Capital gain

Depends again the Section 2 if the holding period that is from the date of acquisition to date of conversion is less than 36 months then it is a STCA otherwise it will be a LTCA.

Because under section 2 transfer includes conversion of capital asset into stock in trade.

Yes, depreciable assets, being a capital asset can be converted into stock in trade. The capital gain is to be calculated at the time of conversion of capital asset.

Further as per income tax act, in case of depreciable assets the deemed value of consideration will be deducted from the respective block of assets and taxed accordingly. There can not be LTCG in this case.