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2012 (12) TMI 518 - ITAT HYDERABADConversion of fixed asset into stock in trade - Business Income vs Capital Gain - Held that:- Though the land was shown as investment in the balance-sheet at the time of acquisition, the assessee has converted it into stock in trade before entering into the development agreement on 25-4-2004. This fact is clear from the assessee’s letter dated 6-12-2008 submitted before the AO in course of assessment proceedings. Therefore, the assessee having given stock in trade for development, the capital gains arising there from has to be charged to tax as per the provisions contained u/s 45(2). The assessee never had the intention of acquiring the land as an investment but to exploit it as business venture. When the assessee has entered into joint development agreement on 25-4-2004, the asset has already been converted into stock in trade and no more remains a capital asset. Therefore, it cannot be treated as a transfer u/s 2(47)(v). Thus no reason to interfere with the finding of the CIT (A) directing the AO to work out the short term capital gains on conversion of land held as investment in stock in trade and also the business income arising from sale of stock in trade separately - against revenue.
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