Incidence of Section 45(2) and subsequent exemption under Se

My query is that when we convert capital asset into stock,  capital gain is calculated according to the FMV of asset on the date of tranfer and capital gain income is considered in the year in which sale of stock is made.

Now to take exemption in this case when we wil have to purchase a house property as per sec 54F. This section says that the house should be purchased within 2 years from the date of transfer. And as per Sec 2(47)conversion into stock means tranfer.

Now how can we claim exemption in the absenec of any income?

Replies (5)

Date of sale of stock-in-trade will be taken as date of transfer.

But in  the year of transfer income is not chargeable to tax, than how can I can i claim exemption for the same?

The above reply which i gave to is incorrect i dont know what was in my mind while i was typing it...sorry!
but now comiing to the point, how can i consider date of sale of SIT as Date of Tranfer because as per section 2(47) conversion into stock in trade construes tranfer. And there is nothing in this regard in section 45(2).

 

See there are two possibilities

1.You purchase the residential house property within the time limit prescribed but claim exemption in the year in which stock is sold.

2.Since year of sale of stock in trade is year of chargeability of capital gains also, consider the limit from that date.

In my opinion you should go for the first option.

There may be case laws on it.

Is this a practical case or just a theortical imaginative point?

If its the latter one, a good one to ponder upon.

The above is now resolved throgh a judgement of Mumbai ITAT clarifying that first option is valid for claiming exemption.

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