Meaning of “Any speculation business”

The meaning of any speculation business under section 70 to 79 of the Income Tax Act is not defined in the act itself. But we can take guidance from decisions by various high courts. Here are excerpts of courts orders in which the Hon’ble High Court tried to explain the meaning of any speculation business.

Meaning of any speculation business defined by court

The phrase ‘any speculation business’ used in section 70 to 79 of the Income Tax Act came up before hon’ble Bombay high court in CIT vs. Lokmat Newspapers (P.) Ltd. [2010] 189 Taxman 370/230 CTR 521/322 ITR 43 (Bom.) and it explained.

Meaning: The expression ‘any speculation business’ in explanation to section 73 means a speculation business of the assessee in respect of which profits and gains for the assessment year in question have arisen and there is no justification to restrict the content of that speculation business where profits have arisen by excluding a business involving actual delivery of shares.

No such restriction is found in the explanation. In other words, once the assessee is carrying on a speculation business and the profits and gains have arisen from that business during the course of the assessment year, the assessee is entitled to set off of the losses carried forward from a speculation business arising out of a previous assessment year.

Section 70 to 79 of Income Tax Act

Set off of loss from one source against income from another source under the same head of income.

70. (1) Save as otherwise provided in this Act, where the net result for any assessment year in respect of any source falling under any head of income, other than “Capital gains“, is a loss, the assessee shall be entitled to have the amount of such loss set off against his income from any other source under the same head.

(2) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any short-term capital asset is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset.

(3) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any capital asset (other than a short-term capital asset) is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset not being a short-term capital asset.

In this article, you can get guidance from high courts on the meaning of any speculation business under section 70 to 79 of the Income Tax Act.

Updated up to Finance Act 2021