THE AHMEDABAD MISCELLANEOUS INDUSTRIAL WORKERS' UNION versus THE AHMEDABAD ELECTRICITY CO. LTD.

WANCHOO, J.-This is an appeal by special leave in an industrial matter. The -ippellant is the Ahmedabad Miscellaneous Industrial Workers' Union, and the dispute wliich went for adjudication before the Industrial Uourt Bombay was with respect to bonus for the year ending September 1956. The appellant claimed that three months' wages should be awarded as bonus by the respondent, which is the Ahmedabad Electricity Company Limited. The contention of the respondent was that if a calculation was made in accordance with the Full Bench Formula evolved by the Labour Appellate Tribunal and approved by this Court in the Associated Cement Comvcmies Ltd. v. 11.i Worbnen ('), there wuulJ be no available surplus from which any bonus could be awarded. The Industrial Court accepted the contention of the respondent and rejected the appellant's claim. The main dispute in the Industrial Court centred on three points namely-

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(i) whether depreciation should be calculated according to the provisions of the Income-tax Act and the rules framed thereunder or in accordance with the provisions contained in the Seventh Schedule to the Electricity (Supply) Act, No. LIV of 1948;

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(ii) whether any deduction should be allowed as a prior charge towards contingencies reserve created under the Electricity (Supply) Act ; and . ·

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(iii) whether any deduction should be

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allowed on account of income-tax. The Industrial Court held against the appellant on all the three points and found that there was uo available surplus from which auy bonus could be awarded. Hence this appeal by special leave.

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It is uot in dispute between the iparties that if depreciation is calculated in accordance with the rules framed under the Income-tax Act, there will be no available surplus, from which bonus could be awarded. The main question therefore that ,arises in this appeal is whether depreciation should be calculated according to the Rules framed under the Income-tax Act or in accordance with the Seventh Schedule to the Electricity (Supply) Act. If this question is decided against the appellant. it would be unnecessary to decide the other two points on which the parties were at variance in the Industrial Court.

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(I) (1959) S.C.R. 925.

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What <leprnciation shoulcl be allowccl in C'ase of electricity oompanios eamc up for dcration before the Appellate Tribunal iu in thCJ case of U. P. Electric ihtp/'ly C'o111pC!n!f v. J'heir Workmen('), and it was vrossccl hdMo that in tho case of electricity ~ot11pa11i0s dO]Jl'eciation should be <lcductecl in the manner spoc:ified in the Seventh Schedule to the Electricity (Supply) Act. The Appellate Tribunal pointed out in the long rnn the resnlt of the application t,he two methods would .be the same ; but it ferred to give as prior charge income-tax dcpreoia-· tion as it was in keeping with the Fn ll ]~c-Hoh formula and was not likely to raise fresh problems. It appears that since then, as pointed out the Industrial Court, various Industrial Tribunalq have been allowing cleprcciation'aouording income-tax rates and not according to the Seventh Schedule to the Eleptricity (Supply) Act in case of electricity companies also.· The U.P. tr·ic Supply Company's case (') came up consideration before this Court in 1.'he JJfeenakshi ,lfills .J,[d. v. The1'.r Workmen (') was approved. This Go1u·t then approved decision of the Appellate Tribunal disallowing initial a,nd additional depreciation in calculating depreciation for purposes of ·the Full formula but accepted th<1t depreciation according.to income-tax rates should be dedueted. It that The Meenakshi 11lill's wse (')was not dealing with ·an electricity comp:iny and this Court not have· occasion to consider th" point directly even· so, this Court approved the decision in the U. P. EleGtric Supply Company's case(') respect to depreciation and could not have unaware of the fact that the Appellate Tribunal had applied the income-tax rules for purposes depreciation to electricity companies in preference (I) (1955) 2L. L.J. 431. (2) (1958) S. C R.

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to the provisions of the Seventh Schedule to the Eleet1frity (Supply) Act.

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Further in The Tinnevdly-Tuticorin Electric Supply Co. Ltd. v. Its Workmen ( this Court dealt with the ease of an electricity company direc•tlv. It had then occasion to consider the U. P. ·Electric S1Lpply Company's case l') again and pointed out that that case decided two questions of law. The first was in regard to the applicability of the Full Bench formula to electricity companies, and the second was with respect to the extent of statutory depreciation to be allowed under the Full Bench Formula. It was pointed out that the decision on the second point by which the income-tax rules were applied for purposes of depreciation to electricity companies with the exception of initial and additional depreciation was approved by this Court in the Meenakshi Mill's case ('). It is again true that in the Tinnevelly-Tuticorin ·Electric Supply Company's case (') the question whether depreciation should be allowed in accordance with the income-tax rules or under the Seventh Schedule to the Electricity (Supply) Act for the purposes of the Full Bench formula was not directly raised ; but in effect the decision in the U. P. Electric Supply Cornpany's case (') where the Appellate Tribunal had applied the income-tax rules of depreciation in preference to the provisions of the Seventh Schedule to the Electricity (Supply) Act, was approved. In the circumstances it seems to us that it is not open to the appellant to raise the question that the provisions of the Seventh Schedule to the Electricity (Supply) Act should be applied for purposes of calculating depreciation in preference to the income-tax Tates in working out the Full Bench formula. (I) (1960) 3 S. C.R. 68. (2) (1955) 2 L.L.J. 431. (3) (I 958) S.C.R. 878. (4) (1960) 3 S.C.R.68.

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But, assuming. that the question is still open because it was never directly raiijed in this Court and specifically decided, a!'e of opinion that. the income-tax rules shoulcl be appliecl ip working out depreciation under the Fn Bench formula in preference to the provisiou~ of the Seventh Schedule to tho Electricity (Supply) Act. It was pointed out in T·innvelly- Tuticori:n Electriq 8upply Go.'8 mse ( that 1..he provisions in tl,le Electricity (Supply) Act contained in s. 57 and the Sixth ancf Seventh Schedules to the Act were for a special purpose, namely, to work :out t.he charges to be recovered from consum<>rs for the supply of electricity. It was also observed that the provisions of the Electricity (SnJ)ply) Act and its Schedules were meant. for operation .in the field covered by the Act and t.hat the principles of industrial adjudication were wholly different and hacl to be worked out in their own way in the industrial field. It seems to us therefore that in working ou't available sur1ilus according to the Full Bench' formula, the same prinoiple with respect to depreciation should be applied in tbe case of electricitx companies as in the case of all other industrial concerns. As the ,Appellate Tribunal pointed out, the result in the long run would be the same, though there might be difference in some vears. Besides, in the foi·muln. when it was evolved in 1950 (see The ivlill-Owners' .Assoc·iation· 'v.-The Rashtriya ~f!ill'Jfazdoor Bombay.('), the' depreciation intended to be allowed was as provided in th{: rules under the Income-tax Act. The Appelhte Tribunal pointed this out. in t·hP [·. P. Ehc:tric S·tipply Oompan's case (') and said the Full Bench formula allowed depreciation according to incometa.x rates. It seems tu us therefore that in the field of iudustriti.l relations in connection with which the Full Bench formnla was 0voh·ed (I) (1960) 3 S. C.R. 68. (2) (1950) 2 L. L.J. 1247.

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(1955) 2 L. L. J. 431.

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it is proper that the formula should be worked out as it was evolved without injecting into it the provisions contained in the Seventh Schedule to the Electricity (Supply) Act. This will work for uniformity in all industrial concerns ; and as pointed out in the Associated Cement Companies' case (1), "the formula had on the whole worked fairly satisfactorily in a large number of industries all over the country, and the claim for bonus should be decided by tribunals on the basis of this formula without attempting to revise it". If the provisions of the Seventh Schedule to the Electricity (Supply) Act which, as we have pointed out, were evolved for a special purpose, were to be injected into this formula, the result would be that electricity com· panies would stand in a group by themselves when compared with other industrial concerns, and the uniformity that the formula had achieved in the matter of bonus would be destroyed. The consequence then will be that in identical situations electricity companies may have to pay bonus while other industrial concerns to which income-tax rates of depreciation would be applied may not have to do so. It seems to us that this is not desirable, particularly when we remember that electricity companies are public utility companies.

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Another reason why we think that income-tax rates of depreciation should be applied for the purposes of the Full Bench formula in the case of electricity companies also is that income-tax rates provide for a quicker building up of the depreciation fund. This to our mind is all to the good in the case of public utility companies like those providing electricity so that they may be in a position to have funds at their disposal in case of unforeseen difficulties resulting in the necessity of replacing plant and machinery earlier than what is provided under the Seventh Schedule to the Electricity (Supply) Act. (I) (1959) S. C.R. 925.

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There is yet another reason which inclines us to approve the view taken by the Appellate Tribunal in the U. P. Electric Supply Company's mse (' ). That case sett.led the law in 1955 and has since been followed throughout the country. We fed th11t we should not disturb that decision, unless there are good reasons for doing so-and none Las bet•n shown. If anything, it appears to us th~.t this is not the time to disturb that decision which has now been followed throughout the country for the last six years, for the whole question of bonus is under refrroncc to a high-powered commission which will go into the matter afresh and will necessarily consider the question of the revision of the Full Bruch form!Jla. As this Court pointed out in the Assoc·irJ,ted Cement Company's case ( the problem mised by the question of the revision of the Full Bench formula is of such a character that it could only he considered by a high-powered commisRion. That is now being done and it seems to us in the circumstances that we should not disturb the decision arrived at by the Appellate Tribunal in the U. P. Electric Supply Company's case ( on this question.

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It follows therefore that the Industrial Court was right in allowing depreciation in accordance with the rates prescribed under the Rules framed under the Income-tax Act. As we have already pointed out, if that is done, there will be no available surplus in this case, from which bonus could be awarded. In the circumstances we do not think it necessary to decide the other two points relating to the contingencies reserve and income-tax, which were raised before the Industrial Court. The appeal fails and is hereby dismissed. In the circumstances we pass no order as to costs.

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Appeal dismissed. (I) (1955) 2 L.LJ. 431. (2) 9j9) S.C.R. 925.

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