Treatment of capital asset

[DEVKUMAR KOTHARI]

For brain storming: Does the A.O. has jurisdiction and power to treat a 'capital asset' as stock-in-trade? In my view -no. Every property is a capital asset, except some excluded items. Whether,an item is stock-in-trade or not will depend on the basis of items for which any person is known as trader or dealer, os long he continue as is dealer in such item. Pool of cars used to run on hire are capital asset, the same person may trade in cars, cars kept for selling are only his stock-in-trade. In cases where a person is not a trader of any item say shares , units, his holding will be capital assets, unless he has treated or converted such assets into stock-in-trade.

AI Summary

Can a Tax Officer Reclassify Capital Assets as Stock-in-Trade? Depends on Business Use and Records. A discussion on whether a tax assessment officer has the authority to classify a 'capital asset' as stock-in-trade. The initial opinion suggests that a capital asset should not be treated as stock-in-trade unless the owner is recognized as a trader or dealer in that item. For instance, cars used for hire are capital assets, while cars intended for sale are stock-in-trade. The reply emphasizes that the classification depends on how assets are recorded in the books and used in business, indicating it is a factual determination without a universal rule.