| Question And Answer | |
|---|---|
| Subject: | Treatment of conversion cost where agriculture land converted in to stock |
| Category: | Income-Tax |
| Querist: | Anil Saraf |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | Agricultural land, stock in trade |
| Date: | June 2, 2022 |
What should be the Treatment of conversion cost where agriculture land converted in to stock.
The conversion expenses like development of land and government fee for conversion paid first and later the land was converted for non-agriculture purpose. The land is treated as stock after conversion into non-agriculture.
While calculating Long Term Capital Gains, the conversion cost and indexed cost of acquisition both be considered?
or
Only cost of acquisition is considered and cost of conversion will be considered as business expenditure?
As we infer, the said agricultural land is an urban agricultural land [if it would have been a rural agricultural land the same would not be a capital asset].
The same would be taxable when the stock in trade is sold. The difference between the FMV on the date of conversion and the cost/indexed cost of acquisition would be the capital gain. Further. FMV plus the costs incurred in making the land useful for non-agricultural purposes would be a business expense.