Supreme Court Holds That Shares Received on Amalgamation as Stock-in-Trade Give Rise to Taxable Business Income Only Upon Allotment When Realisable

Case Name: M/s Jindal Equipment Leasing Consultancy Services Ltd. v. Commissioner of Income Tax, Delhi–II, New Delhi (with connected appeals)
Citation: 2026 INSC 46
Date of Judgment/Order: 09 January 2026
Bench: Justice J.B. Pardiwala and Justice R. Mahadevan

Held: The Supreme Court held that where shares of an amalgamating company, held as stock-in-trade, are substituted by shares of the amalgamated company pursuant to a scheme of amalgamation, such substitution can give rise to taxable business income under Section 28 of the Income-tax Act, 1961 only upon the allotment of the new shares, when the benefit becomes real, definite, and capable of commercial realisation.

Summary: The appeals arose from a common judgment of the Delhi High Court remanding matters to the Income Tax Appellate Tribunal to determine whether shares held by the appellant companies were stock-in-trade or capital assets. The assessees, investment companies of the Jindal Group, held shares of operating companies as part of promoter holding, which were substituted by shares of the amalgamated company pursuant to a court-approved scheme. The Supreme Court examined the scope of Section 47(vii), the charge under Section 28, and the doctrine of real income, and analysed whether substitution of shares constituted a mere paper rearrangement or resulted in real commercial gain. It held that no income accrues on the appointed date or the date of court sanction, and that taxability depends on whether the substituted shares are realisable and of definite value upon allotment, which requires factual determination by the Tribunal.

Decision: The appeals were disposed of by affirming the High Court’s remand, holding in principle that substitution of shares held as stock-in-trade can attract tax under Section 28 upon allotment if the shares are realisable, and directing the Income Tax Appellate Tribunal to undertake a fresh factual adjudication in accordance with law, with no order as to costs and all pending applications disposed of.