Exclusion from tonnage tax scheme

To tax profits from shipping activities by an Indian company, the government has established the Tonnage Tax System. For eligible Indian shipping companies, this tax system is an optional one. A corporation can participate in the programme only after meeting a number of requirements. A corporation must possess at least one qualified ship and regard the operation of the ship as a distinct business in order to be eligible for the tonnage tax system. For this, separate accounts ought to be made.

There are three main criteria for tonnage tax scheme: It is a qualifying company, the company operates ships and the company operates a qualifying ship or ships. A qualifying company must be an Indian company, having at least one qualifying ship and carrying on business which is related to qualifying ships. India should be the location of the company's successful management. A company that chooses for this plan is neither allowed any adjustment of loss nor any depreciation. A company can be expelled from the tonnage tax scheme under any circumstances, and companies are required to pay taxes if they incurred a loss in the previous year. But we will talk about exclusion from Tonnage Tax Scheme.

Matter on 12a.

The investigating officer must issue a written order excluding any tonnage tax firm that is a party to any transaction or agreement from the tonnage tax system. The investigating officer is required to offer the assessee a chance by delivering a notice asking the firm to explain why it shouldn't be omitted from the tonnage tax scheme on the date and at the time indicated in the notice. Without the chief commissioner's prior permission, no order may be issued. If the business can prove to the examining officer that the transaction was legitimately commercial and wasn't done to get a tax break, the rules of this section won't apply.

The option for the tonnage tax scheme shall terminate on the first day of the prior year in which the transaction or arrangement was entered, and the revenue from the business of functioning ships shall be calculated in accordance with the other provisions of this Act if the assessing officer has issued an order with the exception of the tonnage tax company from the tonnage tax scheme.

Click here to know more on section 12a.