M/S JINDAL EQUIPMENT LEASING CONSULTANCY SERVICES LTD. versus COMMISSIONER OF INCOME TAX DELHI – II, NEW DELHI

Citation: [2026] 1 S.C.R. 517 · Decided: 09-01-2026 · Supreme Court of India · Bench: J.B. PARDIWALA · Disposal: Disposed off

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Judgment (excerpt)

[2026] 1 S.C.R. 517 : 2026 INSC 46
M/s Jindal Equipment Leasing Consultancy Services Ltd. 
v. 
Commissioner of Income Tax Delhi – II, New Delhi
(Civil Appeal No. 152 of 2026)
09 January 2026
[J.B. Pardiwala and R. Mahadevan,* JJ.]
Issue for Consideration
Issue arose as regards taxability of gains said to arise on 
amalgamation, where shares of the amalgamating company held 
by the assessees as stock-in-trade, stand substituted by shares 
of the amalgamated company; whether such substitution, in and 
of itself, constitutes a realisation giving rise to taxable business 
income u/s.28, Income Tax Act, 1961 and if so, the conditions under 
which such accrual or receipt can be said to arise in the commercial 
sense, or whether the incidence of taxation arises only upon the 
subsequent sale of the substituted shares; whether the High Court 
while remanding the matter to the Tribunal to ascertain whether the 
shares of the amalgamating company were held as stock-in-trade 
or as capital assets, was justified in recording a finding that, if such 
shares were held as stock-in-trade, the allotment of shares of the 
amalgamated company pursuant to a court-sanctioned scheme of 
amalgamation would give rise to taxable business income in the 
hands of the appellants u/s.28 of the I.T. Act.
Headnotes†
Income Tax Act, 1961 – ss.2(1B), 2(14), 2(47), 28, 45(1), 
47(vii) – Scope of s.28 – Appellants, investment companies 
of the Jindal Group, were shareholders of Jindal Ferro Alloys 
Limited (JFAL) and Jindal Strips Limited (JSL) – Pursuant 
to a scheme of amalgamation, JFAL was amalgamated with 
JSL – In terms of the share exchange ratio approved under the 
scheme, shareholders were allotted 45 shares of JSL against 
100 shares of JFAL – During the relevant assessment year, the 
appellants claimed exemption u/s.47(vii), I.T. Act in respect of 
the receipt of JSL shares in lieu of JFAL shares, treating the 
same to be capital assets – Exemption denied by Assessing 
Officer holding that the shares of JFAL constituted stock-in-
* Author
518
[2026] 1 S.C.R.
Supreme Court Reports
trade in the hands of the appellants and taxed the difference 
between the value of the JSL shares (as on the appointed date) 
and the book value of JFAL shares – Order upheld by CIT(A) – 
However, Tribunal allowed the assessees’ appeals – Appeals 
filed by Revenue – High Court set aside the Tribunal’s order 
and remitted the matter for fresh consideration – Challenge to:
Held: Judgment of the High Court affirmed – s.28 is of wide import 
and encompasses all profits and gains arising in the course of 
business, even when such profit is realised in kind – The statutory 
substitution of shares of the amalgamating company by shares 
of the amalgamated company is not a mere neutral replacement; 
where the new shares are freely marketable and possess a definite 
commercial value, the event constitutes a commercial realisation 
giving rise to taxable business income – Such profit need not 
await actual sale if the benefit received is real and presently 
realisable – Where the shares of an amalgamating company, held 
as stock-in-trade, are substituted by shares of the amalgamated 
company pursuant to a scheme of amalgamation, and such 
shares are realisable in money and capable of definite valuation, 
the substitution gives rise to taxable business income within the 
meaning of s.28 – However, the charge u/s.28 is attracted only 
upon the allotment of new shares – At earlier stages namely, 
the appointed date or the date of court sanction, no such benefit 
accrues or is received – The receipt of shares of the amalgamated 
company in substitution of stock-in-trade can give rise to taxable 
business profits u/s.28 – However, the actual application of this 
principle to the facts of the present case, including whether the 
shares received are freely realisable or otherwise subject to 
restrictions, or whether the shares are held only as investment 
requires factual determination – Matter remitted to the Tribunal 
for fresh adjudication in accordance with law. [Paras 29-31, 33]
Income Tax Act, 1961 – s.28 – Profits and gains of business or 
profession – Scope of – Explained. [Paras 15-15.3, 18.3-18.6]
Income Tax Act, 1961 – s.28 – Profits and gains of business 
or profession – Governing test u/s.28 – Is not the presence of 
a sale, exchange, or extinguishment of rights in the technical 
sense, but whether the assessee has, in consequence of 
business operations, come into po

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