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CALL OPTIONS OR PUT OPTIONS ARE TRANSACTIONS OF DERIVATIVE MARKETS AND CANNOT BE TERMED AS SPECULATIVE IN NATURE

Income Tax - Direct Tax Code - DTC - By: - Mr. M. GOVINDARAJAN - Dated:- 23-5-2015 Last Replied Date:- 24-5-2015 - Section 43(5) of the Income Tax Act, 1961 ( Act for short) defines the term speculative transaction as 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. For this purpose- a contract in respect of raw materials or .....

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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; or 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; or an eligible transaction in respect of trading in commodity derivatives .....

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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 recognized stock exchange; and which is supported by a time stamped contract note issued by such stock broker or sub-broker or such other intermediary to e .....

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odity derivative in accordance with the provisions of the Forward Contracts (Regulation) Act, 1952 (74 of 1952) and the rules, regulations or bye-laws made or directions issued under that Act on a recognised association; and which is supported by a time stamped contract note issued by such member or intermediary to every client indicating in the contract note, the unique client identity number allotted under the Act, rules, regulations or bye-laws referred to in sub-clause (A), unique trade num .....

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594 - MADRAS HIGH COURT it was held that the term derivate has to include foreign currency as an underlying security of the derivative. In simple terms derivatives are financial instruments where values depend on the value of other underlying financial instruments. The International Accounting Standard defines the term derivative as a financial instrument- whose value changes in response to the change in a specified interest rate, security price, commodity price, foreign exchange rate, index of .....

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as shares, bonds and foreign currencies. In IVF Advisors Private Limited V. Assistant Commissioner of Income Tax -2015 (5) TMI 706 - ITAT MUMBAI the appellant is an investment management consultant. The assessee filed return for the year 2009-10 declaring total income as NIL. The return was selected for scrutiny by the Department. The Department analyzed the profit and loss account of the assessee. The Department found that the assessee has claimed a loss of ₹ 91,63,235/- and was of the v .....

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Therefore the loss on account of foreign currency futures was not speculative loss. The Commissioner (Appeals) confirmed the assessment order holding that the Assessing Officer has correctly held that such loss was a speculation loss within the meaning of Section 43(5) of the Act. Aggrieved against the order of Commissioner (Appeals), the appellant filed the present appeal before the Tribunal. The assessee reiterated the contentions raised before the authorities below. The Revenue has failed to .....

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ransaction shows that the transaction must have been carried out electronically in accordance with the provisions of Securities Contracts (Regulation) Act and the rules and regulations or bye laws made or directions issued under this Act or by banks or mutual funds on a recognized stock exchange and which is supported by time stamped contract note issued by such stock broker or sub-broker or intermediary to every client indicating in the contract not the unique client identity number and permane .....

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