The ITAT held that for an assessee opting for taxation under the...

The ITAT held that for an assessee opting for taxation under the Tonnage Tax Scheme pursuant to section 115VP, business income must be computed exclusively under the scheme's provisions, rendering transfer pricing regulations inapplicable. The Tribunal found that adjustments made by the TPO and AO based on arm's length price for charter hire rates and ship sale value were legally unsustainable, as such variations do not affect income calculation under the tonnage-based mechanism. Consequently, the upward transfer pricing adjustments were deleted. The Tribunal further rejected the assessee's contention that disallowances under section 143(1) could be challenged in the current appeal arising from assessment order under section 143(3), holding that such disallowances are outside the scope of the present proceedings. The appeal was partly allowed, affirming that transfer pricing provisions do not apply to tonnage tax companies in relation to their core shipping activities.