12 October 2007
Please clarify, how is the Turnover calcualted in Share Trading - F&O and Options. Also clarify open position held at the financial year end, is disclosed in the B/s.
12 October 2007
DERIVATIVE TRADING AS PER CLAUSE (d) of sub sec 5 of sec 43 OF INCOME TAX ACT is NOT A SPECULATIVE BUSINESS. IT IS NORMAL BUSINESS. THUS NORMS FOR TURNOVER COMPUTATION APPLY AS FOR ANY OTHER BUSINESS. CONTRACTS NOTES TAKE THE PLACE OF INVOICES FOR TURNOVER CALCULATION AND FORM THE BASIS OF TURNOVER. CONSISTENT METHOD OF ARRIVING AT THE TURNOVER FIGURE YEAR ON YEAR IS INSISTED BY THE ASSESSING OFFICER. AS FOR DISCLOSURE OF OPEN POSITION AT YEAR END,THE COST PRICE OF SHARES ACQUIRED IS STATED AS BOOK VALUE AND MARKET PRICE ON 31 ST MARCH IS STATED ONLY AS A MATTER OF RECORD WITHIN BRACKETS AS WE DO IN INVESTMENTS HELD AS ASSET AS WE ARE THE INVESTORS IN THESE SHARES. R.V.RAO
12 October 2007
CLAUSE (d) OF SUB SECTION 5 OF SEC 43 OF INCOME TAX ACT STATES THAT AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES REFERRED TO..... IN SECURITIES CONTRACT REG. ACT 1956 CARRIED OUT ON A RECOGNISED STOCK EXCH. IS NOT A SPECULATIVE TRANSACTION.
THE SALE OF SHARES HELD UNDER DEMATERIALISED FORMAT WITH A DEPOSITORY - IT WILL COME UNDER CAPITAL GAIN - SEC 45(2A).
UNDER THIS SCHEME, THE SHAREHOLDER DOES NOT HAVE A CERTIFICATE TO CLAIM OWNERSHIP OF A SHARES IN A COMPANY. HIS INTEREST IS REFLECTED BY WAY OF ENTIRES IN THE BOOKS OF A DEPOSITORY (AN INTERMEDIARY AGENT WHO MAINTAINS THE RECORDS OF SHAREHOLDERS)
THE COST OF ACQUISITION AND THE PERIOD OF HOLDING SHALL BE DETERMINED ON THE BASIS OF FIFO METHOD. (Circular No 768 Dated 24.06.1998)
FIFO METHOD WILL BE APPLIED FOR EACH ACCOUNT INDEPENDENTLY.
WHEN PHYSICAL STOCK IS DEMATERIALIASED THE DATE OF CREDIT INTO THE DEPOSITORY ACCOUNT SHALL BE CONSIDERED FOR THE PURPOSE OF FIFO METHOD, BUT INDEXED COST OF ACQUISTION SHALL BE COMPUTED ON THE BASIS OF YEAR OF ACQUISTION.
UNDER THE HEAD CAPITAL GAINS THE TURNOVER IS IMMETERIAL.
14 October 2007
Hi, Only the profit or loss from Derivative transactions form part of turnover since there is no delivery of shares.If it is not so, if you do twenty lot of derivatives automatically your turnover will be subject to 44AB.
Hence if your profit or loss from derivatives is more than 40lakh you will be subeject to 44 AB audit. Regarding the open positions it has to shown as stock in the profit and loss account at cost or market price which ever is lower.
In the debit side of the P&L you will have internet charges,brokerage,computer depreciation,computer repair charges etc as the case may be. I differ with the reply given by Ravikumar.
I also am of the opinion of Mr. Alsivasankar. Please confirm, profit or loss, both need to be added together to arrive at the qualifying amount of turnover? What about Option trading
But I beg to differ with respect to showing the stock in trade the open posisition at cost or market price. Becuase, as we are not showing them as purchases.
CAclubindia
