11 December 2018
LAND PURCHASED IN YEAR 2006 AT RS 150000/- ASSESSEE STARTED CONSTRUCTION OF FLAT BUSINESS DURING F .Y. ENDING 31/03/16 AND CONVERTED ABOVE LAND INTO STOCK IN TRADE AT THE COST OF RS 150000/- ASSESSEE ALSO SHOWN PROFIT OF RS 10 LAKHS FROM CONSTRUCTUION BUSINESS TAKEING WORK IN PROGRESS (VALUE OF CONSTRUCTED FLATS) WHETHER STILL LONG TERM CAPITAL GAIN ARISES ON LAND TRANSFER/CONVERTED INTO STOCK IN TRADE DURING THE YEAR
12 December 2018
As per section 48 of the IT Act, for the purpose of calculation of capital gain in case of conversion of capital gain in stock in trade, the FAIR MARKET VALUE of the assets on the date of conversion shall be deemed to be the sale consideration. So You will have to justify to the AO in case of scrutiny that Rs. 150000 is the FMV on the date of conversion. In such case only there will be no tax as the difference is Rs. 0. In case if AO dis agree and get a higher valuation from the valuing officer of department, tax will have to be paid on the differential amount with interest.
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