Section 316 — Shipping business of non-residents. Successor to s.172 of the 1961 Act.
Section 316 is in Chapter XVII — Special Provisions Relating to Certain Persons, which runs from section 302 to section 355.
Sub-section (1) applies the section, notwithstanding the rest of the Act, to the levy and recovery of tax on any ship belonging to or chartered by a non-resident which carries passengers, livestock, mail or goods shipped at a port in India. Sub-section (2) deems 7.5% of the amount paid or payable for that carriage to be income accruing in India to the owner or charterer, whether paid in or out of India, and includes demurrage, handling and similar charges in that amount. Sub-section (3) requires the master of the ship, before departure from an Indian port, to furnish the Assessing Officer a return of the full amount paid or payable since the ship's last arrival there. Sub-section (4) treats that requirement as satisfied where the Assessing Officer is satisfied that the master cannot file before departure and has made satisfactory arrangements, and the return is filed within thirty days of departure by an authorised person. Sub-section (5) requires the Assessing Officer to assess the income and determine the tax at the rates in force applicable to a company that has not made the arrangements in section 393(1) (Table: Sl. No. 7), payable by the master. Sub-section (6) bars such an order after nine months from the end of the tax year in which the return is furnished, and sub-section (7) lets the Assessing Officer call for accounts or documents. Sub-section (8) withholds port clearance until the Commissioner of Customs is satisfied the tax is paid or secured. Sub-sections (9) and (10) let the owner or charterer claim, before the end of the year following the tax year of departure, a regular assessment of total income, with payments made under this section treated as advance tax and the difference paid or refunded.
A non-resident shipowner may have no continuing presence in India, so the section collects tax voyage by voyage from the master before the ship leaves, on a fixed deemed profit rather than on computed profits. The port clearance bar makes the levy effective, and sub-section (9) preserves the right to be assessed on actual total income instead.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Deemed income on carriage from an Indian port | 7.5% of the amount paid or payable | Of the amount on account of the carriage, whether paid or payable in or out of India, and including demurrage, handling or similar charges | Sub-section (2) |
| Time to file the return where the master cannot file before departure | 30 days | From the departure of the ship, by a person authorised by the master, and only where the Assessing Officer is satisfied that filing before departure was not possible and satisfactory arrangements were made | Sub-section (4)(b) |
| Limitation for the assessment order | 9 months | From the end of the tax year in which the return under sub-section (3) is furnished | Sub-section (6) |
| Time to elect a regular assessment on total income | Before the end of the year following the tax year in which the date of departure falls | A claim by the owner or charterer that an assessment be made of his total income under the other provisions of the Act | Sub-section (9) |
The default is that the master files a return before the ship leaves and pays tax on 7.5% of the freight, and the ship does not get port clearance until customs is satisfied the tax has been paid or secured. The thirty-day extension is not automatic — it requires the Assessing Officer to be satisfied both that filing before departure was impossible and that arrangements were made, and the return must then be filed by someone the master authorised. The deemed income base is wider than freight alone: demurrage and handling charges go into it. If the actual profits are lower, the owner or charterer can elect under sub-section (9) for an ordinary assessment before the end of the year following the tax year of departure, and what was paid at the port is then treated as advance tax and adjusted or refunded.
A non-resident owner's ship loads cargo at an Indian port for freight of Rs. 8 crore, with Rs. 40 lakh of demurrage and handling charges. Sub-section (2) deems 7.5% of the whole Rs. 8.4 crore — Rs. 63 lakh — to be income accruing in India, because clause (b) pulls demurrage, handling and similar charges into the base; computing 7.5% on freight alone would understate it. The master must furnish the return to the Assessing Officer before the ship leaves that port, the tax is determined at the rates in force applicable to a company that has not made the section 393(1) (Table: Sl. No. 7) arrangements and is payable by the master, and sub-section (8) withholds port clearance until the Commissioner of Customs is satisfied it has been paid or secured. If the owner's actual profits are lower, sub-section (9) lets him claim an ordinary assessment of his total income before the end of the year following the tax year in which departure falls, and what was paid at the port is then treated as advance tax and adjusted or refunded.
At the port: in the return the master furnishes to the Assessing Officer before departure — or within thirty days after departure, by a person the master authorised, where the Assessing Officer is satisfied it could not be filed earlier and arrangements were made — and in the assessment order, which cannot be made after nine months from the end of the tax year in which that return was furnished. Port clearance from the Commissioner of Customs is the practical pinch point.
7.5% of the amount paid or payable on account of such carriage shall be deemed to be income accruing in India to the owner or charterer on account of such carriage, whether that amount is paid or payable in or out of India
See the full 1961 to 2025 concordance.
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