State the meaning assigned to "Speculative Transaction" under the Income Tax Act, 1961. Explain with brief reasons whether the following are in the nature of speculative transactions: (i) Hedging contract in respect of r

As per section 43(5) of the Income tax Act, 1961, Speculative Transaction means a transaction in which a contract for the purchase or sales 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 of the shares. Proviso to section 43(5) lists down certain transactions which have been expressly excluded from the scope of speculative transaction. Let us understand the nature of following transactions in light of the said provisions. i) Hedging contract in respect of raw materials or merchandise: In terms of Clause (a) of Proviso to Section 43(5), A contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchandising business to guard against loss through future price fluctuations in respect of his contracts for the actual delivery of goods manufactured by him or merchandise sold by him is not in the nature of a speculative transaction.