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Conversion of capital asset into Stock in trade

31 October 2019

If during the year a capital asset is converted into stock in trade, then at WHAT VALUE same shall be deducted from Tax block. Please also quote the relevant section of Income tax act.

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9 Replies

rama krishnan (12234 Points)
Replied 01 November 2019

Pls refer section 45(2) of income tax act

Kapadia Pravin (17249 Points)
Replied 01 November 2019

As per section 45(2) the sale consideration will be equivalent to the Fair Market Value of such asset as existing on the date of conversion. F.M.V has been defined u/s 2(22B).

Thus FMV shall be deducted from asset block

sabyasachi mukherjee (26197 Points)
Replied 01 November 2019

FAIR MARKET VALUE SHOULD BE DETRRMINED IN ASCERTAINING VALUE OF STOCK IN TRADE DURING SUCH CONVERSION.
SECTION 49 HAS BEEN AMMENDED BY INSERTING A SUB SECTION WHICH STATES THAT FOR THE PURPOSE OF CONVERSION OF STK IN TRADE INTO CAPITAL ASSET INC WOULD BE CHARGEABLE TO TAX UNDER BUSINESS IN THE YEAR IN WHICH CONV HAS TAKEN PLACE..
AMMENDMENTS ARE EFFECTIVE FROM AY 19-20.

Kapadia Pravin (17249 Points)
Replied 01 November 2019

In reply to sanyasachi post -

what is query and what replied ??????? Ulta ho gaya. it's ok

sabyasachi mukherjee (26197 Points)
Replied 01 November 2019

@ kapadia cannot understand a simple thing.
the querist has not replied to me.
read section 49 .

@ ammendments in relevant section.
don't confuse the forum.
humbug post.
@ piyush do not send vague question

value should be the essence of your QUERY.

Kapadia Pravin (17249 Points)
Replied 01 November 2019

In reply to sanyasahi post -

The query is for conversion of capital asset into stock in trade which is under 45(2).

Don't torture Forum by irrelevent scandalous post. Why screaming at querist ? That too despite posting ulta post.

Before hollow defence , check your ulta reply --- bcoz query is not for conversion of stock-in-trade into capital asset .

sabyasachi mukherjee (26197 Points)
Replied 01 November 2019

The query should be unambiguous.
it is irrelevant.

Kapadia Pravin (17249 Points)
Replied 01 November 2019

@ Piyush
I know you are inconvenienced but then what to do. Your query is clear cut. 🕉️

sabyasachi mukherjee (26197 Points)
Replied 02 November 2019

@ piyush
tax block means which block...?
if u clarify then .
I understand your inconvenience.
conversion of capital asset into stk in trade is taxable.
My first sentence is fair market value must be determined while conversion of capital asset into stock in trade.