Tested the issue on Android and able to reproduce this issue.

Steps Followed:
1.Launch chrome
2.Navigate to https://iframe-dot-yunabe-gaelab.appspot.com/s/bug110458994.html
3.Tap the border between the two blue regions and Observed that iframe counter is incremented instead of parent.

Chrome versions tested:
60.0.3072.0, 67.0.3396.87(Stable), 69.0.3495.2(Canary)

OS:
Android 8.1.0

Android Devices:
Nexus 6P

This seems to be a Non-Regression issue as same behavior is seen since M-60. Leaving the issue as Untriaged for further input's on this issue.

Please navigate to below link for log's --
go/chrome-androidlogs/864849
 
Thanks!

I can reproduce this reliably with devtools touch emulation whenever the circular cursor overlaps the boundary. This suggests to me it may be a touch adjustment bug. IIRC touch adjustment has some logic to try to ensure the targetted frame is actually top-most at the point that the event gets adjusted to.

Yup. me too. It is easily reproducible with the touch emulation.
Ella has recently worked on some touch adjustment related bugs. Ella, could you take a look at this one too?

I tried resizing the iframe and various divs.  The bug happens only when two main-frame fixed-position divs (i.e. blue divs) has a border that lies over the iframe divs (red divs).

Clearly a hittest problem.  Perhaps caused by composited fixed-position layers?

Turning off touch adjustment can fix this, so I think it's because of the touch adjustment. 
We do have a point base hit test after the rect-base one to correct the target, but the second one is a in frame hit test, which doesn't solve adjusting into different frame like this one. I am working on a fix for this.

I think the ideal solution is fixing the rect base hit test so we can avoid the additional point-base hit test, but not sure if that's possible :)

The following revision refers to this bug:
  https://chromium.googlesource.com/chromium/src.git/+/f2bba0c63e575718391fc38f984165ad1e062cbc

commit f2bba0c63e575718391fc38f984165ad1e062cbc
Author: Ella Ge <eirage@chromium.org>
Date: Wed Jul 25 17:01:11 2018

point-base hit-test after touch adjustment in root frame

On touch adjustment, we do a point-base hit test after the rect-base one
to make sure we find the correct target. This cl changes the point-base
hit test from the iframe to the root frame. Because when we have iframe
overlap by other elements, rect-base hit test might result an incorrect
target in the iframe. In-frame hit-test cannot find the correct target
that is outside the iframe. So, we should do the point-base hit-test on
root-frame to find the correct target.

Bug:  864849 
Change-Id: Ib176a68e5c51eba40c504ad90190bec7fb66dccb
Reviewed-on: https://chromium-review.googlesource.com/1145477
Reviewed-by: Navid Zolghadr <nzolghadr@chromium.org>
Reviewed-by: Dave Tapuska <dtapuska@chromium.org>
Commit-Queue: Ella Ge <eirage@chromium.org>
Cr-Commit-Position: refs/heads/master@{#577946}
[add] https://crrev.com/f2bba0c63e575718391fc38f984165ad1e062cbc/third_party/WebKit/LayoutTests/fast/events/touch/gesture/gesture-tap-frame-overlap.html
[modify] https://crrev.com/f2bba0c63e575718391fc38f984165ad1e062cbc/third_party/WebKit/LayoutTests/resources/gesture-util.js
[modify] https://crrev.com/f2bba0c63e575718391fc38f984165ad1e062cbc/third_party/blink/renderer/core/input/event_handler.cc

This issue is not reproducible on latest M70-70.0.3510.0, but still slightly observed on latest M69-69.0.3497.25, verified on Nexus6P / OPM1.171019.011