Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Provision: Live. Part H of Chapter XV (Profits of non-residents from occasional shipping business). A self-contained code, operating notwithstanding the other provisions of the Act.
Subject: Where a ship belonging to or chartered by a non-resident carries passengers, livestock, mail or goods shipped at an Indian port, a sum equal to a specified percentage of the amount paid or payable on account of such carriage is deemed to be the non-resident's income; the master must furnish a return and pay tax before the ship is granted port clearance; and the non-resident may, under sub-section (7), opt for assessment of his total income under the ordinary provisions.
Finance Act, 2026: No change. Chapter XV is untouched by the Finance Act, 2026; the section stands as amended up to the Finance Act, 2025.
A. SECTION COMMENTARY
1. A self-contained levy on occasional/tramp shipping
Section 172 is a self-contained code, operating 'notwithstanding anything contained in the other provisions of the Act', for the levy and recovery of tax on the shipping income of a non-resident whose ship calls at an Indian port. A specified percentage (presently seven and a half per cent) of the amount paid or payable on account of the carriage of passengers, livestock, mail or goods shipped at an Indian port is deemed to be income accruing in India; the master is required to furnish a return of the full amount and pay the tax before the port grants clearance to the ship (sub-sections (3) and (4)). The mechanism is designed for occasional or 'tramp' calls, where ordinary year-end assessment would be impractical because the ship and the non-resident may never return.
2. The charge reaches freight, not charter hire
The deeming bites only on amounts paid 'on account of the carriage' of goods etc. shipped at an Indian port — that is, on freight. In Gosalia Shipping the Supreme Court held that charter-hire paid by a charterer to the shipowner is consideration for the use of the vessel, not for the carriage of goods, and therefore falls outside section 172. The distinction between freight (within the charge) and hire (outside it) is the foundational limit on the section's reach.
3. A complete code that displaces the TDS machinery
Because section 172 is a complete and special code for the taxation of a non-resident's shipping receipts, the ordinary deduction-at-source machinery does not apply to payments governed by it: a payer is not obliged to deduct tax at source under section 195 on freight/demurrage assessable under section 172, and no disallowance under section 40(a)(i) arises (V.S. Dempo, affirming the Bombay Full Bench). The earlier, narrower view that confined section 172 to non-residents themselves carrying on shipping business (Orient (Goa)) was reconsidered in the Dempo line and should be read in that light.
The summary levy under section 172(4) is, in substance, an ad hoc or provisional charge on a voyage basis. Sub-section (7) gives the non-resident the option, before the end of the relevant assessment year, to have his total income assessed under the ordinary provisions of the Act; on exercise of that option, the tax already paid under section 172 is treated as advance tax and a regular assessment follows, with refund or further demand adjusted accordingly (A.S. Glittre). The option allows a non-resident with deductible expenses to be taxed on real income rather than on the deemed percentage.
B. STATUTORY POSITION (verbatim text)
The text of the section, as it stands in the Act (FA-2025 base), is set out below.
172. (1) The provisions of this section shall, notwithstanding anything contained in the other provisions of this Act, apply for the purpose of the levy and recovery of tax in the case of any ship, belonging to or chartered by a non-resident, which carries passengers, livestock, mail or goods shipped at a port in India.
(2) Where such a ship carries passengers, livestock, mail or goods shipped at a port in India, seven and a half per cent of the amount paid or payable on account of such carriage to the owner or the charterer or to any person on his behalf, whether that amount is paid or payable in or out of India, shall be deemed to be income accruing in India to the owner or charterer on account of such carriage.
(3) Before the departure from any port in India of any such ship, the master of the ship shall prepare and furnish to the Assessing Officer a return of the full amount paid or payable to the owner or charterer or any person on his behalf, on account of the carriage of all passengers, livestock, mail or goods shipped at that port since the last arrival of the ship thereat:
Provided that where the Assessing Officer is satisfied that it is not possible for the master of the ship to furnish the return required by this sub-section before the departure of the ship from the port and provided the master of the ship has made satisfactory arrangements for the filing of the return and payment of the tax by any other person on his behalf, the Assessing Officer may, if the return is filed within thirty days of the departure of the ship, deem the filing of the return by the person so authorised by the master as sufficient compliance with this sub-section.
(4) On receipt of the return, the Assessing Officer shall assess the income referred to in sub-section (2) and determine the sum payable as tax thereon at the rate or rates in force applicable to the total income of a company which has not made the arrangements referred to in section 194 and such sum shall be payable by the master of the ship.
(4A) No order assessing the income and determining the sum of tax payable thereon shall be made under sub-section (4) after the expiry of nine months from the end of the financial year in which the return under sub-section (3) is furnished:
Provided that where the return under sub-section (3) has been furnished before the 1st day of April, 2007, such order shall be made on or before the 31st day of December, 2008.
(5) For the purpose of determining the tax payable under sub-section (4), the Assessing Officer may call for such accounts or documents as he may require.
(6) A port clearance shall not be granted to the ship until the Collector of Customs, or other officer duly authorised to grant the same, is satisfied that the tax assessable under this section has been duly paid or that satisfactory arrangements have been made for the payment thereof.
(7) Nothing in this section shall be deemed to prevent the owner or charterer of a ship from claiming before the expiry of the assessment year relevant to the previous year in which the date of departure of the ship from the Indian port falls, that an assessment be made of his total income of the previous year and the tax payable on the basis thereof be determined in accordance with the other provisions of this Act, and if he so claims, any payment made under this section in respect of the passengers, livestock, mail or goods shipped at Indian ports during that previous year shall be treated as a payment in advance of the tax leviable for that assessment year, and the difference between the sum so paid and the amount of tax found payable by him on such assessment shall be paid by him or refunded to him, as the case may be.
(8) For the purposes of this section, the amount referred to in sub-section (2) shall include the amount paid or payable by way of demurrage charge or handling charge or any other amount of similar nature.
C. AUTHORITIES
Section 172 has a solid, well-defined line. The scope-of-charge, self-contained-code and option authorities are grouped below. All citations are web-verified; V.M. Salgaocar (243 ITR 383), which is not a section 172 case, has been deliberately excluded.
Cluster A — Scope of the charge: freight, not charter hire
Union of India v. Gosalia Shipping (P) Ltd.
Citation: (1978) 113 ITR 307 (SC)
Facts: A non-resident time-chartered a ship which loaded bauxite at an Indian port; whether the time-charter hire was taxable under section 172.
Held: Section 172 fastens only on amounts paid on account of the carriage of goods shipped at an Indian port (freight); charter-hire paid by the charterer to the shipowner is consideration for the use of the vessel, not for carriage of goods, and is outside the deeming charge.
Relevance: The foundational authority defining the precise reach of the section 172 charge.
Cluster B — A self-contained code; relationship with TDS and regular assessment
CIT v. V.S. Dempo & Co. Pvt. Ltd.
Citation: (2016) 387 ITR 354 (SC)
Facts: Demurrage paid to a non-resident shipping concern; disallowance under section 40(a)(i) sought for non-deduction of TDS; whether section 172 governs.
Held: Section 172 is a complete, self-contained code for the levy and recovery of tax on a non-resident's shipping income, operating notwithstanding the other provisions; where the income is assessable under section 172, the payer is not obliged to deduct tax at source, so no section 40(a)(i) disallowance arises.
Relevance: Supreme Court authority that section 172 is a self-contained code excluding the TDS machinery for non-resident shipping receipts.
CIT v. V.S. Dempo & Co. Pvt. Ltd. (Full Bench)
Citation: (2016) 381 ITR 303 (Bom)(FB)
Facts: Reference to a larger bench on whether section 172 displaces the section 195 TDS obligation.
Held: Where a non-resident shipping company's income falls under section 172, the payer is not subject to TDS obligations under section 195 (and Chapter XVII-B); section 172 prevails as a special provision.
Relevance: Leading Full-Bench High-Court authority on section 172 versus TDS, carried to and affirmed by the Supreme Court.
A.S. Glittre D/5 I/S Garonne v. CIT
Citation: (1997) 225 ITR 739 (SC)
Facts: A non-resident shipowner taxed under section 172(4) on a voyage basis later opted under section 172(7) for assessment under the regular provisions.
Held: A section 172(4) assessment is an ad hoc/provisional levy; on exercise of the section 172(7) option, tax already paid under section 172 is treated as advance tax and a regular assessment under the ordinary provisions follows, with refund/further demand adjusted.
Relevance: Defines the interaction of the summary section 172 levy with the section 172(7) option for regular assessment.
CIT v. Orient (Goa) Pvt. Ltd.
Citation: (2010) 325 ITR 554 (Bom)
Facts: Demurrage paid to a non-resident; whether section 172 (and the exclusion of TDS) applied where the recipient was not itself carrying on shipping business.
Held: (Division Bench) Section 172 is applicable only to a non-resident carrying on shipping business, not to other payments.
Relevance: Important on the personal scope of section 172 — but this view was reconsidered and effectively overtaken by the Full Bench in V.S. Dempo; cite as the position later reconsidered.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced from the Income-tax Act, 1961 (text as printed in the local Act, base text amended up to the Finance Act, 2025), with the publisher's footnote apparatus and amendment-marker brackets removed; three asterisks (***) denote words or a provision omitted by amendment and retained only to mark the omission. The Finance Act, 2026 amends no section of Chapter XV of the Income-tax Act, 1961 (its Part-A amendments touch ss.92CA, 139, 140B, 144B, 144C, 147A, 148, 150, 153, 153B, 220, 222, 234, 245, 245MA, 254 and 270A-276 only). Citations are stated as reported; orders of the Tribunal and High Courts 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.
CHAPTER XV — LIABILITY IN SPECIAL CASES
Section 172 — Shipping Business of Non-Residents
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Provision: Live. Part H of Chapter XV (Profits of non-residents from occasional shipping business). A self-contained code, operating notwithstanding the other provisions of the Act.
Subject: Where a ship belonging to or chartered by a non-resident carries passengers, livestock, mail or goods shipped at an Indian port, a sum equal to a specified percentage of the amount paid or payable on account of such carriage is deemed to be the non-resident's income; the master must furnish a return and pay tax before the ship is granted port clearance; and the non-resident may, under sub-section (7), opt for assessment of his total income under the ordinary provisions.
Finance Act, 2026: No change. Chapter XV is untouched by the Finance Act, 2026; the section stands as amended up to the Finance Act, 2025.
A. SECTION COMMENTARY
1. A self-contained levy on occasional/tramp shipping
Section 172 is a self-contained code, operating 'notwithstanding anything contained in the other provisions of the Act', for the levy and recovery of tax on the shipping income of a non-resident whose ship calls at an Indian port. A specified percentage (presently seven and a half per cent) of the amount paid or payable on account of the carriage of passengers, livestock, mail or goods shipped at an Indian port is deemed to be income accruing in India; the master is required to furnish a return of the full amount and pay the tax before the port grants clearance to the ship (sub-sections (3) and (4)). The mechanism is designed for occasional or 'tramp' calls, where ordinary year-end assessment would be impractical because the ship and the non-resident may never return.
2. The charge reaches freight, not charter hire
The deeming bites only on amounts paid 'on account of the carriage' of goods etc. shipped at an Indian port — that is, on freight. In Gosalia Shipping the Supreme Court held that charter-hire paid by a charterer to the shipowner is consideration for the use of the vessel, not for the carriage of goods, and therefore falls outside section 172. The distinction between freight (within the charge) and hire (outside it) is the foundational limit on the section's reach.
3. A complete code that displaces the TDS machinery
Because section 172 is a complete and special code for the taxation of a non-resident's shipping receipts, the ordinary deduction-at-source machinery does not apply to payments governed by it: a payer is not obliged to deduct tax at source under section 195 on freight/demurrage assessable under section 172, and no disallowance under section 40(a)(i) arises (V.S. Dempo, affirming the Bombay Full Bench). The earlier, narrower view that confined section 172 to non-residents themselves carrying on shipping business (Orient (Goa)) was reconsidered in the Dempo line and should be read in that light.
4. The section 172(7) option for regular assessment
The summary levy under section 172(4) is, in substance, an ad hoc or provisional charge on a voyage basis. Sub-section (7) gives the non-resident the option, before the end of the relevant assessment year, to have his total income assessed under the ordinary provisions of the Act; on exercise of that option, the tax already paid under section 172 is treated as advance tax and a regular assessment follows, with refund or further demand adjusted accordingly (A.S. Glittre). The option allows a non-resident with deductible expenses to be taxed on real income rather than on the deemed percentage.
B. STATUTORY POSITION (verbatim text)
The text of the section, as it stands in the Act (FA-2025 base), is set out below.
172. (1) The provisions of this section shall, notwithstanding anything contained in the other provisions of this Act, apply for the purpose of the levy and recovery of tax in the case of any ship, belonging to or chartered by a non-resident, which carries passengers, livestock, mail or goods shipped at a port in India.
(2) Where such a ship carries passengers, livestock, mail or goods shipped at a port in India, seven and a half per cent of the amount paid or payable on account of such carriage to the owner or the charterer or to any person on his behalf, whether that amount is paid or payable in or out of India, shall be deemed to be income accruing in India to the owner or charterer on account of such carriage.
(3) Before the departure from any port in India of any such ship, the master of the ship shall prepare and furnish to the Assessing Officer a return of the full amount paid or payable to the owner or charterer or any person on his behalf, on account of the carriage of all passengers, livestock, mail or goods shipped at that port since the last arrival of the ship thereat:
Provided that where the Assessing Officer is satisfied that it is not possible for the master of the ship to furnish the return required by this sub-section before the departure of the ship from the port and provided the master of the ship has made satisfactory arrangements for the filing of the return and payment of the tax by any other person on his behalf, the Assessing Officer may, if the return is filed within thirty days of the departure of the ship, deem the filing of the return by the person so authorised by the master as sufficient compliance with this sub-section.
(4) On receipt of the return, the Assessing Officer shall assess the income referred to in sub-section (2) and determine the sum payable as tax thereon at the rate or rates in force applicable to the total income of a company which has not made the arrangements referred to in section 194 and such sum shall be payable by the master of the ship.
(4A) No order assessing the income and determining the sum of tax payable thereon shall be made under sub-section (4) after the expiry of nine months from the end of the financial year in which the return under sub-section (3) is furnished:
Provided that where the return under sub-section (3) has been furnished before the 1st day of April, 2007, such order shall be made on or before the 31st day of December, 2008.
(5) For the purpose of determining the tax payable under sub-section (4), the Assessing Officer may call for such accounts or documents as he may require.
(6) A port clearance shall not be granted to the ship until the Collector of Customs, or other officer duly authorised to grant the same, is satisfied that the tax assessable under this section has been duly paid or that satisfactory arrangements have been made for the payment thereof.
(7) Nothing in this section shall be deemed to prevent the owner or charterer of a ship from claiming before the expiry of the assessment year relevant to the previous year in which the date of departure of the ship from the Indian port falls, that an assessment be made of his total income of the previous year and the tax payable on the basis thereof be determined in accordance with the other provisions of this Act, and if he so claims, any payment made under this section in respect of the passengers, livestock, mail or goods shipped at Indian ports during that previous year shall be treated as a payment in advance of the tax leviable for that assessment year, and the difference between the sum so paid and the amount of tax found payable by him on such assessment shall be paid by him or refunded to him, as the case may be.
(8) For the purposes of this section, the amount referred to in sub-section (2) shall include the amount paid or payable by way of demurrage charge or handling charge or any other amount of similar nature.
C. AUTHORITIES
Section 172 has a solid, well-defined line. The scope-of-charge, self-contained-code and option authorities are grouped below. All citations are web-verified; V.M. Salgaocar (243 ITR 383), which is not a section 172 case, has been deliberately excluded.
Cluster A — Scope of the charge: freight, not charter hire
Union of India v. Gosalia Shipping (P) Ltd.
Citation: (1978) 113 ITR 307 (SC)
Facts: A non-resident time-chartered a ship which loaded bauxite at an Indian port; whether the time-charter hire was taxable under section 172.
Held: Section 172 fastens only on amounts paid on account of the carriage of goods shipped at an Indian port (freight); charter-hire paid by the charterer to the shipowner is consideration for the use of the vessel, not for carriage of goods, and is outside the deeming charge.
Relevance: The foundational authority defining the precise reach of the section 172 charge.
Cluster B — A self-contained code; relationship with TDS and regular assessment
CIT v. V.S. Dempo & Co. Pvt. Ltd.
Citation: (2016) 387 ITR 354 (SC)
Facts: Demurrage paid to a non-resident shipping concern; disallowance under section 40(a)(i) sought for non-deduction of TDS; whether section 172 governs.
Held: Section 172 is a complete, self-contained code for the levy and recovery of tax on a non-resident's shipping income, operating notwithstanding the other provisions; where the income is assessable under section 172, the payer is not obliged to deduct tax at source, so no section 40(a)(i) disallowance arises.
Relevance: Supreme Court authority that section 172 is a self-contained code excluding the TDS machinery for non-resident shipping receipts.
CIT v. V.S. Dempo & Co. Pvt. Ltd. (Full Bench)
Citation: (2016) 381 ITR 303 (Bom)(FB)
Facts: Reference to a larger bench on whether section 172 displaces the section 195 TDS obligation.
Held: Where a non-resident shipping company's income falls under section 172, the payer is not subject to TDS obligations under section 195 (and Chapter XVII-B); section 172 prevails as a special provision.
Relevance: Leading Full-Bench High-Court authority on section 172 versus TDS, carried to and affirmed by the Supreme Court.
A.S. Glittre D/5 I/S Garonne v. CIT
Citation: (1997) 225 ITR 739 (SC)
Facts: A non-resident shipowner taxed under section 172(4) on a voyage basis later opted under section 172(7) for assessment under the regular provisions.
Held: A section 172(4) assessment is an ad hoc/provisional levy; on exercise of the section 172(7) option, tax already paid under section 172 is treated as advance tax and a regular assessment under the ordinary provisions follows, with refund/further demand adjusted.
Relevance: Defines the interaction of the summary section 172 levy with the section 172(7) option for regular assessment.
CIT v. Orient (Goa) Pvt. Ltd.
Citation: (2010) 325 ITR 554 (Bom)
Facts: Demurrage paid to a non-resident; whether section 172 (and the exclusion of TDS) applied where the recipient was not itself carrying on shipping business.
Held: (Division Bench) Section 172 is applicable only to a non-resident carrying on shipping business, not to other payments.
Relevance: Important on the personal scope of section 172 — but this view was reconsidered and effectively overtaken by the Full Bench in V.S. Dempo; cite as the position later reconsidered.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced from the Income-tax Act, 1961 (text as printed in the local Act, base text amended up to the Finance Act, 2025), with the publisher's footnote apparatus and amendment-marker brackets removed; three asterisks (***) denote words or a provision omitted by amendment and retained only to mark the omission. The Finance Act, 2026 amends no section of Chapter XV of the Income-tax Act, 1961 (its Part-A amendments touch ss.92CA, 139, 140B, 144B, 144C, 147A, 148, 150, 153, 153B, 220, 222, 234, 245, 245MA, 254 and 270A-276 only). Citations are stated as reported; orders of the Tribunal and High Courts 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.