Section 228 — Relevant shipping income and exclusion from book profit
Old Act equivalent: 115VE of IT Act 1961 Sub-part: G—Special provisions relating to income of shipping companies
Statutory Text
- (1) For the purposes of this Part, the relevant shipping income of a tonnage tax company means—
(a) its profits from core activities referred to in sub-section (3); and
(b) its profits from incidental activities referred to in sub-section (7). (2) Where the aggregate of all such incomes specified in sub-section (1)(b) exceeds 0.25% of the turnover from core activities referred to in sub-section (3), such excess shall not form part of the relevant shipping income for the purposes of this Part and shall be taxable under the other provisions of this Act. (3) The core activities of a tonnage tax company shall be—
(a) its activities from operating qualifying ships; and
(b) other ship-related or inland vessel related activities, as the case may be, as follows:—
(i) shipping contracts in respect of—
(A) earning from pooling arrangements;
(B) contracts of affreightment; (4) For the purposes of sub-section (3)(b)(i),—
(a) “pooling arrangement” means an agreement between two or more persons for providing services through a pool or operating one or more ships or inland vessels as the case may be, and sharing earnings or operating profits on the basis of mutually agreed terms;
(b) “contract of affreightment” means a service contract under which a ton nage 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. (5) The Central Government, if it considers necessary or expedient so to do, may, by notification, exclude any activity referred to in sub-section (3)(b) or prescribe the limit up to which such activities shall be included in the core activities for the purposes of this section. (6) Every notification issued under this Part shall be laid, as soon as may be after it is issued, before each House of Parliament, while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following 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; so, however, that any such modification or annulment shall be without prej udice to the validity of anything previously done under that notification. (7) The incidental activities shall be the activities which are incidental to the core activities and as may be prescribed for the purpose. (8) Where a tonnage tax company operates any ship or inland vessels as the case may be, which is not a qualifying ship, the income attributable to operating such non-qualifying ship shall be computed under other provisions of this Act. (9) Where any goods or services held for the purposes of—
(a) tonnage tax business are transferred to any other business carried on by a tonnage tax company; or
(b) any other business carried on by such tonnage tax company are trans ferred to the tonnage tax business, and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the tonnage tax business does not correspond to the market value of (10) In sub-section (9), “market value”, in relation to any goods or services, means the price that such goods or services would ordinarily fetch on sale in the open market. (11) Where, in the opinion of the Assessing Officer, the computation of the relevant shipping income in the manner specified in sub-section (9) presents exceptional dif ficulties, he may compute such income on such reasonable basis as he considers fit. (12) Where it appears to the Assessing Officer that, owing to the close connection between the tonnage tax company and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the tonnage tax company more than the ordinary profits which might be expected to arise in the tonnage tax business, the Assessing Officer shall, in computing the relevant shipping income of the tonnage tax company for the purposes of this Part, take income as may reasonably be deemed to have been derived therefrom. (13) In this Part, in case the relevant shipping income of a tonnage tax company is a loss, then, such loss shall be ignored for the purposes of computing tonnage income. (14) Where a tonnage tax company also carries on any business or activity other than the tonnage tax business, common costs attributable to the tonnage tax business shall be determined on a reasonable basis. (15) Where any asset, other than a qualifying ship, is not exclusively used for the tonnage tax business by the tonnage tax company, depreciation on such asset shall be allocated between its tonnage tax business and other business on a fair proportion to be determined by the Assessing Officer, having regard to the use of such asset for the purposes of the tonnage tax business and for the other business. (16) The book profit or loss derived from the activities of a tonnage tax company, referred to in sub-section (1), shall be excluded from the book profit of the company for the purposes of section 206(1)(c). Depreciation and gains relating to tonnage tax assets.
Provisos
None.
Explanations
None.
Tables
None.
Key Structure
- Applies to: Qualifying company with relevant shipping income from core and incidental activities.
- Conditions: Core activities: operating qualifying ships, directly related activities. Incidental activities: income from pooling arrangements, slot charters, container activities.
- Time limits: None.
- Monetary limits: Incidental income: not exceeding 0.25% of turnover from core activities.
- Exceptions: Relevant shipping income excluded from book profit for MAT purposes.
Cross-References
Amendment Notes
None noted from the extracted pages.