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(1) [1959] S.C.R. 925.

But the Court threw out a suggestion that the question may be" comprehensively considered by a high-powered Commission", this suggestion was repeated in The Ahmedabad Miscellaneous Industrial Workers' Union v. Ahmedabad Electricity C.,). Ltd.(1) The Government of India then setup a Commission on December 6, 1961 inter alia to define the concept of bonus, to consider in relation to industrial employments the question of payment of bonus based on profits and to recommend principles for computation of such bonus and methods of payment, to determine what the prior charges should be in different circumstances and how they should be calculated, to consider whether there should be lower limits irrespective of losses in particular establishments and upper limits for distribution in one year, and if so, the manner of carrying forward profits and losses over a prescribed period, to suggest an appropriate machinery and method for the settlement of bonus disputes. The Commission held an elaborate enquiry and reported that "bonus" was paid to the workers as a share in the prosperity of the establishment and recommended adherence to the basic scheme of the Bonus Formula viz. determination of bonus as a percentage of gross profits reduced by certain prior charges, viz. normal depreciation admissible under the Indian Income-tax Act including multiple shift allowance, income-tax and super-tax at the current standard rate applicable for the year for which bonus is to be calculated (but not super profits tax), and return on paid-up capital raised by issue of preference shares at the actual rate of dividend payable, on other paid-up capital at 7 % and on reserves used as capital at 4% but not provision for rehabilitation. The Commission recommended that sixty per cent of the available surplus should be distributed as bonus, the excess being carried forward and taken into account in the next year: the balance of forty per cent., should remain with the establishment into which would merge the saving in tax on bonus payable, and the aggregate balance thus left to the establishment may be intended to provide for gratuity, other necessary reserves, rehabilitation in addition to the provision made by way of depreciation in the prior charges, annual provision required for redemption of debentures, return of borrowings, payment of super-profits tax and additional return on capital. They recommended that the distinction between basic wages and dearness allowance for the "Purpose" of expressing the bonus quantum" should be abolished and that bonus should be related to wages and dearness allowance taken together: that minimum bonus should be 4% of the total basic wage and dearness allowance paid during the year or Rs. 40/- to each worker, whichever is higher, and in the case of children the minimum should be equivalent to 4% of their basic wage and dearness allowance, or Rs. 25/- whichever is higher, subject to reduction pro rata for employees who have not (1) [1962] 2 S.C.R. 934.

M14 Sup. C.I./66-3 worked for the whole year, and that the maximum bonus should be equivalent to 20 % of the total basic is wage and dearness allowance paid during the year : that the bonus formula proposed should be deemed to include bonus to employees drawing a total basic pay and dearness allowance up to Rs. 1600 per month regardless of whether they were "workmen" as defined in the Industrial Disputes Act or other relevant statutes, but subject to the proviso that the quantum of bonus payable to employees drawing total basic pay and dearness allowance over Rs. 750 per month shall be limited to what it would be if their pay and dearness allowance were only Rs. 750 per month. It was proposed that the general formula should not apply to new establishments until they had recouped all early losses including all arrears of normal depreciation admissible under the Income- tax Act, subject to a time limit of six years. They also suggested that the scheme recommended should be made applicable to all bonus matters relating to the accounting year ending on any day in the calendar year 1962 other than those matters in which settlements had been reached or deci- sions had been given.

The Commission suggested a 7 % return on paid-up capital and a 4% return on reserves employed as capital. The balance left after these deductions was the available surplus from which 60% was to be paid as bonus to workmen and 40% was to be retained by the employers. The Commission also suggested that the employers must pay a minimum bonus equal to 4 % of the total basic wage and dearness allowance or Rs. 40% (whichever was greater) to each workman whether the allocable surplus permitted it or not and also set a ceiling on bonus by providing that not more than 20% of the total basic wage and dearness allowance bill may be paid as bonus in any year. If there were no profits or if profits could allow payment of bonus more than the 20% maximum, a principle of set oil and set off was devised. The amount paid out as minimum bonus or the extra over and above the 20% maximum had to be carried forward to future years to be set on or set off. against the profits in those years. In this way the payment of minimum -bonus when no bonus was payable, was made less onerous and similarly the amount in excess of 20 % which might have been paid as bonus under a 60 to 40 division was to be carried over to the, future years to be available when the profits were low. The set on and set off were to be valid only for 4 years at the end of which the amounts available for set on or set off were to be ignored. The Commission also recommended payment of bonus to persons whose total basic pay and dearness allowance did not exceed Rs. 1,600/- per month regardless of whether they were "workmen" or not according to the definition of this word in the Industrial Disputes Act. The amount of bonus, however, was flat after the basic wage and dearness allowance taken together reached Rs. 750/- per month. In respect of new units. bonus was to be payable from the 6th year or when profits (after wiping off old losses and allowing for depreciation etc.) permitted. Government by its Resolution accepted these recommendations but with certain modifications. Government allowed deduction of all direct taxes from the gross profits and increased the return on capital to 8-5% (taxable) on paid-up equity capital and 6% on reserves (for banks 7 .5 % and 5 % respectively). Government also gave retrospective effect to the recommendations of the Bonus Commission as amended by itself by resolving that. they should apply to.- all bonus matters other than those cases in which settlement had been reached or decisions had been given already, relating to accounting year ending on any day in the calendar year 1962 in respect of which dispute was pending. The Ordinance and the Act follow the recommendations of the Bonus Commission as modified in the Government Resolution. We shall now refer to the terms of the Act, contrasting them, where necessary, with the terms of the Payment of Bonus Ordinance which has since been repealed.

The validity of arguments about the integration of dearness allowance with wage to determine the quantum of bonus depends on how wages can be viewed today. Labour considers dearness allowance to be as fundamental as wage and, in fact, we have heard repeated pleas for the merger of dearness allowance in minimum wage. In our opinion, dearness allowance must obviously stay -on till at least the need-based wage is reached. The gap between the actual wage and the need-based wage tends to widen as time passes unless the wage and/or dearness allowance are revised to obtain significant neutralization of the cost of living at any given moment of time. It may be that in some industries dearness allowance does, to an appreciable extent, neutralize the cost of living but such companies would hardly be required to pay Minimum bonus for their profits would justify a higher bonus. Again, loss can only be established after the prior charges or some of them are deducted. The charge of minimum bonus is only 4% of the wage bill,i.e.equal to 15 days' wages and cannot be said to be heavy. Further, the provision for set off keeps the matter in suspense for at least four years during which the affairs of the company are likely to improve. Taking the provision for minimum bonus with the provision for set off it can hardly be said that the section is so exorbitant that it amounts to deprivation of the property of the employers with a view to giving it to the workmen. The provision makes payment ,of minimum bonus range next to payment of wages and dearness allowance and to rank in priority over any of the prior charges, deductible in favour of employers. Comparison of minimum bonus with the Land Tax Act considered in Kunnathat Thathunni Moopil Nair v. The State of Kerala and Another(1) which imposed a flat rate of tax on all lands irrespective of their productivity, is not valid. The observations in that case, wide as they may appear, must not be extended by analogical application to a case of minimum bonus which is intended to promote industrial peace and to be a first step towards the goal of needbased wage. Even if the payment is viewed as a compulsatory payment of wage the power to 'impose it as part of minimum wage is not lacking. It must not be forgotten that the fixation of mini- (1) [1961] 3 S.C.R. 77.