Judgment

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, 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 Section 3 of the Act unless the exemption provided in Section 4 of the Act is available. That section provides that the tax shall not be levied in respect of the properties mentioned in clauses (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 define 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 Section 4.

2. The 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 Article 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(1) Under the provisions of clause (g) of sub-section (1) of Section 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 seasons.

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(4) The exemption provided by sub-rules (1) and (2) shall not extend to -

(i) godowns outside the 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

(iii) bungalows or houses intended for or occupied by the managerial or superior staff whether situated within or without the factory compound".

3. There is a proviso to sub-rule (1) with which we are not concerned. We are also not concerned with sub-rules (2) and (3) of Rule (18).

4. The effect of this Rule therefore is that buildings belonging to the proprietors the factory will get the benefit of exemption from taxation under Section 4 of the Act provided three conditions are satisfied : (1) the buildings must be used for the purpose of a factory ; (2) the factory must be one where 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 gown outside the factory compound, or (c) it is not a bungalow G. house intended for or occupied by the managerial or superior staff. In the present case there is no depute that the second condition was satisfied viz. that the factory was one in which the 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 wasn t a godown outside the factory compound nor was it a bungalow or house intended for or occup