Section 115VT of Income Tax Act "Transfer of profits to Tonnage Tax Reserve Account"
115VT. (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
(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.
115VU. (1) A tonnage tax company, after its option has
been approved under sub-section (3) of section 115VP, shall
comply with the minimum training requirement in respect of
trainee officers in accordance with the guidelines framed by
the Director-General of Shipping and notified in the
Official Gazette by the Central Government.
(2) The tonnage tax company shall be required to furnish a
copy of the certificate issued by the Director-General of
Shipping along with the return of income under section 139
to the effect that such company has complied with the
minimum training requirement in accordance with the
guidelines referred to in sub-section (1) for the previous
year.
(3) If the minimum training requirement is not complied with
for any five 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 fifth
consecutive previous year in which the failure to comply
with the minimum training requirement under sub-section (1)
had occurred.