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Loss from Futures Trading

Naina (CA Student) (477 Points)

17 June 2011

During F.Y. 2010-11, an assessee has loss in trading of futures of stocks and commodities. These were bought and sold on the same day. Sale Value - Rs. 72 lacs and Purchase Value - Rs. 72.20 lacs, so a loss of Rs. 20,000.00 is there. Now will it be business loss or short term capital loss. Apart from it, he has earned salary of Rs. 1,50,000.00 during 2010-11. Please reply.

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7 Replies

(Guest)

Loss in day trading is always a speculation loss. S 43(5). It can be treated as Short term loss. Since charged under the head business STT is allowed as deduction. If STT was not subtracted in arriving at loss do subtract. The speculation loss can be set off only frm speculation income.

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CA Ashwani Agarwal (Practice) (3049 Points)
Replied 17 June 2011

The loss is intraday without delivery. So it will be treated as a speculative loss which can be set off only from a speculative income i.e. income from intraday or F&O or Commodity trading.

It can also be carried forward for the next 4 years provided the return of the year in which loss has accrued is filed on or before the due date.

Paras (Mcom,CA Final) (122 Points)
Replied 17 June 2011

speculation loss .... set off against only speculation income . and its not a capital asset as per definition of 2(47) of i-t act .

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 18 June 2011

Originally posted by : Paras
	speculation loss .... set off against only speculation income . and its not a capital asset as per definition of 2(47) of i-t act . :)

yes agreed

M. N. JHA (CA) (8316 Points)
Replied 18 June 2011

Not understand. . . Why u all treating f&o trading as speculative ??? I think f&o trading should be non speculative as per sec. 43(5). . . . . . . . . . . . Pls explain it me in short

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Naina (CA Student) (477 Points)
Replied 18 June 2011

If we treat it as business loss, what will be its code in ITR? What will be the gross receipts in this case? What will be the cash balance? Should income under other heads be considered while mentioning amount of cash balance as on 31st March 2011?

KUNAL DESAI (B.com, ACA) (41 Points)
Replied 20 June 2011

Helloo,

The loss occurring in the course of dealing in derivatives could not be treated as speculation loss.

-DCIT vs SSKI Investors Services (P) Ltd.
Citation 113 TTJ 511

Therefore It will be SHORT TERM CAPITAL LOSS and not BUSINESS LOSS.

but still if you want to treat it as a business loss then the return can be filed u/s 139(3) and as you have said that the transactions is done within the same day, your gross receipts will be your sales value of commodities.

I cant say anything about cash balance because there is no infomation of other transactions of your asseessee with me but you can show any lumpsum amount (i.e.between 25000-40000) as a cash balance in ITR as no accounts maintained by the asseessee but after that you must have to filed ITR-4.