Tonnage tax computation bars separate section 14A disallowance and limits MAT adjustments to statutory additions only.

Tonnage-tax computed shipping income does not permit a separate section 14A read with Rule 8D disallowance for exempt dividend-related expenditure, because the special presumptive scheme already governs the allowability of business expenditure; the deletion of that disallowance was upheld. For book-profit computation under section 115JB, impairment loss on ships linked to the tonnage-tax business and a section 14A disallowance could not be added unless the statute expressly permitted such adjustments; the additions were rejected. The Revenue's challenge therefore failed and the assessee obtained relief on both disputed adjustments.

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Issues: (i) Whether disallowance under section 14A read with Rule 8D of the Income-tax Rules, 1962 could be made where the assessee's shipping income was computed under the tonnage tax scheme. (ii) Whether the amounts representing impairment loss on ships and disallowance under section 14A could be added while computing book profit under section 115JB of the Income-tax Act, 1961.

Issue (i): Whether disallowance under section 14A read with Rule 8D of the Income-tax Rules, 1962 could be made where the assessee's shipping income was computed under the tonnage tax scheme.

Analysis: The shipping business income was assessed under Chapter XII-G on a presumptive basis. Once income from qualifying ships is computed under the special scheme, only the expenditure referable to that business is treated as allowed within that computation. Expenditure relatable to exempt dividend income does not get a separate footing for disallowance under section 14A in such circumstances. The earlier order in the assessee's own case on identical facts was followed.

Conclusion: The disallowance under section 14A read with Rule 8D was not sustainable and its deletion was upheld in favour of the assessee.

Issue (ii): Whether the amounts representing impairment loss on ships and disallowance under section 14A could be added while computing book profit under section 115JB of the Income-tax Act, 1961.

Analysis: For section 115JB, book profit is computed from the net profit in the profit and loss account subject to the statutory adjustments. Impairment loss on ships was linked to the tonnage tax business, so the corresponding adjustment had to be reflected consistently in computing the tonnage-tax book profit excluded under section 115VO. Further, a disallowance computed under section 14A cannot be imported into the MAT computation under section 115JB unless the statute so permits, and no such basis existed here.

Conclusion: The addition of impairment loss and the section 14A disallowance to book profit under section 115JB was not justified. The assessee succeeded on both aspects.

Final Conclusion: The Revenue's appeal failed, and the assessee obtained relief on the disputed additions while the matter stood finally concluded.

Ratio Decidendi: Where income is computed under the tonnage tax scheme, disallowance for exempt income under section 14A cannot be separately superimposed unless the special computation so requires, and a section 14A disallowance cannot ordinarily be imported into section 115JB book-profit computation absent express statutory authority.

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