Page 337 - DCOM301_INCOME_TAX_LAWS_I

Income Tax Laws – I

Notes 2. Long-term Capital Assets (LTCA): An asset, which is held by an assessee for 36 months or
more, immediately before its transfer, is called Long Term Capital Assets. In other words,
an asset, which h is transferred on or after 36 months of its acquisition by assessee, is called
Long Term Capital Assets.
The period of 36 months is taken as 12 months under following cases:

Equity or Preference shares,
Securities like debentures, government securities, which are listed in recognised stock
exchange,

Units of UTI
Units of Mutual Funds
Zero Coupon Bonds

Self Assessment

State whether the following statements are true or false:

5. Unless the gain is relatable to a capital asset there can be no charge to capital gains tax.
6. The term ‘property’ appearing in Section 2(14) has been defined in the Income-tax Act.
7. Where goodwill is self-generated, the cost of acquisition for computation of capital gain
shall be deemed to be nil.
8. An asset, which is held by an assessee for less than 36 months, immediately before its
transfer, is called Short-term Capital Assets.

12.3 Concept of Transfer

Capital gain arises on transfer of capital asset; so it becomes important to understand what the
meaning of word transfer is. The word transfer occupy a very important place in capital gain,
because if the transaction involving movement of capital asset from one person to another
person is not covered under the definition of transfer there will be no capital gain chargeable e
to income tax. Even if there is a capital asset and there is a capital gain.
The word transfer under income tax act is defined under section 2(47). As per section 2 (47)
Transfer, in relation to a capital asset, includes sale, exchange or relinquishment of the asset or
extinguishments of any right therein or the compulsory acquisition thereof under any law.
In simple words Transfer includes:

Sale of asset
Exchange of asset
Relinquishment of asset (means surrender of asset)
Extinguishments of any right on asset (means reducing any right on asset)

Compulsory acquisition of asset.
The definition of transfer is inclusive, thus transfer includes only above said five ways. In other
words, transfer can take place only on these five ways. If there is any other way where an asset
is given to other such as by way of gift, inheritance etc. it will not be termed as transfer.

332 LOVELY PROFESSIONAL UNIVERSITY