Section 33AC:
Reserves for shipping business.
1(1) 2
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):
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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:
4
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:
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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 6
sold or otherwise transferred, other than in any scheme of
demerger by the assessee to any person at any time before the expiry of 7
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.
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(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, 9
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);
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(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.
Notes:
1. Ins. by Act 36 of 1989, s. 5 (w.e.f. 1-4-1990).
2. Subs. by Act 22 of 1995, s. 8, for certain words, brackets and figures (w.e.f. 1-4-1996).
3. Subs. by Act 20 of 2002, s. 15, for the first proviso (w.e.f. 1-4-2003).
4. Ins. by Act 10 of 2000, s. 15 (w.e.f. 1-4-2001).
5. Ins. by Act 23 of 2004, s. 9 (w.e.f. 1-4-2005).
6. Subs. by Act 27 of 1999, s. 14, for “sold or otherwise transferred” (w.e.f. 1-4-2000).
7. Subs. by Act 32 of 2003, s. 17, for “eight years” (w.e.f. 1-4-2004).
8. Ins. by s. 17, ibid. (w.e.f. 1-4-2004).
9. Subs. by Act 18 of 2005, s. 9, for “such sale proceeds” (w.e.f. 1-4-2004).
10. Ins. by Act 18 of 1992, s. 12 (w.e.f. 1-4-1993).