THE TENTH SCHEDULE
COMPUTATION OF PROFITS OF BUSINESS OF OPERATING A QUALIFYING SHIP
1. The profits of the business of operating a qualifying ship for a financial year shall be determined in accordance with the formula-
|
A + B -C |
|
Where |
A |
= |
the total tonnage income of the financial year ; |
|
B |
= |
the aggregate of the amounts referred to in sub-section (2) of section 31; and |
|
C |
= |
the amount of negative profit computed under this Schedule in respect of the business of operating a qualifying ship , for any financial year immediately preceeding the relevant financial year. |
2. The tonnage income of the financial year in respect of each qualifying ship shall be the daily tonnage income of the ship multiplied by the number of days during which the ship is operated by the company as a qualifying ship.
3. The daily tonnage income of a qualifying ship having tonnage referred to in column (1) of the Table below shall be the amount specified in the corresponding entry in column (2) of the Table:
TABLE
|
Qualifying ship having net tonnage |
Amount of daily tonnage income |
|
(1) |
(2) |
|
up to 1,000 tons |
Rs. 46 for each 100 tons |
|
exceeding 1,000 tons but not more than 10,000 tons |
Rs. 460 plus Rs. 35 for each 100 tons exceeding 1,000 tons |
|
exceeding 10,000 tons but not more than 25,000 tons |
Rs. 3,610 plus Rs. 28 for each 100 tons exceeding 10,000 tons |
|
exceeding 25,000 tons |
Rs.7,810 plus Rs. 19 for each 100 tons exceeding 25,000 tons. |
4. The profits of the business of operating a qualifying ship shall be treated as 'nil' if the profits determined under rule 1 is negative.
5. The profits computed under this Schedule shall be presumed to have been computed,-
(a) after giving full effect to every loss, allowance or deduction referred to in sub-sections (1) to (3) of section 33, sub-section (1) of section 34 and sections 35 to section 38;
(b) after giving full effect to any deduction allowable under sub-chapter-I of Chapter III in relation to the profits of the business of operating a qualifying ship .
6. The written down value of any business asset used in the business of operating a qualifying ship shall be computed as if the assessee has claimed and has been actually allowed the deduction in respect of depreciation under section 36, initial depreciation under section 37 and terminal allowance under section 38.
7. The amount of common costs (including depreciation) attributable to the business of operating a qualifying ship shall be determined in the prescribed manner.
8. The successor in a business reorganisation of the business of operating a qualifying ship shall be allowed a deduction in respect of the negative profit determined in the case of the predecessor for,-
(a) the financial year immediately preceeding the financial year in which the business reorganisation has taken place if the reorganisation is on the first day of the financial year; and
(b) the period beginning with the first day of the financial year and ending on the day immediately preceeding the date of business reorganisation, in any other case.
9. A company shall continue to be regarded as an operator of a qualifying ship even in the case of temporary cessation of operation of the ship.
10. A company shall not be regarded as the operator in respect of a ship if the ship has been chartered out by it on bareboat charter-cum-demise terms.
11. A ship shall not be considered as qualifying ship if it temporarily ceases to be a qualifying ship.
12. The Board may make rules for the purposes of computation of income from the business of operating a qualifying ship in respect of the following,-
(a) method and time for opting into the tonnage income scheme and the period for, and circumstances under, which the option shall remain in force;
(b) circumstances under which a company may be excluded from the tonnage income scheme;
(c) such other conditions for applicability of tonnage income scheme having regard to the need for generating internal accruals for acquiring new ships and training of crews;
(d) limits for charter in of tonnage;
(e) prevention of abuse of the tonnage income scheme, having regard to the need to ensure that no transaction or arrangement results, or but for the rule prescribed hereunder, would have resulted in a tax advantage being obtained for-
(i) a person other than a qualifying shipping company; or
(ii) a qualifying shipping company in respect of its activities other than its business of operating a qualifying ship ; and
(f) maintenance and audit of accounts.
13. For the purposes of this Schedule, unless the context otherwise requires,-
(a) "bareboat charter" means hiring of a ship for a stipulated period on terms which give the charterer possession and control of the ship, including the right to appoint the master and crew;
(b) "bareboat charter-cum-demise" means a bareboat charter where the ownership of the ship is intended to be transferred after a specified period to the company to whom it has been chartered;
(c) "business of operating qualifying ships" means the core shipping activities and the permitted incidental shipping activities.
(d) "core shipping activities" means,-
(i) the activities relating to operation of a qualifying ship;
(ii) the activities in connection with, or for the execution of, a service contract under which a tonnage tax company agrees to transport a specified quantity of specified products at a specified rate, between designated loading and discharging ports over a specified period by a qualifying ship;
(iii) on-board or on-shore activities of qualifying ship comprising of fares and food and beverages consumed on board; and
(iv) slot charters, space charters, joint charters, feeder services, or container box leasing, of a qualifying ship.
(e) "permitted incidental shipping activity" means any activity relating to chartering out of a qualifying ship on bareboat charter terms, maritime consultancy, loading or unloading of cargo, ship management or maritime education or recruitment if the aggregate accruals or receipts from all such activity does not exceed one fourth per cent of the turnover from core shipping activities.
(f) "place of effective management of the company" means-
(i) the place where the board of directors of the company or its executive directors, as the case may be, make their decisions; or
(ii) in a case where the board of directors routinely approve the commercial and strategic decisions made by the executive directors or officers of the company, the place where such executive directors or officers of the company perform their functions;
(g) "qualifying shipping company" means a company, which fulfills all the following conditions namely: -
(i) it is an Indian company;
(ii) the place of effective management of the comapny is in India;
(iii) it owns at least one qualifying ship; and
(iv) the main object of the company is to carry on the business of operating ships.
(h) "qualifying ship" means a ship, which fulfills all the following conditions namely:-
(i) it is a sea going ship or vessel of fifteen net tonnage or more;
(ii) it is a ship registered or licensed under, or for the purposes of the Merchant Shipping Act, 1958;
(iii) a certificate indicating the net tonnage of the ship has been issued under, or for the purposes of, the Merchant Shipping Act, 1958 and is in force;
(iv) it is owned or chartered in by the qualifying shipping company wholly, or partly in an arrangement such as slot charter, space charter, or joint charter; and
(v) the ship is not a,-
(A) a seagoing ship or vessel if the main purpose for which it is used is the provision of goods or services of a kind normally provided on land;
(B) fishing vessel as defined in clause (12) of section 3 of the Merchant Shipping Act, 1958;
(C) factory ship including a vessel providing processing services in respect of the processing of the fishing produce;
(D) pleasure craft, being a ship primarily used for the purposes sport or recreation;
(E) harbour and river ferries;
(F) offshore installations; and
(G) a qualifying ship which is used as a fishing vessel for a period of more than thirty days during a previous year.
(i) "seagoing ship" means a ship if it is certified as such by the competent authority of any country;
(j) "tonnage" shall mean,-
(i) the tonnage specified on a certificate issued under, or for the purposes of, Merchant Shipping Act, 1958; and
(ii) the deemed tonnage in a case where an arrangement has been entered into by the qualifying company for purchase of slots, slot charter or sharing of a qualifying ship, calculated in the prescribed manner.
(k) "total tonnage income" shall mean the aggregate of tonnage income from operating of all the qualifying ships.
