Just a moment...

⚠✕
❮ Top
☎ Help
☰
×

By creating an account you can:

Logo TaxTMI
Keyword Search :
AI Tools : New
Ask tax questions in natural language. Powered by AI trained on the TaxTMI legal database. Use AI Tools ➞
Call Us / Help / Feedback✕

Contact Us At :

✉ E-mail: [email protected]

✆ Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters0/2000
Make Most of Text Search ✕
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
    6. Text Search
  6. The system will try to fetch results that contains ALL your words.
  7. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
    8. Text Search
╳
Add to...
You have not created any category. Kindly create one to bookmark this item!
✕
Create New Category
Hide
Title :
Description :
❮❮ Hide
❮ Default View
Expand ❯❯
Close ✕
🔎 TMI Notes - Adv. Search ❯
TEXT SEARCH:

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In:
Main Text + AI Text ❯
  • Main Text
  • Main Text + AI Text
  • AI Text
Law:
---- All Laws----❯
  • ---- All Laws----
  • Benami Property
  • Bill
  • Central Excise
  • Companies Law
  • Customs
  • DGFT
  • FEMA
  • GST
  • GST - States
  • IBC
  • Income Tax
  • Indian Laws
  • Money Laundering
  • SEBI
  • SEZ
  • Service Tax
  • VAT / Sales Tax
Types:
---- All Types ---- ❯
  • ---- All Types ----
  • Act Rules
  • Case Laws
  • Circulars
  • Manuals
  • News
  • Notifications
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
RelevanceDefaultDate
    Case LawsIncome Tax
    Navigating Legal Timelines: The Impact of Incomplete ITBA Orders on Appeal Limitations.
    Case LawsIncome Tax
    Navigating the Thin Line Between Charity and Commerce: Amendment of Trust Deed and Compliance with S...
    Case LawsIncome Tax
    Changing Objectives of Registered Societies: Exemption u/s 11 and survival of the Registration u/s 1...
    Case LawsIncome Tax
    Judicial Scrutiny of Residential Status and Jurisdictional Shift in Income Tax Cases
    Case LawsIncome Tax
    Scrutinizing the Genuineness of Gifts in Income Tax Law: Taxability of Gift u/s 68
    Case LawsIncome Tax
    Interpreting TDS Liability u/s 194-I against Lease Payments: A Legal Analysis of Security Deposit vs...
    Case LawsGST
    Analyzing GST Implications on Free of Cost Supplies in Service Agreements: A Case Study
    Case LawsIncome Tax
    Evaluating Jurisdictional Validity in Taxation: The Significance of Draft Assessment Orders under Se...
    Case LawsIncome Tax
    Breaking Down the Supreme Court's Decision on Double Taxation Avoidance Agreements
    Case LawsIncome Tax
    Balancing Sovereignty and Law: India's Treaty-Making Powers and Domestic Enforcement
    Case LawsIncome Tax
    Navigating DTAAs: A Comparative Analysis of India, Netherlands, France, and Switzerland
    Case LawsIncome Tax
    The OECD Membership Puzzle: Interpreting 'Is' in Double Taxation Agreements
    Case LawsIncome Tax
    The Dual Life of Treaties: Understanding Their Enforcement in Indian Law
    Case LawsPMLA
    Bail, Arrest, and Rights: A Close Look at Recent PMLA Judgment
    Case LawsCustoms
    Classifying Data Collection Devices in Import Regulations: The Kronos 4500 Touch ID Terminal Case
    Case LawsGST
    The Power to Rectify versus Power to review of assessment order: Tax Assessments
    Case LawsPMLA
    From Land Transactions to Money Laundering: A Legal Odyssey
    Case LawsIncome Tax
    Assessment Proceedings and Validity of Section 143(2) Notices: Jurisdictional Clarity and Monetary L...
    Case LawsIndian Laws
    Landmark Judgment on Admissibility of Electronic Evidence: A Legal Analysis
    Case LawsVAT / Sales Tax
    Eligibility of Input Tax Credit (ITC) for purchases made during the manufacturing process of goods: ...
❮
❯
❯❯
MaximizeMaximizeMaximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

    +

    Are you sure you want to delete "My most important" ?

    NOTE:

    Open Link
    Notes
    Showing Results for :
    Reset Filters
    Results Found:
    Show All SummariesHide All Summaries
    Case LawsIncome Tax
    Navigating Legal Timelines: The Impact of Incomplete ITBA Orders on Appeal Limitations.
    Show AI Summary
    Incomplete assessment communication can delay the start of the limitation period for appeals when essential contents are not disclosed.
    Incomplete ITBA order uploads do not void an assessment but may postpone the commencement of the limitation period for appeals because knowledge of decision requires understanding the essential contents; defective communication can justify extension of time even though the assessment's substantive validity remains unaffected.
    Case LawsIncome Tax
    Navigating the Thin Line Between Charity and Commerce: Amendment of Trust Deed and Compliance with S...
    Show AI Summary
    Charitable status preserved where incidental surplus, trustee payments, or deed amendments further educational objectives without private benefit.
    The Court analysed whether surplus generation, fee policies, deed amendments, and payments to trustees removed an educational trust's charitable purpose. It held that incidental surplus and deed changes furthering objectives do not automatically negate charitable character, and payments for genuine services do not necessarily amount to private benefit. Cancellation of registration requires proof of lack of genuineness or objective deviation; mere shortcomings or commercial elements aimed at sustainability are insufficient.
    Case LawsIncome Tax
    Changing Objectives of Registered Societies: Exemption u/s 11 and survival of the Registration u/s 1...
    Show AI Summary
    Alteration of objects: failure to notify tax authority can jeopardise a society's registered status under section 12A.
    A material amendment of a registered society's objects, coupled with failure to intimate the Commissioner under rule 17B and Form No.10A, undermines the basis of registration under Section 12A; Section 12AA(3) addresses activities inconsistent with objects, whereas fundamental change in the objects themselves requires statutory intimation to preserve the original registration.
    Case LawsIncome Tax
    Judicial Scrutiny of Residential Status and Jurisdictional Shift in Income Tax Cases
    Show AI Summary
    Residential status determination can shift tax assessment jurisdiction when overseas activities do not qualify as employment.
    The Tribunal examined whether the appellant's overseas activities constituted employment for residential-status purposes, applying ejusdem generis and noscitur a sociis to conclude they did not. Consequently, the officer of international taxation's assumption of jurisdiction based on non resident status was improper once residential status was contested; the file should have been transferred to the territorially competent assessing officer or an authorised officer. An assessment conducted without such lawful jurisdiction was characterised as legally defective and without effect.
    Case LawsIncome Tax
    Scrutinizing the Genuineness of Gifts in Income Tax Law: Taxability of Gift u/s 68
    Show AI Summary
    Genuineness of gifts requires proof of donor identity and capacity, otherwise taxability follows under assessment rules.
    The High Court examined taxation of receipts treated as gifts, stressing that the assessee must prove the genuineness of gifts by establishing donor identity and the donors' capacity and creditworthiness; acceptance by lower authorities does not relieve the recipient of the burden of proof, and inadequate documentary corroboration justifies reassessment where donations are doubtful.
    Case LawsIncome Tax
    Interpreting TDS Liability u/s 194-I against Lease Payments: A Legal Analysis of Security Deposit vs...
    Show AI Summary
    Advance rent characterization alters TDS obligations under Section 194-I, requiring payers to deduct tax at source.
    Payments labelled as a security deposit that are contractually reduced and adjusted against periodic rent payments are treated as advance rent rather than refundable security, and thus constitute rent for TDS purposes, obliging the payer to deduct tax at source under the statutory withholding framework.
    Case LawsGST
    Analyzing GST Implications on Free of Cost Supplies in Service Agreements: A Case Study
    Show AI Summary
    Non-monetary consideration: free diesel treated as part of taxable value for GTA services under GST implications.
    Whether diesel supplied free of cost by a service recipient constitutes consideration for GST valuation of Goods Transport Agency services is examined, with the analysis concluding that non-monetary benefits provided by recipients may be added to the taxable value and that contractual allocation of free supplies does not displace the statutory valuation framework.
    Case LawsIncome Tax
    Evaluating Jurisdictional Validity in Taxation: The Significance of Draft Assessment Orders under Se...
    Show AI Summary
    Draft assessment procedure required under law: omission invalidates assessment proceedings and denies assessee DRP objection rights.
    Section 144C mandates a non-obstante, mandatory draft assessment procedure for eligible assessees, requiring issuance of a draft order, opportunity to file objections, and consideration by a three-member Dispute Resolution Panel. A foreign entity qualifying as an eligible assessee must be afforded this process; failure to issue the draft order is a substantive lapse that deprives the assessee of the DRP forum and engenders jurisdictional infirmity in any consequent final assessment, demand, or penalty. Revisionary powers do not obviate the Section 144C mandate.
    Case LawsIncome Tax
    Breaking Down the Supreme Court's Decision on Double Taxation Avoidance Agreements
    Show AI Summary
    DTAA incorporation: notification requirement under domestic law limits automatic treaty application across countries and clarifies temporal scope.
    The decision holds that a DTAA requires a mandatory notification under Section 90(1) to be effective domestically, that provisions in a DTAA with one country do not automatically extend to other bilateral agreements without explicit amendment, and that the present-tense term "is" fixes the temporal application of treaty benefits to the date of treaty entry with India.
    Case LawsIncome Tax
    Balancing Sovereignty and Law: India's Treaty-Making Powers and Domestic Enforcement
    Show AI Summary
    Most favoured nation clause interpretation guides treaty effect, subject to domestic notification requirements for implementation.
    The Most Favoured Nation (MFN) clause in tax treaties must be interpreted under Article 31 VCLT principles as reflecting customary international law, with subsequent agreements and state practice serving as authentic means of interpretation. Domestic implementation procedures materially affect treaty operation: comparative practices of other states cannot substitute for India's requirement of formal domestic steps, including issuance of a notification after a treaty trigger event, to assimilate treaty amendments into national law.
    Case LawsIncome Tax
    Navigating DTAAs: A Comparative Analysis of India, Netherlands, France, and Switzerland
    Show AI Summary
    Treaty implementation procedures determine when DTAA modifications bind taxpayers, requiring domestic notification for enforceability.
    In India, DTAA modifications take effect only upon formal domestic notification, preventing automatic retroactive application of third country treaty changes and reflecting a dualist approach requiring assimilation of treaty amendments into domestic law before they bind taxpayers; by contrast, the Netherlands, France, and Switzerland rely on differing domestic mechanisms-executive decrees, parliamentary ratification, or referenda and implementing orders-that may permit retroactive application and integrate treaties into domestic enforceable law.
    Case LawsIncome Tax
    The OECD Membership Puzzle: Interpreting 'Is' in Double Taxation Agreements
    Show AI Summary
    Interpretation of "is" in tax treaties determines when OECD membership triggers treaty benefits under domestic implementation rules.
    Interpretation of the term "is" in DTAAs is context-dependent: although generally present in signification, its temporal application must be determined from the treaty text and purpose. Applied to OECD membership, the operative moment for eligibility to treaty benefits depends on when the DTAA relationship produces the relevant legal consequence, and this assessment must be reconciled with the domestic requirement for legislative action or notification for treaty enforceability.
    Case LawsIncome Tax
    The Dual Life of Treaties: Understanding Their Enforcement in Indian Law
    Show AI Summary
    Treaty Enforcement: legislative enactment required for treaties to create domestic rights; executive negotiation alone is insufficient.
    Treaties do not function as self-executing domestic law; the Union may negotiate and ratify international agreements but legislative enactment is required to create or alter domestic rights and obligations. Under the dualist approach, executive negotiation and foreign measures cannot substitute for domestic incorporation; implementing statutes and notification mechanisms are necessary for tax treaties to be recognized and applied by revenue authorities. Courts may consult treaty texts to resolve ambiguities in domestic implementing laws but cannot themselves import treaty provisions into domestic law absent parliamentary enactment.
    Case LawsPMLA
    Bail, Arrest, and Rights: A Close Look at Recent PMLA Judgment
    Show AI Summary
    Anticipatory bail rights affirmed: non-accused persons may seek protection and PMLA arrests require recorded reasons and prompt court production.
    Anticipatory bail under Section 438 Cr.P.C. is available even before formal accusation and persons not named in an ECIR have locus standi to seek it. Arrest powers under Section 19 of the PMLA require a recorded reasonable belief by the Director and strict compliance with statutory conditions; failure to record reasons or comply with the arrest provisions can vitiate the arrest. Arrested persons must be produced before the court within 24 hours, excluding transit time, to secure judicial oversight and protect liberty.
    Case LawsCustoms
    Classifying Data Collection Devices in Import Regulations: The Kronos 4500 Touch ID Terminal Case
    Show AI Summary
    Classification of data collection devices clarified; device function governs tariff heading with chapter notes guiding treatment.
    The tribunal examined product documentation and found the Kronos 4500's data capture and transmission functions determinative; applying the General Rules of Interpretation and Chapter Note 5(E) to Chapter 84, it concluded the terminal's proximity/badge reader function governed tariff classification rather than mere central server processing capability.
    Case LawsGST
    The Power to Rectify versus Power to review of assessment order: Tax Assessments
    Show AI Summary
    Rectification vs review: assessing authority lacks power to reopen finalized tax assessments; appellate remedy available.
    The assessing authority distinguished between rectification of manifest errors and review of a finalized assessment, concluding it lacked power to review a completed tax assessment merely because the assessee later adjusted claimed input tax credit; the court emphasised the boundary between corrective filings and reopening concluded assessments and noted the availability of appellate remedy to challenge assessment orders.
    Case LawsPMLA
    From Land Transactions to Money Laundering: A Legal Odyssey
    Show AI Summary
    Money laundering investigations: quashing ECIRs premature where disclosure is not mandated, and coercive step restraints are constrained.
    Money laundering inquiries arising from land transactions and property registrations involve independent proceedings under the Prevention of Money Laundering Act; seeking to quash an ECIR is procedurally sensitive where the investigated person lacks a copy and disclosure is not mandated. Such inquiries treat witness status in predicate offences as not determinative of accused status in proceeds of crime investigations, and applications to preclude coercive investigative measures must not substitute for established remedies, while access to investigative records raises transparency questions without creating an absolute entitlement.
    Case LawsIncome Tax
    Assessment Proceedings and Validity of Section 143(2) Notices: Jurisdictional Clarity and Monetary L...
    Show AI Summary
    Jurisdictional validity of Section 143(2) notices: invalid issuance by wrong officer vitiates ensuing scrutiny proceedings.
    The tribunal found that a statutory scrutiny notice issued by an officer without jurisdiction at the time of issuance was defective, and that subsequent action by another assessing officer did not cure the initial defect; jurisdictional allocation must follow administrative monetary thresholds for metropolitan corporate returns, and failure to issue a valid notice at initiation vitiates scrutiny proceedings.
    Case LawsIndian Laws
    Landmark Judgment on Admissibility of Electronic Evidence: A Legal Analysis
    Show AI Summary
    Admissibility of electronic evidence: Section 65-B certificates may be produced at any trial stage if no irreversible prejudice arises.
    A Section 65-B certificate is not required when an electronic record is used as primary evidence; delay in producing the certificate is not per se fatal if it causes no irreversible prejudice, and procedural tools (including witness recall) may be employed to produce and examine forensic reports derived from seized electronic devices.
    Case LawsVAT / Sales Tax
    Eligibility of Input Tax Credit (ITC) for purchases made during the manufacturing process of goods: ...
    Show AI Summary
    Input Tax Credit eligibility limited to tax payable on sale value when purchased inputs are used in manufacturing.
    Eligibility of Input Tax Credit under the UP VAT Act is constrained by the statute's text: credit is allowed only to the extent of tax payable on the sale value of goods or manufactured goods, with a proportional allocation where exempt by products arise. A statutory deeming fiction treats purchased inputs as used in taxable manufacture when by products emerge, enabling ITC claims for taxable outputs and certain exempt by products but disallowing credit for non VAT goods, all governed by strict construction of the statute.

    TMI Notes

    Back

    All TMI Notes

    Showing Results for :
    Reset Filters
      No Records Found

      TMI Notes

      Home› TMI Notes › Income Tax › Manuals › Category › This
      Back

      All TMI Notes

      whatsappJoin Channel
      Showing Results for : Reset Filters
      Income Tax

      Computation of Turnover for the purpose of tax audit u/s 44AB - Speculation Business or Derivatives, futures, and options or Delivery based transactions

      2 June, 2023

      Contents
      Acts
      Plus +
      Summary
      Note

      Note

      -

      Bookmark

      Print

      Print

      Print Options

      Manual - Audit of accounts of certain persons [Tax Audit]

      Section 44AB - Audit of accounts of certain persons carrying on business or profession

      Income-tax Act, 1961

      Determination of Turnover of the Business activities from Speculation transaction or Derivatives, futures, and options or Delivery based transactions always remains in the helm of affairs and debatable.

      In this article, an attempt is being made by the TMI to analyze the provisions as per the Income Tax Act, 1961 alongwith the Guidance Note issued by the ICAI

      Speculation Business

      It means 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. Thus, in a speculative transaction, the contract for sale or purchase which is entered into is not completed by giving or receiving delivery so, as to result in the sale as per value of contract note. In the case of an assessee undertaking speculative transactions there can be both positive and negative differences arising by settlement of various such contracts during the year.

      In such transactions though the contract notes are issued for full value of the purchased or sold asset, the entries in the books of account are made only for the differences.

      Derivatives, futures, and options:

      Such transactions are completed without actual delivery of shares or securities or commodities etc. These are squared up by receipts/payments of differences. The contract notes are issued for the full value of the underlined shares or securities or commodities etc. purchased or sold but entries in the books of account are made only for the differences. The transactions may be squared up any time on or before the striking date. The buyer of the option pays the premia. The turnover in such types of transactions is to be determined as follows:

      1. The total of favourable and unfavourable differences shall be taken as turnover.
      2. Premium received on sale of options is also to be included in turnover. However, where the premium received is included for determining net profit for transactions, the same should not be separately included.
      3. In respect of any reverse trades entered, the difference thereon, should also form part of the turnover.

      Delivery based transactions:

      Where the transaction for the purchase or sale of any commodity including stocks and shares is delivery based whether intended or by default, the total value of the sales is to be considered as turnover.

      How to calculate Turnover/Gross Receipts of Shares, Securities & Derivatives;-

      Speculative transaction

      Derivatives, futures and options

      Turnover = Aggregate of Positives & Negatives, the difference amount will be the ‘Turnover’

      Turnover = Total of Favorable & Unfavorable differences shall be taken as Absolute Turnover.

      Premium, if received in case of Options shall also form part of turnover

       

      Example 1 - For Speculative Business

      Transactions

      Qty

      Buy

      Sell

      Realized

      Turnover

      A

                        58

                           9,52,850

                        9,59,435

                    6,585

                    6,585

      B

                  4,205

                        85,96,345

                      86,55,295

                  58,950

                  58,950

      C

                  3,850

                           3,59,864

                        3,51,614

                   -8,250

                   -8,250

      D

                  2,605

                           5,86,934

                        5,78,365

                   -8,569

                   -8,569

      E

                      800

                           5,98,756

                        5,98,506

                      -250

                      -250

      F

                  7,566

                           8,05,659

                        8,09,659

                    4,000

                    4,000

      G

                  8,995

                        50,06,895

                      50,12,764

                    5,869

                    5,869

      Total

                     1,69,07,303

                  1,69,65,638

                  58,335

                  58,335

       

      Aggregate of Positive & Negative shall form part of turnover i.e., Turnover = ₹58,335

      Example 2 - For Derivatives & Futures

      Transactions

      Qty

      Buy

      Sell

      Realized

      Turnover

      A

                        58

                           9,52,850

                        9,59,435

                    6,585

                    6,585

      B

                  4,205

                        85,96,345

                      86,55,295

                  58,950

                  58,950

      C

                  3,850

                           3,59,864

                        3,51,614

                   -8,250

                    8,250

      D

                  2,605

                           5,86,934

                        5,78,365

                   -8,569

                    8,569

      E

                      800

                           5,98,756

                        5,98,506

                      -250

                        250

      F

                  7,566

                           8,05,659

                        8,09,659

                    4,000

                    4,000

      G

                  8,995

                        50,06,895

                      50,12,764

                    5,869

                    5,869

      Total

                     1,69,07,303

                  1,69,65,638

                  58,335

                  92,473

      Sum of Net Profit

                                                                                    75,404

      Sum of Net Loss

                                                                                    17,069

      Absolute Profit

                                                                                    92,473

       

      Turnover = Absolute profit i.e., Turnover = ₹ 92,473

      For Intraday the same example 2 will be applicable.

      In case of Option, if premium is there then such premium is to add in Absolute Turnover
      For example

      Name of Share

      Nature of transaction

      Lot purchased

      Buy Value

      Sales Value (Premium received on Sale)

      Gain / (Loss)

      Turnover as per GN 2022

      Turnover as per GN 2014

       

      		 

      Sun Limited

      Call Option

      4*1000 =4,000

      60,000

      80,000

      20,000

       

      20,000

       

      80,000 + 20,000 = 100,000

       

      		 

      Star Limited

      Put Option

      1*1500= 500

      30,000

      25,000

      -5,000

      5,000

      25,000+ 5,000 = 30,000

       

      		 
        

      Moon Limited

      Call Option (Not squared off)

      1* 1000 = 1,000

      –

      70,000

      –

      70,000

      70,000

      		  
        

      Total

      95,000

      2,00,000

      		  

      An Opinion - Above mentioned example, as per our understand, is being followed by the professionals in the field. Though there’s different practices are there. Due to complications/confusion in point no. 2 - “Premium received on sale of options is also to be included in turnover. However, where the premium received is included for determining net profit for transactions, the same should not be separately included” regarding treatment of premium received. - Since the end result as per option (i) and (ii) will remain same. 

       

      Full Text:

      Section 44AB - Audit of accounts of certain persons carrying on business or profession

      Income-tax Act, 1961

      Manual - Audit of accounts of certain persons [Tax Audit]

      Manual - Meaning of term "Speculative Transaction"

      Manual - Losses in Speculation Business - Section 73

      Topics

      ActsIncome Tax
      Next ➔