26. Agreement for Avoidance of
Double Taxation and Prevention of Fiscal Evasion with Libyan Arab Jamahiriya
Whereas the
annexed Convention between the Socialist Peoples Libyan Arab Jamahiriya and the
Government of the Republic of India for the avoidance of double taxation and
the prevention of fiscal evasion with respect to taxes on income has been
ratified and the instruments of ratification exchanged as required by Article
25 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 24A of the Companies (Profits) Surtax Act,
1964 (7 of 1964), 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 22(E), dated 1-7-1982.
TEXT OF ANNEXED CONVENTION, DATED 2-3-1981
CHAPTER I - SCOPE OF THE CONVENTION
ARTICLE 1 - Taxes covered - 1. This
Convention shall apply to taxes on income imposed on behalf of each
2. They shall be regarded as taxes on income -
all taxes imposed on total income, or on elements of income.
3. The existing taxes to which this Convention
shall apply are :
(A) With regard to the Socialist Peoples Libyan Arab Jamahiriya :
(i) real estate revenue tax ;
(ii) agricultural revenue tax ;
(iii) taxes on commercial, industrial and
professional profits, which comprise—
(a) taxes on profits realised from commercial, industrial and
professional activities,
(b) taxes on companies ;
(iv) taxes on profits realised by practising fee professions ;
(v) taxes on wages, salaries and the like ;
(vi) taxes on income realised abroad ;
(vii) general tax on income ;
(viii) al-jihad tax (deference tax) ;
(ix) income arising from depositing money in banks and savings accounts.
(B) With regard to the
(i) the income-tax including any surcharge thereon
imposed under the Income-tax Act, 1961 (43 of 1961) ;
(ii) the surtax imposed under the Companies
(Profits) Surtax Act, 1964 (7 of 1964).
4. The Convention shall also apply to any
identical or substantially similar taxes which are subsequently imposed in
addition to, or in place of, the existing taxes. At the end of each year, the
competent authorities of the Contracting States shall notify to each other any
changes which have been made in their respective taxation laws.
CHAPTER II - DEFINITIONS
ARTICLE 2 - General definitions - 1. In this
Convention, unless the context otherwise requires,—
(a) the terms “a Contracting State” and “the other Contracting State”
mean “India” or “Libya”, as the context requires ;
(b) the term “person” comprises an individual, a company and any other
body of persons ;
(c) the term “Company” means any body corporate or any entity which is
treated as a body corporate for tax purposes ;
(d) 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 by a resident of the other
Contracting State ;
(e) the term “competent authority” with respect to the Socialist
Peoples’ Libyan Arab Jamahiriya means the Ministry of Treasury, and with
respect to
2. For the purposes of this Convention, the term
“resident of a Contracting State” means any person who, under the law of that
State, is liable to taxation therein by reason of his domicile, residence,
place of management or any other criterion of a similar nature.
3. As regards the application of the Convention
by a Contracting State any term not otherwise defined shall, unless the context
otherwise requires, have the meaning which it has under the laws of that
Contracting State relating to the taxes which are the subject of the
Convention.
ARTICLE 3 - The tax home - Without prejudice to
the provisions of this Convention, the Tax Home of any income shall be deemed
to be the
ARTICLE 4 - Permanent establishment - 1. For the
purposes of this Convention, the term “Permanent establishment” means a fixed
place of business in which the business of the enterprise is wholly or partly
carried on.
2. The term “permanent establishment” shall
include especially —
(a) a place of management,
(b) a branch,
(c) an office,
(d) a factory,
(e) a workshop,
(f) a mine, quarry or other place of extraction of natural resources,
(g) a building or building site which continues for a period of more
than three months.
3. The term “permanent establishment” shall not
be deemed to include —
(a) the use of facilities solely for the purpose of storage and display
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 and display ;
(c) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of processing by any other enterprise ;
(d) the maintenance of a fixed place of business solely for the purpose
of purchasing goods or merchandise, or for collecting information, for the
enterprise ;
(e) the maintenance of a fixed place of business solely for the
purposes of advertising, for the supply of information, for scientific research
or for similar activities which have a preparatory or auxiliary character, for
the enterprise.
4. A person acting in a Contracting State on
behalf of an enterprise of the other Contracting State other than an agent of
an independent status to whom paragraph (5) applies — shall be deemed to
be a permanent establishment in the first-mentioned State if he has, and
habitually exercises in that State, an authority to conclude contracts in the
name of the enterprise, unless his activities are limited to the purchase of
goods or merchandise for the enterprise.
5. An enterprise of a
6. 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 itself
constitute for either company a permanent establishment of the other.
CHAPTER III - TAXATION OF INCOME
ARTICLE 5 - Income from immovable property - 1.
Income from immovable property may be taxed in the
2. The term “immovable property” shall be
defined in accordance with the law of the
ARTICLE 6 - Business profits - 1. The profits of
an enterprise of a
2. 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 condition 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 deduction expenses which are
incurred for the purpose of the permanent establishment whether such expenses
have been incurred in the State in which the permanent establishment is
situated or elsewhere in accordance with regulations of the State in which the
income is taxable.
4. No profit shall be attributed to a permanent
establishment by reason of the mere purchase by that permanent establishment of
goods or merchandise for the enterprise.
5. For the purpose 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.
6. Where profits include items of income which
are dealt with separately in the other Articles of this Convention, then the
provisions of those Articles shall not be affected by the provisions of this
Article.
ARTICLE 7 - Shipping and air transport - Profits
from the operation of ships or aircraft in international traffic shall be
taxable only in the
ARTICLE 8 - Associated enterprises - Where—
(a) an enterprise of a
(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.
It is to be
understood that the procedures available in the respective laws of each
ARTICLE 9 - Dividends - 1. Dividends paid
by a company which is registered in one of the Contracting States may be taxed
in that State.
2. The term “dividends” shall be defined in
accordance with the law of the
ARTICLE 10 - Interest - 1. Interest arising in a
2. The provisions of paragraph (1) shall
not apply if the recipient of the interest being a resident of a Contracting
State, has in the other Contracting State in which the interest arises, a
permanent establishment with which the debt-claim from which the interest
arises is effectively connected. In such a case, the provisions of article 6
shall apply.
3. Interest shall be deemed to arise in a
ARTICLE 11 - Royalties - 1. Royalties arising in a
2. The term “royalties” as used in this article
means payments of any kind as a consideration for the use of, or the right to
use, any copyright of literary, artistic or scientific work, any patent, trade
mark, design or model, plan, secret formula or process or for the use of, the
right to use, industrial, commercial, or scientific equipment, or for
information concerning industrial, commercial or scientific experience.
3. The term “royalties” as used in this article shall
exclude rentals and other income in respect of cinematographic films. Such
rentals and income shall, for the purpose of this Convention, be considered the
profits from business.
ARTICLE 12 - Independent personal services - 1.
Income derived by a resident of a Contracting State in respect of professional
services or other independent activities of a similar character shall be
taxable only in that State unless he has a fixed base regularly available to
him in the other Contracting State for the purpose of performing his
activities. If he has such a fixed base, the income may be taxed in the other
2. The term “professional services” means
independent activities according to the laws and regulations in force in each
ARTICLE 13 - Dependent personal services -
Salaries, wages, and similar emoluments arising in one of the Contracting
States may be taxable in the State where the services giving rise to that income
are performed but if such income is realised from work carried out on a ship or
aircraft operating in the field of international transport, it shall only be
taxable in the State where the place of effective management of the enterprise
is situated.
ARTICLE 14 - Directors’ fees - Directors’ fees and
similar payments derived by a resident of a
ARTICLE 15 - Artistes and athletes -
Notwithstanding the provisions of articles 12 and 13, income derived by public
entertainers, such as theatre, motion picture, radio or television artistes and
musicians, and by athletes from their personal activities as such may be taxed
in the Contracting State in which these activities are exercised.
ARTICLE 16 - Pensions - Pensions and other similar
income paid to a resident of a
ARTICLE 17 - Government functions/civil services - 1.
Remuneration paid by the Government of one of the Contracting States to any
individual for services rendered to that Government in the discharge of
governmental functions shall be exempt from tax in the other State if the
individual is not resident in that other State or is resident in the other
State solely for the purpose of rendering those services, so provided, however,
that such an individual has the nationality of that Contracting State.
2. The provision of this article shall not apply
to payments in respect of services rendered in connection with any trade or
business carried on by either of the Government for purpose of profits.
3. In this article, “Government” shall be deemed
to include public corporation and any other similar parastatal bodies.
ARTICLE 18 - Students - 1. Payments which a
student or business apprentice who is or was formerly a resident of a
Contracting State and who is present in the other Contracting 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 other State,
provided that such payments are made to him from sources outside that other
State.
2. The provision of this article shall also
apply to the income which the student or business apprentice may derive from an
employment in the other
ARTICLE 19 - Professors, teachers and researchers
- A professor, teacher or research worker from one of the Contracting States
who receives remuneration for teaching or carrying out research work during a
period of temporary residence not exceeding three months at a university,
college or other institute of higher education or scientific research in the
other Contracting State shall be exempt from tax in that other State, in
respect of that remuneration, provided that the period of three months may be
extended by similar periods.
CHAPTER IV - ELIMINATION OF DOUBLE TAXATION
ARTICLE 20 - Tax credits - 1. When a resident of
a Contracting State derives income which has also suffered tax in the other Contracting
State, the first-mentioned State shall allow a deduction from its tax on the
income of that person equal to the tax in the other Contracting State :
provided that the deduction shall not exceed that part of the tax, as computed
before the deduction is given which is applicable to the income taxed in the
other Contracting State.
2. Nothing in this Article contained shall
prevent the granting of such further relief as may be appropriate under the
provisions of the law of either Contracting State in respect of any amount by
which the tax in case of the States exceeds the credit allowed on its account
in the other State in accordance with the provisions of this Article.
CHAPTER V - SPECIAL PROVISIONS
ARTICLE 21 - Non-discrimination - 1. The nationals
of a
2. The term “national” means—
(a) all individuals possessing the nationality of a
(b) all legal persons, partnerships and associations deriving their
status as such from the law in force in a
3. The taxation of a permanent establishment
which 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 Contracting 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 that
first-mentioned State are or may be subjected.
ARTICLE 22 - Mutual agreement procedure - 1. Where
a resident of a Contracting State considers that the actions of one or both the
Contracting States result or will result for him in taxation not in accordance
with this Convention he may, notwithstanding the remedies provided by the
national laws of those States, present his case to the competent authority of
the Contracting State of which he is a resident.
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 an appropriate 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 purposes 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 23 - Exchange of information - 1.
The competent authorities of the Contracting States shall exchange such
information as is necessary for the carrying out of this Convention and of the
domestic laws of the Contracting States concerning taxes covered by this
Convention insofar as the taxation thereunder is in accordance with this
Convention. Information shall also be exchanged as is necessary for the
prevention of fiscal evasion of taxes which are the subject of this Convention.
Any information so exchanged shall be treated as secret and shall not be
disclosed to any persons or authorities other than those concerned with the
assessment or collection of the taxes which are the subject of the Convention.
2. In no case shall the provisions of paragraph
(1) be construed so as to impose on one of the Contracting States the
obligation —
(a) to carry out administrative measures at variance with the laws or
the administrative practice of that or of the other
(b) to supply particulars which are not obtainable under the laws or in
the normal course of the 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.
ARTICLE 24 - Diplomatic and consular officials -
Nothing in this Convention shall affect the fiscal privileges of diplomatic or
consular officials under the general rules of international law or under the
provisions of special agreements.
CHAPTER VI - FINAL PROVISIONS
ARTICLE 25 - Entry into force - The Convention
shall enter into force upon the exchange of instruments of ratification and its
provisions shall have effect from the tax year commencing after the said
ratification.
Any agreement
reached shall be implemented notwithstanding any time limits in the national
laws of the
ARTICLE 26 - Termination - This Convention remains
in force until denounced by one of the Contracting States. Either
In witness of
the agreement reached as above, the signatories have today signed this
Convention by virtue of the authority delegated to them for this purpose by
their respective Governments.
Done in
duplicate at
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Judicial analysis
n Where
assessee had already paid TDS amounting to Rs. 21,150 in foreign currency on
his foreign income against his tax liability of Rs. 14,496, as computed in India
under the Act, no demand for tax could have been made against the assessee—ITO
v. Dr. B.K. Jain [1995] 52 ITD 367 (Jp.) (SMC).