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PETITIONER: WORKMEN OF NATIONAL & GRINDLAYS BANK LTD.

       Vs.

RESPONDENT: THE NATIONAL & GRINDLAYS BANK LTD.

DATE OF JUDGMENT16/01/1976

BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. KHANNA, HANS RAJ FAZALALI, SYED MURTAZA

CITATION:  1976 AIR  611            1976 SCR  (3) 130  1976 SCC  (1) 925

ACT:      Payment of  Bonus Act,  1965-Foreign  banking  company- Bonus-Computation of  allocable surplus  items to  be  taken into account-Depreciation-Certificate  issued by  Income Tax Officer-If possesses evidentiary value-Working funds-Meaning of.

HEADNOTE:      As a result of negotiations between the respondent-Bank and its  employees (appellants)  an industrial  dispute with regard to bonus for the years 1956 to 1964 was settled on an ad hoc  basis. By  the time  of the  settlement however  the Payment of  Bonus Act,  1965 came  into force. In respect of the accounting  year 1964,  though  the  bonus  formula  was applicable, no  separate computation  was made in accordance with that formula since it was settled on an ad hoc basis as a part of an omnibus settlement.      The Bonus  Act provides  a statutory  formula  for  the computation of bonus. Section 2(13) defines an ’employee’ to mean any  person employed  on a salary or wage not exceeding one thousand and six hundred rupees per mensem. Section 4(a) provides that  the gross  profits shall be calculated in the manner specified  in the First Schedule. Item 2 of the First Schedule deals  with "add  back" in  respect of (a) bonus to employees, (b)  depreciation (c)  development rebate reserve and (d)  any other reserves. Item 3(a) deals with "add back" of bonus paid to employees in respect of previous accounting years. Item 6(e) deals with deduction in the case of foreign banking companies of proportionate administrative (overhead) expenses of  head office  allocable to  Indian business. The concept of "available surplus" is defined in s. 2(6) to mean available surplus  computed under s. 5 and that section lays down that the available surplus in respect of any accounting year shall be the gross profit for that year after deducting therefrom the  sums referred  to in s. 6 which, under clause (a) include "any amount by way of depreciation admissible in accordance with the provisions of s. 32(1) of the Income Tax Act"  and  under  clause  (d)  "such  further  sums  as  are specified in respect of the employer in the Third Schedule." Clause (iv)  of the  proviso to item 2 of the Third Schedule provides that  in the  case of  a banking  company  any  sum

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which, in respect of the accounting year, is deposited by it with the Reserve Bank of India under s. 11 (2)(b)(ii) of the Banking  Regulation  Act,  1949  not  exceeding  the  amount required under  this provision  to be  so deposited shall be deducted from  the gross profits as prior charge. Section 15 provides for  what is liable to be carried forward for being set  on  and  set  off  out  of  allocable  surplus  in  the succeeding year or years.      An industrial dispute having arisen between the parties in regard  to the  computation of  bonus for  the accounting year 1966,  it was  referred to  an Industrial  Tribunal for adjudication. The  Tribunal’s  award  was  assailed  by  the workmen on  the following  grounds: (a)  that there  was  an excess of  allocable surplus  over the  amount  of  maximum. bonus for  the accounting  years 1964  and   1965, which, by reason of  s. 15(1),  was liable  to be  carried forward for being set on in the succeeding accounting year 1966;      (b) that  while the  object of  "add back" was that the entire amount  set apart  as provision  for bonus  should be added back in determining the available surplus. in spite of making a  provision of  a much  larger amount  as bonus, the Bank had  added back  only a  small amount  representing the bonus of those workmen who were employees falling within the meaning of s. 2(13) and there by failed to take into account bonus  in   respect  of  those  workmen  who  are  not  such employees; the  word ’employee’  in items  2(a) of the First Schedule was not limited to employees as defined in s. 2(13) but was  used, in  a wider  sense to  include all employees, that is, employees drawing more than 1600 rupees or less; 131      (c) that the Tribunal was wrong in allowing the Bank to deduct a  much A  higher sum by way of depreciation than was shown in  the profit  and loss  account, that  the burden of showing what  the amount of depreciation admissible under s. 32(1) of  the Income  Tax Act  was, was on the Bank which it had  failed   to  discharge   and  that,  at  any  rate  the certificate issued by the Income Tax officer was no evidence and could not be taken into account;      (d) that  the balance  sheet of  the Bank  for the year 1966 showed  a much lesser amount than what the Bank claimed to have  deposited with  the Reserve Bank under s. 11 (2)(b) (ii) of the Banking Regulation Act, 1949 and it was this sum which was  liable to be deducted under this head and not the larger sum which it actually deducted.      The Industrial  Tribunal’s calculation of proportionate administrative (over-head) expenses of head office allocable to the Indian business which are deductible in computing the gross profits,  both the  Bank and the employees assailed it as being incorrect,      For the  bank, it  was contended,  (a) that  borrowings from other  banking companies, the amount of bills issued by the bank  and the  balance of  profit  and  r  loss  account constituted  part  of  its  "working  funds"  and  that  the Industrial   Tribunal    was   wrong   in   rejecting   this interpretation of  "working funds"  and in  limiting  it  to ’paid up capital, reserves and deposits only".      (b) that  the Tribunal  was wrong in refusing to permit the Bank  to add back the sum falling under item 3(a) of the First Schedule. ^      HELD. 1.  The workmen  are rot entitled to contend that though the  claim for bonus for the year 1964 was settled on an  ad  hoc  basis  without  making  computation  under  the provisions of  the Act,  such computation  must now be made, not for  the purpose  of determining  the bonus  payable  to

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them, but  for the  purpose of  determining whether there is any amount  liable to be carried forward and set on. Section 15(1) can  have no  application where no computation is made under the  Act and bonus is paid, not in accordance with the statutory formula,  but on  an ad  hoc basis. Then it is not possible to  say what was really the bonus payable under the Act. It  may be  less or  more than  the bonus in fact paid. That  enquiry  being  rendered  irrelevant  by  the  ad  hoc settlement, there  can be  no question  of carry forward and set on  of any  amount, unless  specifically agreed  upon as part of the settlement. [137 F -138 G]      2. The  workmen cannot  be permitted  to  raise  a  new contention for  the  first  time  in  this  Court  that  the provision for  bonus liable  to be added back was not merely the provision  for bonus  payable to employees as defined in s. 2(13) of the Act but also the provision for bonus payable to workmen  who are not such employees. What is liable to be added back  under item 2(a) of the First Schedule is not the amount of  bonus payable  to the  workmen nor  the amount of bonus in  fact paid, but the provision for bonus made in the profit  and,   loss  account,  3(a)  Though  the  amount  of depreciation calculated  in accordance with account. [139 B- C]      3. (a)  Though the amount of depreciation calculated in accordance with methods known to accountancy practice may be unexceptionable  from   the  point  of  view  of  commercial accountancy, it  would not  necessarily be  admissible as  a deduction  from   gross  profits  under  s.  6(a).  What  is allowable as  a deduction  from the gross profits under that clause is  not  depreciation  calculated  according  to  any recognised  method   but  only   such  depreciation   as  is admissible in  accordance with the provisions of s. 32(1) of the Income Tax Act, 1961. [139 E-F]      (b) The  burden  of  providing  that  the  depreciation claimed by  the Bank was the correct amount admissible under s. 32(1)  of the  Income Tax  Act, 1961  was on the Bank and that burden  had to  be discharged  by the Bank by producing proper and satisfactory evidence. [141 C]      (c) A  certificate issued by the Income Tax officer was not  admissible   in  evidence  to  prove  the  depreciation admissible under  s. 32(1).  It is  the Industrial  Tribunal which must,  in the  exercise of  its  quasi-judicial  duty, calculate the  amount of depreciation by adopting the method set out  in s.  32(1). The Tribunal cannot say that it would accept the  figure of  depreciation arrived  at  br  another authority  charged   with  the   function   of   determining depreciation under 132 a different  statute. There is nothing in the Income Tax Act or in  the Payment of Bonus Act or in any other provision of law  which   attaches  a  presumption  of  accuracy  to  the determination of  the Income  Tax officer in’ this matter or invests it  with  probative  or  evidentiary  value  in  the proceedings before the Industrial Tribunal. [142 F-143 C]      In the  instant case,  however, there  is no  reason to interfere with the decision of the Tribunal in regard to the amount  of   depreciation  deductible  under  s.  6(a).  The certificate of  the  Income  Tax  officer  was  admitted  in evidence without  any objection  by  the  workmen.  Had  the workmen objected  to its  admissibility before  the Tribunal the Bank  could have  led other evidence to substantiate its claim for  depreciation. Since  no such  objection was taken before the  Tribunal the  Bank contented itself by tendering in evidence  only the certificate of the Income Tax officer. [143 C-D]

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    4. No  reliance can  be placed  by the  workmen on  the balance sheet  for 1966  for repelling  the Bank’s  claim to deduct from  the gross  profit the amount deposited with the Reserve Bank  of India under s. 11(2) (b)(ii) of the Banking Regulation Act,  1949. The  balance sheet for the accounting year 1966  would not  show the  amount deposited by the Bank with the  Reserve Bank  in respect  of that accounting year, because that amount would ordinarily be deposited only after the  expiration,   and  not  during  the  currency  of  that accounting year                                                     [144C-F]      5. (a) The Industrial Tribunal had committed a manifest error.  in  regards  to  the  calculation  of  Proportionate Administrative (overhead)  Expenses of head office allocable to Indian  business. Although  item 1  of the First Schedule requires the  Industrial Tribunal  to take  as the  starting point of  computation "net profit as shown in the profit and loss account  after making  usual and necessary provisions", The  fact   that  item   6(e)  provides   for  deduction  of proportionate  administrative   expenses  of   head   office allocable to Indian business in arriving at the gross profit for the  purpose of  bonus under  item 7  shows that the net profit contemplated  in the item 1 is the net profit arrived at without  deducting proportionate  administrative expenses of head  office allocable  to India  business. The amount in respect of  the actual  head office  administrative expenses allocable  to  Indian  business  should  be  added  back  in arriving at the figure of net profit for the purpose of item 1. [145 D-146 B] .      (b) In computing the Indian gross profit the Industrial Tribunal added  back only  the amounts representing bonus to employees and depreciation as set out in item 2 of the First Schedule. Foot  note 3  requires that  the  Indian  gross  r profit  should  be  determined  as  shown  in  item  7  and, therefore, it  was necessary  to add  back not  only  amount under item  2 but  also item  3 and  4 and to deduct amounts under item 6 for the purpose of arriving at the Indian gross profits under item 7. [146 A-B]      (c)  In   calculating  the   total  gross  profits  the Industrial Tribunal committed an error by adding back merely the provision  made under the profit and lass account of the Indian business  for bonus  to employees  and  depreciation. Foot note  3 requires  that the  total  world  gross  profit should be  as per consolidated profit and loss account after adjusting as  in item  2 which means that the provision made in the  consolidate profits  and loss  account for  bonus to employees; depreciation,  development rebate reserve and any other reserves  should be  added back  to the  net profit as shown in  the consolidated  profit and  loss account for the purpose of  arriving at  the total  world gross  profit. The Industrial Tribunal did not explained what was the provision made in  the consolidated  profit and  lost; account  of the Bank under  this head.  If any  provision were  made in  the consolidated profit and loss account for bonus to employees, which would mean employees of the Bank throughout the world, depreciation on  world assets  and  development  rebate  and other reserves such provision would have to be added back to the net  profit as shown in the consolidated profit and loss account      6  (a)   The  Industrial  Tribunal  was  right  in  its interpretation of the term  "working funds" occurring in cl. (ii) and  (iii) of  the proviso  to  item  2  of  the  Third Schedule. The  term  must  be  construed  to  Mean  paid  up capital, reserves 133

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and average  deposits for  52 weeks  of each  year for which weekly returns  of   deposits are  submitted to  the Reserve Bank of  India. It  could hardly be disputed that borrowings from other banking Companies, the amounts of bills issued by the Bank  and the  balance of  profit and  loss account  are neither reserves  nor deposits and they are not liable to be shown in  the weekly  returns of  deposit submitted  to  the Reserve Bank of India. [147 F-H]      (b) The  term "working  funds" was first defined in the award of  Mr. K.  C. Sen  in 1919 in regard to Banks, and it was also  used ill  the Shastri award made in 1953 in regard to industrial disputes between certain banking companies and their workmen.  These words  have always  been understood in the above  sense and that is the sense in which they must be deemed to  have been used by the legislature when it enacted clauses (ii) and (iii) of the proviso to item 2 of the Third Schedule. [147 D-F]      7. The  Industrial Tribunal  was wrong  in refusing  to permit the Bank to add back the sum of Rs. 13.27 lacs on the ground that  "a sum  out of 1965 account must not be allowed to adulterate  the amount  of 1966."  This sum  paid to  the employees in  respect of  bonus for the accounting year 1965 was, on  the plain terms of item 3(a) of the First Schedule, liable to be added back. [143 F-H]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 2533 of 1969.      Appeal by  special leave  from the Award dated the 25th June, 1969  of the  Central Government  Industrial Tribunal, Calcutta, in Reference No. 35 of 1968.      M. K.  Ramamurthi, Ramesh  Pathak, Vineet Kumar for the Appellants.      G. P.  Pai, o.  c. Mathur,  D.  N.  Mishra  and  J.  B. Dadachanji & Co. for Respondent.      The Judgment  of the  Court was  delivered by BHAGWATI, J.-This appeal  by special  leave is  directed against    an award  made  by  the  Industrial  Tribunal,  Calcutta  in  a reference between  the  National  and  Grindlays  Bank  Ltd. (hereinafter referred  to  as  the  Bank)  and  its  workmen represented by  the All  India  National  &  Grindlays  Bank Employees Federation.  The Bank is a banking  company within the meaning  of s.  5 of the Banking Companies Act, 1949 and has  its  Head  office  in  London  and  branch  offices  in different parts of the world, including India. The principal office of the Bank in India is situate in Calcutta. The Bank maintains its accounts according to the calender year and it brings out  not only a consolidated balance sheet and profit and loss account for its world business, but also a separate balance sheet  and profit  and loss  account for  its Indian business. There  was an  industrial dispute between the Bank and its  workmen in  regard to  bonus for  the years 1956 to 1964 and  as  a  result  of  negotiations,  this  industrial dispute was  settled between  the parties on an ad hoc basis under a  Memorandum of  Settlement dated  28th r.  December, 1965. The material terms of the settlement were:           "1. The Bank will pay and the workmen and non-work      men staff  will receive  a sum  of Rs. 27 lakhs (Rupees      twenty seven  lakhs only)  in full and final settlement      of all  bonus claims  covering  the  periods  from  1st      January 1956  to  31st  December  1964,  including  any      claims relating to Centenary Bonus. 134

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         2. The above sum of Rs. 27 lakhs will be allocated      as to  one-third thereof  to Award-staff only and as to      the remaining  two-thirds to  both the  Award and  non-      Award staff,  in both  cases based  on the basic salary      paid over the period, namely, 1st January, 1956 to 31st      December, 1964, and unrelated to any particular year.           8. The  parties agree  that this  Settlement shall      not be  taken as  the basis or govern the principle for      this determination of bonus in future, but nevertheless      this Settlement  shall be  final  and  binding  on  the      parties as  regards bonus  claims for the years 1956 to      1964  (both   inclusive)  and  any  claim  relating  to      Centenary Bonus,  as also  regards  qualifications  for      eligibility and procedures as set out above. It may  be noted that this Settlement was arrived at between the parties  after the  Payment of Bonus Act, 1965 came into force on 25th September, 1965. This Act provided a statutory formula for  computation and  payment of  bonus and  it  was admittedly applicable  in respect  of  the  accounting  year 1964, but no separate computation of bonus for that year was made in  accordance with  this statutory  formula and it was settled on  an  ad  hoc  basis  as  a  part  of  an  omnibus settlement for  the accounting years 1956 to 1964. So far as the claim  for  bonus  for  the  accounting  year  1965  was concerned, computation  was  made  in  accordance  with  the statutory formula  provided in  the Payment of Bonus Act and the maximum  20% of  the salary  or wage  earned during that accounting year was paid by way of bonus to  the  workmen. The  claim for  bonus for the accounting year 1966, however, could not be settled between the parties and, though the  Bank paid  , 18% of the wage or salary earned by the workmen  during  that  accounting  year  as  bonus,  the workmen  were  not  satisfied  and  the  industrial  dispute arising  from   their  claim   had  to   be   referred   for adjudication.  There   were  different   aspects   of   this industrial dispute  which  required  consideration  and  the Central Government, therefore, formulated each  aspect  as a separate question and referred those questions for adjudication  to the  Industrial Tribunal, Calcutta. The Industrial Tribunal  made  an  award  holding  that,  on  an application of  the statutory  formula, the amount available for payment  of bonus  was Rs.  22.17 lakhs  and The workmen were, therefore,  entitled to  a little  over  9%  of  their salary or  wage as  bonus, but  since they  had already been paid by the Bank bonus at the rate of 18% of their salary or wage, which  was much  more than  what they were entitled to receive, nothing  further remained  to ..  be paid  and they were not  entitled to  any relief. This award is impugned in the present  appeal brought  by  the  workmen  with  special leave.      There are  only certain  items in  the  computation  of bonus which  are now  in dispute in the appeal before us and we shall  confine our  attention to them. But before we deal specifically with  these items,  it could  be convenient  to refer to  some of  the relevant provisions of the Payment of Bonus Act. We will refer only to those provisions which have a bearing  on the  items in  dispute  between  the  parties. Section 2  is the  definition section  and cl.  (13) of that section defines ’employees 135 to mean  any  person  employed  on  a  salary  or  wage  not exceeding one  thousand and six hundred rupees per mensem in any  industry   to  do  any  skilled  or  unskilled  manual, supervisory,  managerial,   administrative,   technical   or clerical work for hire or reward. The mode of computation of

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gross profits  in the case of a banking company is laid down in section  4, cl.  (a) which provides that the gross profit shall be  calculated in  the manner  specified in  the First Schedule. The  First Schedule  sets out  in items 2, 3 and 4 various amounts which are to be added and in item 6, various amounts which  are to  be deducted  from the  net profit  as shown in  the profit  and loss  account. We are concerned in this is  appeal only  with items 2, 3(a) and 6(e) which read as follows:- Item No.  Particulars Amount  of Amount of Remarks sub-items main items 2.    Add back provision for      (a) Bonus to employees      (b) Depreciation      (c) Development Rebate  Reserve.      (d) Any other reserves      Total of Item No. 2 Rs. 3.   Add back also      (a) Bonus  paid to  employees in  respect  of  previous      accounting years.      6 Deduct:      (e)In  the   case  of   foreign  ;   banking  companies      proportionate  administrative  (overhead)  expenses  of      Head, office allocable to Indian business The concept  of ’available  surplus’ is defined in s. 2, cl. (6) to  mean available  surplus computed under s. 5 and that section lays  down that  the available surplus in respect of any accounting  year shall  be the gross profit of that year after deducting  therefrom the  sums  referred  to  in  s  6 Clauses (a)  and (d) of s. 6 provide that the following sums shall be  deducted from  the gross  profits as prior charge, namely:-           "(a)  any   amount  by  way  of  the  depreciation      admissible in  accordance with  the provisions  of sub-      section (1)  of section 32 pf the Income-Tax Act, or in      accordance with  the  provisions  of  the  agricultural      income-tax law, as the case may be:"           "(d) such further sums as are specified in respect      of the  employer in the Third schedule The Third  Schedule is  rather material  as it  bears on one item in  dispute between the parties. Clauses (ii) and (iii) of the  proviso to item 2 . in the Third Schedule enact that in case  of a  banking company  which is  a foreign  company within the meaning of s. 591 of the Companies 10-390SCI/76 136 Act, 1956-the  Bank in  the present  case being such banking company-the amount to be deducted shall be the aggregate of-           "(ii) 7.5  per cent.  Of such  amount as bears the      same pro-  r portion  to its total paid up equity share      capital as its total working funds in India bear to its      total world working funds;           (iii) 5  per cent of such amount as bears the same      proportion to its total disclosed reserves as its total      working funds  r in  India  bear  to  its  total  world      working funds;" Then we  come to  the concept  of allocable surplus which is defined in  s. 2,  cl. (4) and under that clause, 60% of the available surplus is to be taken to be the allocable surplus and it  is this allocable surplus which is to be distributed by way,  of bonus  to the  workmen, subject to a limit of 20 per cent.  Of the  total salary  or wage  of  the  employees employed  in   the  establishment.  Sec.  10,  sub-sec.  (1) provides for  payment of  a minimum  bonus of 4 per cent. Of the salary  or wage  earned by  the employees,  irrespective

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whether or not there are profits in the accounting year, and sub-sec. (1)  of s.  11 lays  down that  where the allocable surplus exceeds the amount of minimum bonus payable under s. 10, sub-s.  (1) "the employer shall, in lieu of such minimum bonus, be  bound to  pay to every employee in the accounting year bonus  which shall  be an  amount in  proportion to the salary or  wage earned by the employee during the accounting year subject  to a maximum of twenty per cent of such salary or wage".  Sec. 15  is the  next  material  section  and  it provides, inter alia:           " (1)  Where for any accounting year the allocable      surplus exceeds  the amount of maximum bonus payable to      the employees in the establishment under sec. 11, then,      the excess  shall, subject  to a  limit of  twenty  per      cent, of  the total  salary or  wage of  the  employees      employed in  the establishment in that accounting year,      be carried forward for being set on in the l succeeding      accounting year  and so  on up  to and inclusive or the      fourth accounting  year to  be utilised for the purpose      of payment  of bonus  in the  manner illustrated in the      Fourth t Schedule.           (2) Where  for any  accounting year,  there is  no      available surplus  or the  allocable surplus in respect      of that year falls short of the amount of minimum bonus      payable to  the employees  in the  establishment  under      sec. 10,  and there  is no  amount or sufficient amount      carried forward  and set  on under  sub-sec. (1)  which      could be  utilised for  the purpose  of payment  of the      minimum  bonus,   then,  such  minimum  amount  or  the      deficiency, as  the  case  may  be,  shall  be  carried      forward for  being set off in the succeeding accounting      year and  so on  up to  and  inclusive  of  the  fourth      accounting year in the manner illustrated in the Fourth      Schedule.           (4) Where  in any  accounting year  any amount has      been carried  forward and  set on or set off under this      section, then,  in calculating bonus for the succeeding      accounting year, the - ‘ u, 137      amount of  set on  or set  off carried forward from the      earliest A  accounting year  shall first  be taken into      account. ’ Sec. 34,  sub-s.  (3)  enables  employees  employed  in  any establishment or  class  of  establishments  to  enter  into agreement with  their employer  for grant  of bonus  under a formula which  is different  from that  under the Payment of Bonus Act,  so long  as it  does not  deprive  them  of  the minimum bonus  payable under  s. 10,  sub-sec. (1). It is in the light  of these  provisions that we have to consider the various points arising For determination in the appeal.      We will  first take us for consideration question No. 2 referred to  the Industrial  Tribunal. That question‘ raises the issue whether any amount is liable to be carried forward for being set on in the accounting year 1956 and if so, what amount. The  claim of  the workmen was that there was excess of allocable  surplus over  the amount  of maxi mum bonus in both accounting  years 1964  and  1965  and  the  excess  in respect of  both these years was, by reason of s. 15, sub-s. (1), liable  to be  carried forward  for being set on in the succeeding accounting year 1966. Now, so far as the claim in respect of  the accounting  year  1965  was  concerned,  the amount to  be carried  forward and set on was settled at the figure of  Rs. 10.23  lacs under  an  agreement  arrived  at between the  parties and  no dispute, therefore, survived in respect of  that claim.  But the  claim in  respect  of  the

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accounting year  1964 was strongly resisted on behalf of the Bank  and  a  preliminary  objection  was  raised  that  the question whether any amount was liable to be carried forward and set  on out  of the  profits of the accounting year 1964 did not  form the  subject-matter of the reference and hence this Court,  in appeal  from the Industrial Tribunal, had no jurisdiction to  adjudicate upon  this question.  We do  not think there  is any substance in this preliminary objection. Question No.  2, referred  to the  Industrial  Tribunal,  in terms raises  the issue "whether any amount is to be carried forward for  being set  on in the accounting year 1966", and this issue is wide enough to cover the question in regard to carry forward  and set on of an amount out of the profits of the accounting year 1964. The Bank then contended that since the bonus  payable for  the accounting year 1964 was settled on an  ad hoc  basis, it  was not  possible to  say that the allocable surplus  exceeded the  maximum bonus  payable  for that year and hence there could be no question of any excess to be  carried forward  and set  on in  the succeeding year. There is great force in this contention. Sec. 15, sub-s. (1) provides for  carry forward  and set  on and,  on its  plain terms, it  comes  into  operation  only  when,  in  a  given accounting year,  the allocable  surplus exceeds the maximum bonus pay  able under  the Act, so that after payment of the maximum bonus  there is  surplus left  which can  be carried forward and  set on, subject, of course, to the limit of -20 per cent.  Of the total salary or wage. It is clear from the scheme of  the Act and the context in which this sub section occurs, following  closely upon  sections 4  to 10, that the basic condition for the applicability of this sub-section is that bonus  is computed  in accordance  with  the  statutory formula provided in the preceding sections of the Act and as a result of such computation, it is found that the allocable surplus is  more than  sufficient ....  to cover the maximum bonus payable  under the Act and where such is the case, the sub section  provides that the excess over the amount of the maximum bonus 138 shall, to  the extent  of 20  per cent. Of the total wage or salary, be  carried forward  and set  on in  the  succeeding year. This  sub-section can  have  no  application-where  no computation is  made under the Act and bonus is paid, not in accordance with  the statutory  formula, but  on an  ad  hoc basis. Then  it is  not possible  to say what was really the bonus payable under the Act. It may be less or more than the bonus in  fact paid.  That inquiry being rendered irrelevant by the  ad hoc settlement, there can be no question of carry forward and set on of any amount, unless specifically agreed upon as  part of  the settlement. The workmen in the present case were,  therefore, not  entitled to contend that, though the claim for bonus for the accounting year 1964 was settled on an ad hoc without making computation under the provisions of the  Act, such  computation must now be made, not for the purpose of  determining the  bonus payable to them, which is the only  purpose for which such computation is contemplated to be made, but for the purpose of determining whether there is any  amount liable  to be carried forward and set on. The claim of the workmen for carry forward and set on in respect of the accounting year 1964 must accordingly stand rejected.      We now, proceed to consider the items in dispute in the computation of  ’available surplus’  for the accounting year 1966, which fall within  question  No. 1  referred to  the Industrial  Tribunal. The first item  to which  we must refer is the item of provision for bonus  to employees made in the profit and loss account.

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This item  figures as item 2(a) in the First Schedule to the Act and  it is  required to be added back in the computation of the  gross profits  under s.  4(a). Now,  so far  as  the profit and loss account of the Bank in respect of its Indian business was concerned, the provision for bonus to employees did not  figure in  it as a separate item, but, according to the Bank,  it was  included under  the heading "Salaries and Allowances" or  "other Expenditure" and it came to Rs. 19.52 lakhs. The  Bank thus  agreed to  an add  back of  Rs. 19.52 lakhs in  respect of  provision for  bonus to employees. The workmen, however,  contended that  the provision  for  bonus made by the Bank was for a much larger amount and the amount of Rs.  19.52 lakhs  represented provision for bonus only in respect of  those workmen  who were  ’employees’ within  the meaning of  s. 2,  cl; (13)  and the Bank had failed to take into account  the provision  for bonus  in respect  of those workmen who  were not  such ’employees’. The argument of the workmen was  that the  word ’employees’  in item 2(a) of the First Schedule  was not limited to ’employees’ as defined in s. 2,  cl. (13),  but covered  all  employees,  because  the object of  adding back  provision for bonus to employees was to arrive at the figure of profit available for distribution of bonus  and that required that the entire amount set apart as provision  for  bonus  ‘should  be  added  back,  for  in determining what  is the  available fund  with reference  to which bonus  should be paid, one cannot ’ exclude the amount already paid  or provided  as bonus,  whether  to  employees drawing more  than Rs.  1600/- or to employees drawing less. It is  true, said  the workmen, that the word ’employees’ is defined in  s. 2,  d. (13),  but they  contended that  every definition is  subject to the requirement of the context and here the  context clearly  showed that  the word ’employees’ was not  used in the restricted sense, but in a wider sense, including all  employees. Now,  this argument of the workmen would have  required serious  consideration by us, but we do not 139 think we  can permit the workmen to raise it, as it does not appear to  have been  advanced by them before the Industrial Tribunal. The award of the Industrial Tribunal does not show that this argument was at any time urged by the workmen. The only argument  raised by  the workmen  before the Industrial Tribunal was  that the  amount of  bonus payable to them for the accounting  year 1966 was Rs. 38.66 lacs representing 18 per cent.  Of their  wage or  salary and  this amount of Rs. 38.66 lacs was liable to be added back and not the amount of Rs. 19.52  lacs this  argument was  rightly rejected  by the Industrial Tribunal  because what is liable to be added back under Item  2(a) of  the First Schedule is not the amount of bonus payable  to the  workmen, nor  the amount  of bonus in fact paid,  but the  provision for  bonus made in the profit and loss  account. We  cannot, therefore, permit the workmen to raise  a new  contention for the first time in this Court that the provision for bonus liable to be added back was not merely the  provision for bonus to ’employees’ as defined in s. 2  cl. (13),  but also the provision for bonus to workmen who were not such ’employees’.      The next  item in  dispute relates to the amount liable to be  deducted from  the gross profits under s. 6, cl. (a). What is  required to  be deducted  under this  clause is the amount of  depreciation admissible  in accordance  with  the provisions of  sub-s. (1)  of s.  32 of  the Income-Tax Act. Now, depreciation  represents the  diminution in  value of a capital asset  when applied  to the purpose of making profit or gain.  There are  various methods  known  to  accountancy

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practice for  measuring  such  diminution  in  value  and  a banking company,  like any other firm or company, may follow any one of these methods in maintaining its accounts and the amount of  depreciation calculated  according to such method would be  reflected in  its profit  and loss  account.  But, though such  amount of  depreciation shown in the profit and loss account  may be  unexceptionable from the point of view of  commercial   accountancy  principles,   it   would   not necessarily be  admissible as a deduction from gross profits under s.  6,. d.  (a). What is allowable as a deduction from the gross  profits under  that clause  is  not  depreciation calculated according to any recognised method of accountancy followed by a banking company, but only such depreciation as is admissible  in accordance  with the  provisions of sub-s. (1) of  s. 32  of the  Income-tax Act.  The profit  and loss account of  the Bank  for the accounting year 1966 showed an amount of  Rs. 22.40 lacs debited against the composite item "Depreciation and Repairs to the Banking Company’s Property" and according  to the  Bank, this file included an amount of Rs. 1.89 lacs by way of depreciation. Now, there would be no difficulty if  the Bank claimed to deduct only the amount of Rs. 1.89 lacs by way of depreciation under s. 6, cl. (a), as that was  the amount  of depreciation  debited in the profit and loss  account. But  the Bank claimed that, though it had debited by  way of  depreciation  in  the  profit  and  loss account only  an amount  of Rs.  1.89 lacs,  the  amount  of depreciation actually  admissible  in  accordance  with  the provisions of  sums. (1)  of s. 32 of the Income-tax Act was Rs. 12.79  lacs and  in support  of  this  claim,  the  Bank produced a  certificate issued  by the  Income  Tax  officer which was marked Ex. 12 in evidence. The Industrial Tribunal relying  solely   on  the   certificate  Ex.  12  held  that "depreciation admissible  in accordance  with the provisions of sub-s. (1) of s; 32 of the Income-tax Act" 140 was Rs.  12.79 lacs  as evidenced  by the certificate Ex. 12 and the  Bank was, therefore, entitled to deduct that amount from the gross profits under s. 6, cl. (a).      This decision  of the  Industrial Tribunal was assailed before us and it was contended on behalf of the workmen that the burden  of showing  what was  the amount of depreciation admissible in  accordance with  the provisions of sub-s. (1) of s.  32 of  the Income-tax  Act was  on the  Bank and this burden, the Bank had failed to discharge by producing proper evidence. The  only evidence produced on behalf of the Bank, said the  workmen, was  the certificate Ex. 12 issued by the Income-tax officer, but that certificate was no evidence and could not  be taken  into account for the purpose of holding that the  depreciation admissible  under sub-s. (1) of s. 32 of the Income-tax Act was Rs. 12.79 lacs. The Bank, however, contended that  the workmen did not at any time dispute that the depreciation admissible under sub-s. (1) of s. 32 of the Income-tax Act  was Rs.  12.79 lacs nor did they at any time challenge the  correctness of  the certificate Ex. 12 issued by the  Income-tax officer  and in  the circumstances,  this certificate was  sufficient to  establish the  claim of  the Bank.      Now, in the first place, it is not correct to. say that the workmen  did not  at any time dispute the correctness of the figure  of depreciation  claimed by  the Bank.  Both-the workmen and  the Bank filed their respective computations of bonus before  the Industrial Tribunal and while the Bank, in its computation,  claimed to  deduct the amount of Rs. 12.79 lacs as  depreciation, the  workmen agreed to deduction only of the  amount of  Rs. 1.89  lacs as appearing in the profit

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and loss account. The workmen did not at any time accept the position that  the correct amount of depreciation admissible under s.  32, sub-s.  (1) of  the Income-tax Act came to Rs. 12.79 lacs  as claimed  by the Bank. They seriously disputed it before  the Industrial  Tribunal and hence the Industrial Tribunal had  to go into that question and come to a finding upon it. Even prior to the making of the reference, when the calculation sheet regarding bonus payable for the accounting year 1966  was sent  by the  Bank to  the‘ workmen  with its letter dated  26th July,  1967, the  workmen by their letter dated 3rd  August, 1967  called upon  the  Bank  to  furnish particulars in  regard to  the  amount  of  Rs.  12.79  lacs claimed by the Bank as depreciation and the only reply given by the Bank to this demand was that the information required by the  workmen went "far beyond any legal requirements" and the Bank  was not in a position to accede- to the same. Vide Bank letter  dated 8th August, 1967. This circumstance would also show  that the  workmen did  not accept  the figure  of depreciation claimed  by the  Bank. It  is true  that in the application made  by the  workmen to the Industrial Tribunal for certain clarifications on 8th January, 1969, the workmen did not ask for any clarification in regard to the amount of Rs. 12.79  lacs claimed  by the Bank by way of depreciation, but if  we look  at this  application, it will be clear that the clarifications  sought by  the workmen  were ’on various aspects of  the published  balance-sheet of  the company for the  accounting   years-1-1-1966  to  31-12-1966  and  other figures’ and  there was no attempt at seeking clarifications in respect  of the  various items  in the  computation sheet filed by  the Bank. Moreover. when these clarifications were sought by the application dated 8th January, 1969 the 141 controversy between  the parties  was already crystalised in their pleadings and it was clear from the computation sheets filed by  them that  there was real dispute in regard to the amount of  depreciation and,  therefore, mere failure on the part of  the workmen  to ask for clarification in respect of the amount  of Rs. 12.79 lacs claimed by the Bank, could not justify an inference that the workmen had conceded the claim of the Bank and abandoned the dispute. There can be no doubt that the dispute in regard to the amount of depreciation was very much  there between  the  parties  and  it  had  to  be resolved by the Industrial Tribunal.      It was  not seriously  disputed on  behalf of the Bank, and indeed having regard to the well settled position in law it could not be so disputed, that since the Bank claimed the deduction of  depreciation at  a  figure  higher  than  that appearing in  the profit  and loss  account, the  burden  of proving that  the depreciation claimed by it was the correct amount of depreciation admissible under s. 32, sub-s. (1) of the Income-tax Act was on the Bank and that burden had to be discharged by  the Bank by producing proper and satisfactory evidence. Though  the Industrial  Tribunal relied  solely on the certificate  Ex. 12 issued by the income-tax Officer for the purpose  of holding  that that,  the correct  amount  of depreciation admissible  under s.  32, sub-s.  (1)  was  Rs. 12.79 lacs,  the Bank in the course‘ of its arguments before us, placed reliance not only on this certificate but also on the oral evidence of A. K. Basu who was the Officer examined on behalf  of the  Bank. We  will first  consider  the  oral evidence of  A.  K.  Basu  and  then  examine  how  far  the certificate Ex. 12 helps to establish the claim of the Bank. The statement  in the ’oral evidence of A. K. Basu which was strongly relied  upon on behalf of the Bank, was: "Under the Heading ’Prior  Charge’, the  figure against  ’depreciation’

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was collected  from the  income-tax assessment order" and it was contended  that since  there was no cross examination of A. K.  Basu in regard to this statement, it must be accepted as correct  and  that  was  sufficient  to  prove  that  the depreciation admissible  under s. 32 sub-section (1) was Rs. 12.79 lacs.  This contention  is wholly  fallacious  and  it proceeds upon  a misreading  of the  statement made by A. K. Basu. It  is no  doubt true  that A. K. Basu stated that the figure against  depreciation was  collected from  income-tax assessment order,  but this  statement was made in reference to the  figure against  depreciation appearing  in the First Enclosure to  Annexure (C)  to the  written statement of the workmen,  which   was  the   computation  sheet   containing calculation of  bonus for  the accounting year 1965. That is evident from  the context  in which  this statement  occurs. This statement  finds place  in the paragraph which contains answers given  by the witness to the Industrial Tribunal and the six sentences preceding this paragraph as also the first sentence of  this paragraph  clearly show  that the  answers were in  reference to  the accounting  year  1965.  We  have carefully scanned through the entire evidence of A. K. Basu, but we  do not  find in  it any  statement in  regard to the amount of  depreciation shown  in the  Second  Enclosure  to Annexure (C)  to the written statement of the workmen, which contained  the  computation  in  regard  to  bonus  for  the accounting year  1966. There  was no evidence given by A. K. Basu in  regard to  the amount  of Rs. 12.79 lacs claimed by the Bark  by way  of depreciation  in the  computation sheet submitted by it. Not a word 142 was said  about it  by A.  K. Basu in his evidence and apart from A.  K. Basu, no other witness was examined on behalf of the Bank.  There was  therefore, clearly no oral evidence to support the  claim of  the Bank. Even if the statement of A. K. Basu that the figures against depreciation were collected from  the   income-tax  assessment  order  be  construed  as referring  to  the  computation  sheet  in  respect  of  the accounting  year  1966, it  does not advance the case of the Bank. The  income-tax assessment  order for  the  accounting year 1966 admittedly did not show depreciation at the figure of Rs. 12.79 lacs and that figure could not, therefore, have been collected  by  M.  A.  K.  Basu,  from  the  income-tax assessment order.  Even if  the words  Income-tax assessment order’ as  appearing in  his statement  be  read  so  as  to include the  income-tax return,  it was  admitted  that  the relevant income-tax return was not produced on behalf of the Bank, and  moreover,  A.  K.  Basu  admitted  in  his  cross examination that  he did  not prepare  the income-tax return and consequently  it must  follow that  he had  no  personal knowledge of  the correctness  or veracity of the income-tax return and  what he  stated had  no probative or evidentiary value.      That leaves  for consideration  the certificate  Ex. 12 issued by  the Income-tax  officer which was strongly relied upon on  behalf of  the Bank  and on  which  the  Industrial Tribunal rested its decision on this part of the case. It is clear on  a plain  natural reading of the language  of s. 6, cl. (a)  that what  is   deductible  under  that  clause  is "depreciation admissible  in accordance  with the provisions of sub-s.  (1) of  s. 32  of the  Income-tax  Act"  and  not "depreciation allowed  by the  Income tax  Officer in making assessment on  the employer".  It is the Industrial Tribunal which  has  to  find  for  itself  what  is  the  amount  of depreciation admissible  under sub-s.(1)  of s.  32  and  it cannot abdicate  its duty and surrender its judgment to what

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has  been  done  by  the  Income-tax  officer  while  making assessment under  the Income-tax  Act. Since  depreciation . may be  computed according  to various methods recognized by accountancy  principles,   section  6,   clause  (a)   while providing for  deduction of depreciation, had to specify the method according  to which depreciation to be deducted shall be calculated  and it adopted the method specified in sub-s. (1) of  s.  32.  But  the  calculation  of  depreciation  in accordance with  this method  would necessarily  have to  be done by  the Industrial Tribunal which is entrusted with the task of  determining the  amount of  bonus by  applying  the statutory formula.  Therefore, it is the industrial Tribunal which must  in the  exercise  of  its  quasi  judicial  duty calculate the  amount of depreciation by adopting the method set out  in sub-s.  (1) of  s. 32.  The Industrial  Tribunal cannot say  that  it  will  Blindly  accept  the  figure  of depreciation arrived  at by  another authority  charged with the function  of determining  depreciation under a different statute. The  determination of  the  Income-tax  officer  in regard to  depreciation admissible  under section  32,  sub- section (1)  can be  taken into  account as evidence only if there is  some provision  of  law  which  provides  to  that effect. We  do not find anything in the Income-tax Act or in the Payment  of Bonus  Act or in any other pro vision of law which attaches  presumption of accuracy to the determination of the  Income-tax officer in this matter or invests it with probative or evidentiary value in the proceedings before the Industrial Tribunal.  And the  reason for  this  is  obvious because the workmen, who are sought 143 to be  bound by the determination of the Income-tax officer, would not  be parties to the income-tax proceedings and they would have  no opportunity of putting forward their point of view before  the determination  is arrived at by the Income- tax officer.  Moreover, the  possibility cannot be ruled out that the determination made by the Income-tax officer may be wrong and he might have made a bona fide mistake in arriving at the  figure of  depreciation. If  the workmen  were to be held bound  by the  figure of depreciation determined by the Income-tax  officer,  they  would  have  no  opportunity  of challenging its correctness or showing that it is wrong, nor would they  be able  to verify the figure of depreciation by cross-examination of  the employer  or his witnesses who may have calculated  the same.  That would  be contrary  to  the established principles  of judicial  procedure.  There  can, therefore, be  no doubt  that the  certificate issued by the Income-tax officer  was not  admissible in evidence to prove the depreciation admissible under sub-section (1) of section 32 and  ordinarily we would have refused to rely upon it and directed the  Industrial  Tribunal  to  arrive  at  a  fresh decision after  giving opportunity  to the Bank to prove its claim for depreciation by leading evidence, but we find that the certificate  of the  Income-tax officer  was admitted in evidence without  any objection  on the  part of the workmen and at  no  stage  of  the  hearing  before  the  Industrial Tribunal, it  was contended on behalf of the workmen that it was an  inadmissible piece  of evidence.  If the workman had contended  before   the   Industrial   Tribunal   that   the certificate of  the Income-tax officer was not admissible in evidence,  the   Bank  could  have  led  other  evidence  to substantiate  its  claim  for  depreciation,  but  since  no objection was  raised on  behalf of  the workmen,  the  Bank contented itself by producing and tendering in evidence only the certificate of the Income-tax officer. We do not, in the circumstances see  why reason to interfere with the decision

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of the  Industrial Tribunal  in  regard  to  the  amount  of depreciation deductible under section 6, clause (a). .      We then  come to  item 3(a) of the First Schedule which requires bonus  paid to  the employees  in  respect  of  the previous accounting  years to  be added  back  in  computing gross profits.  The amount  paid to  the  employees  in  the accounting year  1965 was  Rs. 13.27  lacs and the work- men claimed that  this amount  of Rs. 13.27 lacs should be added back under item 3(a) of the First Schedule. The Bank, in the computation sheet  filed by  it, also  showed this amount of Rs. 13.27  as an add back and, therefore there should really have been  no dispute  about it. But the Industrial Tribunal refused to  permit the  Bank to  add back this amount of Rs. 13.27 lacs  on the  ground that  "a sum  out of 1965 account must not be allowed to adulterate the account of 1966". This was an  obvious error  committed by the Industrial Tribunal. The amount  of Rs.  13.27 lacs  paid  to  the  employees  in respect of  bonus for  the accounting year 1965 was clearly, on the  plain terms  of Item  3(a) of  the  First  Schedule, liable to  be  added  back  and  we  direct  the  Industrial Tribunal to do so when the case goes back to it.      The item  which then  requires to be considered is that under   cl. (iv)  of the  proviso to  Item 2.  Of the  Third Schedule. That clause provides that in the case of a banking company, any sum which, in 144 respect of  the accounting year, is deposited by it with the Reserve Bank  of India  under s. 11(2)(b)(ii) of the Banking Regulation Act, 1949 not exceeding the amount required under the said  provision to  be so  deposited, shall  be deducted from the  gross profits.  The Bank  claimed to  deduct under this item  a sum  of Rs.  13.48 lacs  on the  ground that it represented the  amount  deposited  by  the  Bank  with  the Reserve Bank  of India  under s. 11(2)(b)(ii) of the Banking Regulation Act,  1949 and produced in support of this claim, a certificate  of  the  Reserve  Bank  of  India  dated  3rd February,  1969  confirming  that  the  Bank  had  deposited security adequate to fulfil the requirements s. 11(2)(b)(ii) of the  Banking Regulation  Act,  1949  in  respect  of  the accounting year 1966. This certificate was produced by A. K. Basu on  behalf of  the Bank  without ally  objection by the workmen and  it was  marked Ex.  11. The Industrial Tribunal accepted the  claim of  the Bank  on the  strength  of  this certificate and  permitted deduction  of the  amount of  Rs. 13.38 lacs.  The  workmen  impugned  this  decision  of  the Industrial Tribunal  on the ground that the balance sheet of the Bank for the accounting year 1966 showed that the amount deposited by  the Bank with the Reserve Bank of India during that  accounting  year  was  only  Rs.  70,000/-  being  the difference between  Rs. 99.10 lacs and Rs. 98.40 lacs and it was therefore,  only this  amount which  was  liable  to  be deducted in  respect of  this claim.  But this contention of the workmen  is clearly fallacious. The balance sheet of the Bank for  the accounting year 1966 would not show the amount deposited by  the Bank  with the  Reserve Bank  of India  in respect of  that accounting year, for, on a plain reading of s. 11(2)(b)(ii) of the Banking Regulation Act, 1949, that  amount would  ordinarily be deposited only after the  expiration   and  not   during  the  currency  of  that accounting year.  No reliance  can, therefore,  be placed on behalf of  the workmen  on the balance sheet of the Bank for the accounting  year 1966  for the  purpose of repelling the claim of  the Bank. On the other hand, the evidence given by A. K.  Basu on  behalf of  the Bank  clearly showed that the Bank had deposited with the Reserve Bank of India securities

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adequate to  fulfil the  requirements of  s. 11(2)(b)(ii) of the Banking  Regulation Act, 1949 and this statement made by the witness  was sought  to be  supported by the certificate issued by  the  Reserve  Bank  of  India.  The  workmen  did question A.  K. Basu  on this  point, but  he clearly stated that the  deposit was  made in  securities. Having regard to this evidence  of A. K. Basu supported by the certificate of the Reserve  Bank of  India, we  must hold that the claim of the Bank  to deduction  of the  amount of Rs. 13.48 lacs was well founded  and it  was rightly  allowed by the Industrial Tribunal.      That takes us to the last item in dispute which is Item 6(e) of  the First  Schedule. That item requires that in the case   of    foreign   banking    companies,   Proportionate Administrative (over Head) Expenses of Head office allocable to Indian  business shall  be deductible  in computing gross profits. The  Bank claimed  that a sum of Rs. 43.40 lacs was Liable to  be deducted  under this  item, while according to the workmen, the claim for deduction was admissible 145 Only to  the  extent  of  Rs.  43.10  lacs.  The  Industrial Tribunal, however, did not accept the figure of either party but made  its own  calculations and  came to  the conclusion that the  proportionate administrative expenses allocable to Indian business  amounted to  Rs. 23.88  lacs and hence that was the  amount deductible under this item. This decision of the Industrial  Tribunal was  challenged on  both sides.  In order  to   appreciate  the  grounds  of  challenge,  it  is necessary to understand how the Industrial Tribunal actually calculated the proportionate administrative expenses of Head office allocable  to Indian  business. Foot  Note 3  of  the First Schedule  provides that  proportionate  administrative expenses of  Head office allocable to Indian business should be calculated  "in the  proportion of  Indian  Gross  profit (Item  No.   7)  to   total  world   gross  profit  (as  per consolidated profit  and loss  account, adjusted  as in Item No. 2 above only)". Now, the administrative expenses of Head office were  admittedly Rs.  120.52 lacs  and if  X was  the amount of proportionate administrative expenses allocable to Indian business, X/120 would be equal to Indian gross profit under Item  No. 7/total  world gross  profit adjusted  as in Item No.  2. The  Indian gross  profit for  the  purpose  of working out this proportion was calculated by the Industrial Tribunal by  taking the  figure of  Rs. 67.39 lacs which was the net  profit shown  in the  profit and  loss account  and adding to  it Rs. 19.52 lacs representing bonus to employees and Rs.  1.89 lacs  representing depreciation  and  it  was, thus, determined  at  Rs.  88.80  lacs.  Here  there  was  a manifest error committed by the Industrial Tribunal. The net profit of  Rs. 67.39  lacs shown  in  the  profit  and  loss account was  admittedly arrived  at after deducting from the profit of  the Bank  a sum  of Rs.  43.10 lacs in respect of actual head  office  administrative  expenses  allocable  to India. This  amount of Rs. 43.10 lacs was obviously required to be  added back, since Item 6(e) provided for deduction of proportionate Head  office administrative expenses allocable to Indian  business and  the same item could not be deducted twice over  in arriving  at the  Indian gross  profit. It is true  that  Item  1  of  the  First  Schedule  requires  the Industrial  Tribunal  to  take  as  the  starting  point  of computation "net  profit as  shown in  the profit  and  loss account after  making usual  and necessary  provisions". But the  fact   that  Item   6(e)  provides   for  deduction  of proportionate  administrative   expenses  of   Head   office allocable to Indian business in arriving at the gross profit

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for the  purpose of  bonus under  Item 7  shows that the net profit contemplated  in Item  1 is  net  Profit  arrived  at without deducting  proportionate administrative  expenses of head office  allocable  to  Indian  business.  That  is  not regarded  by   the    Legislature  as  usual  and  necessary provision should be deducted for the purpose of ascertaining net profit  under Item  1.  This  position  was  indeed  not disputed by  the learned  counsel appearing on behalf of the Bank and  it is  therefore, obvious  that the  amount of Rs. 43.10 lacs should be added back in arriving at the figure of net profit  for the  purpose of  Item 1.  Then again,  it is clear from  the calculation  made by the Industrial Tribunal that in  computing the  Indian gross Profit at the figure of Rs. 88.80 lacs, the Industrial Tribunal added black only the amounts representing  bonus to employees and depreciation as set out in Item 2 of the First Schedule. But Foot Note 3 146 requires that  the Indian  gross profit should be determined as shown  in Item  7 and, therefore, it was necessary to add back not  only amounts  under item  2 but also amounts under items 3  and 4  and to  deduct amounts  under item 6 for the purpose of arriving at the Indian gross profit under item 7. This, the  Industrial Tribunal  clearly  failed  to  do.  We would, therefore,  direct the  Industrial Tribunal. When the case goes  back to  it, to  determine the  figure of  Indian gross profit  as set  out in  item 7  after adding  back the amount of Rs. 43.10 lacs the figure of net profit under Item 1.      The workmen  also pointed  out  another  error  in  the calculation made  by the Industrial Tribunal and that was in regard to computation of total world gross profit. Foot Note 3 requires  that the  total gross  profit should  be as  per consolidate profit  and loss  account after adjustment as in Item  2.   That  means   that  the  provision  made  in  the consolidated profit and loss account for bonus to employees, depreciation,  development  rebate  reserve  and  any  other reserves should  be added back to the net profit as shown in the consolidated  profit and loss account for the purpose of arriving  at   the  total   world  gross  profit.  What  the Industrial Tribunal, however, did in the present case was to add back  merely the  provision made  in the profit and loss account of  the Indian  business for  bonus to employees and depreciation. The  Industrial Tribunal  did not examine what was the  provision made  in the consolidated profit and loss account of  the Bank  for bonus  to employees, depreciation, development  rebate  reserve  and  other  reserves.  If  any provision were  made in  the consolidated  profit  and  loss account for  bonus to  employees, which would mean employees of the  Bank throughout  the world,  depreciation  on  world assets and  development  rebate  and  other  reserves,  such provision would  have to  be added back to the net profit as shown in  the consolidated  profit and  loss’ account.  This would have  to he  done by  the Industrial Tribunal when the matter goes back to it on remand.      The Industrial  Tribunal will,  thus, after calculating the Indian  gross profit  above,  apply  the  proportion  of Indian gross  profit/total world  gross profit to the amount of Rs.  120.52 lacs representing the administrative expenses of   Head    Office   and    determine   the   proportionate administrative expenses  of head  office allocable to Indian business for the purpose of deduction under Item 6(e) of the first Schedule.      We must also refer to one other ground of challenge put forward on  behalf of  the Bank  against the decision of the Industrial Tribunal  in regard  to  the  amounts  deductible

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under cls.  (ii) and  (iii) of  the proviso to Item 2 of the Third Schedule. This ground of challenge was urged on behalf of the  Bank  in  support  of  the  ultimate  award  of  the Industrial Tribunal  determining the  bonus payable  to  the workmen at  a little  over 9  per cent.  Of their  salary or wage. It was clearly open to the Bank to urge this ground of challenge since  the Bank  was entitled to support the award of the Industrial Tribunal 147 even on  a ground  decided against it. Vide J. K. Synthetics Ltd. v.  A J.  K. Synthetics Mazdoor Union(1) and Management of I.C.C. v. Workmen(2). The controversy arising out of this ground of challenge turned on the true interpretation of the works ’working  funds’ in  clauses (ii)  and  (iii)  of  the proviso to  Item 2  of the  Third Schedule.  The  Industrial Tribunal interpreted the words ’working funds’ to mean "paid up  capital,   reserves  and   deposits"  and  rejected  the contention of  the Bank  that they  also included borrowings from other  banking companies,  bills payable and balance of profit and  loss account.  This view taken by the Industrial Tribunal was  assailed on  behalf of the Bank at the hearing of the  appeal before us. The Bank contended that borrowings from other banking companies, the amounts of bills issued by the Bank  and balance of profit and loss account constituted part of  the working  funds of the Bank and were, therefore, within the  expression  "working  funds".  This  contention, plausible though  it may  seem at  first sight,  is, in  our opinion, not  well-founded. The  words "working funds", when used in  relation to  a  banking  company,  are  not  to  be construed in  their ordinary popular sense by reference to a dictionary. They  have a  history of their own and they have acquired a  definite meaning. These words were first defined in the  award made  by Mr.  K. C.  Sen in  1949 in regard to banks and  the definition  he gave  was that ’working funds’ consisted 1 of "paid-up" capital, reserves and deposits". So also  in  the  Sastri  Award  made  in  1953  in  regard  to Industrial desputes  between certain  banking companies  and their workmen,  the words  ’working funds’  were defined  to mean "paid-up  capital, reserves  and  the  average  of  the deposits for 52 weeks of each year for which weekly. returns of deposits are submitted to the Reserve Bank of India under the provisions  of the Reserve Bank of India Act". So far as banking companies  are concerned,  the words ’working funds’ have always  been understood  in this  sense and that is the sense in  which they must be deemed to have been used by the Legislature when  it enacted  cls. (ii)  and  (iii)  of  the proviso to  Item 2  of the  Third Schedule.  It  is  a  well settled rule  of interpretation  that when  the  Legislature uses certain  words which  have acquired  a definite meaning over a  period of  time, it must be assumed that those words have been  used by  the Legislature  in the  same sense. The words ’working  funds’ in cls. (ii) and (iii) of the proviso to  Item  2  of  the  Third  Schedule  must,  therefore,  be construed to  mean Paid  up capital, reserves and average of the deposits  for 52  weeks of  each year  for which  weekly returns of  deposits are  submitted to  the Reserve  Bank of India. It  could hardly  be disputed  that  borrowings  from other banking  companies the  amounts of bills issued by the Bank and  the balance of profit and loss account are neither reserves nor deposits and they are not liable to be shown in the weekly returns of deposits submitted to the Reserve Bank of India.  The Industrial  Tribunal was,  therefore right in excluding them from the category of ’working funds’ and this round of  challenge urged  on behalf  of the  Bank  must  be rejected.

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    (1) [1972]1 S.C.R. 651         (2) [1973] 1 S.C.R. 105. 148      We  accordingly   set  aside  the  award  made  by  the Industrial A  Tribunal and remand the case to the Industrial Tribunal with  a direction to dispose it according to law in the light  of the  decisions given  and observations made in this judgment.  Since the  workmen have partly succeeded and partly failed,  we think  that the fair order of costs would be that  each party  should bear  and pay  its own  costs of these proceedings. P.B.R                                Appeal allowed in part. 149