judgement:
Civil Appeal No. 2533 of 1969.
Appeal by special leave from the Award dated the 25th June, 1969 of the Central Government Industrial Tribunal, Calcutta, in Reference No. 35 of 1968.
M. K. Ramamurthi, Ramesh Pathak, Vineet Kumar for the Appellants.
G. P. Pai, o. c. Mathur, D. N. Mishra and J. B. Dadachanji & Co. for Respondent.
The Judgment of the Court was delivered by BHAGWATI, J.
This appeal by special leave is directed against an award made by the Industrial Tribunal, Calcutta in a reference between the National and Grindlays Bank Ltd. (hereinafter referred to as the Bank) and its workmen represented by the All India National & Grindlays Bank Employees Federation.
The Bank is a banking company within the meaning of section 5 of the Banking Companies Act, 1949 and has its Head office in London and branch offices in different parts of the world, including India.
The principal office of the Bank in India is situate in Calcutta.
The Bank maintains its accounts according to the calender year and it brings out not only a consolidated balance sheet and profit and loss account for its world business, but also a separate balance sheet and profit and loss account for its Indian business.
There was an industrial dispute between the Bank and its workmen in regard to bonus for the years 1956 to 1964 and as a result of negotiations, this industrial dispute was settled between the parties on an ad hoc basis under a Memorandum of Settlement dated 28th r. December, 1965.
The material terms of the settlement were: "1.
The Bank will pay and the workmen and non work men staff will receive a sum of Rs. 27 lakhs (Rupees twenty seven lakhs only) in full and final settlement of all bonus claims covering the periods from 1st January 1956 to 31st December 1964, including any claims relating to Centenary Bonus.
134 2.
The above sum of Rs. 27 lakhs will be allocated as to one third thereof to Award staff only and as to the remaining two thirds to both the Award and non Award staff, in both cases based on the basic salary paid over the period, namely, 1st January, 1956 to 31st December, 1964, and unrelated to any particular year.
The parties agree that this Settlement shall not be taken as the basis or govern the principle for this determination of bonus in future, but nevertheless this Settlement shall be final and binding on the parties as regards bonus claims for the years 1956 to 1964 (both inclusive) and any claim relating to Centenary Bonus, as also regards qualifications for eligibility and procedures as set out above.
It may be noted that this Settlement was arrived at between the parties after the came into force on 25th September, 1965.
This Act provided a statutory formula for computation and payment of bonus and it was admittedly applicable in respect of the accounting year 1964, but no separate computation of bonus for that year was made in accordance with this statutory formula and it was settled on an ad hoc basis as a part of an omnibus settlement for the accounting years 1956 to 1964.
So far as the claim for bonus for the accounting year 1965 was concerned, computation was made in accordance with the statutory formula provided in the and the maximum 20% of the salary or wage earned during that accounting year was paid by way of bonus to the workmen.
The claim for bonus for the accounting year 1966, however, could not be settled between the parties and, though the Bank paid , 18% of the wage or salary earned by the workmen during that accounting year as bonus, the workmen were not satisfied and the industrial dispute arising from their claim had to be referred for adjudication.
There were different aspects of this industrial dispute which required consideration and the Central Government, therefore, formulated each aspect as a separate question and referred those questions for adjudication to the Industrial Tribunal, Calcutta.
The Industrial Tribunal made an award holding that, on an application of the statutory formula, the amount available for payment of bonus was Rs. 22.17 lakhs and The workmen were, therefore, entitled to a little over 9% of their salary or wage as bonus, but since they had already been paid by the Bank bonus at the rate of 18% of their salary or wage, which was much more than what they were entitled to receive, nothing further remained to . be paid and they were not entitled to any relief.
This award is impugned in the present appeal brought by the workmen with special leave.
There are only certain items in the computation of bonus which are now in dispute in the appeal before us and we shall confine our attention to them.
But before we deal specifically with these items, it could be convenient to refer to some of the relevant provisions of the .
We will refer only to those provisions which have a bearing on the items in dispute between the parties.
Section 2 is the definition section and cl.
(13) of that section defines 'employees 135 to mean any person employed on a salary or wage not exceeding one thousand and six hundred rupees per mensem in any industry to do any skilled or unskilled manual, supervisory, managerial, administrative, technical or clerical work for hire or reward.
The mode of computation of gross profits in the case of a banking company is laid down in section 4, cl.
(a) which provides that the gross profit shall be calculated in the manner specified in the First Schedule.
The First Schedule sets out in items 2, 3 and 4 various amounts which are to be added and in item 6, various amounts which are to be deducted from the net profit as shown in the profit and loss account.
We are concerned in this is appeal only with items 2, 3(a) and 6(e) which read as follows: Item No. Particulars Amount of Amount of Remarks sub items main items 2.
Add back provision for (a) Bonus to employees (b) Depreciation (c) Development Rebate Reserve.
(d) Any other reserves Total of Item No. 2 Rs. 3.
Add back also (a) Bonus paid to employees in respect of previous accounting years.
6 Deduct: (e)In the case of foreign ; banking companies proportionate administrative (overhead) expenses of Head, office allocable to Indian business The concept of 'available surplus ' is defined in section 2, cl.
(6) to mean available surplus computed under section 5 and that section lays down that the available surplus in respect of any accounting year shall be the gross profit of that year after deducting therefrom the sums referred to in s 6 Clauses (a) and (d) of section 6 provide that the following sums shall be deducted from the gross profits as prior charge, namely: "(a) any amount by way of the depreciation admissible in accordance with the provisions of sub section (1) of section 32 pf the Income Tax Act, or in accordance with the provisions of the agricultural income tax law, as the case may be:" "(d) such further sums as are specified in respect of the employer in the Third schedule The Third Schedule is rather material as it bears on one item in dispute between the parties.
Clauses (ii) and (iii) of the proviso to item 2 .
in the Third Schedule enact that in case of a banking company which is a foreign company within the meaning of section 591 of the Companies 10 390SCI/76 Bank in the present case being such banking company the amount to be deducted shall be the aggregate of "(ii) 7.5 per cent.
Of such amount as bears the same pro r portion to its total paid up equity share capital as its total working funds in India bear to its total world working funds; (iii) 5 per cent of such amount as bears the same proportion to its total disclosed reserves as its total working funds r in India bear to its total world working funds;" Then we come to the concept of allocable surplus which is defined in section 2, cl.
(4) and under that clause, 60% of the available surplus is to be taken to be the allocable surplus and it is this allocable surplus which is to be distributed by way, of bonus to the workmen, subject to a limit of 20 per cent.
Of the total salary or wage of the employees employed in the establishment.
10, sub sec.
(1) provides for payment of a minimum bonus of 4 per cent.
Of the salary or wage earned by the employees, irrespective whether or not there are profits in the accounting year, and sub sec.
(1) of section 11 lays down that where the allocable surplus exceeds the amount of minimum bonus payable under section 10, sub section
(1) "the employer shall, in lieu of such minimum bonus, be bound to pay to every employee in the accounting year bonus which shall be an amount in proportion to the salary or wage earned by the employee during the accounting year subject to a maximum of twenty per cent of such salary or wage".
15 is the next material section and it provides, inter alia: " (1) Where for any accounting year the allocable surplus exceeds the amount of maximum bonus payable to the employees in the establishment under sec.
11, then, the excess shall, subject to a limit of twenty per cent, of the total salary or wage of the employees employed in the establishment in that accounting year, be carried forward for being set on in the l succeeding accounting year and so on up to and inclusive or the fourth accounting year to be utilised for the purpose of payment of bonus in the manner illustrated in the Fourth t Schedule.
(2) Where for any accounting year, there is no available surplus or the allocable surplus in respect of that year falls short of the amount of minimum bonus payable to the employees in the establishment under sec.
10, and there is no amount or sufficient amount carried forward and set on under sub sec.
(1) which could be utilised for the purpose of payment of the minimum bonus, then, such minimum amount or the deficiency, as the case may be, shall be carried forward for being set off in the succeeding accounting year and so on up to and inclusive of the fourth accounting year in the manner illustrated in the Fourth Schedule.
(4) Where in any accounting year any amount has been carried forward and set on or set off under this section, then, in calculating bonus for the succeeding accounting year, the ` u, 137 amount of set on or set off carried forward from the earliest A accounting year shall first be taken into account. ' Sec. 34, sub section
(3) enables employees employed in any establishment or class of establishments to enter into agreement with their employer for grant of bonus under a formula which is different from that under the , so long as it does not deprive them of the minimum bonus payable under section 10, sub sec.
It is in the light of these provisions that we have to consider the various points arising For determination in the appeal.
We will first take us for consideration question No. 2 referred to the Industrial Tribunal.
That question` raises the issue whether any amount is liable to be carried forward for being set on in the accounting year 1956 and if so, what amount.
The claim of the workmen was that there was excess of allocable surplus over the amount of maxi mum bonus in both accounting years 1964 and 1965 and the excess in respect of both these years was, by reason of section 15, sub section
(1), liable to be carried forward for being set on in the succeeding accounting year 1966.
Now, so far as the claim in respect of the accounting year 1965 was concerned, the amount to be carried forward and set on was settled at the figure of Rs. 10.23 lacs under an agreement arrived at between the parties and no dispute, therefore, survived in respect of that claim.
But the claim in respect of the accounting year 1964 was strongly resisted on behalf of the Bank and a preliminary objection was raised that the question whether any amount was liable to be carried forward and set on out of the profits of the accounting year 1964 did not form the subject matter of the reference and hence this Court, in appeal from the Industrial Tribunal, had no jurisdiction to adjudicate upon this question.
We do not think there is any substance in this preliminary objection.
Question No. 2, referred to the Industrial Tribunal, in terms raises the issue "whether any amount is to be carried forward for being set on in the accounting year 1966", and this issue is wide enough to cover the question in regard to carry forward and set on of an amount out of the profits of the accounting year 1964.
The Bank then contended that since the bonus payable for the accounting year 1964 was settled on an ad hoc basis, it was not possible to say that the allocable surplus exceeded the maximum bonus payable for that year and hence there could be no question of any excess to be carried forward and set on in the succeeding year.
There is great force in this contention.
Sec. 15, sub section
(1) provides for carry forward and set on and, on its plain terms, it comes into operation only when, in a given accounting year, the allocable surplus exceeds the maximum bonus pay able under the Act, so that after payment of the maximum bonus there is surplus left which can be carried forward and set on, subject, of course, to the limit of 20 per cent.
Of the total salary or wage.
It is clear from the scheme of the Act and the context in which this sub section occurs, following closely upon sections 4 to 10, that the basic condition for the applicability of this sub section is that bonus is computed in accordance with the statutory formula provided in the preceding sections of the Act and as a result of such computation, it is found that the allocable surplus is more than sufficient . to cover the maximum bonus payable under the Act and where such is the case, the sub section provides that the excess over the amount of the maximum bonus 138 shall, to the extent of 20 per cent.
Of the total wage or salary, be carried forward and set on in the succeeding year.
This sub section can have no application where no computation is made under the Act and bonus is paid, not in accordance with the statutory formula, but on an ad hoc basis.
Then it is not possible to say what was really the bonus payable under the Act.
It may be less or more than the bonus in fact paid.
That inquiry being rendered irrelevant by the ad hoc settlement, there can be no question of carry forward and set on of any amount, unless specifically agreed upon as part of the settlement.
The workmen in the present case were, therefore, not entitled to contend that, though the claim for bonus for the accounting year 1964 was settled on an ad hoc without making computation under the provisions of the Act, such computation must now be made, not for the purpose of determining the bonus payable to them, which is the only purpose for which such computation is contemplated to be made, but for the purpose of determining whether there is any amount liable to be carried forward and set on.
The claim of the workmen for carry forward and set on in respect of the accounting year 1964 must accordingly stand rejected.
We now, proceed to consider the items in dispute in the computation of 'available surplus ' for the accounting year 1966, which fall within question No. 1 referred to the Industrial Tribunal.
The first item to which we must refer is the item of provision for bonus to employees made in the profit and loss account.
This item figures as item 2(a) in the First Schedule to the Act and it is required to be added back in the computation of the gross profits under section 4(a).
Now, so far as the profit and loss account of the Bank in respect of its Indian business was concerned, the provision for bonus to employees did not figure in it as a separate item, but, according to the Bank, it was included under the heading "Salaries and Allowances" or "other Expenditure" and it came to Rs. 19.52 lakhs.
The Bank thus agreed to an add back of Rs. 19.52 lakhs in respect of provision for bonus to employees.
The workmen, however, contended that the provision for bonus made by the Bank was for a much larger amount and the amount of Rs. 19.52 lakhs represented provision for bonus only in respect of those workmen who were 'employees ' within the meaning of section 2, cl; (13) and the Bank had failed to take into account the provision for bonus in respect of those workmen who were not such 'employees '.
The argument of the workmen was that the word 'employees ' in item 2(a) of the First Schedule was not limited to 'employees ' as defined in section 2, cl.
(13), but covered all employees, because the object of adding back provision for bonus to employees was to arrive at the figure of profit available for distribution of bonus and that required that the entire amount set apart as provision for bonus `should be added back, for in determining what is the available fund with reference to which bonus should be paid, one cannot ' exclude the amount already paid or provided as bonus, whether to employees drawing more than Rs. 1600/ or to employees drawing less.
It is true, said the workmen, that the word 'employees ' is defined in section 2, d. (13), but they contended that every definition is subject to the requirement of the context and here the context clearly showed that the word 'employees ' was not used in the restricted sense, but in a wider sense, including all employees.
Now, this argument of the workmen would have required serious consideration by us, but we do not 139 think we can permit the workmen to raise it, as it does not appear to have been advanced by them before the Industrial Tribunal.
The award of the Industrial Tribunal does not show that this argument was at any time urged by the workmen.
The only argument raised by the workmen before the Industrial Tribunal was that the amount of bonus payable to them for the accounting year 1966 was Rs. 38.66 lacs representing 18 per cent.
Of their wage or salary and this amount of Rs. 38.66 lacs was liable to be added back and not the amount of Rs. 19.52 lacs this argument was rightly rejected by the Industrial Tribunal because what is liable to be added back under Item 2(a) of the First Schedule is not the amount of bonus payable to the workmen, nor the amount of bonus in fact paid, but the provision for bonus made in the profit and loss account.
We cannot, therefore, permit the workmen to raise a new contention for the first time in this Court that the provision for bonus liable to be added back was not merely the provision for bonus to 'employees ' as defined in section 2 cl.
(13), but also the provision for bonus to workmen who were not such 'employees '.
The next item in dispute relates to the amount liable to be deducted from the gross profits under section 6, cl.
What is required to be deducted under this clause is the amount of depreciation admissible in accordance with the provisions of sub section
(1) of section 32 of the Income Tax Act.
Now, depreciation represents the diminution in value of a capital asset when applied to the purpose of making profit or gain.
There are various methods known to accountancy practice for measuring such diminution in value and a banking company, like any other firm or company, may follow any one of these methods in maintaining its accounts and the amount of depreciation calculated according to such method would be reflected in its profit and loss account.
But, though such amount of depreciation shown in the profit and loss account may be unexceptionable from the point of view of commercial accountancy principles, it would not necessarily be admissible as a deduction from gross profits under section 6,.
d. (a).
What is allowable as a deduction from the gross profits under that clause is not depreciation calculated according to any recognised method of accountancy followed by a banking company, but only such depreciation as is admissible in accordance with the provisions of sub section
(1) of section 32 of the Income tax Act.
The profit and loss account of the Bank for the accounting year 1966 showed an amount of Rs. 22.40 lacs debited against the composite item "Depreciation and Repairs to the Banking Company 's Property" and according to the Bank, this file included an amount of Rs. 1.89 lacs by way of depreciation.
Now, there would be no difficulty if the Bank claimed to deduct only the amount of Rs. 1.89 lacs by way of depreciation under section 6, cl.
(a), as that was the amount of depreciation debited in the profit and loss account.
But the Bank claimed that, though it had debited by way of depreciation in the profit and loss account only an amount of Rs. 1.89 lacs, the amount of depreciation actually admissible in accordance with the provisions of sums.
(1) of section 32 of the Income tax Act was Rs. 12.79 lacs and in support of this claim, the Bank produced a certificate issued by the Income Tax officer which was marked exhibit 12 in evidence.
The Industrial Tribunal relying solely on the certificate exhibit 12 held that "depreciation admissible in accordance with the provisions of sub section
(1) of s; 32 of the Income tax Act" 140 was Rs. 12.79 lacs as evidenced by the certificate exhibit 12 and the Bank was, therefore, entitled to deduct that amount from the gross profits under section 6, cl.
This decision of the Industrial Tribunal was assailed before us and it was contended on behalf of the workmen that the burden of showing what was the amount of depreciation admissible in accordance with the provisions of sub section
(1) of section 32 of the Income tax Act was on the Bank and this burden, the Bank had failed to discharge by producing proper evidence.
The only evidence produced on behalf of the Bank, said the workmen, was the certificate exhibit 12 issued by the Income tax officer, but that certificate was no evidence and could not be taken into account for the purpose of holding that the depreciation admissible under sub section
(1) of section 32 of the Income tax Act was Rs. 12.79 lacs.
The Bank, however, contended that the workmen did not at any time dispute that the depreciation admissible under sub section
(1) of section 32 of the Income tax Act was Rs. 12.79 lacs nor did they at any time challenge the correctness of the certificate exhibit 12 issued by the Income tax officer and in the circumstances, this certificate was sufficient to establish the claim of the Bank.
Now, in the first place, it is not correct to.
say that the workmen did not at any time dispute the correctness of the figure of depreciation claimed by the Bank.
Both the workmen and the Bank filed their respective computations of bonus before the Industrial Tribunal and while the Bank, in its computation, claimed to deduct the amount of Rs. 12.79 lacs as depreciation, the workmen agreed to deduction only of the amount of Rs. 1.89 lacs as appearing in the profit and loss account.
The workmen did not at any time accept the position that the correct amount of depreciation admissible under section 32, sub section
(1) of the Income tax Act came to Rs. 12.79 lacs as claimed by the Bank.
They seriously disputed it before the Industrial Tribunal and hence the Industrial Tribunal had to go into that question and come to a finding upon it.
Even prior to the making of the reference, when the calculation sheet regarding bonus payable for the accounting year 1966 was sent by the Bank to the` workmen with its letter dated 26th July, 1967, the workmen by their letter dated 3rd August, 1967 called upon the Bank to furnish particulars in regard to the amount of Rs. 12.79 lacs claimed by the Bank as depreciation and the only reply given by the Bank to this demand was that the information required by the workmen went "far beyond any legal requirements" and the Bank was not in a position to accede to the same.
Vide Bank letter dated 8th August, 1967.
This circumstance would also show that the workmen did not accept the figure of depreciation claimed by the Bank.
It is true that in the application made by the workmen to the Industrial Tribunal for certain clarifications on 8th January, 1969, the workmen did not ask for any clarification in regard to the amount of Rs. 12.79 lacs claimed by the Bank by way of depreciation, but if we look at this application, it will be clear that the clarifications sought by the workmen were 'on various aspects of the published balance sheet of the company for the accounting years 1 1 1966 to 31 12 1966 and other figures ' and there was no attempt at seeking clarifications in respect of the various items in the computation sheet filed by the Bank.
Moreover.
when these clarifications were sought by the application dated 8th January, 1969 the 141 controversy between the parties was already crystalised in their pleadings and it was clear from the computation sheets filed by them that there was real dispute in regard to the amount of depreciation and, therefore, mere failure on the part of the workmen to ask for clarification in respect of the amount of Rs. 12.79 lacs claimed by the Bank, could not justify an inference that the workmen had conceded the claim of the Bank and abandoned the dispute.
There can be no doubt that the dispute in regard to the amount of depreciation was very much there between the parties and it had to be resolved by the Industrial Tribunal.
It was not seriously disputed on behalf of the Bank, and indeed having regard to the well settled position in law it could not be so disputed, that since the Bank claimed the deduction of depreciation at a figure higher than that appearing in the profit and loss account, the burden of proving that the depreciation claimed by it was the correct amount of depreciation admissible under section 32, sub section
(1) of the Income tax Act was on the Bank and that burden had to be discharged by the Bank by producing proper and satisfactory evidence.
Though the Industrial Tribunal relied solely on the certificate exhibit 12 issued by the income tax Officer for the purpose of holding that that, the correct amount of depreciation admissible under section 32, sub section
(1) was Rs. 12.79 lacs, the Bank in the course` of its arguments before us, placed reliance not only on this certificate but also on the oral evidence of A. K. Basu who was the Officer examined on behalf of the Bank.
We will first consider the oral evidence of A. K. Basu and then examine how far the certificate exhibit 12 helps to establish the claim of the Bank.
The statement in the 'oral evidence of A. K. Basu which was strongly relied upon on behalf of the Bank, was: "Under the Heading 'Prior Charge ', the figure against 'depreciation ' was collected from the income tax assessment order" and it was contended that since there was no cross examination of A. K. Basu in regard to this statement, it must be accepted as correct and that was sufficient to prove that the depreciation admissible under section 32 sub section (1) was Rs. 12.79 lacs.
This contention is wholly fallacious and it proceeds upon a misreading of the statement made by A. K. Basu.
It is no doubt true that A. K. Basu stated that the figure against depreciation was collected from income tax assessment order, but this statement was made in reference to the figure against depreciation appearing in the First Enclosure to Annexure (C) to the written statement of the workmen, which was the computation sheet containing calculation of bonus for the accounting year 1965.
That is evident from the context in which this statement occurs.
This statement finds place in the paragraph which contains answers given by the witness to the Industrial Tribunal and the six sentences preceding this paragraph as also the first sentence of this paragraph clearly show that the answers were in reference to the accounting year 1965.
We have carefully scanned through the entire evidence of A. K. Basu, but we do not find in it any statement in regard to the amount of depreciation shown in the Second Enclosure to Annexure (C) to the written statement of the workmen, which contained the computation in regard to bonus for the accounting year 1966.
There was no evidence given by A. K. Basu in regard to the amount of Rs. 12.79 lacs claimed by the Bark by way of depreciation in the computation sheet submitted by it.
Not a word 142 was said about it by A. K. Basu in his evidence and apart from A. K. Basu, no other witness was examined on behalf of the Bank.
There was therefore, clearly no oral evidence to support the claim of the Bank.
Even if the statement of A. K. Basu that the figures against depreciation were collected from the income tax assessment order be construed as referring to the computation sheet in respect of the accounting year 1966, it does not advance the case of the Bank.
The income tax assessment order for the accounting year 1966 admittedly did not show depreciation at the figure of Rs. 12.79 lacs and that figure could not, therefore, have been collected by M. A. K. Basu, from the income tax assessment order.
Even if the words Income tax assessment order ' as appearing in his statement be read so as to include the income tax return, it was admitted that the relevant income tax return was not produced on behalf of the Bank, and moreover, A. K. Basu admitted in his cross examination that he did not prepare the income tax return and consequently it must follow that he had no personal knowledge of the correctness or veracity of the income tax return and what he stated had no probative or evidentiary value.
That leaves for consideration the certificate exhibit 12 issued by the Income tax officer which was strongly relied upon on behalf of the Bank and on which the Industrial Tribunal rested its decision on this part of the case.
It is clear on a plain natural reading of the language of section 6, cl.
(a) that what is deductible under that clause is "depreciation admissible in accordance with the provisions of sub section
(1) of section 32 of the Income tax Act" and not "depreciation allowed by the Income tax Officer in making assessment on the employer".
It is the Industrial Tribunal which has to find for itself what is the amount of depreciation admissible under sub s.(1) of section 32 and it cannot abdicate its duty and surrender its judgment to what has been done by the Income tax officer while making assessment under the Income tax Act.
Since depreciation .
may be computed according to various methods recognized by accountancy principles, section 6, clause (a) while providing for deduction of depreciation, had to specify the method according to which depreciation to be deducted shall be calculated and it adopted the method specified in sub section
(1) of section 32.
But the calculation of depreciation in accordance with this method would necessarily have to be done by the Industrial Tribunal which is entrusted with the task of determining the amount of bonus by applying the statutory formula.
Therefore, it is the industrial Tribunal which must in the exercise of its quasi judicial duty calculate the amount of depreciation by adopting the method set out in sub section
(1) of section 32.
The Industrial Tribunal cannot say that it will Blindly accept the figure of depreciation arrived at by another authority charged with the function of determining depreciation under a different statute.
The determination of the Income tax officer in regard to depreciation admissible under section 32, sub section (1) can be taken into account as evidence only if there is some provision of law which provides to that effect.
We do not find anything in the Income tax Act or in the or in any other pro vision of law which attaches presumption of accuracy to the determination of the Income tax officer in this matter or invests it with probative or evidentiary value in the proceedings before the Industrial Tribunal.
And the reason for this is obvious because the workmen, who are sought 143 to be bound by the determination of the Income tax officer, would not be parties to the income tax proceedings and they would have no opportunity of putting forward their point of view before the determination is arrived at by the Income tax officer.
Moreover, the possibility cannot be ruled out that the determination made by the Income tax officer may be wrong and he might have made a bona fide mistake in arriving at the figure of depreciation.
If the workmen were to be held bound by the figure of depreciation determined by the Income tax officer, they would have no opportunity of challenging its correctness or showing that it is wrong, nor would they be able to verify the figure of depreciation by cross examination of the employer or his witnesses who may have calculated the same.
That would be contrary to the established principles of judicial procedure.
There can, therefore, be no doubt that the certificate issued by the Income tax officer was not admissible in evidence to prove the depreciation admissible under sub section (1) of section 32 and ordinarily we would have refused to rely upon it and directed the Industrial Tribunal to arrive at a fresh decision after giving opportunity to the Bank to prove its claim for depreciation by leading evidence, but we find that the certificate of the Income tax officer was admitted in evidence without any objection on the part of the workmen and at no stage of the hearing before the Industrial Tribunal, it was contended on behalf of the workmen that it was an inadmissible piece of evidence.
If the workman had contended before the Industrial Tribunal that the certificate of the Income tax officer was not admissible in evidence, the Bank could have led other evidence to substantiate its claim for depreciation, but since no objection was raised on behalf of the workmen, the Bank contented itself by producing and tendering in evidence only the certificate of the Income tax officer.
We do not, in the circumstances see why reason to interfere with the decision of the Industrial Tribunal in regard to the amount of depreciation deductible under section 6, clause (a).
We then come to item 3(a) of the First Schedule which requires bonus paid to the employees in respect of the previous accounting years to be added back in computing gross profits.
The amount paid to the employees in the accounting year 1965 was Rs. 13.27 lacs and the work men claimed that this amount of Rs. 13.27 lacs should be added back under item 3(a) of the First Schedule.
The Bank, in the computation sheet filed by it, also showed this amount of Rs. 13.27 as an add back and, therefore there should really have been no dispute about it.
But the Industrial Tribunal refused to permit the Bank to add back this amount of Rs. 13.27 lacs on the ground that "a sum out of 1965 account must not be allowed to adulterate the account of 1966".
This was an obvious error committed by the Industrial Tribunal.
The amount of Rs. 13.27 lacs paid to the employees in respect of bonus for the accounting year 1965 was clearly, on the plain terms of Item 3(a) of the First Schedule, liable to be added back and we direct the Industrial Tribunal to do so when the case goes back to it.
The item which then requires to be considered is that under cl.
(iv) of the proviso to Item 2.
Of the Third Schedule.
That clause provides that in the case of a banking company, any sum which, in 144 respect of the accounting year, is deposited by it with the Reserve Bank of India under section 11(2)(b)(ii) of the Banking Regulation Act, 1949 not exceeding the amount required under the said provision to be so deposited, shall be deducted from the gross profits.
The Bank claimed to deduct under this item a sum of Rs. 13.48 lacs on the ground that it represented the amount deposited by the Bank with the Reserve Bank of India under section 11(2)(b)(ii) of the Banking Regulation Act, 1949 and produced in support of this claim, a certificate of the Reserve Bank of India dated 3rd February, 1969 confirming that the Bank had deposited security adequate to fulfil the requirements section 11(2)(b)(ii) of the Banking Regulation Act, 1949 in respect of the accounting year 1966.
This certificate was produced by A. K. Basu on behalf of the Bank without ally objection by the workmen and it was marked exhibit 11.
The Industrial Tribunal accepted the claim of the Bank on the strength of this certificate and permitted deduction of the amount of Rs. 13.38 lacs.
The workmen impugned this decision of the Industrial Tribunal on the ground that the balance sheet of the Bank for the accounting year 1966 showed that the amount deposited by the Bank with the Reserve Bank of India during that accounting year was only Rs. 70,000/ being the difference between Rs. 99.10 lacs and Rs. 98.40 lacs and it was therefore, only this amount which was liable to be deducted in respect of this claim.
But this contention of the workmen is clearly fallacious.
The balance sheet of the Bank for the accounting year 1966 would not show the amount deposited by the Bank with the Reserve Bank of India in respect of that accounting year, for, on a plain reading of section 11(2)(b)(ii) of the Banking Regulation Act, 1949, that amount would ordinarily be deposited only after the expiration and not during the currency of that accounting year.
No reliance can, therefore, be placed on behalf of the workmen on the balance sheet of the Bank for the accounting year 1966 for the purpose of repelling the claim of the Bank.
On the other hand, the evidence given by A. K. Basu on behalf of the Bank clearly showed that the Bank had deposited with the Reserve Bank of India securities adequate to fulfil the requirements of section 11(2)(b)(ii) of the Banking Regulation Act, 1949 and this statement made by the witness was sought to be supported by the certificate issued by the Reserve Bank of India.
The workmen did question A. K. Basu on this point, but he clearly stated that the deposit was made in securities.
Having regard to this evidence of A. K. Basu supported by the certificate of the Reserve Bank of India, we must hold that the claim of the Bank to deduction of the amount of Rs. 13.48 lacs was well founded and it was rightly allowed by the Industrial Tribunal.
That takes us to the last item in dispute which is Item 6(e) of the First Schedule.
That item requires that in the case of foreign banking companies, Proportionate Administrative (over Head) Expenses of Head office allocable to Indian business shall be deductible in computing gross profits.
The Bank claimed that a sum of Rs. 43.40 lacs was Liable to be deducted under this item, while according to the workmen, the claim for deduction was admissible 145 Only to the extent of Rs. 43.10 lacs.
The Industrial Tribunal, however, did not accept the figure of either party but made its own calculations and came to the conclusion that the proportionate administrative expenses allocable to Indian business amounted to Rs. 23.88 lacs and hence that was the amount deductible under this item.
This decision of the Industrial Tribunal was challenged on both sides.
In order to appreciate the grounds of challenge, it is necessary to understand how the Industrial Tribunal actually calculated the proportionate administrative expenses of Head office allocable to Indian business.
Foot Note 3 of the First Schedule provides that proportionate administrative expenses of Head office allocable to Indian business should be calculated "in the proportion of Indian Gross profit (Item No. 7) to total world gross profit (as per consolidated profit and loss account, adjusted as in Item No. 2 above only)".
Now, the administrative expenses of Head office were admittedly Rs. 120.52 lacs and if X was the amount of proportionate administrative expenses allocable to Indian business, X/120 would be equal to Indian gross profit under Item No. 7/total world gross profit adjusted as in Item No. 2.
The Indian gross profit for the purpose of working out this proportion was calculated by the Industrial Tribunal by taking the figure of Rs. 67.39 lacs which was the net profit shown in the profit and loss account and adding to it Rs. 19.52 lacs representing bonus to employees and Rs. 1.89 lacs representing depreciation and it was, thus, determined at Rs. 88.80 lacs.
Here there was a manifest error committed by the Industrial Tribunal.
The net profit of Rs. 67.39 lacs shown in the profit and loss account was admittedly arrived at after deducting from the profit of the Bank a sum of Rs. 43.10 lacs in respect of actual head office administrative expenses allocable to India.
This amount of Rs. 43.10 lacs was obviously required to be added back, since Item 6(e) provided for deduction of proportionate Head office administrative expenses allocable to Indian business and the same item could not be deducted twice over in arriving at the Indian gross profit.
It is true that Item 1 of the First Schedule requires the Industrial Tribunal to take as the starting point of computation "net profit as shown in the profit and loss account after making usual and necessary provisions".
But the fact that Item 6(e) provides for deduction of proportionate administrative expenses of Head office allocable to Indian business in arriving at the gross profit for the purpose of bonus under Item 7 shows that the net profit contemplated in Item 1 is net Profit arrived at without deducting proportionate administrative expenses of head office allocable to Indian business.
That is not regarded by the Legislature as usual and necessary provision should be deducted for the purpose of ascertaining net profit under Item 1.
This position was indeed not disputed by the learned counsel appearing on behalf of the Bank and it is therefore, obvious that the amount of Rs. 43.10 lacs should be added back in arriving at the figure of net profit for the purpose of Item 1.
Then again, it is clear from the calculation made by the Industrial Tribunal that in computing the Indian gross Profit at the figure of Rs. 88.80 lacs, the Industrial Tribunal added black only the amounts representing bonus to employees and depreciation as set out in Item 2 of the First Schedule.
But Foot Note 3 146 requires that the Indian gross profit should be determined as shown in Item 7 and, therefore, it was necessary to add back not only amounts under item 2 but also amounts under items 3 and 4 and to deduct amounts under item 6 for the purpose of arriving at the Indian gross profit under item 7.
This, the Industrial Tribunal clearly failed to do.
We would, therefore, direct the Industrial Tribunal.
When the case goes back to it, to determine the figure of Indian gross profit as set out in item 7 after adding back the amount of Rs. 43.10 lacs the figure of net profit under Item 1.
The workmen also pointed out another error in the calculation made by the Industrial Tribunal and that was in regard to computation of total world gross profit.
Foot Note 3 requires that the total gross profit should be as per consolidate profit and loss account after adjustment as in Item 2.
That means that the provision made in the consolidated profit and loss account for bonus to employees, depreciation, development rebate reserve and any other reserves should be added back to the net profit as shown in the consolidated profit and loss account for the purpose of arriving at the total world gross profit.
What the Industrial Tribunal, however, did in the present case was to add back merely the provision made in the profit and loss account of the Indian business for bonus to employees and depreciation.
The Industrial Tribunal did not examine what was the provision made in the consolidated profit and loss account of the Bank for bonus to employees, depreciation, development rebate reserve and other reserves.
If any provision were made in the consolidated profit and loss account for bonus to employees, which would mean employees of the Bank throughout the world, depreciation on world assets and development rebate and other reserves, such provision would have to be added back to the net profit as shown in the consolidated profit and loss ' account.
This would have to he done by the Industrial Tribunal when the matter goes back to it on remand.
The Industrial Tribunal will, thus, after calculating the Indian gross profit above, apply the proportion of Indian gross profit/total world gross profit to the amount of Rs. 120.52 lacs representing the administrative expenses of Head Office and determine the proportionate administrative expenses of head office allocable to Indian business for the purpose of deduction under Item 6(e) of the first Schedule.
We must also refer to one other ground of challenge put forward on behalf of the Bank against the decision of the Industrial Tribunal in regard to the amounts deductible under cls.
(ii) and (iii) of the proviso to Item 2 of the Third Schedule.
This ground of challenge was urged on behalf of the Bank in support of the ultimate award of the Industrial Tribunal determining the bonus payable to the workmen at a little over 9 per cent.
Of their salary or wage.
It was clearly open to the Bank to urge this ground of challenge since the Bank was entitled to support the award of the Industrial Tribunal 147 even on a ground decided against it.
Vide J. K. Synthetics Ltd. vs A J. K. Synthetics Mazdoor Union(1) and Management of I.C.C. vs Workmen(2).
The controversy arising out of this ground of challenge turned on the true interpretation of the works 'working funds ' in clauses (ii) and (iii) of the proviso to Item 2 of the Third Schedule.
The Industrial Tribunal interpreted the words 'working funds ' to mean "paid up capital, reserves and deposits" and rejected the contention of the Bank that they also included borrowings from other banking companies, bills payable and balance of profit and loss account.
This view taken by the Industrial Tribunal was assailed on behalf of the Bank at the hearing of the appeal before us.
The Bank contended that borrowings from other banking companies, the amounts of bills issued by the Bank and balance of profit and loss account constituted part of the working funds of the Bank and were, therefore, within the expression "working funds".
This contention, plausible though it may seem at first sight, is, in our opinion, not well founded.
The words "working funds", when used in relation to a banking company, are not to be construed in their ordinary popular sense by reference to a dictionary.
They have a history of their own and they have acquired a definite meaning.
These words were first defined in the award made by Mr. K. C. Sen in 1949 in regard to banks and the definition he gave was that 'working funds ' consisted 1 of "paid up" capital, reserves and deposits".
So also in the Sastri Award made in 1953 in regard to Industrial desputes between certain banking companies and their workmen, the words 'working funds ' were defined to mean "paid up capital, reserves and the average of the deposits for 52 weeks of each year for which weekly.
returns of deposits are submitted to the Reserve Bank of India under the provisions of the Reserve Bank of India Act".
So far as banking companies are concerned, the words 'working funds ' have always been understood in this sense and that is the sense in which they must be deemed to have been used by the Legislature when it enacted cls.
(ii) and (iii) of the proviso to Item 2 of the Third Schedule.
It is a well settled rule of interpretation that when the Legislature uses certain words which have acquired a definite meaning over a period of time, it must be assumed that those words have been used by the Legislature in the same sense.
The words 'working funds ' in cls.
(ii) and (iii) of the proviso to Item 2 of the Third Schedule must, therefore, be construed to mean Paid up capital, reserves and average of the deposits for 52 weeks of each year for which weekly returns of deposits are submitted to the Reserve Bank of India.
It could hardly be disputed that borrowings from other banking companies the amounts of bills issued by the Bank and the balance of profit and loss account are neither reserves nor deposits and they are not liable to be shown in the weekly returns of deposits submitted to the Reserve Bank of India.
The Industrial Tribunal was, therefore right in excluding them from the category of 'working funds ' and this round of challenge urged on behalf of the Bank must be rejected.
(1) [1972]1 S.C.R. 651 (2) ; 148 We accordingly set aside the award made by the Industrial A Tribunal and remand the case to the Industrial Tribunal with a direction to dispose it according to law in the light of the decisions given and observations made in this judgment.
Since the workmen have partly succeeded and partly failed, we think that the fair order of costs would be that each party should bear and pay its own costs of these proceedings.
P.B.R Appeal allowed in part.

summary:
As a result of negotiations between the respondent Bank and its employees (appellants) an industrial dispute with regard to bonus for the years 1956 to 1964 was settled on an ad hoc basis.
By the time of the settlement however the came into force.
In respect of the accounting year 1964, though the bonus formula was applicable, no separate computation was made in accordance with that formula since it was settled on an ad hoc basis as a part of an omnibus settlement.
The Bonus Act provides a statutory formula for the computation of bonus.
Section 2(13) defines an 'employee ' to mean any person employed on a salary or wage not exceeding one thousand and six hundred rupees per mensem.
Section 4(a) provides that the gross profits shall be calculated in the manner specified in the First Schedule.
Item 2 of the First Schedule deals with "add back" in respect of (a) bonus to employees, (b) depreciation (c) development rebate reserve and (d) any other reserves.
Item 3(a) deals with "add back" of bonus paid to employees in respect of previous accounting years.
Item 6(e) deals with deduction in the case of foreign banking companies of proportionate administrative (overhead) expenses of head office allocable to Indian business.
The concept of "available surplus" is defined in section 2(6) to mean available surplus computed under section 5 and that section lays down that the available surplus in respect of any accounting year shall be the gross profit for that year after deducting therefrom the sums referred to in section 6 which, under clause (a) include "any amount by way of depreciation admissible in accordance with the provisions of section 32(1) of the Income Tax Act" and under clause (d) "such further sums as are specified in respect of the employer in the Third Schedule.
" Clause (iv) of the proviso to item 2 of the Third Schedule provides that in the case of a banking company any sum which, in respect of the accounting year, is deposited by it with the Reserve Bank of India under section 11 (2)(b)(ii) of the Banking Regulation Act, 1949 not exceeding the amount required under this provision to be so deposited shall be deducted from the gross profits as prior charge.
Section 15 provides for what is liable to be carried forward for being set on and set off out of allocable surplus in the succeeding year or years.
An industrial dispute having arisen between the parties in regard to the computation of bonus for the accounting year 1966, it was referred to an Industrial Tribunal for adjudication.
The Tribunal 's award was assailed by the workmen on the following grounds: (a) that there was an excess of allocable surplus over the amount of maximum.
bonus for the accounting years 1964 and 1965, which, by reason of section 15(1), was liable to be carried forward for being set on in the succeeding accounting year 1966; (b) that while the object of "add back" was that the entire amount set apart as provision for bonus should be added back in determining the available surplus.
in spite of making a provision of a much larger amount as bonus, the Bank had added back only a small amount representing the bonus of those workmen who were employees falling within the meaning of section 2(13) and there by failed to take into account bonus in respect of those workmen who are not such employees; the word 'employee ' in items 2(a) of the First Schedule was not limited to employees as defined in section 2(13) but was used, in a wider sense to include all employees, that is, employees drawing more than 1600 rupees or less; 131 (c) that the Tribunal was wrong in allowing the Bank to deduct a much A higher sum by way of depreciation than was shown in the profit and loss account, that the burden of showing what the amount of depreciation admissible under section 32(1) of the Income Tax Act was, was on the Bank which it had failed to discharge and that, at any rate the certificate issued by the Income Tax officer was no evidence and could not be taken into account; (d) that the balance sheet of the Bank for the year 1966 showed a much lesser amount than what the Bank claimed to have deposited with the Reserve Bank under section 11 (2)(b) (ii) of the Banking Regulation Act, 1949 and it was this sum which was liable to be deducted under this head and not the larger sum which it actually deducted.
The Industrial Tribunal 's calculation of proportionate administrative (over head) expenses of head office allocable to the Indian business which are deductible in computing the gross profits, both the Bank and the employees assailed it as being incorrect, For the bank, it was contended, (a) that borrowings from other banking companies, the amount of bills issued by the bank and the balance of profit and r loss account constituted part of its "working funds" and that the Industrial Tribunal was wrong in rejecting this interpretation of "working funds" and in limiting it to 'paid up capital, reserves and deposits only".
(b) that the Tribunal was wrong in refusing to permit the Bank to add back the sum falling under item 3(a) of the First Schedule. ^ HELD. 1.
The workmen are rot entitled to contend that though the claim for bonus for the year 1964 was settled on an ad hoc basis without making computation under the provisions of the Act, such computation must now be made, not for the purpose of determining the bonus payable to them, but for the purpose of determining whether there is any amount liable to be carried forward and set on.
Section 15(1) can have no application where no computation is made under the Act and bonus is paid, not in accordance with the statutory formula, but on an ad hoc basis.
Then it is not possible to say what was really the bonus payable under the Act.
It may be less or more than the bonus in fact paid.
That enquiry being rendered irrelevant by the ad hoc settlement, there can be no question of carry forward and set on of any amount, unless specifically agreed upon as part of the settlement.
[137 F 138 G] 2.
The workmen cannot be permitted to raise a new contention for the first time in this Court that the provision for bonus liable to be added back was not merely the provision for bonus payable to employees as defined in section 2(13) of the Act but also the provision for bonus payable to workmen who are not such employees.
What is liable to be added back under item 2(a) of the First Schedule is not the amount of bonus payable to the workmen nor the amount of bonus in fact paid, but the provision for bonus made in the profit and, loss account, 3(a) Though the amount of depreciation calculated in accordance with account.
[139 B C] 3.
(a) Though the amount of depreciation calculated in accordance with methods known to accountancy practice may be unexceptionable from the point of view of commercial accountancy, it would not necessarily be admissible as a deduction from gross profits under section 6(a).
What is allowable as a deduction from the gross profits under that clause is not depreciation calculated according to any recognised method but only such depreciation as is admissible in accordance with the provisions of section 32(1) of the Income Tax Act, 1961.
[139 E F] (b) The burden of providing that the depreciation claimed by the Bank was the correct amount admissible under section 32(1) of the Income Tax Act, 1961 was on the Bank and that burden had to be discharged by the Bank by producing proper and satisfactory evidence.
[141 C] (c) A certificate issued by the Income Tax officer was not admissible in evidence to prove the depreciation admissible under section 32(1).
It is the Industrial Tribunal which must, in the exercise of its quasi judicial duty, calculate the amount of depreciation by adopting the method set out in section 32(1).
The Tribunal cannot say that it would accept the figure of depreciation arrived at br another authority charged with the function of determining depreciation under 132 a different statute.
There is nothing in the Income Tax Act or in the or in any other provision of law which attaches a presumption of accuracy to the determination of the Income Tax officer in ' this matter or invests it with probative or evidentiary value in the proceedings before the Industrial Tribunal.
[142 F 143 C] In the instant case, however, there is no reason to interfere with the decision of the Tribunal in regard to the amount of depreciation deductible under section 6(a).
The certificate of the Income Tax officer was admitted in evidence without any objection by the workmen.
Had the workmen objected to its admissibility before the Tribunal the Bank could have led other evidence to substantiate its claim for depreciation.
Since no such objection was taken before the Tribunal the Bank contented itself by tendering in evidence only the certificate of the Income Tax officer.
[143 C D] 4.
No reliance can be placed by the workmen on the balance sheet for 1966 for repelling the Bank 's claim to deduct from the gross profit the amount deposited with the Reserve Bank of India under section 11(2) (b)(ii) of the Banking Regulation Act, 1949.
The balance sheet for the accounting year 1966 would not show the amount deposited by the Bank with the Reserve Bank in respect of that accounting year, because that amount would ordinarily be deposited only after the expiration, and not during the currency of that accounting year [144C F] 5.
(a) The Industrial Tribunal had committed a manifest error.
in regards to the calculation of Proportionate Administrative (overhead) Expenses of head office allocable to Indian business.
Although item 1 of the First Schedule requires the Industrial Tribunal to take as the starting point of computation "net profit as shown in the profit and loss account after making usual and necessary provisions", The fact that item 6(e) provides for deduction of proportionate administrative expenses of head office allocable to Indian business in arriving at the gross profit for the purpose of bonus under item 7 shows that the net profit contemplated in the item 1 is the net profit arrived at without deducting proportionate administrative expenses of head office allocable to India business.
The amount in respect of the actual head office administrative expenses allocable to Indian business should be added back in arriving at the figure of net profit for the purpose of item 1.
[145 D 146 B] .
(b) In computing the Indian gross profit the Industrial Tribunal added back only the amounts representing bonus to employees and depreciation as set out in item 2 of the First Schedule.
Foot note 3 requires that the Indian gross r profit should be determined as shown in item 7 and, therefore, it was necessary to add back not only amount under item 2 but also item 3 and 4 and to deduct amounts under item 6 for the purpose of arriving at the Indian gross profits under item 7.
[146 A B] (c) In calculating the total gross profits the Industrial Tribunal committed an error by adding back merely the provision made under the profit and lass account of the Indian business for bonus to employees and depreciation.
Foot note 3 requires that the total world gross profit should be as per consolidated profit and loss account after adjusting as in item 2 which means that the provision made in the consolidate profits and loss account for bonus to employees; depreciation, development rebate reserve and any other reserves should be added back to the net profit as shown in the consolidated profit and loss account for the purpose of arriving at the total world gross profit.
The Industrial Tribunal did not explained what was the provision made in the consolidated profit and lost; account of the Bank under this head.
If any provision were made in the consolidated profit and loss account for bonus to employees, which would mean employees of the Bank throughout the world, depreciation on world assets and development rebate and other reserves such provision would have to be added back to the net profit as shown in the consolidated profit and loss account 6 (a) The Industrial Tribunal was right in its interpretation of the term "working funds" occurring in cl.
(ii) and (iii) of the proviso to item 2 of the Third Schedule.
The term must be construed to Mean paid up capital, reserves 133 and average deposits for 52 weeks of each year for which weekly returns of deposits are submitted to the Reserve Bank of India.
It could hardly be disputed that borrowings from other banking Companies, the amounts of bills issued by the Bank and the balance of profit and loss account are neither reserves nor deposits and they are not liable to be shown in the weekly returns of deposit submitted to the Reserve Bank of India.
[147 F H] (b) The term "working funds" was first defined in the award of Mr. K. C. Sen in 1919 in regard to Banks, and it was also used ill the Shastri award made in 1953 in regard to industrial disputes between certain banking companies and their workmen.
These words have always been understood in the above sense and that is the sense in which they must be deemed to have been used by the legislature when it enacted clauses (ii) and (iii) of the proviso to item 2 of the Third Schedule.
[147 D F] 7.
The Industrial Tribunal was wrong in refusing to permit the Bank to add back the sum of Rs. 13.27 lacs on the ground that "a sum out of 1965 account must not be allowed to adulterate the amount of 1966.
" This sum paid to the employees in respect of bonus for the accounting year 1965 was, on the plain terms of item 3(a) of the First Schedule, liable to be added back.
[143 F H]


judgement:
ivil Appeal Nos.
667 668 of 1975.
From the Judgment and order dated the 10 5 1973 of the Delhi High Court in Letter Patent Appeal Nos. 65 and 103 of 1969.
F. section Nariman.
Randhir Chawla.
G. C. Sharma.
Mrs. A; K. Verma, Talat Ansari.
Ravinder Narain, and O. C. Mathur for the Appellant.
G. L. Sanghi, R. N. Sachthey and Girish Chandra for the Respondents.
The Judgment of the Court was delivered by UNTWALIA, J.
In these appeals by certificate the question for determination is whether the exercise of the power of revision under sub section (3) of section 20 of the Bengal Finance (Sales Tax) Act, 1941 as extended to the Union Territory of Delhi hereinafter called the Act is subject to the period of limitation provided in sub section (2a) of section 11 or section 11A of the said Act.
The requisite 3 facts lie in a narrow compass and may usefully be stated at the outset.
The appellant who was carrying on the business of execution of building contracts was assessed to sales tax under the Act by the Sales Tax officer for the year 1955 56 by an order of assessment made on November 23, 1959.
The appellants appeal before the Assistant Commissioner of Sales Tax succeeded in part.
He held that the assessment for the first two quarters of the year 1955 56 was invalid having been made out of time.
The case was, therefore, remanded to the Sales Tax officer for a fresh assessment in respect of the 3rd and 4th 249 quarters of the year.
The Sales Tax officer in pursuance of the A appellate order of remand dated February 11, 1960 passed a fresh .
assessment order on March 21, 1960.
The Commissioner, however, after notice dated July 21, 1960 to the appellant, by his order dated July 29, 1960 revised the appellate order of the Assistant Commissioner in exercise of his power under section 20(3) of the Act.
He held that no part of the assessment for the year 1955 56 was barred and directed a fresh assessment to be made.
A fresh assessment for all the four quarters was accordingly made by the Sales Tax officer on September 24, 1960.
The appellant filed two writ petitions in the Delhi High Court challenging the order made in revision by the Commissioner and the fresh assessment order passed by the Sales Tax officer in pursuance thereof.
A learned single Judge of the High Court allowed the writ applications on April 2, 1969 and quashed the impugned orders.
The respondents took up the matter in letters patent appeal and succeeded before a Bench of the High Court.
Hence these appeals by the assessees Mr. F. section Nariman appearing for the appellant contended: (1) That the appellate and the revisional authorities must exercise their appellate or revisional power within the period prescribed under sub section (2a) of section 11 of the Act.
If their orders are final orders of assessment then directly they are exercising their powers under sub sections (1) or (2) of section 11.
In case their orders are of remand for fresh assessment to the assessing` authority then also they must pass their orders within the periods aforesaid although under the proviso added in 1959 the assessing authority may have a further period of 4 years or 6 years, as the case may be, for passing a fresh assessment.
(2) That the Commissioner while exercising the power in revision cannot overstep and ignore the period of limitation of 3 years provided in section 11A of the Art (3) That the authority mentioned in sections 11, 11A and 20(3) being the Commissioner, the Commissioner is subject to the period of limitation provided in sections 11 and 11A even when exercising the revisional power under section 20(3).
(4) That in any view of the matter the revisional authority must exercise the Dower in a reasonable manner and within a reasonable time.
It cannot exercise the power of revision, suo moto, after a long lapse of time at its sweet will and pleasure.
Under section 3 of the Act, a hierarchy of officers has been constituted by the Chief Commissioner namely, the Commissioner of Sales Tax, Sales Tax officers and others to assist him.
Section 11 of the Act deals with assessment of tax.
The Sales Tax officer 250 exercising the powers as an officer to assist the Commissioner under section 11(1) of the Act can proceed to assess the amount of the tax due from a registered dealer within 18 months of the expiry of a particular period.
A dealer who has been liable to pay tax under the Act but has failed to get himself registered can be assessed to tax under sub section (2).
Then sub section 2(a) says: "No assessment under sub section (1) shall be made after the expiry of four years and no assessment under subsection (2) shall be made after the expiry of six years from the end of the year in respect of which or part of which the assessment is made :" A proviso was added to sub section (2a) w.e.f. October 1, 1959 By the Amending Act of 1958 and it reads as follows: "Provided that where such assessment is made in consequence of or to give effect to any order of an appellate or revisional authority or of a court, the period of four years or six years, as the case may be, shall be reckoned from the date of such order.
" lt is to be noticed that a period of limitation has been provided in section 11(2a) and no assessment either under sub section (1) or sub section (2) can be made after the expiry of the specified period.
But where such an assessment is made by the assessing authority in consequence of or to give effect to any order of an appellate or revisional authority or any order of a court made in reference, writ or in any other proceeding then under the proviso the period of limitation is to be reckoned from the date of such order.
The Legislature has not provided any period.
within which an order is to be made by an appellate or revisional authority of a court.
Obviously it would have been unpractical and unworkable to do so.
Section 20 deals with an appeal, revision or review.
If the appeal is filed in time the appellate authority in disposing of any appeal filed Under sub section (1) may (a) confirm, reduce, enhance or annul the assessment, or; (b) set aside the assessment and direct the assessing r authority to make a fresh assessment after such further inquiry as may be directed.
" For exercise of the appellate power in any of the manners mentioned above, there is no limitation of time.
If assessment can be reduced in appeal at any time it can be enhanced also without the fetter of time.
If the assessment is set aside and the case remanded to the assessing authority to make a fresh assessment then the authority, because of the proviso to section 11(2a), is obliged to make the fresh assessment within four years of the appellate order.
Sub section (3) of section 20 reads thus: "Subject to such rules as may be prescribed and for reasons to be recorded in writing, the Commissioner upon 251 application or of his own motion may revise any assessment A made or order passed under this Act or the rules there under by a person appointed under section 3 to assist him, and subject as aforesaid, the Chief Commissioner may, in like manner, revise any order passed by the Commissioner.
" The Commissioner can revise any assessment made or order passed under the Act including the order of the appellate authority.
The limits of the revisional power are not circumscribed in sub section (3), ut it goes without saying that they will be akin to the power of the appellate authority as mentioned in sub section (2).
The revisional authority obviously, as pointed out by this Court in the case of The State of Kerala vs K. M. Cheria Abdulla and Company(1) should not trench upon the power expressly reserved by the Act or the rules to other authorities and cannot ignore the limits inherent in exercise of those powers.
Section 11A is one such power which deals with assessment and re assessment of tax in case of an escaped assessment or under assessment.
Exercise of that power is subject to the limitations provided therein.
In Rule 66(2) of the Delhi Sales Tax Rules, 1951 a period of limitation of 60 days has been provided for the filing of an application in revision which can be extended under the proviso appended to that rule on sufficient cause being shown.
But no such limitation has been provided for the suo moto, exercise of the revisional power.
Mr. Nariman very strongly relied upon the majority decision of this Court in The State of Orissa vs Debaki Debi and others (2) and Submitted that the power of revision exercised by the Commissioners ill this case beyond the period of four years prescribed in sub section (2a) of section 11 was illegal and ultra vires.
A close scrutiny of the argument will result in its rejection.
In the Orissa case all the orders made by the Collector in exercise of his power of revision under section 23 of the Orissa Sales Tax Act were passed later than 36 months from the expiry of the period in respect of which the assessment was made.
The High Court 's view that they were in contravention of section 12(7) which was a power of assessment or re assessment in case of an escaped or under assessment was not upheld.
But it was found that the proviso to section 12(6) was in general terms.
It was not only a proviso providing for the period of limitation for the first assessment but it governed the assessment made in exercise of the appellate or the revisional power.
The main ratio decidendi of the case is that the proviso in section 12(6) is in reality an independent legislative provision unrelated to section 12(6).
Therefore, its operation was not confined to assessment under section 12 but applied to any assessment made under the Act.
In the alternative it was also opined that assessment made in exercise of the revisional power was an assessment made under section 12.
It was so said because if the appellate or the revisional authority would have directed the assessing authority to make a fresh assessment it could do so only under section 12 and then it (1) 16 Sales Tax Cases, 875.
(2) 15 Sales Tax Cases, 153.
252 would be subject to the period for limitation of 36 months.
It was pointed out in the majority decision of this Court that there would be an anomalous situation.
If the appellate authority set aside the assessment and remanded it for fresh orders, no fresh assessment could be made because of the period of limitation.
But if instead of doing so the appellate authority affected the same assessment there would be no bar of limitation.
In the present case in view of the proviso added to section 11(2a) the anomaly flows in the reverse direction.
If the appellate or the revisional authority made a remand order the assessing authority could pass a fresh order of assessment within 4 years of such order.
But if the higher authority itself revised the assessment then it would be barred by the rule of limitation provided in section 11 (2a) .
To avoid such an anomaly Mr. Nariman suggested a construction to be put which neither solves the anomaly nor is warranted by the language of the provisions of the Act.
Counsel submitted that in all cases the powers must be.
exercised within 4 years of the period in respect of which an assessment was being made on a registered dealer.
It will be wholly unreasonable almost impossible to say that all orders in appeal, revision or reference must be passed within four years of the end of the period of assessment, otherwise they will be barred.
It does not solve the anomaly either.
Even if the order of remand is made, say, just on the last day of the period of four years, it will be competent to the assessing authority to make a fresh assessment within the further period of four years.
The ratio of the case in Debaki Debi 's (supra) must be confined within its four corners and cannot be extended to the facts of the instant case.
In The Swastik oil Mills Ltd. vs H. B. Munshi, Deputy Commissioner Of Sales Tax Bombay (1) the decision of this Court in Debaki Debi 's case was distinguished on the ground that the provision of limitation of 36 months in substance was not a real proviso to the section in which it was placed but was in fact a period of limitation for all orders of assessment made under any other provision of the Orissa Act, while in the Bombay Acts there was no such general provision prescribing a period of limitation for making an assessment.
Reference to the period of limitation in section 11A of the Bombay Act which is a power of making assessment or re assessment in case of an escaped or under assessed assessments was also rejected.
our attention was also drawn to the decision of a single Judge of the Punjab High Court, Delhi Bench, in Sir Sobha Singh & Company vs Commissioner of Sales Tax, Delhi (2) wherein following the decision of this Court in Debaki Debi 's case it was held that an order of review made by the Commissioner under section 20(4) of the Act in effect is an order of assessment under section 11(1) and cannot be made r o after the expiry of the period prescribed under section 11(2a).
The learned Judge in the course of his judgment made it clear that he was concerned with the construction of the Act as it stood before 1959 and was not obliged to consider the effect of the proviso added to section 11(2a) in 1959.
It is not necessary to decide in this case whether without the aid of the proviso aforesaid the decision of the (1) 21 Sales Tax Cases, 383.
(2) 18 section T. C. 416.
253 learned single Judge was correct or not but surely in face of the proviso it cannot hold good.
In Commissioner of Commercial Taxes, Bihar, Patna vs Sheodutta Prasad Chandeshwar Singh (1) the review proceedings initiated by the assessing authority was held to be barred under the proviso to section 13(6) of the Bihar Sales Tax Act, 1947.
But distinguishing the said decision another Bench of the Patna High Court held in Commissioner of Commercial Taxes, Bihar vs Ashoka Marketing Ltd: (2) that the order of review passed by the Deputy Commissioner was not bared by time.
The decision of the Patna High Court in Commissioner of Commercial Taxes, Bihar, Patna vs Sheodutta Prasad Chandeshwar Singh (supra) on identical facts was followed in Commissioner of Commercial Taxes, Bihar vs Shiva Pujan Prasad Bhagat (3).
But the principle decided in those cases cannot help the appellant.
It may well be that if the assessing authority itself exercises the power of review it cannot circumscribe the bar of limitation provided in section 11 (2a) .
But it will be unjust, unreasonable and impracticable to say that the said bar of limitation must also continue to run at all stages of the proceedings, namely, the appellate, revisional, reference, writ or any other stage.
It was pointed out by this Court in Swastik oil Mills ' case (supra) that the Deputy Commissioner when seeking to exercise his revisional powers was not encroaching upon the powers reserved to other authorities.
The powers were not exercised for the purpose of assessing or re assessing an escaped turn over.
The revisional powers were sought to be exercised to correct what appeared to be an incorrect order passed by an Assistant Commissioner and for such a purpose proceedings could not possibly have been taken under section 11A.
In the instant case also it could not be disputed that the view taken by the Assistant Commissioner in appeal was obviously wrong.
The Commissioner while correcting that mistake in exercise of his revisional power was not doing anything which the Sales Tax officer was empowered to do under section 11A.
He was merely setting right the illegality in the appellate order.
The third point urged by the appellant is too obviously wrong to merit any detailed discussion.
It was not the Commissioner who had passed the assessment order under section 11.
That order was of the Sales Tax officer acting as an officer to assist the Commissioner for the purpose of assessment.
The assessment order was interfered with by the appellate authority, the Assistant Commissioner and the Commissioner was revising the order of the Assistant Commissioner.
All cannot be treated as Commissioners for the purpose of the different powers exercised by the three different authorities.
The use of the term "Commissioner" in the sections is merely for the purpose of describing and, at any rate, including the officer assisting the Commissioner as Commissioner.
(1) 25 S.T.C. 114.
(2) 33 S.T.C. 24, (3) ,33 S.T.C. 466.
254 Apropos the fourth and the last submission of the appellant, suffice it to say that even assuming that the revisional power cannot be exercised suo moto after an unduly long delay, on the facts of this case it is plain that it was not so done.
Within a few months of the passing of the appellate order by the Assistant Commissioner, the Commissioner proceeded to revise and revised the said order.
There was no undue or unreasonable delay made by the Commissioner.
It may be stated here that an appeal has to be filed by an assessee within the prescribed time and so also a time limit has been prescribed for the assessee to move in revision.
The appellate or the revisional powers in an appeal or revision filed by an assessee can be exercised in due course.
No time limit has been prescribed for it.
It may well be that for an exercise of the suo moto power of revision also, the revisional authority has to initiate the proceeding within a reasonable time.
Any unreasonable delay in exercise may affect its validity.
What is a reasonable time, however, will depend upon the facts of each case.
For the reasons stated above the appeals fail and are dismissed with costs.
One set of hearing fee.
P.B.R. Appeals dismissed.

dataset_name: IN-Abs

summary:
Section 11 of the Bengal Finance (Sales Tax) Act, 1941 as extended to the Union Territory of Delhi provides for assessment of tax.
Section 11A provides for assessment or reassessment in case of escaped or under assessment.
Section 20 provides for appeals and revision.
In 1959 the assessee was assessed by the Sales Tax officer for the assessment year 1955 56.
The appellate authority remanded the matter holding that the assessment for the first two quarters was invalid having been made out of time.
The Sales Tax officer passed a fresh assessment order in respect of the third and fourth quarter of the assessment year.
In July, 1960, the Commissioner under section 20(3) revised the appellate order holding that no part of the assessment was barred by limitation and directed fresh assessment.
Appellant 's challenge to the order of tho Commissioner and the assessment order by the assessing authority was unsuccessful in the High Court.
On appeal to this Court, it was contended: (1) that the revisional authority must exercise his powers within the period of four years prescribed under section 11(2) (a) whether the order was a final order of assessment by him or a remand order for fresh assessment by the assessing authority; (ii) while exercising the power of revision the Commissioner cannot ignore the period of limitation of three years provided in section 11A; (iii) even when the Commissioner was exercising the revisional power under section 20(3), his power is subject to the periods of limitation provided because.
in sections 11 11A and 20, the authority mentioned is the Commissioner and (iv) the Revisional authority in the exercise of his power suo moto must exercise it within a reasonable time and not after a long lapse of lime.
Dismissing the appeals, ^ HELD: The Legislature has not provided any period within which an order is to be made by an appellant or revisional authority or a court.
[250 E] F (1)(a) If the appeal is filed in time for the exercise of the appellate power either to assess or to direct assessment under section 20(2), there is no limitation of time.
The limits of the revisional power in section 20(3) are akin to the power of the appellate authority in section 20(2).
[250 F H] (b) No limitation has been provided for the suo moto exercise of the re visional power similar to the one provided in rule 66(2) of the Delhi Sales Tax Rules for filing an application in revision.
[251 D] (c) It will be wholly unreasonable almost impossible to say that all orders in appeal, revision or reference must be passed within four years of the end of the period of assessment and that otherwise they would be barred.
The contention that there would be anomaly because of section 11(2a) in that if the appellate or revisional authority made a remand order, the assessing authority could pass a fresh assessment order within four years of the remand order whereas if the appellate or revisional authority itself passed an order of assessment, it should be done within four years.
and that such an anomaly would be avoided if it was held that the revising authority must exercise its powers within four years in all cases is not warranted by the language of the provision.
Further, it does not solve the anomaly because even if the order 248 of remand is made just on the last day of the period of four years it would be competent to the assessing authority to make a fresh assessment within the further period of four years.
[252 D; B C] (d) The State of Orissa vs Debki Debi [15 STC, 153 (SC] is distinguishable because the period of limitation in that case applied to assessment made i exercise of the appellate or revisional power also whereas in the present case there is no period of limitation for the exercise of appellate or revisional power While correcting a mistake in exercise of his revisional power the Commissioner was merely setting right the illegality in the appellate order, and was not doing anything which the Sales Tax Officer was empowered to do under section 11A and so was not bound by the period of limitation mentioned in that section.
[253] The State of Kerala vs K. M. Cheria Abdulla and Company, 16 Sales Tax Cases, 875, referred to.
(3) The order of assessment was that of the Sales Tax officer action as an officer to assist the Commissioner for the purpose of assessment.
The term "Commissioner" is merely descriptive and includes the various officers appointed under section 3 to assist the Commissioner.
There is a hierarchy of officers and all cannot be treated as "Commissioner" for the purpose of different powers exercised by them.
[253 G Hl (4) Assuming that the revisional power could not be exercised suo moto after a long and unreasonable delay, in the instant case there was no undue delay.
What is reasonable time will depend upon the facts of each case.
[254 A B]