Short-term capital asset is capital asset held by an assessee for not more than 60 months. - Income Tax - 1130/CBDT

INSTRUCTION NO. 1130/CBDT Dated : January 4, 1978 Section(s) Referred: 2(42A) Statute: Income - Tax Act, 1961 Section 2(42A) of the Income-tax Act, 1961. as amended by Finance Act, 1973, defines short-term capital asset to mean a capital asset held by an assessee for not more than 60 months immediately preceding the date of its transfer. (The period of 60 months has been reduced by the Finance(No.2) Act, 1977 to 36 months with effect from 1st April, 1978). 2. A question has been raised as to which of the following is the correct mode of assessment of capital gains arising on the sale of house property/building in cases where the land is held by an assessee for more than 60 months old: (i) the entire amount is taken as long-term capital gains; or (ii) the entire amount is taken as short-term capital gains; or (iii) the entire amount is split proportionately in the long-term and short-term capital gains in the ratio of cost price of the land to the cost of the construction of the building. 3. The Board have been advised that in case where the land appurtenant to the building is of such a nature that it cannot be transferred separately from the building or it forms an integral part of the building so that its existence is essential for necessary use of the building, the land would become a part of the building. The construction of building on such a land would bring into existence a different asset, i.e. house property/building(being building and land appurtenant thereto) on the date of completion of the building. The sale or transfer of such an asset (building and land appurtenant thereto) within a period of 60 months would result in short-term capital gains.