Netting - SEBI Ready Reckoner - SEBI

As per regulation 2(1)(k) of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations,2018 Netting means- the determination by clearing corporation of net payment or delivery obligations of the clearing members of a recognised clearing corporation by setting off or adjustment of the inter-se obligations or claims arising out of buying and selling of securities, including the claims and obligations arising out of the determination by the clearing corporation or stock exchange, on the insolvency, winding-up, liquidation or resolution of any clearing member or trading member or client or such other circumstances as the clearing corporation may specify in its bye-laws, of the transactions admitted for settlement at a future date, so that only a net claim be demanded, or a net obligation be owed; Lalsons Enterprises. Versus Deputy Commissioner Of Income-Tax - 2004 (2) TMI 294 - ITAT DELHI-E In the Para 47 The principle of netting is pressed into serve and not on the basis of the theory of real income but on the basis of the computation provisions relating to the business income. If the interest received is found to have a nexus with the business, still it remains to be excluded from the profits of the business by virtue of Explanation (baa), but the claim is that the quantum of such interest income to be excluded must be determined in accordance with the computation provisions relating to business by allowing expenditure by way of interest which bears a nexus with the interest receipt. The computation provisions includes Section 37(1) under which any expenditure incurred or laid wholly and exclusively for the purpose of the business is to be allowed as deduction. Therefore, any expenditure incurred which has a connection or nexus with the interest receipt has to be allowed as a deduction and only the balance can be excluded from the business profits. There may be other provisions in the computation Sections permitting other allowances or deductions provided a nexus is established between the expenditure and the interest receipt. Thus, there are statutory provisions which authorize the claim of the assessee in the instant case when they contend that the net income by way of interest be computed and excluded from business profits.. For the purpose of applying Explanation (baa) below subsection (4B) of Section 80HHC and while reducing 90% of the receipt by way of interest from the profits of the business, it is only the 90% of the net interest remaining after allowing a set off of interest paid, which has a nexus with the interest received that can be reduced and not 90 percent of the gross interest.