Income of shipping companies

Tonnage income from the business of operating qualifying ships — Receipts emanating from the activities, which do not have a direct and necessary nexus with the shipping/dredging activities of the assessee-company, cannot be exempted under the tonnage tax scheme, as held by VisakhapatnamTrib in Dredging Corpn of India Ltd v ACIT — In favour of: The revenue (partly).

Thus, the income received by the assessee on the sale of scraps and assets, and gains realised on foreign exchange fluctuation, are entitled to the exemption, whereas the recovery of rent for leased quarters, interest on housing loans and other advances, recovery towards late attendance, sale of tender documents, training fees, fees for the supply of information under the RTI Act, liquidated damages collected from various contractee parties as compensatory payment for the failure to execute contract works within the stipulated time are not entitled to the exemption.

Interest on excess refund — Reassessment proceedings under s 147 after the completion of the assessment under s 143(3) are excluded from the purview of a “regular” assessment for the purpose of s 234D.

Decided on: 25 July 2011.