16. Agreement for avoidance of
double taxation and prevention of fiscal evasion with Germany
Whereas the
annexed Agreement between the Government of the Republic of India and the
Government of the Federal Republic of Germany for the avoidance of double
taxation with respect to taxes on income and capital has been concluded ;
And whereas
the aforesaid Agreement was brought into force on the 26th day of October, 1996
after the completion by both the Contracting States to each other of the
procedure required under their laws in accordance with article 28 of the said
Agreement ;
Now,
therefore, in exercise of the powers conferred by section 90 of the Income-tax
Act, 1961 (43 of 1961) and section 44A of the Wealth-tax Act, 1957 (27 of
1957), the Central Government hereby directs that all the provisions of the
said Agreement shall be given effect to in the Union of
Notification : No. SO 836(E), dated 29-11-1996.*
ANNEXURE
Agreement between the republic of India and the
Federal Republic of Germany for the avoidance of double taxation with respect
to taxes on income and capital
Whereas the
Government of the Federal Republic of Germany and the Government of the
Republic of India desire to conclude an Agreement for the avoidance of double
taxation with respect to taxes on income and capital and for promoting their
mutual economic relations ;
Now,
therefore, it is hereby agreed as follows :
ARTICLE 1 - Personal scope - This Agreement
shall apply to persons who are residents of one or both of the Contracting
States.
ARTICLE 2 - Taxes covered - 1. This Agreement
shall apply to taxes on income and on capital imposed on behalf of a
2. There shall be regarded as taxes on income
and on capital all taxes imposed on total income, on total capital, or on
elements of income or of capital, including taxes on gains from the alienation
of movable or immovable property, and the pay roll tax.
3. The existing taxes to which this Agreement
shall apply are in particular :
(a) in the
the Einkommensteuer
(income-tax),
the Korperschaftsteuer
(corporation-tax),
the Vermogensteuer (capital
tax), and
the Gewerbesteuer (trade
tax)
(hereinafter referred to as
“German tax”);
(b) in the
the income-tax
including any surcharge tax thereon (Einkommensteuer, einschl, darauf
entfallender Zusatzsteuern), and the wealth-tax (Vermogensteuer)
(hereinafter
referred to as “Indian tax”).
4. This Agreement shall apply also to any
identical or substantially similar taxes which are imposed after the date of
signature of this Agreement in addition to, or in place of, the existing taxes.
The competent authorities of the Contracting States shall notify each other of
changes of importance which have been made in their respective taxation laws.
ARTICLE 3 - General definitions - 1. For
the purposes of this Agreement, unless the context otherwise requires,—
(a) the term “Federal Republic of Germany” means the area in which the
tax law of the Federal Republic of Germany is in force including the area of
the sea-bed, its sub-soil and the superjacent water column adjacent to the
territorial sea, insofar as the Federal Republic of Germany exercises their
sovereign rights and jurisdiction in conformity with international law and its
national legislation ;
(b) the term “
(c) the terms “a Contracting State” and “the other Contracting State”
mean the Federal Republic of Germany or the Republic of India as the context
requires ;
(d) the term “person” includes an individual, a company and any other
entity which is treated as a taxable unit under the taxation laws in force in
the respective Contracting States ;
(e) the term “company” means any body corporate or any entity which is
treated as a company or body corporate under the taxation laws in force in the
respective Contracting States ;
(f) the term “immovable property” has the meaning
which it has under the law of the Contracting State in which the property in
question is situated. The term shall in any case include property accessory to
immovable property, livestock and equipment used in agriculture and forestry,
rights to which the provisions of general law respecting landed property apply,
usufruct of immovable property and rights to variable or fixed payments as
consideration for the working of, or the right to work, mineral deposits,
sources and other natural resources; ships, boats and aircraft shall not be
regarded as immovable property ;
(g) the terms “enterprise of a Contracting State” and “enterprise of
the other Contracting State” mean respectively an enterprise carried on by a
resident of a Contracting State and an enterprise carried on by a resident of
the other Contracting State ;
(h) the term “national” means,—
(i) in respect of the Federal Republic of Germany
any German within the meaning of Article 116, paragraph (1), of the Basic Law
for the Federal Republic of Germany and any legal person, partnership and
association deriving its status as such from the law in force in the Federal
Republic of Germany ;
(ii) in respect of the Republic of India any
national of the Republic of India and any legal person, partnership and
association deriving its status as such from the law in force in the Republic
of India ;
(i) the term “international traffic” means any
transport by a ship or aircraft operated by an enterprise which has its place
of effective management in a Contracting State except when the ship or aircraft
is operated solely between places in the other Contracting State ;
(j) the term “competent authority” means in the
case of the Federal Republic of Germany the Federal Ministry of Finance, and in
the case of the Republic of India the Central Government in the Ministry of
Finance (Department of Revenue) or its authorised representative ;
(k) the term “fiscal year” means,—
(i) in relation to Indian tax, the previous year
as defined in the Income-tax Act, 1961 ;
(ii) in relation to German tax, the calendar
year ;
(l) the term “tax” means German tax or Indian tax
as the context requires but shall not include interest or penalty imposed in
relation to such taxes.
2. As regards the application of this Agreement
by a Contracting State any term not defined therein shall, unless the context
otherwise requires, have the meaning which it has under the law of that State
concerning the taxes to which this Agreement applies.
ARTICLE 4 - Resident - 1. For the
purposes of this Agreement, the term “resident of a Contracting State” means
any person who, under the laws of that State, is liable to tax therein by reason
of his domicile, residence, place of management or any criterion of a similar
nature. But this term does not include any person who is liable to tax in that
State in respect only of income from sources in that State or capital situated
therein.
2. Where by reason of the provisions of
paragraph 1 an individual is a resident of both Contracting States, then his
status shall be determined as follows :
(a) he shall be deemed to be a resident of the State in which he has a
permanent home available to him, if he has a permanent home available to him in
both States, he shall be deemed to be a resident of the State with which his
personal and economic relations are closer (centre of vital interests) ;
(b) if the State in which he has his centre of vital interests cannot
be determined, or if he has not a permanent home available to him in either
State, he shall be deemed to be a resident of the State in which he has an
habitual abode ;
(c) if he has an habitual abode in both States or in neither of them,
he shall be deemed to be a resident of the State of which he is a
national ;
(d) if he is a national of both States or of neither of them, the
competent authorities of the Contracting States shall settle the question by
mutual agreement.
3. Where by reason of the provisions of
paragraph 1 a person other than an individual is a resident of both Contracting
States, then it shall be deemed to be a resident of the State in which its
place of effective management is situated.
ARTICLE 5 : Permanent establishment - 1.
For the purposes of this Agreement, the term “permanent establishment” means a
fixed place of business through which the business of an enterprise is wholly
or partly carried on.
2. The term “permanent establishment” includes
especially,—
(a) a place of management ;
(b) a branch ;
(c) an office ;
(d) a factory ;
(e) a workshop ;
(f) a mine, an oil or gas well, a quarry or any
other place of extraction of natural resources, including an installation or
structure used for the exploration or exploitation ;
(g) a warehouse or sales outlet ;
(h) a farm, plantation or other place where agricultural, forestry,
plantation or related activities are carried on ; and
(i) a building site or construction, installation
or assembly project or supervisory activities in connection therewith, where
such site, project or activities continue for a period exceeding six months.
3. An enterprise shall be deemed to have a
permanent establishment in a Contracting State and to carry on business through
that permanent establishment if it provides services or facilities in
connection with, or supplies plant and machinery on hire used for or to be used
in the prospecting for or extraction or exploitation of mineral oils in that
State.
4. Notwithstanding the preceding provisions of
this Article, the term “permanent establishment” shall be deemed not to
include,—
(a) the use of facilities solely for the purpose of storage, display or
delivery of goods or merchandise belonging to the enterprise ;
(b) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of storage, display or delivery ;
(c) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of processing by another enterprise ;
(d) the maintenance of a fixed place of business solely for the purpose
of purchasing goods or merchandise or of collecting information, for the
enterprise ;
(e) the maintenance of a fixed place of business solely for the purpose
of carrying on, for the enterprise, any other activity of a preparatory or
auxiliary character ;
(f) the maintenance of a fixed place of business
solely for any combination of activities mentioned in sub-paragraphs (a)
to (e), provided that the overall activity of the fixed place of
business resulting from this combination is of a preparatory or auxiliary
character.
5.
Notwithstanding the provisions of paragraphs 1 and 2, where a person - other
than an agent of an independent status to whom paragraph 6 applies - is acting
in a Contracting State on behalf of an enterprise of the other Contracting
State that enterprise shall be deemed to have a permanent establishment in the
first-mentioned State, if this person,—
(a) has and habitually exercises in that State an authority to conclude
contracts on behalf of the enterprise, unless his activities are limited to the
purchase of goods or merchandise for the enterprise ;
(b) has no such authority, but habitually maintains in the
first-mentioned State a stock of goods or merchandise from which he regularly
delivers goods or merchandise on behalf of the enterprise ; or
(c) habitually secures orders in the first-mentioned State, wholly or
almost wholly for the enterprise itself or for the enterprise and other enterprises
controlling, controlled by, or subject to the same common control, as that
enterprise.
6. An enterprise shall not be deemed to have a
permanent establishment in a Contracting State merely because it carries on
business in that State through a broker, general commission agent or any other
agent of an independent status, provided that such persons are acting in the
ordinary course of their business and in their commercial and financial
relations to the enterprise no conditions are agreed or imposed which differ
from those usually agreed between independent persons.
7. The fact that a company which is a resident
of a Contracting State controls or is controlled by a company which is a
resident of the other Contracting State or which carries on business in that
other State (whether through a permanent establishment or otherwise), shall not
of itself constitute either company a permanent establishment of the other.
ARTICLE 6 - Income from immovable property - 1.
Income derived by a resident of a Contracting State from immovable property
situated in the other Contracting State may be taxed in that other State.
2. The provisions of paragraph 1 shall apply to
income derived from the direct use, letting, or use in any other form of
immovable property.
3. The provisions of paragraphs 1 and 2 shall
also apply to the income from immovable property of an enterprise and to income
from immovable property used for the performance of independent personal
services.
ARTICLE 7 - Business profits - 1. The
profits of an enterprise of a Contracting State shall be taxable only in that
State unless the enterprise carries on business in the other Contracting State
through a permanent establishment situated therein. If the enterprise carries
on business as aforesaid, the profits of the enterprise may be taxed in the
other State but only so much of them as is attributable to that permanent
establishment.
2. Subject to the provisions of paragraph 3,
where an enterprise of a Contracting State carries on business in the other
Contracting State through a permanent establishment situated therein, there
shall in each Contracting State be attributed to that permanent establishment
the profits which it might be expected to make, if it were a distinct and
separate enterprise engaged in the same or similar activities under the same or
similar conditions and dealing wholly independently with the enterprise of
which it is a permanent establishment.
3. In the determination of the profits of a
permanent establishment, there shall be allowed as deductions, expenses which
are incurred for the purposes of the business of the permanent establishment
including executive and general administrative expenses so incurred, whether in
the State in which the permanent establishment is situated or elsewhere, and
according to the domestic law of the Contracting State in which the permanent
establishment is situated.
4. Insofar as in a Contracting State and in
exceptional cases the determination of the profits to be attributed to a
permanent establishment in accordance with paragraph 2 is impossible or gives
rise to unreasonable difficulties, nothing in paragraph 2 shall preclude the
determination of the profits to be attributed to a permanent establishment by
means of either apportioning the total profits of the enterprise to that
permanent establishment or estimating on any other reasonable basis; the method
of apportionment or estimation adopted shall, however, be such that the result
shall be in accordance with the principles contained in this Article.
5. No profits shall be attributed to a permanent
establishment by reason of the mere purchase by that permanent establishment of
goods or merchandise for the enterprise.
6. For the purposes of the preceding paragraphs,
the profits to be attributed to the permanent establishment shall be determined
by the same method year by year unless there is good and sufficient reason to
the contrary.
7. Where profits include items of income which
are dealt with separately in other Articles of this Agreement, then the
provisions of those Articles shall not be affected by the provisions of this
Article.
ARTICLE 8 - Shipping and air transport - 1.
Profits from the operation of ships or aircraft in international traffic shall
be taxable only in the Contracting State in which the place of effective
management of the enterprise is situated.
2. If the place of effective management of a
shipping enterprise is aboard a ship, then it shall be deemed to be situated in
the Contracting State in which the home harbour of the ship is situated, or, if
there is no such home harbour, in the Contracting State of which the operator
of the ship is a resident.
3. For the purposes of this Article, interest on
funds connected with the operation of ships or aircraft in international
traffic shall be regarded as profits derived from the operation of such ships
or aircraft, and the provisions of Article 11 shall not apply in relation to
such interest.
4. The provisions of paragraph 1 shall also
apply to profits from the participation in a pool, a joint business or an
international operating agency.
ARTICLE 9 - Associated enterprises - Where
(a) an enterprise of a Contracting State participates directly or
indirectly in the management, control or capital of an enterprise of the other
Contracting State, or
(b) the same persons participate directly or indirectly in the
management, control or capital of an enterprise of a Contracting State and an
enterprise of the other Contracting State,
and in either
case conditions are made or imposed between the two enterprises in their
commercial or financial relations which differ from those which would be made
between independent enterprises, then any profits which would, but for those
conditions, have accrued to one of the enterprises, but, by reason of those
conditions, have not so accrued, may be included in the profits of that
enterprise and taxed accordingly.
ARTICLE 10 : Dividends - 1. Dividends paid
by a company which is a resident of a Contracting State to a resident of the
other Contracting State may be taxed in that other State.
2. However, such dividends may also be taxed in
the Contracting State of which the company paying the dividends is a resident
and according to the laws of that State, but if the recipient is the beneficial
owner of the dividends, the tax so charged shall not exceed 10 per cent of the
gross amount of the dividends.
This paragraph
shall not affect the taxation of the company in respect of the profits out of
which the dividends are paid.
3. The term “dividends” as used in this Article
means—
(a) dividends on shares including income from shares, “jouissance”
shares or “jouissance” rights, mining shares, founders’ shares or other rights,
not being debt-claims, participating in profits, and
(b) other income which is subjected to the same taxation treatment as
income from shares by the laws of the State of which the company making the
distribution is a resident.
4. The provisions of paragraphs 1 and 2 shall
not apply if the beneficial owner of the dividends, being a resident of a
Contracting State, carries on business in the other Contracting State of which
the company paying the dividends is a resident, through a permanent
establishment situated therein, or performs in that other State independent
personal services from a fixed base, situated therein, and the holding in
respect of which the dividends are paid is effectively connected with such
permanent establishment or fixed base. In such case, the provisions of Article
7 or Article 14, as the case may be, shall apply.
5. Where a company which is a resident of a
Contracting State derives profits or income from the other Contracting State,
that other State may not impose any tax on the dividends paid by the company,
except insofar as such dividends are paid to a resident of that other State or
insofar as the holding in respect of which the dividends are paid is
effectively connected with a permanent establishment or a fixed base situated
in that other State, nor subject the company’s undistributed profits to a tax
on the company’s undistributed profits, even if the dividends paid or the
undistributed profits consist wholly or partly of profits or income arising in
such other State.
ARTICLE 11 - Interest - 1. Interest
arising in a Contracting State and paid to a resident of the other Contracting
State may be taxed in that other State.
2. However, such interest may also be taxed in
Contracting State in which it arises and according to the laws of that State,
but if the recipient is the beneficial owner of the interest the tax so charged
shall not exceed 10 per cent of the gross amount of the interest.
3. Notwithstanding the provisions of paragraphs
1 and 2—
(a) interest arising in the Federal Republic of Germany and paid to the
Government of the Republic of India, the Reserve Bank of India, the Industrial
Finance Corporation of India, the Industrial Development Bank of India, the
Export-Import Bank of India, National Housing Bank and Small Industries
Development Bank of India shall be exempt from German tax;
(b) interest arising in the Republic of India and paid to the
Government of the Federal Republic of Germany, the Deutsche Bundesbank, the
Kreditanstat fur Wiederaufbau or the Deutsche Investitions-und
Entwicklungsgesellschaft (DEG) and interest paid in consideration of a loan
guaranteed by HERMES-Deckung shall be exempt from Indian tax.
4. The term “interest” as used in this Article
means income from debt-claims of every kind, whether or not secured by mortgage
and whether or not carrying a right to participate in the debtor’s profits, and
in particular, income from Government securities and income from bonds or
debentures, including premiums and prizes attaching to such securities, bonds
or debentures. Penalty charges for late payment shall not be regarded as
interest for the purpose of this Article.
5. The provisions of paragraphs 1, 2 and 3 shall
not apply if the beneficial owner of the interest, being a resident of a
Contracting State, carries on business in the other Contracting State in which
the interest arises, through a permanent establishment situated therein, or
performs in that other State independent personal services from a fixed base
situated therein, and the debt-claim in respect of which the interest is paid
is effectively connected with such permanent establishment or fixed base. In
such case, the provisions of Article 7 or Article 14, as the case may be, shall
apply.
6. Interest shall be deemed to arise in a
Contracting State when the payer is that State itself, a land or political
sub-division, a local authority or a resident of that State. Where, however,
the person paying the interest, whether he is a resident of a Contracting State
or not, has in a Contracting State a permanent establishment or a fixed base in
connection with which the indebtedness on which the interest is paid was
incurred, and such interest is borne by such permanent establishment or fixed
base, then such interest shall be deemed to arise in the State in which the
permanent establishment or fixed base is situated.
7. Where, by reason of a special relationship
between the payer and the beneficial owner or between both of them and some
other person, the amount of the interest, having regard to the debt-claim for
which it is paid, exceeds the amount which would have been agreed upon by the
payer and the beneficial owner in the absence of such relationship, the
provisions of this Article shall apply only to the last-mentioned amount. In
such case, the excess part of the payments shall remain taxable according to
the laws of each Contracting State, due regard being had to the other
provisions of this Agreement.
ARTICLE 12 - Royalties and fees for technical
services - 1. Royalties and fees for technical services arising in a
Contracting State and paid to a resident of the other Contracting State may be
taxed in that other State.
2. However, such royalties and fees for
technical services may also be taxed in the Contracting State in which they
arise and according to the laws of that State, but if the recipient is the
beneficial owner of the royalties, or fees for technical services, the tax so
charged shall not exceed 10 per cent of the gross amount of the royalties or
the fees for technical services.
3. The term “royalties” as used in this Article
means payments of any kind received as a consideration for the use of, or the
right to use, any copyright of literary, artistic or scientific work, including
cinematograph films or films or tapes used for radio or television
broadcasting, any patent, trade mark, design or model, plan, secret formula or
process, or for the use of, or the right to use, industrial, commercial or
scientific equipment, or for information concerning industrial, commercial or
scientific experience.
4. The term “fees for technical services” as
used in this Article means payments of any amount in consideration for the
services of managerial, technical or consultancy nature, including the
provision of services by technical or other personnel, but does not include
payments for services mentioned in Article 15 of this Agreement.
5. The provisions of paragraphs 1 and 2 shall
not apply if the beneficial owner of the royalties or fees for technical
services, being a resident of a Contracting State, carries on business in the
other Contracting State in which the royalties or fees for technical services
arise, through a permanent establishment situated therein, or performs in that
other State independent personal services from a fixed base situated therein,
and the right, property or contract in respect of which the royalties or fees
for technical services are paid is effectively connected with such permanent
establishment or fixed base. In such case, the provisions of Article 7 or
Article 14, as the case may be, shall apply.
6. Royalties and fees for technical services
shall be deemed to arise in a Contracting State when the payer is that State
itself, a land or a political sub-division, a local authority or a resident of
that State. Where, however, the person paying the royalties or fees for
technical services, whether he is a resident of a Contracting State or not, has
in a Contracting State a permanent establishment or a fixed base in connection
with which the liability to pay the royalties or fees for technical services
was incurred, and such royalties or fees for technical services are borne by
such permanent establishment or fixed base, then such royalties or fees for
technical services shall be deemed to arise in the State in which the permanent
establishment or fixed base is situated.
7. Where, by reason of special relationship
between the payer and the beneficial owner or between both of them and some
other person, the amount of royalties or fees for technical services paid
exceeds the amount which would have been paid in the absence of such
relationship, the provisions of this Article shall apply only to the
last-mentioned amount. In such case, the excess part of the payments shall
remain taxable according to the laws of each Contracting State, due regard
being had to the other provisions of this Agreement.
ARTICLE 13 - Capital gains - 1. Gains
derived by a resident of a Contracting State from the alienation of immovable
property situated in the other Contracting State may be taxed in that other
State.
2. Gains from the alienation of movable property
forming part of the business property of a permanent establishment which an
enterprise of a Contracting State has in the other Contracting State or of
movable property pertaining to a fixed base available to a resident of a
Contracting State in the other Contracting State for the purpose of performing
independent personal services, including such gains from the alienation of such
a permanent establishment (alone or with the whole enterprise) or of such fixed
base, may be taxed in that other State.
3. Gains from the alienation of ships or
aircraft operated in international traffic or movable property pertaining to
the operation of such ships or aircraft shall be taxable only in the
Contracting State in which the place of effective management of the enterprise
is situated.
4. Gains from the alienation of shares in a
company which is a resident of a Contracting State may be taxed in that State.
5. Gains from the alienation of any property
other than that referred to in paragraphs 1 to 4 shall be taxable only in the
Contracting State of which the alienator is a resident.
ARTICLE 14 - Independent personal services - 1.
Income derived by an individual who is a resident of a Contracting State from
the performance of professional services or other independent activities of a similar
character shall be taxable only in that State except in the following
circumstances when such income may also be taxed in the other Contracting
State :
(a) if he has a fixed base regularly available to him in the other
Contracting State for the purpose of performing his activities, in that case,
only so much of the income as is attributable to that fixed base may be taxed
in that other State ; or
(b) if his stay in the other Contracting State is for a period or
periods amounting to or exceeding in the aggregate 120 days in the relevant
fiscal year; in that case, only so much of the income as is derived from his
activities performed in that other State may be taxed in that other State.
2. The term “professional services” includes
independent scientific, literary, artistic, educational or teaching activities,
as well as the independent activities of physicians, surgeons, lawyers,
engineers, architects, dentists and accountants.
ARTICLE 15 - Dependent personal services - 1.
Subject to the provisions of Articles 16, 18, 19 and 20, salaries, wages and
other similar remuneration derived by a resident of a Contracting State in
respect of an employment shall be taxable in the other Contracting State only
if the employment is exercised there.
2. Notwithstanding the provisions of paragraph
1, remuneration derived by a resident of a Contracting State in respect of an
employment exercised in the other Contracting State shall be taxable only in
the first-mentioned State if :
(a) the recipient is present in the other State for a period or periods
not exceeding in the aggregate 183 days in the fiscal year concerned,
(b) the remuneration is paid by, or on behalf of, an employer who is
not a resident of the other State, and
(c) the remuneration is not borne by a permanent establishment or a
fixed base which the employer has in the other State.
3. Notwithstanding the preceding provisions of
this Article, remuneration derived in respect of an employment exercised aboard
a ship or aircraft operated in international traffic may be taxed in the
Contracting State of which the enterprise operating the ship or aircraft is a
resident.
ARTICLE 16 - Directors’ fees - Directors’ fees
and similar payments derived by a resident of a Contracting State in his
capacity as a member of the board of directors of a company which is a resident
of the other Contracting State may be taxed in that other State.
ARTICLE 17 - Artistes and sportspersons - 1.
Notwithstanding the provisions of Articles 7, 14 and 15, income derived by a
resident of a Contracting State as an entertainer, such as a theatre, motion
picture, radio or television artiste, or a musician, or as a sportsperson, from
his personal activities as such exercised in the other Contracting State, may
be taxed in that other State.
2. Where income in respect of personal
activities exercised by an entertainer or a sportsperson in his capacity as
such accrues not to the entertainer or sportsperson himself but to another
person, that income may, notwithstanding the provisions of Articles 7, 14 and
15, be taxed in the Contracting State in which the activities of the
entertainer or sportsperson are exercised.
3. However, such income shall not be taxed in
the State mentioned in paragraph 1 if the said activities are exercised during
a visit to that State by a resident of the other Contracting State and where
such visit is financed directly or indirectly by that other State, a land, a
political sub-division or a local authority thereof or by an organisation which
in that other State is recognised as charitable organisation.
ARTICLE 18 - Non-Government pensions - Subject to
the provisions of Article 19, pensions and other similar remuneration paid to a
resident of a Contracting State in consideration of past employment shall be
taxable only in that State.
ARTICLE 19 - Government service - 1.
(a) Remuneration other than a pension, paid by a Contracting State, a
land, a political sub-division or a local authority thereof to an individual in
respect of services rendered to that State, Land, sub-division or authority
shall be taxable only in that State.
(b)
However, such remuneration shall be taxable only in the other Contracting
State, if the services are rendered in that State and the individual is a
resident of that State who :
(i) is a national of that State ; or
(ii) did not become a resident of that State solely
for the purpose of rendering the services.
2. (a) Any pension paid by a Contracting
State, a Land, a political sub-division or a local authority thereof to an individual
in respect of services rendered to that State, Land, sub-division or authority
shall be taxable only in that State.
(b)
However, such pension shall be taxable only in the other Contracting State if
the individual is a resident of and a national of that other State.
3. The provisions of Articles 15, 16 and 18
shall apply to remuneration and pensions in respect of services rendered in
connection with a business carried on by a Contracting State, a Land, a
political sub-division or a local authority thereof.
4. The provisions of paragraph 1 shall likewise
apply in respect of remuneration paid, under a development assistance programme
of a Contracting State, a Land, a political sub-division or a local authority
thereof, out of funds exclusively supplied by that State, Land, political
sub-division or local authority, to a specialist or volunteer seconded to the
other Contracting State with the consent of that other State.
ARTICLE 20 - Teachers, students and trainees - 1.
An individual who visits a Contracting State at the invitation of that State or
of a university, college, school, museum or other cultural institution of that
State or under an official programme of cultural exchange for a period not
exceeding two years solely for the purpose of teaching, giving lectures or
carrying out research at such institution and who is, or was immediately before
that visit, a resident of the other Contracting State shall be exempt from tax
in the first-mentioned State on his remuneration for such activity during the
period of the first year from the date of his arrival and in the next year the
exemption will be only in respect of remuneration derived by him from outside
that State.
2. An individual who is present in a Contracting
State solely :
(a) as a student at a university, college or school in that Contracting
State,
(b) as a business apprentice (including in the case of the Federal
Republic of Germany a “Volontar” or a “Praktikant”),
(c) as the recipient of a grant, allowance or award for the primary purpose
of study or research from a religious, charitable, scientific or educational
organisation, or
(d) as a member of a technical cooperation programme entered into by
the Government of that Contracting State, and who is, or was immediately before
visiting that State, a resident of the other Contracting State, shall be exempt
from tax in the first-mentioned Contracting State in respect of—
(i) remittances from abroad for the purposes of
his maintenance, education or training, and
(ii) remuneration from employment in that other
State, in an amount not exceeding DM 7,200 (seven thousand two hundred Deutsche
Mark) or its equivalent in Indian currency during any fiscal year, as the case
may be provided that such employment is directly related to his studies or is
undertaken for the purpose of his maintenance.
ARTICLE 21 - Other income - 1.
Items of income of a resident of a Contracting State, wherever arising, not
dealt with in the foregoing Articles of this Agreement shall be taxable only in
that State.
2. The provisions of paragraph 1 shall not apply
to income, other than income from immovable property, if the recipient of such
income, being a resident of a Contracting State, carries on business in the
other Contracting State through a permanent establishment situated therein, or
performs in that other State independent personal services from a fixed base
situated therein and the right or property in respect of which the income is
paid is effectively connected with such permanent establishment or fixed base.
In such case the provisions of Article 7 or Article 14, as the case may be,
shall apply.
3. Notwithstanding the provisions of paragraph
1, if a resident of a Contracting State derives income from sources within the
other Contracting State in the form of lotteries, crossword puzzles, races
including horse races, card games and other games of any sort or gambling or
betting of any form or nature whatsoever, such income may be taxed in the other
Contracting State.
ARTICLE 22 - Capital - 1. Capital
represented by immovable property, owned by a resident of a Contracting State
and situated in the other Contracting State, may be taxed in that other State.
2. Capital represented by movable property
forming part of the business property of a permanent establishment which an
enterprise of a Contracting State has in the other Contracting State or by
movable property pertaining to a fixed base available to a resident of a
Contracting State in the other Contracting State for the purpose of performing
independent personal services, may be taxed in that other State.
3. Capital represented by ships and aircraft
operated in international traffic and by movable property pertaining to the
operation of such ships or aircraft, shall be taxable only in the Contracting
State in which the place of effective management of the enterprise is situated.
4. All other elements of capital of a resident
of a Contracting State shall be taxable only in that State.
ARTICLE 23 - Relief from Double taxation - 1.
Tax shall be determined in the case of a resident of the Federal Republic of
Germany as follows :
(a) Unless foreign tax credit is to be allowed under sub-paragraph (b),
there shall be exempted from German tax any item of income arising in the
Republic of India and any item of capital situated within the Republic of
India, which, according to this Agreement, may be taxed in the Republic of
India. The Federal Republic of Germany, however, retains the right to take into
account in the determination of its rate of tax the items of income and capital
so exempted.
In the case of
dividends exemption shall apply only to such dividends as are paid to a company
(not including partnerships) being a resident of the Federal Republic of
Germany by a company being a resident of the Republic of India at least 10 per
cent of the capital of which is owned directly by the German company.
There shall be
exempted from taxes on capital any shareholdings the dividends of which are
exempted or, if paid, would be exempted, according to the immediately foregoing
sentence.
(b) Subject to the provisions of German tax law regarding credit for
foreign tax, there shall be allowed as a credit against German tax payable in
respect of the following items of income arising in the Republic of India and
the items of capital situated there, the Indian tax paid under the laws of the
Republic of India and in accordance with this Agreement on :
(i) dividends not dealt with in sub-paragraph (a) ;
(ii) interest ;
(iii) royalties and fees for technical
services ;
(iv) income in the meaning of paragraph 4 of Article 13 ;
(v) directors’ fees ;
(vi) income of artistes and sports persons.
(c) For the purpose of credit referred to in letter (ii) of
sub-paragraph (b), the Indian tax shall be deemed to be 10 per cent of
the gross amount of the interest, if the Indian tax is reduced to a lower rate
or totally waived according to domestic law, irrespective of the amount of tax
actually paid.
(d) The provisions of sub-paragraph (c) shall apply for the
first 12 fiscal years for which this Agreement is effective.
(e) Notwithstanding the provisions of sub-paragraph (a) items of
income dealt with in Articles 7 and 10 and gains derived from the alienation of
the business property of a permanent establishment as well as the items of
capital underlying such income shall be exempted from German tax only if the
resident of the Federal Republic of Germany can prove that the receipts of the
permanent establishment or company are derived exclusively or almost
exclusively from active operations.
In the case of
items of income dealt with the Article 10 and the items of capital underlying
such income the exemption shall apply even if the dividends are derived from
holdings in other companies being residents of the Republic of India which
carry on active operations and in which the company which last made a
distribution has a holding of more than 25 per cent.
Active
operations are the following; producing or selling goods or merchandise, giving
technical advice or rendering engineering services, or doing banking or
insurance business, within the Republic of India.
If this is not
proved, only the credit procedure as per sub-paragraph (b) shall apply.
2. Tax shall be determined in the case of a
resident of the Republic of India as follows :
Where a
resident of the Republic of India derives income or owns capital which, in
accordance with the provisions of this Agreement, may be taxed in the Federal
Republic of Germany, the Republic of India shall allow as a deduction from the
tax on such income of that resident an amount equal to the income-tax paid in
the Federal Republic of Germany, whether directly or by deduction, and as a
deduction from the tax on such capital of that resident an amount equal to the
capital tax paid in the Federal Republic of Germany. Such deduction in either
case shall not, however, exceed that part of the income-tax or capital tax (as
computed before the deduction is given) which is attributable, as the case may
be, to the income or the capital which may be taxed in the Federal Republic of
Germany.
3. The laws in force in either of the
Contracting States shall continue to govern the taxation of income and capital
in the respective Contracting States except where express provision to the
contrary is made in this Agreement.
ARTICLE 24 - Non-discrimination - 1.
Nationals of a Contracting State shall not be subjected in the other
Contracting State to any taxation or any requirement connected therewith which
is other or more burdensome than the taxation and connected requirements to which
nationals of that other State in the same circumstances and under the same
conditions are or may be subjected. This provision shall, notwithstanding the
provisions of Article 1, also apply to persons who are not residents of one or
both of the Contracting States.
2. The taxation of a permanent establishment
which an enterprise of a Contracting State has in the other Contracting State
shall not be less favourably levied in that other State than the taxation
levied on enterprises of that other State carrying on the same activities. This
provision shall not be construed as preventing a Contracting State from
charging the profits of a permanent establishment which a company of the other
Contracting State has in the first-mentioned State at a rate of tax which is
higher than that imposed on the profits of a similar company of the
first-mentioned Contracting State, nor as being in conflict with the provisions
of paragraph 3 of Article 7 of this Agreement. Further, this provision shall
not be construed as obliging Contracting State to grant to residents of the
other Contracting State any personal allowances, reliefs and reductions for
taxation purposes which it grants only to its own residents.
3. Except where the provisions of Article 9,
paragraph 7 of Article 11, or paragraph 7 of Article 12, apply, interest,
royalties and other disbursements paid by an enterprise of a Contracting State
to a resident of the other Contracting State shall, for the purpose of
determining the taxable profits of such enterprise, be deductible under the
same conditions as if they had been paid to a resident of the first-mentioned
State. Similarly, any debts of an enterprise of a Contracting State to a
resident of the other Contracting State shall, for the purpose of determining
the taxable capital of such enterprise, be deductible under the same conditions
as if they had been contracted to a resident of the first-mentioned State.
4. Enterprises of a Contracting State, the
capital of which is wholly or partly owned or controlled, directly or
indirectly, by one or more residents of the other Contracting State, shall not
be subjected in the first-mentioned State to any taxation or any requirement
connected therewith which is other or more burdensome than the taxation and
connected requirements to which other similar enterprises of the
first-mentioned State are or may be subjected.
ARTICLE 25 - Mutual agreement procedure - 1.
Where a person considers that the actions of one or both of the Contracting
States result or will result for him in taxation not in accordance with the
provisions of this Agreement, he may, irrespective of the remedies provided by
the domestic law of those States, present his case to the competent authority
of the Contracting State of which he is a resident or, if his case comes under
paragraph 1 of Article 24, to that of the Contracting State of which he is a
national. The case must be presented within three years from the first
notification of the action resulting in taxation not in accordance with the
provisions of this Agreement.
2. The competent authority shall endeavour, if
the objection appears to it to be justified and if it is not itself able to
arrive at a satisfactory solution, to resolve the case by mutual agreement with
the competent authority of the other Contracting State, with a view to the
avoidance of taxation which is not in accordance with this Agreement. Any
agreement reached shall be implemented notwithstanding any time limits in the
domestic law of the Contracting States.
3. The competent authorities of the Contracting
States shall endeavour to resolve by mutual agreement any difficulties or
doubts arising as to the interpretation or application of this Agreement. They
may also consult together for the elimination of double taxation in cases not
provided for in this Agreement.
4. The competent authorities of the Contracting
States may establish by mutual agreement the mode of application of the
provisions of this Agreement regarding the exemption or reduction of taxes.
5. The competent authorities of the Contracting
States may communicate with each other directly for the purpose of reaching an
agreement in the sense of the preceding paragraphs.
ARTICLE 26 - Exchange of information - 1. The
competent authorities of the Contracting States shall exchange such information
as is necessary for carrying out the provisions of this Agreement. Any
information received by a Contracting State shall be treated as secret in the
same manner as information obtained under the domestic laws of that State and
shall be disclosed only to persons or authorities (including courts and
administrative bodies) involved in the assessment or collection of, the
enforcement or prosecution in respect of, or the determination of appeals in
relation to, the taxes covered by this Agreement. Such persons or authorities
shall use the information only for such purposes. They may disclose the
information in public court proceedings or in judicial decisions.
2. In no case shall the provisions of paragraph
1 be construed so as to impose on a Contracting State the obligation :
(a) to carry out administrative measures at variance with the laws and
administrative practice of that or of the other Contracting State ;
(b) to supply information which is not obtainable under the laws or in
the normal course of the administration of that or of the other Contracting
State ; and
(c) to supply information which would disclose any trade, business,
industrial, commercial or professional secret or trade process, or information,
the disclosure of which would be contrary to public policy (ordre public).
ARTICLE 27 - Diplomatic and Consular Privileges -
Nothing in this Agreement shall affect the fiscal privileges of members of a
diplomatic mission, a consular post or an international organisation under the
general rules of international law or under the provision of special
agreements.
ARTICLE 28 - Entry into force - 1. The
Government of the contracting States shall notify to each other that the legal
requirements for the entry into force of this Agreement have been complied
with.
2. This Agreement shall enter into force one
month after receipt of the latter of the notifications referred to in paragraph
1 and shall have effect :
(a) in the Federal Republic of Germany :
(i) in the case of taxes withheld at source on
dividends, interest, royalties and fees for technical services, in respect of
amounts paid on or after the first day of January of the calendar year next
following that in which this Agreement enters into force ;
(ii) in the case of other taxes, in respect of
taxes levied for periods beginning on or after the first day of January of the
calendar year next following that in which this Agreement enters into
force ;
(b) in the Republic of India :
(i) in respect of income arising in any fiscal
year beginning on or after the first day of April following the calendar year
in which this Agreement enters into force ;
(ii) in respect of capital which is held on the
last day of any fiscal year beginning on or after the first day of April
following the calendar year in which this Agreement enters into force.
3. Upon the entry into force of this Agreement,
the Agreement between the Government of the Federal Republic of Germany and the
Government of India for the Avoidance of Double Taxation of Income signed on
18th March, 1959 and the Protocol amending the Agreement between the Government
of the Federal Republic of Germany and the Government of India for the
Avoidance of Double Taxation of Income signed on 28th June, 1984, along with
the Exchange of Notes of the same date shall expire and shall cease to have
effect as from the date on which the provisions of this Agreement commence to
have effect.
ARTICLE 29 - Termination - This Agreement shall
continue in effect indefinitely but either of the Contracting States may, on or
before the thirtieth day of June, in any calendar year beginning after the
expiration of a period of five years from the date of its entry into force,
give the other Contracting State, through diplomatic channels, written notice
of termination and, in such event, this Agreement shall cease to have effect :
(a) in the Federal Republic of Germany :
(i) in the case of taxes withheld at source on
dividends, interest, royalties and fees for technical services, in respect of
amounts paid on or after the first day of January of the calendar year next
following that in which notice of termination is given ;
(ii) in the case of other taxes, in respect of
taxes levied for periods beginning on or after the first day of January of the
calendar year next following that in which notice of termination is given,
(b) in the Republic of India :
(i) in respect of income arising in any fiscal
year beginning on or after the first day of April following the calendar year
in which the notice of termination is given ;
(ii) in respect of capital which is held on the
last day of any fiscal year beginning on or after the first day of April
following the calendar year in which the notice of termination is given.
In witness
whereof the undersigned being duly authorised thereto, have signed the present
Agreement.
Done at Bonn
on June 19th, 1995 in two originals, each in the German, Hindi and English languages,
all three texts being authentic. In case of divergent interpretation of the
German and the Hindi texts, the English text shall prevail.
Protocol
The Republic
of India and the Federal Republic of Germany have agreed at the signing at Bonn
on 19th June, 1995 of the Agreement between the two States for the avoidance of
double taxation with respect to taxes on income and capital upon the following
provisions which shall form an integral part of the said Agreement.
With
reference to Article 7
1. (a) In the determination
of the profits of a building site or construction, assembly or installation
project there shall be attributed to that permanent establishment in the
Contracting State in which the permanent establishment is situated only the
profits resulting from the activities of the permanent establishment as such.
If machinery or equipment is delivered from the head office or another
permanent establishment of the enterprise (situated outside that Contracting
State) or a third person (situated outside the Contracting State) in connection
with those activities or independently therefrom there shall not be attributed
to the profits of the building site or construction, assembly or installation
project the value of such deliveries.
(b) Income derived by a resident of a Contracting State from planning,
project, construction or research activities as well as income from technical
services exercised in that State in connection with a permanent establishment
situated in the other Contracting State, shall not be attributed to that
permanent establishment.
(c) In respect of paragraph 1 of Article 7, profits derived from the
sale of goods or merchandise of the same or similar kind as those sold, or from
other business activities of the same or similar kind as those effected,
through that permanent establishment, may be considered attributable to that
permanent establishment if it is proved that :
(i) this transaction has been resorted to in order
to avoid taxation in the Contracting State where the permanent establishment is
situated, and
(ii) the permanent establishment in any way was
involved in this transaction.
(d) It is understood that the deductions in respect of the head office
expenses as referred to in paragraph 3 of Article 7 shall in no case be less
than those allowable under the Indian Income-tax Act as on the date of entry
into force of this Agreement.
(e) No deduction shall be allowed in respect of amounts paid or charged
(otherwise than towards reimbursement of actual expenses) by the permanent
establishment to the head office of the enterprise or any of its other offices,
by way of :
(i) royalties, fees or other similar payments in
return for the use of patents or other rights ;
(ii) commission for specific services performed or
for management ; and
(iii) interest on moneys lent to the permanent
establishment except in case of a banking institution.
With
reference to Article 8
2. For the purposes of Article 8, income from
the operation of ships includes income derived from the use, maintenance or
rental of containers (including trailers and related equipment for the
transport of containers) in connection with the transport of goods or
merchandise in international traffic.
With
reference to Article 10
3. For the purpose of taxation in the Federal
Republic of Germany, the term dividends includes income derived by a sleeping
partner (“stiller Gesellschafter”) from his participation as such and
distributions on certificates of an investment fund or investment trust. For
the purpose of taxation in the Republic of India, any income of a similar kind
will be treated alike.
With
reference to Articles 10 and 11
4. Notwithstanding the provisions of these Articles,
dividends and interest may be taxed in the Contracting State in which they
arise, and according to the law of that State,
(a) if they are derived from rights or debt claims carrying a right to
participate in profits (including income derived by a sleeping partner from his
participation as such, from a “partiarisches Darlehen” and from
“Gewinnobligationen” within the meaning of the tax law of the Federal Republic
of Germany) and
(b) under the condition that they are deductible in the determination
of profits of the debtor of such income.
With
reference to Article 13
5. In view of the position confirmed on behalf
of the Government of the Federal Republic of Germany that the Deutsche
Investitionsund Entwicklungsgesellschalt (DEG) is wholly owned by the
Government of the Federal Republic of Germany and is exempted from paying
income-tax in Germany, it is agreed that the long-term capital gains arising to
the DEG due to alienation of shares in Indian companies will be exempt from
taxation in India.
With
reference to Article 23
6. (a) The
exemption provided for in sub-paragraph (a) of paragraph 1 of Article 23
is granted irrespective of whether the income or capital concerned is
effectively taxed in the Republic of India or not.
(b) Where a company being a resident of the Federal Republic of Germany
distributes incomes derived from sources within the Republic of India paragraph
1 of Article 23 shall not preclude the compensatory imposition of corporation
tax on such distributions in accordance with the provisions of German tax law.
(c) The Federal Republic of Germany shall avoid double taxation by a
tax credit as provided for in paragraph (1b) of Article 23, and not by a tax
exemption under paragraph (1a) of Article 23,
(aa) if in the Contracting States income is placed under differing
provisions of the Agreement or attributed to different persons (other than
under Article 9) and this conflict cannot be settled by procedure pursuant to
Article 25 and
(i) if as a result of such placement or
attribution the relevant income would be subject to double taxation ; or
(ii) if as a result of such placement or
attribution the relevant income would remain untaxed or be subject only to
inappropriately reduced taxation in the Republic of India and would (but for the
application of this paragraph) remain exempt from tax in the Federal Republic
of Germany ; or
(bb) if the Federal Republic of Germany has, after due consultation and
subject to the limitations of its internal law, notified the Republic of India
through diplomatic channels of other items of income to which it intends to
apply this paragraph in order to prevent the exemption of income from taxation
in both Contracting States or other arrangements for the improper use of the
Agreement.
In the case of
a notification under sub-paragraph (bb), the Republic of India may,
subject to notification through diplomatic channels, characterise such income
under the Agreement consistently with the characterisation of that income by
the Federal Republic of Germany. A notification made under this paragraph shall
have effect only from the first day of the calendar year following the year in
which it was transmitted and any legal prerequisites under the domestic law of
the notifying State for giving it effect have been fulfilled.
With
reference to Article 26
7. (a) It is also understood that in relation to
the Agreement, the term “information” shall include documents. It is further
understood that the German tax law provides for the transmission of information
in terms of paragraph 3 of Article 117 of the Fiscal Code (Abgabenordnung) -
upon request - and it would be possible to furnish information to the competent
authority in the Republic of India under these provisions irrespective of this
Article.
(b) If personal data is exchanged under this Article, the following
additional provisions shall apply subject to the domestic laws of each
Contracting State :
(i) The data supplying Contracting States shall be
responsible for the accuracy of the data they supply. If it emerges that
inaccurate data or data which should not have been supplied have been
communicated, the receiving State shall be notified of this without delay. That
State shall be obliged to correct or destroy said data;
(ii) The Contracting States shall be obliged to
keep official records of the transmission and receipt of personal data ;
(iii) The Contracting States shall be obliged to
take effective measures to protect the personal data communicated against
unauthorised access, unauthorised alteration and unauthorised disclosure ;
(iv) Upon application, the person concerned shall be informed of the
information stored about him and of the use planned to be made of it. There
shall be no obligation to give this information if on balance it appears that
the public interest in withholding if outweighs the interest of the person
concerned in receiving it. In all other respects, the right of the person
concerned to be informed of the data stored about him shall be governed by the
domestic law of the Contracting State in whose sovereign territory the
application for the information is made.
Done at Bonn
on 19th June, 1995 in two originals, each in the German, Hindi and English
languages, all three texts being authentic. In case of divergent interpretation
of the German and the Hindi text, the English text shall prevail.
Judicial analysis
See the following cases dealing with old
agreements :
n Words
‘subject to the provisions of paragraph (3)’ in article III(1) of Double
Taxation Avoidance Agreement (between Federal Republic of Germany and India)
would indicate that while ‘industrial or commercial income’ of the foreign
enterprise are not taxable in India, the rents, royalties, interests,
dividends, etc., derived by the foreign enterprise from sources in India are
taxable - CIT v.Visakhapatnam Port Trust [1983] 144 ITR 146 (AP).
n Words
‘any other form of indebtedness’ from sources in the other territory could only
mean interest arising or accruing as a separate ‘source’ of income -CIT v.Visakhapatnam
Port Trust [1983] 144 ITR 146 (AP).
n Mere
supply of a plant by a foreign company whose assembly and erection are
undertaken by purchaser under supervision of engineer deputed by supplier does
not amount to foreign company having a ‘permanent establishment’ - CIT
v.Visakhapatnam Port Trust [1983] 144 ITR 146 (AP).
n A
sub-contractor cannot be treated as an agent within meaning of article II(1)(i)(dd)
of Double Taxation Avoidance Agreement between Federal Republic of Germany and
India - CIT v.Visakhapatnam Port Trust [1983] 144 ITR 146 (AP).
n Where
supplier of machinery had a permanent establishment in Germany where press was
manufactured and certain services were rendered in connection with setting up of
that press in India, this could not be treated as personal service in any way
even if agreement for rendering service was embodied in a separate agreement;
as such in view of agreement for avoidance of double taxation between Germany
and India, tax was not deductible at source from amount paid to German company
for such services - Andrew Yule & Co. Ltd. v. CIT [1994] 207
ITR 899 (Cal.).
n Fees for
technical services is industrial or commercial profit and, therefore, would be
entitled to exemption as per article III of DTA between India and Germany - AEG
Telefunken v. CIT [1998] 233 ITR 129/101 Taxman 109 (Kar.).
n In case
of a non-resident, who is a resident of Germany, income arising to him in India
by way of royalties or technical charges could be taxed in India—Dy. CIT v.
UHDE GmbH [1996] 54 TTJ (Bom. - Trib.) 355.
n
Expression ‘laws in force’ occurring in Article XVI, para 1 of Agreement for
Avoidance of Double Taxation between India and Federal German Republic, must
mean the laws in force at the time the construction of a term is to be done and
the term is not restricted to the law in force at the time of execution of the
Agreement—ITO v. Leonhardt Andra UND Partner [1987] 21 ITD 607
(Cal. - Trib.).
n Where
assessee German resident had adopted calendar year for his assessment in
Germany, for purpose of assessment of his income in India also, same should be
taken as previous year in view of article II(1)(g) of Agreement for
Avoidance of Double Taxation between Germany and India and financial year could
not be taken as previous year on ground that he did not maintain accounts—M.G.K.
Blum v. Second ITO [1984] 7 ITD 643 (Bang. - Trib.).
n Where
assessee was not concerned with actual installation of plant but mere supervision
of same, which was not same thing as installation of project, assessee could
not be said to be having a permanent establishment in India within the meaning
of article II(1)(h)(cc) of AADT between Germany and India—UDHE
GmbH v. Dy. CIT [1997] 57 TTJ (Mum. - Trib.) 447.
n Where
under supply and service agreement with Indian company for establishing a
fertiliser project, assessee, a West German company, purchased bulk material
for Indian company and charged from Indian company cost plus 4 per cent
as procurement fee, procurement fee was not assessable as royalty and fee for
technical services but was to be treated as industrial and commercial profit
which was not taxable in view of Double Taxation Agreement between India and
West Germany—Linde A.G. v. ITO [1997] 62 ITD 330 (Mum. - Trib.).
n There is
no merit in contention that only that amount of royalty that was derived from
the operation of a mine, quarry, or any other extraction of natural resources
as stated in article IX of the Double Taxation Avoidance Agreement alone was to
be excluded from industrial and commercial profits and there being no provision
for exclusion of other kinds of royalties, any other receipt of royalty was not
subject to taxation. As provided in article XVI(I), the law of respective
States shall apply unless contrary is provided in the DTA. It means that if
there was no provision for the treatment to be given to the royalty, other than
the royalty under Article IX of the DTA, the same would be subject to Indian
taxation and taxable in India under section 9(1)(viii) of the Act. DTA
does not provide that any receipt, which does not fall in any of the clauses,
would be taxable under the Income-tax Act or would be excluded from the purview
of Indian taxation—G.U.J. Jaeger GmbH v. ITO [1991] 37 ITD 64
(Bom. - Trib.).
n The
contention that the consideration pertaining to the provision of recurring know-how
would also be a part of industrial and commercial profits has no force. It
would be in the nature of royalty and there being a specific exclusion of
royalty from the definition of “industrial and commercial profits”, by Article
III(3) of DTA, it would not enjoy the exemption on the ground that the assessee
had no permanent establishment in India—G.U.J. Jaeger GmbH v. ITO [1991]
37 ITD 64 (Bom. - Trib.).
n
Rendering of consultancy service in India by non-resident in connection with
industrial project would not amount to doing industrial or commercial activity
within meaning of Double Taxation Avoidance Agreement between Federal Republic
of Germany and India so as to make section 195 inapplicable to payments made by
assessee to non-resident—Gujarat Narmada Valley Fertilisers Co. Ltd. v.
ITO [1982] 2 ITD 515 (Ahd.).
n Under no
circumstances executive authority can make an item of income as of taxable
nature with retrospective effect if the same is not provided in the protocol - Tata
Iron & Steel Co. Ltd. v. Dy. CIT [1990] 100 Taxman 51 (Mag.)/62
TTJ (Mum.) 17.
n Words
‘subject to the provisions of paragraph (3)’ in article III(1) of Double
Taxation Avoidance Agreement (between Federal Republic of Germany and India)
would indicate that while ‘industrial or commercial income’ of the foreign
enterprise are not taxable in India, the rents, royalties, interest, dividends,
etc., derived by the foreign enterprise from sources in India are taxable—CIT
v. Visakhapatnam Port Trust [1983] 144 ITR 146 (AP).
n Words
‘any other form of indebtedness’ from sources in the other income could only
mean interest arising or accruing as a separate ‘source’ of income—CIT v.
Visakhapatnam Port Trust [1983] 144 ITR 146 (AP).
n Mere
supply of a plant by a foreign company whose assembly and erection are
undertaken by purchaser under supervision of engineer deputed by supplier does
not amount to foreign company having a ‘permanent establishment’—CIT v.
Visakhapatnam Port Trust [1983] 144 ITR 146 (AP).
n A
sub-contractor cannot be treated as an agent within meaning of article II(I)(i)(dd)
of Double Taxation Avoidance Agreement between Federation Republic of Germany
and India—CIT v. Visakhapatnam Port Trust [1983] 144 ITR 146
(AP).
n Where
supplier of machinery had a permanent establishment in Germany where press was
manufactured and certain services were rendered in connection with setting up
of that press in India, this could not be treated as personal service in any
way even if agreement for rendering service was embodied in a separate
agreement; as such in view of agreement for avoidance of double taxation
between Germany and India, tax was not deductible at source from amount paid to
German company for such services—Andrew Yule & Co. Ltd. v. CIT
[1994] 207 ITR 899 (Cal.).
n
Amendment to 1959/60 DTAA between India and Federal Republic of Germany by GSR
No. 680(E), dated 26-8-1985 could not be made effective from 1-4-1984—Tata
Iron & Steel Co. Ltd. v. Dy. CIT [1998] 100 Taxman 51 (Mum. -
Trib.) (Tax. Mag.).