CA Final · Direct Tax Laws & International Taxation · Aggregation of Income, Set Off or Carry Forward of Losses
Kaveri Securities Ltd is a company whose principal business is manufacturing textiles. Its business also includes purchase and sale of shares of other companies, which it carries on as a part of its business. Its gross total income does not consist mainly of house property, capital gains or other sources income. In the tax year it suffered a loss of Rs 2,00,000 on such share transactions, with no delivery-related exception relevant. Which statement is correct under the Income-tax Act, 2025?
The share dealing is deemed a speculation business to the extent of that activity. The exceptions apply only where gross total income is mainly from house property, capital gains or other sources, or where the principal business is share trading, banking or lending. Neither applies, so the loss is a speculation loss.
- AThe share business is deemed a speculation business to the extent of the purchase and sale of shares, so the loss is a speculation lossCorrect
- BThe loss is a normal business loss because textiles is the principal business
- CThe loss is a specified business loss under section 114
- DThe loss can be set off against income from house property
Explanation
Section 113(5) deems a company with part of its business consisting of purchase and sale of shares of other companies to carry on speculation business to that extent. The exceptions in 113(6) apply only if GTI is mainly from house property, capital gains or other sources, or the principal business is share trading, banking or lending. Neither applies, so the loss is speculation loss.
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