Section 2(22B)

Section 2(22B) — the law in short

What the courts have decided on section 2(22B), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Ravi Kumar Sinha v Commissioner of Income Tax High CourtHelps taxpayer
  I got shares under my employer's stock purchase scheme but they were locked in and I could not sell them. Can the department tax me on the difference between the stock exchange price and what I paid?
  No. The Delhi High Court held that where the shares carry a lock-in and cannot be traded or sold, the fair market value cannot be taken above the face value, so on these facts the determinative figure was Rs 15 per share. The quoted stock exchange price was irrelevant because the shares could not be sold in the open market. The valuation report the employer had obtained from its accountants, putting the value at Rs 22.50, was at best a means for the employer to gauge its withholding obligations and could not fix fair market value for the employee. The assessee's appeal was allowed and the Tribunal's order set aside.
• Ramesh Jaisinghani v DCIT ITATHelps taxpayerSuperseded by amendment
  The officer has taken the cost of my bonus shares as nil and taxed the whole sale price under s.112A. Does the grandfathered value as on 31 January 2018 not apply to bonus shares?
  The Mumbai Tribunal held that it does. Bonus shares on which securities transaction tax has been paid fall within s.55(2)(ac), which is a special computation code for shares eligible under s.112A, and it prevails over the general rule in s.55(2)(aa) that takes the cost of bonus shares as nil. Taking the cost as nil inside the s.112A regime would tax appreciation up to 31 January 2018 and defeat the grandfathering the section was enacted to preserve. On the facts the fair market value as on 31 January 2018, taken at Rs. 500 per share from the assessee's valuation report, was adopted as the cost of acquisition. Read all of this against the amendment the order turns on: the Finance (No. 2) Act, 2024 inserted clause (AA) into Explanation (a)(iii) of s.55(2)(ac), supplying a fair market value for exactly this class of shares - equity shares not listed on 31 January 2018 but listed afterwards, on a sale of unlisted shares under an offer for sale in an initial public offering - and Parliament expressed it to take effect from 1 April 2018, that is retrospectively, from assessment year 2018-19 onwards, which covers the assessment year decided here. Parliament has therefore already legislated over the gap the principal ground relies on. The Tribunal held that insertion substantive rather than clarificatory and so incapable of reaching a transaction already completed; if that characterisation is wrong, the principal ground does not survive. This is a Tribunal decision from October 2025 on a very large sum and its final fate is not known.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.