conversion of asset into stock

This query is : Resolved

CA Puneet Jethliya (Querist)
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01 October 2009 As per sec.49(1)
"The period of previous owner is included in calculation of long term/short term capital gain."

Capital gain chargablity also states that on sale of any depreciable asset - always STCG."

so what if the assesee received a residential house from his father in the year 1999 under his will which converts into stock in trade. If such house sold what is chargeable to tax as LTCG or STCG. bcoz residential house is depreciable as used in business but on the other hand if the period of previous owner included then it will be 36+ months.

pls suggest me.

CA Sanjeev Kr Jain

CA Sanjeev Kr Jain (Expert)
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02 October 2009 first check nature of business.

Ratan Sharma

Ratan Sharma (Expert)
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03 October 2009 It will be long term capital gain/loss upto the year of conversion of asset in stock in trade.
The computation will be as follows;
1.
Cost of conversion of asset into stock in trade XXX
Less:
Indexed cost i.e.
purchase costX Index of the year in which asset converted into stock in trade / Index of 1999

= Longterm capital gain/loss

2. Sale Price XXX
Less: Cost of conversion XXX
= Business profit/loss.

So both Business income as well as Capital Gain will be attracted. Period of holding of asset is only taken into account for the purpose of applying Indexation. Whether the property is long term or short term depends upon the period of holding including the period of holding of previous owner.

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