Income Tax Act, 2025
Section 115VS: Prohibition to opt for tonnage tax scheme in certain cases.—A qualifying company,
115VS. Prohibition to opt for tonnage tax scheme in certain cases.—A qualifying company,
which, on its own, opts out of the tonnage tax scheme or makes a default in complying with the
provisions of section 115VT or section 115VU or section 115VV or whose option has been excluded
from tonnage tax scheme in pursuance of an order made under sub-section (1) of section 115VZC, shall
not be eligible to opt for tonnage tax scheme for a period of ten years from the date of opting out or
default or order, as the case may be.
D.—Conditions for applicability of tonnage tax scheme
115VT. Transfer of profits to Tonnage Tax Reserve Account.—(1) A tonnage tax company shall,
subject to and in accordance with the provisions of this section, be required to credit to a reserve account
(hereafter in this section referred to as the Tonnage Tax Reserve Account) an amount not less than twenty
per cent of the book profit derived from the activities referred to in clauses (i) and (ii) of sub-section (1)
of section 115V-I in each previous year to be utilised in the manner laid down in sub-section (3):
Provided that a tonnage tax company may transfer a sum in excess of twenty per cent of the book
profit and such excess sum transferred shall also be utilised in the manner laid down in sub-section (3).
Explanation.—For the purposes of this section, “book profit” shall have the same meaning as in
the Explanation to sub-section (2) of section 115JB so far as it relates to the income derived from the
activities referred to in clauses (i) and (ii) of sub-section (1) of section 115V-I.
(2) Where the company has book profit from the business of operating qualifying ships and book loss
from any other sources, and consequently, the company is not in a position to create the full or any part of
the reserves under sub-section (1), the company shall create the reserves to the extent possible in that
previous year and the shortfall, if any, shall be added to the amount of the reserves required to be created
for the following previous year and such shortfall shall be deemed to be part of the reserve requirement of
that following previous year:
Provided that to the extent the shortfall in creation of reserves during a particular previous year is
carried forward to the following previous year under this sub-section, the company shall be considered as
having created sufficient reserves for the first mentioned previous year:
Provided further that nothing contained in the first proviso shall apply in respect of the second year in
case the shortfall in creation of reserves continues for two consecutive previous years.
(3) The amount credited to the Tonnage Tax Reserve Account under sub-section (1) shall be utilised
by the company before the expiry of a period of eight years next following the previous year in which the
amount was credited—
(a) for acquiring a new ship for the purposes of the business of the company; and
(b) until the acquisition of a new ship, for the purposes of the business of operating qualifying
ships other than for distribution by way of dividends or profits or for remittance outside India as
profits or for the creation of any asset outside India.
(4) Where any amount credited to the Tonnage Tax Reserve Account under sub-section (1),—
(a) has been utilised for any purpose other than that referred to in clause (a) or clause (b) of
sub-section (3); or
(b) has not been utilised for the purpose specified in clause (a) of sub-section (3); or
(c) has been utilised for the purpose of acquiring a new ship as specified in clause (a) of
sub-section (3), but such ship is sold or otherwise transferred, other than in any scheme of demerger
by the company to any person at any time before the expiry of three years from the end of the
previous year in which it was acquired,
an amount which bears the same proportion to the total relevant shipping income of the year in which
such reserve was created, as the amount out of such reserve so utilised or not utilised bears to the total
reserve created during that year under sub-section (1) shall be taxable under the other provisions of this
Act—
(i) in a case referred to in clause (a), in the year in which the amount was so utilised; or
520
(ii) in a case referred to in clause (b), in the year immediately following the period of eight years
specified in sub-section (3); or
(iii) in a case referred to in clause (c), in the year in which the sale or transfer took place:
Provided that the income so taxable under the other provisions of this Act shall be reduced by the
proportionate tonnage income charged to tax in the year of creation of such reserves.
(5) Notwithstanding anything contained in any other provision of this Chapter, where the amount
credited to the Tonnage Tax Reserve Account in accordance with sub-section (1) is less than the
minimum amount required to be credited under sub-section (1), an amount which bears the same
proportion to the total relevant shipping income, as the shortfall in credit to the reserves bears to the
minimum reserve required to be credited under sub-section (1) shall not be taxable under the tonnage tax
scheme and shall be taxable under the other provisions of this Act.
(6) If the reserve required to be created under sub-section (1) is not created for any two consecutive
previous years, the option of the company 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 failure to
create the reserve under sub-section (1) had occurred.
Explanation.—For the purposes of this section, “new ship” includes a qualifying ship which, before
the date of acquisition by the qualifying company was used by any other person, if it was not at any time
previous to the date of such acquisition owned by any person resident in India.
of section 115VZC, shall
not be eligible to opt for tonnage tax scheme for a period of ten years from the date of opting out or
default or order, as the case may be.
D.—Conditions for applicability of tonnage tax scheme
115VT. Transfer of profits to Tonnage Tax Reserve Account.—
A tonnage tax company shall,
subject to and in accordance with the provisions of this section, be required to credit to a reserve account
(hereafter in this section referred to as the Tonnage Tax Reserve Account) an amount not less than twenty
per cent of the book profit derived from the activities referred to in clauses
and
of sub-section
of section 115V-I in each previous year to be utilised in the manner laid down in sub-section
of section 115JB so far as it relates to the income derived from the
activities referred to in clauses
and
of sub-section
of section 115V-I.
Where the company has book profit from the business of operating qualifying ships and book loss
from any other sources, and consequently, the company is not in a position to create the full or any part of
the reserves under sub-section
The amount credited to the Tonnage Tax Reserve Account under sub-section
shall be utilised
by the company before the expiry of a period of eight years next following the previous year in which the
amount was credited—
for acquiring a new ship for the purposes of the business of the company; and
until the acquisition of a new ship, for the purposes of the business of operating qualifying
ships other than for distribution by way of dividends or profits or for remittance outside India as
profits or for the creation of any asset outside India.
Where any amount credited to the Tonnage Tax Reserve Account under sub-section
has been utilised for any purpose other than that referred to in clause
or clause
of
sub-section
has not been utilised for the purpose specified in clause
of sub-section
has been utilised for the purpose of acquiring a new ship as specified in clause
of
sub-section
shall be taxable under the other provisions of this
Act—
in a case referred to in clause
in a case referred to in clause
in a case referred to in clause
Notwithstanding anything contained in any other provision of this Chapter, where the amount
credited to the Tonnage Tax Reserve Account in accordance with sub-section
is less than the
minimum amount required to be credited under sub-section
shall not be taxable under the tonnage tax
scheme and shall be taxable under the other provisions of this Act.
If the reserve required to be created under sub-section
is not created for any two consecutive
previous years, the option of the company 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 failure to
create the reserve under sub-section
had occurred.
Explanation.—For the purposes of this section, “new ship” includes a qualifying ship which, before
the date of acquisition by the qualifying company was used by any other person, if it was not at any time
previous to the date of such acquisition owned by any person resident in India.