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Clause 230(1) creates a self contained tonnage tax computation by deeming all business losses, allowances and deductions to have been given full effect in their year of origin, prohibiting carry forward or set off of shipping business losses once under the tonnage regime, excluding general chapter based deductions from tonnage profits, and requiring written down values of assets to be computed as if depreciation had been claimed and allowed each relevant year.
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Clause 229(1)-(7) mandates that, on entering the tonnage tax regime, depreciation be computed on the written down value attributable to qualifying ships by dividing the existing block WDV between qualifying and non qualifying assets using explicit proportional formulas; separate qualifying asset blocks are created, WDV is transferred proportionally upon reclassification, intra year depreciation is apportioned by days of use, and the resulting WDV blocks are deemed carried forward from the preceding year to preserve continuity.
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Allocation of shared costs and depreciation: apportionment on reasonable basis and fair proportion affects tonnage tax computations.
Clause 228(14) requires common costs attributable to the tonnage tax business to be allocated on a reasonable basis, with taxpayers maintaining records to support apportionment. Clause 228(15) requires depreciation for assets other than qualifying ships to be apportioned on a fair proportion determined by the Assessing Officer with reference to actual use. Both provisions mirror Section 115VJ, vesting discretion in the AO and preserving the objective of preventing tax arbitrage while increasing documentation and compliance burdens.
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Tonnage tax regime: clarifies qualifying shipping income, market value inter company valuation, and related party anti avoidance adjustments.
Tonnage tax applies to qualifying shipping income measured by net tonnage, defined as profits from specified core shipping activities and prescribed incidental activities; incidental income above a prescribed threshold is excluded. Inter business transfers must be computed at market value, with assessing officer power to use reasonable bases in exceptional cases. Related party arrangements producing more than ordinary profits may be adjusted to reasonable levels. The Central Government may exclude activities or set limits by notification subject to parliamentary laying. Losses in tonnage computation are ignored.
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Allocation of tonnage income: proportional or independent computation affects tax treatment of jointly operated qualifying ships.
Computation of tonnage income for jointly operated qualifying ships follows a two-step approach: where participating companies' shares are definite and ascertainable, income is allocated proportionately to each company; where shares are not definite and ascertainable, tonnage income for each operator is computed as if it were the sole operator. The rule aligns taxation with economic interest, creates documentary and compliance incentives, functions as an anti-avoidance measure, and may interact with cross-border tax rules, requiring clearer guidance on "definite and ascertainable" shares and documentation standards.
Act Rules Bills
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Tonnage tax regime: ships' taxable income computed by daily tonnage rates and aggregation, excluding deductions.
Clause 227(1)-(6) prescribes a ship wise tonnage tax: each qualifying ship's tonnage income equals its daily tonnage income multiplied by qualifying days, with daily rates set by a four tier slab linked to certified net tonnage. Tonnage includes certified physical tonnage and prescribed deemed tonnage for slot and sharing arrangements, rounded to the nearest hundred tons. A non obstante clause bars any deductions or set offs, making the computed tonnage income the exclusive tax base under the Part.
Act Rules Bills
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Tonnage tax scheme: deemed tonnage income treated as business profits, excluding actual shipping income under eligibility conditions.
Clause 226(7) mandates that tonnage income be computed under a separate formulaic provision and be deemed to be the profits chargeable under business income, while expressly excluding the actual "relevant shipping income" from tax once the tonnage computation applies; these effects are conditional on compliance with the Part's eligibility, option, separation, and record keeping requirements.
Act Rules Bills
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Tonnage tax scheme: elective presumptive taxation for shipping income, requiring separate accounting and exclusive computation under qualifying criteria.
The tonnage tax scheme is an elective presumptive regime requiring eligible companies operating qualifying ships to compute profits from that business exclusively under the tonnage basis; the tonnage tax business is treated as a separate business with independent computation and accounting, and companies not opting or ineligible must compute shipping profits under the normal provisions of the Act.
Act Rules Bills
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Qualifying ship definition governs tonnage tax eligibility by tying registration, certification, and operational use to tax benefit access.
The definition of qualifying ship in Clause 235(i) requires three operative conditions for tonnage tax eligibility: a minimum net tonnage, registration under the relevant shipping statute or an authorised foreign licence, and a valid certificate evidencing net tonnage. It lists explicit exclusions-vessels providing services normally provided on land, fishing vessels, factory ships, pleasure crafts, harbour and river ferries, offshore installations-and disqualifies vessels used for fishing beyond a specified threshold in a tax year, anchoring eligibility in maritime regulatory certification and operational use.
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Place of effective management central to qualifying company status, restricting tonnage tax benefits to genuinely India-managed shipping firms.
The qualifying company for the tonnage tax regime must satisfy four cumulative conditions: be an Indian company; have its place of effective management in India-defined to include decisions made by executives as well as the board; own at least one qualifying ship; and have its main object as operating ships. Clause 235(h) consolidates these criteria within a broader definitional framework and references updated maritime legislation to clarify eligibility and reduce interpretive disputes.
Act Rules Bills
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Tonnage tax eligibility defined by operation status: owners and charterers qualify, long term bareboat lessors excluded.
Clause 226(1) treats a company as operating a ship or inland vessel if it owns or charters a vessel, including partial charters such as slot, space, or joint charters, and excludes companies that have chartered out vessels on bareboat charter or bareboat charter cum demise terms for periods exceeding three years, thereby distinguishing operational risk bearing operators from passive, long term financiers for purposes of the tonnage tax scheme.
Act Rules Bills
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Tonnage tax regime: option to compute shipping income on a tonnage basis with deeming treatment as business profits.
Clause 225 creates a self-contained tonnage tax regime for companies operating qualifying ships, allowing an option to compute income under its Part with a deeming provision treating that income as profits and gains of business; key operational questions concern the definition of qualifying ships, the option's exercise and lock-in mechanics, and interaction with loss set-off, allowances, and other tax measures.
Act Rules Bills
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Tonnage tax definitions: expanded, self-contained eligibility rules broaden coverage and tighten residency and exclusion tests.
Clause 235 consolidates and expands tonnage tax definitions by explicitly including inland vessels, embedding a detailed qualifying company test requiring Indian residency, ownership of qualifying ships, principal shipping business, and a specified place of effective management; it also defines qualifying ship with tonnage, registration/licensing and certification requirements and enumerated exclusions to prevent abuse.
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Pass-through taxation preserves investor-level tax treatment of investment fund income while ring-fencing fund-level losses.
Clause 224 restates a pass-through regime: income from investments in a regulated fund is taxed in the hands of unit holders as if held directly, while business income remains taxable at the fund level. Business losses are ring fenced at the fund; other losses pass through subject to holding period conditions and transitional attribution of legacy losses to unit holders. Income retained by the fund is deemed credited to unit holders at year end and prescribed statements must be furnished to unit holders and tax authorities to secure transparency and enforcement.
Act Rules Bills
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Pass-through taxation for business trusts preserves income character and shifts tax consequences to unit holders with reporting duties.
The clause establishes a statutory pass-through mechanism under which income distributed by business trusts is deemed to retain its original character and proportion in the hands of unit holders, while subjecting the trust's total income to tax at the maximum marginal rate subject to specified withholding provisions; it also deems certain scheduled categories of distributed income taxable on distribution, carves out specified statutory exceptions, and imposes prescribed reporting obligations on payers to unit holders and tax authorities.

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Comparison of section 524 "Presumption as to assets, books of account, etc." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

17 September, 2025

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Section 524 Presumption as to assets, books of account, etc

Income-tax Act, 2025

At a Glance

The documents are two textual versions of Clause/Section 524 dealing with presumptions as to assets, books of account and related items encountered during searches (s.247) or surveys (s.253) under the Income-tax enactment. One is the enacted Section 524 of the Income-tax Act, 2025 (Document 1) and the other is the older Bill version of Clause 524 (Document 2). The provisions affect taxpayers, investigating officers and the Department; effective/decision date is Not stated in the document.

Background & Scope

Statutory hooks: references in the texts to searches u/s 247, surveys u/s 253 and requisitioning officer u/s 248. Both texts set out presumptions that may be drawn "in any proceeding under this Act" where specified items are found in the possession or control of a person during search or survey. Definitions or extended explanations are Not stated in the document beyond the explicit list of items and the cross-references to sections 247, 248 and 253.

Statutory Provision Mode

Text & Scope

Coverage and elements (as stated in the Bill version, Document 2): Clause 524 provides that where any books of account, other documents, money, bullion, jewellery, virtual digital asset or other valuable article or thing is found in the possession or control of any person in the course of a search u/s 247 or survey u/s 253, it may, in any proceeding under this Act, be presumed-

  • (a) that such items belong to such person;
  • (b) that the contents of such books of account and other document are true;
  • (c) that signatures and parts purported to be in handwriting of a person are in that person's handwriting;
  • (d) in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested (text includes a trailing phrase that is unclear: "article or thing belong or belongs to such person").

Sub-section (2) in both texts provides that if books/documents/assets have been delivered to the requisitioning officer u/s 248, the presumptions apply as if those items had been found in the possession/control of the person in the course of a search u/s 247.

Interpretation

The Bill text creates evidentiary presumptions in proceedings under the Income-tax enactment where enumerated items are found during statutory search/survey processes. The phrase "it may ... be presumed" indicates a statutory permissive presumption (a rebuttable presumption) rather than an absolute rule; the Bill's accompanying explanatory note (in the summary line) expressly describes the provision as providing "a rebuttable presumption." The operative context for the presumptions is "in the course of a search u/s 247 or survey u/s 253" and in "any proceeding under this Act."

Exceptions/Provisos

No exceptions, provisos, thresholds, or conditions beyond the cross-references to sections 247, 248 and 253 are specified in the Bill text. Any carve-outs or procedural safeguards are Not stated in the document.

Illustrations

  • Example 1: If during a search u/s 247, an assessor finds physical ledgers and jewellery in X's premises, Clause 524 permits a presumption that the ledgers and jewellery belong to X and that the ledger contents are true. (This follows from sub-clauses (a) and (b) of the Bill text.)
  • Example 2: If a stamped contract purportedly signed by Y is recovered in Y's control during a survey u/s 253, the contract may be presumed to be duly stamped and executed by Y per sub-clause (d). (Derived directly from the Bill text.)
  • Example 3: Not stated in the document. (No example involving electronic records is in the Bill text; the enacted Section 524, Document 1, includes such examples by reference to electronic information.)

Interplay

The clause expressly interfaces with: section 247 (search), section 253 (survey), and section 248 (requisitioning officer). There is an explicit mechanism in sub-section (2) treating items delivered to a requisitioning officer as if found during a search u/s 247. Interaction with rules, notifications or other circulars is Not stated in the document.

Differences Between the Two Provisions and Practical Impact

Key textual differences observed between the enacted Section 524 (Document 1) and the Bill/old Clause 524 (Document 2) are:

  • Inclusion of electronic information and computer systems: Document 1 expressly includes "any information in electronic form as defined in section 261(g) or on a computer system as defined in section 261(e) or any computer system containing the said information" among the items found and subject to presumptions. Document 2 omits any such express reference to information in electronic form or computer systems.
  • Additional presumption regarding electronic exchange: Document 1 contains a distinct clause (e) providing that "exchange of such information in electronic form, or on such computer system purported to be exchanged between any parties, is exchanged between the parties thereto." Document 2 lacks an equivalent clause.
  • Expanded specification of covered items: Document 1 repeats the list and explicitly connects "such information or computer system" to the presumptions in sub-clauses; Document 2 lists tangible/digital assets but does not incorporate electronic information/computer systems in the text of presumptions.
  • Stylistic/typographical differences: Document 2's clause (d) contains a textual anomaly-an apparent duplication or misplacement at the end ("...attested article or thing belong or belongs to such person"); Document 1's clause (d) is cleaner and constrained to the stamped/executed/attested document presumption.

Practical impact of those changes (as directly deduced from the texts):

  • Broader evidentiary reach: The enacted text (Document 1) extends statutory presumptions to information in electronic form and to computer systems containing that information. This broadens the class of items which, when found in the course of a search/survey, may be treated as belonging to the person and whose contents may be presumed true.
  • Specific presumption for electronic exchanges: The addition of clause (e) in Document 1 creates a statutory presumption that an electronic exchange recorded on a system was exchanged between the purported parties. This directly addresses evidentiary weight for electronic communications.
  • Increased evidentiary burden on the possessor: By expanding presumptions to electronic records and exchanges, the enacted provision, on its face, shifts the initial evidentiary position in proceedings-raising the threshold for a person in whose possession such records are found to rebut the presumptions. The Bill version provided a narrower scope.
  • Operational/forensic consequences for investigations: The statutory inclusion of computer systems and electronic information signals that material seized in digital form will attract the same presumptive weight as physical books/documents found; this has implications for digital forensics, custody, and chain-of-evidence practices (the text does not prescribe procedures; those are Not stated in the document).

Practical Implications

  • Compliance and risk areas: Under the Bill text, material found during searches/surveys attracts statutory presumptive weight for ownership, truth of ledger contents and authenticity of signatures. Taxpayers and their advisors should be aware that discovery of books/documents/assets during official actions can trigger presumptions in subsequent proceedings. The Bill version does not address electronic information specifically; the enacted text does-see the Differences section above.
  • Record-keeping/evidence points: The Bill text does not prescribe custody, notice, or forensic procedures; therefore, documentation of chain of custody, independent corroborating records and means to rebut presumptions will be relevant in practice. Specific requirements for handling or challenging electronic material are Not stated in the document.

Key Takeaways

  • Clause 524 creates rebuttable presumptions in proceedings under the Act where enumerated items are found during searches (s.247) or surveys (s.253).
  • Presumptions cover ownership, truth of book/document contents, handwriting/signature authenticity and proper stamping/execution/attestation of documents.
  • Sub-section (2) treats items delivered to the requisitioning officer under s.248 as if found in a search under s.247.
  • The Bill version (Document 2) does not expressly mention information in electronic form or computer systems; the enacted Section (Document 1) expands the scope to include electronic information and a presumption as to electronic exchange.
  • No procedural safeguards, timelines, or mechanisms for rebuttal are specified in the Bill text; such matters are Not stated in the document.

Full Text:

Section 524 Presumption as to assets, books of account, etc

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Acts Income Tax