MUMBAI, Nov 4: The Voluntary Disclosure of Income Scheme (VDIS) will permit the declaration of bogus deductions including depreciation claims and brokerage, according to a Central Board of Direct Taxes (CBDT) communique.

It was issued last week in response to a query from an assessee in Mumbai. The first part of the question sought to clarify if wrong claim of depreciation can be disclosed under Voluntary Disclosure of Income Scheme.

The second was to check if the assessee can adjust, against such depreciation and other expenses, the lease rent which is offered as income from the lease transaction.

This will give a chance to companies involved in leasing transactions, which are not bonafide, to clean up their accounts," vice-president, corporate finance, Kotak Mahindra Finance Limited (KMFL) KVS Manian said.

According Commissioner of Income-Tax (II) SNL Agarwala, the Central Board of Direct Taxes communique has also given one more option to the assessees who had claimed wrong depreciation. "The assessee can now withdraw the income from lease transaction from his total income in the next assessment year", he told The Financial Express.

However, tax experts felt that the withdrawal of income might lead to lack of immunity. It could create a negative impression as the declarant's assessing officer will have to be informed about the deletion in the income-tax returns.

The board's communique also advises the declarant to keep his calculation of declared income which, if necessary, can be produced before the assessing officer.

According to SBI Caps deputy director Sudharshan Jha, the communique will have a negative impact on the leasing industry as more companies will be tempted to enter into `questional transactions' hoping for another Voluntary Disclosure of Income Scheme in future.

"The scheme has already adversely affected income tax collections as people prefer the Voluntary Disclosure of Income Scheme route rather than opting for the normal course of filing returns", said a tax expert.

According to sources, collections in Mumbai have dipped by around six per cent in October alone. Last year, the income tax generation in the same month was around Rs 2,200 crore, while corporate tax collection is reported to be around Rs 3,100 crore as against Rs 2,800 crore.

The income-tax department, Mumbai, has a target of Rs 11,200 crore for the current fiscal which includes Rs 5,700 crore component from income-tax. The Voluntary Disclosure of Income Scheme target set for the department is Rs 4,000 crore.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.