“Share Broker” is an agent that charges a fee or commission for executing buy and sells orders submitted by an investor. He sells or buys stocks on behalf of a customer, charging a fee or commission for his services and may also offer advices in which stock or funds to invest. He holds the delivery merely on behalf of his customer. But the question arises whether the sale of securities by a share broker on behalf of his client shall be included in his turnover or not for the income tax purpose?

The Income Tax Act, 1961 (the Act) provides that only the brokerage which is being accounted for in the books of account of share brokers should be taken into account for considering the limits specified under section 44AB of the Act. However, for the transactions entered into by the share broker on his personal account, the sale value should also be taken into account for considering the limit.

Share broker is like a kachha arahtias who is entitled to brokerage and is not interested in the profits and losses made by his constituents. Similarly like a kachha arahtias a share broker acts only as an agent of his constituent and not principal. So, whatever are the modalities of the transactions for the purchase and sale of shares made by the share broker for and behalf of his constituent, the position is undisputed that the share broker does not have any interest whatsoever in the transactions except brokerage for the services rendered by him in bringing the buyer and seller together.

Thus share broker acts merely as an agent to bring the buyer and seller together. In fact a share broker is subject to rules and regulations of the stock exchange, whose working is monitored and overseen by the Securities Exchange Board of India (SEBI) so as to ensure transparency in the transactions entered into by the share broker on behalf of his principal.

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