TaxTMI 
TaxTMI 
Comparison of section 229 "Depreciation and gains relating to tonnage tax assets." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)
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....atment where assets move between businesses, and treatment of capital gains on transfers. The provision affects taxpayers in the shipping industry and the tax department; effective date or enactment date: Not stated in the document. Background & Scope Statutory hooks: Clause 229 sits within the Part addressing special provisions relating to income of shipping companies and operates in conjunction with section 230(1)(d) (referred to for depreciation computation). The clause governs (a) computation of depreciation for the first tax year of the tonnage tax scheme, (b) allocation of WDV between qualifying and non-qualifying ships, (c) creation of separate blocks of qualifying assets, (d) adjustment when assets change use between tonnage tax b....
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....for non-tonnage tax business, an appropriate portion of WDV is transferred from the qualifying block to the other block by A = B x C / D (with variables defined in the sub-clause); (b) conversely, where an other asset begins to be used for the tonnage tax business, an apportioned value is moved from the other block to the qualifying block by E = F x G / I (variables defined). * Clause 229(5) requires allocation of depreciation for assets changing use during a tax year in proportion to days of use in each business. * Clause 229(6) declares that depreciation on the newly created blocks shall be allowed as if the WDV referred in sub-section (2) had been brought forward from the preceding tax year. * Clause 229(7) supplies two definitions....
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....ptions, thresholds, or exceptions are included beyond the mechanics for allocation and transfer on change of use, and the day-pro-rata depreciation allocation for part-year use. Not stated in the document: any caps, transitional time limits beyond "first tax year," or special treatment for leased vessels, second-hand ships, or cross-border issues. Illustrations * Example 1 (illustrative application consistent with the text): A block of ships has book WDV B = 60 and C = 40 as at preceding year-end; tax WDV A = 100. Then D = 100 x 60/(60+40) = 60 and E = 100 x 40/(60+40) = 40; qualifying and other blocks are created with those tax WDVs. * Example 2 (change of use): Within the tax year, a qualifying ship with book WDV C (as described in s....
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....the existing block of assets, being ships as on the last day of the immediately preceding tax year." The Act (Document 1) describes A as "the written down value of the existing block of assets, being ships or inland vessel, as the case may be, as on the first day of the tax year." * Practical impact: The change of reference date from "last day of the immediately preceding tax year" to "first day of the tax year" (and harmonising the asset description with inland vessels) alters the base value used in allocation; administratively this can affect numeric allocation of WDV between qualifying and other blocks and therefore depreciation in the first tonnage-tax year. * Definitions: The Bill (Document 2) includes two defined terms in sub-sect....
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....ships or inland vessels." * Practical impact: No substantive change to mathematical approach is evident, but the change in A's reference date (noted above) may change numerical results. * Miscellaneous drafting differences: Minor variances in phrasing (e.g., passive/active forms) and punctuation occur. * Practical impact: Generally drafting-level, except where temporal/reference changes noted above which can influence computation and coverage. Practical Implications * Compliance and risk areas: Taxpayers must maintain clear book WDV schedules at the immediately preceding year-end to apply the proportional split; errors in computing B and C or in locating the correct A date will affect first-year depreciation and subsequent tax ....