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PETITIONER: THE TINNEVELLY-TUTICORIN ELECTRICSUPPLY CO.  LTD.,

       Vs.

RESPONDENT: ITS WORKMEN

DATE OF JUDGMENT: 22/02/1960

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. SUBBARAO, K. GUPTA, K.C. DAS

CITATION:  1960 AIR  782            1960 SCR  (3)  66  CITATOR INFO :  R          1962 SC1255  (4,9)  RF         1972 SC  70  (21,25)  R          1972 SC 330  (7)

ACT:        Industrial Dispute-Bonus-Full Bench formula-If applicable to        workmen in electricity undertaking-Electric Supply Act. 1948        (54 of 1948). s. 57.  Sixth Schedule, Para, 17(2)(b)(xi).

HEADNOTE: Can the Full Bench formula for calculation of bonus apply to a claim of bonus made by workmen engaged in electricity con- cerns  and undertakings ? That was the question  raised  for decision  in  this appeal.  A Special Bench  of  the  Labour Appellate   Tribunal  held  in  the  affirmative   and   the correctness  of its decision was challenged in this  appeal. It was contended on behalf of the appellant company that the Electricity  Supply  Act,  1948 (54 Of  1948)  was  a  self- contained code intended to regulate the business and affairs of  electricity  concerns and that Act and not  the  formula applied to a claim of bonus by the workmen in an electricity concern. (1)  (1933] 1 I.T.R. 197, 201. 69 Held, that the Special Bench had taken a correct view of the matter and its decision must be upheld. It is evident from the provisions of the Electricity  Supply Act,  1948, and its schedules that the respective fields  of operation  of  the Act and of the principles  of  industrial adjudication  are wholly different, and so there can  be  no conflict  between them and their relevance and  validity  in their own spheres are beyond question. While the Full Bench formula seeks to ensure social  justice to  workmen by apportioning a share of the profits  to  them and thus minimise the gap between the actual and the  living wages, the Act does not provide for wages at all.  But it is improper  to  suggest  on that basis  that  the  workmen  in electricty  undertakings can be denied social justice.  just as the relevant industrial principles have to be applied for framing  a wage structure for such workmen so also must  the problem of bonus be solved in a like manner.

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The  working-sheet prepared under the method  of  accounting required  by the Act can be no basis for calculation of  the amount  of bonus since it is not possible to  ascertain  the gross profit therefrom and the Full Bench Formula has to  be applied on the basis of the profit and loss account which  a company has to keep under the Companies Act. Bayoda  Boyough Municipality v. Its Workmen.  [1957]  S.C.R. 33, referred to. Moreover,  the intention of the Legislature in enacting  cl. (vi)  of  paragraph 17(2)(b) of Sixth Schedule  to  the  Act clearly  ’was  to  include a claim of bonus  is  within  the expenses  covered  by  it  and it was to  set  at  rest  any possible doubt on that score that cl. (xiii) was added by  a subsequent amendment.

JUDGMENT:        CIVIL APPELLATE JURISDICTION: Civil Appeal No. 23 of 1958.        Appeal  by special leave from the decision  dated  September        29,  1956,  of  the Labour Appellate  Tribunal,  Bombay,  in        Appeal (Mad.) No. 96 of 1956, arising out of the Award dated        April 9, 1956, of the Industrial Tribunal., Madras, in  I.D.        No. 52 of 1954.        A.   V.   Viswanatha  Sastri,  and  Naunit  Lal,   for   the        appellants.        T.   S.   Venkataraman   and  M.  K.  Ramamurth,   for   the        respondents.        1960.   February,  22.   The  Judgment  of  the  Court   was        delivered by        GAJENDRAGADKAR,  J.-The appellant, the  Tinnevelli-Tuticorin        Electric Supply Co., Ltd., Tuticorin, is an electric  supply        undertaking,  and it carries on its business as  a  licensee        under the State Government of        70        Madras  subject to the provisions of the Indian  Electricity        Act, 1910 (Act 9 of 1910) and the Electric Supply Act,  1948        (Act  54  of  1948).  This latter Act  will  hereinafter  be        called  the Act.  The business of the appellant consists  of        buying   electric  supply  from  the  State   Hydro-electric        Projects  and of supplying the same to consumers within  the        areas  specified in its licence; this area is in and  around        Tinnevelli  and Tuticorin Municipalities.   The  appellant’s        workmen  (hereinafter called the respondents)  made  several        demands  in  respect of their terms  of  employment.   These        demands  gave  rise  to  an  industrial  dispute  which  was        referred by the Madras Government to the Industrial Tribunal        at  Madurai  for  adjudication  under  s.  10(1)(c)  of  the        Industrial  Disputes Act, 1947 (XIV of 1947).   Amongst  the        items  thus  referred  for  adjudication  was  included  the        respondents’  claim for additional bonus for the year  1952-        53.  Without prejudice to its contention that the  appellant        was not liable to pay bonus it had in fact voluntarily  paid        two months’ basic wages by way of bonus to the  respondents.        The respondents, however, claimed additional bonus and  this        claim  was  one  of the items of  dispute  referred  to  the        tribunal for its adjudication.        Before the industrial tribunal the appellant contended  that        since  it was working as a licensee under the Act  no  claim        for bonus was admissible outside the provisions of the  Act.        In  support of this plea the appellant relied on the  scheme        of  the  Act  which  restricted  the  profit-making  of  the        electricity   concerns   to  a  prescribed  limit   with   a        possibility  of  a  surplus only in  cases  of  overcharging        provided  for in the rules.  The appellant’s case was  that,

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      having  regard to the scheme, object and the  background  of        the Act under which the appellant was carrying on its  busi-        ness, the respondent’s claim for additional bonus was wholly        misconceived.  No claim for bonus can be entertained, it was        urged  on behalf of the appellant, without reference to  the        provisions  of  the Act which governs the  business  of  the        appellant.        The tribunal, however, rejected the appellant’s  contentions        and  held that the appellant was liable to pay  two  months’        basic wages as additional bonus to        71        the respondents.  This award was passed on March 4, 1955.        Against this award the appellant preferred an appeal, No. 56        of  1955,  to the Labour Appellate Tribunal,  and  contended        that  no  additional bonus should have been awarded  in  the        absence  of  proof  of  an excess  of  "clear  profits  over        reasonable return" ; it was the appellant’s case that it was        only from excess of clear profits over reasonable return  as        defined by the Act that bonus can be legitimately awarded to        the  respondents.  It appears that about this time a  number        of appeals raising the same question were pending before the        Labour Appellate Tribunal, and decisions given by the Labour        Appellate  Tribunal  showed  divergence of  opinion  on  the        question about the effect of the Act in respect of the claim        for  bonus  made by employees of  electricity  concerns  and        undertakings.   That  is  why the  Chairman  of  the  Labour        Appellate  Tribunal issued an administrative order that  all        appeals  which  raised the said question should  be  grouped        together   and  posted  for  hearing  before   a   specially        constituted  fuller  bench of five  members.   The  Chairman        thought  that  a decision by a fuller  bench  would  finally        resolve the apparent conflict disclosed in several decisions        pronounced   thereto,  and  give  proper  guidance  to   the        tribunals in future.        The  special bench of the appellate tribunal then heard  the        group  of  appeals  including the appeal  preferred  by  the        appellant.   It held that bonus could be ordered to be  paid        notwithstanding  the  limitations of the Act, and  that  the        quantum  of bonus should be determined even in the  case  of        electricity  concerns or undertakings by the application  of        the  Full  Bench formula laid down in that  behalf.   Having        decided the question of law in this manner, the appeals were        remanded  to the respective benches of the Labour  Appellate        Tribunal  for disposal in accordance with law.   The  appeal        preferred by the appellant was in due course taken up by the        Industrial  Tribunal  at Madras the Industrial  Tribunal  at        Madurai  having  been  in the meanwhile  abolished  and  the        appeals  on its file transferred to the Industrial  Tribunal        at Madras.  This latter tribunal considered the merits        72        of  the contentions raised by the parties, applied the  Full        Bench  formula, and ultimately passed an award on  April  9,        1956, directing the appellant to pay ’an additional bonus of        two months’ basic wages to the respondents.        Thereupon  the  appellant preferred another  appeal  to  the        Labour  Appellate  Tribunal, and it was numbered  as  Appeal        (Madras)  No. 96 of 1956.  Certain contentions  were  raised        before  the  appellate tribunal on the merits,  and  it  was        urged  that the direction to pay an additional bonus of  two        months  basic  wages  was  improper  and  unjustified.   The        appellate tribunal negatived most of the contentions  raised        by the appellant, but it was satisfied that the  calculation        made  by the tribunal in regard to the quantum of  available        surplus  was  erroneous, and so, after rectifying  the  said        error, it held that the additional bonus which the appellant

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      should  pay to the respondents was one month’s  basic  wage.        It  is against this decision of the appellate tribunal  that        the  present appeal by special leave has been filed  by  the        appellant  before this Court.  The main question  which  the        appeal  raises for our decision is whether the fuller  bench        of  the Labour Appellate Tribunal was justified  in  holding        that  the  Full Bench formula can and should be  applied  in        adjudicating  upon the respondents’ claim for bonus  against        the appellant.        Incidentally, we may point out that the fuller bench of  the        Labour Appellate Tribunal in the case of U.  P.  Electricity        Supply Co. Ltd. & Ors. v. Their Workmen (1) has decided  two        questions   of  law.   The  first  was  in  regard  to   the        applicability  of the Full Bench formula to  the  employees’        claim  for  bonus against their employers  carrying  on  the        business of the supply of electricity, and the second was in        regard  to the extent of the statutory depreciation  allowed        by  the  Full Bench formula.  The question  was  whether  it        should  not  include  initial  depreciation  and  additional        depreciation  which  are given for the purpose  of  allowing        relief  in the matter of taxation under s. 10(2)  (vi-b)  of        the  Income-tax Act.  The fuller bench had decided  that  in        allowing a prior charge in the        (1) (1955) L.A.C. 659.        73        working  of  the  formula it is only  the  normal  incometax        depreciation  (including multiple shift  depreciation)  that        should be allowed.  The correctness of this latter  decision        was  challenged  before this Court in Sree  Meenakshi  Mills        Ltd.  v. Their Workmen (1) but the challenge failed and  the        decision of the fuller bench was confirmed.  In the  present        appeal it is the correctness of the fuller bench decision on        the first question which is challenged before us.        Let us being by stating briefly the appellant’s  contention.        It is urged on behalf of the appellant that it is only where        the  "  clear profits " are in ’excess of the  "  reasonable        return " under the Act that a case for the payment of  bonus        can  really arise in regard to the electricity concerns  and        undertakings.  The Act is a self-contained code intended  to        regulate  the business and affairs of  electricity  concerns        including  the  claim of their employees for bonus,  and  as        such  an industrial dispute between such concerns and  their        employees  in regard to bonus must be determined  solely  by        reference  to the provisions of the Act and and not  by  the        application of the Full Bench formula.  As to the quantum of        bonus  which  should  be awarded it would  depend  upon  the        circumstances  in each case; but it is urged that it may  as        an  ad  hoe  measure be decided that  1/4th  of  the  excess        between clear profits and the reasonable return may be taken        as a fair quantum of bonus which electricity concerns should        be  ordered to pay to their employees.  Before dealing  with        the validity of this argument it is necessary to examine the        scheme of the Act. -        Let  us first consider some of the provisions in the  Indian        Electricity  Act 9 of 1910 which may be  relevant.   Section        3(2)(d)(i)  provides  that the State Government may,  on  an        application  made in the prescribed form, and on payment  of        the  prescribed  fee (if any), grant, after  consulting  the        State  Electricity Board, a licence to any person, and  that        the  said licence may prescribe such terms as to the  limits        within  which  and conditions under which,  the  supply  ,of        energy  is to be compulsory or permissive, and generally  as        to such matters as the State Govern-        (1)  [1458] S. C. R. 878.        74

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      ment  may  think  fit.   Section  3(f)  provides  that   the        provisions  contained in the Schedule shall be deemed to  be        Incorporated  with,  and  to form  part  of,  every  licence        granted  under  this Part, except as in the  manner  therein        described.   Section 4(1)(b) empowers the  State  Government        inter  alia to revoke the licence where the licensee  breaks        any of the terms or the conditions of his licence the breach        of which is expressly declared by such licence to render  it        liable   to  revocation.   Section  7(1)  provides  to   the        authorities   specified  in  it  option  to   purchase   the        undertaking.   Section 11 requires the licensee  to  prepare        and  render to the State Government or to such authority  as        the  State  Government  may appoint in that  behalf,  on  or        before the prescribed date in each year an annual  statement        of account of his undertaking made up to such date, in  such        form  and containing such particulars, as may be  prescribed        in  that  behalf.   Section  22  imposes  on  the   licensee        obligation  to  supply  energy  subject  to  the  conditions        prescribed  ; and s. 23 provides that a licensee shall  not,        in making any agreement for the supply of energy, show undue        preference  to any person.  The licensee cannot also  charge        for such supply any rates higher than those permitted.   The        appropriate  Government  is authorised to  fix  the  maximum        charges,  and  by  appropriate rules both  the  maximum  and        minimum  charges  have  been  prescribed.   These  are   the        relevant provisions of Act 9 of 1910.        Let  us now refer to some of the relevant provisions of  the        Act.    Section  57  provides  the  licensee’s  charges   to        consumers.   According  to it the provisions  of  the  Sixth        Schedule  and  the Seventh Schedule shall be  deemed  to  be        incorporated  in the licence of every licensee, not being  a        local  authority,  in  the manner  specified  by  it.   This        section  further  provides  inter  alia  that  as  from  the        specified date the licensee shall comply with the provisions        of  the said Schedules and not provisions of Act 9 of  1910,        and  the licence granted to him thereunder and of any  other        law,  agreement  or instrument applicable  to  the  licensee        shall, in relation to the licence, be void and of no  effect        in so far as they are inconsistent with the        75        provisions  of  s. 57A and the said Schedules.   Section  57        deals with the licensee’s charges to the consumers and  lays        down  provisions which shall have effect in relation to  the        licence  where the provisions of the Sixth Schedule and  the        table appended to the Seventh Schedule are under sub-s.  (1)        deemed  to  be  incorporated in  the  said  licence.   These        provisions  relate to the appointment of the Board  and  the        rating committee.  Section 57A prescribes the principles and        the  procedure  which  has  to be  followed  by  the  rating        committee  in  making  its report to  the  State  Government        regarding the charges for electricity which the licensee may        make  to any class or classes of consumers.  This  provision        gives us an idea as to the object which the Legislature  had        in  mind in ultimately fixing the minimum and maximum  rates        chargeable to the consumers.  Sections 78 and 79 provide for        power  to  make rules and regulations.  Nine  Schedules  are        attached to the Act.  Schedule Six deals with the  financial        principles and their application; Schedule Seven deals  with        the depreciation of assets; Schedule Eight provides for  the        determination  of  cost  of  production  of  electricity  at        generating stations; and schedule Nine prescribes the method        for   allocation  of  costs  of  production  at   generating        stations.        It  is necessary at this stage to refer briefly to  some  of        the provisions contained in the Sixth Schedule, because  Mr.

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      Viswanatha  Sastri,  for the appellant, has  relied  on  the        scheme  of  the said Schedule in support  of  his  principal        argument.    These   provisions  prescribe   the   financial        principles  which  have to be followed  by  the  electricity        concerns  and undertakings covered by the Act.  It is  urged        by  the appellant that these principles along with the  rest        of the Schedules and the provisions of the Act constitute  a        self-contained  code  which  govern  the  business  and  the        financial affairs of electricity concerns, and as such  even        the  claim  of the appellant’s employees for bonus  must  be        dealt with in the light of these provisions.  Paragraph 1 of        Sixth Schedule provides:-        "  1.  Notwithstanding  anything  contained  in  the  Indian        Electricity  Act, 1910 (9 of 1910) (except sub-s. (2) of  s.        22A), and the provisions In the        76        licence  of  a licensee, the licensee shall  so  adjust  his        rates  for the sale of electricity whether by  enhancing  or        reducing them that his clear profits in any year of  account        shall  not,  as  far  as  possible,  exceed  the  amount  of        reasonable return;".        This provision is made subject to four provisos which it  is        unnecessary to mention.        Paragraph 2 reads thus:-        "  II. (1) If the clear profit of a licensee in any year  of        account  is  in excess of the amount of  reasonable  return,        one-third  of such excess, not exceeding five per  cent.  of        the amount of reasonable return, shall be at the disposal of        the  undertaking.   Of the balance of the  excess,  one-half        shall be appropriated to a reserve which shall be called the        Tariffs and Dividends Control Reserve and the remaining half        shall  either be distributed in the form of  a  proportional        rebate on the amounts collected from the sale of electricity        and meter rentals or carried forward in the accounts of  the        licensee  for  distribution to the consumers in  future,  in        such manner as the State Government may direct.        (2)  The  Tariffs  and  Dividend Control  Reserve  shall  be        available for disposal by the licensee only to the extent by        which the clear profit is less than the reasonable return in        any year of account.        (3)  On  the purchase of the undertaking under the terms  of        its  licence  any  balance  remaining  in  the  Tariffs  and        Dividends  Control  Reserve  shall be  handed  over  to  the        purchaser  and  maintained  as such  Tariffs  and  Dividends        Control Reserve."        Paragraph 3 provides for the creation from existing  reserve        or  from  the  revenue of the undertaking a  reserve  to  be        called  Contingencies Reserve.  Paragraph 4  prescribes  the        manner   in   which  the  licensee  shall   appropriate   to        Contingencies  Reserve  from the revenues of  each  year  of        account.  Paragraph 6 directs that there shall be allowed in        each  year  in  respect  of  depreciation  of  fixed  assets        employed  in  the  business of electricity  supply  such  an        amount  as  would  if  set  aside  annually  throughout  the        prescribed period and accumulated at compound interest at  4        per        77        cent. per anum, produce by the end of the prescribed  period        amount  equal  to 90 per cent. of the original cost  of  the        asset after taking into account the sums already written off        or  set  aside  in  the books  of  the  undertaking;  annual        interest  on  the  accumulated balance will  be  allowed  as        expense  from  revenue  as well as  the  annual  incremental        deposit.  Paragraph 7 deals with assets which have ceased to        be  avilable  for  use  through  obsolescence,   inadequacy,

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      superfluity  or  for  any other reason, and  it  allows  the        licensee  to describe the said assets as no longer  in  use,        and  no  further depreciation in respect  thereof  shall  be        allowed as a charge against the revenue.  Paragraph 8 prohi-        bits  any  further  depreciation where  an  asset  has  been        written down in the books of the undertaking to 10 per cent.        or  less of its original cost.  Under paragraph 9,  where  a        fixed  asset is sold for a price exceeding its written  down        cost,  the  excess has to be credited to  the  Contingencies        Reserve.   Paragraph  10 requires the consent of  the  State        Government  to  carry  sums to a reserve  or  to  declare  a        dividend in excess of 3 per cent. on share capital or  other        matters specified therein. Paragraph 13 imposes  limitations        in  respect -of ordinary remunerations of  managing  agents;        whereas  paragraph 14 provides that the Board  of  Directors        shall  not contain more than 10 directors; and paragraph  15        prescribes  the  way  in which the  licensee  can  make  any        capital expenditure which exceeds Rs. 25,000 or 2 per  cent.        of  the  capital  base within three years  before  the  next        option  of purchase under the licence arises.  Paragraph  16        contains   an  arbitration  clause.   Paragraph   17   gives        definitions for the purpose of this Schedule.  Capital  base        is  defined by paragraph 17(1); clear profit is  defined  by        paragraph 17(2) as meaning the difference between the amount        of   income  and  the  sum  of  expenditure  plus   specific        appropriations made up in each case as prescribed in several        sub-clauses of clauses (a), (b) and (c).  It is necessary to        refer to two sub-clauses under clause (b) :-        " (xi) other expenses admissible under the law for the  time        being  in force in the assessment of, Indian Income-tax  and        arising from and ancillary or incidental to the business  of        electricity supply;        78        (xii)     contributions  to Provident Fund,  staff  pension,        gratuity and apprentice and other training schemes.  "        Paragraph 17(9) defines a reasonable return as meaning :-        "  in  respect  of  any year of  account,  the  sum  of  the        following:        (a)  the  amount found by applying the standard rate to  the        capital base at the end of that year;        (b)  the income derived from invesments than those     made        under paragraph IV of this Schedule;        (c)  an  amount equal to one half of one per centum  on  any        loans  advanced  by  the Board  under  subparagraph  (2)  of        paragraph I of the First Schedule." One of the points  which        we have to decide in the present appeal is whether an amount        of  bonus paid by the employer to his employees is  included        under paragraph 17 (2) (b)(xi) of the Sixth Schdule.        It  would  thus be clear that the provisions of the  Act  in        general  and those of the Sixth Schedule in particular,  are        no  doubt  intended  to  control  and  regulate  the   rates        chargeable  to consumers and to provide the method  and  the        machinery  by  which the electrical system  of  the  country        could  be  properly coordinated and integrated.   The  rates        chargeable  are  fixed, so is a reasonable  return  provided        for.   But  it is not as if the Act intends to  guarantee  a        minimum  return to the undertaking.  What it purports to  do        is  to  prohibit - a return higher than the  one  specified.        Appropriations  permissible under revenue receipts are  also        defined and enumerated and a clear profit as contemplated by        the  Act is also prescribed and defined.  Large powers  have        been given to the Electricity Authority, Boards and Councils        for the purpose of canalising the activities of the concerns        as  well  as  for adjusting their  activities  for  changing        conditions  and  circumstances.  Just as the  Act  has  made

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      provision  for the control of rates chargeable to  consumers        its  policy also is to give a fair deal to  the  undertaking        and   persons   engaged  in  the   business   of   supplying        electricity.   ’It is with this twin object that a  working-        sheet is required to be prepared under the provisions of the        Act.   It  is, however, clear that  the  working-sheet  thus        prescribed is essentially        79        different from the balance-sheet and profit and loss account        which  companies keep under the provisions of the  Companies        Act.  The determination of clear profits on the basis of the        working-sheet  ::proceeds on the consideration  of  previous        losses,  contributions towards the arrears  of  depreciation        and   several   appropriations  authorised  by   the   State        Government,  matters which have no relevance  to  commercial        accounting.   The  principles of  commercial  accounting  on        which  the balance, sheets are prepared and profit and  loss        account made are very different from the principles on which        the working-sheet as specified in the Act is required to  be        prepared.   The  question which arises for our  decision  is        whether  the  appellant  is right  in  contending  that  the        present  dispute  arising from the  respondents’  claim  for        bonus must be decided by the provisions of the Act alone and        that  the Full Bench formula is wholly inapplicable for  the        purpose.        In  dealing with this contention it is necessary to bear  in        mind  that the fields covered by the Full Bench formula  and        by  the provisions of the Act are entirely  different.   The        Full   Bench   formula  has  been  evolved   by   industrial        adjudication  for  the purpose of doing  social  justice  to        workmen  and it is. now well-established that the  workmen’s        claim  for  bonus  is  justified on  the  ground  that  they        contribute  to  the employer’s profit and  are  entitled  to        claim a share in the said profit with a view to fill the gap        between  their actual wages and the living wage  which  they        aspire to earn.  On the other hand, the Act does not purport        to  deal with this problem at all.  It is  significant  that        though  the  Act  makes detailed provisions  in  respect  of        matters  intended to be covered by it, it does not refer  to        the  wages  which  the  employer may  have  to  pay  to  his        employees.   Can  it  be  said  that  in  fixing  the  wage.        structure  as  between an electricity  undertaking  and  its        employees   considerations  of  social  justice   would   be        irrelevant?   In  fixing  such wage-structure  none  of  the        provisions of the Act can afford the slightest assistance to        industrial  tribunals.  That task must be attempted  by  the        tribunals  in the light of principles of social justice  and        other  relevant considerations such as the capacity  of  the        employer to pay and the wages        80        received  by  employees  in comparable trades  in  the  same        region.   Just  as the problem of wage-structure has  to  be        solved  in the case of electricity concerns apart  from  the        provisions  of  the  Act and in the light  of  the  relevant        industrial  principles,  so  must the problem  of  bonus  be        resolved  in the like manner.  There is really  no  conflict        between   the   Act  and  the   principles   of   industrial        adjudication.  In fact they cover different fields and their        relevance   and  validity  is  beyond  question   in   their        respective fields.        As we have just indicated the method of accounting  required        by  the Act in preparing the working-sheet is  substantially        different  from  the commercial method of  accounting  which        yields  the  gross profits in the form of  profit  and  loss        account.   Determination of gross profit is the  first  step

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      which  industrial tribunals take in applying the Full  Bench        formula.   Such gross profit cannot be ascertained from  the        working-sheet prepared under the Act.  It is not denied that        the  appellant has to keep accounts under the Companies  Act        on  a commercial basis.  That being so, in dealing with  the        respondents claim for bonus, it is the balance-sheet and the        profit  and  loss account , prepared by the  appellant  that        must  be taken as the basis in the present proceedings,  and        that  is  precisely  what the  tribunals  below  have  done.        Therefore,  we  are  satisfied  that  the  Labour  Appellate        Tribunal  was  right in coming to the  conclusion  that  the        respondents’  claim  for  bonus  must  be  governed  by  the        application of the Full Bench formula.        In this connection it may be useful to refer to the decision        of this Court in the case of Baroda Borough Municipality  v.        Its Workmen (1).  One of the points raised on behalf of  the        Baroda Borough Municipality in resisting the claim for bonus        by  its workmen was that the scheme of the Bombay  Municipal        Boroughs  Act  18  of 1925 by  which  the  Municipality  was        governed did not permit the making of any claim for bonus  :        and  so it was not open to the, labour court or tribunal  to        direct  payment  of  bonus  to  municipal  employees.-  This        argument  was  rejected.   "The  demand  for  bonus  as   an        industrial claim ", it was        (1)  [1957] S.C.R. 33.        81        observed,  "is  not dealt with by the Municipal Act;  it  is        dealt with by the Industrial Disputes Act, 1947.  Therefore,        it  is  not  a  relevant  consideration  whether  there  are        provisions  in the Municipal Act with regard to bonus.   The        provisions  of the Municipal Act are relevant only  for  the        purpose  of  determining the quality or the  nature  of  the        municipal  property  or  fund; those  provisions  cannot  be        stretched beyond their limited purpose for defeating a claim        of  bonus ". That is why this Court came to  the  conclusion        that  the  absence of provisions in the Municipal  Acts  for        payment   of  bonus  to  municipal  employees  was   not   a        consideration  which was either determinative or  conclusive        of the question at issue before it.        The next question which arises is whether a claim for  bonus        can be said to be included under paragraph 17 (2) (b)  (xi).        This  provision  includes under expenditure  other  expenses        admissible under the law for the time being in force in  the        assessment  of  Indian  Income-tax  and  arising  from.  and        ancillary  or  incidental to, the  business  of  electricity        supply.   It is admitted that bonus paid by an  employer  to        his employees constitutes expenses admissible under  section        10(2)(vi) of the Income-tax Act, but it is urged that it  is        not  an  expense  which  can be  said  to  arise  from,  and        ancillary  or  incidental to, the  business  of  electricity        supply.  The argument is that cl. (xi) lays down two  tests,        one  of  which  is  satisfied  viz.,  that  it  is   expense        admissible under the lndian Income-tax Act, but the other is        not  satisfied,  and so the clause is  inapplicable  to  the        amount  paid  by way of bonus.  The appellate  tribunal  has        held  that  even the other test is satisfied  and  that  the        expenditure in question can be said to arise from, or to  be        ancillary,  or  incidental to, the business  of  electricity        supply.   In  our  opinion, it is difficult  to  accept  the        appellant’s  argument  that the construction placed  by  the        appellate tribunal on the latter part of this clause is  not        reasonably  possible.  Besides, it may be relevant to  point        out  that by a subsequent amendment made in 1957 cl.  (xiii)        has  been  added  under  paragraph  17(2)(b)  of  the  Sixth        Schedule.  This clause which is numbered (xiii) reads  thus:

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      " Bonus paid to the employees it        82        of  the  undertaking-(a) where any  dispute  regarding  such        bonus  has been referred to any tribunal or other  authority        under  any  law  for the time being in  force,  relating  to        industrial  or  labour  disputes  in  accordance  with   the        decision  of such tribunal or authority ; (b) in  any  other        case, with the approval of the State Government ". After the        insertion  of  this clause there can be no  doubt  that  the        amount paid by the employer to his employees by way of bonus        would  definitely be admissible expenditure under  paragraph        17(2)(b).  In our opinion, the insertion of this clause  can        be  more  reasonably explained on the  assumption  that  the        Legislature  has thereby clarified its  original  intention.        Even when cl. (xi) was enacted the intention was to  include        claims  of bonus under expenses covered by the said  clause,        but  in order to remove any possible doubt  the  Legislature        thought it better to provide specifically for bonus under  a        separate category.  Otherwise, it is difficult to appreciate        how   contributions  to  Provident  Fund  were  treated   as        admissible expenditure all the time since they were  covered        by  cl.  (xii)  and bonus could not  have  been  treated  as        admissible  expenditure under cl. (xi).  That is why we  are        on  the  whole prepared to agree with the  construction  put        upon  cl.  (xi) by the appellate tribunal.  If that  be  the        true  position  then  bonus has always  been  an  admissible        expenditure  under the scheme of the Act, and as such  there        is  no conflict between the scheme of the Act and the  claim        made by the respondents in the present case.   Incidentally,        we may add that this point appears to have been conceded  by        the  appellant  before  the  appellate  tribunal.   We  must        accordingly  hold that the appellate tribunal was  right  in        coming to the conclusion that the Full Bench formula applied        in  adjudicating  upon  the  respondents’  claim  for  bonus        against  the  appellant in the present proceedings.   As  we        have already indicated, before the fuller bench reached this        decision there was a conflict of opinion in the decisions of        the   Labour  Appellate  Tribunals,  but  in  view  of   our        conclusion  it is unnecessary to refer to the  said  earlier        decisions.        83        That  takes us to the merits of the award.  The first  point        is  in regard to the appellant’s claim  for  rehabilitation.        -Before the Labour Appellate Tribunal it was fairly conceded        by  the respondents that at least income-tax at seven  annas        in a rupee on the gross profits less depreciation, and  also        a  contingency  reserve of Rs. 6,047 have to be  allowed  in        arriving  at  the figure of net available  surplus  for  the        purpose  of bonus payable to the respondents ; and  that  in        regard  to normal statutory depreciation the correct  figure        must  be  taken to be Rs. 99,038 instead of  Rs.  90,393  as        given   by  the  industrial  tribunal.   Then,  as  to   the        rehabilitation the appellant has led no evidence at all  and        so the appellate tribunal refused to grant any sum by way of        rehabilitation  in  addition  to the  total  amount  of  Rs.        1,13,950.  In our opinion, the appellate tribunal was  right        in  holding  that the adoption of a factor of  2-7  for  all        assets purchased before 1945 was not justified, and that the        adoption of the figures of the estimated life of the  assets        from  the Schedule to the Electric Supply Act  without  even        deducting the respective portions of the life of the  assets        which had already expired was equally unjustified.  In  that        view of the matter we do not see how’ the appellant can make        any grievance against the finding of the appellate  tribunal        on  the question of rehabilitation.  The appellate  tribunal

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      has  fairly  observed that, in future if  a  dispute  arises        between  the appellant and its employees, the appellant  may        substantiate its claim for rehabilitation by leading  proper        evidence.        The claim of the appellant for the triple shift allowance in        respect  of  the  mains has been allowed  by  the  appellate        tribunal and there is no dispute in respect of it; but it is        urged  that  rule  8 of the Incometax  Rules  justifies  the        appellant’s  claim in respect of all its electric plant  and        machinery  under Entry IIIE (1).  Rule 8 provides  that  the        allowance  under  s. 10 (2) (vi) of the Act  in  respect  of        depreciation  of  buildings, machinery, plant  or  furniture        shall be a percentage of the written down value or  original        cost,  as the case may be, equal to one-twelfth  the  number        shown in the corresponding entry in the second column of the        following statement.  There are two        84        provisos to this rule which it is not necessary to set  out.        The appellant makes a claim under IIIE (1) which deals  with        electric plant, machinery and boilers, whereas, according to        the  respondents, the appellant’s case in this behalf  falls        under  IIIC  (4)  and  (5)  which  respectively  deal   with        underground cables and wires and overhead cables, and wires.        The argument for the respondents is that in respect of these        items the appellant’s claim is inadmissible.  In support  of        this  argument the respondents rely upon the remark  against        item 3 on page 8 of the Rules.  This remark would show  that        the  benefit claimed by the appellant does not apply  to  an        item  of  machinery or plant specifically  excepted  by  the        letters  N, E, S, A being shown against it.   These  letters        are  the  contraction  of the expression "  No  Extra  Shift        Allowance ". There is no doubt that these letters are to  be        found  against  items in IIIC (4) and (5).   Therefore,  the        point which arose for decision before the appellate tribunal        was  whether the appellant’s claim falls under IIIE  (1)  or        IIIC (4) and (5).  The appellate tribunal has observed  that        the  appellant made no attempt to show that any  such  claim        for  shift depreciation in respect of its cables  and  wires        had   been   put  forward  by  it  before   the   income-tax        authorities,  or that it was held to be admissible by  them.        It  has also observed that if the appellant’s case was  true        that  the  cables  and  wires fell under  IIIE  (1)  it  was        difficult  to understand why separate provision should  have        been  made  in respect of depreciation of cables  and  wires        under IIIC (4) and (5).  Besides, the appellate tribunal was        not satisfied that such cables and wires would depreciate in        value to a materially greater extent when electrical  energy        is  allowed  to pass through them for more than  one  shift.        That is why, on the materials as they were available on  the        record,  the  appellate  tribunal  saw  no  reason  why  the        appellant should be allowed any extra shift depreciation  in        respect of underground and overhead cables by way of a prior        charge.   The  appellant’s claim for the  provision  of  Rs.        23,516  in that behalf was’ therefore, rejected.   It  would        thus  be seen that the appellant seeks to claim this  amount        by way of prior charge;        85        and  in  substance  this  claim has  been  rejected  by  the        appellate  tribunal on the ground that  sufficient  material        has not been placed before it by the appellant on which  the        claim  could be examined and granted.  In such a case we  do        not  see  how we can interfere in favour of  the  appellant.        The  present decision will not preclude the  appellant  from        making  a  similar  claim in future  and  justifying  it  by        leading proper evidence.

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      In the result the appeal fails and is dismissed with costs.                                   Appeal dismissed.