TaxTMI 
TaxTMI 
Comparison of section 228 "Relevant shipping income and exclusion from book profit." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)
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....e for tonnage taxation, tax authorities (Assessing Officers), and advisors in maritime and corporate taxation. Effective date or decision date: Not stated in the document. Background & Scope Statutory hooks: Clause 228 forms part of a Part dealing with special provisions relating to income of shipping companies within the Income Tax Bill, 2025. It defines "relevant shipping income" for a "tonnage tax company", lists core and incidental activities, prescribes limits for incidental income, empowers the Central Government to exclude or limit certain activities by notification, and directs treatment of transfers between tonnage and non-tonnage businesses, allocation of common costs and depreciation, and the exclusion of the relevant shipping ....
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....ion 3(b) or prescribe limits to their inclusion in core activities by notification, with parliamentary laying and modification procedure specified in sub-section (6). * Sub-section (7) provides that incidental activities are those incidental to the core activities and "as prescribed for the purpose." Sub-section (8) disapplies this Part to income from non-qualifying ships - such income to be computed under other provisions of the Act. * Sub-sections (9)-(12) deal with related-party or non-arm's-length transfers between tonnage tax business and other businesses, market value adjustment, Assessing Officer's power to adopt reasonable basis where computation under (9) is exceptionally difficult, and ability to make adjustments where....
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....nage rules produce separate tax outcomes. Exceptions/Provisos Carve-outs and conditions explicitly stated: * Incidental income exceeding 0.25% of turnover from core activities is excluded from relevant shipping income (sub-section (2)). * Income from non-qualifying ships is excluded from this Part and computed under other provisions (sub-section (8)). * Losses in relevant shipping income are ignored for tonnage income computation (sub-section (13)). * Central Government may exclude or prescribe limits by notification (sub-section (5)); such notifications are subject to parliamentary laying and possible modification/annulment under sub-section (6). Illustrations * Example 1: A tonnage tax company earns freight from qualifying sh....
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....nsfers between tonnage and other business at market value or maintaining supporting valuations to withstand AO scrutiny under sub-section (9)-(11); contemporaneous allocation methods for shared costs and depreciation in mixed-use assets per sub-sections (14)-(15). * Record-keeping/evidence: maintain detailed accounts of core activity turnover to calculate the 0.25% threshold; contracts and agreements (pooling arrangements, contracts of affreightment) and terms; market value evidence for inter-business transfers; allocation methodology documentation for common costs and depreciation; and contemporaneous justification where Assessing Officer is required to adopt or review "reasonable basis". Key Takeaways * The Clause defines "relevant s....
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....in sub-section (7) ("as prescribed for the purpose" vs "as may be prescribed for the purpose"). These are stylistic and do not materially change scope. * Substantive cross-reference change: Clause 228 (Bill) sub-section (16) refers to "the purposes of section 206" generally; Section 228 (Act) refers more specifically to "the purposes of section 206(1)(c)". * Practical impact: the Act's more specific cross-reference narrows the provision's structural application to a particular sub-clause of section 206 (presumably the clause dealing with a particular computation of book profit). This narrows the operational effect and reduces ambiguity as to which part of section 206 the exclusion applies to. The Bill's broader reference cou....