Das Gupta, J.
1. These two appeals raise the question whether certain buildings belongingto the respondent the British India Corporation Ltd., in one appeal and therespondent Shri Gopal Paper Mills Ltd., in the other appeal, are liable totaxation under the Punjab Urban Immovable Property Tax Act 1940. The buildingsin both these cases are situated in the rating area shown in the Schedule tothe Act and would consequently be liable to taxation under s. 3 of the Actunless the exemption provided in s. 4 of the Act is available. The sectionprovides that the tax shall not be levied in respect of the propertiesmentioned in cls. (a) to (g) thereof. Clause (g) mentions 'such buildingsand lands used for the purpose of a factory as may be prescribed.'Prescribed' has been defined as 'prescribed by the rules made underthe Act.' Rule 18 of the Punjab Urban Immovable Property Tax Rules, that wereframed by the Punjab Government in 1941, prescribed buildings and lands for thepurpose of clause (g) of s. 4.
2. The Assessing Authority rejected the claims for exemption made by therespondents and assessed the buildings for the purpose of taxation. The appealsto the Deputy Excise and Taxation Commissioner were unsuccessful. Therespondents then moved the Punjab High Court under Art. 226 of the Constitutionpraying that the order of the Taxation Commissioner be quashed. In both thecases the High Court held that the petitioners were entitled to the exemptionprayed for and quashed the orders of assessment. The question in these appealstherefore is whether the High Court was right in its view that the buildings ofthe respondents come within the class which has been prescribed for exemptionby Rule 18 of the Punjab Urban Immovable Property Tax Rules, 1941. The relevantportion of this Rule, which has been altered from time to time, stood thus in1956 when the assessment order was made : -
(4) The exemption provided by sub-rules(1) and (2) shall not extend to -
(i) godowns outside the factorycompound;
(ii) godowns, shops, quartersor other buildings, whether situated within or without the factory compound,for which rent is charged either from employees of the factory or from otherpersons; and
(iii) bungalows or housesintended for or occupied by the managerial or superior staff whether situatedwithin or without the factory compound.'
3. There is a proviso to sub-rule (1) with which we are not concerned. Weare also not concerned with sub-rules (2) and (3) of Rule 18.
4. The effect of this Rule therefore is that buildings belonging to theproprietors of the factory will get the benefit of exemption from taxationunder s. 4 of the Act provided three conditions are satisfied : (1) thebuilding must be used for the purpose of a factory; (2) the factory must be onewhere a manufacturing process involving the use of power is being and has beencarried on for a continuous period of six months; and (3) a) no rent is being chargedfor 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 orsuperior staff. In the present case there is no dispute that the secondcondition was satisfied, viz., that the factory was one in which manufacturingprocess involving the use of power was being and had been carried on for acontinuous period of six months. Admittedly, also the building was not a godownoutside the factory compound nor was it a bungalow or house intended for oroccupied by the managerial or superior staff. The controversy is limited thusonly to two questions. (1) Whether the building was used for the purpose of afactory and (2) whether rent was being charged for it.
5. Before we examine the facts of the two cases for solving the controversywe have to arrive at the correct interpretation of the words 'used for thepurpose of a factory' and the word 'rent' in the Rule.
6. It is neither necessary nor desirable to attempt to define what amountsto 'use for the purposes of a factory.' That the legislature leftthis undefined is a good indication that the intention of the legislature wasto have the question decided, in any case where controversy arises over it, ona consideration of the facts of the case. It appears to us to be reasonable tothink, however, that two principles will be easy of application in the solutionof the problem in the majority of cases. One is that where the building is usedfor a purpose which the factory law requires must be fulfilled in order thatthe factory may function, that will be user for the purpose of a factory. Theother is that where the user of the building is such as is necessary for theefficiency of the machines or of the workmen engaged in the factory thebuilding should be held to be used for the purpose of a factory.
7. The 5th Chapter of the factories Act contains numerous provisions for thewelfare of workmen employed in the factory. Section 42 requires that adequateand suitable facilities for washing shall be provided and maintained for theuse of the workers in every factory. It empowers the State Government toprescribe standards of the facilities to be provided. Section 43 empowers theState Government to make rules in respect of any factory or class ordescription of factories requiring the provision 'of suitable places forkeeping clothing not worn during working hours and for the drying of wetclothing.' Section 46 empowers the State Government to make rulesrequiring that in any specified factory wherein more than two hundred and fiftyworkers are ordinarily employed, a canteen or canteens shall be provided andmaintained by the occupier for the use of the workers. Section 47 requires thatin every factory employing more than one hundred and fifty workers'adequate and suitable shelters or rest rooms and a suitable lunch room,with provision of drinking water, where workers can eat meals brought by themshall be provided and maintained for the use of the workers.' Section 48requires the provision and maintenance of a 'suitable room or rooms forthe use of children under the age of six years of such women' employed inthe factory if more than fifty women are employed ordinarily. Section 92 makesthe contravention of any of the provisions of the Factory Act or of any Rulemade thereunder or any order in writing given thereunder punishable withimprisonment or fine.
8. It is obvious therefore that in order that a factory may function inaccordance with law buildings or parts of buildings have to be provided by theowner for the use of the workmen for the purposes mentioned in the severalsections mentioned above. Such use of these buildings must therefore be held tobe 'use for the purpose of a factory.'
9. Advances in scientific knowledge as to how the industrial efficiency canbe improved have made it clear that even other facilities and amenities, otherthan those required by the factory legislation, conduce in a great measure to arise in the efficiency of the industrial worker and that some of these areindeed necessary to the maintenance of a proper standard of efficiency. Manyenlightened employers of labour, taking a long view of things have thereforeinvested considerable sums of money for the provision of such facilities andamenities even though not required by law and have raised buildings for thatpurpose. In our opinion, the use of buildings for the provision of suchfacilities and amenities which are necessary to the maintenance of a properstandard of efficiency of the factory workers must also be held to be 'usefor the purpose of a factory.' The learned Advocate-General, who appearedfor the State of Punjab, readily agreed that when a building is provided forthe use of the machinery in order that the machinery may function efficientlyor that it may not deteriorate, the building is being used 'for thepurpose of a factory'. He is reluctant however to apply a similar rule toa building used for the purposes of maintaining the efficiency of the men whowork the machinery. We are unable to see any reasonable ground for thisdifferentiation. Just as the use of a building for a purpose which maintainsthe efficiency of the machines is a user for the purpose of a factory, so also,we are convinced, is the user of a building for the purpose of providingsomething which is necessary for maintaining the efficiency of the workers.
10. A large number of cases were cited at the Bar to show how the Englishcourts have understood the words 'industrial purpose' or'purpose other than the manufacturing process or handicraft carried on inthe factory' in connection with the Rating and Valuation (Apportionment)Act, and the Factory Act 1901. No useful purpose will be served by discussingall these cases as the schemes of those Acts are largely different from outAct. We shall refer only, however, to the decision in London Co-operativeSociety Ltd., v. Southern Essex Assessment Committee (1942) 1 K.B. 53., toindicate the tendency of the English courts in more recent times to attachimportance to what is necessary for the welfare and efficiency of the workersin deciding the question.
11. There was a place of refreshments for persons employed in a laundrywhich was qualified as a factory and workshop and therefore was an'industrial hereditament'. The question was whether this refreshmentplace was 'solely used for some purpose other than the manufacturing processor handicraft, carried on in the laundry'. The Kings Bench answered thisquestion in the negative. Viscount Caldecote, C.J. said that applying theup-to-date considerations in the equipment and layout of a factory, the Canteenwas not a place which was 'solely used for some purpose other than themanufacturing process or handicraft carried on in the laundry.' HisLordship observed that these considerations might assist in the determinationof the character of parts of a factory like - a lavatory, or a room where surgicalfirst aid is provided or a cloak-room, or a number of other parts of thehereditament. Tucker J. agreed with this conclusion and observed :-
12. For applying the two principles mentioned above to the facts of thesetwo appeals, we have to ascertain to what use the property in question has beenput. In the first appeal (in which the British India Corporation Ltd. is therespondent) we are concerned with four units : (1) A set of rooms used forindoor games by the mill employees; (2) One big hall used as the Gurkha GuardsClub; (3) A set of rooms used as Officers' Club, and (4) A set of rooms used asresidential quarters by workers of the mills.
13. In our opinion, the allotment of these buildings for the use of theworkmen was made for a purpose which was necessary to the efficiency of theworkmen.
14. The property assessed in the other appeal (in which Shri Gopal PaperMills Ltd., is the respondent) consists of 200 quarters which have beenallotted to workers of the factory for their occupation. The provision of suchquarters is clearly necessary to the welfare and efficiency of the workmen andit must be held that in this case also the buildings were being used for thepurpose of a factory.
15. The next question is : what is the meaning of 'rent' in clause(ii) of Rule 18(4). In its wider sense rent means any payment made for the useof land or buildings and thus includes the payment by a licensee in respect ofthe use and occupation of any land or building. In its narrower sense it meanspayment made by tenant to landlord for property demised to him. Did therule-making authority when providing that the exemption provided by sub-rules 1and 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 narrowersense In seeking an answer to this question it is legitimate to examine theuse of the word 'rent' in the Act for which these rules were made. Atthe time the rules were first made in 1941 the Act used the word'rent' only in two sections. First, in s. 5, where in providing howthe annual value of land or building shall be ascertained the legislature saidthat it shall be ascertained 'by estimating the gross annual rent at whichsuch land or buildings................................... ............mightreasonably be expected to let from year to year'. It is absolutely clearthat here the word 'rent' is used in its strict and narrower sense ofpayment by tenant to landlord for demised property. The other section where theword 'rent' occurs is s. 14, where in providing for recovery of taxin arrears the legislature said : '............ it shall be lawful for theprescribed authority to serve upon any person paying rent................... tothe person from whom the arrears are due, a notice stating the amount of sucharrears of tax and requiring all future payments of rent by the person payingthe rent to be made direct to the prescribed authority.............and alsoproviding that such notice shall operate to transfer to the prescribedauthority the right to recover, receive and give a discharge for suchrent'. While the section itself leaves it doubtful whether the word'rent' has been used in the narrower or the wider sense, the marginalnote describes the subject-matter of the section thus : 'Recovery of taxfrom tenants.' If this note is taken into consideration it becomes clearthat in this section also the word 'rent' was used in its narrowersense to mean payment made by tenant to landlord for demised property.
16. When in 1941 the rule-making authority set about framing the Rules, ithad before it this clear use of the word 'rent' in its narrower sensein s. 5 and the marginal note in s. 14 which was some indication that therealso the word 'rent' was used in the narrower sense. In the absence ofanything to indicate the contrary, it would be reasonable to think that therule-making authority would not depart from the meaning in which it had reasonto believe that the legislature had used the word, and that it used the word inclause (ii) of Rule 18(4) in the same narrower sense of payment by tenant tolandlord for demised property.
17. Our conclusion therefore is that the word 'rent' in clause(ii) of Rule 18(4) means payment to a landlord by a tenant for the demisedproperty and does not include payments made by licensees.
18. In coming to this conclusion we have not over-looked the fact that thereis scope for an argument that in cls. (d) and (e) of s. 4 of the Act as theystand 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 theword in 1954 and 1957 cannot be taken into account for the purpose ofinterpretation, as the Rule under consideration was framed long before thesedates.
19. Coming now to the facts of the two cases before us, we find thatadmittedly, in both the cases the property that has been assessed was allowedto be used by the employees on leave and license. Whatever payment was receivedfrom them was not therefore 'rent' within the meaning of clause (ii).
20. Our conclusion therefore is that no tax is leviable under the PunjabUrban Immovable property Tax Act, 1940, in respect of the buildings in thesetwo appeals. The High Court therefore rightly quashed the orders of assessment.The appeals are accordingly dismissed with costs.
21. Appeals dismissed.