Capital gains on conversion into stock in trade: FMV at conversion sets taxable gain, taxed on eventual sale. Conversion of a capital asset into stock in trade produces capital gains equal to FMV on the conversion date minus cost of acquisition, with cost indexation allowed up to the year of conversion; FMV on conversion is treated as sale consideration and capital gains are taxed in the year the converted asset is sold. Conversion of stock in trade into a capital asset triggers business income in the year of conversion, while subsequent disposal gives rise to capital gains in the year of transfer.