The Income-tax, Act, 1961 has in all 298 sections and many of these have cross reference to each other while interpreting the provisions. In such a scenario, when any amendment takes place in any of the sections, the corresponding effect and reference should be given to the relevant related sections as well.
However, inconsistency exists at present in few of the sections of which 2 instances are listed below:-
1. Section 54, 54B, 54D & 54F:
The Finance Act, 2017 amended section 2(42A) so as to reduce the period of holding from the existing 36 months to 24 months in case of immovable property, being land or building or both, to qualify as long-term capital asset.
Consequential amendments for reducing the holding period of immovable property from 3 to 2 years is required to be made in sections 54, 54B, 54D & 54F in line with the amendment in section 2(42A). At present, these sections restrict transfer of new assets purchased for 3 years.
2. Section 94(7):
DDT u/s 115-O is abolished by Budget 2020 and so w.e.f 01.04.20, dividend is taxable in the hands of shareholder. Thus, Dividend stripping provisions stand redundant starting FY 20-21 & thus section 94(7) is no more relevant. However, no change in this section has been made yet.
Thus, these are 2 of the few inconsistencies amongst the sections present in the Act at present which should be looked into & corrected upon in the upcoming historical “Paperless budget” to be presented on February 1, 2021 by the Hon. FM Nirmala Sitharaman.
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Also the inconsistency in Audit limit u/s 44AB and 44AD.
With the increased limits of non cash business Tax audits to 5/10 Crores, the limit of 44AD also should have been increased.
Ideally the limit of 44AD should never be lesser than Tax Audit limit…