Capital gain on conversion of capital asset into stock-in trade-Section45(2)
Notwithstanding anything contained in section 45(1), the profits or gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business carried on by him shall be chargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him.
Amount of consideration Fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.
- FMV shall be taken of the date on which conversion of capital asset into stock in trade take place. But capital gain shall be chargeable in the year in which such stock in trade is ultimately sold or transferred.
- Indexation of capital asset shall be done upto the year of conversion.
Sale price (-) FMV will be chargeable as business profit under PGBP head.