S.44AB: Turnover in case of Speculative Transaction

Section 44AB of the Income Tax Act: The turnover or gross receipts in respect of transactions in shares,  securities and derivatives may be determined in the following manner.

A speculative transaction means a transaction in which a contract for the purchase or 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. 

Thus, in a speculative transaction, the contract for sale or purchase which is entered into is not completed by giving or receiving delivery so as to result in the sale as per value of contract  note. The contract is settled otherwise and squared up by paying out  the difference which may be positive or negative. As such, in such  transaction the difference amount is 'turnover'. 

In the case of an  assessee undertaking speculative transactions there can be both  positive and negative differences arising by settlement of various such  contracts during the year. Each transaction resulting into whether a  positive or negative difference is an independent transaction. Further,  amount paid on account of negative difference paid is not related to  the amount received on account of positive difference. 

In such  transactions though the contract notes are issued for full value of the  purchased or sold asset the entries in the books of account are made  only for the differences. Accordingly, the aggregate of both positive  and negative differences is to be considered as the turnover of such  transactions for determining the liability to audit vide section 44AB.