Mere change of ownership of business doesn't transform stock-in-trade into a capital asset

In the instant case, the properties, which were hitherto being held

 as stock-in-trade by the HUF, were allotted to the assessee on its 

partition. The HUF was in the business of real estate which was 

continued by assessee after the partition and hence these 

properties remained stock-in-trade even after partition.

The tribunal held that the properties were stock-in-trade of real 

estate business when HUF owned it and remained stock-in-trade 

when assessee became its owner on partition. In these 

circumstances, there was no conversion of capital assets to stock-

in-trade either by the assessee or the joint family. Therefore, the 

provision of section 45(2) of the Act is not applicable in the instant 

case. As Sec 49(1) doesn't apply to stock-in-trade, cost of 

acquisition of these properties to assessee is taken at FMV and 

not the cost to their pervious owner-HUF - C. RAMAIAH REDDY v. 

DCIT [2012] 21 taxmann.com 516 (Bangalore - Trib.)