We are a foreign shipping line assessed under section 44B. The Assessing Officer has included freight we collected abroad and also our demurrage. What actually goes into the "aggregate of the amounts" under section 44B(2), and does it matter where the money was received?
It matters, but only for cargo shipped at a port OUTSIDE India. Section 44B(2) has two clauses and they are deliberately different: clause (i) takes in the amount paid or payable "whether in or out of India" on account of carriage of passengers, livestock, mail or goods shipped at any port IN India, so where the freight was collected is irrelevant for an Indian loading; clause (ii) takes in only the amount "received or deemed to be received in India" on account of carriage of goods shipped at any port OUTSIDE India, so for a foreign loading receipt in India is the condition of charge. The Explanation to sub-section (2) then provides that the amount referred to in either clause shall include amounts by way of demurrage charges or handling charges or any other amount of similar nature.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 1976-04-01, reported as Section 44B of the Income-tax Act, 1961. It bears on section 44B, section 44B(1), section 44B(2), section 172, section 172(8), section 44BB, section 44BB(3), section 44BBB, section 44BBB(2) of the Income Tax Act 1961, in Presumptive Taxation & Audit, Assessment & Scrutiny and How Tax Law Is Read matters.
Section 44B is the annual presumptive regime for a non-resident's shipping business and it overrides sections 28 to 43A. Three features decide assessments. First, the asymmetry just described is the whole of the answer to "is freight collected overseas taxable?" — for cargo lifted from an Indian port, yes, because clause (i) says "whether in or out of India"; for cargo lifted abroad, only if the money is received or deemed received in India. Reading clause (i)'s words into clause (ii), or the reverse, is the commonest error in this area. Second, the Explanation is a charging enlargement, not a clarification of accounting: demurrage and handling charges go into the 7.5 per cent base, and it was inserted by the Finance Act 1997 with retrospective effect from 1 April 1976 — the same instrument and the same retrospective date as the parallel s.172(8). Third, and this is the one that costs money: section 44B contains NO counterpart to s.44BB(3) or s.44BBB(2). A non-resident shipowner cannot escape the 7.5 per cent by producing audited books showing a lower profit or a loss. The presumption in s.44B is one-way. That is a sharp contrast with the mineral-oil and turnkey-power regimes and it should be priced into any decision about how a shipping business into India is structured. Note also what s.44B does NOT reach: it is confined to an assessee "engaged in the business of operation of ships", so a person who is not operating ships is outside it and falls to be taxed under the ordinary provisions.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Section 44B reads: "44B. (1) Notwithstanding anything to the contrary contained in sections 28 to 43A, in the case of an assessee, being a non-resident, engaged in the business of operation of ships, a sum equal to seven and a half per cent of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head \"Profits and gains of business or profession\". (2) The amounts referred to in sub-section (1) shall be the following, namely:— (i) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the carriage of passengers, livestock, mail or goods shipped at any port in India; and (ii) the amount received or deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers, livestock, mail or goods shipped at any port outside India. Explanation.—For the purposes of this sub-section, the amount referred to in clause (i) or clause (ii) shall include the amount paid or payable or received or deemed to be received, as the case may be, by way of demurrage charges or handling charges or any other amount of similar nature." An earlier edition of the section prints the same words. Neither edition prints any sub-section (3), and neither prints any proviso permitting the assessee to claim lower profits on audited books.
For a non-resident engaged in the business of operation of ships, 7.5 per cent of the aggregate of the s.44B(2) amounts is deemed to be the profits of that business, notwithstanding sections 28 to 43A. The aggregate is asymmetric: for carriage of goods shipped at an Indian port the amount is included whether paid or payable in or out of India; for carriage of goods shipped at a port outside India only the amount received or deemed to be received in India is included. Demurrage charges, handling charges and amounts of a similar nature form part of the aggregate under either clause. The section provides no mechanism by which a lower profit may be claimed on audited books.
Not applicable — this is a statement of statutory text taken from two departmental editions. No judicial reasoning is involved. The comparison drawn with s.44BB(3) and s.44BBB(2) is a comparison of statutory texts separately transcribed for the companion entries in this batch.
(i) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the carriage of passengers, livestock, mail or goods shipped at any port in India; and (ii) the amount received or deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers, livestock, mail or goods shipped at any port outside India.
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Handle my notice → Ask a CA on WhatsAppIt matters, but only for cargo shipped at a port OUTSIDE India. Section 44B(2) has two clauses and they are deliberately different: clause (i) takes in the amount paid or payable "whether in or out of India" on account of carriage of passengers, livestock, mail or goods shipped at any port IN India, so where the freight was collected is irrelevant for an Indian loading; clause (ii) takes in only the amount "received or deemed to be received in India" on account of carriage of goods shipped at any port OUTSIDE India, so for a foreign loading receipt in India is the condition of charge. The Explanation to sub-section (2) then provides that the amount referred to in either clause shall include amounts by way of demurrage charges or handling charges or any other amount of similar nature. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 44B, section 44B(1), section 44B(2), section 172, section 172(8), section 44BB, section 44BB(3), section 44BBB, section 44BBB(2) of the Income Tax Act 1961. It is reported as Section 44B of the Income-tax Act, 1961. Section 44B is the annual presumptive regime for a non-resident's shipping business and it overrides sections 28 to 43A. Three features decide assessments. First, the asymmetry just described is the whole of the answer to "is freight collected overseas taxable?" — for cargo lifted from an Indian port, yes, because clause (i) says "whether in or out of India"; for cargo lifted abroad, only if the money is received or deemed received in India. Reading clause (i)'s words into clause (ii), or the reverse, is the commonest error in this area. Second, the Explanation is a charging enlargement, not a clarification of accounting: demurrage and handling charges go into the 7.5 per cent base, and it was inserted by the Finance Act 1997 with retrospective effect from 1 April 1976 — the same instrument and the same retrospective date as the parallel s.172(8). Third, and this is the one that costs money: section 44B contains NO counterpart to s.44BB(3) or s.44BBB(2). A non-resident shipowner cannot escape the 7.5 per cent by producing audited books showing a lower profit or a loss. The presumption in s.44B is one-way. That is a sharp contrast with the mineral-oil and turnkey-power regimes and it should be priced into any decision about how a shipping business into India is structured. Note also what s.44B does NOT reach: it is confined to an assessee "engaged in the business of operation of ships", so a person who is not operating ships is outside it and falls to be taxed under the ordinary provisions. If it applies to you, the first step is this: Split the receipts by loading port before you argue about anything else. Cargo shipped at an Indian port falls in clause (i) and the place of receipt is irrelevant; cargo shipped at a foreign port falls in clause (ii) and only what is received or deemed received in India is taken.
Section 44B reads: "44B. (1) Notwithstanding anything to the contrary contained in sections 28 to 43A, in the case of an assessee, being a non-resident, engaged in the business of operation of ships, a sum equal to seven and a half per cent of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head \"Profits and gains of business or profession\". (2) The amounts referred to in sub-section (1) shall be the following, namely:— (i) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the carriage of passengers, livestock, mail or goods shipped at any port in India; and (ii) the amount received or deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers, livestock, mail or goods shipped at any port outside India. Explanation.—For the purposes of this sub-section, the amount referred to in clause (i) or clause (ii) shall include the amount paid or payable or received or deemed to be received, as the case may be, by way of demurrage charges or handling charges or any other amount of similar nature." An earlier edition of the section prints the same words. Neither edition prints any sub-section (3), and neither prints any proviso permitting the assessee to claim lower profits on audited books. The matter was decided on 1976-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. For a non-resident engaged in the business of operation of ships, 7.5 per cent of the aggregate of the s.44B(2) amounts is deemed to be the profits of that business, notwithstanding sections 28 to 43A. The aggregate is asymmetric: for carriage of goods shipped at an Indian port the amount is included whether paid or payable in or out of India; for carriage of goods shipped at a port outside India only the amount received or deemed to be received in India is included. Demurrage charges, handling charges and amounts of a similar nature form part of the aggregate under either clause. The section provides no mechanism by which a lower profit may be claimed on audited books.
Not applicable — this is a statement of statutory text taken from two departmental editions. No judicial reasoning is involved. The comparison drawn with s.44BB(3) and s.44BBB(2) is a comparison of statutory texts separately transcribed for the companion entries in this batch. In the words reproduced by the source cited on this page: "(i) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the carriage of passengers, livestock, mail or goods shipped at any port in India; and (ii) the amount received or deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers, livestock, mail or goods shipped at any port outside India."
It was decided by the CBDT Circulars & Instructions on 1976-04-01 and is reported as Section 44B of the Income-tax Act, 1961. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 44B, section 44B(1), section 44B(2), section 172, section 172(8), section 44BB, section 44BB(3), section 44BBB, section 44BBB(2), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. For a non-resident engaged in the business of operation of ships, 7.5 per cent of the aggregate of the s.44B(2) amounts is deemed to be the profits of that business, notwithstanding sections 28 to 43A. The aggregate is asymmetric: for carriage of goods shipped at an Indian port the amount is included whether paid or payable in or out of India; for carriage of goods shipped at a port outside India only the amount received or deemed to be received in India is included. Demurrage charges, handling charges and amounts of a similar nature form part of the aggregate under either clause. The section provides no mechanism by which a lower profit may be claimed on audited books. It arises in Presumptive Taxation & Audit, Assessment & Scrutiny and How Tax Law Is Read matters, on section 44B, section 44B(1), section 44B(2), section 172, section 172(8), section 44BB, section 44BB(3), section 44BBB, section 44BBB(2) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Add demurrage and handling charges to the base. The Explanation is express, and the Finance Act 1997 made it retrospective to 1 April 1976, so an old year is not a defence. Do not build a case on audited books showing a loss. Section 44B has no lower-profit option; if the client needs one, the argument has to be that s.44B does not apply at all, not that the percentage should be reduced. Where a treaty shipping Article applies, take the treaty point first — s.44B is a computation provision in the domestic Act and gives way where the treaty allots the profits exclusively to the other State. Keep s.44B and s.172 separate in your head and on paper: s.44B computes a year's profits of a shipping business, s.172 levies and recovers tax on a single voyage. The Bombay High Court Full Bench has held they are referable to one another; it has not held they are the same thing.
Still good law. Two editions of section 44B print it identically, which is the best evidence obtainable here that the section is unchanged. That is not the same as reading the current Finance Act: no Finance Act text is set out here, and whether a later edition of the section exists is not established. No check of judicial treatment of s.44B has been made; this entry states the statutory text only. For a live dispute the asymmetry in sub-section (2) is where the work is: for an Indian loading the place of receipt is irrelevant, for a foreign loading it is the condition of charge, and demurrage and handling charges are inside the aggregate under either clause. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The text of s.44B above is taken from two editions of the section, each printing the Act name "Income-tax Act, 1961" and the section heading "Special provision for computing profits and gains of shipping business in the case of non-residents". Both print sub-sections (1) and (2) and the Explanation word for word identically, which is the strongest evidence available here that the section has not moved. The amending-Act dates come from the footnote list printed with the section: footnote 79, "Inserted by the Finance Act, 1975, w.e.f. 1-4-1976", against the section itself, and footnote 81, "Inserted by the Finance Act, 1997, w.r.e.f. 1-4-1976", against the Explanation. Those references are not verified here against the Finance Acts themselves and are labelled as the footnotes they are. Only footnotes stating a legislative fact are reproduced; the editorial cross-references printed alongside them are not. THE PROPOSITION THAT s.44B HAS NO LOWER-PROFIT OPTION is stated on the basis that neither edition prints any sub-section (3) and neither prints any proviso to that effect, both having been read through in sequence rather than by named parts. That is worth being precise about, because s.44BB(3) and s.44BBB(2) do carry such an option and the absence of one here is the point of contrast. Whether an edition of s.44B later than the more recent of the two exists is not established here. decided_on is the COMMENCEMENT DATE of the section and of its Explanation — the section inserted by the Finance Act, 1975 w.e.f. 1 April 1976 and the Explanation inserted by the Finance Act, 1997 with retrospective effect from the same date — and is not a decision date; this is a statutory entry and it asserts no bench and no holding. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
For a non-resident engaged in the business of operation of ships, 7.5 per cent of the aggregate of the s.44B(2) amounts is deemed to be the profits of that business, notwithstanding sections 28 to 43A. The aggregate is asymmetric: for carriage of goods shipped at an Indian port the amount is included whether paid or payable in or out of India; for carriage of goods shipped at a port outside India only the amount received or deemed to be received in India is included. Demurrage charges, handling charges and amounts of a similar nature form part of the aggregate under either clause. The section provides no mechanism by which a lower profit may be claimed on audited books.
TaxSphere, “Statutory position — section 44B: the 7.5 per cent shipping presumption, and why clause (i) and clause (ii) of sub-section (2) are not symmetrical”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-section-44b-seven-and-a-half-per-cent-and-the-asymmetry-in-sub-section-2/ (validity last checked 2026-09-09)
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