What is Limit for charter in of tonnage? What is
Maintenance and audit of accounts? Section 115VV and
Income Tax Act 1961
Limit for charter in of tonnage and Maintenance and
audit of accounts are
defined under sections 115VV and 115VW of Income Tax Act 1961.
Provisions under these Sections are :
Section 115VV of Income Tax Act "Limit for
charter in of tonnage"
Section 115VV. (1) In the case of every company which has
opted for tonnage tax scheme, not more than forty-nine per
cent of the net tonnage of the qualifying ships operated by
it during any previous year shall be chartered in.
(2) The proportion of net tonnage referred to in
sub-section (1) in respect of a previous year shall be
calculated based on the average of net tonnage during that
(3) For the purposes of sub-section (2), the average of
net tonnage shall be computed in such manner as may be
prescribed in consultation with the Director-General of
(4) Where the net tonnage of ships chartered in exceeds
the limit under sub-section (1) during any previous year,
the total income of such company in relation to that
previous year shall be computed as if the option for tonnage
tax scheme does not have effect for that previous year.
(5) Where the limit under sub-section (1) had exceeded in
any two consecutive previous years, the option for tonnage
tax scheme shall cease to have effect from the beginning of
the previous year following the second consecutive previous
year in which the limit had exceeded.
Explanation.-For the purposes of this section, the term
"chartered in" shall exclude a ship chartered in by the
company on bareboat charter-cum-demise terms.
Section 115VW of Income Tax Act "Maintenance and
audit of accounts"
Section 115VW. An option for tonnage tax scheme by
a tonnage tax company shall not have effect in relation to a
previous year unless such company-
(i) maintains separate books of account in respect of the
business of operating qualifying ships; and
(ii) furnishes, along with the return of income for that
previous year, the report of an accountant, in the
prescribed form4 duly signed and verified by such
Explanation.-For the purposes of this section,
"accountant" shall have the same meaning as in the
Explanation below sub-section (2) of section 288.