Case Law Details
To recapitulate briefly, the assessee is a company as defined under Section 2(17) of the Act and is also in the business of operating qualifying ship(s). It is also not in dispute that it owns a qualifying ship and fulfillment of this condition permits the assessee to exercise its option for computation of income from the business of operating qualifying ships under Chapter XIIG of the Act. The assessee exercised the option in this behalf, as per Section 115VP of the Act in respect of Assessment Years in question. Therefore, the assessee is a ‘qualifying company’ under Section 115VC of the Act. In fact, the income that is generated from the qualifying ship owned by the assessee is also assessed under the special provisions contained in Chapter XIIG of the Act. The dispute, however, pertains to the income from the slot charter arrangements which the assessee has made in other ships during the concerned Assessment Years. The ships where slot charter are arranged are obviously not owned by the assessee. Further, as only some slots are chartered, full ships are not chartered.
In this context, the first question would be as to whether such a slot charter can be treated as ‘operating ships’ within the meaning of Section 115VB of the Act? This provision specifically provides that for the purpose of Chapter XIIG, a company would be regarded as operating a ship ‘if it operates any ship whether owned or chartered by it and includes a case where even a part of the ship has been chartered by it in an arrangement such as slot charter, space charter or joint charter’. It is clear from the above that slot charter is specifically included as an instance of a ship chartered by the company.
Next comes the issue as to whether it would be treated as a ‘qualifying ship’ as defined under Section 115VD of the Act. A perusal of the provisions of Section 115VD of the Act would indicate that all the conditions laid down therein are fulfilled by the assessee, except the conditions stipulated in clause (c) which impose an obligation on the assessee to produce a valid certificate in respect of such a ship where slot is chartered, indicating its net tonnage in force. The entire controversy revolves around the production of this certificate. As per the Revenue, this is an essential requirement contained in Section 115VD of the Act which cannot be done away with because of the formula that is contained in Section 115VG of the Act for the computation of Tonnage Income. It is argued that computation of Tonnage Income under TTS has to be as for the provisions of Section 115VG and sub-section (4) thereof defines ‘Tonnage’ to mean tonnage of a ship indicated in the certificate referred to in Section 115VX. This Section makes the following reading:
“115VX. (1) For the purposes of this Chapter,—
(a) the tonnage of a ship shall be determined in accordance with the valid certificate indicating its tonnage;
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