Speculative Transaction - Definition - Law Dictionary Home Dictionary Definition speculative-transaction

Definition :

Speculative transaction, a transaction is not 'speculative' within the meaning of sub-s. (5) of s. 43, Income Tax Act, 1961 where there is a breach of the contract and on a dispute between the parties damages are awarded as compensation by an arbitration award. The definition of 'speculative transaction' in s. 43(5) has to be interpreted by importing the sense conveyed by the law relating to the contracts, Commissioner of Income Tax v. Shantilal Pvt. Ltd., AIR 1983 SC 952 (954): (1983) 3 SCC 561: (1983) 3 SCR 470. [Income Tax Act, 1961, s. 43(5)]

Explanation 2 to s. 24(1) of the Income Tax Act defines a speculative transaction as 'a transaction in which a contract for purchase and 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 .......'. It is apparent that what is contemplated is a real or factual delivery or transfer, and not a notional delivery or transfer, Jute Investment Company Ltd. v. Commissioner of Income Tax, AIR 1980 SC 483: (1980) 1 SCR 902: (1980) 1 SCC 117. [Income-tax Act, 1922, s. 24(1), Expl. 2]