Qualifying ship under tonnage tax scheme remains covered despite alternative road or rail transport for the cargo

Section 115VD's exclusion for goods or services of a kind normally provided on land does not disqualify a seagoing ship merely because the cargo could also be moved by road or rail. The article explains that the provision targets land-based commercial activities shifted onto a ship, not ordinary port-to-port maritime carriage of bulk cargo. A literal reading consistent with the tonnage tax scheme therefore treats such coastal shipping as within the definition of a qualifying ship. The contrary view, based on the availability of land transport, is rejected in the stated analysis, while the dissent would apply the exclusion more strictly.

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Issues: Whether a seagoing ship carrying thermal coal between Indian ports, where the cargo could also have been moved by road or rail, is excluded from the definition of a qualifying ship under clause (i) of section 115VD of the Income-tax Act, 1961.

Analysis: The exclusion in section 115VD applies where the main purpose of the ship is the provision of goods or services of a kind normally provided on land. The phrase does not refer to transport routes merely because land transport is also possible for the cargo. The ship in question was engaged in the core maritime function of carrying bulk cargo from port to port. The availability of an alternate land route does not change the character of the ship's use, and the provision cannot be expanded by adding a condition that transportation by sea is disallowed whenever the goods can also be carried by road or rail. A literal and ordinary reading of the provision, consistent with the object of the tonnage tax scheme, shows that the exclusion is aimed at land-type commercial activities shifted to a ship, not at ordinary coastal shipping operations.

Conclusion: The ship was a qualifying ship under section 115VD, and the assessee remained entitled to the tonnage tax scheme. The Revenue's challenge failed.

Dissenting Opinion: The Judicial Member took the view that the statutory exclusion should be applied strictly and that the ship was not a qualifying ship because the coal movement could be routed through land transport, and therefore the Revenue's appeal should succeed.

Ratio Decidendi: The exclusion for goods or services of a kind normally provided on land does not disqualify a seagoing ship merely because the cargo could alternatively be transported by road or rail; the provision targets land-based commercial activities, not ordinary port-to-port maritime carriage.

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