Giriraj had purchased a residential site at Kanpur on 12th March, 2019 for ₹ 22 lakh. On 26th May, 2022, this asset was converted by him into stock-in-trade. On this date, the stamp duty valuation was ₹ 28 lakh. This ass

Capital gains on conversion of capital asset into stock-in-trade: Where a capital asset is converted into stock-in-trade, the capital gain arising on such conversion will have to be computed. However, the same will be chargeable to tax only in the year in which such converted asset is sold in the business. In the given situation, the capital gain, though arising in the PY 2022-23, will be taxable only in the AY 2024-25 i.e. 2023-24, being the year in which the plot is actually sold by the assessee, as per section 45(2) of the Income tax Act, 1961. Computation of Income chargeable to tax of Giriraj in the AY 2024-25 Particulars Amount (₹) Income from Capital Gain: Sales Consideration (FMV on date of conversion is deemed as Consideration, since in the question, FMV is not given, Stamp duty value as on date of conversion is taken as Consideration) 28,00,000 Less: Cost of Acquisition (Original purchase price i.e. ₹ 22,00,000) Indexed cost of acquisition (₹ 22,00,000 x 331/280) (26,00,714) Long-term capital gain 1,99,286 Income from Business & Profession: Sales consideration from Business (Stamp duty valuation) 40,00,000 Less: Brokerage on sale (2% of ₹ 34,00,000) (68,000) Net Sale Consideration 39,32,000 Less: Cost of Acquisition (as taken while computing capital gains) (28,00,000) Income from PGBP 11,32,000