Which layer should be used for conversion to DTO from Domain Object

In my experience, the conversion should be on the Controller layer. This gives an advantage that able to reuse other service methods with the return object is the origin.

This point may be important sometimes because the DTO object often reduce fields from the origin object. Therefore, we need more code to get these reduced fields, making our code ugly and duplicated.

I know that it would be moving logic to the controller layer, but it is a tradeoff.

It depends on application needs and architecture. Idea is to keep dto conversion at edge. It is generally prefer to have dto and domain conversion at the controller level. If you want to keep services/business logic independent of consumer, then it is always better to have at api level. This becomes more clear if your service has been consumed by more than one consumer.

I think there is no "better way" for converting your domain objects to your DTO objects, it's a matter of taste. In my projects I convert the domain objects to the DTO in the service layer as part of my "business logic". So you reduce the accessability of your domain objects only to your service layer. Furthermore I want to reduce the "logic" inside my controllers as they are part of the application layer.

PS: If you are looking for several ways to convert your domain objects to your DTOs have look at one of my latest Stackoverflow questions (How to properly convert domain entities to DTOs while considering scalability & testability)