1958, the Tribunal made its  award. It  considered the  several rival contentions raised  by the  parties in  support of their respective  claims and awarded bonus ranging from 7  months’ basic  wages to  1  month’s  basic wages according to its finding as to the available surplus in  respect of  each mill.  It is  against this award  that the  appellants have come to this Court by special leave.      At the time when the award was pronounced the decision of  this Court  in the  Associated Cement Cos. Ltd., Dwarka Cement Works, Dwarka v. Its Work men (1) had not been pronounced, In that decision, this  Court   has  considered   all  the  relevant problems which  arise in  the working  of the Full Bench formula  governing the  award  of  bonus  to industrial labour and some of the points which the appellants wanted  to raise  against the  award in question are  now concluded by that decision. That is how  in the present appeal, the appellants have confined themselves  to the  points on  which  the Industrial Tribunal  has decided  contrary to  the decision of  this Court  in the case of Associated Cement Companies  Ltd. or which are not covered by that Judgment.      Civil Appeal  No,  159/61  arises  out  of  a reference made  by the  State Government of Madras on  the  3rd  October,  1959,  in  respect  of  an industrial dispute  for bonus  for the  year  1958 between 51  mills and  their respective employees. The Industrial  Tribunal which  heard this dispute pronounced its award on the 11th of January, 1960. In dealing with this 931 dispute, it  naturally followed  the same  line of approach which  it had  adopted in  dealing with a similar dispute for the year 1956 from which Civil Appeal No.  419/60 arises.  As  a  result  of  its finding, the Tribunal has directed 24 mills to pay bonus to  their respective employees, the rate for the same  ranging from 6 months’ to half a month’s basic wages  according to the available surplus in each case.  It is  against this  award that the 23 mills have  come to this Court by special leave in this appeal.

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    Civil  Appeal   No.  302/59  arises  from  an industrial   dispute   for   bonus   between   the appellant,   the   Management   of   the   Express Newspapers (Private)  Ltd. and  its employees, the respondents. The  claim for  bonus which  has been referred by  the State Government for adjudication to the  Industrial Tribunal  at Madras on the 19th August 1957,  relates to  the  years  1954-55  and 1956-1957. The  appellant in  this case carries on the business  of publishing certain newspapers and periodicals in  English and in the vernacular from four centers  in  India.  viz.,  Madras,  Madurai, Bombay and  Delhi. After  hearing the  parties and considering  the   evidence  adduced  by  them  in support  of   their  respective  contentions,  the Tribunal  disallowed  the  respondents  claim  for bonus for the years 1954-55 but allowed it for the years 1956-57.  It has  found that  for  the  year 1956-57,  the  appellant  had  in  its  hands  Rs. 1,60,000 as  available  surplus  and  so,  it  has directed that  not less  than 80  per cent  of the said surplus  should be  made available for bonus; that is  to say,  it has  held that Rs. 1.25 lakhs should be distributed by way of bonus which worked roughly @  half a  month’s total  wages  including dearness allowance.  It is against this award that the appellant  has come  to this  Court by special leave.      In Civil  Appeal No.  419/60, the first point which has  been raised  by Mr. Sastri on behalf of the  appellant   relates  to   the   question   of rehabilitation. In  the working of the formula the multiplier has been 932 duly determined  by the  Tribunal and  there is no dispute about  it before  us. It  is  against  the divisor adopted by the Tribunal that the appellant is aggrieved  and so,  the question to consider is whether the Tribunal was right in holding that the life of  the textile  machinery should be taken to be  25   years  and  not  15  as  alleged  by  the appellants,   Mr.   Sastri   contends   that   the appellants  had   examined  two   experts  Mr.  K. Srinivasan and  Mr. Seetharaman and their evidence consistently was  that the  life of  the machinery would be  15 years  and no  more. It is urged that this evidence  should have  been accepted  by  the Tribunal because  it has not been shaken in cross- examination.  We   are  not   impressed  by   this argument. The  Tribunal has carefully examined the evidence  of   the  two   experts  and  has  given satisfactory reasons for holding that the estimate made  by  them  in  regard  to  the  life  of  the machinery is  too modest. In fact, as the Tribunal has pointed  out, though  the experts purported to say categorically  that the  life of the machinery could not be more than 15 years, they had to admit that in  several cases  machinery which  was  much older   than    15   years    was   working    not unsatisfactorily and  so the  statement about  the estimated  life  of  the  machinery  made  be  the witnesses could not be accepted at its face value. Indeed, as  the Tribunal  observes, experts  while giving evidence  about the  estimated life  of the machinery  are   apt  to   be  too  technical  and

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sometimes dogmatic  but their  evidence has  to be judged in  the light  of  the  probabilities,  the admissions made  by them  in cross-examination and other evidence  about older  machinery  which  was found working  in the  different mills. Therefore, we do  not think  that on  the question  as to the estimated  life   of  the   textile  machinery  in question we would be justified in interfering with the conclusion  of the Tribunal that the said life can be reasonably estimated at 25 years. 933      It is  then contended  that the estimate made by the  experts about  the  life  of  the  textile machinery was  consistent with  the period  of  15 years allowed  for the  rehabilitation of  textile machinery be  the Labour  Appellate Tribunal which evolved the  formula  in  the  case  of  The  Mill Owners’ Association,  Bombay v. The Rashtriya Mill Mazdoor Sangh,  Bombay(1). The  argument  is  that since   15   years’   period   was   allowed   for rehabilitating the machinery, that should be taken to the  normal estimate  about  the  life  of  the machinery. On  the other  hand, it is urged by the respondents that  15 years’  period was allowed by the Labour  Appellate Tribunal  in the case of The Mill  Owners   Association  (1)  even  though  the machinery was  more than  25 years  old  and  that would suggest that the life of the machinery is 40 years.  We  are  not  prepared  to  accept  either argument because,  in our opinion, the life of the machinery in  every case  has to  be determined in the light of evidence adduced by the parties. What the Labour  Appellate Tribunal  did in the case of The Mill Owners’ Association(1) was to adopt an ad hoc basis  for allowing  rehabilitation within  15 years because  it  was  obvious,  and  indeed  not disputed, that  the textile  machinery with  which the Tribunal  was dealing  had become  obsolescent and very  badly needed  rehabilitation. Indeed, it was because  of this  admitted position,  that the problem of  rehabilitation  assumed  an  important place in  the discussion  before the Tribunal when it  evolved   the  formula.  Therefore,  from  the decision  in   the  case   of  The   Mill  Owners’ Association(1) no rule can be safely evolved as to the probable life of the textile machinery.      An attempt  was then made to suggest that the rate of  15 per  cent  at  which  depreciation  is allowed under  s. 10 (2)(vi) of the Income-tax Act for machinery  which is  used  in  multiple  shift would approximate to the estimate of 15 years made by the  experts in  the present case. But when the actual 934 calculations were  made, it  was conceded that the rate of  15% at  which depreciation  is allowed in respect of  machinery used  under multiple  shifts works at  18 years  and not  15 years.  Therefore, even the  argument based  on the depreciation rate permitted by the Income-tax Act is of no avail. In conclusion, we confirm the finding of the Tribunal that the  estimated life  of the textile machinery in question should be taken to be 25 years.      The next  contention which has been seriously pressed before  us is  in regard to the finding of

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the Tribunal  that some addition should be made to the estimated  life of  the machinery by reference to practical consideration as to when the employer would be  able to make rehabilitation in fact. The Tribunal considered  the financial position of the respective mills,  the  availability  of  the  new textile  machinery,   the  difficulty   about  the foreign exchange, and so it came to certain ad hoc conclusions while  determining the  divisor to  be adopted. It  held that  in the  case of  machinery purchased before  1947 whose  life expired by that year, the  period for  rehabilitation should be 15 year from  1947. In  regard to machinery purchased prior to  1947 whose  life does  not terminate  by that   year,   the   period   for   carrying   out modernisation would be fixed at 10 years after the expiration  of   the  life  and  in  the  case  of machinery purchased  after 1947,  that period will be 5  years after its normal life. In other words, the  Tribunal   decided  that  the  rehabilitation requirement about  the first category of machinery should be  spread over  15  years,  that  for  the second  category   should  be   spread  over   the remainder of  its life  plus 10  years and for the third category, the normal life of 25 years plus 5 years.  Mr.  Sastri  contends  that  this  ad  hoc addition made  to the  machinery determined by the Tribunal    on     hypothetical    or    practical considerations is  justified. In our opinion, this contention is well founded. It is now well settled that in determining 935 the claim  of the employer for rehabilitation, two factors  essential   to   ascertain;   first   the multiplier and that has to be done by reference to the purchase price of the machinery, and the price which  has   to  be  paid  for  rehabilitation  or replacement;   the    second   problem    is   the determination of  the divisor  and that  has to be done  by   deciding  the   probable  life  of  the machinery. Once  the probable or estimated life of the machinery  is determined there is no scope for making any  additions to  the number of years thus determined on  any extraneous considerations as to the financial  position of  the  employer  or  the availability  of  the  machinery.  If  the  amount awarded for  rehabilitation for  any given year is not utilised  for that  purpose, the  same may  be taken into  account the next year-that is all. But when determining  the divisor,  it is  not open to the Tribunal  to add  to the estimated life of the machinery on  the ground that the employer may, in fact, not  be able  to rehabilitate or replace his machinery. Therefore,  there is  no doubt that the Tribunal was  in error in making further additions to the  estimated life  of textile  machinery. The divisor must  be  adopted  on  the  basis  of  the finding that 25 years is the estimated life of the machinery and no more.      The next  contention raised  by Mr. Sastri is in regard  to the  rehabilitation allowed  by  the Tribunal in  respect of  the second hand machinery purchased  by   Lotus  Mills   Ltd.,  one  of  the appellants before us. The Tribunal thought that in the case of old machinery purchased, only half the

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claim  for   rehabilitation  should   normally  be allowed and  it added  that whether  more or  less should be allowed would depend upon the age of the machinery at  the time  of the  purchase. Then  it considered the evidence in respect of items I to M as  disclosed   in  the  rehabilitation  statement Exhibit M.  47 (B)  furnished by  the Lotus  Mills Ltd. It  appears that  the items  of machinery  in question had all been 936 purchased prior to 1910 and so, the Tribunal fixed the rehabilitation  at 30%.  In dealing  with this question, however,  the Tribunal has observed that full rehabilitation  requirement cannot be allowed in respect  of second  hand machinery  without the depreciation being  deducted from out of the total requirement. Acting  on this basis, the amount has been fixed at 30%. Mr. Sastri contends that if the Tribunal proceeded  on the  basis that second hand machinery must  be replaced  only by  second  hand machinery. It  was obviously  wrong. We think this contention is  well founded.  It no  doubt appears that in  the case  of Associated  Industries Ltd., and Its  Workmen (1)  the Industrial  Tribunal has observed that in the case of second hand machinery it would  be reasonable  that the  employer should meet half  the cost  of the  rehabilitation of the plant from other sources, either by increasing its share capital,  or from  other reserves  that  may have accumulated  in the  course of years. Indeed, it is  on this  decision  that  the  Tribunal  has founded its  decision in dealing with the question about the  second hand  machinery purchased by the Lotus Mills Ltd. in 1910.      In our  opinion, it  would not  be  right  to insist that  an employer who purchases second hand machinery  must   rehabilitate  it  by  purchasing second hand  machinery  in  turn.  That  would  be obviously unreasonable  and unjust,  for ought one knows second  hand machinery may not be available. Besides, the  employer is  entitled to say that he wants  to   purchase  new   machinery  by  way  of replacement. Therefore,  if the  Tribunal intended to lay  down a  general rule  that in dealing with the question  of the  rehabilitation of  a  second hand machinery  purchased by  an employer only 50% of rehabilitation  amount should  be allowed, that would be  erroneous. On the other hand, it is true that in  determining the  amount of rehabilitation and deciding the question of multiplier, the 937 cost price  of the  machinery must  be ascertained and this  can be  done only  by enquiring  for how mush the  machinery was  originally purchased when new. Depreciation  amount accruing  due after  the first purchase  must also  be ascertained.  If the purchase money  is determined  but it is difficult to ascertain  the depreciation  amount thereafter, then at  the highest  the whole  of  the  purchase money could  be adopted as depreciation amount and then  the   amount  of   rehabilitation   can   be determined. Whatever  relevant facts  are required to be  considered in  dealing with  this  question must no  doubt be ascertained. But if all relevant factors are  ascertained, then  it cannot  be said

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that because  rehabilitation is claimed in respect of second  hand machinery,  therefore only half or one-third of  the amount should be allowed. In the present case,  the  relevant  material  about  the original price  and subsequent  depreciation prior to the  purchase by  the appellant  mills has  not been adduced  before  the  Tribunal  and  so,  the Tribunal was  justified in  adopting some  ad  hoc basis. But  grievance is  made not so much against the  particular   ad  hoc  basis  adopted  by  the Tribunal  in  the  present  case  as  against  the general principle  about which  the  Tribunal  has made certain observations. As we have already made it clear,  those  observations  do  not  correctly represent the true legal position in the matter.      That takes  us to  the last  point raised  in this appeal  on behalf  of Saroja Mills Ltd. which is one  of the  appellants. Saroja Mills Ltd. is a company which  runs two  mills, viz., Saroja Mills Ltd., Coimbatore.  and Thiagaraja  Mills at  Madu. The latter  has been  started in  1956, while  the former has  been in  existence for  many years. It was urged  on behalf  of the  appellant before the Tribunal that  in dealing  with  the  question  of bonus  payable   to  the   employees  in  the  two respective mills, the two mills should be 938 treated as  separate units  and not  as  one.  The Tribunal has  rejected this  contention and it has held that  the two  mills constitute  one unit and the question  of bonus  payable to  the  employees working in  the  two  respective  mills,  must  be considered on  that  basis.  It  is  against  this finding  that   Mr.  Sastri  has  made  a  serious grievance before  us. He  contends that  there are several  factors   which  militate   against   the validity  of  the  conclusion  of  the  Industrial Tribunal that  the two  mills constitute one unit. The two mills are situated at two different places separated by  a distance  of  nearly  150  to  200 miles;  in  starting  the  Thiagaraja  Mills,  the necessary  cotton,   stores  and   personnel  were secured by  the Company  from Meenakshi  Mills  at Madura; the  workers working  in the two mills are different and  they are  not transferable from one mill to  the  other;  the  two  mills  manufacture different counts  of yarn  and different qualities and  the   raw  material   required  by   them  is different; they  maintain different  accounts  and their Tex-marks are different; when the Thiagaraja Mills was  started in  1956, the  Co., borrowed an amount of  nearly Rs.  32.50 lakhs from the Indian Finance Corporation  and Pudukottai  Co. Ltd.  and the same  was debited  to  the  Thiagaraja  Mills. Therefore, all these factors indicate that the two mills are  different units,  they work as such and should not be taken to constitute one unit for the purpose of determining the question of bonus.      On the  other hand,  Mr. Ramamurthy  contends that there  are several other considerations which justify the  conclusion of  the Tribunal  that the two mills  constitute one  unit. He argues that it is important  to bear  in mind  that the two mills are owned and conducted by one Company, the Saroja Mills Ltd. in fact, the Thiagaraja Mills at Madura

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has no  independent legal  existence except  as  a concern run by the Company; ultimately, the profit 939 and loss  account for  both the  Companies is  one consolidated account and dividend would be paid on the said  account; separate  accounts are no doubt kept for  convenience because  the two  mills  are situated  in   two  different   places;  but   the maintenance of  separate cash  book and ledger are not behalf  as important as the maintenance of one profit and  loss account  which the Company has to keep as  a  whole;  the  borrowing  on  which  the appellant relier  is the  borrowing of the Company and as such, the Company is the debtor and not the mills at  Madura; the  distance  between  the  two mills can hardly be important because the features on which  the appellant relies may well be present in the case of two mills owned and run by the same Co. though  the mills may be situated side by side in the  same locality;  what is  important in this connection is  the fact  that the business carried on by  the two  mills is  of  the  same  type  and character though  the quality of yarn produced may not be  the same.  Therefore, it is urged that the Tribunal was  right in  holding that the two mills constituted one unit.      The question  thus raised for our decision is not always  easy to  decide. In  dealing with  the problem, several  factors are relevant and it must be remembered that the significance of the several relevant factors  would not  be the  same in  each case nor  their importance. Unity of ownership and management and  control would be relevant factors. So would  the general  unity of  the two concerns; the unity  of finance  may not  be irrelevant  and geographical  location   may  also   be  of   some relevance; functional  integrality can  also be  a relevant and important factor in some cases. It is also possible  that in  some cases, the test would be whether  one concern  forms an integral part of another so  that the  two together  constitute one concern, and  in dealing  with this  question  the nexus of integration in the form of some essential dependence of the one on the other may assume 940 relevance. Unity  of purpose  or design,  or  even parallel  or   co-ordinate  activity  intended  to achieve  a   common  object  for  the  purpose  of carrying out  the business of the one or the other can also  assume relevance  and  importance,  vide Ahmedabad manufacturing & Calico Printing Co. Ltd. v. Their Workmen (1).      Mr. Sastri, however, contends that functional integrality is  a very  important test and he went so far  as to suggest that if the said test is not satisfied,  then   the  claim   that   two   mills constitute one  unit must  break down.  We are not prepared to  accept this  argument. In the complex and  complicated  forms  which  modern  industrial enterprise assumes  it would  be  unreasonable  to suggest that  any one  of the  relevant  tests  is decisive; the  importance and  significance of the tests would  vary according  to the  facts in each case  and   so,  the   question  must   always  be determined bearing  in mind all the relevant tests

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and  co-relating   them  to   the  nature  of  the enterprise with  which the  Court is concerned. It would  be   seen  that   the  test  of  functional integrality would be relevant and very significant when the  Court is dealing with different kinds of businesses   run    by   the    same    industrial establishment or  employer. Where an employer runs two different  kinds of  business which are allied to each  other, it is pertinent to enquire whether the  two   lines  of   business  are  functionally integrated or  are mutually  inter  dependent.  If they  are,   that  would,  no  doubt,  be  a  very important factor  in favour  of the  plea that the two lines of business constitute one unit. But the test of  functional integrality  would not  be  as important when  we are dealing with the case of an employer  who   runs  the  same  business  in  two different  places.  The  fact  that  the  test  of functional integrality is not and generally cannot be satisfied by two such concerns run by the same 941 employer in  the same  line, will  not necessarily mean that  the two  concerns do not constitute one unit. Therefore, in our opinion, Mr. Sastri is not justified in  elevating  the  test  of  functional integrality to  the position of a decisive test in every  case.  If  the  said  test  is  treated  as decisive, an  industrial establishment  which runs different factories  in the  same line  and in the same place may be able to claim that the different factories are  different units  for the purpose of bonus. Besides,  the context  in which the plea of the unity  of two  establishments is raised cannot be ignored. If the context is one of the claim for bonus, then  it may  be relevant  to remember that generally a  claim for bonus is allowed to be made by all  the employees together when they happen to be the employees employed by the same employer. We have carefully  considered the  contentions raised by the parties before us and we are unable to come to the conclusion that the finding of the Tribunal that the  two mills  run by  the Saroja Mills Ltd. constitute one unit, is erroneous in law.      In this  connection, it would be necessary to refer to  some  of  the  decisions  to  which  our attention was  drawn. In  the case  of  Associated Cement Companies  Ltd. and their Workmen (1), this Court held  that on  the evidence  on record,  the limestone quarry  run by  the employer was another part of  the establishment  (factory) run  by  the same employer  within the  meaning of  Section 25E (iii) of  the Industrial  Disputes Act.  It  would thus be  seen that  the question  with which  this court was  concerned was one under s. 25E (iii) of the Act and it arose in reference to the limestone quarry run by the appellant Company and the cement factory  owned  and  conducted  by  it  which  are normally  two  different  businesses.  It  was  in dealing with this problem that this Court referred to several tests which would be relevant, amongst 942 them being  the test of functional integrality. In dealing with  the question,  S. K.  Das,  J.,  who spoke for  the Court,  observed that it is perhaps impossible to lay down any one test as an absolute

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and  invariable  test  for  all  cases.  The  real purpose of  these tests  is to  find out  the true relation between  the parts, branches, units, etc. If in  their true  relation  they  constitute  one integrated whole, we say that the establishment is one; if,  on the  contrary, they do not constitute one integrated whole, each unit is then a separate unit. It  was also  observed by  the Court that in one case,  the unity  of ownership, management and control may  be the  important  test;  in  another case, functional  integrality or general unity may be an  important test;  and in still another case, the important test may be the unity of employment. Therefore, it  is clear  that in applying the test of functional  integrality  in  dealing  with  the question  about   the  intercalation  between  the limestone quarry  and the  factory, this Court has been careful  to point  out that  no test  can  be treated  as   decisive  and   the  relevance   and importance of  all the test will have to be judged in the light, of the facts in each case.      In the  case of  Pratap Press, etc. and Their Workmen, (1)  this Court  had  to  deal  with  the question as to whether the Pratap Press started by the  proprietor,   Narendra,  in   1954  and   the newspaper ’Vir  Arjun’  started  by  him  in  1954 constituted one unit. It appeared in evidence that the Press  also printed and published Daily Pratap which was owned by Narendra and his partner. Thus, the problem  raised before  this Court was whether the  business   of  running  Vir  Arjun  which  is distinct  and   different  from  the  business  of running a  Press, constituted  a part  of the same unit as  the Pratap  Press itself  and in  dealing with this question, this Court reiterated the same principle   that   the   applicability   and   the significance of the relevant tests would 943 depend upon  the facts  in each  case.  Where  the Court is  dealing  with  two  different  kinds  of business conducted  by the same owner, the test of functional    integrality     naturally    assumes importance and  it was  that the  test  which  was emphasised  by   this  Court   in  coming  to  the conclusion that  the Press  and the  Paper did not constitute one  unit. Besides,  the conduct of the proprietor in  dealing with the two businesses and other relevant  facts were  taken into  account in reaching that conclusion.      In Pakshiraja  Studios v.  Its  Workmen,  (1) this  Court   was  dealing  with  a  case  of  the management of  a cinema  studio which also carried on the  business activities of producing films and taking distribution  rights of  pictures,  and  in coming to  the conclusion  that the  two lines  of business   were    not   distinct   but   together constituted one single industrial unit, this Court emphasised  the  importance  of  the  test  as  to whether there  is functional integrality and unity of finance and employment of labour.      Thus, it  would be  seen that the question as to whether  two different concerns run by the same employer constitute  one industrial  unit for  the purpose of  bonus, has  to be  determined  in  the light of  facts in  each case.   we  have  already

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indicated,   after   carefully   considering   the relevant facts  in the present case, we are unable to hold  that the  conclusion of  the Tribunal  is erroneous in law.      That takes us to Civil Appeal No. 159/61. The first point  which has  been raised in this appeal relates to the claim made by the Coimbatore Cotton Mills Ltd.,  one of  the appellants, in respect of the development rebate allowed to it to the extent of Rs.  1,25,000. Before the Tribunal it was urged that this  amount should  be treated  as  a  prior charge but  the Tribunal  rejected the  contention and we think, rightly. In this Court, the argument has 944 taken another  form. It  is urged that this rebate must be  left out  of account  in determining  the available surplus because there is a statutory bar which precludes  the appellant from utilising this amount for  the payment of bonus. This argument is based on  the provisions  contained in proviso (b) to  explanation  (2)  of  Section  10  (2)(vi)  as introduced by  the Finance  Act XI  of  1958.  The relevant portion  of the  statutory  provision  on which reliance has been placed reads thus:-           "Provided that  no allowance  under this      clause shall be made unless:-                (a) .......................................                (b)  except where the assessee is a                     company   being   a   licensee                     within  the   meaning  of  the                     Electricity (Supply) Act, 1948                     or where  the  ship  has  been                     acquired or  the machinery  or                     plant   has   been   installed                     before the 1st day of January,                     1958, amount  equal to  75% of                     the development  rebate to  be                     actually allowed is debited to                     the profit and loss account of                     the relevant previous year and                     credited to a, reserve account                     to be utilised by him during a                     period  of   ten  years   next                     following for  the purpose  of                     the    business     of     the                     undertaking, except:                          (i) for  distribution  by                     way of  dividends  or  profits                     :............."      It is  the last  clause which is the basis of the present  argument. Mr.  Sastri  contends  that bonus is  awarded out  of profits available in the hands of  the employer and the statutory provision just   quoted    prohibits   the   employer   from distributing the development rebate amount allowed to him by way of profits. There is no substance in this argument.  What the  statute prohibits is the distribution of  the amount  in question by way of dividends to  the share-holders  or profits to the partners. In the 945 context, the  distribution by way of profits means nothing else  than the  distribution of profits to

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the partners.  Besides, it  is  obvious  that  the amount  of  bonus  paid  by  an  employer  to  his employees is  allowed to  be treated as admissible expense under  s. 10(2)(x)  of the Income-tax Act. It is clear that the development rebate allowed is in part  recognition of the claim for depreciation and the  provision in  question cannot, therefore, be treated  as constituting  a bar  against taking the said amount into consideration in ascertaining the available surplus in the hands of the employer during  the   year  in  question.  Therefore,  the argument which has been urged before us in respect of the  development rebate  of Rs. 1,25,000 cannot be upheld.      It is  true that  in support of this argument Mr. Sastri  has relied  on the  decision  of  this Court in  The  Central  Bank  of  India  v.  Their Workmen (1).  In that  case, section  10(i) of the Banking Companies  Act prior  to its  amendment in 1956 fell  to be  construed. Section  (I) (b) (ii) provides, inter  alia that:  "No  banking  company shall employ any person whose remuneration or part of whose remuneration takes the form of a share in the profits of the company". It was held that this provision prohibited the grant of industrial bonus to  bank  employees  inasmuch  as  such  bonus  is remuneration which  takes the  form of  a share in the profits  of the banking company. We do not see how this decision can assist the appellant at all. What we are called upon to construe in the present case is  the expression for distribution by way of dividends or profits" and, as we have pointed out, the context  makes it  perfectly  clear  that  the distribution by way of profits which is prohibited is the  distribution by way of profits amongst the partners. Therefore, the decision in the case of 946 Central Bank  of India  is of no assistance to the appellant in the present case.      There is  one more  point which  needs to  be considered in this appeal and that is in regard to the  claim   for  interest  made  by  one  of  the appellants, the  Coimbatore Cotton  Mills Ltd., in respect of  the amount  of depreciation used by it by way  of working  capital. The  interest claimed amounts to  Rs. 33.429. The Tribunal has held that the appellant  is not entitled to claim any return on depreciation  and in  that connection,  it  has referred to  its earlier  decision in  the case of Deccan Sugar Abkhari Co. Ltd.(1), and has observed that it  had  nothing  to  add  to  the  reasoning adopted in  that case.  Mr. Sastri  contends  that this  view   is  clearly   inconsistent  with  the decisions of  this Court  and this  contention  is well founded.      In Petlad Turkey Red Dye Works Ltd. v. Dyes & Chemical Workers’  Union, Petlad  (2), this  Court has held  that if  any portion of the reserve fund is found to have been actually utilised as working capital in the year under consideration, it should be treated  as entitled  to a  reasonable rate  of return and the amount thus ascertained deducted as a  prior  charge  in  ascertaining  the  available surplus. To  the same  effect is  the decision  of this Court in Mysore Kirloskar Ltd. v. Its Workmen

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(3). In  that case,  this Court  has held that the amount in  the depreciation reserve proved to have been utilised  as working  capital during the year in question should be taken into consideration for the purpose  of making  provision  for  return  on working capital.  It is  thus  clear  that  if  an employer shows that the amount of depreciation was actually available  and has, in fact, been used as working capital during the relevant year, he would be entitled  to claim  a reasonable  return on the said amount. The contrary 947 view expressed by the tribunal in the present case must, therefore, be reversed.      In the  two  Civil  Appeals  No.  419/60  and 159/61, we  have dealt  with  the  general  points raised before us not because the appellants wanted any relief  in respect  of their contentions which we have  upheld but  because they  wanted that the points in  question  should  be  decided  for  the guidance of  the Tribunal when it may have to deal with  similar  disputes  between  the  parties  in future.  Therefore,  these  two  appeals  are,  in substance dismissed.  Parties will  bear their own costs.      That leaves  Civil Appeal No. 302/59. In this appeal, as  we have  already noticed, the Tribunal has found the available surplus to be Rs. 1,60,000 and it  has directed that out of it Rs. 1.25 lakhs should be  distributed as  bonus for  the relevant year. One  of the points which the Tribunal had to consider in  dealing with  the respondents’  claim for bonus  in this  case was in regard to the life of the  machinery and  it  held  that  the  normal economic life  of the  printing machinery  can  be easily fixed  at 20  years. Then  it proceeded  to consider what  should be the period of spread over after  the  total  rehabilitation  requirement  is ascertained, and  following its  decision  in  the award from  which Appeal  No.  419/60  arises,  it purported  to  divide  the  machinery  into  three categories and  proceeded to make ad hoc additions to the  normal life of 20 years already determined by it.  We have  already held  that  this  ad  hoc addition to  the normal  life of  the machinery as determined by the Tribunal is not justified. It is conceded before  us by the respondents that if the addition thus  made by  the Tribunal is set aside, then there  would be  no available  surplus in the hands of  the appellant  for the relevant year. In that view  of the  matter, it  is  unnecessary  to consider the  other  points  which  the  appellant wanted to  raise before  us in the present appeal. On the basis 948 that the  normal life of the printing machinery is 20 years, a divisor will have to be adopted and by the adoption of the proper divisor it would follow that  there   is  no  available  surplus  for  the relevant year. That is why the award passed by the Tribunal directing the appellant to distribute Rs. 1.25 lakhs  by way  of bonus amongst its employees for the  year 1956-57  has to  be set  aside.  The appeal is  accordingly allowed; but there would be no order as to costs.

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                                  Appeal allowed.