Section 43(5)

Speculative transaction

Scope of ‘speculative transaction’ - Where bona fide forward sales are entered into with a view to guarding against the risk of raw materials or merchandise in stock falling in value, the losses arising as a result of such forward sales should not be treated as speculation losses.

Hedging transactions in connected, though not the same, commodities should not be treated as speculative transactions.

If on the facts of any case it can be demonstrated that the forward transaction has been entered into only for safeguarding against loss through future price fluctuations, such a transaction should not be treated as a speculative transaction but as a case of hedging.

Hedging transactions having reasonable relation to the value and volume of dealer’s or the investor’s holdings are excepted from the ambit of speculative transactions; but transactions in scrips outside his holdings are not.

For the purpose of set off under sections 10 and 24(1) of the 1922 Act, the speculation loss of any year should first be set off against the speculation profits of that year and the remaining amount of speculation profit, if any, should then be utilised for setting off any loss of that year from other sources.—Circular : No. 23D(XXXIX-4) [F. No. 412(4) 60/TPL], dated 12-9-1960.

Notified Stock Exchanges under clause (ii) in Explana­tion to clause (d) of proviso to clause (5) of section 43 - In exercise of the powers conferred by clause (ii) in the Expla­nation to clause (d) of the proviso to clause (5) of section 43 of the Income-tax Act, 1961 (43 of 1961) read with sub-rule (4) of rule 6DDB of the Income-tax Rules, 1962, the Central Govern­ment hereby notifies the following stock exchanges as recognised stock exchanges for the purposes of the said clause with effect from the date of publication of this notification in the Official Gazette, namely :—

(1) National Stock Exchange of India Limited, Mumbai

(2) Bombay Stock Exchange Limited, Mumbai

2. The Central Government may withdraw the recognition granted to the stock exchange if any of the conditions prescribed in rule 6DDA of the Income-tax Rules, 1962, subject to which the recogni­tion is granted, is violated.

3. This notification shall remain in force until the approval granted by the Securities and Exchange Board of India is with­drawn or expires, or this notification is rescinded by the Cen­tral Government as provided in sub-rule (5) of rule 6DDB of the Income-tax Rules, 1962 - Notification No. - SO 89(E), dated 25-1-2006.

 

Notification Two

In exercise of the powers conferred by clause (ii) in the Explanation to clause (d) of the proviso to sub-section (5) of section 43 of the Income-tax Act, 1961 (43 of 1961), read with rule 6DDB of the Income-tax Rules, 1962, the Central Government hereby notifies MCX Stock Exchange Ltd. as a recognized stock exchange for the purpose of the said clause with effect from the date of publication of this notification in the Official Gazette.

2. MCX Stock Exchange Ltd. shall separately maintain data regarding all transactions registered in the system in which client codes have been allowed to be changed for periodical inspection by the Director-General of Income-tax (Investigation) having jurisdiction over such exchange and provide copies of the relevant information as and when required.

3. The Central Government may withdraw the recognition granted to MCX Stock Exchange Ltd. if any of the conditions specified in rule 6DDA of the Income-tax Rules, 1962, subject to which the recognition is granted, is violated.

4. This notification shall remain in force until the approval granted by the Securities and Exchange Board of India is withdrawn or expires, or this notification is rescinded by the Central Government as provided in sub-rule (5) of rule 6DDB of the Income-tax Rules, 1962. - Notification No. SO 1327(E), dated 22-5-2009.