Law:

Section:

Section 45 of the Income-tax Act, 1961 - Capital gain - Chargeable as (Conversion of capital asset into stock-in-trade) - Assessment year 2003-04 - Assessee acquired land in question as capital asset for its hotel business but later on converted same into stock-in-trade for purpose of carrying on its construction business - During relevant assessment year, land was sold - Whether, provisions of section 45(2) were applicable on facts of case - Held, yes - Whether though capital gain on conversion of capital assets into stock-in-trade was payable only in year in which, assessee ultimately sells such stock-in-trade yet for purpose of computing capital gains date of conversion will have to be determined - Held, yes - Whether since date of conversion of land into stock-in-trade was not clear, issue of date of conversion into stock-in-trade was to be restored to Assessing Officer to decide on basis of evidence produced before it - Held, yes [Paras 8 and 9][In favour of assessee/Matter remanded] FACTS â–  The assessee-company was originally incorporated with the object of carrying on the business of running a hotel for which purpose a land was acquired as a capital asset. â–  Later on the land was converted into stock-in-trade for the purpose of carrying on business of construction. â–  The land was sold during the relevant assessment year and same was subjected to tax. â–  According to the assessee, the land in question was originally a capital assets which was later converted into stock-in-trade and, therefore, provisions of section 45(2) were attracted. â–  On appeal, the Commissioner (Appeals) did not accept the submission of assessee and upheld the order of the Assessing Officer. â–  On second appeal, the Tribunal allowed the assessee's appeal and held that provisions of section 45(2) would be applicable. Further since date of conversion of land into stock-in-trade was not clear on facts, the Tribunal restored that issue to the Assessing Officer to decide on basis of evidence. â–  On revenue's appeal, before the High Court: HELD â–  The assessee was incorporated in the year 1970 with the main object of establishment of its…

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