Profit from trading in stock market

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 May 2015 Mr. X dealing in shares. He used to do everyday day-trade(intraday) in shares. And also used to deal in delivery based(for short term period)shares.
So now my questions are:

1) Whether it is to be treated as Business or Speculative business or Capital gain for both the profit mentioned above?

2) How to calculate the Turnover for the purpose of Audit u/s 44AB ?

CA. SHIVA SHANKARA R. SHETTY

CA. SHIVA SHANKARA R. SHETTY (Expert)
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05 May 2015 It has to be treated as Speculative business. The turnover is, difference between selling price and buying price.

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Querist : Anonymous

Querist : Anonymous (Querist)

07 May 2015 The difference amount is to be treated as "Gross Receipts".

Then i dont have to pay under Capital Gain.

And some shares I purchased in delivery based(purchased today sell tomorrow on credit basis) then turnover how calculated?

For e.g.
I purchased shares as on 01.01.14 of Bajaj Auto 300 Nos @ Rs. 4200 per share, total amount will be Rs. 12,60,000/- and sold it on 02.01.2014(on next day)
I have done this type of transaction near about 50 times during the year.
So now the amount of purchase/sales was near about Rs. 6.30 crores.

Now I will liable for Audit?

CA. SHIVA SHANKARA R. SHETTY

CA. SHIVA SHANKARA R. SHETTY (Expert)
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08 May 2015
The aggregate of the difference amount, i.e., positive difference (profit) and negative (loss) difference should be considered as turnover for the purpose of determining the liability to audit under Section 44AB of the IT Act.

If the transaction for the purchase or sale of any commodity including stocks and shares is delivery based, it means the actual delivery has taken place. Hence, the total value of the sale is to be considered as turnover for determining the liability to audit under Section 44AB.

One more issue may arise: is the purchase or sale of shares undertaken by the assessee is in the course of business or investment? The answer to this issue will depend on the facts and nature of transaction.

Books of accounts have to be maintained to determine the turnover of the business. The total turnover for intra-day trading in shares will be the aggregate of both positive and negative differences of all the transactions. For example, if there is a profit in one transaction and loss in another, the profit and loss of both the transactions have to be added for determining the turnover.

Therefore, under Section 44AB, books of accounts have to be audited if the total turnover as per speculation and delivery-based transaction of the assessee in the course of business exceeds Rs 100 lakh.

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