Trading in commodities

This query is : Resolved

Hiteshkotharica (Querist)
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28 July 2012 i have a query

we are trading in derivatives on commodities(gold and silver) on MCX (multi commodity exchange of india lTd ) and it is not an hedging transaction and have profits from the same
i have 2 queries

1) is this income speculative or business income

2) can this income be set off against capital gains from equity shares or equity derivatives

is my assumption that commodities trading has now been removed from speculative ambit right if the transactions are carried out on MCX

pls reply and oblige

CA Rahul Jain

CA Rahul Jain (Expert)
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28 July 2012 You are correct in your assumption that commodities trading is not speculative income if the transactions are carried out on MCX.

Reply to your queries:
1. Income from trading in derivatives is "Business Income"

2. Please specify under which head the loss has been incurred. However, loss under the head capital gain is not allowed to be set off with the income of any other head.

Hiteshkotharica

Hiteshkotharica (Querist)
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28 July 2012 Many of CACLUB member says only Mcx Stock Exchange Ltd. is recognised Stock Exchange for Section 43(5). So Trading on Multy Commodities Exchange of India is Speculative Transaction.

we are confused regarding this
please clarify

Please Reply and oblige.
thanks

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CA Rahul Jain

CA Rahul Jain (Expert)
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28 July 2012 MCX is recognised stock exchange for Sec 43(5) and therefore trading on this exchange is excluded from the scope of speculative transaction.

As per section 43(5)(d) transaction carried out on recognised stock exchange is not speculative transaction.

you may refer the bare text for more clarity.

Hiteshkotharica

Hiteshkotharica (Querist)
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28 July 2012 i am really sorry

i am now further elaborating on the query

Ther is one MCX stock exchange ltd which deals only in foreign currency and then there is MCX commodity exchange which deals in commoditeis

now manymembers of caclub are interpreting that only the first excahnage is notified as notified stock exchange and hence only currency futures can be treated as business income whereas according to them mcx which deals in commodities is not a notified exchange and hence trading in commodity futures will still continue to be speculative income.pls keep in mind that we are not hedging in commodities and thus will not be eligible to claim it as business income on taht grounds
pls clarfy on this whether this is true

CA Rahul Jain

CA Rahul Jain (Expert)
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29 July 2012 Trading in derivatives in NSE, BSE, MCX Stock Exchange Ltd is outside the scope of speclative transaction and thus these trading is "business income".

you may check the contract note. If the transaction is done on MCX Stock Exchange Ltd, it is business income and if it is done on MCX (Multicommodity Exchange), it will be speculative income.