Commonwealth Numbered Acts

INCOME TAX ASSESSMENT AMENDMENT ACT 1984 No. 14 of 1984 - SECT 9

9. After section 57AL of the Principal Act the following section is inserted:
Special depreciation on trading ships

"57AM. (1) In this section-
'commission', in relation to a trading ship, means put the ship into service,
or hold the ship in reserve for the purpose of being put into service;
'commissioning date', in relation to a trading ship, means the date on which
the ship is first commissioned;
'eligible date', in relation to an eligible Australian ship, means-

   (a)  in the case of a new ship-

        (i)    if the ship becomes an eligible Australian ship before the
               expiration of 90 days after the commissioning date of the
               ship-the commissioning date of the ship; or

        (ii)   in any other case-the day on which the ship becomes an eligible
               Australian ship;

   (b)  in the case of a post-July 1982 ship-

        (i)    if the ship becomes an eligible Australian ship before the
               expiration of 90 days after the commencement of this
               section-the commissioning date of the ship; or

        (ii)   in any other case-the day on which the ship becomes an eligible
               Australian ship; and

   (c)  in the case of a pre-July 1982 ship-

        (i)    if the ship becomes an eligible Australian ship before the
               expiration of 90 days after the commencement of this section-29
               July 1982; or

        (ii)   in any other case-the day on which the ship becomes an eligible
               Australian ship;
'Government ship' means a ship that is owned by the Commonwealth or a State or
Territory, but does not include a ship that is owned by the Australian
Shipping Commission;
'harbour' has the same meaning as in the Navigation Act 1912;
'lease', in relation to a trading ship, includes-

   (a)  any scheme under which a right to use the ship is granted by the owner
        to another person; and

   (b)  any scheme under which a right to use the ship, being a right derived
        directly or indirectly from a right referred to in paragraph (a), is
        granted by a person to another person,
but does not include a hire-purchase agreement;
'manning notice' means a notice given by the Secretary under sub-section (22)
in relation to a ship;
'new' means not having previously been either used by any person or acquired
or held by any person for use by that person, but does not include
reconditioned or wholly or mainly reconstructed;
'new ship' means a trading ship the commissioning date of which occurs after
the commencement of this section;
'passenger' has the same meaning as in the Navigation Act 1912;
'person' includes a partnership and a person in the capacity of the trustee of
a trust estate;
'post-July 1982 ship' means a trading ship the commissioning date of which
occurred on or after 29 July 1982 and before the commencement of this section;
'pre-July 1982 ship' means a trading ship the commissioning date of which
occurred on or after 29 July 1977 and before 29 July 1982;
'Secretary' means the Secretary to the Department administered by the Minister
for the time being administering the Navigation Act 1912;
'ship' has the same meaning as in the Navigation Act 1912;
'trading ship' means a ship that is used, or is held in reserve for use, for,
or in connection with, any business or commercial activity and, without
limiting the generality of the foregoing, includes a ship that is used, or is
held in reserve for use, wholly or principally for the carriage of passengers
or cargo for hire or reward, but does not include-

   (a)  a ship that is used, or is held in reserve for use, wholly or
        principally for the provision of services to ships or shipping,
        whether for reward or otherwise;

   (b)  a Government ship or ship that is, within the meaning of the
        Navigation Act 1912, a fishing vessel, an inland waterways vessel, a
        pleasure craft, an off-shore industry vessel or an off-shore industry
        mobile unit;

   (c)  a small craft within the meaning of the Shipping Registration Act 
        1981 ; or

   (d)  a ship that is used, or is held in reserve for use, wholly or
        principally within a harbour.



"(2) For the purposes of this section, a ship that is owned or is leased by a
private company and is used at any time for a private or domestic purpose by-

   (a)  an employee of the company;

   (b)  a director of the company;

   (c)  a member of the company; or

   (d)  a relative of a person referred to in paragraph (a), (b) or (c), shall
        be taken to have been used at that time by the company for a purpose
        other than the purpose of producing assessable income.

"(3) In this section-

   (a)  a reference to the acquisition of a ship by a person shall be read as
        including a reference to the construction of the ship for the person
        by another person or persons; and

   (b)  a reference to the depreciated value of a ship at the beginning of a
        year of income shall, if the depreciated value of the ship cannot be
        ascertained at that time, be read as a reference to the depreciated
        value of the ship at the first time during that year of income at
        which that value can be ascertained.



"(4) For the purposes of this section, a pre-July 1982 ship, a post-July 1982
ship or a new ship owned by a taxpayer shall be taken to be an eligible
Australian ship if-

   (a)  the taxpayer is a resident;

   (b)  the ship was constructed by, or acquired new by, the taxpayer and is
        for use by the taxpayer wholly and exclusively for the purpose of
        producing assessable income;

   (c)  depreciation is allowable to the taxpayer under section 54 in respect
        of the ship;

   (d)  the ship, when manned, is manned by persons each of whom is either a
        resident or a person in relation to whom a certificate issued under
        sub-section (26) is in force;

   (e)  in the case of a pre-July 1982 ship, the ship-

        (i)    was, on 29 July 1982, registered under the
               Shipping Registration  Act 1981 and that registration has, at
               all times since that date, remained in force;

        (ii)   has not, at any time since that date, been registered in a
               country other than Australia; and

        (iii)  has, at all times since the commissioning date of the ship,
               been owned by the taxpayer;

   (f)  in the case of a post-July 1982 ship or a new ship, the ship-

        (i)    was, on the commissioning date of the ship, registered under
               the Shipping Registration Act 1981 and that registration has,
               at all times since that date, remained in force;

        (ii)   has not, at any time since that date, been registered in a
               country other than Australia; and

        (iii)  has, at all times since that date, been owned by the taxpayer;

   (g)  where the ship is on lease to another person-

        (i)    the other person is a resident; and

        (ii)   the ship is for use by the other person wholly and exclusively
               for the purpose of producing assessable income; and

   (h)  the ship is used, or is held in reserve for use, in operations of a
        kind specified in a manning notice in force in relation to the ship
        and is not, when manned, manned otherwise than in accordance with, or
        at a level that exceeds the level specified in, the notice for
        operations of that kind.



"(5) Notwithstanding anything contained in sections 55, 56, 56A and 57, but
subject to sub-sections 56 (2) and (3) and to the provisions of this section,
the depreciation allowable under this Act in respect of a ship that is an
eligible Australian ship owned by a taxpayer in respect of the year of income
in which the eligible date in relation to the ship occurred or a subsequent
year of income shall be ascertained in accordance with this section.

"(6) A deduction is not allowable pursuant to this section to a taxpayer in
respect of a ship unless-

   (a)  the taxpayer makes an election under sub-section (29) in respect of
        the ship on or before the date of lodgment of his return of income
        for-

        (i)    in a case where a deduction would be allowable to the taxpayer
               in respect of a year of income pursuant to sub-section (9)-that
               year of income; or

        (ii)   in any other case-the year of income in which the ship became
               an eligible Australian ship; and

   (b)  where the ship is on lease to another person-the other person makes an
        election under sub-section (29) in respect of the ship on or before
        the date of lodgment of his return of income for the year of income-

        (i)    in a case where the lease was in force on the day on which the
               ship became an eligible Australian ship-in which that day
               occurred; or

        (ii)   in any other case-in which the lease was entered into, or
               before such later date as the Commissioner allows.

"(7) The depreciation allowable to a taxpayer under this Act in respect of an
eligible Australian ship in respect of the year of income in which the
eligible date in relation to the ship occurred or in respect of a subsequent
year of income is-

   (a)  in the case of a new ship, or a post-July 1982 ship, the eligible date
        in relation to which is the commissioning date of the ship-20% of the
        cost of the ship; or

   (b)  in any other case-20% of the depreciated value of the ship at the
        beginning of the year of income in which the eligible date in relation
        to the ship occurred.



"(8) If, at any time, an eligible Australian ship ceases to be an eligible
Australian ship, depreciation ascertained in accordance with this section is
not allowable in respect of the ship in respect of the year of income in which
the ship ceases to be an eligible Australian ship or in respect of any
subsequent year of income.

"(9) Where-

   (a)  a taxpayer is, or is to be, the owner of a ship that has not yet been
        commissioned (including a ship in the course of construction);

   (b)  the taxpayer is a resident;

   (c)  the taxpayer has lodged with the Commissioner a declaration signed by
        the taxpayer on or before the date of lodgment of his return of income
        in respect of the year of income (in this sub-section referred to as
        the 'relevant year of income') immediately preceding the year of
        income in which the taxpayer predicts that the ship will be
        commissioned (in this sub-section referred to as the 'succeeding year
        of income')-

        (i)    specifying the amount that the taxpayer estimates will be the
               cost of the ship (in this sub-section referred to as the
               'estimated cost of the ship');

        (ii)   specifying the year of income which will be the succeeding year
               of income; and

        (iii)  stating that the taxpayer will take all possible steps to
               ensure that the ship will become an eligible Australian ship
               before the expiration of 90 days after the commissioning date
               of the ship and to ensure that depreciation ascertained in
               accordance with paragraph (7) (a) will be allowable to the
               taxpayer in respect of the succeeding year of income and of
               each of the 3 next succeeding years of income;

   (d)  the estimated cost of the ship does not exceed the amount that, in the
        opinion of the Commissioner, will be the cost of the ship;

   (e)  the Commissioner is satisfied that depreciation ascertained in
        accordance with paragraph (7) (a) will be allowable to the taxpayer in
        respect of the ship in respect of the succeeding year of income and of
        each of the 3 next succeeding years of income; and

   (f)  the taxpayer has, before the expiration of the relevant year of
        income, expended moneys in acquiring or constructing the ship, an
        amount equal to-

   (g)  in a case where the amount of the moneys so expended equals or exceeds
        an amount equal to 20% of the estimated cost of the ship-20% of the
        estimated cost of the ship; or

   (h)  in any other case-the moneys so expended, is allowable as a deduction
        to the taxpayer in respect of the relevant year of income.

"(10) Where-

   (a)  a deduction has not been allowed and is not allowable to a taxpayer
        pursuant to sub-section (9) in respect of an eligible Australian ship
        owned by the taxpayer;

   (b)  the ship is a new ship the eligible date in respect of which is the
        commissioning date of the ship; and

   (c)  the taxpayer had, before the expiration of the year of income (in this
        sub-section referred to as the 'relevant year of income') immediately
        preceding the year of income (in this sub-section referred to as the
        'succeeding year of income') during which the eligible date in
        relation to the ship occurred, expended moneys in acquiring or
        constructing the ship, an amount equal to-

   (d)  in a case where the amount of the moneys so expended equals or exceeds
        an amount equal to 20% of the cost of the ship-20% of the cost of the
        ship; or

   (e)  in any other case-the moneys so expended, is allowable as a deduction
        to the taxpayer in respect of the relevant year of income.

"(11) Where-

   (a)  the eligible date in respect of a post-July 1982 ship owned by a
        taxpayer is the commissioning date of the ship;

   (b)  the ship (being a ship the commissioning date of which occurred before
        1 July 1983) is not a ship-

        (i)    the construction of which by the taxpayer commenced before 29
               July 1982; or

        (ii)   that was acquired by the taxpayer under a contract entered into
               before 29 July 1982; and

   (c)  the taxpayer had, before the expiration of the year of income (in this
        sub-section referred to as the 'relevant year of income') immediately
        preceding the year of income (in this sub-section referred to as the
        'succeeding year of income') during which the eligible date in
        relation to the ship occurred, expended moneys in acquiring or
        constructing the ship, an amount equal to-

   (d)  in a case where the amount of the moneys so expended equals or exceeds
        an amount equal to 20% of the cost of the ship-20% of the cost of the
        ship; or

   (e)  in any other case-the moneys so expended, is allowable as a deduction
        to the taxpayer in respect of the relevant year of income.

"(12) A deduction allowed or allowable to a taxpayer in respect of a ship
pursuant to sub-section (9), (10) or (11) shall, for the purposes of this Act
other than sub-section (7), be taken to be an amount of depreciation allowed
or allowable to the taxpayer in respect of the ship.

"(13) Where-

   (a)  a deduction (in this sub-section referred to as the 'relevant
        deduction') has been allowed or would, but for this sub-section, be
        allowable to a taxpayer pursuant to sub-section (9) in respect of a
        ship in respect of a year of income; and

   (b)  depreciation ascertained in accordance with paragraph (7) (a) is not
        allowable to the taxpayer in respect of the ship in respect of the
        next succeeding year of income, the relevant deduction shall be taken
        not to be allowable and never to have been allowable to the taxpayer.

"(14) Where a deduction (in this sub-section referred to as the 'relevant
deduction') has been allowed or would, but for this sub-section, be allowable
to a taxpayer pursuant to sub-section (9) in respect of a ship in respect of a
year of income (in this sub-section referred to as the 'relevant year of
income') and-

   (a)  in a case where the relevant deduction was allowed or would be
        allowable pursuant to paragraph (9) (g)-

        (i)    the amount that the taxpayer estimated, for the purposes of
               sub-section (9), would be the cost of the ship (in this
               sub-section referred to as the 'estimated cost of the ship')
               exceeds the cost of the ship; or

        (ii)   the estimated cost of the ship is less than the cost of the
               ship and the amount of the moneys expended referred to in that
               paragraph is greater than an amount equal to 20% of that
               estimated cost; or

   (b)  in a case where the relevant deduction was allowed or would be
        allowable pursuant to paragraph (9) (h)-the estimated cost of the ship
        exceeds the cost of the ship and the amount of the moneys expended
        referred to in that paragraph exceeds an amount equal to 20% of the
        cost of the ship, the relevant deduction shall be taken not to be
        allowable and never to have been allowable to the taxpayer and an
        amount equal to-

   (c)  in a case to which sub-paragraph (a) (i) applies-20% of the cost of
        the ship;

   (d)  in a case to which sub-paragraph (a) (ii) applies-20% of the cost of
        the ship or the amount of the moneys expended, whichever is the less;
        or

   (e)  in a case to which paragraph (b) applies-20% of the cost of the ship,
        shall be taken to be allowable as a deduction to the taxpayer pursuant
        to sub-section (9) in respect of the ship in respect of the relevant
        year of income.

"(15) This section does not apply, and shall be taken never to have applied,
in relation to an eligible Australian ship owned by a taxpayer if, before the
expiration of 12 months after the day on which the ship became an eligible
Australian ship, the ship ceased to be an eligible Australian ship.

"(16) Where-

   (a)  depreciation ascertained in accordance with this section has been
        allowed, or would but for this sub-section be allowable, in respect of
        an eligible Australian ship owned by a taxpayer;

   (b)  after the expiration of 12 months after the day on which the ship
        became an eligible Australian ship and before the expiration of the
        last year of income in respect of which depreciation ascertained in
        accordance with this section would, but for this sub-section, be
        allowable to the taxpayer in respect of the ship, the ship ceased to
        be an eligible Australian ship; and

   (c)  the Commissioner is satisfied that, at the time when the ship became
        an eligible Australian ship, the taxpayer intended that the ship would
        cease to be an eligible Australian ship during the period referred to
        in paragraph (b), any depreciation ascertained in accordance with this
        section shall, if the Commissioner so determines, be taken not to have
        been, or not to be, allowable, as the case may be.

"(17) Sub-section (15) does not apply in relation to a ship ceasing to be an
eligible Australian ship by reason of the disposal of the ship by a taxpayer
being a company, being a disposal occurring before the expiration of the
period of 12 months after the day on which the ship became an eligible
Australian ship, if-

   (a)  the disposal by the taxpayer was to another company (in this
        sub-section referred to as the 'transferee') that was, at the time of
        the disposal, related to the taxpayer;

   (b)  the ship was not, at any time (in this paragraph referred to as the
        'relevant time') during that period of 12 months, owned by a person
        other than-

        (i)    in a case where the transferee was the holding company of the
               taxpayer-the transferee or a company related to the transferee
               at the relevant time;

        (ii)   in a case where the transferee was a wholly-owned subsidiary of
               the taxpayer-the taxpayer or a company related to the taxpayer
               at the relevant time;

        (iii)  in a case where the transferee was a wholly-owned subsidiary of
               another company (in this sub-paragraph referred to as the
               'holding company') of which the taxpayer was also a
               wholly-owned subsidiary-the holding company or a company
               related to the holding company at the relevant time; or

        (iv)   in a case where the transferee was a wholly-owned subsidiary of
               other companies (in this sub-paragraph referred to as the
               'parent companies') of which the taxpayer was also a
               wholly-owned subsidiary-a company that, at the relevant time,
               was a wholly-owned subsidiary of the parent companies; and

   (c)  at any time during that period of 12 months when the ship was owned
        by-

        (i)    in a case where the transferee was the holding company of the
               taxpayer-the transferee;

        (ii)   in a case where the transferee was a wholly-owned subsidiary of
               the taxpayer-the taxpayer; or

        (iii)  in a case where the transferee was a wholly-owned subsidiary of
               another company of which the taxpayer was also a wholly-owned
               subsidiary-that other company,
the transferee, the taxpayer, or that other company, as the case may be, was
an eligible public company in relation to the year of income in which that
time occurred.



"(18) Where-

   (a)  pursuant to an order of a court made under the law of a State or
        Territory relating to companies-

        (i)    the whole of the undertaking, property and liabilities of a
               company (in this sub-section referred to as the 'relevant
               company') is vested in another company (in this sub-section
               referred to as the 'substituted company');

        (ii)   the persons who beneficially owned shares in the relevant
               company become the beneficial owners of all of the shares in
               the substituted company without reduction in their respective
               interests; and

        (iii)  the relevant company is dissolved; and

   (b)  for the purpose of the application of sub-section (17), the relevant
        company is the transferee referred to in sub-paragraph (17) (b) (i),
        the taxpayer referred to in sub-paragraph (17) (b) (ii), the holding
        company referred to in sub-paragraph (17) (b) (iii) or one of the
        parent companies referred to in sub-paragraph (17) (b) (iv),
        paragraphs (17) (b) and (c) apply, in relation to any time after the
        time when the conditions specified in paragraph (a) of this
        sub-section were satisfied, as if the substituted company were the
        transferee, the taxpayer, that holding company or that parent company,
        as the case may be.

"(19) Sub-sections 82AJA (3), (4), (5), (6), (7) and (8) apply for the
purposes of the interpretation of sub-sections (17) and (18).

"(20) A person who is, or is to be, the owner of a ship (including a ship in
the course of construction or a ship the construction of which has not yet
commenced), or a person authorized for the purpose by the first-mentioned
person may, by notice in writing given to the Secretary, request the Secretary
to give a manning notice in relation to the ship.

"(21) A request pursuant to sub-section (20) or (23) in relation to a ship
shall include a statement setting out-

   (a)  the specifications of the ship (including a plan of the accommodation
        layout of the ship);

   (b)  details of the kinds of operations in which the ship is, or is to be,
        engaged; and

   (c)  the number of officers of specified designations and the number of
        members of the crew of specified designations with which the ship is
        being, or is proposed to be, manned while engaged in each of the kinds
        of operations referred to in paragraph (b).



"(22) The Secretary shall, after receiving a request made pursuant to
sub-section (20) in relation to a ship, give a notice in writing by post to
the person who made the request setting out, in relation to each kind of
operations in which the ship is, or is to be, engaged, the number of officers
of specified designations and the number of members of the crew of specified
designations with which the ship should, in the opinion of the Secretary,
having regard to any relevant industrial relations considerations, be manned
to enable the ship to be operated in a safe and efficient manner while engaged
in operations of that kind.

"(23) A person who is, or is to be, the owner of a ship (including a ship in
the course of construction or a ship the construction of which has not yet
commenced) in relation to which a manning notice is in force, or a person
authorized for the purpose by the first-mentioned person, may, by notice in
writing given to the Secretary, request the Secretary to vary the manning
notice and, where the Secretary receives such a request, has had regard to any
relevant industrial relations considerations and is satisfied that the manning
notice in force in relation to the ship is no longer appropriate by reason of-

   (a)  a proposed change in the operations in which the ship is, or is to be,
        engaged; or

   (b)  a proposed modification of the ship, the Secretary shall give a notice
        in writing by post to the person who made the request varying the
        manning notice.

"(24) A manning notice or notice of a variation of a manning notice shall be
given by the Secretary before the expiration of 70 days after-

   (a)  in a case where notice of the request pursuant to sub-section (20) or
        (23), as the case may be, is given to the Secretary before the
        commissioning date of the ship-the commissioning date of the ship; or

   (b)  in any other case-the day on which notice of the request pursuant to
        sub-section (20) or (23), as the case may be, is given to the
        Secretary.



"(25) A manning notice or a variation of a manning notice comes into force on
the day on which the notice or notice of the variation, as the case may be, is
given.

"(26) Where the Secretary is satisfied that-

   (a)  a person possessing particular skills is required to be employed or
        engaged on a trading ship at a particular time; and

   (b)  a resident possessing those skills is not available to be employed or
        engaged on the ship at that time, the Secretary may, on application in
        writing made to him by the owner or lessee of the ship or by a person
        authorized for the purpose by the owner or lessee, being an
        application that specifies a particular person (not being a resident)
        who possesses those skills, issue to the person who made the
        application a certificate authorizing the employment or engagement on
        the ship of that person for a specified period.

"(27) A certificate issued under sub-section (26) ceases to be in force at the
expiration of the period specified for the purpose in the certificate.

"(28) In specifying a period in a certificate issued under sub-section (26),
the Secretary shall have regard to the likelihood of a resident with the
particular skills required becoming available to be employed or engaged on the
ship concerned.

"(29) A taxpayer may make an election that all income derived by the taxpayer
from the use by the taxpayer of a particular ship will be assessable income
for the purposes of this Act.

"(30) Where a taxpayer makes an election under sub-section (29), paragraphs
23(q) and (r) shall be taken not to apply and never to have applied in
relation to income derived by the taxpayer from the use by the taxpayer of the
ship during any year of income in respect of which depreciation ascertained in
accordance with this section has been allowed or is allowable to the taxpayer
or to another person in respect of the ship.

"(31) In sub-sections (29) and (30), a reference to income derived by a
taxpayer from the use of a ship shall be read as including a reference to
income derived by the taxpayer from the granting of a lease of the ship.

"(32) An election under sub-section (29) in relation to a ship shall be
exercised by notice in writing to the Commissioner signed by or on behalf of
the taxpayer.

"(33) Where-

   (a)  a taxpayer leases to another person (in this sub-section referred to
        as the 'lessee') a trading ship acquired by the taxpayer from the
        lessee;

   (b)  the commissioning date of the ship occurred on or after 29 July 1977;

   (c)  the ship was constructed or acquired new by the lessee and had, since
        its commissioning date and prior to its being acquired by the
        taxpayer, been owned by the lessee;

   (d)  the period between the commissioning date of the ship and the date on
        which it was acquired by the taxpayer did not exceed 6 months;

   (e)  the Commissioner is satisfied that the acquisition or construction of
        the ship by the lessee, the acquisition of the ship by the taxpayer
        from the lessee and the leasing of the ship by the taxpayer to the
        lessee occurred in pursuance of a contract or arrangement entered into
        at arm's length;

   (f)  in the case of a pre-July 1982 ship, the ship-

        (i)    was, on 29 July 1982, registered under the
               Shipping Registration  Act 1981 and that registration has, at
               all times since that date, remained in force;

        (ii)   has not, at any time since that date been registered in a
               country other than Australia; and

        (iii)  has, at all times since it was acquired by the taxpayer, been
               owned by the taxpayer; and

   (g)  in the case of a post-July 1982 ship or a new ship, the ship-

        (i)    was, on the commissioning date of the ship, registered under
               the Shipping Registration Act 1981 and that registration has,
               at all times since that date, remained in force;

        (ii)   has not, at any time since that date been registered in a
               country other than Australia; and

        (iii)  has, at all times since it was acquired by the taxpayer, been
               owned by the taxpayer, then-

   (h)  for the purposes of this section and, if the ship was acquired new by
        the lessee under a contract entered into on or after 1 January 1976 or
        was constructed by the lessee and the construction commenced on or
        after that date, for the purposes of Subdivision B, the ship shall be
        taken to have been acquired new by the taxpayer and the commissioning
        date of the ship shall be taken to be the date on which the taxpayer
        acquired the ship from the lessee; and

   (j)  a deduction pursuant to sub-section (9), (10) or (11) is not allowable
        in respect of the ship.



"(34) For the purpose of ascertaining the depreciation allowable to a taxpayer
pursuant to this section in respect of an eligible Australian ship, where-

   (a)  the amount that, but for this sub-section, would be the cost of the
        ship for the purposes of this section is attributable, in whole or in
        part, to a transaction to which the taxpayer was a party; and

   (b)  the Commissioner is satisfied that-

        (i)    having regard to any connection between any 2 or more of the
               parties to the transaction and to any other relevant
               circumstances, those parties were not dealing with each other
               at arm's length in relation to the transaction; and

        (ii)   the amount that, but for this sub-section, would be the cost of
               the ship for the purposes of this section is greater than the
               amount (in this sub-section referred to as the 'arm's length
               amount') that would have been the cost of the ship for the
               purposes of this section if the parties to the transaction had
               dealt with each other at arm's length in relation to the
               transaction, the arm's length amount shall be taken to be the
               cost of the ship for the purposes of this section.".