In Brief
Companies in the Jindal Group received shares in JSL from their shares in JFAL under a court-approved merger. They claimed tax exemption as capital gains. The tax authority treated the received shares as business income. The Supreme Court held that if the original shares were held as stock-in-trade (trading inventory), the merged shares constitute taxable business profit when they are freely tradeable and have definite market value. However, the nature of original holding determines taxability—shares held as investments remain exempt under the exemption provision for corporate mergers. The Court remitted the case for determining whether the original shares were investments or trading stock.
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