Section 115V — Definitions

CHAPTER XII-G — SPECIAL PROVISIONS RELATING TO INCOME OF SHIPPING COMPANIES (TONNAGE TAX)

Section 115V — Definitions

Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise

Chapter / Part: Chapter XII-G (Special Provisions Relating to Income of Shipping Companies — the Tonnage Tax Scheme), inserted by the Finance (No. 2) Act, 2004 w.e.f. 1-4-2005 (AY 2005-06).

Finance Act, 2026: No amendment. The Finance Act, 2026 does not touch any section of Chapter XII-G (verified against the Finance Act, 2026 text).

Finance Act, 2025: Extended the Scheme to inland vessels (Inland Vessels Act, 2021) — inland-vessel words inserted across the Chapter w.e.f. 1-4-2026; s.115VP timeline/IFSC provisos also added. Text below is the in-force position for AY 2026-27.

A. SECTION COMMENTARY

1. Function of the definition clause

Section 115V is the dictionary of Chapter XII-G. It opens the self-contained tonnage-tax code with thirteen defined expressions — from 'bareboat charter' to 'tonnage tax scheme' — every one of which is load-bearing because the Chapter operates as a closed, presumptive regime detached from the normal computational provisions (ss.28 to 43C). The opening words 'unless the context otherwise requires' make these meanings the default, displaceable only where the surrounding text plainly demands otherwise.

The defined terms fall into three families. The first fixes the SUBJECT-MATTER of the Scheme — 'qualifying company' (s.115VC), 'qualifying ship' (s.115VD), 'tonnage tax company' (a qualifying company with a live option) and 'seagoing ship'. The second fixes the CHARTERING vocabulary on which eligibility turns — 'bareboat charter' and 'bareboat charter-cum-demise', which carry possession/control and an intended transfer of ownership respectively, and which determine when a company is, or ceases to be, an 'operator' under s.115VB. The third fixes the COMPUTATIONAL vocabulary — 'tonnage income', 'tonnage tax activities' and 'tonnage tax scheme'.

2. The Finance Act, 2025 inland-vessel layer (in force AY 2026-27)

With effect from 1 April 2026 the Finance Act, 2025 wove 'or inland vessel, as the case may be' into the definitions of 'bareboat charter', 'bareboat charter-cum-demise', 'pleasure craft' and 'qualifying ship', and inserted a new clause (ea) defining 'inland vessel' by reference to section 3(q) of the Inland Vessels Act, 2021. The policy aim is to extend the presumptive Scheme to India's 14,500 km of inland waterways. For AY 2026-27 the practitioner must read every 'ship' in the Chapter as 'ship or inland vessel' wherever the amendment so provides. The Finance Act, 2026 makes no further change.

3. Exclusionary definitions

Several definitions operate as carve-outs that keep the Scheme tethered to genuine cargo/passenger shipping: 'factory ship', 'fishing vessel' (by reference to s.3(12) of the Merchant Shipping Act, 1958) and 'pleasure craft' map directly onto the excluded categories in s.115VD. 'Director-General of Shipping' anchors the certification and training machinery (ss.115VD, 115VU, 115VX) in the office created under s.7(1) of the Merchant Shipping Act, 1958.

B. STATUTORY POSITION (verbatim operative text)

Section 115V, Income-tax Act, 1961 (Chapter XII-G), as in force on and after 1 April 2026 (inland-vessel words inserted by the Finance Act, 2025 w.e.f. 1-4-2026):

115V. In this Chapter, unless the context otherwise requires,—

(a) “bareboat charter” means hiring of a ship or inland vessel, as the case may be, for a stipulated period on terms which give the charterer possession and control of the ship or inland vessel, as the case may be, including the right to appoint the master and crew;

(b) “bareboat charter-cum-demise” means a bareboat charter where the ownership of the ship or inland vessel, as the case may be, is intended to be transferred after a specified period to the company to whom it has been chartered;

(c) “Director-General of Shipping” means the Director-General of Shipping appointed by the Central Government under sub-section (1) of section 7 of the Merchant Shipping Act, 1958 (44 of 1958);

(d) “factory ship” includes a vessel providing processing services in respect of processing of the fishing produce;

(e) “fishing vessel” shall have the meaning assigned to it in clause (12) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958);

(ea) “inland vessel” shall have the same meaning as assigned to it in clause (q) of section 3 of the Inland Vessels Act, 2021 (24 of 2021);

(f) “pleasure craft” means a ship or inland vessel, as the case may be, of a kind whose primary use is for the purposes of sport or recreation;

(g) “qualifying company” means a company referred to in section 115VC;

(h) “qualifying ship” means a ship or inland vessel, as the case may be, referred to in section 115VD;

(i) “seagoing ship” means a ship if it is certified as such by the competent authority of any country;

(j) “tonnage income” means the income of a tonnage tax company computed in accordance with the provisions of this Chapter;

(k) “tonnage tax activities” means the activities referred to in sub-sections (2) and (5) of section 115V-I;

(l) “tonnage tax company” means a qualifying company in relation to which tonnage tax option is in force;

(m) “tonnage tax scheme” means a scheme for computation of profits and gains of business of operating qualifying ships under the provisions of this Chapter.

Inland-vessel words in clauses (a), (b), (ea), (f) and (h) inserted by the Finance Act, 2025 (Act 7 of 2025) w.e.f. 1-4-2026. The Finance Act, 2026 makes no change.

C. AUTHORITIES

Candour note: No reported decision construes the definition section 115V as such. The terms are, however, interpreted in the course of construing the operative sections — the authorities below bear directly on the meaning of 'operating'/charter terms (s.115VB) and 'qualifying ship' (s.115VD), and on the Scheme's purposive construction.

C-1 Purposive construction of the defined Scheme (Supreme Court)

CIT v. Trans Asian Shipping Services (P) Ltd — (2016) 385 ITR 637 (SC) / [2016] 71 taxmann.com 35 / (2016) 241 Taxman 30 (SC)

Forum / Bench: Supreme Court of India; T.S. Thakur CJI, A.K. Sikri J and R. Banumathi J. Judgment dated 5 July 2016, affirming the Kerala High Court and the Cochin Bench of the Tribunal.

Provisions: Sections 115VA, 115VB, 115VF, 115VG (including the s.115VG(4) Explanation on 'deemed tonnage') and 115VX, read with Rule 11Q; Chapter XII-G generally.

Issue: Whether income from 'slot charter' operations of a tonnage tax company can be included in 'tonnage income' under the Tonnage Tax Scheme (TTS) even where those operations are carried on in ships that are NOT the company's own 'qualifying ships' — and whether production of the tonnage certificate referred to in s.115VX is a pre-condition for computing such slot-charter income.

Held: Allowing the assessee, the Court held that although only income from operating a 'qualifying ship' is computed under Chapter XII-G, s.115VB expressly treats a company as 'operating a ship' even where only a PART of a ship has been chartered in under an arrangement such as slot charter, space charter or joint charter. A slot-charter arrangement is made with a shipping line and not in relation to an identified ship, so the carrying vessel (and its certificate) cannot be identified. The 'deemed tonnage' mechanism in the Explanation to s.115VG(4) — covering purchase of slots, slot charter and sharing of break-bulk vessel — was introduced precisely to capture such arrangements; to insist on a s.115VX certificate for slot charters would render deemed tonnage otiose. The s.115VX certificate requirement therefore does NOT apply to slot/space-charter operations and the slot-charter income is includible in tonnage income.

Ratio / why it matters: The leading — and only — Supreme Court authority on Chapter XII-G. It settles the architecture of the Scheme: (i) the charging provision is s.115VA read with s.115VF and s.115VG; (ii) the TTS is a 'preferential regime of taxation' to be construed to advance its object of making Indian shipping globally competitive (Rakesh Mohan Committee, January 2002); and (iii) 'deemed tonnage' is a distinct head of tonnage not dependent on a ship-specific certificate. The Court relied on CBDT Circular No. 5/2005 dated 15-7-2005 and reaffirmed that CBDT circulars explaining a scheme bind the Department.

C-2 'Qualifying ship' / charter vocabulary in operation

ACIT v. West Asia Maritime Ltd (Third Member) — [2012] 16 ITR (Trib) 175 (Chennai) / 2011-TIOL-479-ITAT-MAD-TM

Forum / Bench: Income-tax Appellate Tribunal, Chennai — Third Member (Vice-President) reference resolving a difference between the Accountant Member and the Judicial Member; AY 2006-07.

Provisions: Section 115VD(i) (exclusion of a seagoing ship whose main use is the provision of goods or services 'of a kind normally provided on land'); s.115VB.

Facts: Of 10 ships operated by the assessee, the vessel 'M.V. Gem of Ennore' carried thermal coal solely between Indian ports (Haldia / Paradip / Vizag to Ennore / Tuticorin). The AO denied TTS on the footing that coal could equally move by road or rail and was therefore a 'service of a kind normally provided on land' excluded by s.115VD(i).

Held: Coastal operation does not change the operating character of a seagoing ship. Nothing in Chapter XII-G confines TTS to international voyages or excludes coastal shipping; the s.115VD(i) exclusion is aimed at floating land-type services (retail outlets, restaurants, hotels, casinos, offices and the like — drawn from the cognate British tonnage-tax legislation on which the Indian Scheme is modelled), not at the bona fide carriage of cargo between two domestic ports. 'M.V. Gem of Ennore' is a qualifying ship and the assessee is entitled to TTS.

Ratio / why it matters: The leading tribunal authority that coastal / inter-Indian-port shipping qualifies for TTS, and the leading exposition of the s.115VD(i) 'normally provided on land' exclusion. It also endorses recourse to the British tonnage-tax model where the Indian text is in pari materia.

CIT v. Jaggon International Ltd — [2013] 214 Taxman 630 / 35 taxmann.com 614 (Delhi)

Forum: Delhi High Court.

Provisions: Section 115VD — 'qualifying ship'; exclusion clause (vi) 'offshore installations'.

Facts / Issue: The assessee's vessel 'D' was engaged in drilling operations at different locations and was registered under the Merchant Shipping Act, 1958. The AO held it was not a qualifying ship but an 'offshore installation' (an excluded category) and denied TTS.

Held: A self-propelled vessel that moves from site to site to perform drilling and is registered under the Merchant Shipping Act is a 'qualifying ship' under s.115VD and is NOT an 'offshore installation'. An offshore installation is fixed for a specific purpose at a site and, the purpose achieved, is dismantled and shifted; a mobile drilling vessel does not answer that description. TTS was available.

Ratio / why it matters: Authority on the boundary between a 'qualifying ship' and the excluded category 'offshore installations' in s.115VD; registration under the Merchant Shipping Act and the mobility of the vessel are the decisive markers.

C-3 CBDT's contemporaneous exposition (binding)

CBDT Circular No. 5/2005 dated 15 July 2005 — Explanatory Notes to the Finance (No. 2) Act, 2004

Nature: Departmental circular explaining the newly inserted Tonnage Tax Scheme.

Effect: Describes the Scheme as a 'preferential regime of taxation' and clarifies that the charging provision is s.115VA read with s.115VF and s.115VG. Relied on by the Supreme Court in Trans Asian Shipping (supra), which reaffirmed that CBDT circulars explaining a scheme bind the Department.

On the binding force of CBDT circulars — Union of India v. Azadi Bachao Andolan (2003) 263 ITR 706 (SC); Navnit Lal C. Javeri v. K.K. Sen, AAC (1965) 56 ITR 198 (SC); UCO Bank v. CIT (1999) 237 ITR 889 (SC)

Relevance: Expressly invoked by the Supreme Court in Trans Asian Shipping to hold that CBDT circulars explaining the Tonnage Tax Scheme (notably Circular No. 5/2005) bind the Revenue. Useful wherever a beneficial reading of a Chapter XII-G provision is supported by CBDT's contemporaneous exposition.

Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced verbatim from the Income-tax Act, 1961 (text as in force on and after 1 April 2026, incorporating the inland-vessel insertions made by the Finance Act, 2025 with effect from 1 April 2026). Citations are stated as reported; tribunal and stay-stage orders are flagged as such. Where a section has not been judicially construed, that is stated candidly and the nearest governing authority is given. This material is for professional reference and is not legal advice.