Section 115VK of Income Tax Act "Depreciation"
115VK. (1) For the purposes of computing depreciation
under clause (iv) of section 115VL, the depreciation for the
first previous 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 of account as on the last
day of the preceding previous year:
Provided that any change in the value of the assets
consequent to their revaluation after the date on which the
Finance (No. 2) Act, 2004 receives the assent of the
President shall be ignored;
(b) the book written down value of all the qualifying assets
and other assets shall be aggregated; and
(c) the ratio of the aggregate book written down value of
the qualifying assets to the aggregate book written down
value of the other assets shall be determined.
(5) Where an asset forming part of a block of qualifying
assets begins to be used for purposes other than the tonnage
tax business, an appropriate portion of the written down
value allocable to such asset shall be reduced from the
written down value of that block and shall be added to the
block of other assets.
Explanation.-For the purposes of this sub-section,
appropriate portion of the written down value allocable to
the asset, which begins to be used for purposes other than
the tonnage tax business, shall be an amount which bears the
same proportion to the written down value of the block of
qualifying assets as on the first day of the previous year
as the book written down value of the asset beginning to be
used for purposes other than tonnage tax business bears to
the book written down value of all the assets forming the
block of qualifying asset.
(6) Where an asset forming part of a block of other assets
begins to be used for tonnage tax business, an appropriate
portion of the written down value allocable to such asset
shall be reduced from the written down value of the block of
other assets and shall be added to the block of qualifying
asset.
Explanation.-For the purposes of this sub-section,
appropriate portion of written down value allocable to the
asset which begins to be used for the tonnage tax business
shall be an amount which bears the same proportion to the
written down value of the block of other assets as on the
first day of the previous year as the book written down
value of the asset beginning to be used for tonnage tax
business bears to the total book written down value of all
the assets forming the block of other assets.
(7) For the purposes of computing depreciation under clause
(iv) of section 115VL in respect of an asset mentioned in
sub-sections (5) and (6), depreciation computed for the
previous year shall be allocated 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. 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 loss referred to in sub-sections (1) and (3) of
section 70 or sub-sections (1) and (2) of section 71 or
sub-section (1) of section 72 or sub-section (1) of section
72A, in so far as such loss relates to the business of
operating qualifying ships of the company, shall be carried
forward or set off where such loss relates to any of the
previous years when the company is under the tonnage tax
scheme;
(iii) no deduction shall be allowed under Chapter VI-A in
relation to the profits and gains from the business of
operating qualifying ships; and
(iv) in computing the depreciation allowance under section
32, the written down value of any asset used for the
purposes of the tonnage tax business shall be computed as if
the company has claimed and has been actually allowed the
deduction in respect of depreciation for the relevant
previous years.