Derivative transaction
Jan-19th-2010
Dear Mr. Choudhary
Your article on taxation impact of derivative transactions throw extensive light on some grey areas and debatable opinions. Can you further clarify the following:-
> What are the exception to explanation of sec 73? If a company business is of trading in share of other companies, will it be regarded as speculation? Under what circumstances the company business of trading in shares will not be regarded as speculation?
CA Sandeep Soni
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Dear Mr. Soni
If you go through the article, circumstances in which share trading business of a company not treated as speculation already given in the article. Although exceptions of explanation to sec 73 are as follows:
a) It is a Company whose gross total income consists mainly of income which is chargeable under the heads Interest on securities, Income from house property, Capital gains and Income from other sources.
b) It is a Company whose principal business is the business of banking or the granting of loans and advances
If a company dealing in the shares of other company and not satisfy the above two conditions, then company shall be deemed to carrying on a speculation business to the extent to which the business consists of the purchase and sale of shares.
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