( Expert )
29 September 2010
As per Notification No- SO 89(E), dated 25-01-06, only two exchanges i.e.NSE and BSE are considered as recognised stock exchange for the purpose of section 43(5).
there is one amendment via notification – No.46/2009, dated 22-05-09, which includes contract carried out at MCX will not be treated as speculative.so now 3 exchanges are covered.
you talk about NCDEX which is not covered in notification.so transactions carried out at NCDEX will be speculative and cant be covered u/s 43(5) of IT Act.
below is details of notification for your reference:
CBDT has issued a notification – No.46/2009, dated 22-05-09. The notification specifies
MCX Stock Exchange Ltd. as a recognized stock exchange for the purpose of Sec.
43(5)(d)(ii) of the Income Tax Act.
Summary of Sec. 43(5):
Sec. 43(5) defines the speculative transaction. “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
delivery or transfer of the commodity or scrips.
However, there is a specific exemption provided in provision (d) of the section.
Provision (d) to Sec. 43(5)
An eligible transaction in respect of trading in derivatives referred to in clause [(ac)] of
section 2 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;
Thus, if the transaction in derivatives carried out in recognized stock exchange can not be
treated as speculative transaction eventhough settled otherwise than by delivery
“Recognised stock exchange” for the above provision is elaborated in explanation (ii) of
the above provision.
“Recognised stock exchange” means a stock exchange as referred to in clause (f) of
section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and which
fulfils such conditions as may be prescribed and notified by the Central Government for
Situation before notification:
Before the issuance of the above notification only two exchanges were notified for the
above purpose vide Notification No- SO 89(E), dated 25-01-06:
(1) National Stock Exchange of India Limited, Mumbai
(2) Bombay Stock Exchange Limited, Mumbai
Effect after notification:
After issuance of the above notification; From now onwards even MCX Exchange will be
eligible for the above exception as per provision (d) of Sec. 43(5). So contract carried out
in MCX for the purchase or sale of any commodity will not be treated as speculative
transaction eventhough it is periodically or ultimately settled otherwise than by the
actual delivery or transfer of the commodity.
Security Transaction Tax is levied on all the trades executed except on commodity.
However, CTT – commodity transaction tax is yet not notified. Thus, transaction carried
out in MCX for commodity does not attract CTT and also not consider as speculative
CA Hiral Shah