Case: State Of Punjab &amp; Another Vs. British India Corporation Ltd

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, are liable to taxation under the Punjab Urban immovable Property Tax Act, 1940. The buildings in both these cases are 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 cls. (a) to (g) thereof. Clause (g) mentions "such buildings and lands used for the purpose of a factory as may be prescribed." "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.Assessing Authority rejected the claims for exemption made by the respondents and assessed the buildings for the purpose of taxation. The appeals to the Deputy Excise and Taxation Commissioner 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.

Court's reasoning:
It appears to us to be reasonable to think, however, that two principles will be easy of application in the solution of tile 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 factory the building should be held to be used for the purpose of aour opinion, the allotment of these buildings for the use of the workmen was made for a purpose which was necessary to the efficiency of thecoming to this conclusion we have not overlooked the fact that there is scope for an argument that in cls. (d) and (e) of s. 4 of the Act as they stand after the amendments in 1954 and 1957, respectively, the word "rent" has been used in the wider sense. Assuming that this is so, such use of the word in 1954 and 1957 cannot be -taken into account for the purpose of interpretation, as the Rule under consideration was framed long before thesenow to the facts of the two cases before us, we find that admittedly, in both the cases. the property that has been assessed was allowed to be used by the employees on leave and license. Whatever payment was received from them was not therefore "rent" within the meaning of cl.conclusion therefore is that no tax is leviable under the Punjab Urban Immovable property Tax Act, 1940, in respect of the buildings in these two appeals. The High Court therefore rightly quashed the orders of assessment.