Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(SC) 16

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION
R. MAHADEVAN, J
M/S JINDAL EQUIPMENT LEASING CONSULTANCY SERVICES LTD – Appellant
Versus
COMMISSIONER OF INCOME TAX DELHI – II, NEW DELHI – Respondent
CIVIL APPEAL NO. 152 OF 2026 | CIVIL APPEAL NO. 153 OF 2026 | CIVIL APPEAL NO. 154 OF 2026 | CIVIL APPEAL NO. 155 OF 2026

Advocates:
For the Appellants/Petitioners: Mr. Ajay Vohra
For the Respondents: learned Additional Solicitor General

Amalgamation can generate taxable business income under Section 28 of the Income Tax Act when shares received are tradable and possess definable market value, reflecting a real income rather than notional gains.

Headnote:(A) Income Tax Act, 1961 - Sections 28 and 47(vii) - Amalgamation - Taxability of share substitution - High Court remanded the matter to the Tribunal to determine if shares received in amalgamation were stock-in-trade or capital assets, noting that if treated as stock-in-trade, income would be taxable under Section 28 due to realisation of trading assets. - Amalgamation does not equate to mere transfer or exchange; rather, it generates realisable business income upon allotment of shares with ascertainable value. (Paras 28, 30, 34)

(B) Jurisdiction of High Court - High Court did not err in remitting the matter to the Tribunal, as the core issues on taxability were sufficiently framed in the context of the appeals. The court’s findings clarified the nature of the substitution as a taxable event contingent upon the shares’ tradability and ascertainable value. (Paras 9, 26, 28)

(C) Concept of real income - Taxation under Section 28 applies when the substituted shares are tradable and possess a definite market value, distinguishing between capital assets and business income. (Paras 15, 30)

Judgement Key Points

Based on the provided legal document, the issue of bail is not directly addressed within the text. The document primarily discusses the tax implications of amalgamation under the Income Tax Act, the nature of transfer, and the timing and realization of income in the context of corporate mergers and stock-in-trade.

However, generally, in the context of tax disputes or proceedings related to such matters, bail considerations would typically fall under criminal or procedural law rather than the specific tax provisions discussed here. If the question pertains to bail in a related criminal case or a proceeding involving the assessment or recovery process, it would be governed by the applicable criminal procedure or civil procedure laws, not directly by the tax law provisions discussed in the document.

In the absence of explicit references to bail within this document, I recommend examining the relevant criminal or procedural statutes, or providing additional context regarding the nature of the case—whether it involves criminal charges, proceedings for recovery, or other legal processes where bail might be relevant.

If you need advice on bail in a specific context or a different legal matter, please provide further details, and I will assist accordingly.

JUDGMENT

R. MAHADEVAN, J.

Leave granted.

2. The present appeals arise out of a common judgment and final order dated 07.08.2020 passed by the High Court of Delhi, Hereinafter referred to as “the High Court” in ITA Nos. 935, 822, 853, and 961 of 2005, pertaining to the Assessment Year 1997-98. By the impugned judgment, the High Court remanded the matters to the Income Tax Appellate Tribunal, For short, “the Tribunal” for fresh adjudication on the question of whether the shares held in the amalgamating company constituted stock-in-trade or capital assets, upon observing that, if the shares were, in fact, held as stock-in-trade, the transaction would fall outside the purview of Section 47 (vii) of the Income Tax Act, 1961 , For short, “the I.T. Act”, and its taxability would consequently be governed by Section 28 under the head “profits and gains of business or profession”.

FACTUAL MATRIX

3. The facts, which are common to all these appeals, may be briefly stated as under:

3.1. The appellants are investment companies of the Jindal Group. The shares of the operating companies, namely Jindal Ferro Alloys Limited (JFAL) and Jindal Strips Limited (JSL), were held as part of the promoter holding, representing controlling interest. The appellants had also furnished non-disposal undertakings to the financial institutions / lenders who had advanced loans to the operating companies. These shares were reflected as investments in the balance sheets of the appellants.

3.2. During the previous year relevant to the assessment year 1997-98, pursuant to a scheme of amalgamation approved by orders dated 19.09.1996 and 03.10.1996 of the High Courts of Andhra Pradesh and Punjab & Haryana respectively, under Sections 391 – 394 of the Companies Act, 2013 , JFAL was amalgamated with JSL. As per the sanctioned scheme, the appointed date of amalgamation was 01.04.1995, and the orders sanctioning the amalgamation were filed with the Registrar of Companies on 22.11.1996 (the effective date). Under the scheme of amalgamation, the shareholders of JFAL were allotted 45 shares of JSL for every 100 shares of JFAL held by them. Accordingly, the appellants were allotted shares of JSL in lieu of the shares of JFAL.

3.3. The appellants, in their returns of income filed for the assessment year in question, claimed exemption under Section 47 (vii) of the I.T. Act in respect of the receipt of JSL shares in lieu of JFAL shares, treating the same to be capital assets. However, in the assessment completed under Section 143 (3) vide order dated 29.02.2000, the Assessing Officer treated the shares of JFAL as stock-in- trade, denied the exemption under Section 47 (vii), and brought to tax the value of JSL shares as business income, computed with reference to their market value. The said order was upheld by the Commissioner of Income Tax (Appeals).

3.4. On further appeals, the Tribunal vide order dated 17.02.2005, allowed the assessees’ appeals by observing that it was unnecessary to decide whether the shares were held as stock-in-trade or capital assets since no profit accrues unless the shares held by the appellants are either sold or transferred for consideration, irrespective of the nature of holding. It was further observed that there was admittedly no sale of shares and, therefore, the only question for consideration was whether the allotment of JSL shares in lieu of JFAL shares under the scheme of amalgamation amounted to a “transfer”. Following the decision of this Court in Commissioner of Income Tax, Bombay v. Rasiklal Maneklal (HUF) and others, (1989) 177 ITR 198 : (1989) 2 SCC 454 the Tribunal concluded that there was no transfer of shares and, consequently, no taxable profit could be said to have accrued to the appellants.

3.5. The Revenue challenged the Tribunal’s decision before the High Court, raising the following substantial questions of law:

“1. Whether shares received by the assesses on amalgamation are entitled to the benefit of section 47(vii) without the Trib

Click Here to Read the rest of this document

2026 Supreme(Online)(SC) 16

Amalgamation can generate taxable business income under Section 28 of the Income Tax Act when shares received are tradable and possess definable market value, reflecting a real income rather than notional gains.

Cases Referred (1)