# Stat1 of Punjab v. Briti1'1. ,India

- **Citation:** [1964] 2 S.C.R. 114
- **Court:** Supreme Court of India
- **Decided:** 1964
- **Case number:** Civil_ Appeal No. 639 of 1961
- **Bench:** S. K. Das, A. K. Sarkah, K. c. DAS GUPTA, i\. RAJAGOPALA AYYANGAR
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/stat1-of-punjab-v-briti1-1-india-2828
- **Pages:** 12

## Headnote

Properly 1'ax-Exemption-"Uscd for the purpose of a
factory" and "Rent"-Mea11i11g of-Punjab Urban Immot'!lbk
Property Tax Ac/, 1940 (Pb. 17 of 1940), ss. 3, 4-Punjab
Urban lmmovabk Property Tax Rules, 1941, r. JS.
The property involved in the first appeal was a set or
room5 used for indoor games b)' the mill employees, one big
-
hall used as the Gurkha (;uards Club, a set of rooms used as ~
Officers' Club and a set of roon1s used as residential quarters t
~·
by workers of the mills. The property involved in the second •---
appeal consi•ted of 200 quarters which had Leen allotted to the
workers of the factory for their occupation. The question wa•
whether these properties w<"rc exempted fro1n taxation under
s. 4 of the Punjab Urban Immovable Property Tax Act, 1940,
-
2 S.C.R.
SUPREME COURT REPORTS
115
br not,
The assessing Authority held that these properties were
!fable to taxation, Appeals against the orders of the Authority
were rejected by the Deputy Excise and Taxation Commissioner. The respondents moved the High Court under Art. 226
of the Constitution for getting the orders quashed. The High
Court held in both cases that the petitioners were entitled to
exemption prayed for and quashed the orders of assessment.
The State of Punjab came to this Court] against the order of
the High Court.
Held, that no tax was leviable under the Punjab Urban
Immovable Property Tax Act, 1940, in respect of the buildings
in the two appeals and the High Court had rightly quashed the
orders of assessment. In the first appeal, the buildings were
allotted for the use of workmen and that was a purpose which
was neceS5ary for the efficiency of workmen. In the second
appeal also, the allotment of 200 quarters was necessary for the
welfare and efficiency of workmen. Hence it must be held
that the buildings were being used for the purposes of a
factory. Just as the use of a building for a purpose which
maintains the efficiency of the machines is a user for the purpo•e of a factory, so also is the user of a building for the purpose of providing something which is necessary for maintaining
· the efficiency of workers.
Where a building is used for a purpose which the Factory Law requires must be fulfilled in order
that the factory may function, that user is also for the purpose
of a factory.
Held, also; that the word "rent" in cl. (ii) of r. 18 (4)
of the Punjab Urban Immovable Tax Rules, 1941, means payment to a landlord by a tenant for the demised property and
does not include payments made by licensees.
London Go-operative Society Ltd.
v.
Southern Esaex
AsBts8ment Oommitlu, [1942] I K. B. 53, referred to.

## Text

1963
P. H. Ira(l<illi
•.
Mjs. Air Fra11"
C.Jndl4
WdllcAH J,
1963
F1truary 15
114 SUPREME COURT REPORTS [1964] VOL.
respondent had however to justify· the order of dismissal before the Labour Court in view of the defect
in the inquiry. It has succeeded in doirig so and
therefore the approval of the Labour Court will
relate back to the date on which the respondent
passed the order of dismissal.
The contention of
the appellant therefore that dismissal in this case
should take effect from the date from which the
Labour Court's award came into operation must fail.
There is no force in this appeal and it is hereby
dismissed.
In the circumstances we pass no order
as to costs.
STATE OF PU~JAB & ANOTHER
v.
BRITISH INDIA CORPORATION LTD.
(S. K. DAS, A. K. SARKAH, K. c. DAS GUPTA
and 'i\. RAJAGOPALA AYYANGAR JJ.)
Properly 1'ax-Exemption-"Uscd for the purpose of a
factory" and "Rent"-Mea11i11g of-Punjab Urban Immot'!lbk
Property Tax Ac/, 1940 (Pb. 17 of 1940), ss. 3, 4-Punjab
Urban lmmovabk Property Tax Rules, 1941, r. JS.
The property involved in the first appeal was a set or
room5 used for indoor games b)' the mill employees, one big
-
hall used as the Gurkha (;uards Club, a set of rooms used as ~
Officers' Club and a set of roon1s used as residential quarters t
~·
by workers of the mills. The property involved in the second •---
appeal consi•ted of 200 quarters which had Leen allotted to the
workers of the factory for their occupation. The question wa•
whether these properties w<"rc exempted fro1n taxation under
s. 4 of the Punjab Urban Immovable Property Tax Act, 1940,
-
2 S.C.R.
SUPREME COURT REPORTS
115
br not,
The assessing Authority held that these properties were
!fable to taxation, Appeals against the orders of the Authority
were rejected by the Deputy Excise and Taxation Commissioner. The respondents moved the High Court under Art. 226
of the Constitution for getting the orders quashed. The High
Court held in both cases that the petitioners were entitled to
exemption prayed for and quashed the orders of assessment.
The State of Punjab came to this Court] against the order of
the High Court.
Held, that no tax was leviable under the Punjab Urban
Immovable Property Tax Act, 1940, in respect of the buildings
in the two appeals and the High Court had rightly quashed the
orders of assessment. In the first appeal, the buildings were
allotted for the use of workmen and that was a purpose which
was neceS5ary for the efficiency of workmen. In the second
appeal also, the allotment of 200 quarters was necessary for the
welfare and efficiency of workmen. Hence it must be held
that the buildings were being used for the purposes of a
factory. Just as the use of a building for a purpose which
maintains the efficiency of the machines is a user for the purpo•e of a factory, so also is the user of a building for the purpose of providing something which is necessary for maintaining
· the efficiency of workers.
Where a building is used for a purpose which the Factory Law requires must be fulfilled in order
that the factory may function, that user is also for the purpose
of a factory.
Held, also; that the word "rent" in cl. (ii) of r. 18 (4)
of the Punjab Urban Immovable Tax Rules, 1941, means payment to a landlord by a tenant for the demised property and
does not include payments made by licensees.
London Go-operative Society Ltd.
v.
Southern Esaex
AsBts8ment Oommitlu, [1942] I K. B. 53, referred to.
CIVIL APPELLATE JURISDICTION : Civil_ Appeal
No. 639 of 1961.
.
From the judgment dated August 4, 1960 of
the Punjab High Court at Chandigarh in Letters
Patent Appeal No. J 86of1957.
AND
Civil Appeal No. 287 of 1962.
1963
Stat1 of Punjab
v.
Briti1'1. ,India
Corporation Ltd.
1963
Stat• of P>mju
v.
BritiJla /Mia
G.rporaJioo Ltd.
Du Gupta J.
...... , ............
• ... ~
> -
..
+i-·-
..
116 SUPREME COURT REPORTS [1964] VOL.
From
the
judgment
and
order
datcil
September 7, 1960, of the Punjab High Court at
Chandigarh, in Civil Writ No. 216 of 1958.
S. M. Sikri, Advocate-General
of Punjab,
N. S. Biiulm aud P. D . .Menon, for the appellants.
Bhagimth Das and IJ. P. Jfahesl1wari, for
respondent (In C. A. No. 6:l9i6 l ).
A. V. Viswanatha Sastri, 0. P. Malhotra,
0. G. J!athur, J. B. Dadachanii and Ravimkr
Narain, for the respondent (in C. A. No. 287/62).
1963. February 15.
The Judgment of the
Court was delivered by
DAS GuPTA J.-These two appeals raise the·
question whether certain buildings belonging to the
respondent the British India Corporation Ltd., in one
appeal and the respondent Shri Gopal Paper Mills
Ltd., in the other appeal, arc liable to taxation under
the Punjab Urban Immovable Property Tax Act,1940.
The buildings in both these cases arc situated in the
rating area shown in the Schedule to the Act and
would consequently be liable to taxation under s. 3
of the Act unless the exemption provided in s. 4 of
the Act is available. That section provides that
the tax shall not be levied in respect of the properties
mentioned in els. (a) to (g) thereof.
Clause (g)
mentions "such buildings and lands used for the
purpose of a
factory
as
may be P.rescribed."
"Prescribed" has been defined as 'prescribed by the
rules made under the Act.' Rule 18 of the Punjab
Urban Immovable Property Tax Rules, that were
framed by the Punjab Government in 1941, prescribed buildings and lands
for the purpose of
cl. (g) of s. 4.
The Assessing Authority rejected the claims
for exemption made by the respondents and assessed
-
\:
-
-
-
2 s.a.R;
SUPREME QOURT REPORTS
117
the buildings for the purpose of taxation.
The
aepcals to the Deputy Excise and Taxation Commiss10ner were unsuccessful.
The respondents then
moved the Punjab High Court under Art. 226 of the
Constitution praying that the order of the Taxation
Commissioner be quashed. In
both the cases
the High Court held that the petitioners were entitled
to the exemption prayed for and quashed the orders
of assessment.
The question in these appeals therefore is ,whether the High Court was right in its view'
that the buildings of the respondents come within
the class which has been prescribed for exemption by
Rule 18 of the Punjab Urban Immovable Property
Tax Rules, 1941. The relevant portion of this Rule,
which has been altered from time to time, stood thus
in 1956 when the assessment order was made:-
';'18. (I) Under the provisions of clause (g) of
sub-section (I) of s. 4 of the Act, all buildings
and lands used for the purpose of a factory,
which are owned by the proprietors of such
factory, shall be exempt from the tax, if a
manufacturing process involving the use of
power is being and has been carried on therein
for a continuous period of six months, or in the
case of a seasonal factory since the commencement of the working season.
o o o • • • • • • o o • • • o •••JO t 0 O 0 I I 0 ltl • O o o o • 0 0 0 • • o • o • • • o • • o o o o o o o o o o
(4) The exemption provided by sub-rules (1)
and (2) shall not extend to-
(i)
godowns outside tl::e factory compound;
(ii) godowns,
shops, quarters or other
buildings, whether situated within or
without the factory compound, for
which rent is charged either from
employees of the
factory or from
other persons; and
'
1963
State of Punjab
v.
British Indio
Corporation Ltd.
Das Gupta J.
St•t1 Df Pu,Y••
••
BritiJlr br•ia
Gtr(JO'raliM l1J.
Vas Gu,14 J,
u
••
......
,....,..,,,..,..._ -~ ....... ,
•··•.......,.
"'""'"'"
•• .. oi. -JJi_..,;,...._ ... :,-
•-I
I
118
SUPREME COURT REPORTS [1964] VOL.
'
(iii)
bungalows or houses intended for or
occupied
by
the managerial
or
superior staff whether situated within
or without the factory compound."
There is a proviso to sub-rule (1) with which
we are not concerned. We are alse not concerned
with sub-rules (2) and (3) of Rule 18.
The effect of this Rule therefore is that buildings belonging to the proprietors of the factory will'
get the benefit of exemption from taxation under s. 4
of the Act provided three conditions are satisfied :
(1) the building must be used for the purpose of a
factory; (2) the factory must be one where a manufacturing process involving the use of power is being
and has been carried on for a continuous period of
six months; and (3) (a) no rent is being charged for
the buildings; (b) it is not a godown outside the
factory compound, or (c) it is not a bungalow or house
intended for or occupied by the managerial or superior
staff.
In the present case there is no dispute that the
second condition was satisfied, viz., that the factory
was one in which manufacturing process involving
the use of power was being and had been carried on
for a continuous period of six months.
Admittedly,
also the building was not a godowu outside the
factory compound nor was it a bungalow or house
intended for or occupied by the managerial or
superior staff.
The controversy is limited thus only
to two questions. ( 1) \Vhether the building was used
for the purpose of a factory and ( 2) whether rent
was being charged for it.
Before we examine the facts of the two cases
for solving the controversy we have to arrive at the
correct interpretation of the words "used for the
purpose of a factory"
and the word '·rent" in the
Rule.
It is neither necessary nor desirable to attempt
to define what amounts to "use for the purposes of
•
,r
I
c
-
-
-
2 S.C.R.
SUPR.EME COURT REPORTS 119
a factory."
That the legislature left this undefined
is a good indication that the intention of the legislature was to have the question decided, in any case
where controversy arises over it, on a consideration
of the facts of the case. It appears to us to be
reasonable to think, however, that two principles
will be easy of application in the solution of the
problem in the majority of cases.
One is that where
the building is used for a purpose which the factory
law requires must be fulfilled in order that the
factory may function,
that will be user for the
purpose of a factory.
The other is that where the
user of the building is such as is necessary for the
efficiency
of the machines or of the workmen
engaged in the fa.::tory the building should be held
to be used for the purpose of a factory.
The 5th Chapter of the factories Act contains
numerous provisions for the welfare of workmen
employed in the factory.
Section 42 requires that
adequate and suitable facilities for washing shall be
provided and maintained for the use of the workers
in every factory.
It empowers the State Government
to prescribe standards of the facilities to be provided.
Section 43 empowers the State Government to make
rules in respect ·of any factory or class or description
of factories requiring the provision "of suitable places
for keeping clothing not worn during working hours
and. for the drying of wet clothing." Section 46
empowers the State Government to make rules
requiring that in any specified factory wherein more
tha,n two hundred and fifty workers are ordinarily employed, a canteen or canteens shall be provided and
maintained by the occupier for the use of the workers.
.....
Section 4 7 requires that in every factory employing
more t?an one hundred and fifty workers "adequate
and suitable shelters or rest rooms and a suitable
lunch room, with provision for drinking water, where
workers can eat meals brought by them shall be
provided.and maintained for the use of the workers."
1163
Stt1t1 of Punja '1
••
British India
c.,por.ii•• Lli.
Dos Gupta J.
1963
S~alt of P11nja6
v.
BrifiJh lnrli•
C()fftoTOlio11 lttl.
Das Gupt~ J.
...........
120 SUPREME COURT REPORTS [1964] VOL.
Section 48 requires the provision and maintenance
of a "suitable room or rooms for the use of children
under the age of six years of such women" employed
in the factory if more than fifty women are employed
ordinarily.
Section 92 makes the contravention of
any of the provisions of the Factory Act or of any
Rule made thereunder or any order in writing given
thereunder punishable with
imprisonment or fine.
It is obvious therefore that in order that a
'factory may function in accordance with law buildings or parts of buildings have to be provided by
the owner for the use of the workmen for the purposes
mentioned in the several sections mentioned above.
Such use of these buildings must therefore be held
to be "use for the purpose of a factory."
Advances in scientific knowledge as to how the
industrial efficiency can be improved have made it
clear that even other facilities and amenities, other
than those required bv the factory legislation, conduce
in a great measure to a rise in the efficiency of the
industrial worker and that some of these arc indeed
necessary to the maintenance of a proper standard
of efficiency.
~fany enlightened
employers
of
labour, taking a long view of things have therefore invested considerable sums of money for the
provision of such facilities and amenities even though
not rcq uired by law and have raised buildings for
that purpose. In our opinion, the use of buildings
for the provision of such facilities and amenities
which are necessary to the maintenance of a proper
standard of efficiency of the factory workers must
also be held to be "use for the purpose of a factory."
The learned Advocate-General, who appeared for
the State of Punjab, readily agreed that when a
building is provided for the use of the machinery
in order that the machinery may function efficiently
or that it may not deteriorate, the building is being
used "for the purpose of a factory''.
He is reluctant
-
; :•.-
-~ -
2 S.C.R.
SUPREME COURT REPORTS
121
/
however to apply a similar rule to a building used
for the purposes of maintaining the efficiency of the
men who work the machinery. We are unable to
see any reasonable ground for this
differentiation.
Just as the use of a building for a purpose which
maintains the efficiency of the machines i~ a user
for the purpose of a factory, so also, we are convinced, is the user of a building for the purpose of providing something which is necessary for maintaining
the efficiency of the workers.
A large number of cases were cited at the Bar
to show how the English courts have understood the
words "industrial purpose" or "purpose other than
the manufacturing process or handicraft carried on
in the factory" in connection with the Rating and
Valuation (Apportionment) Act, and the Factory Act
1901. No useful purpose will be served by discussing all these cases as the schemes of those Acts are
largely different from our Act.
We shall refer only,
however, to the decision · in London Co-operative
Society Ltd.,
v.
Southern Essex Assessment
Committee (1), to indicate the tendency of the English
courts in more recent times to attach importance to
what is necessary for the welfare and efficiency of the
workers in deciding the question.
There was a place of refreshments for persons
employed in a laundry which was qualified as a
factory and workshop and therefore was an "industrial hcreditament". The question was whether this
refreshment place was "solely used for some purpose other than the manufacturing process or handicraft, carried on in the laundry". The Kings Bench
answered this question in the negative.
Viscount
Caldecote, C. J. said that applying the up-to-date
consi<lerations
in the equipment and. layout of
a factory, the Canteen was not a place which was
"solely used for some purpose other than the manufacturing process or handicraft carried on in the
(I) [1942) l K.B, 53,
Sfot1 of Prmt46
v.
British lMi•
Corpordtian , Ltd.
Das Gupta.- J,
I
S1at1 of Punjab
y,
B•iliih lndi•
W.p.r11m Ltd.
Dos G•pto J.
122 SUPREME COURT REPORTS [1964) VOL.
laundry."
His Lordship observed that these con·
siderations might assist in the determination of the
character of parts of a factory like-a lavatory, or
a room where surgical first aid is provided or a cloakroom, or a number of other parts of the hereditament.
Tucker .J. agreed with this conclusion and
observed .---
"The element which, to my
mind,
is
decisive is that the facts stated show that the
canteen was necessary and essential for
the
welfare and efficiency of the workers engaged
in the admittedly industrial part of the undertaking."
For applying the two principles mentioned
above to the facts of these two appeals, we have to
ascertain to what use the property in question has
been put.
In the first appeal (in which the British
lud1a Corpornl ion Ltd. is the respondent) we are
concerned with four .units : (I) A set of rooms used
for indoor games by the mill employees; (2) One
big hall used as the Gurkha Guards Club; (3) A set
of rooms used
a~ Officers' Club, and (4) A set of
rooms used as residential quarters
by workers of
the mills.
In our opinion, the allotment of these buildings
for the use of the workmen was made for a purpose
which was necessary to the efficiency of the workmen.
The property · asscsse<l in the other appeal (in
which Shri Gopal Paper Mills Lt<l., is the respondent)
consists of 200 quarters which have been allotted to·
workers of the factory for their occupation. The
provision of such quarters is clearly necessary to the
welfare and cfliciencv of the workmen and it must be
held that in this c'ase also the buildings were being
used for the purpose of a factory.
2 S.C.R.
SUPREME COURT REPORTS
123
The next qHestion is : what is the meaning of
"rent" in cl. (ii) of Rule 18 (4).
In its wider sense
rent means any payment made for the use of land or
buildings and thus includes the payment by a licensee
in respect of the use and occupation of any land or
building.
In its narrower sense it means payment
made by tenant to landlord for property demised to
him. Did the rule-making authority when providing
that the exemption provided by sub-rules 1 and 2 of
Rule 18 shall not extend to quarters and other
buildings for which "rent" is charged, used the
word in its wider sense or in its narrower sense? In
seeking an answer to this question it is legitimate to
examine the use of the word "rent" in the Act for
which these rules were
made.
At the time the
rules were first made in 1941 the Act used the word
"rent" only in ·two seciions.
First, in s. 5': where in
providing how the annual value of land or building
shall be ascertained the legislature said that it shall
be ascertained "by estimating the gross annual rent
at which such land or building ........................ .
.. . . .. .. .. . . .. . .. .. .. .... .. .. .. .. might reasonably be expecte.d to . let from year to year". It is absolutely clear
that here the word "rent" is used in its strict and
narrower sense of payment by tenant to landlord for
demised property.
The other section where the
word "rent" occurs is s. 14, where in providing for
recovery of tax in arrears the legislature said :
" ........................ it shall be lawful for the prescribed authority to serve upon any person paying
rent.~ ............................ to the person from whom
the arrears are due, a notice stating the amount of
such arrears of tax and requiring all future payments of rent by the person paying the rent to be
made direct to the prescribed authority ............ and
also providing that such notice shall operate to transfer to the prescribed authority the right to recover,
receive and give a discharge for such rent". While
the section itself leaves it doubtful whether the word
"rent" has been used in the narrower or the wider
1963
St1t1 of Punjq6
y,
British lntii•
Corporation LJJ,,
-.-
DatGupttt
~·
1963
Si.u of Puojoh
v.
B rilisli "/ nJia
C01p.roll.. ltd.
Dtu Gupta J,
124 SUPREME COURT REPORTS [1964] VOL.
sense, the marginal note describes the subject-matter
of the section thus : "Recovery of tax from tenants."
If this note is taken into consideration it becomes
clear that in this section also the word "rent" was
used in its narrower sense to mean payment made by
tenant to landlord for demised property.
When in 1941 the rule-making authority st:t
about framing the Rules, it had before it this clear
use of the word "rent" in its narrower sense in s. 5
and the marginal note in s. 14 which was some indication that there also the word "rent" was used in the
narrower sense.
In the absence of anything to
indicate the contrary, it would be reasonable to think
that the nde-making authority would not depart from
the meaning in which it had reason to believe that
the legislature had used the word, and that it used
the word in cl. (ii) of Rule 18 (4) in the same narrower sense of payment by tenant
to landlord for
demised property.
Our conclusion
therefore is that the word
"rent" in cl. (ii) of Rule 18 (4) means payment to
a landlord by a tenant for the demised property and
docs not include payments made by licensees.
In coming to this conclusion we have not overlooked the fact that there is scope for an argument
that in els. (d) and (e) of s. 4 of the Act as they
stand after the amendments in 1954 and 195i,
respectively, the word "rent" has been used in the
wider sense.
Assuming that this is so, such use of
the word in 1954 and I 957 cannot be taken into
account for the purpose of interpretation, as the Rule
under consideration was framed long before these
dates.
Coming now to the facts of the two cases before
m, we find that admittedly, in both the cases the
property that has been assessed was allowed to be
25.C.R.
SUPREME COURT REPORTS 125
used by the employees on leave and license. Whatever payment.w~s received f~om them ~as not them·
fore "rent" w1thm the meanmg of cl. (u).
Our conclusion therefore is that no tax is
leviable under the Punjab Urban Immova?li; pr?-
perty Tax Act, 11140, in respect of the buildmgs m
these two appeals. The High Court therefore rightly
quashed the orders of assessment.
The appeals are
accordingly dismissed with costs.
Appeals 'dismissed.
THE TATA OIL MILLS CO., LTD.
v.
WORKMEN & ANR.
(P. B. GAJENDRAGADKAR, M. HIDAYATULLAH
and J. C. SHAH JJ.)
Industrial Disputt-'.l'ermination of service of an employee
an payment of one month's salary in lieu of notice-Order of
termination purported ta be discharg• under R. 40 (1) of Service
Rules-Jurisdiction of the Tribunal to examine whether it
amounU to a discharge or dismi8Sal.
Mr.
Banerjee was an employee of the appellant. His
services were terminated on the ground that the appellant had
lost confidence in him and in Heu of notice he was paid one
month's salary. The union to which Mr. Banerjee belonged
took up his cause and on the failure of the parties to reach a
settlement the matter was referred to the Industrial Tribunal
by the Government.
The appellant contended before the Tribunal that the
order of termination of service of Mr. Banerjee was an order
of discharge which it was competent to make under R. 40 (I)
l963
Stat1 ofol'unjab
••
Britcl India
iorpoT<tifJll Ltd.
D., Gupu /,
1965 --