Speculative Business (Exp 2 to 28)

Speculative Business

Introduction:-

Ø  Exp 2 to Section 28 says that, speculation business of an assessee should be deemed as Separate & Distinct

Ø  Section 73 provide that, losses from Speculative Business shall be set off against Profits from speculative business only

Ø  Speculative business loss can be carried forward up to 8 Years

Meaning:-

Ø  Speculative transaction

Ø  Transaction in which

Ø  a contract of purchase or sale of

Ø  any commodity including shares and stocks

Ø  is periodically or ultimately settled

Ø  Otherwise than by

Ø  Actual delivery or transfer of the commodity or scrips

Where any part of a company consists of purchase and sale of shares of other companies, that company shall be deemed to be carrying speculative business to that extent.

Deeming provision not applicable to:-

a. A company whose Gross Total Income mainly consists of

Ø  Interest on securities

Ø  Income from house property

Ø  Capital Gains

Ø  Income from other sources

b. A company, whose principal business is

Ø  Trading in shares

Ø  Banking

Ø  Granting of loans and advances

Transactions not deemed to be speculative:-

Hedging contract	Ø  In respect of raw materials or merchandise Ø  in the course of manufacturing / Trading business Ø  to guard against future price fluctuations Ø  in respect of his contracts Ø  for actual delivery of goods manufactured/merchandise sold by him
Hedging contract	Ø  In respect of stocks and shares Ø  by a dealer or investor Ø  to guard against loss through future price fluctuation
Forward contract	Ø  Entered by a member of forward market or stock exchange Ø  transaction in the nature of jogging or arbitrage Ø  to guard against loss in the ordinary course of business
Trading in Derivatives	Ø  Eligible transaction Ø  in respect of trading in derivatives Ø  in a recognized stock exchange Eligible transaction :- ü  Any transaction carried out ü  electronically on screen-based systems ü  through stock broker / sub broker / intermediary ü  registered under SEBI ü  in accordance with SEBI,SCRA, Depositories Act, 1996 Which is supported by       a time stamped contract note       issued by Stock broker / Sub broker / intermediary       indicating Unique Client Identity Number and PAN Recognized stock exchange for the purpose of 43(5) :- v  BSE v  NSE v  MCX v  United Stock Exchange
Trading in commodity derivatives	Ø  Eligible transaction Ø  in respect of trading in commodity derivatives Ø  in a recognized Association Ø  which is chargeable to Commodities transaction Tax Ø  under Chapter VII of finance act 2013 Eligible transaction :- ü  Any transaction carried out ü  electronically on screen-based systems ü  through member / intermediary ü  registered under bye laws, rules, regulations made by recognised association ü  in accordance with forward contracts Act, 1952 Which is supported by       a time stamped contract note       issued by member / intermediary       indicating Unique Client Identity Number and PAN Recognized Association :- v  referred under 2(j) of Forward Contracts (Regulation) Act, 1952 v  And which fulfills conditions of Central Government.