P. H. Ira(l<illi v. BRITISH INDIA CORPORATION LTD

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 ~ t Officers' Club and a set of roon1s used as residential quarters 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, ~· 1963 Stat1 of Punjab v. Briti1'1. ,India Corporation Ltd. 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 Commis sioner. 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 In the first appeal, the buildings were orders of assessment. 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 the purposes of a that the buildings were being used factory. Just as the use of a building for a purpose which maintains the efficiency of the machines is a user for the pur po•e of a factory, so also is the user of a building for the pur pose of providing something which is necessary for maintaining · the efficiency of workers. Where a building is used for a pur pose 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 pay ment 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 Stat• of P>mju v. BritiJla /Mia G.rporaJioo Ltd. Du Gupta J. ...... , ............ • ... ~ > - .. +i-·- . . 116 SUPREME COURT REPORTS [1964] VOL. From datcil September 7, 1960, of the Punjab High Court at Chandigarh, in Civil Writ No. 216 of 1958. judgment - \: - S. M. Sikri, Advocate-General of Punjab, N. S. Biiulm aud P. D . .Menon, for the appellants. Bhagimth Das and IJ. P. Jfahesl1wari, 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 thereof. Clause (g) mentioned in els. (a) to mentions "such buildings and lands used for the factory as may be P.rescribed." purpose of a "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, pres cribed buildings and lands for the purpose of cl. (g) of s. 4. (g) The Assessing Authority rejected the claims for exemption made by the respondents and assessed 1963 State of Punjab v. British Indio Corporation Ltd. Das Gupta J. - - 2 s.a.R; SUPREME QOURT REPORTS 117 In both the buildings for the purpose of taxation. The aepcals to the Deputy Excise and Taxation Commi ss10ner were unsuccessful. The respondents then moved the Punjab High Court under Art. 226 of the Constitution praying that the order of the Taxation the cases Commissioner be quashed. 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 there fore 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 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 commence ment of the working season. involving o o o • • • • • • o o • • • o •••JO t 0 O 0 I I 0 l t l • 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 factory compound, for without the which rent is charged either from employees of the factory or from other persons; and ' St•t1 Df Pu,Y•• •• BritiJlr br•ia Gtr(JO'raliM l1J. Vas Gu,14 J, u •• . . . . . . , . . . . , . . , , , . . , . . ._ -~ . . . . . . . , • · · • . . . . . . . , . " ' " " ' " ' " • • . . o i . -JJi_..,;,...._ ... :,- • - I I 118 SUPREME COURT REPORTS [1964] VOL. ' (iii) bungalows or houses intended for or occupied by superior staff whether situated within or without the factory compound." the managerial 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 build ings 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 manu facturing 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 it is not a godown outside the the buildings; (b) 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 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 ( 1) \Vhether the building was used to two questions. 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 that the intention of the legis is a good indication lature 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 think, however, that reasonable to 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 will be user for the factory may function, purpose of a factory. The other is that where the user of the building is such as is necessary for the efficiency the workmen engaged in the fa.::tory the building should be held to be used for the purpose of a factory. of the machines or of 1163 Stt1t1 of Punja '1 •• British India c.,por.ii•• Lli. Dos Gupta J. 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 It empowers the State Government in every factory. 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 requiring that in any specified factory wherein more tha,n two hundred and fifty workers are ordinarily em ployed, 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." to make ..... ........... 120 SUPREME COURT REPORTS [1964] VOL. 1963 S~alt of P11nja6 v. BrifiJh lnrli• C()fftoTOlio11 lttl. Das Gupt~ J. 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 imprisonment or fine. thereunder punishable with It is obvious therefore that in order that a 'factory may function in accordance with law buil dings 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 employers of of efficiency. ~fany enlightened labour, taking a long view of things have there fore 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 In our opinion, the use of buildings that purpose. 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 convinc ed, is the user of a building for the purpose of pro viding 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 discuss ing 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., Southern Essex Assessment ), to indicate the tendency of the English Committee (1 times to attach importance to courts in more recent what is necessary for the welfare and efficiency of the workers in deciding the question. v. There was a place of refreshments for persons in a laundry which was qualified as a employed factory and workshop and therefore was an "indust rial hcreditament". The question was whether this refreshment place was "solely used for some pur pose other than the manufacturing process or handi craft, 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 the equipment and. layout of consi<lerations a factory, the Canteen was not a place which was "solely used for some purpose other than the manu facturing 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 122 SUPREME COURT REPORTS [1964) VOL. S1at1 of Punjab y, B•iliih lndi• W.p.r11m Ltd. Dos G•pto J. 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 cloak room, or a number of other parts of the heredita ment. Tucker .J. agreed with this conclusion and observed .--- "The element which, to my mind, decisive is that the facts stated show that the canteen was necessary and essential for welfare and efficiency of the workers engaged in the admittedly industrial part of the under taking." 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. 1963 St1t1 of Punjq6 y, British lntii• Corporation LJJ,, -.- DatGupttt ~· 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 In its narrower sense it means payment building. 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 at which such land or building ........................ . .. . . .. .. .. . . .. . .. .. .. .... .. .. .. .. might reasonably be expec te.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 legislature said : " ........................ it shall be lawful for the pre- scribed 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 pay ments 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 trans fer 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 124 SUPREME COURT REPORTS [1964] VOL. 1963 Si.u of Puojoh v. B rilisli "/ nJia C01p.roll.. ltd. Dtu Gupta J, 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 indica tion that there also the word "rent" was used in the narrower sense. 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 narro wer sense of payment by tenant to landlord for demised property. In the absence of anything Our conclusion 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. therefore In coming to this conclusion we have not over looked 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 in 1954 and I 957 cannot be taken into the word 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 l963 Stat1 ofol'unjab •• Britcl India iorpoT<tifJll Ltd. D., Gupu /, 1965 --

25.C.R. SUPREME COURT REPORTS 125 used by the employees on leave and license. What ever payment.w~s received f~om them ~as not them· fore "rent" w1thm the meanmg of cl. (u). that no therefore is Our conclusion 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)