Budget 2013: Avoid double taxation of income from transfer of qualifying asset in shipping, says FICCI

NEW DELHI: In its pre-budget 2013 memorandum, Federation of Indian Chambers of Commerce and Industry ( FICCI) has asked the government to treat income from transfer of qualifying asset and income from deployment of reserves as income from 'core' activity for the shipping and ports sector.

"Any profits or gains arising from transfer of a qualifying asset are chargeable to income-tax as capital gains. Such profits, being not considered as 'core shipping income' are also subjected to MAT. This results in double taxation of the same income," explains FICCI.

According to FICCI, book profit on sale of qualifying assets should be treated as 'core shipping income' and be excluded from book profits while computing MAT liability.

In order to utilize the reserve account for the purpose of acquisition of ships, Indian tonnage tax companies need to maintain adequate cash. Income generated through deployment of such cash in short term investments till the time statutory reserves are utilized for acquisition of ships is not being considered as income from 'core activity', said the industry body.

The reserves are created as per the requirement under the Act and are out of core and incidental activities of the tonnage tax company. Therefore, FICCI has recommended that aforesaid income should be treated as income from core activity of a tonnage tax company and should be subjected to tax accordingly.

FICCI also recommended that port projects should be completely exempt from MAT and from payment of dividend distribution tax.