Capital gain on conversion of assets

According to the sec 45(2) Capital gain arising from the transfer by way of conversion of a capital asset into stock in trade of b/s, shall be charged to tax as his income of the P/Y in which such stockin trade is sold or otherwise transferred.

In the given case Capital gain shall be computed as

Fair Market Vale of asset on date of conversion

Less Cost of transfer

Less Index cost of acquisition

According to provisions of sec 45(3) (for bringing Capital asset into business)

It shall apply only if the share in capital account of assesse is more than Cost of transfer and Indexed cost of transfer taken together

Introduction of a capital asset by a partner or by a member in AOPs./BOIs is a transfer.

Capital gain will be computed as

Amount credited in partners capital account.

Less Cost of transfer

Less Indexed cost of acquisition

Lets see what others say

Completely agree with Z

Yes , in this case for the purpose of sec 48 , the fair market value of the asset on the date of such conversion shall be deemed to be full vaue of consideration .

Thank u very much for valued guidance. I think since assets converted in stock has been introduced as capital within 2 yrs, then it should be STCG.

Thanks again.....

I meant Indexed/Cost of improvement

STCG