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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Location of Business

Under the Income-tax Act, 2025, which one of the following is a condition for a company to be a 'qualifying company' for the tonnage tax scheme, a point relevant when a board decides whether to opt for tonnage taxation of its shipping business?

A qualifying company must be an Indian company with its place of effective management in India, own at least one qualifying ship, and have operating ships as its main object. Foreign companies and companies owning no ship, or only fishing vessels, do not qualify.

  1. AIts place of effective management is in India and it owns at least one qualifying shipCorrect
  2. BIt is a foreign company with a branch office in India and charters at least one ship
  3. CIt operates only fishing vessels and factory ships
  4. DIt holds ships only on bareboat charter-cum-demise terms and owns no ship

Explanation

The definition requires an Indian company, place of effective management in India, ownership of at least one qualifying ship, and a main object of operating ships. A foreign company fails the Indian company test, and fishing vessels and factory ships are excluded from qualifying ships. A company owning no ship fails the ownership condition.

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