06 June 2012
dear sir, one of my client have converted land and sold with the amount rate on sq. ft. which is less than the DLC value, also the same was shown as bus in his books. who taxablity will be calculated on capital gain or bus income with amount of registry or DLC. thankx for e. 1 biga land Rs. 400000 and converted cost Rs. 200000 total approx 600000 for land 20000 sq ft. dlc for there is 100 per sq ft than profit will come arround 70 rs per sq ft.? but in case of bus actual sale reg value is arround 40 to 50rs. than how we should filed return?
06 June 2012
1.If the land was converted as stock in trade then on that date market value will be treated as sales consideration and capital gain tax will be calculated even if it was not sold . After converting it into stock in trade the sale will be treated as business income.
2. If not converted in to stock then the sales will be treated as capital gain .
Conclusion :- capital gain will apply in both case and if dlc value is higher then it will be treated as sales consideration
06 June 2012
1. Conversion of capital asset into stock-in-trade amounts to transfer and accordingly capital gain will be arise.
2. Howeevr, capital gain will arise only when such stock-in-trade is SOLD.
3. The sale consideration for computing capital gain shall be the fair market value on the date of conversion.
4. Such fair market value shall be the cost of acquisition of the stock-in-trade.
5. The difference between ACTUAL SALE PRICE and above cost shall be business profit taxable under the head Income from Business or Profession.
6. If the actual sale price is less than DLC value, even then the actual sale price will be taken to compute business income because Section 50C is applicable only in case of CAPITAL ASSETS and NOT stock-in-trade.
CAclubindia
