The Bombay High Court, though, admitted that depreciation under Section 32 of the Income Tax Act serves a specific purpose in commercial accounting and indicates the real cost borne by an industry in maintaining its productive assets; however, it strongly ruled that the same cannot be treated as a device to exaggerate losses.
While holding that the law does not permit an employer to place inflated figures under the head of depreciation to project an adverse financial picture, the Court clarified that wage adjudication by the Industrial Tribunal cannot proceed on uncertain or unsupported entries in accounts.
Finding that the Industrial Tribunal has taken into account the financial record of the petitioner for a continuous period of seven assessment years, which enabled it to understand the long-term financial health of the establishment, instead of focusing on isolated figures of profit or loss, the Court opined that the Tribunal did not commit any error in balancing the relief claimed as well as the award granted.
A Single Judge Bench of Justice Amit Borker observed that the petitioner (factory) failed to show any document to prove that the depreciation was claimed in accordance with Section 32 of the Income Tax Act. Therefore, in wage adjudication, the unsupported figures cannot be accepted at their face value.
The Single Judge highlighted that depreciation is a matter of factual proof, and the employer must show the real depreciation arising from the use of machinery and equipment. The employer must also show that the figure claimed is not inflated or notional.
Further, on the issue of comparison with other industries, the Tribunal has examined the material placed before it with care, and has referred to the industries relied upon for comparison and has analysed their wage structures in light of the recognised tests. Thus, the Bench held that a mere assertion of the employer that an industry is different cannot displace the said findings of the Tribunal.
Since the Industrial Tribunal has applied the test of the capacity of the employer to pay, the nature of the work, the conditions of the industry and the prevailing wage structure in comparable establishments, in a structured manner, the Bench affirmed the findings of the Tribunal that comply with the industrial jurisprudence.
As far as the contention regarding the losses suffered due to fluctuation in foreign exchange rates, the Bench observed that such losses arising out of foreign exchange variation form part of the commercial risks of an industry engaged in import-based or export-linked operations, and therefore, they must be proved with clarity.
As a bare reference to fluctuation in exchange rates cannot form the basis for claiming financial incapacity, the Bench concluded that the Industrial Tribunal cannot be faulted for not giving weight to unproven claims. Accordingly, the Bench dismissed the petition and refused to interfere in the award, since it did not suffer from any patent illegality, perversity or violation of law.
Briefly, in December 2014, the respondent (registered trade union) submitted a charter of demands to the petitioner, who runs a factory at Pune and manufactures precision goods. As the petitioner did not respond, the union raised an industrial dispute before the Conciliation Officer, which failed. Later, the Industrial Tribunal passed an interim order granting an interim wage rise of three thousand rupees per month, which, thereafter, culminated in a final award of a wage rise of five thousand eight hundred rupees.
Appearances:
Advocates A.D. Patwardhan and T.R. Yadav, for the Petitioner
Advocate Nitin A. Kulkarni, for the Respondent
