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| The Tax Publishers2019 TaxPub(DT) 1034 (Mum-Trib) : (2019) 175 ITD 0190 : (2019) 199 TTJ 0607 INCOME TAX ACT, 1961
Section 45(2)
In the absence of entry passed by the assessee for conversion of capital asset into stock-in-trade, intention of assessee to commercially exploit the property would be relevant for determination of date of conversion, however, capital gain derived from conversion of capital asset into stock-in-trade would be chargeable to tax in the year in which such stock-in-trade had been sold and not on the basis of advance received from customers.
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Capital gains - Conversion of capital asset into stock-in-trade - Determination of date of conversion and year of taxability of capital gain -
Assessee converted its capital asset being leasehold land into stock-in-trade for development purposes and declared long-term capital gain as envisaged under section 45(2). for assessment year 2008-09 by considering the date on which IOD had been granted by municipal authority, i.e, 9-1-1997 as the date of conversion. AO considered date of filing application for IOD, i.e., 2-2-1994 as the date of conversion and also computed long-term capital gain derived from conversion of capital asset into stock-in-trade proportionately for assessment years 2001-02 to 2006-07 on the basis of advance received from customers. Held: Date of conversion of capital asset into stock-in-trade would be determined either on the basis of entry passed in books of account or intention of assessee to exploit the capital asset into stock-in-trade for its business purpose. In the instant case, undisputedly, assessee had not passed any entry in his books of account for converting its capital asset into stock in trade. But, the assessee intended to develop impugned land into stock-in-trade by filing application for IOD on 2-2-1994, accordingly, conversion of capital asset into sotck-in-trade had taken place on 2-2-1994. However, project had been completed in assessment year 2008-09 and accordingly, capital gain derived from conversion of capital asset into stock-in-trade was taxable in assessment year 2008-09.
Distinguished:Estate of Late NJ Patel v. Dy. CIT (2007) 17 SOT 543 (Mum.) : 2007 TaxPub(DT) 0313 (Mum-Trib).
REFERRED :
FAVOUR : Partly in assessee's favour.
A.Y. : 2001-02 to 2008-09
INCOME TAX ACT, 1961
Section 80-IB(10)
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