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TMI BlogDetermination of Tonnage for Shipping Companies under Indian Tax Law : Clause 227(9) of the Income Tax Bill, 2025 Vs. Section 115VX of the Income Tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... ng actual profits, the regime taxes notional income based on the net tonnage of ships operated by qualifying companies. This system is intended to enhance the global competitiveness of Indian shipping companies, provide fiscal certainty, and align the Indian tax regime with international practices. Clause 227(9) is a part of a broader legislative overhaul proposed in the Income Tax Bill, 2025, which seeks to modernize and consolidate the law. Section 115VX, on the other hand, is an existing provision under Chapter XII-G of the Income Tax Act, 1961, which introduced and governs the tonnage tax scheme in India. Both provisions are fundamentally similar in their structure and objective, but a detailed analysis is necessary to highlight nuance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , recognizing the growing importance of inland water transport. 3. Detailed Analysis of Clause 227(9) Breakdown and Interpretation * Sub-clause (a): Tonnage Determination by Certificate The tonnage of a ship or inland vessel is to be determined strictly as per the certificate indicating its tonnage. This removes any room for alternative methods of measurement or estimation, ensuring objectivity and consistency. * Sub-clause (b): Definition of "Valid Certificate" * (i) Ships Registered in India * (A) Length less than 24 metres: Certificate under the Merchant Shipping (Tonnage Measurement of Ship) Rules, 1987, made under the Merchant Shipping Act, 1958. * (B) Length 24 metres or more: International tonnage certificate under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y other evidence acceptable to the Director-General of Shipping" for foreign ships introduces some subjectivity, which could potentially lead to inconsistent application unless further clarified by rules or guidelines. * Overlap of Regulatory Jurisdiction: The provision references multiple statutes (Merchant Shipping Act, 1958; Inland Vessels Act, 2021), which may lead to jurisdictional overlaps, especially for vessels operating in both inland and coastal waters. * Update and Harmonization: The reference to the Merchant Shipping (Tonnage Measurement of Ship) Rules, 1987, presumes that these rules will remain unchanged. Any amendment to the underlying rules could necessitate corresponding legislative updates. 4. Practical Implications ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ysis: Clause 227(9) vs. Section 115VX Aspect Section 115VX of the Income Tax Act, 1961 Clause 227(9) of the Income Tax Bill, 2025 Applicability Ships and, post-amendment, inland vessels for tonnage tax scheme Ships and inland vessels; explicitly covers both categories Definition of Valid Certificate Specifies certificates under Merchant Shipping Act, 1958, and Inland Vessels Act, 2021 Repeats same requirements, consolidates language for clarity Ships <24m (India) Certificate under Merchant Shipping (Tonnage Measurement of Ship) Rules, 1987 Same Ships >=24m (India) International tonnage certificate under 1969 Convention, as per 1987 Rules Same Ships Registered Outside India Licence by DG Shipping under s.406 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 227(9) is situated within a broader, restructured framework for computation of tonnage income, whereas Section 115VX is located within Chapter XII-G, which is specifically dedicated to the tonnage tax scheme. Potential Conflicts or Overlaps * Transitional Issues: During the transition from the 1961 Act to the new Bill, there may be some confusion or overlap regarding the applicability of the two provisions, especially for assessment years straddling the commencement date. * Consistency in Interpretation: Given the near-identical language, judicial and administrative interpretations u/s 115VX are likely to be relevant and persuasive for Clause 227(9), ensuring continuity in legal principles. 6. Comparative Analysis with International ..... X X X X Extracts X X X X X X X X Extracts X X X X
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