SECTION – 73: LOSSES IN SPECULATION BUSINESS
The loss of speculation business of any AY is allowed to be set off only against the profits and gains of another speculation business in the same AY and allowed to be carried forward to be claimed as set off in the subsequent year only against the income of any speculation business. Such loss is allowed to be carried forward for 4 AYs immediately succeeding the AY for which the loss was computed.
Section 43(5): defines a Speculative Transaction to mean a transaction in which a contract for purchase or sale of any commodity, including stocks and shares is periodically or ultimately settled otherwise than by actual delivery or transfer of the commodity or scrip.
- Filing of return before the due date is necessary for carry forward of such loss
- Where the loss arises from illegal speculation business, then it cannot be carried forward.
- In respect of unabsorbed depreciation and unabsorbed capital expenditure on scientific research, the effect shall first be given to provisions of section 73 i.e. carried forward of speculation loss shall be first set off.
- Loss from derivative trading shall be treated as loss from non-speculative business, if transactions of derivative is done through NSE or BSE.
EXPLANATION TO SECTION 73
Where any part of the business of a company (whether private or public) consists of sale and purchase of shares of other companies, such company shall be deemed to be carrying on a speculation business to the extent to which the business consists of sale and purchase of shares.
This shall not apply to the following companies:
- Investment Company i.e. the company whose total income mainly consists of income from House Property, capital gains and income from other sources.
- Company whose principal business is of Banking or of granting loans and advances.
c). Company whose principal business is the business of trading in shares.
- Explanation to section 73 is applicable only to a company. It is applicable only when the part of the business of the company consist of purchase and sale of shares i.e. the company must be carrying on some other business in addition to the business of purchase and sale of shares. In such a case, the business of purchase and sale of shares shall be deemed to be speculation business even if deliveries of shares have been affected.
If the principal business of the company is of trading in shares, then the Explanation to section 73 shall not apply even if company is also carrying on some other business. The income from trading in shares shall not be treated as speculation income.
- Explanation to section 73 is applicable only for sale and purchase of shares. The said explanation is not applicable if the company is in the business of sale and purchase of units, debentures.