C. S. P. Singh, J. - The petitioner is a public limited company and carries on the business of manufacturing sugar. For the assessment year 1954-55 and 1955-56, the company claimed depreciation on rollers which was valued at Rs. 3,23,000/-. Appeals were preferred against the assessment orders for these two years, but they were dismissed. The petitioners thereafter went up in appeal before the Appellate Tribunal. The appeals were dismissed on 7-12-1968 and 31-8-1968. A reference was made by the Tribunal to this Court being I.T.R. 781 of 1970 and the points referred were :-
1. 'Whether on the facts and circumstances of the case and in law, the assessee company was entitled to the claim of depreciation on Rollers ?'
2. 'Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the proviso to section 10(v)(a) of the Income-tax Act, 1922 applied in regards to the purchase of machinery from Seth Benarsi Das Gupta ?'
In the reference, an attempt was made to challenge the vires of Item No. III(xii) of the Rules framed under the Income tax Act 1922, but that was not considered, for the view was taken that the vires of the provisions of the Income-tax Act, 1922 cannot be considered on a reference under section 66 of the Act. On merits, the first question was decided against the assessee and the second in his favour. The petitioner assessee now challenges the vires of Rule 8 Item No. III(xii) of the aforesaid Rules.
2. Before we consider, the contention of counsel for the assessee, it would be convenient to extract section 10(2) and the relevant part of Rule 8, which run as under :-
'10(2). Such profits or gains shall be computed after making the following allowances, namely, :-
(vi) in respect of depreciation of such buildings, machinery, plant or furniture being property of the assessee, as sum equivalent, where the assets are ships other than ships ordinarily plying on in land waters, to such percentage cost thereof to the assessee as may in any case or class of cases be prescribed and in any other case, top such percentage on the written down value thereof as may in any case of class of cases be prescribed.'
The relevant part of Rule 8 before its amendment of 1950 runs as under :-
'8. The allowances under sec. 10(2)(vi) of the Act in respect of depreciation of buildings, machinery, plant, or furniture shall be at percentages of the written down value of original cost, as the case may be, equal to one-twelfth the number shown in the corresponding entry in the column of the following statement :-'
The relevant part of the statement is Item No. III (2) and was as follows :-
3. Counsel contends that inasmuch as the rate for depreciation on Rollers has been put as Nil the result is that no depreciation no Rollers is allowable. This according to counsel is violative of the provision of sec. 10(2)(iv) of the Act. We are in the present case concerned with schedule as it stands after 1950. Item No. III A(iv) of Rule 8 fixed the number on the basis of which the percentage is to be calculated on the written down value in case of Sugar Except Rollers at 9% i.e. while calculating the depreciation. Rollers have to be excluded while calculating the written down value. Sec. 10(2)(vi) enjoins that computation of profits and gains for each year only after making allowance for depreciation. In case machinery, the allowance is a percentage of the written down value has to be prescribed by the Rules. In the case of Rollers, inasmuch as the number prescribed in 'nil', no depreciation is allowable under the Rules. The Rule, however, allows reimbursement of the total costs of the Rollers as and when they are replaced. An assessee can as such claim that total costs of replacement as a revenue expenditure. When depreciation is allowed on a particular asset of the assessee, the profit and gains of that business are reduced to the extent of depreciation of the amount and that results is a lower extent of tax. In the case of Rollers, although no depreciation is allowed year-wise, but inasmuch as the total costs of replacement as allowed to assessee as and when new Rollers are substituted in place of old one, the assessee recoups the entire allowance so to say when new purchases are made. All that happens is that instead of assessing the allowance year wise, the amount in question is granted to him on replacement. Thus the practical effect is the same even though the allowance is granted only on replacement. The case might have been otherwise in case costs of replacement or Rollers was not allowable at all. Thus the allowance in question instead of being read over for a number of years is granted in a lump sum to an assessee. Although it would be anomalous to call the word 'nil' a percentage on the written down value, yet mathematically speaking 'nil' or 'zero' is also a percentage inasmuch as all mathematical reckoning begins with the word 'zero'. 'Zero is the starting point for all calculations and is an essential part of all numerals. Thus strictly speaking it cannot be said that there is technically any voilation of the provisions of sec. 10(2)(vi) by prescribing the rate as 'nil' for Rollers used in Sugar works, specially when the entire costs of replacement is allowable to the assessee as a revenue expenditure. We must, however, not be understood as laying down the principle that the Rule making authority can prescribe the rate or percentage as 'nil' for all machinery building etc. for all times without making the same recoupable at a latter point of time.
4. There is another difficulty in the way of the petitioner seeking the relief of striking down Item No. III (xii) of Rule 8. This item has already been quoted, even if this item is struck down, the assessee does not stand to gain for then he would not be even entitled to the cost of replacement as a revenue expenditure. It is settled, that futile writs will not benefit a petitioner are not issued under Article 226 of the Constitution, and for this reason also we decline to interfere.
5. The writ petition is accordingly dismissed. There shall, however, be no order as to costs.
Gulati, J. - I agree with brother C. S. P. Singh that this writ petition deserves to be dismissed.
7. Section 10(2) (v) of the Income-tax Act, 1922 provides that profits and gains of a business shall be computed after making allowances in respect of depreciation of buildings, machinery, plant or furniture etc. which are the property of the assessee and are used for business purposes. The depreciation is to be calculated on a certain percentage of the written down value of the business assets concerned as may be prescribed. Rule 8 prescribes the percentage for various types of business assets. The rate of depreciation allowance in respect of sugar works is 9 per cent except roller used in such sugar mills. On rollers no depreciation is to be allowed but the cost of the replacement of the roller is to be allowed as a revenue expenditure. The contention raised in this case is that case is that this part of the Rule relating to rollers is ultra vires inasmuch as it in conflict with section 10(2) (iv) of the Act which provides for depreciation on every business assets.
8. There is a fallacy in this argument. It is not correct to say that no depreciation has been provided for rollers. The entire cost of replacement is to be allowed as a revenue expenditure, which means that the depreciation on rollers is hundred per cent. Of course, the depreciation is to be allowed that at the time of replacement of rollers. But that fact does not after the position that a depreciation of 100 per cent it has been provided for. The Rule making authority has made such a provision apparently because the wear and tear in the case of rollers is very high and ordinary depreciation calculated at a certain percentage of the cost of rollers will not give adequate relief to the assessee. In fact, by providing that the cost of replacement shall be allowed as a revenue expenditure, the assessee has been put to a gain inasmuch as the normal depreciation calculated on the basis of the written down value can never be 100 percent of the cost. It is not correct to say, therefore, that no depreciation has been provided for in respect of rollers. Only the method of calculating the depreciation in different. Depreciation allowance is also allowed as expenditure in the computation of the income and the cost of the roller is also allowed as expenditure at the time of replacement. Thus there is no difference between the case where depreciation is allowed on the basis of a percentage of the written down value and on the basis of replacement.
By the Court - For reasons stated in our judgment, this petition fails and is accordingly dismissed. There shall, however, be no order as to costs.