Amended and updated notes on section 115V-I of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to relevant shipping income.
Chapter XIIG (Sections 115V to 115VZC) of the Income Tax Act 1961 deals with the provisions related to special provisions relating to income of shipping companies. Section 115VI of IT Act 1961-2023 provides for relevant shipping income.
Recently, we have discussed in detail section 115VH (Calculation in case of joint operation, etc.) of IT Act 1961. Today, we learn the provisions of section 115VI of Income-tax Act 1961. The amended provision of section 115VI is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 115VI of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962, regulations, notifications, circulars, orders and Press Release by CBDT, Income Tax Department and the Ministry of Law and Justice, Government of India.
Section-115VI: Relevant shipping income
Section 115VI(1) of Income Tax Act
For the purposes of this Chapter, the relevant shipping income of a tonnage tax company means—
(i) its profits from core activities referred to in sub-section (2);
(ii) its profits from incidental activities referred to in sub-section (5):
Provided that where the aggregate of all such incomes specified in clause (ii) exceeds one-fourth per cent of the turnover from core activities referred to in sub-section (2), such excess shall not form part of the relevant shipping income for the purposes of this Chapter and shall be taxable under the other provisions of this Act.
Section 115VI(2) of Income Tax Act
The core activities of a tonnage tax company shall be—
(i) its activities from operating qualifying ships; and
(ii) other ship-related activities mentioned as under :—
(A) shipping contracts in respect of—
- (i) earning from pooling arrangements;
- (ii) contracts of affreightment.
Explanation: For the purposes of this sub-clause,—
(a) “pooling arrangement” means an agreement between two or more persons for providing services through a pool or operating one or more ships and sharing earnings or operating profits on the basis of mutually agreed terms;
(b) “contract of affreightment” means a service contract under which a tonnage 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;
(B) specific shipping trades, being—
- (i) on-board or on-shore activities of passenger ships comprising of fares and food and beverages consumed on board;
- (ii) slot charters, space charters, joint charters, feeder services, container box leasing of container shipping.
Section 115VI(3) of Income Tax Act
The Central Government, if it considers necessary or expedient so to do, may, by notification in the Official Gazette, exclude any activity referred to in clause (ii) of sub-section (2) or prescribe the limit up to which such activities shall be included in the core activities for the purposes of this section.
Section 115VI(4) of Income Tax Act
Every notification issued under this Chapter 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, 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.
Section 115VI(5) of Income Tax Act
The incidental activities shall be the activities which are incidental to the core activities and which may be prescribed for the purpose.
Section 115VI(6) of Income Tax Act
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.
Section 115VI(7) of Income Tax Act
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 in the accounts of the tonnage tax business does not correspond to the market value of such goods or services as on the date of the transfer, then, the relevant shipping income under this section shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date:
Provided that where, in the opinion of the Assessing Officer, the computation of the relevant shipping income in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such income on such reasonable basis as he may deem fit.
Explanation: For the purposes of this sub-section, “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.
Section 115VI(8) of Income Tax Act
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 Chapter, take the amount of income as may reasonably be deemed to have been derived therefrom.
Explanation: For the purposes of this Chapter, 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.