Rule 11UAB – Fair Market Value Of Inventory
Rule 11UAB – Fair Market Value of Inventory
Clause (via) to Section 28 of the Income Tax Act, 1961, was inserted vide the Finance Act, 2018. The said clause provides that any profit and gains at the time of conversion of inventory into the capital assets should be charged to tax as business income under the head ‘profit or gains from business or profession’.
Vide notification no. 42/2018 dated 30th August 2018, rule 11UAB was inserted into Income Tax Rules. The said newly inserted rule 11UAB provides the manner of determination of fair market value of the inventory which has been converted into the capital assets or treatment as a capital asset.
Provisions of Rule 11UAB of the Income Tax Rules –
The Fair market value of the inventory as on the date of conversion or treatment as a capital asset, as per rule 11UAB, shall be determined as under –
- The fair market value of the immovable property (being land or building or both) shall be –
The value which has been adopted/assessed or assessable by any authority of State Government or Central Government for the purpose of payment of stamp duty in respect of such immovable property as on the date on which the inventory is converted/treated as a capital asset.
- The fair market value of Jewellery, drawings, archaeological collections, paintings, any work of art, sculptures, shares or securities referred in rule 11UA shall be –
The value arrived at as determined by following the manner provided at rule 11UA(1) of the Income Tax Rules.
- The fair market value of any other property not covered above shall be –
The value/price that the property would ordinarily get in the open market as on the date on which the inventory is converted/treated as a capital asset.
Effective Date From Which Rule 11UAB Would Be Applicable
The rule 11UAB shall come into force with effect from 1st April 2019. It must be noted that the same would apply in relation to the assessment year 2019-2020 and subsequent years.