Conversion of capital asset into stock in trade

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Gaurav Soni (Querist)
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20 February 2017 Can anybody tell me that when section regarding conversion of capital asset into stock in trade came into force.

Case- Mr. X had purchased 3 bigha agriculture land in 2009 then in 2010 he convert this land into commercial property and then start selling the land.

So tell me whether he can convert his capital asset into stock in trade.

Tony John

Tony John (Expert)
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20 February 2017 Section 45(2) talks about computation of capital gain in the case of conversion of capital asset into stock in trade. The Section came into effect from AY 1985-86 by way of amendment in Section 45 by Taxation Laws (Amendment) Act, 1984 to nullify the effect of Apex Court Judgement in the case of CIT v. Bai Shirinbai K. Kooka [1962] 46 ITR 86.

Tony John

Tony John (Expert)
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20 February 2017 It is possible to convert capital asset into stock in trade.
Capital gains = FMV of asset on date of conversion- Acquisition cost. It is taxed i nthe year in which stock is transferred.

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