intra-day share trading

r u satify or not

Dear Jignesh,

100 Shares Bought on 01.04.2010 & Sold on 02.04.2010

The above transaction will result in STCG..Reason deliveries are generally settled at T+2 Days - I agree, but Bhai its not that deliveries for 2 days are settled together...In the above situation -

Shares will be credited in the Demat a/c on 03.04.2010 & will be debited on 04.04.2010...u can check the statement of Demat a/c - the above transaction will appear in Demat a/c...whereas in case of intraday transaction they do appear in the trading a/c but not in the Demat a/c...

Originally posted by : Amir
	Dear Jignesh, 100 Shares Bought on 01.04.2010 & Sold on 02.04.2010 The above transaction will result in STCG..Reason deliveries are generally settled at T+2 Days - I agree, but Bhai its not that deliveries for 2 days are settled together...In the above situation - Shares will be credited in the Demat a/c on 03.04.2010 & will be debited on 04.04.2010...u can check the statement of Demat a/c - the above transaction will appear in Demat a/c...whereas in case of intraday transaction they do appear in the trading a/c but not in the Demat a/c...

Fully agree wid Amir bhai's reply.. !

There is also a common point on this matter that the brokerage for the above transaction will be charged at the rate applicable in case of delivery & not at the rate of trading.

Originally posted by : Amir
	Dear Jignesh, 100 Shares Bought on 01.04.2010 & Sold on 02.04.2010 The above transaction will result in STCG..Reason deliveries are generally settled at T+2 Days - I agree, but Bhai its not that deliveries for 2 days are settled together...In the above situation - Shares will be credited in the Demat a/c on 03.04.2010 & will be debited on 04.04.2010...u can check the statement of Demat a/c - the above transaction will appear in Demat a/c...whereas in case of intraday transaction they do appear in the trading a/c but not in the Demat a/c...

 Well i get your point, but kindly go through the following

Definitions of certain terms relevant to income from profits and gains of business or profession.

43.    In sections 28 to 41 and in this section, unless the context otherwise requires³⁹—

                          ⁶³(5)   ⁶⁴“speculative transaction”⁶⁵ means a transaction in which a contract⁶⁵ for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery⁶⁵ 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; ⁶⁶[or]

  ⁶⁶[(d)   an eligible transaction in respect of trading in derivatives referred to in clause ⁶⁷[(ac)] of section 2 ⁶⁸ 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.

                      ⁶⁹[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 2 ⁷⁰ of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and which fulfils such conditions as may be prescribed and notified⁷¹ by the Central Government for this purpose;]

As My Friends , i also agree with your views , but the literal concept and meaning of the I.T.Act says, actual delivery , which in this case is delivery in the demat account ,

since the delivery has not been received it would be considered as speculation and not STCG

Also there are many traders who do not take delivery from their brokers purposely.

As per the above statements if these traders do not sell on same day then it will be treated as STCG, i think it is not proper. If any transaction setlled otherwise than by delivery in said demat account it should be treated as Speculation Income.

If there is any CASE LAW on this , kindly bring out so that it guides us to give a proper eftect to the accouting entries as well showing it in Return of Income.

Dear Jignesh,

Bhai, Delivieries will be effected in the above case thats exactly what I mentioned above with an example...

Credit & Debit in Demant A/c means what???It simply mean that in this transaction deliveries were involved...

Pls reply if u need further clarification..........

Ideally this should be treated as Speculative business income but on the other side we can follow the crowd on the logic that when IT dept is not objecting that can not we do it.

Though this risk should not be taken when the tran value is very higher to avoid any contingency:)

Dear Prakash Sir,

Thanks for ur gesture...!

But Sir its not a wrong practice to treat them as Capital Gains...IT IS NOT A SPECULATIVE TRANSACTION.....

There is only one situation in which above transaction can be treated as speculative but I don't want to go there since till now forum has not reached to a consensus on its being a transaction of Capital Gain...

I want to repeat neither Assessee nor Department is against Law in treating the above transaction as Capital Gain...

Let me take another example -

I am not doing business in Jewellery but I enter into an agreement to sell say 10 grams of gold..k.. I was not having the gold when I entered in the transaction so what I do I purchase 10 grams from somewhere & give that to the person with whome I entered into an agreement...

Now just becos I entered the contract for sale first before having jewellery in my possession , will it become a Speculative transaction??

No it will not then why is this so in case of shares...??  

Dear Amir

The example as mentioned by you is a case of delivery transaction where you purchased the gold and sold the sold through actual delivery though the sale was before purchase but you had actually bought and sold the gold. So this is a clear case of delivery.

However the case being discussed is for shares which are different than the normal business transactions. I have seen one of the case as mentioned by Jignesh and in the case of Buy today and seel tomorrow cases no delivery of shares actually takes place and there are no entries for the same if you refer the demant statement also, though the charges and other levies like brokerage, STT, etc are levied according to the transaction being considered as delivery.

I am also confused regarding the treatment of the same as there was no either debit or credit in the account for that scriptt. So though our intention is to buy for the day and sell tommorrow no actual deleivery is taking place in the above transactions as transactions are settled in T + 2 and shares have already been sold so delivery in actual terms takes place.

Aditya Sir,

Even in case of auction of shares, there is no delivery but the charges & levies like brokerage, STT, etc are levied according to the transaction being considered as delivery.

I think this can constitute deemed delivery. but i have no ground/reason/case law for constituting it as deemed delivery.

but it can be said that broker is acting as an agent & if that broker gets the delivery in his pool a/c, then this must be deemed as the delivery has been made to the principal. & this may be also the reason for charging brokerage at the rate applicable in case of delivery.

Whats ur opinion on this logic prinicipal & agent ?

My all friends....  Idont get why you all having problem.. There is nothing like deemed delivery in shares trading or in F&O.

Intraday means to sell and buy in the same day.... Delivery of transactions of T+2 and all that does not come into picture.. Its not demat everywhere. You can sell it the next day also and its not said as intraday....

There is no physical delivery of shares now in INDIA>>>>>

On practical front, I used to keep my shares in pool a/c of my share broker for even 3-4days.. I think, the broker keeps these shares on behalf of me as an agent. So, at the time when the share comes in the pool a/c, it means delivery has been made.

Please correct me, if i m wrong in the concept of transfer of shares in pool a/c... !

Dear Friends ,

I understand each and every point raised by you all.

But I would like to bring few points in veiw so as to give correct treatment to the transaction which is not a intraday nor a delivery based transaction.

1. Capital Gains Chapter does not say anything on delivery of shares to treat it as STCG or Speculation.

2. Due to Point No 1. - We have to rely upon Section 43(5) which i had quoted in my earliar post.

Based on above points , again i would like to state following:-

1. If Income Tax Department does not contend your case does not mean the treatment given by assessee is correct.

2. Amir bhai - reference your reply on 13-04-2010

     I would like to state that , the said demat account statement does not reflect the transaction settled on 01-04-2010 and 02-04-2010. So that contention of delivery is not relevent.

3. Amir bhai - reference your reply on 14-04-2010, towards prakash sir's answer.

     As i have pointed above if IT Dept does not raise issue against you on this does not mean what assesseee does is correct.

4. Hence from all of above , if we all agree that

    a.   If it is a non-delivery based transaction whether purchased and sold on same day or not shall be treated as Speculation transaction in normal circumstances.

    b.   so prime purpose to treat a transaction as a STCG is delivery is must, otherwise section 43(5) will get attracted.

    c.    So to avoid Section 43(5) it would be necessary to do delivery based transaction.

Any issues on above please feel free to reply. Untill we all reach at one concensus this thread / Post / Forum should bring us together to solve this grave matter.

Thanks a lot for your replies.

Dear Adarsh

There is no doubt in our minds that shares kept in pool account are not your shares and not considered as delivery. The shares kept in the pool account of the broker are ours only and treatment for the same is given as if the shares are in our demat account itself. The point here being discussed is that transactions like buy today & sell tomorrow where you you do not get any actual delivery of shares and the shares are squarred up without the same being reflected in your pool account of the broker or your own demat account for that purpose.

Dear Shivang

Here the topic for discussion is in T + 2 type of settlement of trasactions we do not get delivery of shares even in our pool or demat account. we are not discussing physical purchase & sale of shares.

Also for your reference unlisted company shares are delivered mostly in physical form only.

Also very few of the listed shares which are listed for a very long time are still traded in physical form only. Like Sandur Magnese which has recently be transferred to trading in demat form.

So now it leaves what Jignesh has to say. He states that in T + 2 type of settlement of trasactions we do not get delivery of shares even in our pool or demat account so should they be considered as speculative transactions or as STC Gains. But another problem which arises is that there are some stock which are traded T to T that is the transactions are settled on that day itself. So even in buy today sell tommorrow (BTST) kind of situations they will be treated as capital gains only.

Also what you are trying to emphasis could be found out for a small investor not having many transactions. In case of a regular dealer in shares doing how can you find out BTST types of transactions from regular trading transaction as the contract notes will tell you that there was actual purchase and sale of shares?

Also in case of an arbitrtor who sometime buy in BSE & sell in NSE at the same time still the contract note states the that there was actual purchase and sale of shares? So how can you identify such transactions where there are many?

So though they view expressed by you may be correct but there may be practical problems in implementing the same for as listed here. So what should be the correct treatment?

Someone should someone up all the above points.