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Limit for charter in of tonnage - Section 115VV - Income Tax - Ready Reckoner - Income TaxExtract Limit for charter in of tonnage - Section 115VV Limit upto which qualifying ships can be chartered in by a tonnage tax company - In the case of every company which has opted for tonnage tax scheme, not more than 49% of the net tonnage of the qualifying ships operated by it during any previous year shall be chartered in. The proportion of net tonnage in respect of a previous year shall be calculated based on the average of net tonnage during that previous year in such manner as may be prescribed in consultation with the Director-General of Shipping. As per Rule 11S , the average of net tonnage shall be computed by dividing total number of chartered-in-ton days by the total number of ton days operated by the company. Consequence if the net tonnage of the chartered in ship exceeds 49%:- Where the net tonnage of ships chartered in exceeds the limit of 49% during any previous year, the total income of such company in relation to that previous year shall be computed as if the option for tonnage tax scheme does not have effect for that previous year. Where such limit had exceeded in any two consecutive previous years, the option for tonnage tax scheme shall cease to have effect from the beginning of the previous year following the second consecutive previous year in which the limit had exceeded. Note:- For the purposes of this section, the term chartered in shall exclude a ship chartered in by the company on bareboat charter- cum -demise terms.
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