In a significant ruling, the Calcutta High Court held in the case of Russel Credit Ltd that gains from the sale of unlisted shares must be taxed as capital gains, consistent with CBDT Instruction dated May 2, 2016. The court emphasized that only exceptional circumstances—such as sham transactions or lack of genuineness—can warrant a different treatment.
The case involved gains from unlisted preference shares of ICICI Bank, accepted as long-term capital gains by the Assessing Officer. The Principal Commissioner invoked revisionary powers under Section 263, alleging the shares were stock-in-trade. The Tribunal set aside the revision, and the High Court upheld this decision.
Key factors favoring the assessee included: acquisition as investments per board resolution, holding period of nearly six years, and a one-time sale without regularity. The Court reiterated that accounting nomenclature does not determine taxability and that revisionary powers cannot be exercised where a plausible view has been taken.
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