Meaning of “Commodity”

Case Name : Anz grindlays bank Vs. Dy. CIT

Citation :[2004] 88 ITD  53 (Delhi – Trib.)

Court : ITAT-mumbai

Section : 43(5)

Meaning : According to every dictionary meaning, the word ‘commodity’ would mean ‘any article of trade or commerce’. This should, therefore, be considered as plain and natural meaning. So, any article which is ordinarily purchased and sold in the market would be within the ambit of the word ‘commodity’. Shares, securities and units are freely traded in the market and their price is normally quoted in the daily newspapers. Hence, those items would be included in the plain and natural meaning of the word ‘commodity’.

The word ‘commodity’ in section 43(5) would not only include stocks and shares but also securities and units in their plain and natural meaning. Consequently, trading in such items would fall within the scope of ‘speculative transactions’ subject to other conditions being fulfilled.

Case Name :  CIT  Vs. Shri Bharat R. Ruia (Huf) 

Citation : [2011] 199 taxman 87/241 CTR  1/337 ITR  452/10 taxmann.Com 265 (bom.)

Court : Bombay high court

Section : 43(5)

Meaning : The expression ‘commodity’ is not defined under the act. Therefore, the expression ‘commodity’ in section 43(5) has to be given a meaning as is understood in common parlance. In common parlance, the expression ‘commodity’ means an article of trade or commerce which is tangible in nature.

For the purposes of section 43(5), the expression ‘commodity’ has been expanded to include ‘stocks and shares’. Since transactions in derivatives are not specifically included in section 43(5), the same would fall outside the purview of section 43(5). The expression ‘commodity’ would cover all articles of trade including stocks and shares. Even under section 43(5), the expression ‘commodity’ is not expanded to include ‘stocks and shares’. In fact, use of ‘comma’ in between the word ‘commodity’ and the words ‘including stocks and shares’ in section 43(5) makes it clear that transactions for purchase of any commodity would include transactions for purchase or sale of stocks and shares. In other words, section 43(5) does not seek to expand the scope of expression ‘commodity’ but merely emphasizes that the transaction in commodity includes transactions in stocks and shares. Therefore, transactions in futures contracts like transactions in stocks and shares when settled otherwise than by actual delivery would be speculative transactions under section 43(5).

Case Name : CIT  Vs. New ambadi estates (p.) Ltd. 

Citation : [2012] 20 Taxmann.Com 180/206 taxman 286/250 ctr 75 (mad.)

Court : Madras high court

Section : 43(5)

Meaning : Debenture cannot come within the expression of ‘commodity’ or ‘shares’ as occurring in section 43(5) of the income-tax act.

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