Two Gujarat based companies notified as recognised stock exchange for derivative transaction not to be treated as speculative transaction
Section 43(5) of the Income Tax Act, 1961 defines a “speculative transaction” as the one in which a contract for the 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 scrips.
However clause (d) of the proviso exempts transactions in derivative carried out in a recognised stock exchange.
The Central Government/CBDT, for the purpose of said clause, has issued two notifications (No. 35/2018 and No. 36/2018) to notify the following two companies as a ‘recognised stock exchange’ :
(a) India International Exchange (IFSC) limited, Gandhinagar,Gujarat (PAN: AAGCB8819B)
(b) NSC IFSC Limited Gandhinagar,Gujarat (PAN: AAFCN4161P)
The recognition is subject to fulfilment of the following conditions in respect of trading in derivatives,namely;
(i) the stock exchange shall have the approval of the Securities and Exchange Board of India established under the Securities and Exchange Board of India Act, 1992(15 of 1992) in respect of trading in derivatives and it shall function in accordance with the guidelines or conditions laid down by the Securities and Exchange Board of India;
(ii) It shall ensure that the particulars of the client (including unique client identity number and PAN) are duly recorded and stored in its databases;
(iii) It shall maintain a complete audit trail of all transactions (on respect or derivative market) for a period of seven years on its system;
(iv) It shall ensure that transactions (in respect of derivative market) once registered in the system are not erased;
(v) it shall ensure that the transactions (in respect of derivative market) once registered in the system are modified only in cases of genuine error and maintain data regarding all transactions (in respect of derivative market) registered in the system which have been abcaus.in modified and submit a monthly statement In Form No. 3BB to the Director General or Income-tax (Intelligence and Criminal Investigation), New Delhi within fifteen days from the last day of each month to which such statement relates.
These notification shall remain in force until the approval granted by the Securities and Exchange Board of India is withdrawn or expires. Further, if any of the conditions stipulated above are violated, it may lead to rescinding of the notification.
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