TMI BlogInsertion of new Chapter XII-GX X X X Extracts X X X X X X X X Extracts X X X X ..... duce; (e) "fishing vessel" shall have the meaning assigned to it in clause (12) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958); (f) "pleasure craft" means a ship of a kind whose primary use is for the purposes of sport or recreation; (g) "qualifying company" means a company referred to in section 115VC; (h) "qualifying ship" means a ship referred to in section 115VD; (i) "seagoing ship" means a ship if it is certified as such by the competent authority of any country; (j) "tonnage income" means the income of a tonnage tax company computed in accordance with the provisions of this Chapter; (k) "tonnage tax activities" means the activities referred to in sub-sections (2) and (5) of section 115V-I; (l) "tonnage tax company" means a qualifying company in relation to which tonnage tax option is in force; (m) "tonnage tax scheme" means a scheme for computation of profits and gains of business of operating qualifying ships under the provisions of this Chapter. B.-Computation of tonnage income from business of operating qualifying ships 115VA. Computation of profits and gains from the business of operating qualifying ships -Notwithstanding anything to the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ishing vessels; (iii) factory ships; (iv) pleasure crafts; (v) harbour and river ferries; (vi) off-shore installations; (vii) dredgers; (viii) a qualifying ship which is used as a fishing vessel for a period of more than thirty days during a previous year. 115VE. Manner of computation of income under tonnage tax scheme -(1) A tonnage tax company engaged in the business of operating qualifying ships shall compute the profits from such business under the tonnage tax scheme. (2) The business of operating qualifying ships giving rise to income referred to in sub-section (1) of section 115V-I shall be considered as a separate business (hereafter in this Chapter referred to as the tonnage tax business) distinct from all other activities or business carried on by the company. (3) The profits referred to in sub-section (1) shall be computed separately from the profits and gains from any other business. (4) The tonnage tax scheme shall apply only if an option to that effect is made in accordance with the provisions of section 115VP. (5) Where a company engaged in the business of operating qualifying ships is not covered under the tonnage tax scheme or, has not made an option to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sting of kilograms shall be ignored and thereafter if such tonnage is not a multiple of hundred, then, if the last figure in that amount is fifty tons or more, the tonnage shall be increased to the next higher tonnage which is a multiple of hundred and if the last figure is less than fifty tons, the tonnage shall be reduced to the next lower tonnage which is a multiple of hundred; and the tonnage so rounded off shall be the tonnage of the ship for the purposes of this section. (6) Notwithstanding anything contained in any other provision of this Act, no deduction or set off shall be allowed in computing the tonnage income under this Chapter. 115VH. Calculation in case of joint operation, etc -(1) Where a qualifying ship is operated by two or more companies by way of joint interest in the ship or by way of an agreement for the use of the ship and their respective shares are definite and ascertainable, the tonnage income of each such company shall be an amount equal to a share of income proportionate to its share of that interest. (2) Subject to the provisions of sub-section (1), where two or more companies are operators of a qualifying ship, the tonnage income of each company sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the session or the successive sessions aforesaid, both Houses agree in making any modification in the notification, or both Houses agree that the notification should not be issued, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that notification. (5) The incidental activities shall be the activities which are incidental to the core activities and which may be prescribed for the purpose. (6) Where a tonnage tax company operates any ship, which is not a qualifying ship, the income attributable to operating such non-qualifying ship shall be computed in accordance with the other provisions of this Act. (7) Where any goods or services held for the purposes of tonnage tax business are transferred to any other business carried on by a tonnage tax company, or where any goods or services held for the purposes of any other business carried on by such tonnage tax company are transferred to the tonnage tax business and, in either case, the consideration, if any, for such transfer as recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s year of the tonnage tax scheme (hereafter in this section referred to as "the first previous year" shall be computed on the written down value of the qualifying ships as specified under sub-section (2). (2) The written down value of the block of assets, being ships, as on the first day of the first previous year, shall be divided in the ratio of the book written down value of the qualifying ships (hereafter in this section referred to as the "qualifying assets") and the book written down value of the non-qualifying ships (hereafter in this section referred to as the other assets). (3) The block of qualifying assets as determined under sub-section (2) shall constitute a separate block of assets for the purposes of this Chapter. (4) For the purposes of sub-section (2), the book written down value of the block of qualifying assets and the block of other assets shall be computed in the following manner, namely:- (a) the book written down value of each qualifying asset and each other asset as on the first day of the previous year and which form part of the block of assets to be divided shall be determined by taking the book written down value of each asset appearing in the books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... located in the ratio of the number of days for which the asset was used for the tonnage tax business and for purposes other than tonnage tax business. Explanation 1.- For the removal of doubts, it is hereby declared that for the purposes of this Act, depreciation on the block of qualifying assets and block of other assets so created shall be allowed as if such written down value referred to in sub-section (2) had been brought forward from the preceding previous year. Explanation 2.- For the purposes of this section, "book written down value" means the written down value as appearing in the books of account. 115VL. General exclusion of deduction and set off, etc -Notwithstanding anything contained in any other provision of this Act, in computing the tonnage income of a tonnage tax company for any previous year (hereafter in this section referred to as the "relevant previous year") in which it is chargeable to tax in accordance with this Chapter- (i) sections 30 to 43B shall apply as if every loss, allowance or deduction referred to therein and relating to or allowable for any of the relevant previous years, had been given full effect to for that previous year itself; (ii) no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of sub-section (2) of section 115VK. 115V-O.Exclusion from provisions of section 115JB -The book profit or loss derived from the activities of a tonnage tax company, referred to in sub-section (1) of section 115V-I, shall be excluded from the book profit of the company for the purposes of section 115JB. C.-Procedure for option of tonnage tax scheme 115VP. Method and time of opting for tonnage tax scheme -(1) A qualifying company may opt for the tonnage tax scheme by making an application to the Joint Commissioner having jurisdiction over the company in the form and manner as may be prescribed, for such scheme. (2) The application under sub-section (1) may be made by any existing qualifying company at any time after the 30th day of September, 2004 but before the 1st day of January, 2005 (hereafter referred to as the "initial period"): Provided that- (i) a company incorporated after the initial period; or (ii) a qualifying company incorporated before the initial period but which becomes a qualifying company for the first time after the initial period, may make an application within three months of the date of its incorporation or the date on which it became a qualify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in accordance with the other provisions of this Act. 115VR. Renewal of tonnage tax scheme -(1) An option for tonnage tax scheme approved under sub-section (3) of section 115VP may be renewed within one year from the end of the previous year in which the option ceases to have effect. (2) The provisions of sections 115VP and 115VQ shall apply in relation to a renewal of the option for tonnage tax scheme in the same manner as they apply in relation to the approval of option for tonnage tax scheme. 115VS. Prohibition to opt for tonnage tax scheme in certain cases - A qualifying company, which, on its own, opts out of the tonnage tax scheme or makes a default in complying with the provisions of section 115VT or section 115VU or section 115VV or whose option has been excluded from tonnage tax scheme in pursuance of an order made under sub-section (1) of section 115VZC, shall not be eligible to opt for tonnage tax scheme for a period of ten years from the date of opting out or default or order, as the case may be. D.-Conditions for applicability of tonnage tax scheme 115VT. Transfer of profits to Tonnage Tax Reserve Account -(1) A tonnage tax company shall, subject to and in acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or profits or for remittance outside India as profits or for the creation of any asset outside India. (4) Where any amount credited to the Tonnage Tax Reserve Account under sub-section (1),- (a) has been utilised for any purpose other than that referred to in clause (a) or clause (b) of sub-section (3); or (b) has not been utilised for the purpose specified in clause (a) of sub-section (3); or (c) has been utilised for the purpose of acquiring a new ship as specified in clause (a) of sub-section (3), but such ship is sold or otherwise transferred, other than in any scheme of demerger by the company to any person at any time before the expiry of three years from the end of the previous year in which it was acquired, an amount which bears the same proportion to the total relevant shipping income of the year in which such reserve was created, as the amount out of such reserve so utilised or not utilised bears to the total reserve created during that year under sub-section (1) shall be taxable under the other provisions of this Act- (i) in a case referred to in clause (a), in the year in which the amount was so utilised; or (ii) in a case referred to in clause (b), in the year i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous years, the option of the company for tonnage tax scheme shall cease to have effect from the beginning of the previous year following the fifth consecutive previous year in which the failure to comply with the minimum training requirement under sub-section (1) had occurred. 115VV. Limit for charter in of tonnage -(1) In the case of every company which has opted for tonnage tax scheme, not more than forty-nine per cent. of the net tonnage of the qualifying ships operated by it during any previous year shall be chartered in. (2) The proportion of net tonnage referred to in sub-section (1) in respect of a previous year shall be calculated based on the average of net tonnage during that previous year. (3) For the purposes of sub-section (2), the average of net tonnage shall be computed in such manner as may be prescribed in consultation with the Director-General of Shipping. (4) Where the net tonnage of ships chartered in exceeds the limit under sub-section (1) 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. (5) Where the limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny or companies, then, subject to the other provisions of this section, the provisions relating to the tonnage tax scheme shall, as far as may be, apply to the amalgamated company if it is a qualifying company: Provided that where the amalgamated company is not a tonnage tax company, it shall exercise an option for tonnage tax scheme under sub-section (1) of section 115VP within three months from the date of the approval of the scheme of amalgamation: Provided further that where the amalgamating companies are tonnage tax companies, the provisions of this Chapter shall, as far as may be, apply to the amalgamated company for such period as the option for tonnage tax scheme which has the longest unexpired period continues to be in force: Provided also that where one of the amalgamating companies is a qualifying company as on the 1st day of October, 2004 and which has not exercised the option for tonnage tax scheme within the initial period, the provisions of this Chapter shall not apply to the amalgamated company and the income of the amalgamated company from the business of operating qualifying ships shall be computed in accordance with the other provisions of this Act. 115VZ. De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produces to the tonnage tax company more than ordinary profits which might be expected to arise from tonnage tax activities. 115VZC. Exclusion from tonnage tax scheme -(1) Where a tonnage tax company is a party to any transaction or arrangement referred to in sub-section (1) of section 115VZB, the Assessing Officer shall, by an order in writing, exclude such company from the tonnage tax scheme: Provided that an opportunity shall be given by the Assessing Officer by serving a notice calling upon such company to show cause, on a date and time to be specified in the notice, why it should not be excluded from the tonnage tax scheme: Provided further that no order under this sub-section shall be passed without the previous approval of the Chief Commissioner. (2) The provisions of this section shall not apply where the company shows to the satisfaction of the Assessing Officer that the transaction or arrangement was a bona fide commercial transaction and had not been entered into for the purpose of obtaining tax advantage under this Chapter. (3) Where an order has been passed under sub-section (1) by the Assessing Officer excluding the tonnage tax company from the tonnage tax scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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