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This query is : Resolved 

I had just read a detail conversation that as per circular to ITO now daily transaction in share market not for dividend just for earning profit will be taxable as business income can any body can tell me where is that detail or send me that circular on kirti_ganatra@yahoomail.com or give detail of this circular by reply

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OUR CA CLUB FORUM ESTEEMED MEMBER CA SRI SAMPAT JAIN REPLIED A SIMILAR QUERY ON OUR CA CLUB FORUM AS FOLLOWS.
IAM REPRODUCING THE SAME FOR YOUR DETAILED INFORMATION.
Please note that section 43 states as under:
speculative transaction”29 means a transaction in which a contract29 for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery29 or transfer of the commodity or scrips:

Provided that for the purposes of this clause—

(a) a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him; or

(b) a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; or

(c) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of his business as such member; 30[or]
__________________________________________
[(d) an eligible transaction in respect of trading in derivatives referred to in clause 31[(ac)] of section 232 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;

[Explanation.—For the purposes of this clause, the expressions—

(i) “eligible transaction” means any transaction,—

(A) carried out electronically on screen-based systems through a stock broker or sub-broker or such other intermediary registered under section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) and the rules, regulations or bye-laws made or directions issued under those Acts or by banks or mutual funds on a recognised stock exchange; and

(B) which is supported by a time stamped contract note issued by such stock broker or sub-broker or such other intermediary to every client indicating in the contract note the unique client identity number allotted under any Act referred to in sub-clause (A) and permanent account number allotted under this Act;

(ii) “recognised stock exchange” means a recognised stock exchange as referred to in clause (f) of section 234 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and which fulfils such conditions as may be prescribed and notified35 by the Central Government for this purpose;]

AS SUCH INCOME FROM DERIVATIVES WILL BE TREATED AS NORMAL BUSNESS INCOME , AND NOT SPECULATIVE BUSINESS INCOME .
AS FOR THE CIRCULAR WHICH YOU REFER I DID NOT COME ACROSS ANY. IF AND WHEN FOUND , I SHALL LET ALL KNOW THROUGH OUR FORUM.
R.V.RAO

Very useful.

My question is not regarding derrivative i am asking for delivery/ cash transaction mean if there is number of cash transaction not for dividend motive but for income earning then it will be taxable as business income instead of capital gain

IF THE REGULAR BUSINESS OF DELIVERY AND CASH TRANSACTIONS OF STOCKS IS CARRIED ,THE INCOME is TAXED AS SPECULATIVE BUSINESS INCOME AS OER SEC 28
( EXPLANATION 2 UNDER CLAUSE (vi) OF SEC 28) , SINCE IT IS A SPECULATIVE BUSINESS .
BUT INCOME FROM, DERIVATIVE TRANSACTIONS AS DESCRIBED IN THE ABOVE REPLIES OF OUR MEMBERS ARE BUSINESS INCOME .
BUT AN ASSESING OFFICER IS GUIDED BY THE MOTIVES OF INVESTOR WHETHER HE IS HOLDING SHARES AS INVETMENT OR STOCK AND WHAT IS THE HOLDING PERIOD OF SHARES AND MOTIVE OF INVESTMENT ETC... TO DECIDE THE QUESTION OF TAXING SUCH GAINS AS BUSINESS INCOME OR OTHERWISE.
R.V.RAO



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