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    Hierarchy of tax authorities clarified: consolidation and streamlined nomenclature aim to centralise appellate functions and improve clarity.
    Clause 236 consolidates the hierarchy of income-tax authorities-from the Central Board of Direct Taxes to Inspectors and Tax Recovery Officers-streamlining nomenclature and grouping alternative designations. It notably omits Deputy Commissioners (Appeals), signalling possible consolidation of first-level appellate functions at higher levels, and leaves allocation of specific powers and appellate responsibilities to subordinate rules and notifications.
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    Tonnage tax exclusion: anti abuse power to remove companies from the regime where transactions lack bona fide commercial purpose.
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    Anti-abuse safeguards in tonnage tax: exclusion applies where arrangements produce tax advantages for non-eligible activities.
    Clause 234(1)-(3) excludes the tonnage tax scheme where a tonnage tax company is party to any transaction or arrangement that constitutes an abuse by resulting, or that would but for the clause have resulted, in a tax advantage for persons other than the tonnage tax company or for the company in respect of its non-tonnage activities. "Tax advantage" includes manipulation of expense or interest allowances or cost allocation affecting non-tonnage income or loss, and transactions producing more than ordinary profits from tonnage tax activities.
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    Temporary cessation of operations preserves tonnage tax continuity, but temporary loss of qualifying status suspends benefits for that period.
    A company is deemed to be operating a qualifying ship for tonnage tax purposes during periods of temporary cessation of operations, so long as the cessation is not permanent; however, a ship that temporarily ceases to meet the statutory criteria of a qualifying ship is excluded from qualifying status for the period of non-qualification and cannot attract tonnage tax benefits during that time.
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    Where a demerged company transfers its business to a resulting company before expiry of its tonnage tax option, the tonnage tax scheme shall, subject to other provisions, apply to the resulting company for the unexpired period if it is a qualifying company; similarly, the demerged company retains its option for the unexpired period if it continues to be a qualifying company, with both continuities conditional on statutory eligibility, procedural compliance, and anti-avoidance requirements.
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    Clause 233(1)-(4) secures continuity of the tonnage tax regime on amalgamation by applying the scheme to the amalgamated company if it remains a qualifying company, requiring non-tonnage amalgamated companies to elect the scheme within a prescribed short period, granting the amalgamated entity the longest unexpired option period when multiple merging companies are under the scheme, and excluding entities that failed to elect during the original implementation window from accessing the regime post-amalgamation.
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    Tonnage determination by statutory certificates ensures objective tonnage income computation and limits administrative discretion, aligning with international practice.
    The net tonnage for tonnage income must be determined from prescribed certificates: Indian ships by Merchant Shipping Rules or the 1969 Convention certificate as applicable; foreign ships by a DG Shipping licence reflecting Flag State tonnage certificates or other evidence acceptable to the DG; inland vessels by Inland Vessels Act, 2021 certificates. Reliance on statutory certificates is central, reducing subjective measurement and constraining administrative assessment to verification of certificate authenticity.
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    Tonnage tax compliance: separate books and certified accountant's report required or tonnage tax option lapses for the year.
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    Companies opting for the tonnage tax regime must train trainee officers as per guidelines of the Director-General of Shipping and furnish an annually issued compliance certificate in the prescribed form with their tax return; sustained non-compliance over consecutive years results in automatic cessation of the company's option for the tonnage tax scheme from the year following the concluding year of default. Delegation to the Director-General allows technical adaptability but leaves open statutory ambiguities on thresholds, partial compliance and transitional treatment.
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    Clause 232 conditions tonnage tax access on crediting a specified portion of book profit from qualifying shipping activities to a Tonnage Tax Reserve Account, usable within eight years for acquisition of a new ship or inland vessel; interim restrictions prevent distribution or foreign remittance, and proportional re taxation, carryforward rules, and cessation of the option after sustained default enforce compliance.
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    Tonnage tax disqualification: companies face a ten-year bar on re-entry after opting out, default, or formal exclusion.
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    Clause 231(10) requires renewal of an approved tonnage tax option within one year from the end of the tax year in which the prior option ceases, with renewal discretionary and subject to approval or refusal by the competent authority. Clause 231(11) imports sub sections (1) to (10) to apply equally to renewals, ensuring procedural parity-application format, eligibility checks, opportunity of being heard, timelines and cessation consequences-but leaves unresolved whether benefits continue during pendency or whether delayed applications may be condoned.
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    Tonnage tax lock in establishes a multi year tenure and automatic cessation for qualification loss or compliance defaults.
    Clause 231(8)-(9) provides that an approved tonnage tax option remains in force for ten years from the tax year of exercise, and ceases from the tax year in which the company ceases to qualify, defaults on compliance under section 232(1)-(20), is excluded under the exclusion provision, or voluntarily declares in writing to the Assessing Officer that the part will not apply; on cessation, shipping profits are computed under the general provisions of the Act.
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    Tonnage tax opting procedure ensures time-bound approval and procedural fairness under the updated legislative framework.
    A qualifying company must apply in the prescribed form to the Joint Commissioner within the statutory window; the Commissioner may call for documents, must afford an opportunity of being heard before refusing, and must communicate a written order within a set time measured from the end of the processing quarter. On approval, the tonnage tax regime applies from the tax year in which the option is exercised, with transitional provisions for IFSC units and further clauses governing duration, cessation, renewal and a bar on re-entry.
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    Exclusion of book profits: tonnage tax income is removed from MAT computation to preserve the presumptive shipping regime.
    Clause 228(16) excludes the book profit or loss derived from the activities of a tonnage tax company, as defined in Clause 228(1), from the company's book profit for the purposes of section 206, thereby preventing MAT from applying to profits attributable to qualifying core and incidental shipping activities; the exclusion operates alongside detailed provisions on caps for incidental income, allocation of costs and depreciation, treatment of non qualifying ships, and transfer pricing adjustments.
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    Capital gains on qualifying ships taxed under tonnage tax regime with WDV computed for block of qualifying assets.
    Profits or gains on transfer of capital assets forming part of the block of qualifying ships are chargeable to income-tax, with capital gains computed under the capital gains provisions specified in the Bill. For that computation, references to "written down value of the block of assets" are to be read as the "written down value of the block of qualifying assets", and that WDV is to be determined by the method prescribed in sub-section (2) of Clause 229.
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    Tonnage tax loss set off limited to shipping income; pre option losses deemed set off and apportionment must be reasonable.
    Clause 230(2)-(4) (and mirror Section 115VM) deem pre option losses attributable to the tonnage tax business to have been set off against relevant shipping income while under the tonnage tax regime, bar their set off against non shipping income after opting in, and require any necessary apportionment to be made on a reasonable basis, creating documentary and evidentiary obligations and potential disputes over apportionment and the definition of relevant shipping income.
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    Tonnage tax exclusion: carry forward and deductions barred, creating a self contained computation regime for shipping companies under new bill
    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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    Depreciation under tonnage tax: explicit WDV allocation formulas clarify asset classification and continuity of depreciation claims.
    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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      Illegality of Arrest and Remand for Non-Supply of Written Grounds: The Two-Hour Pre-Remand Standard under the BNSS Framework

      4 February, 2026

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      This note presents a concise research digest of the judicial decision, summarising the key issues, findings, and outcome. The judgment is analysed in the context of its factual background, issues framed, and conclusions reached by the Court.

      2025 (11) TMI 367 - Supreme Court

      Case Snapshot

      A set of criminal matters raised a recurring constitutional question: whether an arrested person must be furnished the grounds of arrest in writing, and whether failure to do so necessarily vitiates the arrest and subsequent remand. The Court treated the issue as one of general legal position under Article 22(1) of the Constitution of India and the corresponding procedural mandate in Section 50 of the Code of Criminal Procedure, 1973 (now Section 47 of the Bharatiya Nagarik Suraksha Sanhita, 2023).

      The Court held that communication of grounds of arrest is a mandatory constitutional safeguard applicable across offences and statutes. As a general rule, grounds of arrest must be communicated in writing, in a language understood by the arrestee. However, in exceptional situations where furnishing written grounds at the moment of arrest is impractical, oral communication at the time of arrest may suffice temporarily, subject to written grounds being supplied within a reasonable time and, in any event, at least two hours before production for remand.

      On the case outcomes, the Court disposed of one matter after settling the legal position, continued interim bail in connected matters (with liberty to seek remand after supplying written grounds), and continued interim bail in a tagged matter while directing it to be listed before an appropriate Bench.

      Material Facts

      The lead matter arose from a road traffic incident alleged to involve rash and high-speed driving, resulting in a fatality and injuries. An FIR was registered invoking provisions of the Bharatiya Nyaya Sanhita, 2023 and the Motor Vehicles Act, 1988. The investigation included reliance on CCTV footage and other materials said to link the appellant to the driving of the vehicle at the relevant time.

      The appellant was arrested without a warrant. During remand proceedings, the appellant challenged the legality of arrest and custody on the ground that the grounds of arrest were not furnished in writing, invoking Article 22(1) of the Constitution of India and Section 50 of the Code of Criminal Procedure, 1973, corresponding to Section 47 of the Bharatiya Nagarik Suraksha Sanhita, 2023.

      A writ challenge to the arrest was considered by the High Court (not identified here). While acknowledging a procedural lapse, the High Court upheld the validity of arrest, reasoning (in substance) that the appellant was aware of the nature of allegations and that the circumstances justified custody despite non-furnishing of written grounds. The appellant approached the Court to settle the legal position on the requirement of furnishing grounds of arrest in writing.

      In connected matters raising similar questions, interim bail had been granted during pendency. An amicus curiae was appointed to assist the Court.

      Issue Involved

      The Court framed the controversy around Article 22(1) of the Constitution of India and the statutory reflection of that safeguard in Section 50 of the Code of Criminal Procedure, 1973 (now Section 47 of the Bharatiya Nagarik Suraksha Sanhita, 2023):

      • Whether, in each and every case (including ordinary penal offences under the Indian Penal Code, 1860, now the Bharatiya Nyaya Sanhita, 2023), it is necessary to furnish grounds of arrest to an accused either before arrest or forthwith after arrest.
      • Whether, even in exceptional cases where exigencies prevent furnishing grounds of arrest before arrest or immediately after arrest, the arrest stands vitiated for non-compliance with Section 50 of the Code of Criminal Procedure, 1973 (now Section 47 of the Bharatiya Nagarik Suraksha Sanhita, 2023).

      Closely connected to these questions were two operational aspects: (i) the mode of communication (oral versus written), and (ii) the time by which the grounds must be supplied to preserve the constitutional purpose of enabling legal consultation and meaningful opposition to remand.

      Decision

      The Court crystallised the following holdings:

      (1) Universality of the safeguard.Article 22(1) of the Constitution of India imposes a mandatory obligation to inform the arrestee of the grounds of arrest "as soon as may be". This obligation is not statute-specific and applies to arrests for offences under all statutes, including offences under the Indian Penal Code, 1860 (now Bharatiya Nyaya Sanhita, 2023) as well as special laws.

      (2) Written communication as the governing rule. The grounds of arrest must be communicated in writing to the arrestee, in the language the arrestee understands, to fulfil the intended constitutional purpose of enabling consultation with counsel and effective participation in remand proceedings.

      (3) Exceptional impracticability and calibrated timeline. Where furnishing written grounds at the time of arrest or soon after arrest is impractical (illustrated by arrests in situations akin to flagrante delicto offences against body or property), it is sufficient to orally convey the grounds at the time of arrest. However, a written copy must then be supplied within a reasonable time and, in any event, not later than two hours prior to production before the Magistrate for remand proceedings. The remand papers must contain the grounds of arrest, and any delay in supplying written grounds must be explained by a note to the Magistrate.

      (4) Consequence of non-compliance. Failure to adhere to the above schedule renders the arrest and subsequent remand illegal, entitling the arrestee to be set at liberty. Thereafter, if custody/remand is still sought, it may be moved for after supplying the written grounds, with reasons for earlier non-supply; the Magistrate is to decide such an application expeditiously and preferably within a week, consistent with natural justice.

      Applying this to case management: the Court disposed of one matter after clarifying the legal position; continued interim bail in connected matters while permitting the prosecution to move for remand/custody after supplying written grounds; and continued interim bail in a tagged matter while directing further listing before an appropriate Bench.

      Key Observations

      Constitutional foundation. The Court located the requirement of communicating grounds of arrest within Article 21 (procedure established by law protecting personal liberty) and Article 22(1) (prompt intimation of grounds and right to consult and be defended by counsel). The statutory vehicle giving effect to Article 22(1) was identified as Section 50 of the Code of Criminal Procedure, 1973, corresponding to Section 47 of the Bharatiya Nagarik Suraksha Sanhita, 2023.

      Associated safeguards under the BNSS/CrPC scheme. The Court emphasised that the architecture of protections is not limited to Section 47BNSS (Section 50 CrPC). Section 50A of the Code of Criminal Procedure, 1973 (now Section 48 of the Bharatiya Nagarik Suraksha Sanhita, 2023) obligates the arresting authority to inform a relative/friend/nominated person about the arrest and place of detention, with the Magistrate having a duty to verify compliance under Section 48(4)BNSS. The Court also referred to Section 38 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (right to meet an advocate during interrogation, though not throughout) and to remand-related provisions: Section 167 of the Code of Criminal Procedure, 1973 (now Section 187BNSS) read with Section 57 CrPC (now Section 58BNSS), underscoring that remand is a judicial function requiring application of mind, not a mechanical act.

      Meaningful communication and the writing requirement. The Court reasoned that mere oral reading of grounds may be ineffective, particularly when the arrestee is not in a position to retain and recall details, and it can generate factual disputes about whether communication occurred. Written grounds, acknowledged by the arrestee, support both constitutional efficacy and procedural certainty. The Court's approach aligns with the broader principle that fundamental rights protections must be practical and enforceable, not illusory.

      Language understood by the arrestee. Drawing from established doctrine under Article 22(5) concerning preventive detention, the Court treated the expression "communicate" as requiring that the grounds be brought home to the person in a manner enabling effective representation. Accordingly, the grounds must be furnished in a language the arrestee understands, and in a script the person can read if literate. Oral explanation of written grounds in an unfamiliar language was considered inadequate for this constitutional purpose.

      Balancing rights with operational exigencies. While characterising Article 22(1) as unexceptional in its obligation to inform grounds, the Court nevertheless acknowledged field realities where immediate written grounds may be impracticable. The solution adopted was not to dilute the right, but to structure an enforceable timeline: oral grounds at the point of arrest in exceptional cases, followed by written grounds within a reasonable time, but mandatorily at least two hours before remand production. The "two-hour" minimum interval was justified as functionally necessary to enable counsel to examine the grounds and prepare to oppose remand effectively.

      Consequences and curative pathway. Non-compliance leads to illegality of arrest and remand and entitlement to release. At the same time, the Court indicated a procedural route for the investigating agency to seek remand afresh after compliance, with reasons for earlier non-supply placed before the Magistrate, who must decide expeditiously and preferably within a week.

      Practical Relevance

      For police and investigating agencies. For arrests without warrant, Section 47BNSS 2023 (Section 50 CrPC 1973) must be operationalised through written grounds as a general rule, in the language understood by the arrestee. In document-heavy or pre-planned arrests where grounds are already available (including situations where the accused has joined investigation after notice under Section 41A CrPC 1973, corresponding to Section 35(3) to 35(6)BNSS 2023), written grounds should be handed over contemporaneously with arrest. In exigent arrests (including flagrante delicto situations), oral grounds at arrest are permissible, but written grounds must follow within reasonable time and at least two hours before remand production; remand papers should include grounds and any delay note.

      For remand advocacy and legal aid. The requirement directly affects the remand stage under Section 187BNSS 2023 (Section 167 CrPC 1973). Defence counsel may test compliance by asking when and in what language written grounds were supplied, and whether supply occurred at least two hours prior to remand production. The Court's reasoning also reinforces the importance of early access to legal assistance at pre-remand stages, and the Magistrate's duty to ensure procedural compliance rather than treating remand as routine.

      For Magistrates. Magistrates are expected to verify compliance with Section 48BNSS 2023 (Section 50A CrPC 1973) regarding intimation to relatives/friends, and to be alive to the constitutional purpose of Article 22(1) when authorising detention under Section 187BNSS 2023. Where written grounds are supplied late, the existence of an explanatory note in remand papers becomes relevant. If non-compliance is established, custody is illegal, and any fresh remand request must follow supply of written grounds with reasons for earlier non-supply.

      For litigation strategy. Challenges to arrest and remand can now be structured around a clear compliance matrix: (i) whether grounds were communicated, (ii) whether they were in writing, (iii) whether they were in a language understood, and (iv) if not immediate, whether written grounds were supplied within reasonable time and at least two hours before remand production. The decision thus provides a concrete framework for adjudicating disputes that otherwise degenerate into contested assertions of oral communication.

       


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      2025 (11) TMI 367 - Supreme Court

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