Reserves for shipping business
33AC. (1) In the case of an assessee, being 98[ 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 the total income (computed before making any deduction under this section and Chapter VI-A), 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 amount of the paid-up share capital (excluding the amounts capitalised from reserves) of the assessee, no allowance under this sub-section shall be made in respect of such excess.
(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 subsection (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 by the assessee to any person at any time before the expiry of eight 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.
Explanation : For the purposes of this section,—
( a) †"public company" shall have the meaning assigned to in section 3 of the Companies Act, 1956 (1 of 1956);
The following clause (aa) shall be inserted in the Explanation by the Finance Act, 1992, w.e.f. 1-4-1993 :
(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.]