Turnover and speculation - commodity

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CA Tejas Andharia (Querist)
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21 August 2012 In case of Commodity Derivatives Trading on a Recognized Stock Exchange..

1. What will be the turnover? Absolute sum of profit and loss on each commodity or the actual turnover?

2. Whether it would be considered as a Speculative Transaction or Non-speculative Transaction in light of proviso (d) to section 43(5)?

Amol S Joglekar

Amol S Joglekar (Expert)
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21 August 2012 without delivery is always SPECULATIVE... there is no second opinion for that. But ABSOLUTE value is not yet clarified by the income tax department.

CA Tejas Andharia

CA Tejas Andharia (Querist)
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21 August 2012 Not always speculative even in case of without delivery. Please refer to Section 43(5) proviso (d). The only question is whether it is applicable to commodity derivatives also?

Secondly the question is if we take into account the GN issued by ICAI on Tax audit, Judgement of Growmore Exports pvt. ltd. and Judgement of Babulal, then such a definition of turnover (absolute sum of profit and loss) will also applicable in commodity derivative transactions?

Amol S Joglekar

Amol S Joglekar (Expert)
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21 August 2012 First thing first.... if you are taking the delivery of commodity by exercising the option, then it will not be regarded a speculative. But in most of the cases, where delivery is not taken, the transactions are regarded as SPECULATIVE. now the second one, I personally feel that the same logic/rule of absolute value be permitted. But unfortunately, individual choice has no weight in income tax. So we need to take the call very cautiously.

CA Tejas Andharia

CA Tejas Andharia (Querist)
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21 August 2012 Anyone else will also throw some light? as this is the topic with lots of disputes.

CA. BHAVIK

CA. BHAVIK (Expert)
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22 August 2012 It will be a speculative transaction ; since commodities are not securities to be governed by SCRA Act..

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CA Tejas Andharia

CA Tejas Andharia (Querist)
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22 August 2012 Thanks Bhavikbhai. But What will be turnover? Absolute sum of profit and loss?

Praveen Kumar Rathi

Praveen Kumar Rathi (Expert)
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23 August 2012 dear Mr. Tkandharia plz tell me the name of recognized commodity derivative exchange .

Amol S Joglekar

Amol S Joglekar (Expert)
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23 August 2012 the commodity exchange is very much recognised. The debate was whether it falls under the definition of the same as contemplated under income tax act? Another difference of opinion is "MOD' value i.e. "ABSOLUTE" value. Request you to please contribute your views on this.

Praveen Kumar Rathi

Praveen Kumar Rathi (Expert)
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24 August 2012 MCX Stock Exchange Ltd is diffrent then MCX so it is not recognized SE.

1. it is speculative transaction.

2.the turnover is difference means (profit+Loss)

See notification no 46/2009 dated 22.05.2009 issued by CBDT.

https://law.incometaxindia.gov.in/DIT/Notifications.aspx

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CA Tejas Andharia

CA Tejas Andharia (Querist)
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25 August 2012 @Rathiji: I have gone through the Notification No. 46/2009 as said by you. That notification also say that MCX Stock Exchange Ltd. is a Recognized Stock Exchange.
But, I came to know from somewhere that Commodities are not governed by SCRA but FCRA (Forward Contract Regulation Act). Hence As per Section 43(5)(d)it is speculative transaction.
Whether all are agree? Or someone has some different view yet?

Amol S Joglekar

Amol S Joglekar (Expert)
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25 August 2012 i think this one seems to acceptable. So transaction is speculative. MOD value be considered. thanks Kandharia

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CA Tejas Andharia

CA Tejas Andharia (Querist)
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25 August 2012 It was a healthy discussion. Thanks to all. Please provide your email IDs so that I can mail you all the relevant updates in various laws. My id is tejasinvites@gmail.com

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