Conversion of capital asset into stock in trade

For the Income Tax Purpose If The asset is Trfd. By Holding Co. to its Subsidiary co. or vice versa. It shall not be treated as Transfer Provided the transferee co. is Indian Co.(Sec46 & 47) and for the cost purpose,Actual cost of the transferee co. shall be same as would have been to the tranferor co. 1)If the SPV is Dealing in the Land It may opt to considered as it Stock in trade. 3)Where the Land has been converted in the stock in trade from capital asset it shall be taxable as capital gain in the year in which it has been sold.

I do not agree with the above....

First, the nature of the property will depend on the nature of the business... even if you show it as Capital assets, the A.O will not accept that because he would want to tax the transfer in the same year.. Again,you will have to define the OBJECTS of the SPV in its Memorandum of Associations... 

If the Capital asset is transfered as Stock in trade to the subsidiary.. The provisos to the relevant section 47(vi) will b attracted, and the exemption u/s 47 will not b available..

The transfer will b taxed in the year of transfer to the subsidiary itself... Sec 47A does not come to play...

so if you can play with that MOA part, then you can show the land as Capital... but then again, if it is sold or converted 47A will take away the benefits....

You can do one thing though.... keep the OBJECTS as something else... develop the land for SPV's business and then give it away on lease of less than 12 years... you can then avoid all the sections... proviso to 47(vi) and 47A

Here I would like to raise one Question Where the company is dealing in Real estate can not hold building for its own purpose. It is on the option of the assessee to convert capital asset into stock in trade. here the holding period of asset  matters.