Allahabad HC - Lucknow Bench|Friday, 20 February 2026
Calcutta HC Upholds Long-Term Capital Gains Classification in Principal Commissioner Of Income Tax vs Russel Credit Limited
Bench
The Hon'ble Justice Rajarshi Bharadwaj
Rajarshi Bharadwaj
Calcutta HC Upholds Long-Term Capital Gains Classification in Principal Commissioner Of Income Tax vs Russel Credit Limited (2026) held that The court affirmed that for the Principal Commissioner to invoke Section 263, both conditions of being erroneous and prejudicial must be satisfied, which was not the case here.
The case involves an appeal by the Principal Commissioner of Income Tax against the ITAT's decision which upheld the assessment order of the Assessing Officer regarding the classification of capital gains from the sale of unlisted preference shares. The key legal issues revolved around the interpretation of Section 263 of the Income Tax Act and whether the gains should be classified as business income or long-term capital gains. The court ruled in favor of the assessee, affirming the ITAT's decision that the gains were indeed long-term capital gains and not subject to revision under Section 263. The ruling emphasized the necessity of both erroneous and prejudicial conditions for invoking revisional powers under the Act.
The court affirmed that for the Principal Commissioner to invoke Section 263, both conditions of being erroneous and prejudicial must be satisfied, which was not the case here.
The classification of the gains from the sale of shares as long-term capital gains was upheld, as the shares were held for a significant period and the transaction did not reflect business activity.
The court reiterated that new arguments or facts cannot be introduced at the appellate stage without prior ventilation in lower proceedings.
Return of income filed by the respondent for AY 2018-19
Assessment completed by the Assessing Officer
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Principal CIT invoked Section 263
ITAT upheld the AO's assessment order
Final judgment delivered
