Income-tax Act, 2025

Certain conditions for applicability of tonnage tax scheme - Section 232

Certain conditions for applicability of tonnage tax scheme.

232. (1) A tonnage tax company shall, subject to and as per the provisions of this section, be required to credit to a reserve account (herein referred to as the Tonnage Tax Reserve Account) an amount, being 20% or more of the book profit derived from the activities referred to in section 228(1)(a) and (b) in each tax year to be utilised in the manner laid down in sub-section (6).

(2) For the purposes of this section, the expression "book profit" shall have the meaning assigned to it in section 206(1)(c) so far as it relates to the income derived from the activities referred to in section 228(1)(a) and (b).

(3) Where the company has

(a) book profit from the business of operating qualifying ships; and

(b) 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 tax year and the shortfall, if any, shall be added to the reserves required to be created for the following tax year and such shortfall shall be deemed to be part of the reserve requirement of that following tax year.

(4) For the purposes of sub-section (3), to the extent the shortfall in creation of reserves during a particular tax year is carried forward to the following tax year under the said sub-section, the company shall be considered as having created sufficient reserves for the first mentioned tax year.

(5) For the purposes of sub-section (3), nothing contained in sub-section (4) shall apply in respect of the second year in case the shortfall in creation of reserves continues for two consecutive tax years.

(6) The amount credited to the Tonnage Tax Reserve Account under sub-section (1) shall be utilised by the company before the expiry of eight years following the tax year in which the amount was cre .... To read the full section download the app from Google Play store