Income-tax provisions are very clear that the same income cannot be taxed twice. But can a taxpayer claim a double deduction of expenditure against income? Let's find out.

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A taxpayer, engaged in the financial service sector as a share broker offered rental income from letting out of certain office premises in his return of income filed for the financial year 2012-13. The total income offered to tax was Rs 50.15 lakhs in the return of income.

The rental income was offered to tax under the head 'house property' and the taxpayer had claimed a standard deduction at 30% as per the provisions of the Income Tax Act ('the Act'). Further, the taxpayer had claimed maintenance charges of Rs 4.14 lakhs and depreciation of Rs 4.34 lakhs against these premises as business expenditure against the business income from share broking in the said return of income.

During the course of assessment, the tax officer objected to the claim for depreciation and maintenance expenditure and disallowed the same. Accordingly, additions were made to the taxpayer's income. The taxpayer filed an appeal before the first appellate authority.

The taxpayer submitted to the appellate authority that once an asset forms part of the block of assets (different assets that are eligible for depreciation at the same rate are grouped as one block) as per the provisions of the Act, individual assets in the block lose its independent identity and depreciation is fully allowable against the block irrespective of where or for what purpose the asset is being used in the business. The first appellate authority was of the view that the taxpayer had offered the income under the head house property and allowed standard deduction, which was duly allowed by the tax officer. The provisions of the law are such that the standard deduction takes care of all the possible deductions other than the interest paid on home loans. Therefore, claiming a deduction for depreciation is actually making a claim for double deduction which is not permissible under the law. The taxpayer's claim for relief was rejected.

The taxpayer further filed an appeal with the Mumbai income tax Tribunal. Based on the facts of the case and the decision by the first appellate authority, the Tribunal observed that the taxpayer was in possession of various office premises, out of this few units were let out during the year and a few were used by the taxpayer for his own use. The depreciation on the units used for the purpose of his business was not disputed. The Tribunal also noted that the taxpayer had also not disputed the disallowance of the office maintenance charges claimed as business expenditure.

The primary condition as envisaged in the provisions under which depreciation is allowed is that the assets should be used for the purposes of one's own business. In the current case, this has remained unfulfilled, specifically for the units that were given on rent. The Tribunal relied on preceding decisions where depreciation on assets was allowed even if the assets were not generating income for the taxpayer, but the assets were not diverted for non-business purposes.

The tax Tribunal accordingly decided not to interfere with the decision of the first appellate authority and denied the claim for depreciation to the taxpayer.

The writer is a Sebi-registered investment advisor