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TMI Blog2012 (12) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 2008-09 was completed u/s. 143(3) of the Act. In both the years, the assessee opted for computation of shipping income under Chapter XII-G of the Act which contains "Special Provisions relating to income of shipping companies" in sections 115V to 115VZC. 4. In both the years, the assessee has operated its own ships and has also chartered in ships under 'slot charter' arrangement. Under "slot Charter" arrangement, the assessee would be chartering in only a portion of the ship and not the entire ship. In order to avail the benefit of Chapter XII-G, the assessee has to show that the ship operated by it was a "Qualifying ship" and for that purpose, it has to produce a "Valid certificate indicating its net tonnage" as provided in sec. 115VX(1)(b) of the Act. The assessee submitted the 'Valid certificate" only for "own ships" and did not submit the same in respect of ships chartered in under the 'slot charter' arrangement (for the sake of convenience "part of ship"). According to the assessee, the "valid certificate" is required only for own ships and for ships hired in fully (for the sake of convenience "full ships"). According to the assessee, there is no requirement to sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act). 7. The next question is "What is meant by "Operating ships"? Section 115VB of the Act defines the term "Operating ships" as under:- "Operating ships. 115VB. For the purposes of this Chapter, a company shall be regarded as operating a ship if it operates any ship whether owned or chartered by it and includes a case where even a part of the ship has been chartered in by it in an arrangement such as slot charter, space charter or joint charter. Provided that a company shall not be regarded as the operator of a ship which has been chartered out by it on bareboat charter-cum-demise terms or on bareboat charter terms for a period exceeding three years". 8. The next question is - Whether the benefit of provisions of Chapter XII-G can be availed by all companies, which are "operating ships" as defined in sec. 115VB of the Act? The answer is "No", i.e., the Chapter XII-G is applicable only to a "tonnage tax company", which should be a "Qualifying Company". A tonnage tax company is defined in clause (1) of sec. 115V as "a qualifying company in relation to which tonnage tax option is in force. The term "Qualifying company" is defined in sec. 115VC as under:- "Qualifying compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns (2) and (3). (2) For the purposes of sub-section (1), the tonnage income of each qualifying ship shall be the daily tonnage income of each such ship multiplied by- (a) the number of days in the previous year; or (b) the number of days in part of the previous year in case the ship is operated by the company as a qualifying ship for only part of the previous year, as the case may be. (3) For the purposes of sub-section (2), 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 havening net tonnage Amount of daily tonnage income (1) (2) upto 1,000 Rs. 46 for each 100 tons. exceeding 1,000 but not more than 10,000 Rs. 460 plus Rs. 35 for each 100 tons exceeding 1,000 tons exceeding 10,000 but not more than 25,000 Rs. 3,610 plus Rs. 28 for each 100 tons exceeding 10,000 tons exceeding 25,000 Rs. 7,810 plus Rs. 19 for each 100 tons exceeding 25,000 tons. (4) For the purposes of this Chapter, the tonnage shall mean the tonnage of a ship indicated in the certificate referred to in section 115VX and includes the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of provisions of Chapter XII-G can be availed only by a 'tonnage tax company" in respect of the business of operating "Qualifying ships". In our view, "Operation of Qualifying ships" is a mandatory condition for availing the benefit of Chapter XII-G of the Act. Undoubtedly, the assessee opting to avail the benefit of Chapter XII-G has to necessarily to show that it has generated income from the business of operation of "Qualifying ships". 14. Now we shall deal with the main question, i.e., Is it necessary to show that the ships chartered in under "Slot Charter" arrangement are also "Qualifying ships" by producing the "Valid certificate"? In our view the answer to this question is definitely "YES". The Ld Counsel appearing on behalf of the assessee heavily placed reliance on the provisions of sec. 115VB, "Deemed tonnage" defined in sec. 115VG and "Specific shipping trades defined in sec. 115VI and also on clause 10 of Form No.66 to contend that there is no necessity to furnish the "Valid certificate" in respect of ships chartered in under "Slot charter" arrangement. The net result of the said contention is that the ship chartered in under "slot charter" arrangement need not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertificate' in respect of such ships also. 17. We may also gainfully refer to Form No.66, i.e., the Audit report prescribed under clause (ii) of section 115VW of the Act. Clause (6) of the notes gives an illustration for calculation of average of net tonnage for computing the limit for charterin. For the sake of convenience, we extract below the said clause 6:- "6. Calculation of average of net tonnage for computing the limit for charter-in (illustrative example): Ship No. Ownership/type of operation Net Tonnage No. of days Ton-days Operation Charter-in 1. Qualified ship chartered-in on BBCD basis 11000 365 4015000 - 2. Owned qualified ship 15000 356 5475000 - 3. Owned qualified ship but chartered out on BBC basis to another company for more than three years 20000 365 0 - 4. Qualified ship chartered-in for 5 years on BBC basis 12000 365 4380000 4380000 5. Qualified owned ship-time chartered-out 10000 365 3650000 - 6. Qualified ship - voyage chartered-in 15000 60 900000 900000 7. Qualified ship - time chartered-in 20000 120 2400000 2400000 8. Qualified ship - time chartered-in 15000 365 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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