HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Delhi Cloth & General Mills Co. Ltd. v. Workmen
Civil Appeal No. 622 of 1967
[1972] 1 SCR 594 ·
Payment of Bonus Act, 1965: sections 3, 5, 6(c), 7 and Second Schedule · Income-tax Act, 1961 (rate reference within Bonus Act computation)
Holding and result. For establishment-level bonus computation, the statutory fiction applied to gross profit, prior charges and direct tax alike; actual company-wide tax could not replace notional establishment liability, and the Court computed 7.31% before recording the parties’ agreement for 10% bonus.
Sources & disclosures includedDownload original judgment / order
Three-judge bench; judgment delivered by G. K. Mitter, J. · G. K. Mitter, J. · C. A. Vaidialingam, J. · P. Jaganmohan Reddy, J.
01 · Facts of the case
Delhi Cloth Mills and Swatantra Bharat Mills kept separate accounts but historically pooled profits for bonus. The management’s computation of deductible direct tax produced 7.31% bonus; the workmen’s use of a lower tax figure produced 16.64%. The industrial tribunal accepted the workers’ approach.
02 · Discussion by the Hon’ble Court
The Bonus Act operated as a complete code. Once branches were treated as an establishment under section 3, the fiction governed gross profits, prior charges, available surplus, allocable surplus and direct taxes consistently. Section 7 required the rate at which establishment income was liable to tax; it did not require reassessing actual company-wide taxable income. Metal Box supported the notional approach.
Source: Primary judgment: reasoning
03 · Judicial decision
Management correctly quantified section 6(c) direct taxes and the tribunal’s higher computation was set aside; the legal bonus rate was 7.31%.
Source: Primary judgment: holdings
04 · Outcome / in whose favour
Appeal allowed without costs. On a renewed offer accepted by the employees, the award was finally modified to 10% bonus, payable before Diwali 1971 without interest.
05 · AKHB REVIEW POINT
AKHB analysis: keep the statutory establishment fiction consistent across every component, including direct tax, and distinguish a court-computed rate from a later consensual operative rate. This is a bonus-law allocation ruling, not a determination of the company’s actual income-tax assessment.
Source & verification
Download original judgment / order · Open cited source rendition
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Statutory scope
Historical statutory provisions are described as they appeared in the report. Verify the current enactment, amendments and later judicial treatment before reliance.
Later treatment
Source checked 2026-10-12. No comprehensive later-treatment or present-law clearance is represented. The note reports the historical statutory text and result in this primary report only.
Page references identify the supplied PDF; paragraph references identify the judgment unless stated otherwise.
AI disclosure & professional disclaimer
This AKHB research note was prepared with AI assistance from the identified primary report and has not been represented as independently human-reviewed.
General legal and tax research only; not legal or tax advice. Verify the complete judgment, governing statutory version and subsequent judicial treatment before reliance. The AKHB REVIEW POINT is editorial analysis, not the Court's holding, and no current-law clearance is claimed.