17. Agreement for avoidance of
double taxation with Greece
Whereas the
annexed Agreement between the Government of India and the Government of Greece for
the avoidance of double taxation of income has been ratified and the
instruments of ratification exchanged, as required by Article XX of the said
Agreement ;
Now,
therefore, in exercise of the powers conferred by section 90 of the Income-tax
Act, 1961 (43 of 1961), the Central Government hereby directs that all the
provisions of the said Agreement shall be given effect to in the Union of
Notification : No. GSR 394, dated 17-3-1967.
TEXT OF ANNEXED AGREEMENT DATED 11-2-1965
Whereas the
Government of India and the Government of Greece desire to conclude an
Agreement for the avoidance of double taxation of income ;
Now,
therefore, it is hereby agreed as follows :
ARTICLE I - 1. The taxes which are the subject
of the present Agreement are:
(a) in
(hereinafter referred to as
“Indian tax”);
(b) in
Greece :
the tax on physical persons
and the income-tax on legal entities, and any special tax levied in Greece with
reference to freight earned by shipping enterprises by the carriage of
passengers, livestock or goods, imposed under the Royal Decrees No. 3323/1955
and 3843/1958 and the Law No. 1880/1951
(hereinafter referred to as
“Greek tax”).
2. The present Agreement shall also apply to any
other taxes of substantially similar character imposed in India or Greece
subsequent to the date of signature of the present Agreement.
ARTICLE II - 1. In the present Agreement, unless
the context otherwise requires,—
(a) the
term “Greece” means the territory of the Kingdom of Greece ;
(b) the
terms “one of the territories” and “the other territory” mean Greece or India
as the context requires ;
(c) the
term “person” includes natural persons, companies and all other entities which
are treated as taxable units under the tax laws in force in the respective
territories ;
(d) the
term “company” means any entity which is treated as a body corporate or as a
company for tax purposes ;
(e) the
term “tax” means the Greek tax or Indian tax, as the context requires ;
(f) the terms “resident of Greece” and “resident
of India” mean, respectively, a person who is resident in Greece for the
purposes of Greek tax and not resident in India for the purposes of Indian tax,
and a person who is resident in India for the purposes of Indian tax and not
resident in Greece for the purposes of Greek tax :
a company shall be regarded
as resident in Greece if it is incorporated in Greece or its business is wholly
managed and controlled in Greece; a company shall be regarded as resident in
India if it is incorporated in India or its business is wholly managed and
controlled in India ;
(g) the
terms “Greek enterprise” and “Indian enterprise” mean, respectively, an
industrial or commercial enterprise or undertaking carried on by a resident of
Greece and an industrial or commercial enterprise or undertaking carried on by
a resident of India; and the terms “enterprise of one of the territories” and
“enterprise of the other territory” mean a Greek enterprise or an Indian
enterprise as the context requires ;
(h) the term “permanent establishment” means a fixed place of business
in which the business of the enterprise is wholly or partly carried on :
(aa) the
term “fixed place of business” shall include a place of management, a branch,
an office, a factory, a workshop, a warehouse, a mine, quarry or other place of
extraction of natural resources ;
(bb) an enterprise of one
of the territories shall be deemed to have a fixed place of business in the
other territory if it carries on in that other territory a construction,
installation or assembly project or the like ;
(cc) the use of mere
storage facilities or the maintenance of a place of business exclusively for
the purchase of goods or merchandise and not for any processing of such goods
or merchandise in the territory of purchase, shall not constitute a permanent
establishment ;
(dd) a
person acting in one of the territories for or on behalf of an enterprise of
the other territory shall be deemed to be a permanent establishment of that
enterprise in the first-mentioned territory, only if—
(1) he has and habitually exercises in the first-mentioned territory a
general authority to negotiate and enter into contracts for or on behalf of the
enterprise, unless the activities of the person are limited exclusively to the
purchase of goods or merchandise for the enterprise, or
(2) he
habitually maintains in the first-mentioned territory a stock of goods or
merchandise belonging to the enterprise from which the person regularly
delivers goods or merchandise for or on behalf of the enterprise, or
(3) he
habitually secures orders in the first-mentioned territory wholly or almost
wholly for the enterprise itself or for the enterprise and other enterprises
which are controlled by it or have a controlling interest in it ;
(ee) a
broker of a genuinely independent status who merely acts as an intermediary
between an enterprise of one of the territories and a prospective customer in
the other territory shall not be deemed to be a permanent establishment of the
enterprise in the last-mentioned territory ;
(ff) the fact that a company, which is a resident
of one of the territories has a subsidiary company which either is a resident
of the other territory or carries on a trade or business in that other
territory (whether through a permanent establishment or otherwise) shall not,
of itself, constitute that subsidiary company a permanent establishment of its
parent company ;
(i) the term “pension” means a periodic payment
made in consideration of services rendered or by way of compensation for
injuries received;
(j) the
term “annuity” means a stated sum payable periodically at stated times during
life or during a specified or ascertainable period of time under an obligation
to make the payments in return for adequate and full consideration in money or
money’s worth ;
(k) the
term “competent authority” means in the case of India, the Central Government in
the Ministry of Finance, Department of Revenue, or its authorised
representative and in the case of Greece, the Ministry of Finance or its authorised representative.
2. In the application of the provisions of this
Agreement in one of the territories any term not otherwise defined in this
Agreement shall, unless the context otherwise requires, have the meaning which
it has under the laws in force in that territory relating to the taxes which
are the subject of this Agreement.
ARTICLE III - 1. Subject to the provisions of
paragraph (3) below, tax shall not be levied in one of the territories on the
industrial or commercial profits of an enterprise of the other territory unless
profits are derived in the first-mentioned territory through a permanent establishment
of the said enterprise situated in the first-mentioned territory. If profits
are so derived, tax may be levied in the first-mentioned territory on the
profits attributable to the said permanent establishment.
2. There shall be attributed to the permanent
establishment of an enterprise of one of the territories situated in the other
territory the industrial or commercial profits which it might be expected to
derive in that other territory if it were an independent enterprise engaged in
the same or similar activities under the same or similar conditions and dealing
at arm’s length with the enterprise of which it is a permanent establishment.
In any case, where the correct amount of profits attributable to a permanent
establishment is incapable of determination or the ascertainment thereof
presents exceptional difficulties, the profits attributable to the
establishment may be estimated on a reasonable basis.
3. For the purposes of this Agreement the term
“industrial or commercial profits” shall not include income in the form of
rents, royalties, interest, dividends, management charges, remuneration for labour or personal services or income from the operation of
ships or aircraft.
ARTICLE IV - Where—
(a) an
enterprise of one of the territories participates directly or indirectly in the
management, control or capital of an enterprise of the other territory, or
(b) the
same persons participate directly or indirectly in the management, control or
capital of an enterprise of one of the territories and an enterprise of the
other territory,
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 but for those
conditions would have accrued to one of the enterprises but by reasons of those
conditions have not so accrued may be included in the profits of that
enterprise and taxed accordingly.
ARTICLE V - 1. Income derived from the operation
of aircraft by an enterprise of one of the territories shall not be taxed in
the other territory, unless the aircraft is operated wholly or mainly between
places within that other territory.
2. Paragraph (1) shall likewise apply in respect
of participations in pools of any kind by enterprises engaged in air transport.
ARTICLE VI - 1. When a resident of Greece,
operating ships, derives profits from India through such operations carried on
in India, such profits may be taxed in Greece as well as in India; but the tax
so charged in India shall be reduced by an amount equal to 50 per cent thereof,
and the reduced amount of Indian tax payable on the profits shall be allowed as
a credit against Greek tax charged in respect of such income. The credit
aforesaid shall not exceed the Greek tax charged in respect of such income.
2. (a) When a resident of India,
operating ships, derives profits from Greece, through such operations carried
on in Greece, such profits may be taxed in Greece as well as in India; but the
tax so charged in Greece shall be reduced by an amount equal to 50 per cent
thereof and the reduced amount of Greek tax payable shall be allowed as a
credit against Indian tax charged in respect of such income. The credit
aforesaid shall not exceed the Indian tax charged in respect of such income.
(b)
Sub-clause (a) of clause (2) shall not, however, apply as long as the
laws in Greece do not impose any tax on income derived from the operation of
ships belonging to foreign enterprises operating in the Greek territory. In such
cases, the profits referred to in sub-clause (a) of clause (2) may be
taxed only in India.
3. Paragraphs (1) and (2) shall not apply to
profits arising as a result of coastal traffic.
4. The provisions of clause (1) shall not in the
case of India affect the application of sub-sections (1) to (6) of section 172
of the Income-tax Act, 1961, for the assessment of profits from occasional
shipping or tramp steamers; but the provisions of that clause will be applied,
when an adjustment is to be made under sub-section (7) of the aforesaid section
of the Income-tax Act, 1961, in such cases.
ARTICLE VII - Royalties derived by a resident of one of
the territories from sources in the other territory may be taxed only in that
other territory.
In this
Article, the term “royalty” means any royalty or other like amount received as
consideration for the right to use copyrights, artistic or scientific works,
cinematographic films, patents, models, designs, plans, secret processes or
formulae, trade marks and other like property or rights, but does not include
any royalty or other like amount in respect of the operation of mines, quarries
or other natural resources.
ARTICLE VIII - Dividends paid by a company which is a
resident of one of the territories to a resident of the other territory may be
taxed only in the first-mentioned territory.
ARTICLE IX - Interest on bonds, securities, notes,
debentures or any other form of indebtedness derived by a resident of one of the
territories from sources in the other territory may be taxed only in that other
territory.
ARTICLE X - Income from immovable property may be taxed
only in the territory in which the property is situated. For this purpose any
rent or royalty or other income derived from the operation of a mine, quarry or
any other place of extraction of natural resources shall be regarded as income
from immovable property.
ARTICLE XI - Capital gains derived from the sale,
exchange or transfer of a capital asset, whether movable or immovable, may be
taxed only in the territory in which the capital asset is situated at the time
of such sale, exchange or transfer.
ARTICLE XII - 1. Remuneration other than pensions
and annuities, paid in Greece for services rendered therein out of public funds
of India shall not be taxed in Greece unless the payment is made to a citizen
of Greece.
2. Remuneration other than pensions and
annuities, paid in India for services rendered therein out of public funds of
Greece shall not be taxed in India unless the payment is made to a citizen of
India.
3. The provisions of paragraphs (1) and (2) of
this Article shall not apply to payments in respect of services in connection
with any trade or business carried on by either of the Contracting Parties or
political sub-divisions thereof for purposes of profit.
4. The provisions of paragraphs (1) and (2) of
this Article shall also apply to remuneration other than pensions and annuities
paid by the Reserve Bank of India, the Public Railways Authorities and the
Postal Administration of India and by the Bank of Greece, Greek State Railways
and the Greek Postal and Telegraphic Administration.
ARTICLE XIII - Any pension or annuity derived by a
resident of one of the territories from sources in the other territory may be
taxed only in that other territory.
ARTICLE XIV - 1. Profits or remuneration for
professional services or for services as an employee (including services as a
director) performed in one of the territories by an individual who is a
resident of the other territory may be taxed only in the territory in which
such services are performed.
2. An individual who is a resident of India
shall not be taxed in Greece on profits or remuneration referred to in
paragraph (1) if—
(a) he
is temporarily present in Greece for a period or periods not exceeding in the
aggregate 183 days during the calendar year immediately preceding the relevant
fiscal year,
(b) the
services are performed for or on behalf of a resident of India,
(c) the
profits or remuneration are subject to Indian tax, and
(d) the
profits or remuneration are not deducted in computing the profits of an
enterprise chargeable to Greek tax.
3. An individual who is a resident of Greece
shall not be taxed in India on the profits or remuneration referred to in
paragraph (1) if—
(a) he
is temporarily present in India for a period or periods not exceeding in the
aggregate 183 days during the relevant “previous year”,
(b) the
services are rendered for or on behalf of a resident of Greece,
(c) the
profits or remuneration are subject to Greek tax, and
(d) the
profits or remuneration are not deducted in computing the profits of an
enterprise chargeable to Indian tax.
4. Where an individual permanently or
predominantly performs services on ships or aircraft in international traffic
operated by an enterprise of one of the territories, profits or remuneration
from such services may be taxed only by the country of which the individual is
resident.
ARTICLE XV - A professor or teacher from one of the
territories, who receives remuneration for teaching, during a period of
temporary residence not exceeding two years, at a university, college, school
or other educational institution in the other territory, shall not be taxed in
that other territory in respect of that remuneration.
ARTICLE XVI - An individual from one of the territories
who is temporarily present in the other territory solely—
(a) as a student at a university, college or school in such other
territory,
(b) as a business apprentice, or
(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,
shall not be
taxed in the other territory in respect of remittances from abroad for the purposes
of his maintenance, education or training, in respect of a scholarship, and in
respect of any amount representing remuneration for services rendered in that
other territory, provided that such services are in connection with his studies
or training or are necessary for the purpose of his maintenance.
ARTICLE XVII - 1. The laws in force in either of
the territories will continue to govern the assessment and taxation of income
in the respective territories except where express provision to the contrary is
made in this Agreement.
2. Subject to the provisions of Article VI
income from sources within Greece which under the laws of Greece and in
accordance with this Agreement is subject to tax in Greece either directly or
by deduction shall not be subject to Indian tax.
3. Subject to the provisions of Article VI
income from sources within India which under the laws of India and in
accordance with this Agreement is subject to tax in India either directly or by
deduction shall not be subject to Greek tax.
4. The graduated rate of Greek tax to be imposed
on residents of Greece and the graduated rate of Indian tax to be imposed on
residents of India may be calculated as though income which under this
Agreement is not subject to Greek or Indian tax, as the case may be, were
included in the amount of the total income.
ARTICLE XVIII - The competent authorities shall exchange
such information (being information which is at their disposal under their
respective taxation laws in the normal course of administration) as is
necessary for carrying out the provisions of the present Agreement. Any
information so exchanged shall be treated as secret and shall not be disclosed
to any persons other than those concerned with the assessment and collection of
the taxes which are the subject of the present Agreement. No information as
aforesaid shall be exchanged by the competent authority of one of the
territories which would disclose any trade, business, industrial or
professional secret or any trade process to the authority of the other
territory.
ARTICLE XIX - Where a resident of one of the territories
shows proof that the action of the taxation authorities of the other territory
has resulted or will result in double taxation contrary to the provisions of
the present Agreement, he shall be entitled to present his case to the
competent authority of the territory of which he is resident. Should his claim
be deemed worthy of consideration, the competent authority to which the claim
is made shall endeavour to come to an Agreement with
the competent authority of the other territory with a view to avoiding double
taxation.
ARTICLE XX - 1. The present Agreement shall be
ratified and the instruments of ratification shall be exchanged at New Delhi as
soon as possible.
2. Upon exchange of the instruments of
ratification, the present Agreement shall have effect—
(a) in India, for any year of assessment, beginning on or after the 1st
April, 1964,
(b) in Greece, for any fiscal year, beginning on or after the 1st
January, 1964.
ARTICLE XXI - This Agreement shall continue in effect
indefinitely but either of the Contracting Parties may on or before the 30th
day of June in any calendar year after 1965 give to the other Contracting Party
notice of termination, and in such event this Agreement shall cease to be
effective—
(a) in
India, for any year of assessment beginning on or after the 1st April in the
calendar year next following such written notice of termination.
(b) in
Greece, for any fiscal year beginning on or after the 1st January next following
such written notice of termination.
In witness
whereof, the undersigned duly authorised thereto have
signed this Agreement and have affixed thereto their seals.
Done at New
Delhi on the 11th day of February, 1965, in duplicate in the English language.
Judicial analysis
n Where assessee-company, carrying on shipping business, entered
into an agreement with HLL, a Greek company, and according to agreement, entire
affairs of assessee-company were to be managed by HLL
as their agents, assessee-company had to be treated
as resident in Greece in terms of article II(I)(i)
of Agreement for Avoidance of Double Taxation between India and Greece and was
entitled to deduction of 50 per cent of tax charged in India in respect of its
shipping business—Universal Cargo Carriers Inc. v. CIT [1993] 70
Taxman 515/[1994] 205 ITR 215 (Cal.).
n Where
remedy of claiming refund under sub-section (7) of section 172 was barred on
account of expiry of time limit, claim for relief of tax provided under clause
(1) of article VI of Agreement between Government of India and Government of
Greece for avoidance of double taxation of income was not entertainable—Azolla Shipping Co. Ltd. v. ITO [1986]
15 ITD 438 (Bom. - Trib.).