1. This petition under Article 223 of the Constitution by the Sewak Bus and Transport Company (Private), Ltd., Moga., hereinafter referred to as the company, is directed against the award of the Industrial Tribunal, Punjab, Patiala, allowing bonus to its workmen. The dispute was referred by Punjab State under Clause (d) of Sub-section (1) of Section 10 of the Industrial Disputes Act, 1947, vide notification No. 7558-Lab. (1)-59/9032 dated 27 August 1959, to the aforesaid tribunal. The dispute in this case arose because the workmen claimed bonus and whereas the company refused its payment on the ground that it had suffered a loss of Rs. 22,502-2 nP during the relevant year. The case of the workmen, on the other hand, was that there was no loss suffered by the company but in fact it had made a profit. According to the finding of the tribunal, there was no loss, but there has been a profit amounting to Rs. 52,593-30 nP. A number of points were raised in the present petition by the company but the learned Counsel for the company has now confined his argument to only one, namely, that according to the Full Bench formula as laid down by the Labour Appellate Tribunal in Millowners' Association, Bombay v. Rashtriya Mill Mazdoor Sangh 1950--II L.L.J. 1247 no deduction has been allowed on account of income-tax payable by the company from the profits earned during the bonus year. This appears to be so. The relevant part of the tribunal's award after it had arrived at the figure of Rs. 52,593-30 nP is as follows :--
The total of these four items, viz., Rs. 75,095-30 nP has to be added back and when that is done, the figure of loss is converted into one of profit of RS. 52,593-30 nP from which Rs. 11,304 has to be deducted on account of Interest at 6 per cent on the invested capital of Rs. 1,88,400. The available surplus thus comes to Rs. 41,289-30 nP. The monthly wage bill of the workmen comes to RS. 7,214 out of Rs. 41,289-30 nP. I allow three months' wages as bonus to the workmen. The balance that the concern will be left with would be Rs. 18,647-30 nP. It will also get and save Income-tax rebate on the amount of bonus.
2. It will be apparent from this that no provision for income-tax has been made. The bonus year in question is 1957-58. It is not disputed by the company as well as by the respondents, the workmen, that the available net surplus for distribution as bonus has to be arrived at in accordance with the Full Bench formula and according to that formula in arriving at the net surplus available for distribution of bones, deductions on account of depredation, income-tax, interest on paid up capital as well as working capital and provision for building, rehabilitation and modernizing of plant and machinery have to be made out of the gross profits.
3. The contention of the learned Counsel for the company is that in the instant case no deduction on account of income-tax has been allowed and, therefore, the determination of the available surplus for purposes of distribution as bonus is not in accordance with the Full Bench formula and that this error is apparent on the face of the award. Therefore, the short question that requires determination is whether the award is in accordance with the Full Bench formula. The learned Counsel for the company accepts the figure of Rs. 52,593-30 nP as gross profits and contends that if a provision for payment of income-tax on this amount is made, no surplus would be left for the distribution of bonus allowed by the tribunal and, therefore, the award would be vitiated. He places, his reliance on the decision of the Supreme Court in Kirloskar Oil Engines, Ltd. v. their workmen 1960--I L.L.J. 512, for this contention. The learned Counsel for the workmen, 6n the other hand, relies on the decision of the Supreme Court in Sri Meenakshi Mills, Ltd. v. their workmen 1958--I L.L.J. 239. The facts in the Meenakshi Mills case were that the management had claimed a deduction for depreciation to the extent of Rs. 8,43,927, but the tribunal held that they were only entitled to the deduction on this count to the extent of Rs. 4,00,000. On the basis of the depreciation of Re, 8,43,927, the management had provided Rs. 1,75,000 for the payment of income-tax. Before the Supreme Court, the argument raised by the learned Counsel for the management was that the amount of RS. 4,43,927 which was disallowed on account of depreciation must inevitably add to the total amount of gross profits and if the total amount of gross profits la increased, logically provision for higher amount of income-tax must be made. This argument was rejected by the Supreme Court with the following observations (at p. 245):--.the difficulty in accepting the argument is that the total amount of gross profits determined by industrial tribunals in these proceedings is not and cannot necessarily be the taxable gross profits of the employer. We have already observed that in determining the trading profits of the employer in such disputes, the method' adopted by the industrial tribunals does not conform to all the requirements and provisions of the Income-tax Act, and so it would be fallacious to assume that the gross profits determined by the industrial tribunal should be taken to be gross profits that would be necessarily taxable under the Income-tax Act. Besides, It would be relevant to remember that the provision for taxation in question has been made by the appellants themselves and presumably it is based on the appellants' anticipation as to how much approximately they will have to pay by way of income-tax. But, apart from this consideration, there can be no doubt that the appellants would get exemption from the payment of income-tax in respect of the amounts of initial and additional depreciation also as shown in their books of accounts. That is a right which has been conferred on the appellants by the relevant provisions of Section 10 of the Income-tax Act; and the benefit which the appellants are entitled to get under the said section cannot be ignored in deciding whether or not the provision of the sum of RS, 1,75,000 for taxation purposes is adequate or not. We think it is not open to the appellants to contend that though for the amounts covered by the normal and additional depreciation, they would not be required to pay income-tax, nevertheless they should be allowed to provide for the payment of income-tax in. respect of these two items merely on the ground that they are disallowed by the industrial tribunal and have thus added to the total of gross profits as determined by the tribunal. The adequacy or otherwise of the provision for income-tax must necessarily be judged in the light of the Income-tax Act since it is under the said Act that the liability to pay tax would ultimately be determined. Besides, if the appellants' argument is accepted and an amount notionally payable by way of income-tax in respect; of disallowed items of depreciation is added to the estimated amount of income-tax provided by the appellants, the very object of disallowing the two items of depreciation would be substantially defeated. On the other hand, the rejection of the appellants' argument would not mean any hardship because the additional amount sought to be added by them in the provision for income-tax would definitely not have to be paid by them. We are, therefore, satisfied that the grievance made by the appellants against the order passed by the Appellate Tribunal on the ground that it suffers from a mistake apparent on the face of the record is not well-founded.
This decision has no applicability to the facts of the present case. In the present case, there is no provision whatever for the payment of income-tax, whereas in the Meenakshi Mills case 1958--I L.L.J. 239 there was such a provision and that provision was held not to be 'inadequate even in the altered circumstances. Their lordships of the Supreme Court also held that no additional sum by way of income-tax would have to be paid by the management. Therefore, the argument of the learned Counsel based on this decision cannot bear scrutiny for a moment, because there is no analogy between the facts of that case and those of the present. As I have already said, in the present case, there is no provision whatever made by the tribunal for payment of income-tax.
4. On the other hand, the decision relied on by the learned Counsel for the company in Kirloskar case fully applies. For this reason, I have thought it fit to quote in extenso from that decision. The observations of their lordships of the Supreme Court at p. 513 fully Support the contention of the learned Counsel for the company and are in these terms:
The calculations made by the tribunal under the Full Bench formula show that even after the appellant pays the bonus as directed by the award it would be left with a surplus of Rs. 1.89 lakhs. These calculations are, however, challenged by the appellant as being inconsistent with the formula. It is urged on its behalf that the tribunal was in error in not granting to the appellant its claim for the deduction of income-tax payable by it on the profits of the bonus year according to the formula. There is no dispute about the material facts in respect of this claim. If the income-tax payable by the appellant on the amount of profits ascertained after deducting from the gross profits the admissible depreciation claimed is allowed to the appellant, it would amount to Rs. 2.25 lakhs; This was and is conceded by the respondents. They, however, urged before the tribunal that for the previous year ending on 31 March 1953, the appellant had sustained a loss of Rs. 9 lakhs, and under Section 24(2) of the Income-tax Act, the appellant would be entitled to absorb the said loss in the profits of this year and as a consequence it would, in fact, not be liable to pay any tax for the relevant year. The respondents' case was that in such a case the appellant was not entitled to claim any deductions on account of income-tax. This argument has been accepted by the tribunal and it has disallowed the whole of the claim made by the appellant in respect of the whole of the item of income-tax.
In Associated' Cement Companies, Ltd., Bombay v. their workmen 1959--I L.L.J. 644 we have considered this point and we have held that in working out the Full Bench formula, the employer is entitled to claim the appropriate amount of income-tax payable on the profits determined under the formula even though under the provisions of the aforesaid session of the Income-tax Act he may not be required to pay the said tax. In view of the said decision we must hold that the tribunal was in error in not allowing the appellant's claim for deduction of Rs. 2.25 lakhs as a prior charge under the Item of income-tax payable for the relevant year. It has been fairly conceded by Sri Phadke, for the respondents, and we think rightly, that if this item is allowed to the appellant, the conclusion of the tribunal that there was available surplus from which bonus could be paid to the respondents cannot be sustained. The award shows that, the available surplus from which bonus .has been ordered to be paid is Rs. 2.26 lakhs. If Rs. 2.25 lakhs is deducted from the surplus, we are left with a figure of only Rs. 01 lakh whereas the amount ordered to be paid by way of bonus is Rs. 0.37 lakh.
5. With these observations in that case, the industry's contention was accepted and the award of bonus by the tribunal to the workmen was set aside. Thus it must be held that the award in this case is not in accordance with the Full Bench formula.
6. Faced with this situation, the learned Counsel for the workmen raised another contention, to the effect that even if an allowance for income-tax is made, there will still be surplus left to pay the bonus to the workmen and, therefore, the company will suffer no hardship. It is, therefore, urged that this petition should be dismissed on this ground. According to the learned Counsel, the gross profits as assessed by the tribunal come to Rs. 94,718-28 nP. Out of this, deductions according to the Full Bench formula have to be allowed. These deductions work out as under:
Rs. nP.Gross Profits 94,718 28
Deductions.Less notional normal depre-ciation. 37,766 00__________56,952 28 Less Income-tax. 21,468 25__________35,484 03Less: Interest at 6per cent on the working capital 11,304 00__________Available surplus 24,180 03
7. Thus the available surplus comes to Rs. 24,189-03 nP whereas the available surplus found by the tribunal without giving deduction for income-tax comes to Rs. 41,289-30 nP. It is no doubt true that this surplus would be enough to meet the demand of bonus by the workmen and after meeting that demand, a surplus of Rs. 2,538-03 nP is left with the company, in addition to the rebate on income-tax which the company will earn on the amount of bonus.
8. It was observed by their lordships of the Supreme Court in Tata Oil Mills Co. Ltd. v. their workmen 1959--II L.L.J. 250, as under:
There are three sharers in the available surplus, namely, the industry, share-holders and labour.
9. To the same effect are the observations of the Supreme Court in the Indian Hume Pipe Co. Ltd. v. their workmen 1959--II L.L.J. 357 at pp. 359-360.
10. The tribunal while allowing three months' bonus to the workmen proceeded on the basis that the available surplus was Rs. 41,289-30 nP whereas in fact the available surplus according to the Full Bench formula comes to Rs. 24,180-03 nP. Thus it is very difficult to say, on this available surplus what amount the tribunal in its discretion would have awarded as bonus to the workmen keeping in view the observations of the Supreme Court in Tata Mills and Hume Pipe cases. It is conceded by the counsel for the company, that the Industry has claimed no share in the available surplus and that the same is divisible only between the shareholders and the labour. This was also the stand taken up before the tribunal. If I were acting as a Court of appeal, I may have' substituted my decision for the decision of the tribunal, but it is well-settled that under Article 226 of the Constitution, this Court is not sitting as a Court of appeal on the award of the tribunal. The jurisdiction of this Court is limited to the correction of errors of jurisdiction. Therefore, the only course open in the circumstances is to remit the case to the tribunal to determine what bonus on the available surplus of Rs. 24,180-03 nP in the circumstances of the case is to be allowed to the workmen consistent was the observations of the Supreme Court in Tata Mills and Hume Pipe cases. In the circumstances of this case, however, I will make no order as to costs.