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2010 (2) TMI 22 - HC - Income TaxSpeculative transaction – Section 43(5) - The Assessing Officer as well as the Commissioner of Income Tax (Appeals) held that the sum of Rs 13,33,688/-, which was treated by the assesee as a loss incurred on bargain settlement, amounted to a “speculative transaction” falling within the meaning of Section 43(5) of the Income Tax Act, 1961. Consequently, the Assessing Officer as well as the Commissioner of Income Tax (Appeals) disallowed the claim of set off to the extent of Rs 13,33,688/-. - according to the Tribunal, the loss had been incurred by the assessee in the regular course of business with regard to breach of contract. The Tribunal directed that the loss, as claimed by the assessee, be set off against the regular business income. – held that - even if we assume for the sake of argument that the said transactions amounted to speculative transactions as defined in Section 43(5), the same would be of no help to the revenue inasmuch as Section 43(5) is merely a definitional clause defining as to what a speculative transaction is for the purposes of Section 28 to Section 41 of the said Act. It is only when the speculative transaction, as defined in Section 43(5), matures into a speculative business as appearing in Explanation 2 to Section 28 that any effects would flow from the said definition. In case the speculative transaction, as defined in Section 43(5) of the said Act, matures into a speculative business, then the loss in such a transaction can only be set off against the gains or profits of a speculative business in terms of Section 73 of the said Act.
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