COMMISSIONER OF INCOME TAX, KOCHI versus TRANS ASIAN SHIPPING SERVICES (P) LTD.

Citation: [2016] 3 S.C.R. 337 · Decided: 05-07-2016 · Supreme Court of India · Bench: T.S. THAKUR · Disposal: Dismissed

Cited by 2 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

[2016] 3 S.C.R. 337 
COMMISSIONER OF INCOME TAX, KOCH! 
v. 
TRANS ASIAN SHIPPING SERVICES (P) LTD. 
(Civil Appeal No. 5869of2016) 
A 
JULYOS,2016 
B 
[T.S. THAKUR, CJI, A.K. SIKRI AND R. BANUMATID, JJ.) 
Income Tax Act, 1961: 
Chapter Xl/G: ss.115 VE, 115 VG - Tonnage Tax Scheme -
Assessee in business of operating qualifying ships - Held: ls eligible 
for getting income computed under the special provisions contained 
in Chapter XIIG 
s.115VB - Income ji-om slot charter - Whether the assessee 
was eligible to. include the income derived from activities through 
'slot charter' arrangements as relevant shipping income to determine 
the deemed tonnage in terms of Rule II Q of the Income Tax Rules -
Held: Income earned by the assessee under slot charter 
arrangement.1· comes under the definition of 'deemed tonnage tax' 
as per explanation lo sub-section (./) of s.115VG of the Act and 
therefore, this income is includible while assessing the same under 
the said special provisions. 
s.115 VX - Tonnage of a ship - Determination of - Held: 
Whenever the question of a tonnage of a ship crops up and the said 
tonnage is to be determined, it has to be in accordance with the 
valid certificate indicating its tonnage and it is a compulsory 
obligation of the assessee to produce such a certificate - Howeve1; 
this requirement of producing a certificate would not apply when 
entire ship is not chartered and the arrangement pertains only to 
purchase of slots, slot charter and m1 arrange men I of sharing of 
break-bulk vessel. 
Dismissing the ·appeals, the Court 
HELD: 1. Section 115VB specifically pl'ovides that for the 
purpose of Chapter XlIG, 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, 
337 
c 
D 
E 
F 
G 
H 
33~ 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016) 3 S.C.R. 
space charter or joint charter'. All the conditions laid down in Section 
115VD of the Act 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. Section 115VG is in two parts insofar as computation of 
tonnage is concerned. When it comes to tonnage of a ship, a certificate 
as mentioned in Section ll5VX is to be produced. Second part of this 
provision talks about 'deemed tonnage' in contradistinction to the 
'actual tonnage' mentioned in the certificate. Thus, it is not only the 
actual tonnage that is mentioned in the certificate referred to in 
Section 115VX of the Act which this provision deals with. In addition, 
deemed tonnage is also to be included if there is such a deemed 
tonnage, and that deemed tonnage is to be added to the actual tonnage 
which is indicated in the certificate. Explanation to sub-section (4), 
inter alia, mentions that insofar as slot charter arrangements are 
concerned, purchase of such slot charter shall be treated as deemed 
tonnage. Tiie Legislature has, thus, clearly visualized that insofar as 
deemed tonnage is concerned, the!e would not be a11y possibility of 
producing a certificate referred to in Section 115VX ofthe Act. When 
reading the provision in this manner, it becomes amply clear that 
Section 115VD of the Act which talks of a qualifying ship, contemplates 
the situation in which entire ship is either owned or chartered. Similar 
is the position which inheres in Section 115VX of the Act as it refers 
to 'the tonnage of a ship'. Therefore, whenever the question of a 
tonnage of a ship crops up and the said tonnage is to be determined, 
it has to be in accordance with the valid certificate indicating its 
tonnage and it is a compulsory obligation of the assessee to produce 
such a certificate. However, this requirement of producing a certificate 
would not apply when entire ship is not chartered and the 
arrangement pertains only to purchase of slots, slot charter and an 
arrangement of sharing ofbrcak-bulk vessel. The legal fiction created 
by su

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