India: Income Tax

The Bangalore bench of the Income Tax Appellate Tribunal (‘ITAT’) has held that ESOP expenditure cross-charged by a foreign holding company to its Indian subsidiary is allowable as a deduction under section 37(1) of the Income-tax Act, 1961 ('Act'). The Tribunal reiterated that ESOP discount constitutes employee compensation and gives rise to an ascertained liability during the vesting period and that the possibility of future forfeiture, non-exercise of options, or issuance of a valuation report after the financial year-end does not render the liability contingent or hypothetical.

The Bengaluru Bench of the National Company Law Tribunal has declined to approve a proposed merger involving four real estate companies under the same promoter group. The decision raises important questions about the requirements and standards for corporate amalgamation schemes under the Companies Act, 2013.

The Hon’ble Punjab and Haryana High Court (HC) in Jyoti Sareen vs. UOI & Others (CWP No. 15791-2024 (O&M)) (Order) held the retrospective amendments carried out vide the Finance Act, 2026, with respect to the powers of the Jurisdictional Assessing Officer (JAO) to issue a reopening notice under section 148 (Reopening Notice) of the Income-tax Act, 1961 (IT Act), as unconstitutional, being violative of the ‘doctrine of separation of powers’ and thus violative of Article 14 of the Constitution of India.

Alternative investment funds (“AIFs”) are privately pooled investment vehicles which raise funds and invest in accordance with a defined investment policy for the benefit of the investors. AIFs established and operating within India (except in the Gujarat International Finance Tec-City (“GIFT City”)) are regulated by the Securities and Exchange Board of India (“SEBI”) under the SEBI (Alternative Investment Funds) Regulations, 2012, as amended (“AIF Regulations”), which allow AIFs to be structured as a trust, a limited liability partnership (“LLP”), a company, or a body corporate.

Receiving an income tax notice can be unsettling, especially when it demands additional tax, disallows a claimed deduction, or alleges a discrepancy in your filed return. Many taxpayers assume that once a notice is issued, they have no choice but to comply.

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) in T. Srikanth v. DCIT [ITA No. 3792/Chny/2025] has unequivocally held that the deeming fiction created u/s 50C of the Income-tax Act, 1961 (‘the Act’), which substitutes stamp duty value as the "full value of consideration" for computing capital gains u/s 48, cannot be imported into section 54F to reduce the quantum of exemption available to a taxpayer who has reinvested the entire actual sale consideration in a new residential house.

The taxation of employee stock options in India has sparked considerable debate, particularly when vested but unexercised options are repurchased by employers. The Bangalore Income-tax Appellate Tribunal recently examined whether such consideration should be taxed as salary perquisites or capital gains, establishing critical distinctions between the taxation of stock options at exercise versus the taxation of rights embedded in vested options.

The Bangalore Bench of the ITAT has delivered an important ruling clarifying the tax treatment of consideration received on repurchase of vested but unexercised employee stock options (ESOPs). The Tribunal held that such consideration is taxable as capital gains and not as salary since the options were never exercised and no shares were allotted.

The Central Board of Direct Taxes issued an order dated 9th July, 2026, authorizing the Director General of Income-Tax (Systems) to upload financial data obtained via the Automatic Exchan-ge of Information (AEOI) framework into taxpayers’ Annual Information Statements (AIS) in Form No. 26AS. This directive requires that international financial information currently held for the years 2022, 2023 and 2024 be integrated into taxpayer records within 90 days of the order’s issuance.