Drilling vessel treated as a qualifying ship for tonnage tax where its movable character remained intact.

A drilling rig that remains a movable vessel and is recognised under the Merchant Shipping Act, 1958 was treated as a ship, not an offshore installation, for section 115VD of the Income-tax Act, 1961. Its specialised drilling function did not change its essential character, and the vessel's registration and licence under section 407 supported ship status. On that basis, the assessee could exercise the tonnage tax option under sections 115VP and 115VR. The analysis also aligned with the assessee's earlier judicial treatment of the same vessel as a ship.

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Issues: Whether the assessee's drilling rig was a "qualifying ship" under section 115VD of the Income-tax Act, 1961, and whether the assessee was entitled to exercise the option under the tonnage tax scheme under sections 115VP and 115VR of the Income-tax Act, 1961.

Analysis: The vessel was held to be a ship and not an offshore installation. Its functional description as a rig did not alter its essential character as a movable vessel. The registration and licence issued under section 407 of the Merchant Shipping Act, 1958 supported its treatment as a ship, and the exclusion of offshore installations in section 115VD did not apply. The decision also followed the assessee's own earlier judicial history where the same vessel had been treated as a ship.

Conclusion: The rig qualified as a ship within section 115VD, and the assessee was entitled to the tonnage tax option under sections 115VP and 115VR.

Ratio Decidendi: A drilling vessel that remains a movable ship and is duly recognised under the Merchant Shipping Act, 1958 is not to be treated as an offshore installation merely because of its specialised function.

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