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shares speculative business

krishna vishwanath (student) (81 Points)

29 December 2007

assesse whose regular business is purchase and sale of shares wether comes under speculative business or not

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Sathish Karunakaran (ACA) (614 Points)
Replied 29 December 2007

Purchase and sale of shares which do not result in delivery of securities only deemed as speculative business. example - day trading. otherwise it comes under capital gains head of income.

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Late CA Sampat Jain (Chartered Accountant) (4772 Points)
Replied 30 December 2007

SECTION 43(5) DEFINES SPECULATIVE TRANSACTIONS AS FOLLOWS:
5) “speculative transaction means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery29 or transfer of the commodity or scrips:

Provided that for the purposes of this clause—

(a) a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him; or

(b) a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; or

(c) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of his business as such member; [or]

[(d) an eligible transaction in respect of trading in derivatives referred to in clause (ac)] of section 232 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) carried out in a recognised stock exchange;]

shall not be deemed to be a speculative transaction;

[Explanation.—For the purposes of this clause, the expressions—

(i) “eligible transaction” means any transaction,—

(A) carried out electronically on screen-based systems through a stock broker or sub-broker or such other intermediary registered under section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) and the rules, regulations or bye-laws made or directions issued under those Acts or by banks or mutual funds on a recognised stock exchange; and

(B) which is supported by a time stamped contract note issued by such stock broker or sub-broker or such other intermediary to every client indicating in the contract note the unique client identity number allotted under any Act referred to in sub-clause (A) and permanent account number allotted under this Act;

(ii) “recognised stock exchange” means a recognised stock exchange as referred to in clause (f) of section 234 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and which fulfils such conditions as may be prescribed and notified35 by the Central Government for this purpose

(Guest)

The Explanation-2 to SEc.28, read as [Where 'speculative transactions' carried on by an assessee are of such a nature as to constitute a business, the business shall be deemed to be distinct and separate from any other business.] In view of the above explanation, it shall be deemed that the legislate do regard the purchase/sale of shares as a business as it provides for dealing with it seperatly for carry forward and set off purposes.

visu iyer (mentor) (834 Points)
Replied 19 July 2009

As a investor, he will have both

Intraday and

delivery based..

It is impracticable to differentiate on day to day base where the volume is huge.............eeeeeeee

Please suggest the alternate to classify the speculation.

snpathak (income tax advocate) (38 Points)
Replied 19 July 2009

Originally posted by :visu
"	As a investor, he will have both Intraday and delivery based.. It is impracticable to differentiate on day to day base where the volume is huge.............eeeeeeee Please suggest the alternate to classify the speculation.	"