Exclusion of deduction, loss, set off, etc.

Section 230 — EXCLUSION OF DEDUCTION, LOSS, SET OFF, ETC.

Section 230 of the Income-tax Act, 2025 corresponds to ss. 115VL and 115VM of the Income-tax Act, 1961.

STATUTORY ARCHITECTURE

Section 230 governs computing the tonnage income of a tonnage tax company for any tax year in which it is chargeable to tax under this Part, irrespective of other provisions. Sub-section (1) treats losses, allowances and deductions of the tonnage tax years as fully used in those years and denies Chapter VIII deductions for the shipping business. Sub-sections (2) to (4) deal with losses that accrued before the company opted for the tonnage tax scheme.

KEY ELEMENTS

• s. 230(1)(a): ss. 28 to 52 apply as if every loss, allowance or deduction for any relevant tax year had been given full effect to in that year.
• s. 230(1)(b): no loss referred to in s. 108(1) or (2)(b), s. 109(1), s. 112(1) or s. 116(1), so far as it relates to operating qualifying ships, is carried forward or set off where it relates to a tax year when the company is under the scheme.
• s. 230(1)(c): no Chapter VIII deduction for profits and gains from operating qualifying ships.
• s. 230(1)(d): for depreciation under s. 33, the written down value of tonnage tax business assets is computed as if depreciation had been claimed and actually allowed for the relevant tax years.
• s. 230(2): s. 112 applies to pre-option losses attributable to the tonnage tax business as if they had been set off against relevant shipping income in the tonnage tax years.
• s. 230(3): those losses cannot be set off against any income other than relevant shipping income in any tax year beginning on or after the option under s. 231 is exercised.
• s. 230(4): any apportionment needed to determine those losses is made on a reasonable basis.

CHANGES FROM THE 1961 ACT

Section 230 combines s. 115VL of the 1961 Act (now sub-section (1)) and s. 115VM of the 1961 Act (now sub-sections (2) to (4)); the rules are substantively the same. The visible changes are renumbered references: ss. 28 to 52 for ss. 30 to 43B; s. 108, s. 109, s. 112 and s. 116 for ss. 70, 71, 72 and 72A; Chapter VIII for Chapter VI-A; s. 33 for s. 32; s. 112 for s. 72 in the pre-option loss rule; and s. 231 for s. 115VP. "Tax year" replaces "previous year", and "this Part" replaces "this Chapter".

PRACTITIONER NOTES

• The depreciation base for tonnage tax business assets is the notionally reduced written down value.
• Pre-option losses attributable to the tonnage tax business are treated as absorbed against relevant shipping income and cannot later be used against other income.
• Record the reasonable basis used for any apportionment under sub-section (4).

CROSS-REFERENCES

• ss. 28 to 52 — deemed given full effect under clause (1)(a).
• s. 108(1), s. 108(2)(b), s. 109(1), s. 112(1), s. 116(1) — losses barred under clause (1)(b).
• Chapter VIII; s. 33 — clauses (1)(c) and (1)(d).
• s. 112 — applied to pre-option losses by sub-section (2).
• s. 231 — the option referred to in sub-section (3).