This Tax Alert summarizes a Supreme Court (SC) ruling (two-judge bench) dated 9 January 2026[1], where the core issue under consideration was whether shares received on amalgamation in lieu of shares held in the amalgamating company as stock-in-trade, is taxable.
The SC held that where shares are held as capital assets, amalgamation results in a transfer, but remains exempt due to specific statutory provisions. Whereas, when the shares constitute stock in trade, taxability arises only if the receipt represents real income i.e., the new shares received have definite and ascertainable value and are immediately realizable. Presence of lock in restrictions, lack of marketability etc., make the assets unrealizable and defer its taxability until actual sale. The SC reaffirmed that business profits may be realized in kind, but such consideration in kind needs to be in the form of realizable instruments capable of valuation in money’s worth.
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