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2016 (1) TMI 939 - AT - Income TaxConversion of income as Stock in trade - capital gain or business income - Held that:- Admittedly, the assessee, the owner of the capital asset converted the same into stock-in-trade in the year 2005. Though the assessee converted the investment as stock-in-trade, it offered the capital gains from the transaction in these two assessment years as income from capital gains. It is not correct. In our opinion, the Assessing Officer has to compute the income under two heads by applying sec. 45(2) though the assessee has raised a ground relating to applicability of provisions of sec. 45(2) before the CIT(A). The CIT(A) wrongly observed that the income generated from the development of IT Park to be considered as capital gains which is not appropriate. In our opinion, the entire issue has to be relooked by the Assessing Officer so as to apply the provisions of sec. 45(2) of the Act and he has to compute the income upto the date of conversion as income from capital gains and thereafter income has to be computed as income from business. The stand of the assessee right from the beginning and even now before us that capital asset in question are its investment and any gain on sale is capital gain and not business. This is not based on any sound principles. The assessee has converted the property as stock-in-trade in the year 2005 when it entered into an agreement with Project Engineer and from that date onwards the assessee's landed property is to be considered as stock-in-trade and income generated from the transfer thereafter has to be considered as business income only. To that extent, we remit this issue to the file of the Assessing Officer for re-computation of income as indicated above. Decided in favour of Revenue for statistical purposes.
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