Tonnage tax scheme excludes interest on collateral fixed deposits; such income is taxable separately as other sources.

Interest earned on fixed deposits placed as collateral for bank finance and guarantees does not fall within the Tonnage Tax Scheme because the scheme covers only income from core shipping activities and the narrowly specified incidental activities. Fixed deposits are not part of operating qualifying ships or the enumerated ship-related transactions, and the source of the interest is the deposit itself rather than the shipping business. The interest is therefore outside the presumptive shipping regime and is taxable separately as income from other sources.

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Issues: Whether interest earned on fixed deposits placed as collateral security for bank finance and guarantees in connection with shipping business is covered by the Tonnage Tax Scheme.

Analysis: The scheme under Chapter XII-G taxes shipping income on a presumptive basis and extends only to profit from core activities and specified incidental activities. Core activities are exhaustively defined as activities from operating qualifying ships and certain enumerated ship-related transactions, while incidental activities are separately and narrowly listed in the Rules. Fixed deposits kept with the bank as collateral do not form part of operating ships, shipping contracts, or the specified incidental activities. The source of the interest income is the fixed deposit itself and not the shipping activity, even if the deposits were made in the course of business.

Conclusion: The interest on fixed deposits is not covered by the Tonnage Tax Scheme and is chargeable separately as income from other sources.

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