TaxTMI 
TaxTMI 
The company has purchased 10000 shares of another listed company in the year 2002 - 2003 held it as stock in trade. On 01.04.2005, such stock in trade was converted to Investments. I want to know impact of capital gain if I sell whole of such investment on 31.03.2010. What will i consider the holding period and which year i should take the base year for calculating index cost. Whether such conversion will be treated as business income or capital gain at the time of sale of such shares.?
Impact of capital gain - sale of investment
01 Feb 2010 
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Conversion of stock-in-trade to investment: holding period generally runs from original acquisition; exchange sale with STT may be exempt.
Where stock in trade is converted into investments, sale on a recognised exchange with transaction tax may attract the exchange sale exemption and be treated as capital gains. Authorities conflict on whether the holding period and indexed cost are measured from original acquisition or from the conversion date; absent a specific reverse conversion provision, holding period commonly runs from original purchase and indexed cost is based on that acquisition date. (AI Summary)
Where stock in trade is converted into investments, sale on a recognised exchange with transaction tax may attract the exchange sale exemption and be treated as capital gains. Authorities conflict on whether the holding period and indexed cost are measured from original acquisition or from the conversion date; absent a specific reverse conversion provision, holding period commonly runs from original purchase and indexed cost is based on that acquisition date. (AI Summary)