Tonnage tax company - Definition / Legal Terminology - Income Tax

For the purpose of section 115V(l) of the Income tax Act 1961, In Chapter XII-G ( Special Provisions Relating to Income of Shipping Companies), unless the context otherwise requires,- tonnage tax company means- a qualifying company in relation to which tonnage tax option is in force; SOUTH INDIA CORPORATION LTD. - [ 2008 (2) TMI 388 - KERALA HIGH COURT] Section 115VA provides that notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of a company , the income from the business of operating qualifying ships, may, at its option, be computed in accordance with the provisions of Chapter XII-G and such income shall be deemed to be the profits and gains of such business chargeable to tax under the head Profits and gains of business or profession . For the purpose of that Chapter, a qualifying ship, in terms of section 115VD, is one which satisfies the three conditions (a), (b) and (c) thereof, but does not include the different categories enumerated thereunder as exclusions. The question as to whether a company is operating ship, has to be decided with reference to section 115VB. These provisions will show that while the net effect of section 115VA is available to a company which operates qualifying ships, what could be computed on the exercise of option under section 115VA, has to result in the income so computed being deemed to be the profits and gains of such business, thereby meaning the business of operating qualifying ships, chargeable to tax under the head Profits and gains of business or profession . Tonnage tax company means a qualifying company in relation to which tonnage tax is in force see section 115VL. Section 115VP(1) provides that a qualifying company may opt for the tonnage tax scheme by making an application to the Joint Commissioner and under sub-section (3) of that section, the Joint commissioner shall, on being satisfied about the eligibility of the company to opt for tonnage tax scheme, pass an order in writing approving the option for tonnage tax scheme. By section 115VC, a qualifying company for the purpose of Chapter XII-G, is one which is an Indian company ; with the place of its effective management being in India; owns at least one qualifying ship and the main object of which is to carry on the business of operating ships. The company satisfying the bench mark fixed in section 1I5VC would, thus, be treated as a qualifying company to sustain its application under section 115VP for the approval of the option for tonnage tax scheme, which coverage would immediately be referable to section 115VA. The overwhelming thrust of section 115VA is the derivation of income from the business of operating qualifying ships. The concept of the main object of the company in section 115VC(d), in the absence of any provision to the contrary in Chapter XII-G, has necessarily to be understood in the manner in which that term is understood in common parlance, without being tied down to any requirement of the Companies Act to classify the objects of a company into principal and ancillary and show them distinctly in the object clauses in the memorandum of association of the company . In the context of business operations by companies having different business activities, the purpose of providing a provision like section 115VA has to be understood to be one intended to provide a method of computation on tonnage basis, at the option of the assessee. In that view of the matter, the plain meaning of the term the main object of the company in section 115VC(d), does not call for any restriction that the said provision would apply only in cases where the company applying for the approval of its option, has to be one which has the business of operating ships enumerated as its main object, going by its memorandum of association.