20. Agreement for avoidance of double taxation and
prevention of fiscal evasion with
Whereas the
annexed Convention between the Government of the Republic of India and the
Government of the State of Israel for the avoidance of double taxation and for
the prevention of fiscal evasion with respect to taxes on income and on capital
has entered into force on the 15th May, 1996, after the notification by both
the Contracting States to each other of the completion of the procedures
required under their laws for bringing into force of the said Convention in
accordance with Article 29 of the said Convention.
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 Convention shall be given effect to in the Union of
Notification
: No. GSR 256(E), dated 26-6-1996.
ANNEXURE
CONVENTION BETWEEN THE
PREVENTION OF
FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL
The Government
of the
Desiring to
conclude a Convention for the avoidance of double taxation and the prevention
of fiscal evasion with respect to taxes on income and on capital, have agreed
as follows :
Article 1 : Personal scope - This Convention shall apply to persons who are
residents of one or both of the Contracting States.
Article 2 : Taxes covered - 1. This Convention shall apply to taxes
on income 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, taxes on the total amounts of wages or
salaries paid by enterprises, as well as taxes on capital appreciation.
3. The existing taxes to which the Convention
shall apply are in particular :
(a) In
(i) the income-tax,
including any surcharge thereon ; and
(ii) the wealth-tax,
(hereinafter
referred to as “Indian tax”) ;
(b) In
(i) the income-tax ;
(ii) the company tax ;
(iii) the capital gains tax
;
(iv) the tax imposed upon gains from the
alienation of immovable property according to the Land Appreciation Tax Law ;
and
(v) taxes imposed on real property
according to the Property Tax Law,
(hereinafter referred to as “Israeli tax”).
4. The Convention shall apply also to any
identical or substantially similar taxes which are imposed after the date of
signature of the Convention in addition to, or in place of, the existing taxes.
The competent authorities of the Contracting States shall notify each other of
significant changes which have been made in their respective taxation laws.
Article 3 : General definitions - 1. For the purposes of this
Convention, unless the context otherwise requires :
(a) the term “India” means the territory of India and includes the
territorial sea and airspace above it, as well as any other maritime zone in
which India has sovereign rights, other rights and jurisdiction, according to
the Indian law and in accordance with international law, including the U.N.
Convention on the Law of the Sea ;
(b) the term “Israel” means the State of Israel, and when used in a
geographical sense, means the territory and the territorial sea over which it
exercises its State sovereignty and jurisdiction, as well as the continental
shelf, the exclusive economic zone and that part of the sea-bed and sub-soil
under the sea over which it exercises sovereign rights according to the
international law ;
(c) the term “person” includes an individual, a company, a body of
persons and any other entity which is treated as a taxable unit under the
taxation laws in force in the respective Contracting State ;
(d) the term “company” means any body
corporate or any entity which is treated as a body corporate for tax purposes ;
(e) the terms “a
(f) 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 ;
(g) the term ‘international traffic’ means any transport by a ship or
aircraft operated by an enterprise which is a resident of a Contracting State,
except when the ship or aircraft is operated solely between places in the other
Contracting State ;
(h) the term “competent authority” means :
(i) in
(ii) in
(i) the term “national”
means :
(i) any individual
possessing the nationality of a
(ii) any legal person,
partnership or association deriving its status as such from the laws in force
in a
(j) the term “fiscal year” means :
(i) in the case of
(ii) in the case of
(k) the term “tax” means Indian tax or Israeli tax, as the context
requires, but shall not include any amount which is payable in respect of any
default or omission in relation to the taxes to which this Convention applies
or which represents a penalty imposed relating to those taxes.
2. (a) As regards the application of the
Convention 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 the Convention applies.
(b) If as a result of the application of sub-paragraph (a), the
meaning of a term under the laws of a Contracting State is different from the
meaning of that term under the laws of the other Contracting State, or if the
meaning of such term is not readily determinable under the laws of one of the
Contracting States, the competent authorities of the Contracting States may
agree upon a common meaning of that term.
(c) If, in a particular case, the application of the Convention fails
to prevent double taxation because the Contracting States have differing rules
with respect to the source of the category of income involved, the competent
authorities of the Contracting States may reach agreement as to the source of
income in the particular case so as to eliminate double taxation.
Article 4 : Resident - 1. For the purposes of this Convention,
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 other criterion of a similar nature.
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. If the State in which its place of
effective management is situated cannot be determined, then the competent
authorities of the Contracting States shall settle the question by mutual
agreement.
Article 5 : Permanent establishment - 1. For the purposes of this
Convention, 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 ; and
(f) a mine, an oil or gas well, a quarry or
any other place of extraction of natural resources.
3. A building site or construction or assembly
project or supervisory activities in connection therewith constitute a
permanent establishment only if such site, project or activity last more than
six months.
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 on behalf of an enterprise and has, and
habitually exercises, in a Contracting State an authority to conclude contracts
in the name of the enterprise, that enterprise shall be deemed to have a
permanent establishment in that State in respect of any activities which that
person undertakes for the enterprise, unless the activities of such person are
limited to those mentioned in paragraph 4 which, if exercised through a fixed
place of business, would not make this place of business a permanent
establishment under the provisions of that paragraph.
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
of an independent status, provided that such persons are acting in the ordinary
course of their business, and in their commercial and financial relations with
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
2. The term “immovable property” shall have the
meaning which it has under the law of the
3. The provisions of paragraph 1 shall apply to
income derived from the direct use, letting, or use in any other form of
immovable property.
4. The provisions of paragraphs 1 and 3 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
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 determining the profits of a permanent
establishment, there shall be allowed as deductions expenses which are incurred
for the purposes 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.
4. Insofar as it has been customary in a
Contracting State to determine the profits to be attributed to a permanent
establishment on the basis of an apportionment of the total profits of the
enterprise to its various parts, nothing in paragraph 2 shall preclude that
Contracting State from determining the profits to be taxed by such an
apportionment as may be customary; the method of apportionment 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 Convention, then the provisons 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 and aircraft in international traffic shall be taxable only
in the
2. The term “profits” shall include derived by
the enterprise from the rental of ships and aircraft operated in international
traffic. Such term shall also include income derived by the enterprise from the
use, maintenance or rental of containers operated in international traffic
(including trailers, barges and related equipment for the transport of such
containers) if such income is incidental to the profits of the enterprise from
the operation of ships and aircraft in international traffic.
3. The provisions of paragraph 1 shall also
apply to profits from the participation in a pool, a joint business or an
international operating agency.
4. For the purposes of this Article, interest on
funds connected with the operation of ships or aircraft in international
traffic shall be regarded as income or profits derived from the operation of
such ships or aircraft and the provisions of Article 11 shall not apply in
relation to such interest.
5. The term “operation of ships and aircraft”
shall mean business of transportation by ships or air of passengers, mail,
livestock or goods carried on by the owners or lessees or charterers
of ships and aircraft, including the sale of tickets for such transportation on
behalf of other enterprises, the incidental lease of ships and aircraft and any
other activity directly connected with such transportation.
Article 9 : Associated enterprises - 1. Where,
(a) an enterprise of a
(b) the same persons participate directly or
indirectly in the management, control or capital of an enterprise of the other
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.
2. Where a Contracting State includes in the
profits of an enterprise of that State - and taxes accordingly - profits on
which an enterprise of the other Contracting State has been charged to tax in
that other State and the profits so included are profits which would have
accrued to the enterprise of the first-mentioned State if the conditions made
between the two enterprises had been those which would have been made between
independent enterprises, then that other State shall make an appropriate
adjustment to the amount of the tax charged therein on those profits where that
other State considers the adjustment justified. In determining such adjustment,
due regard shall be had to the other provisions of this Convention and the
competent authorities of the Contracting States shall if necessary consult each
other.
Article 10 : Dividends - 1. Dividends paid by a company which is a
resident of a
2. However, such dividends may also be taxed in
the
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 income from shares, “jouissance” shares or “jouissance” rights, mining shares, founders’ shares or
other rights, not being debt-claims, participating in profits, as well as
income from other corporate rights 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 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 15, 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
2. However, such interest may also be taxed in
the
3. Notwithstanding the provisions of paragraphs
1 and 2, interest arising in a
(a) a bond, debenture or other similar
obligation of the Government of the first-mentioned
(b) a loan made, refinanced, guaranteed or
insured, or a credit extended, refinanced, guaranteed or insured by—
(i) in the case of
(ii) in the case of
(iii) other governmental
agencies or lending institutions as may be specified and agreed in an exchange
of notes between the competent authorities of the Contracting States.
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 15, as the case may be, shall
apply.
6. Interest shall be deemed to arise in a
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
Article 12 : Royalties - 1. Royalties arising in a
2. However, such royalties may also be taxed in
the
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 film, any patent, trade mark, design or model, plan, secret
formula or process, or for information concerning industrial, commercial or
scientific experience.
4. The provisions of paragraphs 1 and 2 shall
not apply if the beneficial owner of the royalties, being a resident of a
Contracting State, carries on business in the other Contracting State in which
the royalties arise, through a permanent establishment situated therein, or
perform in that other State independent personal services from a fixed base
situated therein, and the right or property in respect of which the royalties
are paid is effectively connected with such permanent establishment or fixed
base. In such case, the provisions of Article 7 or Article 15, as the case may
be, shall apply.
5. Royalties shall be deemed to arise in a
6. 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 royalties, having regard to the use, right or
information for which they are 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
Article 13 : Fees for technical services - 1. Fees for technical
services arising in a
2. However, such 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 fees
for technical services, the tax so charged shall not exceed 10 per cent of the
gross amount of the fees for technical services.
3. The term “fees for technical services” as
used in this Article means payments of any kind received as a consideration for
services of a 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 16 of this Convention.
4. The provisions of paragraphs 1 and 2 shall
not apply if the beneficial owner of the fees for technical services, being a
resident of a Contracting State, carries on business in the other Contracting
State, in which the fees for technical services arise, through a permanent
establishment situated therein, or perform in that other State independent
personal services from a fixed base situated therein, and the right, property
or contract in respect of which the 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 15, as the case may be, shall
apply.
5. Fees for technical services shall be deemed
to arise in a
6. 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 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
7. The provisions of paragraphs 1 to 6 of this
Article shall not apply to payments relating to services mentioned hereinbelow :
(i) Services that are ancillary and subsidiary,
and inextricably and essentially linked, to a sale of property
;
(ii) Services that are ancillary and subsidiary to
the rental of ships, aircraft, containers or other equipment used in connection
with the operation of ships or aircraft in international traffic ;
(iii) Teaching in or by an educational institution ;
(iv) Services for the personal use of the individual or individual
making the payments ; or
(v) Professional services as defined in Article 15.
Article 14 : Capital gains - 1. Gains derived by a resident of a
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 also be tax 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
4. Gains from the alienation of shares or similar
rights being shares in a company, the assets of which consist principally of
immovable property situated in a
5. Gains derived by a resident of a
6. Gains from the alienation of any property
other than that referred to in paragraphs 1 to 5, shall be taxable only in the
Article 15 : Independent personal services - 1.
Income derived by a resident of a Contracting State in respect of professional
services or other activities of an independent 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 state is for a period or periods exceeding
in the aggregate 183 days in any twelve-month period commencing or ending in
the fiscal year concerned; 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
especially independent scientific, literary, artistic, educational or teaching
activities as well as the independent activities of physicians, surgeons,
lawyers, engineers, architects, dentists and accountants.
Article 16 : Dependent personal services - 1. Subject to the
provisions of Articles 17, 19, 20 and 21, salaries, wages and other similar
remuneration derived by a resident of a
If the
employment is so exercised, such remuneration as is derived therefrom
may also be taxed in that other State.
2. Notwithstanding the provisions of paragraph
1, remuneration derived by a resident of a
(a) the recipient is present in the other State for a period or periods
not exceeding in the aggregate 183 days in any twelve-month period commencing
or ending 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 of 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 also be taxed in the
Article 17 : Directors’ fees - Directors’ fees and other similar payments
derived by a resident of a
Article 18 : Artistes and sportspersons - 1. Notwithstanding the
provisions of Articles 15 and 16, 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 sportsman himself but to another person,
that income may, notwithstanding the provisions of Articles 7, 15 and 16, be
taxed in the Contracting State in which the activities of the entertainer or
sportsperson are exercised.
3. Notwithstanding the provisions of paragraph
1, income derived by an entertainer or a sportsperson who is a resident of a
Contracting State from his personal activities as such exercised in the other
Contracting State, shall be taxable only in the first-mentioned Contracting
State, if the activities in the other Contracting State are supported wholly or
substantially from the public funds of the first-mentioned Contracting State,
including any of its political sub-divisions or local authorities.
4. Notwithstanding the provisions of paragraph 2
and Articles 7, 15 and 16, where income in respect of personal activities
exercised by an entertainer or a sportsperson in his capacity as such in a Contracting
State accrues not to the entertainer or sportsperson himself but to an other
person, that income shall be taxable only in the other Contracting State, if
that other person is supported wholly or substantially from the public funds of
that other State, including any of its political sub-divisions or local
authorities.
Article 19 : Pensions
- Subject to the provisions of paragraph 2 of Article 20, 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 20 : Government service - 1. (a) Remuneration,
other than a pension, paid by a Contracting State or a political sub-division
or a local authority thereof to an individual in respect of services rendered
to that State or 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, or out of
funds created by, a Contracting State or a political sub-division or a local
authority thereof to an individual in respect of services rendered to that
State or sub-division or authority shall be taxable only in that State.
(b)
However, such pension shall be taxable only in the other
3. The provisions of Articles 16, 17 and 19
shall apply to remuneration and pensions in respect of services rendered in
connection with a business carried on by a
Article 21 : Professors, teachers and students - 1. Remuneration
received for education or scientific research by an individual who is or was
immediately before visiting a
2. (a) Payments which a student or
business apprentice who is or was immediately before visiting a Contracting
State a resident of the Contracting State and who is present in the
first-mentioned State solely for the purpose of his education or training
receives for the purpose of his maintenance, education or training shall not be
taxed in that State, provided that such payments arise from sources outside
that State.
(b)
Payments which a student or business apprentice receives as remuneration from
employment in the first-mentioned State, in an amount not exceeding a sum
equivalent to 3,000 US dollars in the currency of the first-mentioned State
during any fiscal year shall be exempt from tax in the first-mentioned State.
The benefit of
this paragraph shall extend only for such period of time as may be reasonable
or customarily required to complete the education or training undertaken, but
in no event shall any individual have the benefits of this paragraph for more
than three consecutive years from the date of his first arrival in the
first-mentioned
Article 22 : Other income - 1. Items of income of a
resident of a
2. The provisions of paragraph 1 shall not apply
to income, other than income from immovable property as defined in paragraph 2
of Article 6, 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 15, as the case may be, shall apply.
3. Notwithstanding the provisions of paragraph
1, any winnings from lotteries, crossword puzzles, races including horse races,
card games and other games of any form or nature whatsoever may also be taxed
in the
Article 23 : Capital - 1. Capital represented by immovable property
referred to in Article 6, owned by a resident of a
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 also 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 and aircraft, shall be taxable only in the
4. All other elements of capital of a resident
of a
Article 24 : Elimination of double taxation - 1. Subject to the laws
of Israel from time to time in force regarding the allowance as a credit
against Israeli tax or tax paid in any country other than Israel (which shall
not affect the general provision contained in this paragraph), Indian tax paid
in respect of income derived from or capital owned in India shall be allowed as
a credit against Israeli tax payable in respect of that income or capital. The
credit shall not, however, exceed that portion of Israeli tax which the income
or capital from sources within
2. Where a resident of
(a) as a deduction from the tax on the income
of that resident, an amount equal to the income-tax paid in
(b) as a deduction from the tax on the capital
of that resident, an amount equal to the capital tax paid in
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
3. Notwithstanding the provisions of paragraphs
1 and 2 of this Article, where, a resident of a
4. Notwithstanding the provisions of paragraphs
1 and 2 of this Article, where a resident of a
5. Where in accordance with any provision of the
Convention income derived or capital owned by a resident of a
Article 25 : Non-discrimination - 1. Nationals of
2. The taxation on a permanent establishment
which an enterprise of a
3. Except where the provisions of paragraph 1 of
Article 9, paragraph 7 of Article 11, paragraph 6 of Article 12, or paragraph 6
of Article 13, 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
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 requirements
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 26 : 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 Convention,
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 25,
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 the Convention.
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
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
the Convention. They may also consult together for the elimination of double
taxation in cases not provided for in the Convention.
4. 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. When it seems advisable in
order to reach agreement to have an oral exchange of opinions, such exchange
may take place through a Commission consisting of representatives of the
competent authorities of the Contracting States.
Article 27 : Exchange of information - 1. The competent authorities of
the Contracting States shall exchange such information (including documents),
as is necessary for carrying out the provisions of this Convention or of the
domestic laws of the Contracting States concerning taxes covered by the
Convention insofar as the taxation thereunder is not
contrary to the Convention in particular for the prevention of fraud or evasion
of such taxes. The exchange of information is not restricted by Article 1. 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 the Convention. 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
(a) to carry out administrative measures at
variance with the laws and administrative practice of that or of the other
(b) to supply information which is not
obtainable under the laws or in the normal course of administration of that or
of the other
(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 28 : Diplomatic agents and consular officers - Nothing in this
Convention shall affect the fiscal privileges of diplomatic agents or consular
officers under the general rules of international law or under the provisions
of special agreements.
Article 29 : Entry into force - 1. The
2. The Convention shall enter into force on the
date of the letter of such notifications and its provisions shall have effect :
(a) in the
(i) in respect of taxes withheld at source on
dividends, interest, royalties and fees for technical services, as defined in
Articles 10, 11, 12 and 13, respectively, for amounts paid or credited on or
after the first day of the month next following that in which the Convention
enters into force ;
(ii) in respect of taxes on income, and taxes on
capital, for fiscal years beginning on or after the first day of April, 1994 ;
and
(b) in the State of
(i) in respect of taxes withheld at source on
dividends, interest, royalties and fees for technical services, as defined in
Articles 10, 11, 12 and 13, respectively, for amounts paid or credited on or
after the first day of the month next following that in which the Convention
enters into force ;
(ii) in respect of taxes
on income, and taxes on capital, for taxable periods beginning on or after the
first day of January, 1994.
Article 30 : Termination - This Convention shall remain in force 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 the entry into force of the Convention, give the other
Contracting State through diplomatic channels, written notice of termination
and, in such event, this Convention shall cease to have effect :
(a) in the
(i) in respect of taxes withheld at source on
dividends, interest, royalties and fees for technical services, as defined in
Articles 10, 11, 12 and 13, respectively, for amounts paid or credited on or
after the first day of April, next following the calendar year in which the
notice of termination is given ; and
(ii) in respect of taxes on income, and taxes on
capital, of fiscal years beginning on or after the first day of April, next
following the calendar year in which the notice of termination is given ; and
(b) in the State of
(i) in respect of taxes withheld at source on
dividends, interest, royalties and fees for technical services, as defined in
Articles 10, 11, 12 and 13, respectively, for amounts paid or credited on or
after the first day of January, next following the calendar year in which the
notice of termination is given ; and
(ii) in respect of taxes
on income, and taxes on capital, for taxable periods beginning on or after the
first day of January, next following the calendar year in which the notice of
termination is given.
In witness
whereof the undersigned, duly authorised hereto, have
signed this Convention.
Done at
Protocol
At the signing
today of the Convention between the Republic of India and the State of Israel
for the Avoidance of Double Taxation and for the Prevention of Fiscal Evasion
with respect of Taxes on Income and on Capital, the undersigned have agreed
upon the following provisions, which shall form an integral part of the
Convention.
1. Nothing in the provisions of paragraph 3 of
Article 7 shall be interpreted as precluding a
2. The competent authorities of the Contracting
States shall initiate the proper procedure to review the provisions of Articles
12 and 13 (Royalties and fees for technical services, respectively) after a
period of five years from the date of entry into force of this Convention.
However, if under any Convention or Agreement between India and any third State
which enters into force after 1-1-1995, India limits its taxation at source or
Royalties or Fees for Technical Services or Interest or Dividends to a rate
lower or a scope more restricted than the rate or scope provided for in this
Convention, the same rate or scope as provided for in that Convention or
Agreement on the said items of income shall also apply under this Convention
with effect from the date on which the present Convention comes into force or
the relevant Indian Convention or Agreement, whichever enters into force later.
3. In respect of paragraph 2 of Article 25, it
is understood that if India enters into an Agreement or Convention for the
avoidance of double taxation with a third State after 1-1-1995, whereby the
difference in the rates of tax between enterprises of a permanent establishment
of a company of a country other than India and that of India is removed or
reduced, then, a corresponding reduction shall be effected in respect of rates
of taxes on profits according to the enterprises of a company which is a
resident of Israel.
In witness
whereof the undersigned, duly authorised hereto, have
signed this Protocol.
Done at