Income Tax 25 October 2026
Bombay HC Clarifies Tax on Proportionate Rights Shares
The Bombay High Court ruled that proportionate rights shares issued under Section 56(2)(x) are taxable as capital assets, rejecting the argument that they are exempt under the share‑transfer provision. The decision follows a show‑cause notice issued on 24 March 2026, providing clarity for taxpayers and assessors on how to compute tax liability on such rights issues.
The Bombay High Court has clarified the tax treatment of proportionate rights shares under Section 56(2)(x).
- Shares are treated as capital assets and taxed accordingly
- Exemption under share‑transfer rules does not apply
- Ruling issued after a show‑cause notice on 24 March 2026
Read the full judgment here.
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