S. 73 : Loss in share trading-Speculation loss-Set-off-Not allowable against profit from F&O transactions-Arbitrage operations- Explanation to S.73 operates independently of S.43(5)-Speculative loss cannot be adjusted against F&O business income. [S. 28(i), 43(5)]
The assessee, a stock broker, engaged in arbitrage operations, simultaneously purchased shares in the cash segment and sold them in the F&O segment. While it incurred losses in the cash segment, it earned profits in the F&O segment, resulting in an overall gain. The AO held that loss in the cash segment constituted speculation loss under Explanation to S.73 and disallowed set-off against F&O profits. The CIT(A) allowed set-off following earlier ITAT orders. The Judicial Member, relying on Snowtex Investment Ltd. v. PCIT (2019 )414 ITR 227) (SC) and PCIT v. Diamond Securities (P) Ltd. (2021)431 ITR 201) (MP) HC), held that cash segment loss is speculative and cannot be set off. The Accountant Member distinguished Snowtex, holding arbitrage as a composite business. On reference u/s 255(4), the Third Member held that F&O profits are business income by virtue of S.43(5), but delivery-based share trading loss is speculation loss under Explanation to S.73. Since both provisions operate independently, speculation loss cannot be set off against F&O business income. Accordingly, the Revenue’s appeal was allowed. (ITA Nos. 3144, 6362, 3175 & 6114/Mum/2018 dt . 18.08.2025 (AY. 2012-13 , 2013-14 )
DCIT v. JM Financial Services Ltd. (TM) (Mum.)(Trib.) www.itatonline.org
[Coram : Hon’ble Shri Mahavir Singh, VP]