A long-term capital asset means a capital asset held by an individual for more than 36 months immediately preceding its date of transfer. However, the following are treated as long-term capital assets, if held for more than 12 months:
• Shares held in a company;
• Other securities listed in a recognized stock exchange in India ;
• Units of the Unit Trust of India or specified mutual funds.
(S. 2(29A) and 2(42A) of the Income-tax Act, 1961)
Short-term and long-term capital gain
The distinction between short term and long term capital assets is important, since this distinction determines whether the capital gain should be taxed as short-term capital gain or long-term capital gain and consequently the tax rate that applies to such type of capital gains. Short-term capital gains are included within normal income, and taxed in accordance, with the progressive slab rates of tax for individuals. Long-term capital gains are generally taxable at the rate of 20%, though this rate could be reduced to 15% in case of capital gains arising from transfer to certain long-term capital assets (S. 2(29B), 2(42B) and 112 of the Income-tax Act, 1961).
Further, any income arising from the transfer of a long term capital asset, being an equity share in a company or a unit of an equity oriented fund (subject to conditions being satisfied) is exempt.
S. 2(29B), 2(42B) & 45(1) of IT Act, 1961—Capital gain—The capital gain arising out of the sale of the leasehold interest in the land in incomplete building will have to be bifurcated into the gain arising out of a sale of lease hold interest in the land and sale of the complete building—CIT vs. Hindustan Hotels Ltd. & Anr (2011) 237 CTR 32 (Bom.)
S. 2(29B) of IT Act, 1961—Capital gain—Gain arising on transfer of land has to be taxed as long-term capital gain but on other hand, gain arising out of transfer of building has to taken as short-term capital gain for the reason that the assessee is claiming depreciation on building in question year after year—ITO vs. International Rubber & Plastics (2010) 127 ITD 347 (ITAT-Chennai)
S. 2(29B), 2(42B), 2(47) & 45 of Income-tax Act, 1961—Capital Gain—Land and building belonging to partnership firm were given on lease for a period of 99 years to a private limited company, the shares of which are held by the partners of the assessee firm. The respondent assessee relied on the terms of the lease deeds and contended that the consideration received for assignment of the lease in rent received for each year for the entire period of the lease i.e. 99 years but received fully and in bulk in advance. High Court of Kerala held that transaction of lease for 99 years of the land and building by the assessee firm, to a company in which the partner of firm were shareholders is nothing but a transfer within the meaning of S. 2(47)(vi) and consideration received by the partners of the firm by way of fully paid up shares of the lessee company was assessable as long term capital gains.
Cases referred to:
A.R. Krishnamurthy vs. CIT(1989) 76 CTR (SC) 18 (1989) 176 ITR 417 (SC)
CIT vs. Panbari Tea Co. Ltd. (1965) 57 ITR 422 (SC),
Durga das Khanna vs. CIT (1969) 72 ITR 796 (SC),
Maharaja Chintamani Saran Nath Sah Deo vs. CIT (1966) 62 ITR 167 (Pat),
Mrs. G. Seetha Kamrajj vs. CIT (2006) 204 CTR (AP) 487 (2006) 284 ITR 54 (AP) &
N. Khandervali Saheb vs. N. Gudu Sahib (Decd.) & Ors. (2003) 261 ITR 1 (SC)  19 ITCD 1 (KERALA)
As Per Section 2(29B), of the Income Tax Act, 1961-
In this Act, unless the context otherwise requires—
S. 2(29B) “long-term capital gain” means capital gain arising from the transfer of a long-term capital asset.