Liability of capital gain

[Ashutosh Chhawchharia]

A company has converted its listed shares from Stock-in-Trade to Investment as on 01.04.2004.Whether the difference between cost of Shares and Market value on that date shall be liable to Capital Gain?

AI Summary

Shares Converted to Investment: No Immediate Capital Gain Tax, Payable on Sale per Section 45(2) of Income Tax Act A company converted its listed shares from Stock-in-Trade to Investment on April 1, 2004, raising a query about capital gain liability. The response clarified that no tax on capital gain is payable at the conversion date. Tax on capital gain or business profit is due only upon the actual sale of shares. At sale, the capital gain and business profit must be calculated, referencing Section 45(2) of the Income Tax Act, 1961, which states that profits from conversion are taxable in the year the stock-in-trade is sold, using the fair market value at conversion as the consideration value.