What is Qualifying ship? What is Manner of computation of income under tonnage tax scheme? Section 115VD and 115VE of Income Tax Act 1961

Qualifying ship and Manner of computation of income under tonnage tax scheme are defined under sections 115VD and 115VE of Income Tax Act 1961. Provisions under these Sections are :

Section 115VD of Income Tax Act "Qualifying ship"

Section 115VD. For the purposes of this Chapter, a ship is a qualifying ship if-
(a) it is a sea going ship or vessel of fifteen net tonnage or more;
(b) it is a ship registered under the Merchant Shipping Act, 1958 (44 of 1958), or a ship registered outside India in respect of which a licence has been issued by the Director-General of Shipping under section 406 or section 407 of the Merchant Shipping Act, 1958 (44 of 1958); and
(c) a valid certificate in respect of such ship indicating its net tonnage is in force,

but does not include-
(i) a sea going ship or vessel if the main purpose for which it is used is the provision of goods or services of a kind normally provided on land;
(ii) fishing vessels;
(iii) factory ships;
(iv) pleasure crafts;
(v) harbour and river ferries;
(vi) offshore installations;
(vii) -
(viii) a qualifying ship which is used as a fishing vessel for a period of more than thirty days during a previous year.

 

Section 115VE of Income Tax Act "Manner of computation of income under tonnage tax scheme"

Section 115VE. (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 that effect, as the case may be, the profits and gains of such company from such business shall be computed in accordance with the other provisions of this Act.

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