Move expected to increase compliance burden on taxpayers, say experts
Subsequent to the enactment of the Finance Bill 2021, the Income Tax Department has notified changes to be incorporated in the audit report. These changes relate to reporting of property transactions and goodwill, besides others.
The amendment in the I-Tax Act prescribed that sale amount on transfer of an eligible residential unit shall be deemed to be consideration so received if the stamp duty value of such property does not exceed 120 per cent of the consideration. This is subject to certain conditions. One, transfer by way of first-time allotment of an eligible residential unit should have taken place during November 12, 2020-June 30, 2021. Also, the consideration should not exceed ₹2 crore.
Also, to incentivise home buyers and real-estate developers, it has been decided to increase safe harbour limit to 20 per cent from 10 per cent for primary sale of residential units
According to Divakar Vijayasarathy, Founder & Managing Partner at DVS Advisors LLP, “Consequent to above amendments, additional details regarding applicability of Section 43 CA and 56(2)(x) have been provided in the revised audit report while disclosing sale of property under Clause 17 of Form 3CD.”
Under amended Section 115BAC (taxation of individuals and Hindu Undivided Family) and Section 115BAD (taxation of resident co-operative societies at 24 per cent), specified deductions such as those pertaining to the amount of loss and depreciation, cannot be claimed.
Vijayasarathy said in Clause 18 of Form 3CD, there is mention about the adjusted written-down value. For assessees opting for the new tax regimes, the amount of loss and depreciation pertaining to the specified deductions shall be deemed to have been given full effect and no further deduction shall be allowed. As per the amendment vide Finance Act 2021, goodwill of a business or profession will not be considered as a depreciable asset, hence, no depreciation shall be charged on such asset.
“Thus, the revision in the audit report has been made to exclude the goodwill of a business or profession while considering the adjustment mentioned here, as it is no longer a depreciable asset,” he said.
Commenting on the notification, SR Patnaik, Partner with Cyril Amarchand Mangaldas said these changes are clarificatory in nature and the CBDT seems to have shifted the burden on the taxpayer as well as the certifying chartered accountant, so that the data in the tax return and Form 3CD have been validated at least once. “While this may increase the administrative burden on the taxpayer, it will also enable the tax authorities to receive the data already validated by an independent chartered accountant,” he said.