CHAPTER III
DIRECT TAXES
Income-tax
Amendment of section 2.
3. In section 2 of the Income-tax Act, in clause (42A),-
(a) in the third proviso [as inserted by section 3 of the Finance Act, 2016 (28 of 2016)], after the words and brackets “a company (not being a share listed in a recognised stock exchange in India)”, the words “or an immovable property, being land or building or both,” shall be inserted with effect from the 1st day of April, 2018;
(b) in Explanation 1, in clause (i),-
(A) after sub-clause (he), the following sub-clause shall be inserted with effect from the 1st day of April, 2018, namely:-
“(hf) in the case of a capital asset, being equity shares in a company, which becomes the property of the assessee in consideration of a transfer referred to in clause (xb) of section 47, there shall be included the period for which the preference shares were held by the assessee;”;
(B) after sub-clause (hf) as so inserted, the following sub-clause shall be inserted, namely:-
“(hg) in the case of a capital asset, being a unit or units, which becomes the property of the assessee in consideration of a transfer referred to in clause (xix) of section 47, there shall be included the period for which the unit or units in the consolidating plan of a mutual fund scheme were held by the assessee;”.
Notes on Clauses:
Clause 3 of the Bill seeks to amend section 2 of the Incometax Act relating to definitions.
The existing provisions contained in clause (42A) of the said section defines the expression "short-term capital asset" to be a capital asset held by an assessee for not more than thirty-six months immediately preceding the date of its transfer. Further Explanation 1 of the said clause provides for determining the period for which the capital asset is held by the assessee.
It is proposed to amend the third proviso to the said clause so as to provide that in the case of an immovable property being land or building or both, the aforesaid period of holding shall be less than twenty-four months for it to be treated as short term capital asset.
It is also proposed to insert a new sub-clause (hf) in Clause (i) of Explanation 1 of the said clause so as to provide that in the case of a capital asset being equity shares in a company, which becomes the property of the assessee in consideration of a transfer referred to in clause (xb) of section 47, there shall be included the period for which the preference shares were held by the assessee.
These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-2019 and subsequent years.
It is also proposed to amend clause (i) of the said Explanation to insert clause (hg) so as to provide that in the case of a capital asset, being a unit or units, which becomes the property of the assessee in consideration of a transfer referred to in clause (xix) of section 47, there shall be included the period for which the unit or units in the consolidating plan of the mutual fund scheme were held by the assessee.
This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-2018 and subsequent years.
