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Conversion of Current Assets to Investment(Shares)

Purushothama J (CA Student - Final) (71 Points)

04 June 2008

Hi,

will conversion of stock in trade to investment(shares) attract income tax liability.

Thanks in Advance

Purushothama J

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6 Replies

Brahma Reddy (Manager Accounts) (57 Points)
Replied 04 June 2008

i think in this , income tax will not appear but how we can convert Stocks in to Investment simply by passing entry or is there any procedure, let me know.

Tarun (CA Practice ) (166 Points)
Replied 04 June 2008

The Capital Gains will not arise when stock-in-trade is converted into capital asset (i.e. investments) because as per the provisions of section 2(47) the above stated transaction is not regarded as transfer and hence not Capital Gains arise.

Tarun (CA Practice ) (166 Points)
Replied 04 June 2008

The Stock-in-trade can be converted in to capital asset by just passing an entry in the books of accounts.

CA. Gurdeep Singh Chawla (C A) (7080 Points)
Replied 04 June 2008

Tarun (CA Practice ) (166 Points)
Replied 06 June 2008

dear gurdeep,

what is meant by 'no' .

sry, but i'm not able to understand...

thanx , well in advance.

Mahesh Paryani (Chartered Accountant) (365 Points)
Replied 10 June 2008

hi.....

there no capital gain arises when you convert stock in trade to investment as there is no transfer taking place but when you sell that asset it will attract capital gain even if you root it through stock in trade