44. 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 Democratic Socialist Republic of Sri Lanka for the avoidance
of double taxation and the prevention of fiscal evasion with respect to taxes
on income and on capital has been ratified and the instruments of ratification
exchanged as required by 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 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 342(E), dated 19-4-1983.
SAARC Limited Multilateral Agreement
(For detail click here)
TEXT OF CONVENTION, DATED 27-1-1982
The Government
of the Republic of India and the Government of the Democratic Socialist
Republic of Sri Lanka 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 and on capital imposed on behalf of
each
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 as well as taxes on capital appreciation.
3. The existing taxes to which this Convention
shall apply are :
(a) In
(i) the income-tax, including the income-tax based
on the turnover of enterprises licensed by the Greater Colombo Economic
Commission ; and
(ii) the wealth-tax;
(hereinafter referred to as
“
(b) In
(i) the income-tax including any surcharge
thereon;
(ii) the surtax ; and
(iii) the wealth-tax ;
(hereinafter referred to as
“Indian tax”).
4. This Convention shall also apply to any
identical or substantially similar taxes which are imposed after the date of signature
of this Convention in addition to, or in place of, the existing taxes. The
competent authorities of the Contracting States shall notify each other of any
important changes which have been made in their respective taxation laws.
ARTICLE 3 - General definitions - 1. In
this Convention, unless the context otherwise requires:
(a) the terms “ a
(b) the term “person” includes 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 the 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 carried on by a resident of
the other Contracting State ;
(e) 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
(f) the term “national” means :
(i) an individual possessing the nationality of a
(ii) a legal person, partnership or an association
deriving its status as such from the laws in force in a
(g) the term “competent authority” means :
(i) in the case of
(ii) in the case of
2. As regards the application of this Convention
by a Contracting State any term not defined therein shall, unless the context
otherwise requires, have the meaning which it has under the laws of that State
relating to the taxes which are the subject of this Convention.
ARTICLE 4 - Fiscal domicile - 1. 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 tax therein by reason
of his domicile, residence, place of management or any other 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) of this article 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) of this article 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 Convention, the term “permanent establishment” means a
fixed place of business through 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, an oil or gas well, a quarry or any
other place of extraction of natural resources ;
(g) an agricultural or farming estate or plantation ;
1(h) a
building site or construction or assembly project which exists for more than
183 days ;
1(i) the
furnishing of services, including consultancy services, by an enterprise
through employees or other personnel, where activities of that nature continue
within the country for a period or periods aggregating more than 183 days
within any twelve-month period.
3. 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 ; and
(e) the maintenance of a fixed place of business solely for the purpose
of advertising for the supply of information or for scientific research, being
activities solely of a preparatory or auxiliary character in the trade or
business of 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 (6) of this article 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. Notwithstanding the preceding provisions of
this article, an insurance enterprise of a Contracting State shall, except in
regard to reinsurance, be deemed to have a permanent establishment in the other
Contracting State if it collects premiums in the territory of that other State
or insures risks situated therein through a person other than an agent of
independent status to whom paragraph (6) of this article applies.
6. An enterprise of a
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 from immovable property may be taxed in the
2. The term “immovable property” shall have the
meaning which it has under the law of the
3. The provisions of paragraph (1) of
this article 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)
of this article shall also apply to the income from immovable property of an
enterprise and to income from immovable property used for the performance of
professional services.
ARTICLE 7 - Business profits - 1. The
profits of an enterprise of a
(a) that permanent establishment,
(b) sales in that other State of goods or merchandise of the same or
similar kind as those sold through that permanent establishment,
(c) other business activities carried on in that other State of the
same or similar kind as those effected through that permanent establishment.
The provisions
of sub-paragraphs (b) and (c) above shall not apply if the
enterprise proves that such sales or activities are not attributable to the
permanent establishment.
2. Subject to the provisions of paragraph (3)
of this article, 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 deduction 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.
However, no such deduction shall be allowed in respect of amounts, if any, paid
(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 royalties, fees or other similar payments, in return for the use of
patents or other rights, or by way of commission, for specific services
performed or for management, or, except in the case of a banking enterprise, by
way of interest on money lent to the permanent establishment. Likewise, no
account shall be taken in the determination of the profits of a permanent
establishment, for amounts 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 royalties, fees or other
similar payments in return for the use of patents or other sights, or by way of
commission for specific services performed or for management, or except in the
case of a banking enterprise by way of interest on money lent to the head
office of the enterprise or any of its other offices.
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) of this Article
shall preclude that Contracting State from determining the profits to be taxed
by such an apportionment as may be customary ; the method of apportionment
shall, however, be such that the result will 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
provisions of those articles shall not be affected by the provisions of this
article.
ARTICLE 8 - Shipping and air transport - 1.
Profits derived by an enterprise of a
12. Notwithstanding the
provisions of paragraph (1), profits derived from the operation of ships
in international traffic may be taxed in the
Provided that for the purpose of the calculation of
the tax, such profits shall be deemed to be an amount not exceeding the rates
presently provided in the taxation laws of the respective States for the
computation of such profits.
3. The provisions of paragraphs (1) and (2)
of this article shall likewise apply in respect of profits from the participation
in a pool, a joint business or an international operating agency of any kind by
enterprises engaged in the operation of ships or aircraft in international
traffic.
4. For the purpose of paragraph (1),
interest on funds connected with the operation of ships or aircraft in
international traffic shall be regarded as income from the operation of such
aircraft, and the provisions of article 11 shall not apply in relation to such
interest.
5. 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 State of which the operator of the ship
is a resident.
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 a
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 as 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 the
independent enterprises, then that other State shall make an appropriate
adjustment to the amount of the tax charged therein on those profits. 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
3. The term “dividends” as used in this article means
income from shares, 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 taxation law of the State of which the company making the distribution
is a resident.
4. The provisions of paragraphs (1) and (2)
of this article 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 and the holding in respect of which
the dividends are paid is effectively connected with such permanent establishment.
In such case the provisions of article 7 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 situated in that other
State, nor subject the company’s undistributed profits to a tax on
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 paragraph (2)
of this article interest arising in a
(a) the payer of the interest is the Government of that
(b) the interest is paid to the Government of the other
4. The term “interest” as used in this article
means income from Government securities, bonds or debentures, whether or not
secured by mortgage and whether or not carrying a right to participate in
profits, and debt-claims of every kind as well as all other income assimilated
to income from money lent by the taxation law of the State in which the income
arises.
5. The provisions of paragraphs (1) to (3)
of this article 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 and the debt-claim in respect of which the interest is paid is
effectively connected with such permanent establishment. In such case, the
provisions of article 7 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 a 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 any copyright of literary, artistic or scientific work including
cinematograph films, or tapes for television or 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 provisions of paragraphs (1) and (2)
of this article 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 and the right or property in respect of which the royalties are paid is
effectively connected with such permanent establishment. In such a case the
provisions of article 7 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 a case, the excess part of the payment shall
remain taxable according to the laws of each
ARTICLE 13 - Capital gains - 1. Gains
derived by a resident of a
2. Gains from the alienation of immovable
property forming part of the business property of a permanent establishment
which an enterprise of a Contracting State has in the other Contracting State
(including such gains from the alienation of such a permanent establishment
alone or with the whole enterprise) 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
4. Gains from the alienation of stocks/shares of
a company may be taxed in the
5. Gains from the alienation of any property
other than that referred to in paragraphs (1) to (4) of this
Article, shall be taxable only in the
6. The term “alienation” means the sale,
exchange, transfer, or relinquishment of the property or the extinguishment of
any rights therein or the compulsory acquisition hereof under any law in force
in the respective Contracting States.
ARTICLE 14 - 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 unless his stay in the other Contracting State is for a period or
periods exceeding in the aggregate 120 days within any 12 month period, when
such income may also be taxed in the other Contracting State.
2. The term “professional services” includes
independent scientific, literary, artistic, educational or teaching activities,
as well as the independent activities of physicians, lawyers, engineers,
architects, dentists and accountants.
ARTICLE 15 - Dependent personal services - 1.
Subject to the provisions of articles 16, 18 and 19, salaries, wages and other
similar remuneration derived by a resident of a
2. Notwithstanding the provisions of paragraph (1),
remuneration derived by a resident of a
(a) the recipient is present in other State for a period or periods not
exceeding in the aggregate 183 days within any 12-month period ; and
(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 in respect of an employment exercised aboard a ship
or aircraft in international traffic, may be taxed only in the
ARTICLE 16 - Directors’ fees - Directors’ fees
and other similar payments derived by a resident of a
ARTICLE 17 - Artistes and athletes - 1.
Notwithstanding the provisions of articles 14 and 15 income derived by public
entertainers (such as theatre, motion picture, radio or television artistes and
musicians) or athletes, from their personal activities as such may be taxed in
the
Provided that such income shall not be taxed in the
2. Where income in respect of personal
activities exercised by an entertainer or an athlete in his capacity as such
accrues not to the entertainer or athlete 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 athlete are
exercised.
3. For the purposes of this article, the term
“Government” includes a State Government, a political sub-division or a local
authority of either
ARTICLE 18 - Government service - 1. (a)
Remuneration other than a pension, paid by the Government of a
(b)
However, such remuneration shall be taxable only in the other Contracting State
if the services are rendered in that other State and the individual is 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. Any pension paid by the Government of one of
the Contracting States to any individual may be taxed in that
3. The provisions of articles 15, 16 and 19
shall apply to remuneration and pensions in respect of services rendered in
connection with a business carried on by a
4. For the purposes of this article, the term
“Government” shall include any State Government or local authority of either
ARTICLE 19 - Non-Government pensions and annuities
- 1. Any pension (other than a pension referred to in article 18) or
annuity derived by a resident of a
2. The term “pension” means a periodic payment
made in consideration of services rendered in the past or by way of
compensation for injuries received in the course of performance of services.
3. The term “annuity” means 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.
ARTICLE 20 - Professors and teachers - A
professor or teacher who makes a temporary visit to a Contracting State for a
period not exceeding two years for the purpose of teaching or conducting
research at a university, college, school or other educational institution, and
who is, or immediately before such visit was a resident of the other
Contracting State shall be exempt from tax in the first-mentioned Contracting
State in respect of remuneration for such teaching or research.
ARTICLE 21 - Students and apprentices - 1.
Payments which a student or business apprentice who is or was immediately
before visiting a Contracting State, a resident of the other 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.
2. In respect to grants, scholarships and
remuneration from employment not covered by paragraph (1) of this
article a student or business apprentice described in paragraph (1) of
this article shall, in addition, be entitled during such education or training
to the same exemptions, reliefs or reductions in respect of taxes available to
residents of the State which he is visiting.
Article 22 - Other
income - Items of income of a resident of a Contracting State which are not
expressly mentioned in the foregoing article of this agreement in respect of
which he is subject to tax in that State shall be taxable only in that State.
Article 23 - Capital
- 1. Capital represented by immovable property referred to in paragraph (2)
of article 6 may be taxed in the
2. Capital represented by movable property
forming part of the business property of a permanent establishment of an
enterprise may be taxed in the
3. Notwithstanding the provisions of paragraph (2)
of this article, ships and aircraft operated in international traffic and
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. 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 when express provision to the contrary is
made in this Convention. When income or capital is subject to tax in both
Contracting States, relief from double taxation shall be given in accordance
with the following paragraphs of this article.
2. Subject to the provisions of the law of India
regarding the allowance as a credit against Indian tax of tax payable in a
territory outside India (which shall not affect the general principle hereof)
Sri Lanka tax payable under the law of Sri Lanka and in accordance with this
Convention whether directly or by deduction on profits, income or chargeable
gains from sources within Sri Lanka (excluding in the case of a dividend, tax
payable in respect of the profits out of which the dividend is paid) or capital
in Sri Lanka shall be allowed as a credit against any Indian tax computed by
reference to the same items of income or capital by reference to which the Sri
Lanka tax is computed :
Provided that such credit shall not exceed Indian tax
(as computed before allowing any such credit), which is appropriate to the
income derived from sources within Sri Lanka or to capital in Sri Lanka, so
however, that where such resident is a company by which surtax is payable in
India, the credit aforesaid shall be allowed in the first instance against income-tax
payable by the company in India, and as to the balance if any against surtax
payable by it in India.
3. For the purposes of paragraph (2) of
this article, the term “Sri Lanka tax payable” shall be deemed to include any
amount which would have been payable as Sri Lanka tax for any year but for an
exemption or reduction of tax granted for that year or any part thereof under :
(a) any of the following provisions, that is to say sections 11, 16,
17, 18, 19, 20, 21, 22 and 85 of the Sri Lanka Inland Revenue Act No. 28 of
1979 so far as they were in force on, and have not been modified since, the
date of the signature of this Convention, or have been modified only in minor
respects so as not to affect their general character; or
(b) any agreement entered into under section 17 of the Greater Colombo
Economic Commission Law No. 4 of 1978; or
(c) any other provisions which may subsequently be made granting an
exemption or reduction of tax which is agreed by the competent authorities to
be of a substantially similar character, if it has not been modified thereafter
or has been modified only in minor respects so as not to affect its general
character.
4. Subject to the provisions of the law of Sri
Lanka regarding the allowance as a credit against Sri Lanka tax of tax payable
in a territory outside Sri Lanka (which shall not affect the general principle
hereof) Indian tax payable under the law of India and in accordance with the
Convention, whether directly or by deduction, on profits, income or chargeable
gains from sources within India (excluding in the case of a dividend, tax
payable in respect of the profits out of which the dividend is paid) or capital
in India shall be allowed as a credit against any Sri Lanka tax computed by
reference to the same items of income or capital by reference to which the Sri
Lanka tax is computed:
Provided that such credit shall not exceed
5. For the purpose of paragraph (4) of
this article, the term “Indian tax payable” shall be deemed to include any
amount which would have been payable as Indian tax for any year but for an
exemption or reduction of tax granted for that year or any part thereof under:
(a) any of the following provisions, that is to say, sections 10(4),
10(4A), 10(15)(iv), 32A, 33A, 35C, 54E, 80CC, 80HH, 80J,
80K of the Income-tax Act, 1961; or
(b) any other provisions which may subsequently be made granting an
exemption or reduction of tax which is agreed by the competent authorities to
be of a substantially similar character if it has not been modified thereafter
or has been modified only in minor respects so as not to affect its general
character.
Article 25 - Non-discrimination
- 1. Nationals of a
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 or paragraph (6) 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
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.
5. The provisions of this article shall,
notwithstanding the provisions of article 2, apply to taxes of every kind and
description.
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. The competent authorities, through
consultations, shall develop appropriate bilateral procedures, conditions,
methods and techniques for the implementation of the mutual agreement procedure
provided for in this article. In addition, a competent authority may devise
appropriate unilateral procedures, conditions, methods and techniques to
facilitate the above-mentioned bilateral actions and the implementation of the
mutual agreement procedure.
Article 27 - 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 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
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 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 28 - Diplomatic agents and consular officials - Nothing in this
Convention shall affect the fiscal privileges of diplomatic agents or consular
officials under the general rules of international law or under the provisions
of special agreements.
Article 29 - Entry into force - 1. This convention shall be ratified and
the instruments of ratification shall be exchanged at
2. The Convention shall enter into force upon the exchange of instruments
of ratification and its provisions shall have effect—
(a) in
(i) in respect of income assessable for any year
of assessment commencing on or after 1st April, 1980;
(ii) in respect of capital assessable for any year
of assessment commencing on or after 1st April, 1980.
(b) in
(i) in respect of income assessable for any year
of assessment commencing on or after 1st April, 1981;
(ii) in respect of capital assessable for any year
of assessment commencing on or after 1st April, 1980.
3. The agreement between the Government of Ceylon and the Government of
India or relief from or the avoidance of double taxation of income, signed on
10th September, 1956, shall terminate and cease to have effect as respects
taxes on income to which the present Convention applies in accordance with the
provisions of paragraph (2) of this Article.
Article 30 - Termination - This Convention shall remain in force
indefinitely but either Contracting State may, on or before June 30 in any
calendar year beginning after the expiration of a period of five years from the
date of its entry into force, give to the other Contracting State, through
diplomatic channels, written notice of termination.
In such event, the Convention shall cease to have effect—
(a) in
(i) in respect of income assessable for any year
of assessment commencing on or after 1st April in the calendar year next
following that in which such notice is given;
(ii) in respect of capital assessable for any year
of assessment commencing on or after 1st April in the calendar year next
following that in which such notice is given.
(b) in
(i) in respect of income assessable for the
assessment year commencing on the 1st day of April in the second calendar year
next following the calendar year in which the notice is given, and subsequent
years;
(ii) in respect of capital assessable for any year
of assessment commencing on or after 1st April in the calendar year next
following that in which such notice is given.
In witness whereof the undersigned, duly authorised thereto,
have signed this Convention.
Done in duplicate at
|
** |
** |
** |
Judicial Analysis
n Amount
of tax attributable to income-tax in a country means the tax actually payable
in that country—O.A.P. Andiappan v. CIT [1971] 82 ITR 876 (SC).
n
Agreement with
n Mere
failure to produce ‘finality certificate’ is not enough to deny assessee relief
from double taxation—A.S. Sivan Pillai v. CIT [1960] 40 ITR 450 (Mad.).
n Revenue
should allow an abatement equal to lower of amounts of tax attributable to such
excess in either country—CIT v. V.S. Sivalingam Chettiar [1972] 86 ITR 772 (Mad.)/CIT
v. S.K. Srinivasan [1970] 75 ITR 93 (Mad.).
n Under
article III of agreement between India and Ceylon abatement is equal to lower
of two taxes on the same income—M. Abubacker v. CIT [1968] 69 ITR
809 (Ker.).
n Ceylon
income-tax for the purpose of double income-tax relief would be tax as computed
under section 20(7) of the Ceylon Income-tax Ordinance less the deduction under
section 45(4)(b)(ii) of that Ordinance—CIT v. Madras
Palyakai Co. (P.) Ltd. [1969] 74 ITR 642 (Mad.).