{"id":91686,"date":"1972-12-20T00:00:00","date_gmt":"1972-12-19T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/shri-ambica-mills-ltd-no-1-vs-the-textile-labour-association-on-20-december-1972"},"modified":"2018-04-20T13:19:45","modified_gmt":"2018-04-20T07:49:45","slug":"shri-ambica-mills-ltd-no-1-vs-the-textile-labour-association-on-20-december-1972","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/shri-ambica-mills-ltd-no-1-vs-the-textile-labour-association-on-20-december-1972","title":{"rendered":"Shri Ambica Mills Ltd. No. 1 vs The Textile Labour Association, … on 20 December, 1972"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Shri Ambica Mills Ltd. No. 1 vs The Textile Labour Association, … on 20 December, 1972<\/div>\n
Equivalent citations: 1973 AIR 1081, \t\t 1973 SCR (3) 123<\/div>\n
Author: A Alagiriswami<\/div>\n
Bench: Alagiriswami, A.<\/div>\n
           PETITIONER:\nSHRI AMBICA MILLS LTD.\tNO. 1\n\n\tVs.\n\nRESPONDENT:\nTHE TEXTILE LABOUR ASSOCIATION, AHMEDABAD,, AND VICE VERSA\n\nDATE OF JUDGMENT20\/12\/1972\n\nBENCH:\nALAGIRISWAMI, A.\nBENCH:\nALAGIRISWAMI, A.\nDUA, I.D.\nVAIDYIALINGAM, C.A.\n\nCITATION:\n 1973 AIR 1081\t\t  1973 SCR  (3) 123\n 1973 SCC  (3) 787\n\n\nACT:\nPayment\t of  Bonus  Act\t 1965,\tSecond\tSchedule  Item\t6(g)\n-Allowable   deductions\t under-Subsidy'\t  meaning   of-Cash\npayments   by\tway  of\t assistance   are   subsidy-Indirect\nassistance  like  Customs  Drawback and\t relate\t on  Railway\nFreight is not 'Subsidy'-Subsidy to be allowable under\tItem\n6(g) must be by Govt. body or Body Corporate established  by\nany law for the time being in force-Distinction between Body\nCorporate established 'by' law and 'under' under law-Payment\nreceived  for  earlier year must be deemed to be  income  of\nyear of receipt especially where accounts maintained on cash\nbasis.\n\n\n\nHEADNOTE:\nThere  was a dispute between the appellant mills  and  their\nworkmen\t as  to the bonus payable for the  year\t 1967.\t The\ndispute was referred to the Industrial Court, Gujarat  under\ns.  73-A of the Bombay industrial Relations Act. 1946.\t The\nworkmen claimed inter alia that bonus should be paid at\t the\nrate  of  6.59% of the annual earnings.\t The  Mills  on\t the\nother  had  contended  that bonus was payable  only  at\t the\nminimum rate of 4%.  The Mills in calculating the  available\nsurplus\t claimed deductions of certain items  falling  under\nitem 6(g) of the Second Schedule of the Payment of Bonus Act\n1965,  as subsidies.  The dispute centred round the  meaning\nof the word 'subsidy' in item 6(g) of the Second Schedule to\nthe  Payment of Bonus Act.  Another incidental question\t was\nwhether\t the  Joint Plant Committee or\tthe,  Indian  Cotton\nMills  Federation was a 'Body Corporate established  by\t any\nlaw for the time being in force'.\nHELD  :\t (i) The Industrial Court was right in\tholding\t (a)\nthat  the  word Subsidy' cannot be confined only  to  those\ncases where cash payment is made by Government in order that\nan  industry  may survive, (b) that even  if  assistance  is\ngiven  by  way of an incentive it would not cease  to  be  a\nsubsidy\t provided  it  is a cash payment  given\t by  way  of\nassistance   and  (c)  that  certain  types  of\t  assistance\nparticularly those Which are only indirect like rebates etc.\nshould be excluded. [127D]\nWhether the grant is made to a single establishment or it is\ngranted\t on  certain terms which make it  available  to\t all\npersons\t and  establishments carrying on the  same  industry\ndoes not make any difference in,; principle.  The subsidy is\nreceived  by the concern or establishment carrying  on\tthat\nindustry or activity. [129E-F]\nIn  view  of the clear provision in item  6(g)\tfor  subsidy\nbeing  deducted\t it was not open to the\t Court\tto  consider\nwhether\t it  was  proper  to deduct  the  subsidy  from\t the\nallocable  surplus.   But  the\tword  'Subsidy'\t should\t  be\nrestricted to the narrowest possible limits and should\ttake\nin,  only, direct cash subsidies as contemplated under\titem\n6(g).\tIt  cannot cover indirect  assistance  like  Customs\nDrawback or rebate on railway freights. [13OA-C]\nThe mere fact that the full excise duty and railway  freight\nis  paid'  in  the first instance and part of  it  is  later\nrefunded should not make\n\t  123\n124\nany difference to the ultimate fact that what is paid by the\nmanagement   is\t A  ,only  concessional\t excise\t  duty\t and\nconcessional freight. [130F]\nSona  Valley  Portland\tCement Co. v.  The  Workmen,<\/a>  [1972]\nL.L.J.,\t 642 and Bengal Textiles Association v. I.T.  Commr.\n1960 A.I.R. 1320, referred to.\nAccordingly,  while  item I claimed by the  appellant  Mills\ni.e. the subsidy paid by the Government should be deemed  to\nbe a permissible deduction, items 3 & 4 were not permissible\ndeductions.\n(ii)  (a)  The\tJoint Plant Committee  is  certainly  not  a\nGovernment Body.  It seems to be more or less functioning on\nan  informal basis.  It does not seem to have any  statutory\npowers.\t The decision of the Industrial Court that the\tcash\npaid  by the Body is a deductible item could not be  upheld.\nItem  2 claimed by the appellant Mills was therefore  not  a\npermissible deduction. [133C-D]\n(b)Item 5 claimed by the Company was also not an allowable\n,deduction because the Indian Cotton Mills Federation  which\nmade the ,cash payment in this case was not a Body Corporate\nestablished  by\t any law for the time being in\tforce.\t The\ncontention that the words 'body corporate established by any\nlaw'  should  be  deemed to include even  a  body  corporate\nestablished under any law i.e. even a company, could ,not be\naccepted. [133G]\nMajoar\tSahkari\t Bank Ltd. v. M. N. Jujumdar & Anr.  1955  2\nL.L.J. 755 applied.\n(iii)The  amount of Rs. 6873 due for the year 1966  but\nreceived (under item 1) in 1967 should also be deemed to  be\nincome for the year 1967.\nConsolidated  Coffee Estate Ltd. v. Workmen,<\/a> 1970  2  L.L.J.\n576 relied on.\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL  APPELLATE JURISDICTION : Civil  Appeal Nos. 2083\t and
\n2084 of 1969.\n<\/p>\n
Appeals by special leave from the Award Part-I dated  August
\n13,  1969 of the Industrial Court, Gujarat in Ref. (IC)\t No.
\n110 .,of 1968.\n<\/p>\n
Civil Appeal Nos. 1259 and 1260 of 1970.\n<\/p>\n
Appeals by special leave from the Award Part 11 dated August
\n28,  30, 1969 of the Industrial Court Gujarat  Ahmedabad  in
\nRef. (IC) No. 110 of 1968.\n<\/p>\n
S.-V. Gupte, Bhuoanesh Kumari, O. C. Mathur-, J. B.  Dada-
\nchanii and Ravinder Narain for the appellant. (in C.As. Nos.
\n2083 & 2084\/69) & for respondent (in C.As. Nos. 1259 &\t1260 of 70
\n).\n<\/p>\n
V.M.  Tarkunde,\t K.  L. Hathi and P.  C.  Kapur\t for  the
\nrespondent  (in\t C.As.\tNos.  2083  &  2084\/69)\t &  for\t the
\nappellant (in C.As. Nos. 1269 & 1260\/70).\n<\/p>\n
The Judgment of the Court was delivered by
\nALAGIRISWAMI,  J. Civil appeals Nos. 2083 and 2084  of\t1969
\nare by the Management, Shri Ambica Mills Ltd No. 1, against
\nthe  Award Part I dated 13th August, 1969 and Part II  dated
\n28th  August,  1969, respectively of the  Industrial  Court,
\nGujarat in Reference IC No. 110 of 1968.  Civil appeals Nos.\n<\/p>\n
125<\/span><\/p>\n
1259   and   1260  of  1970  are  by  the   Textile   Labour
\nAssociation,.\tAhmedabad, representing the workmen  against
\nthe same award.\n<\/p>\n
Shri  Ambica  Mills  Ltd., Ahmedabad, is  a  public  limited
\ncompany owning three textile units, viz., Shri Ambica  Mills
\nLtd.  No.  1 and No. 2 at Ahmedabad, Shri Ambica Mills\tLtd.
\nNo. 3 at Baroda and two engineering units, viz., Shri Ambica
\nTubes  at Vata, and Shri Ambica Machinery  Manufacturers  in
\nthe premises of Shri Ambica Mills Ltd.\tNo. 1 at  Ahmedabad.
\nThe  last  unit, i.e., Ambica Machinery\t Manufacturers\tcame
\ninto  existence\t in the beginning of the  year\t1967.\tShri
\nAmbica Mills Ltd. 2 and 3 have entered into an agreement  to
\npay  bonus  on the lines of Shri Ambica Mills Ltd.   No.  1,
\nAhmedabad.  All the aforesaid undertakings have been treated
\nas  parts  of the same establishment,  namely,\tShri  Ambica
\nMills Ltd., for the purpose of computation of bonus.
\nThe  dispute  relates to the payment of bonus for  the\tyear
\n1967.  The demand for the payment of bonus for the year 1967
\nwas  raised  as a result of notice of change  given  by\t the
\nTextile\t Labour Association (hereinafter referred to as\t the
\nAssociation)  on  15-7-1968.  The appellant  mills  did\t not
\nagree  to the payment of bonus as demanded and\tconciliation
\nproceedings  having failed, the dispute was  referred  under
\nSection\t 73-A of the Bombay Industrial Relations Act,  1946.
\nThe  Association requested the Mills Company to furnish\t the
\ninformation  regarding the computation of gross\t profits  as
\nwell  as  allocable  surplus to enable\tthe  Association  to
\ncalculate  the bonus for the year 1967.\t The  Mills  Company
\nsupplied  the said information, but it also claimed  certain
\ndeductions  from  the  gross  profit  for  calculating\t the
\nallocable surplus.\n<\/p>\n
In  the statement of claim filed by the Association  it\t was
\nsubmitted that-\n<\/p>\n
(a)The\tMills Company should be directed to pay\t bonus\tat
\nthe rate of 6.59% of the annual earnings.\n<\/p>\n
(b)The\tsaid  amount should be directed to  be\tpaid  with
\ninterest at the prevailing rate.\n<\/p>\n
(c)The\tHonble\tCourt may be pleased to\t grant\tany  other
\nfurther relief as it may deem fit.\n<\/p>\n
The  deductions claimed by the in calculating the  available
\nsurplus\t were  of certain items falling under item  6(g)  of
\nthe  Second Schedule of the payment of Bonus Act,  1965,  as
\nsubsidies.  it\twas contended that only 4% bonus  i.e.,\t the
\nminimum bonus was payable.\n<\/p>\n
126<\/span><\/p>\n
The Association accepted the facts and figures furnished  by
\nthe Mills Company and the dispute only related to the matter
\nof deduction in respect of an amount of Rs. 32,42,945\/-\t and
\nwhether the whole or any part thereof was subsidy or not.
\nThe   amounts\tclaimed\t as  subsidies\tconsisted   of\t the
\nfollowing .Eve different items :–\n<\/p>\n
(1)  Rs. 8,63,194\/-\n<\/p>\n
Cash  subsidy  on export of steel pipes and  tubes  received
\nfrom Joint Chief Controller of Imports and Exports, Bombay.
\n(2)  Rs. 4,25,233\/-\n<\/p>\n
Cash  by  way of steel entitlement received from  the  Joint
\nPlant Committee, Calcutta.\n<\/p>\n
(3)  Rs. 9,33,213\/-\n<\/p>\n
Cash by way of Customs Drawback realisation on certain types
\nof pipes received from the Collector of Customs, Bombay.
\n(4)  Rs. 71,754\/-\n<\/p>\n
Cash  by  way of Railway Freight Rebate paid  by  the  Chief
\nCommercial Superintendent, Western Railway, Bombay.
\n(5)  Rs. 9,49,551\/-\n<\/p>\n
Export\tincentive  on  the  cotton  textile  goods  exported
\nreceived from the Indian cotton Mills Federation, Bombay.
\nOut  of this total amount, an amount of Irs. 9,72,986\/-\t re-
\nlates  to  past\t years i.e., the year 1965  and\t 1966,\tand,
\naccording to the Mills Company that cannot, in any event, be
\ntreated as income for the accounting year 1967 to which\t the
\ndispute relates.\n<\/p>\n
The  Industrial\t Court held that the Mills Company  was\t en-
\ntitled\tto deduct the first two items i.e., cash  assistance
\nfrom  Jt.   Chief Controller of Imports &  Exports,  Bombay,
\nbeing  Rs.  8,63.194  and  cash\t payment  by  way  of  steel
\nentitlement  being Rs. 4,25,233 but not items Nos. 3, 4\t and\n<\/p>\n
5.   It\t further  directed  the\t parties  to’\tfile   fresh
\ncalculation on the basis of its directions in Award Part 1.
\nOn  the basis of the above directions the Association  filed
\nthe ,calculations reserving its right to appeal.  The  Mills
\nCompany\t also submitted fresh calculations.  Based on  these
\ncalculations  the Industrial Court made an  award  directing
\nthe Mills Company
\n127<\/span>
\nto pay 4.53% of wages as bonus to all its employees in the 3
\ntextile units and 2 engineering units.\n<\/p>\n
The  dispute  ‘thus centres round the meaning  of  the\tword
\n‘Subsidy’  found in item 6(g) of the Second Schedule to\t the
\nPayment\t of  Bonus  Act.   Another  incidental\tquestion  is
\nwhether the Joint Plant Committee or the Indian Cotton Mills
\nFederation  is a “Body Corporate established by any law\t for
\nthe time being in force”.\n<\/p>\n
The  word  ‘Subsidy’  is  not  defined\tin  the\t Act.\t The
\nIndustrial Court took into consideration the meanings of the
\nword  ‘Subsidy’\t given\tin  the\t (i)  Webster’s\t New   World
\nDictionary,  1962, (ii) Shorter Oxford\tEnglish\t Dictionary,
\nVol.  11,  Third Edition, (iii) Chambers  Twentieth  Century
\nDictionary,  Revised Edition, and (iv) The  Reader’s  Digest
\nGreat  Encyclopaedia Dictionary, Vol. 11 (M-Z), and came  to
\nthe  conclusion that the word ‘subsidy’ cannot\tbe  confined
\nonly to those cases where cash payment is made by Government
\nin  order  that\t an  industry  may  survive,  that  even  if
\nassistance  is\tgiven by way of an incentive  it  would\t not
\ncease to be a subsidy provided it is a cash payment given by
\nway  of\t assistance  and that certain  types  of  assistance
\nparticularly those which are only indirect like rebates etc.
\nshould be excluded.\n<\/p>\n
We find ourselves in agreement with this view. The  various
\ndefinitions given in the dictionaries in so far as they\t are
\nrelevant, are as follows :\n<\/p>\n
Webster’s New World Dictionary, 1962
\n“…..a\t grant\tof  money,  specifically  (a)  …  (b)\t  a:
\ngovernment  grant  to  a private  enterprise  considered  of
\nbenefit to the public.”\n<\/p>\n
Shorter Oxford English Dictionary
\n“Help, aid, assistance N. Financial aid furnished by a state
\nor  a public corporation in furthering of an undertaking  or
\nthe upkeep of a thing. . . . ”\n<\/p>\n
Chambers Twentieth Century Dictionary, Revised Edn.
\n“Assistance  and in money … a I grant of public  money  in
\naid  of some enterprise, industry etc., or to keep down\t the
\nprice of a commodity. . . ”\n<\/p>\n
The Reader’s Digest Great Encyclopaedic Dictionary, Vol.  II
\n\t      (M-Z)
\n“2. Financial aid given by government towards expenses of an
\nundertaking or institution held to
\n128<\/span>
\nbe of public utility; money paid by government to  producers
\nof a commodity so that it can be sold to consumers at a\t low
\nprice\t ”\n<\/p>\n
In  addition our attention has been drawn to the  definition
\ngiven  in  ‘Words and Phrases, Permanent Edition,  Col.\t 40″
\nwhere subsidy is described as follows :\n<\/p>\n
“A subsidy is a grant of funds or property from a government
\nas of the state or municipal corporation to a private person
\nor  company to assist to the establishment or support of  an
\nenterprise deemed advantageous to the public; a subvention.”
\nReference is made to 60 Corpus Juris.\n<\/p>\n
Corpus Juris Secundum, Vol. 83, page 760 gives the following
\nunder the heading of Subsidy :\n<\/p>\n
“Something, usually money, donated or given or\tappropriated
\nby  the government through its proper agencies; a  grant  of
\nfunds  or property from a government, as of the state or,  a
\nmunicipal  corporation,\t to a private person or\t company  to
\nassist\tin  the establishment or support  of  an  enterprise
\ndeemed advantageous to the public; a subvention.
\nPecuniary  premiums  offered by the  government\t to  persons
\nenlisting  in the public service, or engaging in  particular
\nindustries, or performing specified services for the  public
\nbenefit are treated in Bounties.”\n<\/p>\n
The  emphasis  in  every  one of  these\t definitions  is  on
\nsomething  given  or  donated; indirect\t assistance  is\t not
\nmentioned.\n<\/p>\n
Before\twe proceed further, it may be necessary to refer  to
\nthe history regarding the place of “subsidy” in the  payment
\nof bonus.  Under what is known as the “Full Bench”  formula,
\nsubsidy\t will not be a proper deduction in  calculating\t the
\nsurplus available for payment of bonus.\t ‘Mere is no  reason
\non principle why subsidies should be kept out of account  in
\ncalculating  the  available sum for payment of\tbonus.\t The
\nBonus Commission in its report did not recommend subsidy  as
\na deductible item.  Schedule 2 to the Bonus Act is really  a
\ncopy of the schedule found at page 30-40 of the Commission’s
\nreport, with the single addition of item (g) after item 6(f)
\nfound  in  the\tCommission’s report.   Even  the  dissenting
\nminute to that report did not recommend that subsidy  should
\nbe a deductible item; but then the dissenting minute was  on
\na completely different basis from that of the main report.\n<\/p>\n
129<\/span><\/p>\n
After\tthe  report  of\t the  Commission,  the\t legislation
\nregarding bonus took the form of a Bonus Ordinance where for
\nthe  first time we come across item 6(g) in Schedule 2.\t The
\nResolution  of the Government of India which considered\t the
\nrecommendations\t of the Commission’s report and accepted  it
\nsubject\t to  certain  modifications,  for  the\tfirst\ttime
\nreferred  to  subsidies.   The\tparticular  sentence  is  as
\nfollows:\n<\/p>\n
” (ii)……………………………. Further,  subsidies
\npaid  by  Government  to certain concern like the  Hindustan
\n\t      Shipyard\tshould not be taken into account  in
\n\t      working out the gross profits for the  purpose
\n\t      of payment of bonus.”\n<\/p>\n
The Press Note issued by the Government regarding the  Ordi-
\nnance also contained ‘a similar statement.  On the basis  of
\nthese  two  statements and on the basis of an  extract\tfrom
\nKothari’s  “Economic Guide and Investore Handbook of  India’
\nwhere  this  subsidy to the Hindustan Ship Yard,  which\t was
\noriginally  called the Scindia Steam Navigation Co has\tbeen
\ndescribed,  it had been argued before the Industrial  Court,
\nand  the same argument was repeated before this Court,\tthat
\nthe  subsidy  contemplated  under item 6(g) can\t only  be  a
\nsubsidy\t to  a\tparticular  concern  or\t establishment.\t  We
\nconsider this argument as fallacious.  The reference to\t the
\nHindustan  Shipyard  is merely illustrative.   The  argument
\nbased on this that only grants to particular  establishments
\nas such and not grants to any activity which any  establish-
\nment  can  carry on should be called a subsidy,\t is  a\tfar-
\nfetched\t one.\tWhether\t the  grant  is\t made  to  a  single
\nestablishment  or it is granted on certain terms which\tmake
\nit  available to all persons or establishments\tcarrying  on
\nthe same industry does not make any difference in principle.
\nThe  subsidy  is received by the  concern  or  establishment
\ncarrying on that industry or activity.\n<\/p>\n
On  the\t other\thand we realize the force  of  the  argument
\nadvanced  on  behalf  of Labour that a grant,  even  a\tcash
\nsubsidy, made in respect of the export of some commodity  or
\nother,\tas in the present case, is related to the  commodity
\nitself,\t towards  the production of which  both\t labour\t and
\ncapital\t have  contributed and, therefore, any part  of\t the
\nincome\treceived in respect of that activity should  not  be
\ndeducted  in calculating the available surplus, and that  it
\nwould  be  unfair  to labour to do so.\tThe  force  of\tthis
\nargument  was appreciated and acceded to even by Shri  Gupta
\nappearing  on behalf of the Management.\t His sole point\t was
\nthat  but  for the introduction of item 6(g) in\t the  Second
\nSchedule  to  the Bonus Act it would not be open to  him  to
\ncontend\t that subsidy should be deducted from the  allocable
\nsurplus\t for  the  purpose  of payment\tof  bonus.   But  he
\ncontended,  the\t Act itself having made\t the  provision\t for
\nsubsidy being deducted 10-63ISuPCI\/73
\n130<\/span>
\nit  is\tnot open to this Court to consider  whether  it\t was
\nproper to deduct the subsidy from the allocable surplus.  He
\nargued\tthat  if  subsidy should not be\t so  deductible\t the
\nremedy\tlay elsewhere and that it was with  the\t Legislature
\nand while it would be perfectly legitimate for this Court to
\nrecommend  that\t the  deduction of  subsidy  should  not  be
\npermitted,  the\t subsidy  must be deducted as  long  as\t the
\nstatute\t stands as it is.  We appreciate the  reasonableness
\nof  the\t stand.\t  But we consider that\tthe  word  ‘subsidy’
\nshould\tbe restricted to the narrowest possible\t limits\t and
\nshould\ttake in only direct cash subsidies  as\tcontemplated
\nunder  item 6(g).  It cannot cover indirect assistance\tlike
\nCustoms Drawback or rebate on railway freight.
\nIt was contended that an assistance is an assistance whether
\nit is direct or indirect and the drawback of Central  Excise
\nand  the rebate on railway freight are indirect\t assistance,
\ntowards\t export,  and  they  should also  be  deemed  to  be
\nsubsidy.   As pointed out earlier the overwhelming  view  of
\nthe meaning of the term ‘,subsidy” is direct payment and not
\nindirect assistance.  Furthermore, if instead of ‘allowing a
\ndrawback  in Central Excise and a rebate on railway  freight
\nthe  scheme of assistance had been on the basis\t that  goods
\nexported will pay only half the Central Excise Duty and half
\nthe  usual  railway  freight,  this  argument  will  not  be
\navailable to the Management.  In that case there would have
\nbeen  no repayment to the Management of part of the  Central
\nExcise\tDuty and part of the railway freight paid by it\t and
\nit  could  not have been claimed as a  cash  receipt.\tThe,
\nwhole of the Excise Duty and the railway freight  originally
\npaid has been included as an item of expense, thus  reducing
\nthe surplus and when part of it is received back it does not
\nstand  to reason that it should not go towards reduction  of
\nthe  expenses and consequently increasing the surplus.\t The
\nmere  fact that the full excise duty and railway freight  is
\npaid in the first instance ;and part of it is later refunded
\nshould\tnot  make any difference to the ultimate  fact\tthat
\nwhat  is paid by the management is only concessional  excise
\nduty  and concessional railway freight and but for the\tmode
\nadopted of collecting the full excise duty and full  railway
\nfreight\t in  the  first instance and refunding\tpart  of  it
\nlater, neither the sums nor the argument would be  available
\nto  the management.  We are, therefore, quite clear  in\t our
\nmind  that  the\t drawback of Central Excise  and  rebate  on
\nRailway freight should not be deemed to be a subsidy for the
\npurposes  of  this  Act.   The\tterm  subsidy  cannot  cover
\nconcessional rates of excise duty and freight but only\tcash
\npayments.\n<\/p>\n
We  may,  perhaps  refer  in  this  connection\tto   certain
\ndecisions  relied  on  by the both sides.   In\tSone  Valley
\nPortland Cement Co.\n<\/p>\n
131<\/span><\/p>\n
v The Workmen(1) this Court held that apart from legislation
\nan incentive bonus for increase of production,\tirrespective
\nof the question as to whether the industry was making profit
\nor not is one that must be introduced by the particular unit
\nof industry, and it would be for the management to fix\twhat
\nincentives should be given to different departments to\tstep
\nup  production.\t  It  was further held\tthat  an  Industrial
\nTribunal  would\t not  be justified in  holding\tthat  merely
\nbecause there has been augmentation in the production labour
\nwould  be entitled to make a claim to bonus because of\tsuch
\nincrease,  and that labour would undoubtedly be entitled  to
\nrevision of wage scales, dearness allowance and other  terms
\nand conditions of service as also profit bonus.\t This  deci-
\nsion  is  not, therefore. an authority for  the\t proposition
\nthat  a\t subsidy intended to encourage export could  not  be
\ntaken  into  account  for the  purpose\tof  calculating\t the
\nallocable  surplus.   This decision itself proceeds  on\t the
\nbasis  that  in calculating the profit\tbonus  such  amounts
\nwould have to be taken into account.  All that was held\t was
\nthat  the amount paid as subsidy by itself  could  not\tbe
\nconsidered  to be one in which labour would be\tentitled  to
\nshare.\n<\/p>\n
The decision of this Court in Bengal Textiles Association v.
\nI.  T. Commr. 2 ) though it had to consider the\t meaning  of
\nthe word ‘subsidy’ occurring in the Business Profits Tax Act
\n1947.  would  not be relevant for deciding the\tquestion  at
\nissue.\t In that case it was held that the use of  the\tword
\n‘bonus’\t or  ‘subsidy’ connotes that the payment is  in\t the
\nnature of a gift, and as the payments in that case were made
\nby the Government to an association to assist it in carrying
\non  its\t business and for the services it was  rendering  to
\nGovernment,  the payments were not in the nature of a  gift.
\nThis  decision was relied on by Mr. Tarkunde  as  supporting
\nhis  argument  that a payment made for\ta  service  rendered
\ncannot be deemed to be a subsidy.  That is no doubt so,\t but
\nin the present case there is no question of any service ren-
\ndered  by the management to :the Government.  The mere\tfact
\nthat  the  Government is interested in\tencouraging  exports
\nand, therefore. offers many incentives for export, of  which
\nany  manufacturer could take advantage, does not  mean\tthat
\nany   such   manufacturer  is  rendering  any\tservice\t  to
\nGovernment.   These are schemes intended by  the  Government
\nfor  the benefit of the country and. therefore.\t any  person
\nwould  be entitled to take advantage of that scheme  and  be
\nentitled   to\tsubside\t or  assistance\t promised   by\t the
\nGovernment.  Such payments do not become either payments for
\nservice rendered or cease to be subsidy merely on the ground
\nthat any number of persons coming under that category, would
\nbe entitled to that benefit or payment.\n<\/p>\n
(1) [1972] L.L.J. 612
\n(2) A.T.R. 1960 S.C. 1320.\n<\/p>\n
132<\/span><\/p>\n
It  was argued by Mr. Tarkunde that if a manufacturer  takes
\nit  into  his head to export all the products  that  he\t had
\nmanufactured it would mean that all his receipts would be in
\nthe form of subsidy, drawback on Central Excise and.  rebate
\non  railway  freight,  and  if all these  items\t are  to  be
\ndeducted  from the profits there will be  nothing  available
\nfor  distribution  as bonus and that it will  be  unfair  to
\nlabour\tto  deprive  it\t of its share  of  the\tincome\tfrom
\nproducts towards the production of which it has made its own
\ncontribution.\tNationally  that is possible but  in  actual
\npractice  that is hardly likely.  But it does not,  however,
\ntake  away the force of the argument that the  deduction  of
\nsubsidies from the total income would be unfair to labour in
\nthe matter of payment of bonus.\t As we have already  pointed
\nout the remedy lies with the Legislature.  What prompted the
\nGovernment  to include item 6(g) in the Second\tSchedule  to
\nthe Bonus Act we have no way of knowing.\n<\/p>\n
We  thus come to the conclusion that only direct  cash\tpay-
\nments  should  be deemed to be subsidies  and  not  indirect
\nreceipts in the form of drawn up of part of the Excise\tDuty
\nand  rebate  on railway freight, which are  in\treality\t not
\nsubsidies  but concessional rate of Excise Duty and  railway
\nfreight.   This\t means that item 1, i.e., the  subsidy\tpaid
\ndecree\t by  the  Government  should  be  deemed  to  be   a
\npermissible deduction but not items 3 and 4.
\nThis  leaves  the  question  regarding items  2\t and  5\t for
\nconsideration.\t Both these items are, of course,  cases  of
\ncash  payment,\tbut  only  if  they  are  payments  by\t the
\nGovernment  or a Body Corporate established by any  law\t for
\nthe   time  being  in  force  they  would   be\t permissible
\ndeductions.\n<\/p>\n
As  regards the Joint Plant Committee the  Industrial  Court
\nmerely said that it appears to be a Government Body, and  at
\nanother\t place that it appears to be a Body  constituted  by
\nthe Government.\t A body constituted by the Government is not
\nnecessarily  a Government body.\t We find from  the  brochure
\nissued\tby  the Joint Plant  Committee\tregarding  Indenting
\nProcedure and General Conditions of Sale for Iron and Steel,
\nthat  it  was  constituted  by\tthe  Central  Government  in
\nexercise  of the powers conferred by Clause 17 of  the\tIron
\nand  Steel (Control) Order 1956 to take over  the  functions
\npreviously  performed  by the Iron and Steel  Controller  in
\nregard\tto planning and distribution of indents and  rolling
\nprogrammes.   It consisted of Iron and Steel  Controller  as
\nChairman  and one representative of each of the\t main  steel
\nplants,\t the Tata Iron & Steel Co. Ltd., the Indian  Iron  &
\nSteel  Co. Ltd., Hindustan Steel Ltd.,\tRourkela,  Hindustan
\nSteel Limited.\tBhilai, Hindustan Steel Ltd., Durgapur,\t and
\na  representative  of the Railway Ministry.   This  was\t the
\nresult of the
\n133<\/span>
\ndecision  to  abolish over-all statutory  control  over\t the
\nprices\tof the bulk of steel production and the decision  to
\nentrust\t freight equalisation to the Joint Plant  Committee.
\nClause\t17 of the Iron and Steel (Control) Order 1956 is  as
\nfollows :\n<\/p>\n
“17.   Pawer of Central Government to give directions.\t The
\nCentral\t Government may give directions as to the  procedure
\nto   be\t  followed   by\t the   authorities   issuing   quota
\ncertificates,  permits\tor written orders,  referred  to  in
\nClause\t4 and 5. as to the maintenance by the Controller  of
\nrecords in connection with the distribution of iron or steel
\nand  generally\tfor  the purpose of  giving  effect  to\t the
\nprovisions of this part.”\n<\/p>\n
From  these  provisions it does not appear how\texactly\t the
\nfunds  of the Joint Plant Committee are obtained and why  or
\nhow the Joint Plant Committee makes the payments of the kind
\nin  question.  This is certainly not a Government Body.\t  It
\nseems  to be more or less functioning on an informal  basis.
\nIt does not seem to have any statutory powers.\tThe decision
\nof the Industrial Court that the cash paid by this Body is a
\ndeductible items cannot, therefore, be upheld.
\nAs  regards  the  payment made by the  Indian  Cotton  Mills
\nFederation,  it\t appears that the payment is made out  of  a
\nfund  collected by it at the rate of Rs. 200\/- per  bale  of
\nimported  cotton.  It means, therefore, that  when  payments
\nare made out of this fund the mill receiving that payment is
\nin fact getting back either the whole or a substantial\tpart
\nof  what  it has already paid, when  it\t purchased  imported
\ncotton.\t That apart, this Federation cannot be said to be  a
\nBody Corporate established by any law for the time being  in
\nforce.\t It  may be a Body Corporate established  under\t the
\nCompanies  Act because it is registered under the  Companies
\nAct.   The  Payment  of Bonus Act, Section  2(9)  defines  a
\ncompany as follows :\n<\/p>\n
“(9) ‘company’ means any company as defined in section 3  of
\nthe  Companies\tAct, 1956, and includes\t a  foreign  company
\nwithin the meaning of sec. 591 of that Act;”
\nA  corporation\tis defined in section 2 (11 ) as  “any\tbody
\ncorporate  established by or under any Central,\t Provisional
\nor  State  Act\tbut  does not include a\t company  or  a\t co-
\noperative  society”.   Now  it\twill  be  noticed  that\t the
\ndefinition  of\tthe  term  ‘corporation’  takes\t in   bodies
\ncorporate  established\tby law as well as  bodies  corporate
\nestablished  under any law.  It cannot, therefore,  be\tsaid
\nthat  ‘when item 6(g) in the Second Schedule uses the  words
\n‘body corporate established by any law’ it was not conscious
\nof  the distinction between a body corporate established  by
\nlaw  and a body corporate established under any\t law.\tThis
\ndistinction has also been
\n134<\/span>
\nnoticed\t in  the  decision of the High Court  of  Bombay  in
\nMajoor\tSahkari\t Bank Ltd. v. M. N. Majumdar &\tAnr.(1)\t tn.
\ndiscussing this question the learned Judes said
\n“But what, in our opinion , the notification contemplates is
\nnot  incorporation  under any law but by,  an,\tIndian\tlaw,
\nwhich  means  that  A special  law  should  incorporate\t the
\nparticular  company or association.  For instance we have  a
\nReserve Bank of India; we had an Imperial Bank of India;  we
\nhave now State Banks.  The Act itself incorporates the bank,
\nassociation or society.\t And the language used is clear.  It
\nis   not   “incorporated  under\t an  Indian  law”;   it\t  is
\n“incorporated by an Indian law”.  But what appears to us  to
\nbe  fairly clear in the first part of the  notification\t and
\nwhen  we look at that it applies to the business of  banking
\ncompanies registered under any of the enactments relating to
\ncompanies  for\tthe  time being in force.   Now\t the  object
\nobviously was to apply this notification not to associations
\nof less *than 10 persons who were doing business of  banking
\nand  who  could\t not  be incorporated  but  to\tconfine\t the
\noperation  of this notification to ten persons or  more\t who
\ncould be, and would have to be registered, either under\t the
\nIndian\tCompanies   Act\t or  some  other  Act  relating\t  to
\n\t      companies.”\n<\/p>\n
It  was\t argued\t by Mr. Gupte that under the  Act  bonus  is
\npayable\t by  a\t“corporation” as well as  a  “company”\tand,
\ntherefore, the words ‘body corporate established by any law’
\nshould\t be  deemed  to\t include  even\ta   body   corporate
\nestablished  under  any law i.e., even a  company.   But  it
\nappears to us that the words ‘body corporate established  by
\nany  law’ have been deliberately used.\tWhile all  companies
\nand  corporations, as defined in the Act are liable  to\t pay
\nbonus. the intention seems to be that only subsidies paid by
\nbody corporate established by any law, should, be deductible
\nitems and not subsidies paid by bodies corporate established
\nunder any law.\tThe above decision of the Bombay High  Court
\nreferred  to  the Reserve Bank of India,  Imperial  Bank  of
\nIndia\tand  State  Banks.   There  are\t  bodies   corporate
\nestablished by law like the Rubber Board, Coffee Board etc.,
\nwhich grant subsidies for replantation, rehabilitation\tetc.
\nThe  idea  apparently  in  referring  to  a  body  corporate
\nestablished  by any law was that  when bodies corporate\t are
\nestablished  by\t any  law  for\tthe,,  specific\t purpose  of
\nencouraging  any  industry and they  grant  subsidies,\tsuch
\nsubsidies alone should be taken into account.  We are of the
\nopinion.  therefore.  that item 5 also is not  a  deductible
\nitem.\n<\/p>\n
(1) [1955] 2 L.L.J. 755.\n<\/p>\n
135<\/span><\/p>\n
This  leaves for decision the question whether the  sum\t of
\nRs.  9,72,986 which relates to amounts received in the\tyear
\n1967  but relate to earlier years, can also be\tdeducted  or
\nnot.   In the view that we have taken that only item 1 is  a
\ndeductible  item, the amount involved is a small one of\t Rs.
\n6,873  due for the year 1966 but received in the year  1967.
\nWe  are not able to agree with the contention on  behalf  of
\nlabour\tthat as the whole of the sum of Rs. 32.43  lacs\t has
\nbeen shown as item of income in the profit and loss  account
\nof the mills the management cannot now contend that any part
\nof  it cannot be deducted and that the whole of\t the  amount
\nshould\tbe held to be profit available for  calculating\t the
\nbonus.\tAll that section 23 of the Act Provides is for\tpre-
\nsumption of the accuracies of the balance sheet and profits
\nand  loss  account  of\tcorporations  and  COmpanies.\t The
\ncorrectness  has  been accepted by both\t the  parties.\t But
\nwhether any part of that amount should be held to fall under
\nitem  6\t (g)  of the Second Schedule to the  Act  cannot  be
\ndecided\t on the basis that it is shown as an income  in\t the
\nprofit\tand loss account or the balance sheet.\tThere is  no
\nquestion  of estoppel here.  All the same we have  no  doubt
\nthat  amounts due for earlier years received in 1967  should
\nalso be deemed to be income for the year 1967.\tOtherwise it
\nmeans that such sums would not have been taken into  account
\nin  the years for which they were due as also in  the  years
\nwhen  they  were received.  Moreover. the accounts  in\tthis
\ncase  have been maintained on a cash basis  and,  therefore,
\nthe amounts received in the year 1967 should be deemed to be
\nthe income of that year though due in respect of an  earlier
\nyear.\tWe  may also refer to the decision  in\tConsolidated
\nCoffee Estate Ltd. v. Workmen<\/a>(1) where it was held that even
\nthough\tthe  company had been paving bonus in  the  past  by
\nnegotiating with its employees, if it insisted that for\t the
\nyear  in  question  it\twould pay  in  accordance  with\t the
\nrelevant  law  it  could not be prevented  from\t having\t its
\nliability for bonus determined accordingly.
\nIn  the\t result\t the  appeals  of  the\tMills  Company\t are
\ndismissed.   The appeals of the Association are\t allowed  in
\npart  holding that item 2, i.e., the sums received from\t the
\nJoint  Plant Committee is not a deductible item and  item  I
\nalone  will  be\t a deductible item under item  6(g)  of\t the
\nSecond\tSchedule.  As the Association has succeeded in\tfive
\nout  of six questions that had to be decided they  will\t get
\ntheir costs from the management.  The Industrial Court\twill
\nhave  to re-calculate the bonus on this basis.\tOne  hearing
\nfee.\n<\/p>\n
G. C.\n<\/p>\n
(1) [1970] 2 L.L.J. 576.\n<\/p>\n
136<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Shri Ambica Mills Ltd. No. 1 vs The Textile Labour Association, … on 20 December, 1972 Equivalent citations: 1973 AIR 1081, 1973 SCR (3) 123 Author: A Alagiriswami Bench: Alagiriswami, A. PETITIONER: SHRI AMBICA MILLS LTD. NO. 1 Vs. RESPONDENT: THE TEXTILE LABOUR ASSOCIATION, AHMEDABAD,, AND VICE VERSA DATE OF JUDGMENT20\/12\/1972 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-91686","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nShri Ambica Mills Ltd. 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