Double dipping – Possible Tax Revenue Leakage

Term DOUBLE DIPPING is used to indicate the possibility of getting double benefits under two sections or under two Jurisdictions/countries by the same taxpayer.

Examples of double dipping wherein question on revenue leakage arises –

1. Claiming deduction twice on the same amount spent on particular expenses. First time claiming interest as expenses and after adding said expenses as cost to cost, second time claiming said expenses as cost of acquisition while calculating capital gain.

2. Profit from a particular type of transaction is exempt and loss from the same type of transaction is claimed to set off against the same head of Income.

3. Profit from a particular activity is claimed as not taxable in India under DTAA in one year, and loss from said activity is claimed to set off in subsequent years against gain from the same head of Income.

Is double dipping allowed?

In various judicial precedents, it was observed that a double dip may indeed occur. However, the matter was concluded after considering the provisions of income tax, which sometimes permits it.

Said Position is unintended/undesirable, as evident from the global concern and various amendments done in Indian Income Tax to neutralise such dual benefits.