Amrit Dye Chem Industries, Mumbai vs Acit - 20(1), Mumbai on 10 August, 2017
5.6 It is undisputed that there was no act on the part of the assessee to
convert such land into stock-in-trade during the financial years 2002-03 to
2005-06 and the land was shown as capital asset since the beginning in the
books of accounts of the assessee. It was only in financial year 2000-01 that
the assessee had sought permission for converting the said land from
industrial to residential but this does not imply that the assessee had
converted the land into stock-in-trade during the financial year 2000-01. We
find merit in the contention of the assessee that the land was converted from
capital asset to stock-in-trade only during the year under consideration i.e. FY
2006-07 and not any time before that, because the language of section 45(2)
of the Act provides that capital asset held by the owner is converted by him
into stock-in-trade or capital asset is treated as stock-in-trade by the owner
and in both the situations, the emphasis is on the treatment given by the
owner of the capital asset. Thus, till the time the owner himself either
converts the capital asset into stock-in-trade, the provisions of section 45(2) of
the Act will not be attracted. Thus, what is provided is that only positive
act/conduct of the owner assessee in applying/treating a capital asset into
stock-in-trade is relevant to determine the applicability of section 45(2) of the
Act and nothing else and this aspect has been approved by the Hon'ble High
Court in the assessee's case referred to above.