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“conversion of capital asset into stock”

Capital GainsSection 45(2)Section 45(2)43 judgments

The decision most relied on for conversion of capital asset into stock is CIT v. Bai Shirinbai K. Kooka (46 ITR 86), cited in 13 judgments on BharatTax.

Leading authorities on conversion of capital asset into stock

CIT v. Bai Shirinbai K. Kooka
46 ITR 86 · 1962 · Supreme Court
13
citing judgments

When a capital asset is converted into stock-in-trade, the taxable profit is determined by deducting the market value of the asset at the date of conversion from the sale proceeds, not its original cost.

Jehangir T. Nagree v. ACIT
23 SOT 512 · 2008 · ITAT
11
citing judgments

An assessee has the sole discretion to determine when they convert a capital asset into stock-in-trade, which is relevant for the applicability of Section 45(2) of the Income Tax Act. The conversion itself is sufficient to trigger Section 45(2).

Judgments citing conversion of capital asset into stock

DCIT, Circle 4(2), New Delhi vs. M/S Cyberwalk Tech Park Pvt Ltd, New Delhi

In the result, grounds raised by the revenue are dismissed

ITA 448/DEL/2025[2012-13]Status: DisposedITAT Delhi06 Feb 2026AY 2012-13

Bench: Shri S. Rifaur Rahman & Shri Anubhav Sharmadcit, Circle 4 (2), Vs. Cyberwalk Tech Park Pvt. Ltd., Select City Walk 6Th Floor, Delhi. A-3, District Centre Saket New Delhi – 110 017. (Pan : Aadcs8089F) (Appellant) (Respondent) Assessee By : Sh. R.S. Ahuja, Ca & Sh. P.S. Sodhi, Adv Revenue By : Sh. Rajesh Kumar Dhanesta, Sr. Dr Date Of Hearing : 13.11.2025 Date Of Order : 06.02.2026 O R D E R

For Appellant: Sh. R.S. Ahuja, CA &For Respondent: Sh. Rajesh Kumar Dhanesta, Sr. DR
Section 45(2)

very clear which provide that when the fair market value is taken for the purpose of conversion of capital asset into stock in trade then that fair market value, having been deemed as value of consideration by that section becomes the cost of purchase for the purpose of calculation

Milan Theatres P Limited, Mumbai vs. DCIT Circle 12(3)(2), Mumbai

ITA 5072/MUM/2024[2017-18]Status: DisposedITAT Mumbai22 Jan 2026AY 2017-18
Section 143(3)Section 342Section 45(2)

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘D’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI ARUN KHODPIA, ACCOUNTANT MEMBER

Mr Popatrao Dashrathrao Suryawanshi, Pune vs. Income Tax Officer, Ward-7(4), Pune

In the result, the appeal filed by the assessee is allowed for statistical purposes

ITA 234/PUN/2024[2017-18]Status: DisposedITAT Pune21 Jan 2026AY 2017-18

Bench: Shri R. K. Panda & Ms. Astha Chandraassessment Year : 2017-18 Mr. Popatrao Dashrathrao Suryawanshi Ito, Ward 7(4), Pune S.No.38, Tingre Nagar, Havaldar Mala, Vs. Vishrantwadi, Pune – 411015 Pan: Adhps2643F (Appellant) (Respondent) Assessee By : Shri Suhas Bora Department By : Shri Manish Mehta, Addl.Cit Date Of Hearing : 19-01-2026 Date Of Pronouncement : 21-01-2026 O R D E R

For Appellant: Shri Suhas BoraFor Respondent: Shri Manish Mehta, Addl.CIT
Section 142(1)Section 143(2)Section 45(2)Section 54BSection 54F

asset u/s 2(14)(iii) of the Act, therefore, no capital gain could arise in assessment year 2011-12. He submitted that conversion of capital asset into stock u/s 45(2) of the Act is inconsequential and the transfer of land and conversion of land into stock on same

Rohini Maruti Deshmukh, Pune vs. Income Tax Officer, Ward 6(2), Pune

In the result, all the appeals (ITA Nos

ITA 1839/PUN/2025[2015-16]Status: DisposedITAT Pune17 Dec 2025AY 2015-16

Bench: Dr. Manish Borad & Shri Vinay Bhamore

For Appellant: Shri Sarang Gudhate, CAFor Respondent: Shri Manoj Tripathi, Addl.CIT
Section 250Section 271(1)(c)Section 44ASection 54B

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE “B” BENCH : PUNE BEFORE DR. MANISH BORAD, ACCOUNTANT MEMBER & SHRI VINAY BHAMORE, JUDICIAL

Tulsabai Vasant Deshmukh, Pune vs. Income Tax Officer, Ward 6(2), Pune

In the result, all the appeals (ITA Nos

ITA 1838/PUN/2025[2015-16]Status: DisposedITAT Pune17 Dec 2025AY 2015-16

Bench: Dr. Manish Borad & Shri Vinay Bhamore

For Appellant: Shri Sarang Gudhate, CAFor Respondent: Shri Manoj Tripathi, Addl.CIT
Section 250Section 271(1)(c)Section 44ASection 54B

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE “B” BENCH : PUNE BEFORE DR. MANISH BORAD, ACCOUNTANT MEMBER & SHRI VINAY BHAMORE, JUDICIAL

Amol Vasant Deshmukh, Pune vs. Income Tax Officer, Ward 6(2), Pune

In the result, all the appeals (ITA Nos

ITA 1837/PUN/2025[2015-16]Status: DisposedITAT Pune17 Dec 2025AY 2015-16

Bench: Dr. Manish Borad & Shri Vinay Bhamore

For Appellant: Shri Sarang Gudhate, CAFor Respondent: Shri Manoj Tripathi, Addl.CIT
Section 250Section 271(1)(c)Section 44ASection 54B

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE “B” BENCH : PUNE BEFORE DR. MANISH BORAD, ACCOUNTANT MEMBER & SHRI VINAY BHAMORE, JUDICIAL

Anil Shrichand Sadhwani, Nashik vs. ITO, Ward 2(1), Nashik

Appeal is allowed

ITA 2443/PUN/2024[2015-16]Status: DisposedITAT Pune20 May 2025AY 2015-16

Bench: Dr.Dipak P. Ripote & Shri Vinay Bhamoreआयकर अपील सं. / Ita No.2443/Pun/2024 िनधा"रण वष" / Assessment Year: 2015-16 Anil Shrichand Sadhwani, V The Income Tax Officer, Chhatrapati Shivaji Hsg Soc, S Ward-2(1), Pune. Nashik Road, Jailroad, Nashik – 422101. Maharashtra. Pan: Annps1615D Appellant/ Assessee Respondent / Revenue Assessee By Shri Sanket M Joshi – Ar Revenue By Shri Ramnath P Murkunde – Dr Date Of Hearing 23/04/2025 Date Of Pronouncement 20/05/2025 आदेश/ Order Per Dr. Dipak P. Ripote, Am: Thisappeal Filed By The Assessee Is Against The Order Of Ld.Commissioner Of Income Tax(Appeals)[Nfac], Passed Under Section 250Of The Income Tax Act, 1961; Dated 23.09.2024 For Assessment Year 2015-16. The Assessee Has Raised The Following Grounds Of Appeal : “1. The Learned Ctt(A) Erred In Confirming The Addition U/S 50C Of Rs.6,15,600 By Taxing The Appellant'S Share In Difference Between Govt. Valuation Of Rs.2,52,31,000 & Actual Consideration Of Rs 2,40,00,000 Received On Sale Of Immovable Property As Income U/S 50C Without

Section 143(3)Section 250oSection 263Section 50CSection 54ESection 54F

आयकर अपीलीय अिधकरण ”ए” "ायपीठ पुणेम"। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “A” :: PUNE BEFORE DR.DIPAK P. RIPOTE

Shri Navinchandra N. Patel, Vadodara vs. The ACIT, Circle-1(2), Vadodara

In the result, the appeal of the assessee is allowed

ITA 869/AHD/2023[2012-13]Status: DisposedITAT Ahmedabad30 Apr 2025AY 2012-13

Bench: Dr. B.R.R. Kumar, Vice-Ms. Suchitra Kamble

For Appellant: Shri Vipul Shah, ARFor Respondent: Shri R.N. Dzouza, CIT-DR
Section 143(3)Section 147Section 148Section 148(2)Section 14ASection 234BSection 250Section 271(1)(c)Section 45(2)Section 69

square meter). As per section 45(2) of the act, the notional short term capital gain arising from transfer by way of conversion of capital asset into stock in trade at fair market value of Rs. 5167.31 lakh after deducting cost of acquisition of Rs. 777.24 lakh works ... square meter). As per section 45(2) of the act, the notional short term capital gain arising from transfer by way of conversion of capital asset into stock; in trade at fair market value of Rs. 5167.31 lakh after deducting cost of acquisition of Rs. 7717.24 lakh works

Asst. Commissioner of Income Tax, Central Circle-2(3), Bengaluru vs. Nalapad Hotels and Convention Centre, Bengaluru

ITA 1959/BANG/2024[2017-18]Status: DisposedITAT Bangalore24 Apr 2025AY 2017-18

Bench: Shri Laxmi Prasad Sahu & Shri Prakash Chand Yadav

For Respondent: Sri V. Srinivasan, A.R
Section 153C

legally not sustainable since in terms of the provisions of section 45(2) of the Act, the business income on account of conversion of capital asset into stock in trade is taxable in the year when the asset is finally sold. The ld. CIT(A) partly allowed the appeal ... para 7.34 to 7.37 has observed as under: "7.34 Now the next question is with regard to computation of business income after conversion of capital asset into stock in trade. 7.35 After conversion of capital asset into stock in trade of business of assessee then the fair market value

Asst. Commissioner of Income-Tax, Central Circle-2(3), Bengaluru vs. Nalapad Properties, Bangalore

In the result, both appeals of the revenue are allowed for statistical purposes

ITA 1958/BANG/2024[2017-18]Status: DisposedITAT Bangalore24 Apr 2025AY 2017-18

Bench: Shri Laxmi Prasad Sahu & Shri Prakash Chand Yadavassessmentyear:2017-18

For Appellant: Sri V. Srinivasan, A.RFor Respondent: Sri Subramanian S., D.R
Section 153CSection 45(2)

legally not sustainable since in terms of the provisions of section 45(2) of the Act, the business income on account of conversion of capital asset into stock in trade is taxable in the year when the asset is finally sold. The ld. CIT(A) partly allowed the appeal ... para 7.34 to 7.37 has observed as under: “7.34 Now the next question is with regard to computation of business income after conversion of capital asset into stock in trade. 7.35 After conversion of capital asset into stock in trade of business of assessee then the fair market value

P V Raghavulu, Pathebada vs. Income Tax Officer, Ward-2, Eluru

In the result, appeal filed by the assessee is allowed

ITA 78/VIZ/2024[2016-17]Status: DisposedITAT Visakhapatnam07 Mar 2025AY 2016-17

Bench: Shri K.Narasimha Chary & Shri Balakrishnan Sआ.अपी.सं / Ita No.78/Viz/2024 (निर्धारण वर्ा / Assessment Year: 2016-17) P.V.Raghavulu Vs. Income Tax Officer Eluru Ward-2 [Pan : Aaihp9021Q] Eluru अपीलधर्थी / Appellant प्रत्‍यर्थी / Respondent निर्धाररती द्वधरध/Assessee By: Shri C.Subrahmanyam, Ar रधजस्‍व द्वधरध/Revenue By: Dr.Satyasai Rath,Cit-Dr

For Appellant: Shri C.Subrahmanyam, ARFor Respondent: Dr.Satyasai Rath,CIT-DR
Section 143(3)Section 271(1)(c)

आयकर अपीलीय अधिकरण, विशाखापटणम पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI K.NARASIMHA CHARY, JUDICIAL

Ramchandraudaysinghjadhavrao, Pune vs. ACIT, Circle-3, Pune

ITA 1399/PUN/2024[2016-17]Status: DisposedITAT Pune24 Feb 2025AY 2016-17

Bench: Shri R. K. Panda & Ms. Astha Chandra

For Appellant: Shri Kishor B PhadkeFor Respondent: Shri Ajay Kumar Keshari
Section 133ASection 139(1)Section 139(4)Section 143(1)Section 271(1)(c)Section 45(2)

accounts were not audited for assessment year 2011-12 and the return form does not contain any clause for showing the conversion of capital asset to stock in trade the assessee did not show the same. Relying on the following decisions, he submitted that when income filed incorporating the income ... financial year 2010-11 relevant to assessment year 2011-12, however, due to no clause in the return form to disclose such conversion from capital asset to stock in trade, the assessee could not do the same. Further, the accounts of the assessee were also not subject to any audit

Mustafa Katthawala, Kota vs. DCIT ACIT, Circle-2, Kota

In the result, the appeal of the assessee is allowed for

ITA 1156/JPR/2024[2015-16]Status: DisposedITAT Jaipur20 Jan 2025AY 2015-16

Bench: DR. S. SEETHALAKSHMI (Judicial Member), SHRI RATHOD KAMLESH JAYANTBHAI, AM\nआयकर अपील सं./ITA. No. 1156/JPR/2024\nनिर्धारण वर्ष / Assessment Years : 2015-16\nMustafa Katthawala\nProp. Shakti Steels, Near Reliance\nPetrol Pump Jhalawar Road, IPIA\nKota.-324005.\nबनाम | The DCIT/ACIT,\nVs.\nCircle-2,\nKota.\nस्थायी लेखा सं./ जीआईआर सं./PAN/GIR No.: AGPPK5043C\nअपीलार्थी / Appellant\nप्रत्यर्थी / Respondent\nनिर्धारिती की ओर से / Assessee by :Shri Devang Gargieya, Adv.\nराजस्व की ओर से / Reven

For Appellant: Shri Devang Gargieya, AdvFor Respondent: Shri Anup Singh, Addl. CIT
Section 144Section 147Section 148Section 148ASection 234BSection 234CSection 234DSection 244ASection 45(3)

Developers during the relevant assessment year. However, assessee has transferred his agriculture land owned jointly with his father brothers by way of conversion of capital asset into stock in trade on dated 20.11.2013 that relates to F.Y. 2013-14 pertaining to A.Y. 2014-15. The assessee further states that ... that the assessee's reply revolves around mainly 2 points which are as under- (i) Capital asset was transferred by way of conversion of capital asset into stock in trade on 20.11.2013 which pertains to A.Y.2014-15, (ii) He has converted his capital asset into stock in trade as per provisions

R R Paints Private Limited, Mumbai vs. Deputy Commissioner of Income Tax Circle 15(3)(1), Mumbai

The appeal is partly allowed

ITA 1112/MUM/2024[2012-2013]Status: DisposedITAT Mumbai05 Dec 2024AY 2012-2013

Bench: Shri Saktijit Dey & Ms Padmavathy S, Am

For Appellant: Shri R.R. Makwana, Sr. DR
Section 143(3)Section 147Section 148Section 151

records for AY 2012-13 and notes to accounts of the financial statements where the assessee has disclosed the details of conversion of capital asset into stock in trade. Further it is relevant take note of the following observations of the AO in the order disposing the objections raised

Ishoo Narang, Hyderabad vs. Deputy Commissioner of Income Tax, Circle-2(1), Hyderabad

In the result, appeal filed by the assessee is allowed for statistical purposes

ITA 319/HYD/2022[2015-16]Status: DisposedITAT Hyderabad25 Sept 2024AY 2015-16

Bench: Shri Manjunatha, G. & Shri K. Narasimha Charyआ.अपी.सं /Ita No.319/Hyd/2022 (िनधा"रण वष"/Assessment Year: 2015-16) Ishoo Narang Vs. Dy. C. I. T. Hyderabad Circle 2(1) Pan: Acspn1664K Hyderabad (Appellant) (Respondent) S.A. No.2/Hyd/2024 (Arising Out Of Ita No.319/Hyd/2022) A.Y 2015-16 Ishoo Narang Vs. Dy. C. I. T. Hyderabad Circle 2(1) Pan: Acspn1664K Hyderabad (Appellant) (Respondent)

For Appellant: Shri P Murali Mohan Rao, CAFor Respondent: : Smt. TH Vijaya Lakshmi, CIT (DR)
Section 2(22)Section 2(22)(e)

ITA No 319 of 2022 and SA No.2 of 2024 Ishoo Narang आयकर अपील"य अ"धकरण, हैदराबाद पीठ IN

Nalapad Properties, Bangalore vs. The Deputy Commissioner of Incomer Tax, Central Circle-2(3), Bangalore

ITA 1297/BANG/2024[2017-18]Status: DisposedITAT Bangalore16 Aug 2024AY 2017-18
For Appellant: Sri H. Guruswamy, ITP &For Respondent: Shri Kiran D., D.R
Section 139(9)Section 143(2)Section 153CSection 250Section 45

income emanated from the impugned JDA is chargeable under the head "capital gain” as well as “business income” as there was a conversion of capital asset into stock in trade and the provisions of section 45(2) of the Act is applicable. Thus, the provisions of section

Nithin Pandurang Dhond, Mumbai vs. Income Tax Officer, Mumbai

In the result, appeal of the assessee is allowed

ITA 661/MUM/2024[2016-17]Status: DisposedITAT Mumbai23 Jul 2024AY 2016-17

Bench: SHRI AMIT SHUKLA (Judicial Member), SHRI RATNESH NANDAN SAHAY (Accountant Member)

Section 143(3)Section 45(2)Section 48

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘SMC‘ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI RATNESH NANDAN SAHAY, ACCOUNTANT

Maheshwari Megaventures Limited, Hyderabad vs. ACIT, Circle-16(2), Hyd, Hyderabad

In the result, appeal of the assessee is allowed

ITA 1291/HYD/2016[2009-10]Status: HeardITAT Hyderabad03 May 2024AY 2009-10

Bench: Shri Rama Kanta Panda & Shri K.Narasimha Chary

For Appellant: Shri K.C. Devdas, ARFor Respondent: Shri Kumar Pranav, CIT-DR
Section 143(3)Section 147Section 50C

section 263 of the Act. When the matter reached the Tribunal, the Tribunal while taking cognizance of Page 10 of 12 this conversion of capital asset into stock in trade, quashed the order under section 263 of the Act. Order of the Tribunal had attained finality. Conversion of the capital

Ahmed Alam Khan, Hyderabad vs. Deputy Commisioner of Income Tax Circle 2(1), Hyderabad

In the result, appeal of the assessee is allowed

ITA 167/HYD/2021[2015-16]Status: DisposedITAT Hyderabad26 Mar 2024AY 2015-16

Bench: Shri S. Rifaur Rahman(Virtual Hearing) & Shri K.Narasimha Chary

For Appellant: Shri Sashank Dundu, ARFor Respondent: Shri K. Madhusudan, CIT-DR
Section 143(2)Section 263Section 54Section 54B

Officer passed the order without making any enquiries, thereby resulting in the under assessment in respect of taxing of capital gains on conversion of capital asset into stock in trades and capital gains on sale of land. Further according to the learned AR, there is no non-application of mind

ITO 23(1)(6), Mumbai vs. Holiday Resort Corporation, Mumbai

In the result, Cross Objections under consideration filed by the Assessee are allowed and the appeals filed by the Revenue are dismissed being infructuous

ITA 2199/MUM/2023[2007-2008]Status: DisposedITAT Mumbai30 Jan 2024AY 2007-2008

Bench: Shri.Narender Kumar Choudhry () & Shri S Rifaur Rahman ()

For Appellant: Shri. Piyush Chajjed
Section 148Section 151Section 151(1)Section 250

sold to the vendors, the revenue is recognised in the year of sale and the corresponding capital gains on the conversion of capital asset into stock in trade is also held to be chargeable to tax in the year of sale. From the perusal of return of income filed