It Dept Targets Bogus Depreciation Claims

The recent action against the Pune-based Western Paques of the Western Gadgil group, and the Hyderabad-based Advanced Radio Masts is only the tip of the iceberg, said IT sources.

Although the exact amount involved in bogus depreciation claims is difficult to ascertain, the authorities claim that hundreds of crores of rupees is involved. The authorities are zeroing in on promoters of public limited companies involved in the large-scale siphoning of shareholders money by setting up leasing and finance companies. The modus operandi involves the buying of equipment, plant or machinery by the leasing companies and hiring it back to the same company from which it has purchased it at heavy rentals.

 

Out of 10 investigating wings of the IT department, five are tracking down firms which are involved in making bogus claims.

High on their agenda is the pursuit of firms involved in 100 per cent depreciation by making bogus claims on ventures such as environment-friendly projects, pilot projects for research and development, wind mill projects and oxygen and gas cylinder projects. In several cases, the authorities have found that the 100 per cent depreciation claims were made to hoodwink the IT officials.

With the amendment of the finance act, whereby depreciation can be claimed only on written down value method, the IT authorities say this has plugged the loophole through which companies made repeat claims of depreciation for the same equipment. The authorities will also look into the extent of misuse of depreciation by firms and those found guilty will be accordingly taxed the entire amount as income.

The authorities, wherever required, will also slap a 100 per cent tax on the evaded amount, impose 1.5 to 2 per cent penal interest per month and a 6 month to 7-year imprisonment for making false claims and statements.