1963 (2) TMI 54 - SC - Indian Laws

High Court: No tax under Punjab Property Tax Act for buildings. Assessment orders quashed. Appeals dismissed.

STATE OF PUNJAB & ANOTHER Versus BRITISH INDIA CORPORATION LTD

The court concluded that no tax was leviable under the Punjab Urban Immovable Property Tax Act, 1940, for the buildings in question. The High Court's ... - Issues Involved:1. Liability of certain buildings to taxation under the Punjab Urban Immovable Property Tax Act, 1940.2. Interpretation of the term 'used for the purpose of a factory.'3. Interpretation of the term 'rent' in Rule 18(4) of the Punjab Urban Immovable Property Tax Rules, 1941.Detailed Analysis:1. Liability to Taxation:The primary issue in these appeals was whether certain buildings belonging to the respondents were liable to taxation under the Punjab Urban Immovable Property Tax Act, 1940. The buildings in question were situated in the rating area shown in the Schedule to the Act, making them liable to taxation under Section 3 unless exempt under Section 4. Section 4 provides exemptions for properties mentioned in clauses (a) to (g), with clause (g) covering 'such buildings and lands used for the purpose of a factory as may be prescribed.' The term 'prescribed' refers to rules made under the Act, specifically Rule 18 of the Punjab Urban Immovable Property Tax Rules, 1941.2. Interpretation of 'Used for the Purpose of a Factory':The court needed to determine whether the buildings were 'used for the purpose of a factory' as per Rule 18. The rule exempts buildings if:- They are used for the purpose of a factory.- A manufacturing process involving the use of power is carried on for a continuous period of six months.- No rent is charged for the buildings, they are not godowns outside the factory compound, and they are not bungalows or houses intended for or occupied by managerial or superior staff.The court held that the term 'used for the purpose of a factory' should be interpreted based on the facts of each case. Two principles were identified:- If the building is used for a purpose required by factory law for the factory to function, it is considered used for the purpose of a factory.- If the building's use is necessary for the efficiency of the machinery or workmen, it is also considered used for the purpose of a factory.The court referred to various provisions of the Factories Act, such as Sections 42, 43, 46, 47, and 48, which mandate facilities for workers' welfare, indicating that buildings used for such purposes are essential for the factory's functioning. The court concluded that buildings providing facilities and amenities necessary for maintaining workers' efficiency are used for the purpose of a factory.3. Interpretation of 'Rent':The court examined the term 'rent' in Rule 18(4)(ii), which states that the exemption does not extend to buildings for which rent is charged. The court considered whether 'rent' should be interpreted in its wider sense (any payment for the use of land or buildings) or its narrower sense (payment by a tenant to a landlord for demised property).The court noted that the Act used the term 'rent' in its narrower sense in Sections 5 and 14. It concluded that the rule-making authority likely intended 'rent' to have the same narrower meaning in Rule 18(4)(ii). Therefore, 'rent' refers to payments made by tenants to landlords for demised property and does not include payments made by licensees.Application to the Facts:In the first appeal, the buildings in question included rooms for indoor games, a hall for the Gurkha Guards Club, an officers' club, and residential quarters for workers. The court held that these buildings were necessary for the efficiency of the workmen and were used for the purpose of a factory.In the second appeal, the buildings consisted of 200 quarters allotted to factory workers. The court found that these quarters were necessary for the workers' welfare and efficiency and were used for the purpose of a factory.In both cases, the payments received from employees were not considered 'rent' within the meaning of Rule 18(4)(ii) since they were on a leave and license basis.Conclusion:The court concluded that no tax was leviable under the Punjab Urban Immovable Property Tax Act, 1940, for the buildings in question. The High Court's decision to quash the orders of assessment was upheld, and the appeals were dismissed with costs.