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F&O income/loss

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(Querist)
27 July 2008 Whether an income by way of transactions in F&O segment can be treated as business income or be treated as income from speculative business? If it can be treated as business income, then can the loss in the said segment be adjusted against any other business income during the same financial year?
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CA RAMESH KUMAR AHUJA

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CA RAMESH KUMAR AHUJA (Expert)
28 July 2008 Income from F&O segment of Stock Exchanges is non speculative in terms of Section 43(5) of the Income Tax Act. However, the income from derivatives of Commodity Exchange is speculative unless it is from a headging transaction. Headging transaction is the transaction entered in the F&O segment for sale of a commodity in hand with intention to cover up the risk of price fluctuation over the period such goods are sold or consumed for sale.

The non speculative part may be adjusted against other non speculative income or loss.
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