33AC. Reserves for shipping business.- (1) In the
case of an assessee, being a Government company or a public
company formed and registered in India with the main object
of carrying on the business of operation of ships, there shall,
in accordance with and subject to the provisions of this section,
be allowed a deduction of an amount not exceeding fifty per
cent of profits derived from the business of operation of
ships (computed under the head “Profits and gains of
business or profession” and before making any deduction
under this section), as is debited to the profit and loss
account of the previous year in respect of which the deduction
is to be allowed and credited to a reserve account, to be
utilised in the manner laid down in sub-section (2) :
Provided that where the aggregate of the amounts carried
to such reserve account from time to time exceeds twice the
aggregate of the amounts of the paid-up share capital, the
general reserves and amount credited to the share premium
account of the assessee, no allowance under this sub-section
shall be made in respect of such excess :
Provided further that for five assessment years commencing
on or after the 1st day of April, 2001 and ending before the
1st day of April, 2006, the provisions of this sub-section
shall have effect as if for the words “an amount not
exceeding fifty per cent of profits”, the words “an
amount not exceeding the profits” had been substituted:
Provided also that no deduction shall be allowed under this
section for any assessment year commencing on or after the
1st day of April, 2005.
(2) The amount credited to the reserve account under sub-section
(1) shall be utilised by the assessee before the expiry of
a period of eight years next following the previous year in
which the amount was credited—
(a) for acquiring a new ship for the purposes of the business
of the assessee ; and
(b) until the acquisition of a new ship, for the purposes
of the business of the assessee other than for distribution
by way of dividends or profits or for remittance outside India
as profits or for the creation of any asset outside India.
(3) Where any amount credited to the reserve account under
sub-section (1),—
(a) has been utilised for any purpose other than that referred
to in clause (a) or clause (b) of sub-section (2), the amount
so utilised ; or
(b) has not been utilised for the purpose specified in clause
(a) of sub-section (2), the amount not so utilised ; or
(c) has been utilised for the purpose of acquiring a new
ship as specified in clause (a) of sub-section (2), but such
ship is sold or otherwise transferred , other than in any
scheme of demerger by the asses-see to any person at any time
before the expiry of three years from the end of the previous
year in which it was acquired, the amount so utilised in acquiring
the ship,
shall be deemed to be the profits,—
(i) in a case referred to in clause (a), in the year in
which the amount was so utilised ; or
(ii) in a case referred to in clause (b), in the year immediately
following the period of eight years specified in sub-section
(2) ; or
(iii) in a case referred to in clause (c), in the year in
which the sale or transfer took place,
and shall be charged to tax accordingly.
(4) Where the ship is sold or otherwise transferred (other
than in any scheme of demerger) after the expiry of the period
specified in clause (c) of sub-section (3) and the sale proceeds
are not utilised for the purpose of acquiring a new ship within
a period of one year from the end of the previous year in
which such sale or transfer took place, so much of such sale
proceeds which represent the amount credited to the reserve
account and utilised for the purposes mentioned in clause
(c) of sub-section (3) shall be deemed to be the profits of
the assessment year immediately following the previous year
in which the ship is sold or transferred.
Explanation.—For the purposes of this section,—
(a) “public company” shall have the meaning
assigned to it in section 3 of the Companies Act, 1956 (1
of 1956) ;
(aa) “Government company” shall have the meaning
assigned to it in section 617 of the Companies Act, 1956 (1
of 1956) ;
(b) “new ship” shall have the same meaning as
in clause (ii) of sub-section (2) of section 32AB.
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