The Tinnevelly-Tuticorin Electric Supply Co. Ltd. vs Its Workmen

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 23 of 1958

Decision Date: 22 February 1960

Coram: P.B. Gajendragadkar, K.C. Das Gupta, Subbarao, K. Gupta

The appeal titled The Tinnevelly‑Tuticorin Electric Supply Co. Ltd. versus Its Workmen was decided on 22 February 1960 by the Supreme Court of India. The opinion was authored by Justice P. B. Gajendragadkar, with Justices Subbarao, K. Gupta and K. C. Das Gupta forming the bench. The case is reported in 1960 AIR 782 and 1960 SCR (3) 66, and further cited as R 1962 SC 1255 (4,9), RF 1972 SC 70 (21,25) and R 1972 SC 330 (7). The matter concerned the applicability of the Full Bench formula for the calculation of bonus under the provisions dealing with industrial disputes to workmen employed in an electricity undertaking, specifically within the framework of the Electricity Supply Act, 1948 (Act 54 of 1948). The headnote frames the central question: whether the Full Bench formula may be used to determine a bonus claim by workmen engaged in electricity concerns and undertakings. The Labour Appellate Tribunal, Bombay, had earlier held affirmatively on a Special Bench, and this decision was challenged by the corporate appellant. The appellant argued that the Electricity Supply Act, 1948, operated as a self‑contained code intended solely to regulate the business and affairs of electricity concerns, and that therefore the statutory formula for bonus should not be applied to the workmen of such an undertaking. The citation (1933) 1 ITR 197, 201 is also mentioned in support of the appellant’s submission.

The Court held that the Special Bench had correctly interpreted the matter and that its decision should be affirmed. It observed that the provisions of the Electricity Supply Act, 1948, and its schedules occupy a field of operation distinct from the principles governing industrial adjudication, and consequently there is no conflict between the two regimes; each retains its relevance and validity within its own sphere. While the Full Bench formula is designed to promote social justice by allocating a share of profits to workmen, thereby narrowing the gap between actual earnings and living wages, the Electricity Supply Act itself makes no provision for wages. The Court rejected the contention that workmen in electricity undertakings could be denied social justice merely because the Act does not address wages. It emphasized that the same industrial principles that guide the framing of a wage structure for such employees must also be applied to resolve the question of bonus. The Court further noted that the working‑sheet prepared under the accounting method required by the Act cannot serve as a basis for computing bonus, since it does not permit the determination of gross profit. Accordingly, the Full Bench formula must be applied using the profit‑and‑loss account that a company prepares under the Companies Act. The decision in Bayoda Boyough Municipality v. Its Workmen [1957] SCR 33 was referred to in support of this approach. Finally, the Court pointed out that the legislature, in enacting clause (vi) of paragraph 17(2)(b) of the Sixth Schedule to the Electricity Supply Act, expressly intended to include a claim of bonus within the expenses covered by the Schedule, thereby dispelling any doubt that subsequent amendment of clause (xiii) altered that intention.

In this case the Court explained that the provision under discussion was intended to be covered by the statute and that the purpose of the amendment adding clause (xiii) was to eliminate any uncertainty about that coverage. The matter was presented before the Court in a civil appeal numbered 23 of 1958. The appeal was taken by special leave from a judgment dated 29 September 1956 that had been rendered by the Labour Appellate Tribunal in Bombay in Appeal (Mad.) No. 96 of 1956. That judgment itself arose out of an award dated 9 April 1956 which had been made by the Industrial Tribunal of Madras in industrial dispute No. 52 of 1954. Counsel for the appellant were A. V. Viswanatha Sastri and Naunit Lal, while counsel for the respondents were T. S. Venkataraman and M. K. Ramamurth. The appeal was heard on 22 February 1960 and the judgment was delivered by Justice Gajendragadkar.

The appellant, identified as the Tinnevelli‑Tuticorin Electric Supply Co., Ltd., based in Tuticorin, operated as an electric supply undertaking. It functioned as a licensee of the State Government of Madras and was subject to the provisions of the Indian Electricity Act, 1910 (Act 9 of 1910) and the Electric Supply Act, 1948 (Act 54 of 1948), the latter of which the Court referred to simply as “the Act.” The company’s business involved purchasing electrical energy from the State’s hydro‑electric projects and distributing that electricity to consumers located within the geographical area specified in its licence, namely the municipalities of Tinnevelli and Tuticorin and the surrounding region.

The workmen of the appellant, who were subsequently referred to in the judgment as the respondents, presented a series of demands concerning their terms of employment. These demands gave rise to an industrial dispute. The Government of Madras referred the dispute to the Industrial Tribunal at Madurai for determination under section 10(1)(c) of the Industrial Disputes Act, 1947 (Act XIV of 1947). Among the matters referred for adjudication was the respondents’ claim for an additional bonus for the financial year 1952‑53.

While maintaining that it was not legally obliged to pay any bonus, the appellant nevertheless voluntarily paid the respondents an amount equal to two months’ basic wages, describing that payment as a bonus. Nevertheless, the respondents argued that they were entitled to a further bonus, and this claim formed one of the issues that the tribunal was required to resolve.

Before the tribunal, the appellant argued that because it operated as a licencee under the Act, any claim for bonus that fell outside the statutory scheme of the Act could not be entertained. To support this position, the appellant relied on the design of the Act, which limited the profit‑making capacity of electricity undertakings to a prescribed ceiling, allowing a surplus only in the event of over‑charging as defined by the rules. The appellant maintained that, given the purpose, object, and background of the Act governing its operations, the respondents’ demand for an additional bonus was fundamentally mistaken. The appellant asserted that no bonus claim could be considered unless it was expressly provided for within the provisions of the Act that regulated its business.

Contrary to the appellant’s arguments, the Industrial Tribunal rejected those contentions. The tribunal held that the appellant was indeed liable to pay the respondents an amount equal to two months’ basic wages as an additional bonus, thereby rejecting the appellant’s reliance on the statutory limitations of the Act.

The award passed on 4 March 1955 required the appellant to pay the respondents an additional bonus equivalent to two months’ basic wages. The appellant challenged this award by filing Appeal No 56 of 1955 before the Labour Appellate Tribunal, contending that an additional bonus could be awarded only when there was proof of an excess of “clear profits over reasonable return” as defined by the Act, and that without such proof the award was unwarranted.

At about the same time, several other appeals raised the same question before the Labour Appellate Tribunal, and the decisions issued by the Tribunal showed a divergence of opinion on the effect of the Act with respect to bonus claims by employees of electricity concerns and undertakings. To resolve this apparent conflict, the Chairman of the Labour Appellate Tribunal issued an administrative order directing that all appeals presenting this issue should be grouped together and heard before a specially constituted fuller bench of five members. The Chairman believed that a decision by a fuller bench would finally settle the conflicting rulings and would provide clear guidance to lower tribunals in future cases.

The specially constituted bench subsequently heard the grouped appeals, including the appellant’s appeal. It held that a bonus could be ordered to be paid notwithstanding the limitations imposed by the Act and that the quantum of the bonus for electricity concerns should be determined by applying the Full Bench formula laid down for that purpose. After resolving the question of law in this manner, the bench remanded the appeals to the respective benches of the Labour Appellate Tribunal for disposal in accordance with the law.

Later, the appellant’s appeal was taken up by the Industrial Tribunal at Madras, after the Industrial Tribunal at Madurai was abolished and its file transferred to Madras. The Madras tribunal considered the merits of the parties’ contentions, applied the Full Bench formula, and on 9 April 1956 passed an award directing the appellant to pay an additional bonus of two months’ basic wages to the respondents.

The appellant then preferred another appeal before the Labour Appellate Tribunal, recorded as Appeal (Madras) No 96 of 1956. It raised several merits‑based submissions, arguing that the direction to pay an additional bonus of two months’ basic wages was improper and unjustified. The appellate tribunal rejected most of the appellant’s submissions, but it found that the calculation of the available surplus used by the lower tribunal was erroneous. After correcting that error, the appellate tribunal held that the additional bonus payable by the appellant to the respondents should be one month’s basic wage.

The appeal before this Court arose by special leave against a decision of the Labour Appellate Tribunal, which had reduced the additional bonus liability of the appellant to the amount of one month’s basic wage. The principal question presented for determination was whether the fuller bench of the Labour Appellate Tribunal was correctly empowered to apply the Full Bench formula in adjudicating the respondents’ claim for bonus against the appellant. The Court noted that the fuller bench of the Labour Appellate Tribunal had previously addressed two distinct legal questions in the case of U. P. Electricity Supply Co. Ltd. & Ors. v. Their Workmen (1). The first question concerned the applicability of the Full Bench formula to a claim for bonus by employees of an electricity supply undertaking against their employer. The second question related to the scope of statutory depreciation that could be taken into account under the Full Bench formula, specifically whether the calculation should include both the initial depreciation and any additional depreciation allowed for tax relief under section 10(2)(vi‑b) of the Income‑tax Act. The fuller bench had held that, for the purpose of the formula, only the normal income‑tax depreciation— including any multiple‑shift depreciation—should be allowed. That decision was subsequently challenged before this Court in Sree Meenakshi Mills Ltd. v. Their Workmen (1); the challenge was rejected and the fuller bench’s decision was affirmed. In the present appeal, the appellant contested the correctness of the fuller bench’s first decision, namely the application of the Full Bench formula to the bonus claim.

The appellant’s contention was that a claim for bonus should arise only when the “clear profits” of an electricity undertaking exceed the “reasonable return” prescribed by the Act. The appellant argued that the Act constitutes a comprehensive code governing the business and affairs of electricity concerns, including the rights of employees to claim bonus, and therefore any industrial dispute concerning bonus must be resolved solely on the basis of the statutory provisions and not by resorting to the Full Bench formula. Regarding the amount of bonus to be awarded, the appellant suggested that the appropriate quantum should be determined on a case‑by‑case basis, proposing that a fair measure might be one‑quarter of the surplus of clear profits over the reasonable return. Before addressing the merit of this argument, the Court indicated that it would first examine the scheme of the Act and consider the relevant provisions.

The Court noted that the Indian Electricity Act of 1910 contains a number of provisions that are directly relevant to the issues before it. Section 3(2)(d)(i) empowers the State Government, upon receipt of an application in the prescribed form and payment of any prescribed fee, to grant a licence to any person after consulting the State Electricity Board. The licence may prescribe the limits and conditions within which the supply of energy must be either compulsory or permissive, and may include any other matters that the State Government deems appropriate. Section 3(f) further provides that the provisions contained in the Schedule to the Act are deemed to be incorporated into every licence granted under this part, except to the extent that the Schedule itself specifies a different treatment. Section 4(1)(b) gives the State Government the authority to revoke a licence where the licencee breaches any term or condition of the licence that the licence expressly declares to be a ground for revocation. Section 7(1) creates an option for the authorities named in that provision to purchase the undertaking. Under Section 11, the licencee is required to prepare and submit to the State Government, or to any authority appointed by the State Government, an annual statement of account of the undertaking. This statement must be rendered on or before the prescribed date each year, in the form and containing the particulars prescribed for that purpose. Section 22 imposes on the licencee an obligation to supply energy subject to the conditions prescribed by the Act, while Section 23 forbids the licencee, when concluding any agreement for the supply of energy, from showing undue preference to any particular person. The licencee is also prohibited from charging rates higher than those permitted. The appropriate Government is authorised to fix the maximum charges, and by appropriate rules both maximum and minimum charges have been prescribed. The Court then turned to Section 57, which deals with the licencee’s charges to consumers. Section 57 states that the provisions of the Sixth Schedule and the Seventh Schedule are deemed to be incorporated into the licence of every licencee who is not a local authority, in the manner specified therein. The section further provides, inter alia, that from a specified date the licencee must comply with the provisions of those Schedules and not with the provisions of the 1910 Act that are inconsistent with them. Moreover, any licence, law, agreement or instrument that is inconsistent with Section 57A and the aforementioned Schedules shall, in relation to the licence, be void and of no effect. The Court emphasized that Section 57, together with the related provisions, lays down the rules that govern the licencee’s charges to consumers and that these rules have effect in relation to the licence wherever the provisions of the Schedules apply.

The Court explained that the Sixth Schedule and the table attached to the Seventh Schedule are, under sub‑section (1), deemed to be incorporated in the licence granted to a licensee. Those provisions deal with the appointment of the Board and the rating committee. Section 57A, which the Court then described, sets out the principles and the procedure that the rating committee must follow when it prepares its report for the State Government on the electricity charges that the licensee may levy on any class or classes of consumers. The Court said that this provision reveals the legislative intention of fixing both minimum and maximum rates that may be charged to consumers. Sections 78 and 79 were noted as giving the authority to make rules and regulations. The Act contains nine Schedules. Schedule Six sets out the financial principles and their application; Schedule Seven deals with depreciation of assets; Schedule Eight provides the method for determining the cost of production of electricity at generating stations; and Schedule Nine prescribes how the costs of production at generating stations are to be allocated. The Court then turned to the Sixth Schedule because the appellant, represented by counsel, had relied on its scheme to support his main argument. Those provisions prescribe the financial principles that must be observed by electricity concerns and undertakings covered by the Act. The appellant urged that these principles, together with the remaining Schedules and the provisions of the Act, form a self‑contained code that governs the business and financial affairs of electricity concerns, and that consequently the claim of the appellant’s employees for a bonus should be decided in accordance with those provisions. Paragraph 1 of the Sixth Schedule reads: “1. Notwithstanding anything contained in the Indian Electricity Act, 1910 (9 of 1910) (except sub‑section (2) of section 22A), and the provisions in the 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.” The Court noted that this provision is subject to four provisos, which it deemed unnecessary to set out. Paragraph 2 of the Sixth Schedule states: “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 accordance with the direction of the State Government.” The Court recorded these excerpts to show the statutory framework that governs the financial adjustments and reserves that a licensee must maintain.

In the schedule, the licence required the licencee to make the Tariffs and Dividend Control Reserve available for disposal only to the extent that its clear profit fell short of the reasonable return in any accounting year. When the undertaking was purchased under the terms of its licence, any balance that remained in the Tariffs and Dividend Control Reserve had to be transferred to the purchaser, and the reserve was to be maintained by the purchaser in the same form. Paragraph three authorised the creation of a separate reserve called the Contingencies Reserve, which could be established either from an existing reserve or from the revenue of the undertaking. Paragraph four then prescribed the manner in which the licencee must appropriate amounts to the Contingencies Reserve from the revenue of each accounting year. Paragraph six dealt with depreciation of fixed assets used in the electricity‑supply business. It directed that, in each year, the licencee should allow an amount for depreciation that, if set aside annually throughout the prescribed period and accumulated at compound interest of four per cent per annum, would produce by the end of the period an amount equal to ninety per cent of the asset’s original cost after taking account of sums already written off or set aside in the books. The annual interest on the accumulated balance was to be allowed as an expense from revenue together with the annual incremental deposit. Paragraph seven addressed assets that had ceased to be available for use because of obsolescence, inadequacy, superfluity or any other reason. It permitted the licencee to describe such assets as no longer in use and barred any further depreciation of those assets as a charge against revenue. Paragraph eight prohibited any further depreciation where an asset had already been written down in the books to ten per cent or less of its original cost. Under paragraph nine, if a fixed asset was sold for a price exceeding its written‑down cost, the excess amount had to be credited to the Contingencies Reserve. Paragraph ten required the consent of the State Government before the licencee could transfer sums to a reserve or declare a dividend that exceeded three per cent on share capital, or before taking any other action specified in that paragraph. Paragraph thirteen imposed limits on the ordinary remuneration of managing agents. Paragraph fourteen limited the composition of the Board of Directors to no more than ten directors. Paragraph fifteen set out the procedure for the licencee to make any capital expenditure that exceeded Rs 25,000 or two per cent of the capital base within three years before the next option of purchase under the licence became available. Paragraph sixteen contained an arbitration clause. Finally, paragraph seventeen provided definitions for the schedule; it defined “capital base” in subsection (1) and defined “clear profit” in subsection (2) as the difference between the amount of income and the sum of expenditure plus specific appropriations made up in each case as

The Act prescribes certain matters in several sub‑clauses of clauses (a), (b) and (c). It is necessary to refer to two sub‑clauses that are part of clause (b). The first, labelled (xi), reads: “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.” The second, labelled (xii), reads: “contributions to Provident Fund, staff pension, gratuity and apprentice and other training schemes.” Paragraph 17(9) of the Schedule defines a reasonable return as follows: “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 issues that the Court had to determine in the present appeal was whether a bonus paid by the employer to his employees fell within paragraph 17(2)(b)(xi) of the Sixth Schedule. The Court observed that the provisions of the Act generally, and those of the Sixth Schedule specifically, were undoubtedly intended to control and regulate the rates chargeable to consumers and to provide the method and machinery by which the electrical system of the country could be properly coordinated and integrated. The rates chargeable are fixed, and a reasonable return is provided for, but the Act does not intend to guarantee a minimum return to the undertaking. Its purpose is to prohibit a return higher than the one specified. The Act also defines and enumerates the appropriations permissible under revenue receipts and prescribes a clear profit as contemplated by the statute. Large powers have been given to the Electricity Authority, Boards and Councils for the purpose of canalising the activities of the concerns and for adjusting those activities in response to changing conditions and circumstances. Just as the Act makes provision for the control of rates chargeable to consumers, its policy is also to give a fair deal to the undertaking and to persons engaged in the business of supplying electricity. For this twin object a working‑sheet is required to be prepared under the provisions of the Act. The Court noted that the working‑sheet so prescribed is essentially different from the balance‑sheet and profit‑and‑loss account that companies keep under the Companies Act. The determination of clear profits on the basis of the working‑sheet proceeds on consideration of previous losses, contributions towards the arrears of depreciation and several appropriations authorised by the State Government—matters that have no relevance to commercial accounting. The principles of commercial accounting on which balance‑sheets and profit‑and‑loss accounts are prepared are very different from those that govern the working‑sheet required by the Act.

The Court observed that the working‑sheet required under the Act must be prepared according to the specific accounting principles laid down in that legislation. The matter before the Court was whether the appellant’s contention was correct that the present controversy, which arose from the respondents’ demand for a bonus, should be decided solely by applying the provisions of the Act and that the Full Bench formula should have no application. In examining this contention, the Court noted that the subject matters dealt with by the Full Bench formula and those addressed by the Act belong to entirely separate domains. The Full Bench formula, the Court explained, was developed through industrial adjudication with the purpose of achieving social justice for workmen. It is now well‑settled that a claim for bonus by workmen is justified because they participate in the employer’s profit and therefore have a right to a share of that profit, a share that is intended to bridge the gap between their actual wages and the living wage they aspire to receive. By contrast, the Act does not aim to resolve this issue at all. Although the Act contains detailed provisions covering the matters within its scope, it makes no reference to the wages that an employer may be required to pay his employees. The Court asked whether considerations of social justice could be deemed irrelevant when fixing the wage structure between an electricity undertaking and its employees. It held that none of the Act’s provisions can provide even the slightest assistance to industrial tribunals in determining such a wage structure. Instead, tribunals must approach the problem by applying principles of social justice together with other relevant factors, such as the employer’s capacity to pay and the wages prevailing in comparable trades within the same region. In the same way that the wage‑structure question for electricity concerns must be resolved apart from the Act and in accordance with industrial principles, the bonus issue must also be addressed using that approach. The Court stressed that there is no conflict between the Act and the principles of industrial adjudication; they simply operate in different fields, and each retains its full relevance and validity within its own domain. The Court further explained that the method of accounting prescribed by the Act for preparing the working‑sheet differs substantially from the commercial accounting method that produces a profit‑and‑loss account showing gross profit. Determining gross profit is the initial step that industrial tribunals undertake when applying the Full Bench formula, and such gross profit cannot be derived from the working‑sheet prepared under the Act. While acknowledging that the appellant is required to maintain accounts on a commercial basis under the Companies Act, the Court concluded that, for the purpose of adjudicating the respondents’ claim for a bonus, the balance‑sheet and profit‑and‑loss account prepared by the appellant must be the basis of consideration.

The Court explained that the balance‑sheet and profit‑and‑loss account prepared by the appellant under the Companies Act were to be taken as the basis for determining the respondents’ claim for bonus in the present proceedings. This approach was exactly the one adopted by the tribunals below, and the Court was satisfied that the Labour Appellate Tribunal had correctly concluded that the respondents’ claim for bonus must be assessed by applying the Full Bench formula.

To illustrate the principle, the Court referred to its earlier decision in Baroda Borough Municipality v. Its Workmen. In that case the municipality had argued that the Bombay Municipal Boroughs Act of 1925, which governed the municipality, did not authorize any claim for bonus and therefore a labour court or tribunal could not order payment of bonus to municipal employees. The Court rejected that argument, observing that a demand for bonus is an industrial claim governed by the Industrial Disputes Act, 1947, and not by the Municipal Act. Consequently, the existence or absence of a provision on bonus in the Municipal Act was irrelevant to the determination of the claim. The Court therefore held that the lack of a bonus provision in the municipal statutes was neither determinative nor conclusive of the issue before it.

The Court then turned to the next question, namely whether a claim for bonus could be included under paragraph 17(2)(b)(xi) of the Sixth Schedule. That clause permitted the inclusion, as expenditure, of other expenses that were admissible under the Income‑Tax Act in force at the time and that arose from, or were ancillary or incidental to, the business of electricity supply. The Court noted that bonus paid by an employer is indeed an expense admissible under section 10(2)(vi) of the Income‑Tax Act. However, the appellant contended that such bonus could not be said to arise from, or be ancillary or incidental to, the electricity‑supply business. The appellant argued that clause (xi) imposed two tests: first, the expense must be admissible under the Income‑Tax Act (which was satisfied); second, the expense must arise from or be ancillary to the electricity‑supply business (which the appellant claimed was not satisfied). The appellate tribunal had held that both tests were satisfied, finding that the bonus expense could indeed be characterised as arising from, or being ancillary or incidental to, the business of electricity supply.

In its opinion, the Court found it difficult to accept the appellant’s construction of clause (xi). The Court expressed doubt about the appellant’s argument that the latter part of the clause could not be reasonably interpreted to include the bonus expenditure, indicating that the tribunal’s broader interpretation was more consistent with the legislative intent.

In this case the Court observed that interpreting the latter part of clause (xi) of paragraph 17(2)(b) of the Sixth Schedule was not a feasible task for the tribunal. The Court further noted that a subsequent amendment made in 1957 added clause (xiii) to paragraph 17(2)(b) of the Sixth Schedule. The newly inserted clause, numbered (xiii), was quoted in full: “Bonus paid to the employees 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.” The Court held that after this insertion there could be no doubt that any amount paid by an employer to his employees as bonus would unquestionably qualify as admissible expenditure under paragraph 17(2)(b). In the Court’s view the purpose of inserting this clause could be reasonably explained as the Legislature’s attempt to clarify its original intent. The Court explained that when clause (xi) was originally enacted the legislature intended to include bonus claims within the expenses covered by that clause, but to remove any possible ambiguity the legislature subsequently provided a specific category for bonuses. The Court added that otherwise it would be difficult to understand why contributions to the Provident Fund had always been treated as admissible expenditure under clause (xii) while bonus could not have been treated as admissible expenditure under clause (xi). Accordingly, the Court expressed willingness to adopt the construction of clause (xi) that had been adopted by the appellate tribunal. Assuming this construction to be correct, the Court concluded that bonus has always been an admissible expenditure within the scheme of the Act, and therefore there is no inconsistency between the Act’s scheme and the respondents’ claim in the present case. The Court also observed that the appellant appeared to have conceded this point before the appellate tribunal. Consequently, the Court held that the appellate tribunal was correct in concluding that the Full Bench formula should apply in adjudicating the respondents’ claim for bonus against the appellant in these proceedings. The Court mentioned that before the Full Bench arrived at this conclusion, there had been divergent opinions in the decisions of the Labour Appellate Tribunals, but in light of the present conclusion it was unnecessary to refer to those earlier decisions. Turning to the merits of the award, the Court addressed first the appellant’s claim for rehabilitation. The Court recorded that, prior to the Labour Appellate Tribunal, the respondents had fairly conceded that, in computing the net available surplus for the purpose of the bonus payable to the respondents, at least income tax at the rate of seven annas in a rupee on the gross profits after depreciation, together with a contingency reserve of Rs. 6,047, had to be allowed, and that in regard to

In this case the Court noted that, for the purpose of normal statutory depreciation, the correct amount to be taken was Rs 99,038 rather than the Rs 90,393 that had been recorded by the industrial tribunal. Regarding the claim for rehabilitation, the appellant presented no evidence at all, and therefore the appellate tribunal declined to award any sum for rehabilitation beyond the total amount of Rs 1,13,950 that had already been granted. The Court agreed with the appellate tribunal’s view that it was improper to apply a factor of 2‑7 to every asset purchased before 1945, and it was also improper to use the estimated life of the assets as set out in the Schedule to the Electric Supply Act without first subtracting the portions of the lives that had already expired. Because of this reasoning, the Court saw no basis for the appellant to complain about the tribunal’s finding on the rehabilitation issue. The appellate tribunal had fairly observed that, should a future dispute arise between the appellant and its employees, the appellant could substantiate any rehabilitation claim by producing appropriate evidence. The appellate tribunal had allowed the appellant’s claim for a triple‑shift allowance in respect of the mains, and there was no dispute on that point. The appellant, however, argued that Rule 8 of the Income‑Tax Rules supported its claim for extra shift allowance on all of its electric plant and machinery under Entry IIIE(1). Rule 8 provides that, for depreciation of buildings, machinery, plant or furniture, the allowance under section 10(2)(vi) of the Act shall be a percentage of the written‑down value or of the original cost, whichever is applicable, equal to one‑twelfth of the number shown in the second column of the prescribed table. The rule contains two provisos, which the Court did not need to set out. The appellant relied on Entry IIIE(1), which deals with electric plant, machinery and boilers. The respondents, on the other hand, contended that the appellant’s claim should fall under Entries IIIC(4) and IIIC(5), which relate respectively to underground cables and wires and to overhead cables and wires, and that the claim was therefore inadmissible. To support this argument the respondents referred to a remark against item 3 on page 8 of the Rules, which indicates that the benefit claimed does not apply to any item of machinery or plant that is specifically excepted by the letters N, E, S, A. These letters stand for “No Extra Shift Allowance” and appear against items listed in IIIC(4) and IIIC(5). Consequently, the question before the appellate tribunal was whether the appellant’s claim fell under Entry IIIE(1) or under Entries IIIC(4) and IIIC(5). The appellate tribunal observed that…

The tribunal observed that the appellant had not demonstrated that it had ever presented a claim for shift depreciation concerning its cables and wires before the income‑tax authorities, nor had it shown that such a claim had been accepted as admissible by those authorities. The tribunal further noted that, even assuming the appellant’s contention that the cables and wires fell within the category IIIE (1), it was difficult to understand why a separate provision for depreciation of cables and wires existed under the categories IIIC (4) and IIIC (5). Moreover, the tribunal was not convinced that the cables and wires would lose value to a materially greater degree simply because electrical energy passed through them for more than one shift. Consequently, based on the material that was before them, the tribunal found no justification for allowing the appellant any extra shift depreciation on underground or overhead cables through a prior charge. Accordingly, the appellant’s request for a provision of Rs 23,516 in this respect was rejected. The tribunal therefore concluded that the appellant was seeking to obtain this amount as a prior charge, but that such a claim could not be sustained because the appellant had not placed sufficient material before the tribunal for the claim to be examined and granted. In these circumstances, the tribunal saw no basis on which it could intervene in favour of the appellant. The decision, however, did not prevent the appellant from making a similar claim in the future, provided it could support the claim with proper evidence. As a result, the appeal was dismissed, and costs were awarded against the appellant.