44 AB vs Capital Gain

This query is : Resolved

Vivek Gangwal (Querist)
Follow

26 July 2008 A Share broker owning Bolt also doing Intra day Trading. can he is eligibal to show it as STCG where its turnover exceeds limit prescribed u/s 44 for Tax Audit.

Whether he comes under the ambit of tax Audit u/ 44 AB and to treat as business income.

Pls Advice.

CA Hemant T Dewani

CA Hemant T Dewani (Expert)
Follow

26 July 2008 and turnover of delivery based buying & selling is less than 40 lacs but speculation business in share trading where intra-day sale purchase is effected but delivery is not taken exceeds 40 lacs, is tax audit applicable ? surendra.gandhi@......in

This issue was subject to controversial interpretation by assessee and income tax department.The issue had come up in case of Babulal Enterprise vs ACIT before Mumbai bench of ITAT [1999-2000] wherein it was held that where the actual delivery was not taken and difference in price was settled on the basis of contract note,the turn over can not include those transactions. Another decision of Mumbai Tribunal expressing similar views was in case of Growmore Exports Ltd vs ACIT [78 ITD 95] . Therefore , if you are involved in Day Trading, i.e you are squaring off of the share deal same day, the contract value is not taken for the purpose of turnover, but the differential shall be taken for the purpose of turnover.

Remember , however since the F & O trades have been declared as business trade and not speculative , the department shall read the law literally.So, in case of Future & option trade , get your accounts audited u/s 44AB of the I T Act.

Therefore, if you are only doing day tarding ,and intra day sale exceeds Rs 40 lac contract note vale of share sale , you will not fall for tax audit u/s 44AB of the I T Act