SC Dismisses Revenue SLPs in Reliance Amalgamation Tax Dispute 2026

What Happened?

The Supreme Court of India has dismissed the Revenue's Special Leave Petitions (SLPs) in the high-profile Reliance Industries amalgamation tax case. This dismissal comes after the Court issued a fresh notice directing the Income Tax Department to serve a new tax notice on Reliance Industries. The Bombay High Court had previously quashed the tax assessments of companies that merged with Reliance, creating significant uncertainty for the Revenue. This October 2026 development represents a major setback for the Income Tax Department's aggressive stance on amalgamation-related tax assessments.

Background & Legal Context

Amalgamations under the Income Tax Act 2025 (previously Section 72A of the IT Act 1961) allow companies to merge while carrying forward losses and certain tax attributes. However, the Income Tax Department has consistently taken the position that certain amalgamation structures may attract tax implications if not structured correctly.

Key Legal Sections Involved:

• Section 72 of IT Act 2025 — Carryforward of losses in case of amalgamation
• Section 72A of IT Act 2025 — Conditions for carryforward of losses (newly reorganized)
• Section 47(vi) of IT Act 2025 — Transfer of capital assets in amalgamation (no capital gains tax)
• Section 48 of IT Act 2025 — Cost of acquisition in amalgamation cases

In this case, the Revenue had issued assessments to the merged companies (before they ceased to exist as separate legal entities) on the basis that certain provisions of the Income Tax Act were violated during the amalgamation process. The Bombay High Court, however, found that the assessments were fundamentally flawed because:

• The merged entities had already ceased to exist as legal persons on the date of assessment
• You cannot assess a company that no longer exists in the eyes of law
• The proper procedure under the Income Tax Act 2025 was not followed
• Section 159 of IT Act 2025 (previously Section 159 of IT Act 1961) requires the assessing officer to follow due procedure

The Supreme Court's dismissal of the Revenue's SLPs effectively endorses the Bombay High Court's reasoning and creates binding precedent for similar cases across India. This is particularly important for Assessment Year 2025-26 and 2026-27 where amalgamation-related notices may still be pending.

What Does This Mean for You?

For Reliance Industries and Large Corporate Groups:

• The Supreme Court's decision provides relief from aggressive tax assessments on amalgamation transactions
• However, the fresh notice being served means the matter is not entirely settled; the Revenue will attempt to reassess on proper legal grounds
• Companies must ensure that when the fresh notice is served, they respond with complete documentation showing compliance with Section 72, 72A, and 47(vi) of IT Act 2025
• The precedent protects against assessments on entities that have legally ceased to exist

For Mid-Size and Small Amalgamating Companies:

• This ruling provides strong legal protection if your company merged and the Income Tax Department issued assessments to the merged entity
• You can now cite this Supreme Court decision to argue that such assessments are procedurally invalid
• Section 159 of IT Act 2025 strictly requires assessment to be made to an existing person; merged companies no longer qualify
• If you received notices on merged entities for AY 2024-25 or AY 2025-26, file an objection referring to this Supreme Court precedent

For the Income Tax Department:

• The fresh notice being served on Reliance Industries (the surviving entity) indicates the Revenue will shift its assessment strategy
• Instead of assessing merged companies, the Department will now assess the amalgamated company (the survivor) under Section 68, 69, or other catch-all provisions
• This means increased scrutiny on the adopting company's books, especially regarding loss carryforward claims

What Should You Do Now?

If You Have Undergone Amalgamation:

• Review Pending Assessments: If the Income Tax Department has issued assessments to the merged entity after it ceased to exist, immediately file an objection citing this Supreme Court ruling and Bombay HC judgment. Section 246A of IT Act 2025 allows such objections.
• Prepare for Fresh Notices: The Revenue may now issue fresh notices to the surviving/amalgamated company. Ensure you have all documentation ready:
  • Copy of the amalgamation scheme approved by shareholders and court
  • Details of losses carried forward (Section 72 compliance)
  • Details of cost base adjusted under Section 48
  • Copy of Form 32 filed with the Stock Exchange (if applicable)
• Engage Tax Professional Early: Do not wait for the Income Tax Department's notice. Proactively engage a CA to conduct a compliance audit of your amalgamation structure. This is especially critical for Assessment Year 2025-26 filings (due by 31 July 2025).
• File Robust Response: When responding to any fresh notice, cite:
  • Specific sections of IT Act 2025 (Sections 72, 72A, 47(vi))
  • This Supreme Court judgment
  • Bombay High Court's earlier order
  • Documentary evidence of compliance
• Consider Transfer Pricing: If your amalgamated company has international related party transactions, ensure Form 3CEB is filed for AY 2025-26 under Section 92F of IT Act 2025, as the Revenue may also scrutinize transfer pricing in amalgamation cases.

Key Takeaways

• Supreme Court Dismisses Revenue's Appeal: The SC has dismissed the Revenue's SLPs in the Reliance amalgamation case, supporting the earlier Bombay HC order that quashed assessments on merged entities. This is a major setback for tax authorities.
• Procedural Flaw in Assessments: Assessments cannot be issued to companies that have legally ceased to exist. Section 159 of IT Act 2025 requires assessment to an existing person. Merged companies, by definition, no longer exist as separate legal entities after the amalgamation.
• Fresh Notice Strategy by Revenue: The Income Tax Department will now shift to issuing fresh notices to the surviving/amalgamated company instead. Taxpayers must be prepared for increased scrutiny on the adopting company's books and loss carryforward claims.
• Strong Precedent for Taxpayers: This ruling provides significant legal protection to all companies that have undergone amalgamation and received questionable assessments on merged entities. You can now confidently challenge such assessments citing this Supreme Court judgment.
• Compliance Remains Critical: While this judgment protects against procedurally flawed assessments, it does not override the substantive requirements of Sections 72, 72A, and 47(vi) of IT Act 2025. Ensure your amalgamation fully complies with these sections before the fresh notice is served.

Impact on Assessment Years 2024-25, 2025-26, and 2026-27: This ruling applies retrospectively to all pending amalgamation assessments. If you received an assessment notice on a merged entity for any of these AYs, file an immediate objection or appeal.

Important Note: The fresh notice being served on Reliance Industries means this is not a complete victory. The case will continue. Ensure you respond comprehensively when the new notice arrives, with full documentation and professional CA assistance.

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