Section 115VX and 115VY: Determination of Tonnage and Amalgamation
A practical explanation of former sections 115VX and 115VY of the Income-tax Act, 1961, together with the corresponding provisions now applicable under the Income-tax Act, 2025.
Updated: 29 September 2026
Overview of the tonnage tax provisions
The tonnage tax scheme provides a special method for computing income from the operation of qualifying ships and, under the current law, qualifying inland vessels where the statutory conditions are satisfied. Instead of treating the certificate merely as a shipping document, the tax law uses the certified tonnage as part of the statutory framework for computing tonnage income.
Former Section 115VX: Determination of Tonnage
Section 115VX of the Income-tax Act, 1961 dealt specifically with the determination of tonnage for the purposes of Chapter XII-G. It required the tonnage of a ship to be determined according to a valid certificate indicating its tonnage.
What was a valid certificate under section 115VX?
Ships registered in India below 24 metres: the provision referred to a certificate issued under the Merchant Shipping (Tonnage Measurement of Ship) Rules, 1987 made under the Merchant Shipping Act, 1958.
Ships registered in India of 24 metres or more: it referred to an international tonnage certificate issued under the Convention on Tonnage Measurement of Ships, 1969, as specified in the 1987 Rules.
Ships registered outside India: it referred to the prescribed licence from the Director-General of Shipping specifying net tonnage on the basis of the Flag State tonnage certificate or other evidence acceptable to the Director-General of Shipping.
The Finance Act, 2025 expanded the provision, with effect from 1 April 2026, to include inland vessels registered in India and certificates issued under the Inland Vessels Act, 2021. That policy is carried into the current Income-tax Act, 2025.
Current Law: Section 227 and Tonnage Certificates
Under the Income-tax Act, 2025, section 227 deals with computation of tonnage income. Sub-section (9) contains the certificate-based rule corresponding to the earlier section 115VX. It provides that the tonnage of a ship or inland vessel, as the case may be, is determined according to the valid certificate indicating its tonnage.
| Vessel category | Certificate or evidence contemplated by current law |
|---|---|
| Indian ship below 24 metres | Certificate under the Merchant Shipping (Tonnage Measurement of Ship) Rules, 1987. |
| Indian ship of 24 metres or more | International tonnage certificate under the 1969 Convention as specified in the 1987 Rules. |
| Ship registered outside India | Licence from the Director-General of Shipping under the applicable Merchant Shipping Act provisions, specifying net tonnage on the stated statutory basis. |
| Inland vessel registered in India | Certificate issued under the Inland Vessels Act, 2021. |
Accordingly, users dealing with assessment years or proceedings governed by the Income-tax Act, 2025 should read the current section 227 rather than relying only on the old section 115VX text.
Former Section 115VY: Amalgamation
Section 115VY of the Income-tax Act, 1961 governed the effect of an amalgamation on the tonnage tax scheme. Its central rule was that, where a company amalgamated with another company or companies, the tonnage tax provisions could apply to the amalgamated company, as far as possible, if the amalgamated company was a qualifying company.
Key rules under former section 115VY
- If the amalgamated company was not already a tonnage tax company, it had to exercise the option for the tonnage tax scheme under section 115VP(1) within three months from approval of the scheme of amalgamation.
- If the amalgamating companies were tonnage tax companies, the Chapter applied, as far as possible, for the period represented by the option having the longest unexpired duration.
- A special historical restriction applied where one of the amalgamating companies was a qualifying company on 1 October 2004 but had not exercised the option within the initial statutory period. In that situation, the tonnage tax Chapter did not apply to the amalgamated company and qualifying-ship income was computed under the other provisions of the Act.
Current Law: Section 233 on Amalgamation
Section 233 of the Income-tax Act, 2025 now brings the amalgamation and demerger rules together. For amalgamation, the substance of the earlier continuity framework is retained.
Qualifying company requirement: the tonnage tax scheme applies, as far as may be, to the amalgamated company if it is a qualifying company.
Three-month option: if the amalgamated company is not a tonnage tax company, it must exercise the option under section 231(1) within three months from approval of the amalgamation scheme.
Existing tonnage tax companies: where the amalgamating companies are tonnage tax companies, the current Part continues for the period represented by the option having the longest unexpired period.
Historical 2004 condition: section 233 retains the special rule concerning a qualifying company as on 1 October 2004 that did not exercise the option before 1 January 2005.
The current provision also incorporates rules for a demerger. This makes section 233 the principal current reference point for corporate restructuring under the tonnage tax scheme.
Why the Correct Provision Matters
The former sections 115VX and 115VY remain useful when reading older assessments, appeals, agreements and judicial records. For matters governed by the law in force from 1 April 2026, however, the corresponding provisions of the Income-tax Act, 2025 should be checked. The applicable assessment year, transaction date and transitional provisions may affect which enactment must be applied to a particular matter.
Official Legal Resources
Note: This article is intended as a statutory reference and general legal information. For a particular assessment, restructuring or shipping transaction, the law applicable to the relevant assessment year and facts should be verified.