M/S MODI TRADING AND INDUSTRIAL SYNDICATE PRIVATE LIMITED FEROZEPUR Vs. THE WORKMAN, THROUGH SUTLEJ FLOUR MILLS WORKERS UNION FEROZEPUR CITY AND OTHERS

JUDGEMENT

(1.) THE petitioner is a private company registered under the Companies Act. It owns a flour mill at Ferozepur under the name and style of Sutlej Flour Mills, Ferozepur City and some other manufacturing units like ice manufacture, oil crushing and rice husking. The accounting year to which this case relates is 1971 -72, that is, from March 1, 1971, to February 29, 1972. For this year, the company paid 8.33 percent, bonus under the Payment of Bonus Act (hereinafter referred to as the Act) to its employees. By notice dated August 16, 1972, the workmen demanded 20 per cent bonus from the petitioner company. On refusal by the company, the dispute was referred to the Industrial Tribunal on January 24, 1973. The Tribunal gave its award on June 28, 1974, which was published in the Punjab Government Gazette dated August 16, 1974. The petitioner company, feeling dissatisfied from that award, has field the present petition.

(2.) THE only point urged before me is that the Tribunal allowed a deduction of Rs. 55000/ - on account of direct taxes under section 6 (c) of the Act instead of Rs. 450,399/ - which was actual amount payable on account of the direct taxes by the petitioner company. Before the Industrial Tribunal, it was also claimed by the petitioner company that a sum of Rs. 1,94,138/ - should be deducted out of the income; profits and gains of the business of the petitioner company on account of the income to the earning of which the workman had not contributed their labour. That plea was not accepted by the Tribunal and is not pressed in their petition.

(3.) SECTION 6 (c) of the Act provides that from the gross profits, the amount of any direct tax which the employer is liable to pay for the accounting year in respect of his income, profits and gains, during that year, has to be deducted subject to the provisions of section 7 of the Act. The phrase occurring in section 6 (c), that requires interpretation, is 'Is liable to pay'. This matter is concluded by the judgment of their Lordships of the Supreme Court in Metal Box Company of India Limited v. Their Workman, A.I.R. 1965 S.C. 612. In that case, the company claimed a deduction from the gross profits of Rs. 145/ - lacs on account of the direct taxes. It had made provision however, for Rs. 130 lacs for direct taxes in the profit and loss account. In the computation, it had made a provision of Rs. 136/ - lacs. At the stage of evidence and arguments, it contended that the proper amount would be Rs. 145 lacs. It claimed that direct taxes were to be calculated under section 6 (c) of the Act on the gross profits worked out under section 4 of the Act, less the charges allowable under section 6 Ibid, namely, depreciation and development (sic) but without deducting from such balance the bonus payable in the particular accounting year. The Tribunal accepted the contention and allowed the deduction of Rs. 145 lacs on account of direct taxes under section 6 (c) of the Act; and the Supreme Court upheld that deduction. The relevant observations in paragraph 27 of the report read as under