Tonnage tax income under a special presumptive regime is not subject to transfer pricing adjustments for ship operation charges.

Tonnage tax income under Chapter XII-G is computed under a special presumptive formula based on registered tonnage and qualifying ship days, and section 115VA excludes the normal business computation provisions in sections 28 to 43C. Transfer pricing machinery determines arm's length price for international transactions, but the stated price does not govern computation of income under the tonnage tax regime. As a result, adjustments to mobilisation and demobilisation charges paid to an associated enterprise cannot alter the taxable income of qualifying ship operations under the special scheme.

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Issues: Whether transfer pricing provisions apply to income of a tonnage tax company computed under Chapter XII-G of the Income-tax Act, 1961, so as to permit an adjustment to mobilisation and demobilisation charges paid to an associated enterprise.

Analysis: Chapter XII-G provides a special and self-contained method for computing income of a tonnage tax company on the basis of registered tonnage and the number of days the qualifying ship is held. The computation is presumptive in nature and is governed by the special charging and computation provisions in that chapter. Section 115VA begins with a non obstante clause and excludes the operation of the normal business computation provisions in sections 28 to 43C. Transfer pricing provisions are machinery provisions meant to determine arm's length price of international transactions, but the stated price of a transaction has no relevance to computation of tonnage income under Chapter XII-G. Since the tax liability of qualifying ship operations is determined by the statutory formula under the tonnage tax scheme, an adjustment under Chapter X would not alter the income chargeable under that special regime.

Conclusion: Transfer pricing provisions do not apply to the assessee's qualifying ship operations taxed under the tonnage tax scheme, and the adjustment made on account of mobilisation and demobilisation charges could not be sustained.

Final Conclusion: The special computation regime for tonnage tax prevailed over the transfer pricing machinery, so the assessee succeeded on the core legal issue.

Ratio Decidendi: Where income is required to be computed under a special presumptive tax scheme that contains its own charging and computation code and excludes the normal business computation provisions, the transfer pricing machinery cannot be used to make adjustments that do not affect the statutory basis of taxation.

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