Loss from intra day trading.

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M S UMESH (Querist)
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01 December 2018 For AY 2016-17, I have made a profit of Rs.2,00,000/- and suffered a loss of Rs.4,00,000/-, in all net loss of Rs.2,00,000/ on intra day share trading. I have filed before the AO, unaudited P&L Statement issued by my Broker .
AO is saying that he will impose tax on the profit component of Rs.2,00,000/- and will not recognise the loss of Rs.4,00,000/-. Is this correct? Can he selectively take only the profit portion and ignore the loss portion in the same P&L Statement?

Expert opinion is solicited.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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01 December 2018 AO is not right, Intra day trading is speculative. Speculative loss can be adjusted against speculative gain.

Z (Expert)
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01 December 2018 The action of AO is not correct.
The turnover in the case of an intraday transaction is the aggregate of profits and the aggregate of the losses.

Extracts from guidance note on the applicability of tax audit.
[https://resource.cdn.icai.org/34728gn-taxaudit-dtcicai.pdf]
Speculative transaction: A 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. Thus, in a speculative transaction, the contract
for sale or purchase which is entered into is not completed by giving or
receiving delivery so as to result in the sale as per value of contract
note. The contract is settled otherwise and squared up by paying out
the difference which may be positive or negative. As such, in such
transaction the difference amount is 'turnover'. In the case of an
assessee undertaking speculative transactions there can be both
positive and negative differences arising by settlement of various such
contracts during the year. Each transaction resulting into whether a
positive or negative difference is an independent transaction. Further,
amount paid on account of negative difference paid is not related to
the amount received on account of positive difference. In such
transactions though the contract notes are issued for full value of the
purchased or sold asset the entries in the books of account are made
only for the differences. Accordingly, the aggregate of both positive
and negative differences is to be considered as the turnover of such
transactions for determining the liability to audit vide section 44AB.

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