55. Agreement for avoidance of
double taxation and prevention of fiscal evasion with United Kingdom of Great
Britain and Northern Ireland
Whereas the
annexed Convention between the Government of the Republic of India and the
Government of the United Kingdom of Great Britain and Northern Ireland for the
avoidance of double
taxation and the prevention of fiscal evasion with respect to taxes on income
and capital gains has entered into force on 26th October, 1993 on the
notification by both the Contracting States to each other of the completion of
the procedures required by their respective laws, as required by Article 30 of
the said Convention;
Now,
therefore, in exercise of the powers conferred by section 90 of the Income-tax
Act, 1961 (43 of 1961), the Central Government hereby directs that all the
provisions of the said Convention shall be given effect to in the Union of
Notification : No. GSR 91(E), dated 11-2-1994.
Annexure
Convention between the Government of the republic
of India and the Government of the United Kingdom of Great Britain and Northern
Ireland for the avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on income and capital gains
The Government
of the Republic of India and the Government of the United Kingdom of Great
Britain and Northern Ireland; Desiring to conclude a new Convention for the
avoidance of double taxation and the prevention of fiscal evasion with respect
to taxes on income and capital gains;
Have agreed as
follows :
ARTICLE 1 - Scope of the Convention - 1. This
Convention shall apply to persons who are residents of one or both of the
Contracting States.
2. This Convention extends to the territory of each
Contracting State, including its territorial sea, and to those areas of the
exclusive economic zone or the continental shelf adjacent to the outer limit of
the territorial sea of each State over which it has, in accordance with
international law, sovereign rights for the purpose of exploration and
exploitation of the natural resources of such areas, and references in this
Convention to the Contracting State or to either of them shall be construed
accordingly.
ARTICLE 2 - Taxes covered - 1. The taxes which
are the subject of this Convention are :
(a) in the
(i) the income-tax;
(ii) the corporation tax;
(iii) the capital gains tax; and
(iv) the petroleum revenue tax;
(hereinafter referred to as
“
(b) in
the income-tax including
any surcharge thereon;
(hereinafter referred to as
“Indian tax”).
2. This Convention shall also apply to any
identical or substantially similar taxes which are imposed by either
ARTICLE 3 - General definitions - 1. In this
Convention, unless the context otherwise requires :
(a) the term “
(b) the term “
(c) the term “tax” means United Kingdom tax or Indian 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;
(d) the term “fiscal year” in relation to Indian tax means “previous
year” as defined in the Income-tax Act, 1961 (43 of 1961) and in relation to
United Kingdom tax means a year beginning with 6th April in one year and ending
with 5th April in the following year;
(e) the terms “a Contracting State” and “the other Contracting State”
mean India or the United Kingdom, as the context requires;
(f) the term “person” includes an individual, a
company and any other entity which is treated as a taxable unit under the
taxation laws in force in the respective Contracting States, but, subject to
paragraph 2 of this Article, does not include a partnership;
(g) the term “company” means any body corporate or any entity which is
treated as a company or body corporate for tax purposes;
(h) 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;
(i) the term “competent authority” means, in the
case of the
(j) the term “international traffic” means any
transport by a ship or aircraft operated by an enterprise of a
(k) the term “Government” means the Government of a
2. A partnership which is treated as a taxable
unit under the Income-tax Act, 1961 (43 of 1961) of
3. As regards the application of this 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 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 taxation 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 of this Article an individual is a resident of both
(a) he shall be deemed to be a resident of the
(b) if the
(c) if he has an habitual abode in both Contracting States or in either
of them, he shall be deemed to be a resident of the
(d) if he is a national of both Contracting 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
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” shall
include especially :
(a) a place of management;
(b) a branch;
(c) an office;
(d) a factory;
(e) a workshop;
(f) premises used as a sales outlet or for
receiving or soliciting orders;
(g) a warehouse in relation to a person providing store facilities for
others;
(h) a mine, an oil or gas well, quarry on other place of extraction of natural
resources;
(i) an installation or structure used for the
exploration or exploitation of natural resources;
(j) a building site or construction, installation
or assembly project or supervisory activities in connection therewith, where
such site, project or supervisory activity continues for a period of more than
six months, or where such project or supervisory activity, being incidental to
the sale or machinery or equipment, continues for a period not exceeding six
months and the charges payable for the project or supervisory activity exceed
10 per cent of the sale price of the machinery and equipment;
(k) the furnishing of services including managerial services, other
than those taxable under Article 13 (Royalties and fees for technical
services), within a Contracting State by an enterprise through employees or
other personnel, but only if:
(i) activities of that nature continue within that
State for a period or periods aggregating more than 90 days within any
twelve-month period; or
(ii) services are performed within that State for
an enterprise within the meaning of paragraph 1 of Article 10 (Associated
enterprises) and continue for a period or periods aggregating more than 30 days
within any twelve-month period:
Provided that for
the purposes of this paragraph an enterprise shall be deemed to have a
permanent establishment in a Contracting State and to carry on business through
that permanent establishment if it provides services or facilities in
connection with, or supplies plant and machinery on hire used or to be used in,
the prospecting for, or extraction or production of, mineral oils in that
State.
3. The term “permanent establishment” shall not
be deemed to include:
(a) the use of facilities solely for the purpose of storage or 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 or display;
(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 for collecting information, for the
enterprise;
(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 of
business of the enterprise. However, this provision shall not be applicable
where the enterprise maintains any other fixed place of business in the other
Contracting State for any purpose or purposes other than the purposes specified
in this paragraph;
(f) the maintenance of a fixed place of businesses
solely for any combination of activities mentioned in sub-paragraphs (a)
to (e) of the paragraph, provided that the overall activity of the fixed
place of business resulting from this combination is of a preparatory or
auxiliary character.
4. A person acting in a Contracting State for or
on behalf of an enterprise of the other contracting State - other than an agent
of an independent status to whom paragraph (5) of this Article applies, shall
be deemed to be a permanent establishment of that enterprise in the first
mentioned State if:
(a) he has, and habitually exercises in that State, an authority to
negotiate and enter into contracts for or on behalf of the enterprise, unless
his activities are limited to the purchase of goods or merchandise for the
enterprise; or
(b) he habitually maintains in the first-mentioned Contracting State a
stock of goods or merchandise from which he regularly delivers goods or
merchandise for or on behalf of the enterprise; or
(c) he habitually secures orders in the first-mentioned State, wholly
or almost wholly for the enterprise itself or for the enterprise and the
enterprises controlling, controlled by, or subject to the same common control,
as that enterprise.
5. An enterprise of a Contracting State shall
not be deemed to have a permanent establishment in the other Contracting State
merely because it carries on business in that other State through a broker,
general commission agent or any other agent of an independent status, where
such persons are acting in the ordinary course of their business. However, if
the activities of such an agent are carried out wholly or almost wholly for the
enterprise (or for the enterprise and other enterprises which are controlled by
it or have a controlling interest in it or are subject to same common control)
he shall not be considered to be an agent of an independent status for the
purposes of this paragraph.
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
of itself constitute either company a permanent establishment of the other.
7. For the purposes of this Article the term
“control”, in relation to a company, means the ability to exercise control over
the company’s affairs by means of the direct or indirect holding of the greater
part of the issued share capital or voting power in the company.
ARTICLE 6 - Income from immovable property - 1.
Income from immovable property may be taxed in the Contracting State in which
such property is situated.
2.(a) The term “immovable property” shall, subject to
the provisions of sub-paragraph (b) of this paragraph, be defined in
accordance with the law of the Contracting State in which the property in
question is situated.
(b) The term “immovable property” shall in any case include property
accessory in immovable property, livestock and equipment used in agriculture
and forestry, rights, to which the provisions of general law respecting landed
property apply, usufruct of immovable property and rights to variable or fixed
payment as consideration for the working of, or the right to work, mineral
deposits, sources and other natural resources. Ships and aircraft shall not be
regarded as immovable property.
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 a enterprise
and to income from immovable property used for the performance of independent
personal services.
ARTICLE 7 - Business profits - 1. The profits of
an enterprise of a Contracting State shall be taxable only in that State unless
the enterprise carries on business in the other Contracting State through a
permanent, establishment situated therein. If the enterprise carries on
business as aforesaid, the profits of the enter price may be taxed in the other
State but only so much of them as is directly or indirectly attributable to
that permanent establishment.
2. Where an enterprise of a Contracting State
carries on business in the other Contracting State through a permanent
establishment situated therein, the profits which that permanent establishment
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 shall be treated for the purposes of paragraph 1 of this Article
as being the profits directly attributable to that permanent establishment.
3. Where a permanent establishment takes an
active part in negotiating, concluding or fulfilling contracts entered into by
the enterprise, then, notwithstanding that other parts of the enterprise have
also participated in those transactions, that proportion of profits of the
enterprise arising out of those contracts which the contribution of the
permanent establishment to those transactions bears to that of the enterprise
as a whole shall be treated for the purpose of paragraph 1 of this Article as
being the profits indirectly attributable to that permanent establishment.
4. Insofar as it has been customary in a
Contracting State according to its law 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 paragraphs
1and 2 of this Article shall preclude that Contracting State from determining
the profits to be taxed by such an apportionment as may be necessary; the
method of apportionment adopted shall, however, be such that the result shall
be in accordance with the principles laid down in this Article.
5. Subject to paragraphs 6 and 7 of this
Article, 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, which are allowed under
the provisions of and subject to the limitations of the domestic law of the
Contracting State in which the permanent establishment is situated.
6. Where the law of the Contracting State in
which the permanent establishment is situated imposes a restriction on the
amount of the executive and general administrative expenses which may be
allowed, and the restriction it relaxed or overridden by any Convention between
that Contracting State and a third State which is a member of the Organisation
for Economic Cooperation and Development or a State in a comparable stage of
development, and that Convention enters into force, after the date of entry
into force of this Convention, the competent authority of that Contracting
State shall notify the competent authority of the other Contracting State of
the terms of the relevant paragraph in the Convention with that third state
immediately after the entry into force of that Convention and, if the competent
authority of the other Contracting State so requests, the provisions of this
Convention shall be amended by protocol to reflect such terms.
7. Paragraph 5 of this Article shall not apply
to 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, to 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 monies lent to the
permanent establishment; nor shall account be taken in the determination of the
profits of a permanent establishment of amounts charged (otherwise than towards
reimbursement of actual expenses) by the permanent establishment of 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
any way of commission, for specific services performed or for management, or,
except in the case of a banking enterprise, by way of interest on monies lent
to be head office of the enterprise or any of its other offices.
8. No profits shall be attributed to permanent
establishment by reason of the mere purchase by that permanent establishment of
goods or merchandise for the enterprise.
9. 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 - Air transport - 1. Profits derived
from the operation of aircraft in international traffic by an enterprise of one
of the Contracting States shall not be taxed in the other Contracting State.
2. The provisions of paragraph 1 of this Article
shall likewise apply in respect of participation in pools of any kind by
enterprises engaged in air transport.
3. For the purposes of this Article the term
“operation of aircraft” shall include transportation by air of persons
livestock, goods or mail, carried on by the owners or lessees or charterers of
aircraft, including the sale of tickets for such transportation on behalf of
other enterprises, the incidental lease of aircraft on a character basis and
any other activity directly connected with such transportation.
4. Gains derived by an enterprise of a
Contracting State from the alienation of aircraft owned and operated by the
enterprise, the income from which is taxable only in that State, shall be taxed
only in that State.
ARTICLE 9 - Shipping - 1. Income of an enterprise
of a Contracting State from the operation of ships in international traffic
shall be taxable only in that State.
2. The provisions of paragraph 1 of this Article
shall not apply to income from journeys between places which are situated in a
Contracting State.
3. For the purposes of this Article, income from
the operation of ships includes income derived from the rental on a bareboat
basis of ships if such rental income is incidental to the income described in
paragraph 1 of this Article.
4. Notwithstanding the provisions of Article 7
(business profits) of this Convention, the provisions of paragraphs 1 and 2 of
this Article shall likewise apply to income of an enterprise of a Contracting
State from the use, maintenance or rental of containers (including trailers and
related equipment for the transport of containers) used for the transport of
goods or merchandise.
5. The provisions of this Article shall apply
also to income derived from participation in a pool, a joint business or an
international operating agency.
6. Gains derived by an enterprise of a
contracting State from the alienation of ships or containers owned and operated
by the enterprise shall be taxed only in that State if either the income from the
operation of the alienated ships or containers was taxed only in that State, or
the ships or containers are situated outside the other Contracting State at the
time of the alienation.
ARTICLE 10 - Associated enterprises - 1. Where (a)
an enterprise of a Contracting State participates directly or indirectly in the
management, control or capital of an enterprise of the other Contracting State,
or
(b) the
same persons participate directly or indirectly in the management, control or
capital of an enterprise of a Contracting State and an enterprise of the other
Contracting State,
and in either
case conditions are made or imposed between the two enterprises in their
commercial or financial relations which differs 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. 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 11 - Dividends - 1. (a) A dividend paid by
a company which is a resident of the United Kingdom to a resident of India may
be taxed in India.
(b)
Where under paragraph 2 of this Article, a resident of India is entitled to a
tax credit in respect of that dividend, tax may also, be charged in the United
Kingdom and according to the laws of the Untied Kingdom on the aggregate of the
amount or value of the dividend and the amount of the tax credit, at a rate not
exceeding 15 per cent.
(c)
Except as provided in sub-paragraph (b) of this paragraph, a divided
derived from a company which is a resident of the United Kingdom by a resident
of India, who is the beneficial owner of that dividend, shall be exempt from
any tax in the United Kingdom which is chargeable on dividends.
2. An individual who is a resident of India and
who receives a dividend from a company which is a resident of the United
Kingdom shall, provided he is the beneficial owner of the dividend, be entitled
to the tax credit in respect of that dividend which an individual resident in
the United Kingdom would have been entitled to had he received that dividend,
and to the payment of any excess of that tax credit over his liability to
United Kingdom tax.
3. A dividend paid by a company which is a
resident of India to a resident of the United Kingdom may be taxed in the
Untied Kingdom. The dividend may also be taxed in India but the Indian tax so
charged shall not exceed 15 per cent of the gross amount of the dividend.
4. The preceding paragraphs of this Article
shall not affect the taxation of the company in respect of the profits out of
which the dividend is paid.
5. The provision of paragraphs 1 and 2 or, as
the case may be, paragraph 3 of the Article shall not apply if the beneficial
owner of the dividend, being a resident of a Contracting State, has, in the
other Contracting State of which the company paying the dividend is a resident,
a permanent establishment or fixed base with which the holding by virtue of
which the dividend is paid is effectively connected. In such a case the
provisions of Article 7 (Business profits) or Article 15 (Independent personal
services) of this Convention, as the case may be, shall apply.
6. 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 consists wholly or partly of profits or income arising in
that other State.
7. As used in this Article the term “dividend”
means income from shares or other rights, not being debit-claims, participating
in profits, as well as income from other corporate rights treated in the same
manner as income from shares by the taxation law of the State of which the
company making the distribution is a resident and any other item treated as a
dividend or distribution under that law.
ARTICLE 12 - Interest - 1. Interest arising in a
Contracting State and paid to a resident of the other Contracting State may be
taxed in that other State.
2. However, such interest may also be taxed in
the Contracting State in which it arises and accordingly to the law of that
State, provided that where the resident of the other Contracting State is the
beneficial owner of the interest the tax so charged shall not exceed 15 per
cent of the gross amount of the interest.
3. Notwithstanding the provisions of paragraph 2
of this Article:
(a) where the interest is paid to a bank carrying on a bona fide
banking business which is a resident of the other Contracting State and is the
beneficial owner of the interest, the tax charged in the Contracting State in
which the interest arises shall not exceed 10 percent of the gross amount of
the interest;
(b) where the interest is paid to the Government of one of the
Contracting States or a political sub-division or local authority of that State
or the Reserve Bank of India, it shall not be subject to tax by the State in
which it arises.
4. Notwithstanding the provisions of Article 7
of this Convention and of paragraphs 2 and 3 of this Article :
(a) interest arising in India which is paid to any beneficially owned
by a resident of the United Kingdom shall be exempt from tax in India if it is
paid in respect of a loan made, guaranteed or insured, or any other debt-claim
or credit guaranteed or insured by the United Kingdom Export Credits Guarantee
Department; and
(b) interest arising in the United Kingdom which is paid to and
beneficially owned by a resident of India shall be exempt from tax in the
United Kingdom if it is paid in respect of a loan made, guaranteed or insured,
or any other debt-claim or credit guaranteed or insured by the Export Credits
and Guarantee Corporation of India and/or Export-Import Bank of India.
5. 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 but, subject to the provisions of paragraph 9 of this Article,
shall not include any item which is treated as a distribution under the
provisions of Article 11 (Dividends) of this Convention.
6. The provisions of paragraphs 1, 2 and 3(a)
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, 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 (Business profits) or
Article 15 (Independent personal services) of this Convention, as the case may
be shall apply.
7. Interest shall be deemed to arise in a
Contracting State when the payer is that State itself, a political
sub-division, a local authority or a resident of that State. Where, however,
the person paying the interest, whether he is a resident of a Contracting State
or not, has in a Contracting State a permanent establishment or a fixed base in
connection with which the indebtedness on which the interest is paid was
incurred, and such interest is borne by that permanent establishment or fixed
base, then such interest shall be deemed to arise in the Contracting State in
which the permanent establishment or fixed base is situated.
8. Where, owing to a special relationship between
the payer and the beneficial owner or between both of them and some other
person, the amount of the interest paid exceeds for whatever reason 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 that case,
the excess part of the payments shall remain taxable according to the law of
each Contracting State, due regard being had to the other provisions of this
Convention.
9. Any provision in the laws of either
Contracting State relating only to interest paid a non-resident company shall
not operate so as to require such interest paid to a company which is a
resident of the other Contracting State to be treated as a distribution or
dividend by the company paying such interest or to be left out of account as a
deduction in computing the taxable profits of the company paying the interest.
The preceding sentence shall not apply to interest paid to a company which is a
resident of one of the Contracting State in which more than 50 per cent of the
voting power is controlled, directly or indirectly, by a person or persons who
are residents of the other Contracting State.
10. The relief from tax provided for in paragraph
2 of this Article shall not apply if the beneficial owner of the interest :
(a) is exempt from tax on such income in the Contracting State of which
he is a resident ; and
(b) sells or makes a contract to sell the holding from which such
interest is derived within three months of the date such beneficial owner
acquired such holding.
11. The provisions of this Article shall not
apply if it was the main purpose or one of the main purposes of any person
concerned with the creation or assignment of the debt-claim in respect of which
the interest is paid to take advantage of this Article by means of that
creation or assignment.
ARTICLE 13 -Royalties and fees for technical services
- 1. Royalties and fees for technical services arising in a Contracting
State and paid to a resident of the other Contracting State may be taxed in
that other State.
2. However, such royalties and fees for
technical services may also be taxed in the Contracting State in which they
arise and according to the law of that State; but if the beneficial owner of
the royalties or fees for technical services is a resident of the other
Contracting State, the tax so charged shall not exceed :
(a) in the case of royalties within paragraph 3(a) of this
Articles, and fees for technical services within paragraphs 4(a) and (c)
of this Article,—
(i) during the first five years for which this
Convention has effect ;
(aa) 15 per cent of the gross amount of such royalties or fees for
technical services when the payer of the royalties or fees for technical
services is the Government of the first-mentioned Contracting State or a
political sub-division of that State, and
(bb) 20 per cent of the gross amount of such royalties or fees for
technical services in all other cases; and
(ii) during subsequent years, 15 per cent of the
gross amount of such royalties or fees for technical services; and
(b) in the case of royalties within paragraph 3(b) of this
Article and fees for technical services defined in paragraph 4(b) of
this Article, 10 per cent of the gross amount of such royalties and fees for
technical services.
3. For the purposes of this Article, the term
“royalties” means :
(a) payments of any kind received as a consideration for the use of, or
the right to use, any copyright of a literary, artistic or scientific work,
including cinematography films or work on films, tape or other means of
reproduction for use in connection with radio or television broadcasting, any
patent, trade mark, design or model, plan, secret formula or process, or for
information concerning industrial, commercial or scientific experience; and
(b) payments of any kind received as consideration for the use of, or
the right to use, any industrial, commercial or scientific equipment, other
than income derived by an enterprise of a Contracting State from the operation
of ships or aircraft in international traffic.
4. For the purposes of paragraph 2 of this
Article, and subject to paragraph 5, of this Article, the term “fees for
technical services” means payments of any kind of any person in consideration
for the rendering of any technical or consultancy services (including the
provision of services of a technical or other personnel) which :
(a) are ancillary and subsidiary to the application or enjoyment of the
right, property or information for which a payment described in paragraph 3(a)
of this article is received ; or
(b) are ancillary and subsidiary to the enjoyment of the property for
which a payment described in paragraph 3(b) of this Article is received
; or
(c) make available technical knowledge, experience, skill know-how or
processes, or consist of the development and transfer of a technical plan or
technical design.
5. The definition of fees for technical services
in paragraph 4 of this Article shall not include amounts paid :
(a) for services that are ancillary and subsidiary, as well as
inextricably and essentially linked, to the sale of property, other than
property described in paragraph 3(a) of this Article;
(b) for 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;
(c) for teaching in or by educational institutions ;
(d) for services for the private use of the individual or individuals
making the payment ; or
(e) to an employee of the person making the payments or to any
individual or partnership for professional services as defined in Article 15
(Independent personal services) of this Convention.
6. The provisions of paragraphs 1 and 2 of this
Article shall not apply if the beneficial owner of the royalties or fees for
technical services, being a resident of a Contracting State, carries on
business in the other Contracting State in which the royalties or fees for
technical services arise through a permanent establishment situated therein, or
performs in that other State independent personal services from a fixed base
situated therein, and the right, property or contract in respect of which the
royalties or fees for technical services are paid is effectively connected with
such permanent establishment or fixed base. In such case, the provisions of
Article 7 (Business profits) or Article 15 (Independent personal services) of
this Convention, as the case may be, shall apply.
7. Royalties and fees for technical services
shall be deemed to arise in a Contracting State where the payer is that State
itself, a political sub-division, a local authority or a resident of that
State. Where, however, the person paying the royalties or fees for technical
services, whether he is a resident of a Contracting State or not, has in a
Contracting State a permanent establishment or a fixed base in connection with
which the obligation to make payments was incurred and the payments are borned
by that permanent establishment or fixed base then the royalties or fees for
technical services shall be deemed to arise in the Contracting State in which
the permanent establishment or fixed base is situated.
8. Where, owing to a special relationship between
the payer and the beneficial owner or between both of them and some other
person, the amount of the royalties or fees for technical services paid exceeds
for whatever reason 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 that case, the excess part of the payments shall
remain taxable according to the law of each Contracting State, due regard being
had to the other provisions of this Convention.
9. The provisions of this Article shall not
apply if it was the main purposes or one of the main purposes of any person
concerned with the creation or assignment of the rights in respect of which the
royalties or fees for technical services are paid to take advantage of this
Article by means of that creation or assignement.
ARTICLE 14 - Capital Gains - 1. Except as provided
in Article 8 (Air Transport) and 9 (Shipping) of this Convention, each
Contracting State may tax capital gains in accordance with the provisions of
its domestic law.
ARTICLE 15 - Independent personal services - 1.
Income derived by an individual, whether in his own capacity or as a member of
a partnership, who is a resident of a Contracting State in respect of
professional services or other independent activities of a similar character
may be taxed in that State. Such income may also be taxed in the other
Contracting State if such services are performed in that other State and if :
(a) he is present in that other State for a period or periods
aggregating to 90 days in the relevant fiscal year ; or
(b) he, or the partnership, has a fixed base regularly available to
him, or it, in that other State for the purpose of performing his activities ;
but in each
case only so much of the income as is attributable to those services.
2. For the purposes of paragraph 1 of this
Article an individual who is a member of a partnership shall be regarded as
being present in the other State during days on which, although he is not
present, another individual member of the partnership is so present and
performs professional services or other independent activities of a similar
character in that State.
3. The term “professional services” includes
independent, scientific, literary, artistic, educational or teaching activities
as well as the independent activities or physicians, surgeons, lawyers,
engineers, architects, dentists and accountants.
ARTICLE 16 - Dependent personal services - 1. Subject
to the provisions of Article 17 (Directors’ fees), 18 (Artistes and athletes),
19 (Governmental remuneration and pensions), 20 (Pensions and annuities), 21
(Students and trainees) and 22 (Teachers) of this Convention, salaries, wages
and other similar remuneration derived by a resident of a Contracting State in
respect of an employment shall be taxable only in that State unless the
employment is exercised in the other Contracting State. If the employment is so
exercised, such remuneration as is derived therefrom may be taxed in that other
State.
2. Notwithstanding the provisions of paragraph 1
of this Article, remuneration derived by a resident of a Contracting State in
respect of an employment exercised in the other Contracting State shall not be
taxed in that other State if :
(a) he is present in the other State for a period or periods not
exceeding in the aggregate 183 days during the relevant fiscal year;
(b) the remuneration is paid by, or on behalf of, an employer who is
not resident of that other State; and
(c) the remuneration is not deductible in computing the profits of an
enterprise chargeable to tax in that 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 in the Contracting State of
which the person deriving the profits from the operation of the ship or
aircraft is a resident.
ARTICLE 17 - Directors’ fees - 1. Directors’ fees
and similar payments derived by a resident of a Contracting State in his capacity
as a member of the board of directors of a company which is a resident of the
other Contracting State may be taxed in that other State.
ARTICLE 18 - Artistes and athletes - 1.
Notwithstanding the provisions of Articles 15 (Independent personal services)
and 16 (Dependent personal services) of this Convention, income derived by
entertainers (such as stage, motion picture, radio or television artistes and
musicians) or athletes, from their personal activities as such may be taxed in
the Contracting State in which these activities are exercised.
2. Where income arising from personal activities
are such exercised in a Contracting State by an entertainer or athlete accrues
not to that entertainer or athlete himself but to another person, that income may,
notwithstanding the provisions of Articles 7 (Business profits), 15
(Independent personal services) and 16 (Dependent personal services) of this
convention be taxed in that Contracting State.
3. The provisions of paragraphs 1 and 2 of this
Article shall not apply if the visit to a Contracting State of the entertainer
or the athlete is directly or indirectly supported, wholly or substantially,
from the public funds of the other Contracting State, including a political
sub-division or local authority of that other State.
ARTICLE 19 - Government remuneration and pensions - 1.
Remuneration, other than a pension, paid by the Government of a Contracting
State to any individual who is a national of that State in respect of services
rendered in the discharge of governmental functions in the other Contracting
State shall be exempt from tax in that other Contracting State.
2. Any pension paid by the Government of a
Contracting State to any individual in respect of services rendered to that
Government shall be taxable only in that Contracting State.
3. The provisions of this Article shall not
apply to remuneration or pensions in respect of services rendered in connection
with any trade or business.
ARTICLE 20 - Pensions and annuities - 1. Any
pension, other than a pension referred to in Article 19(2) of this Convention,
or annuity paid to a resident of a Contracting State shall be taxable only in
that State.
2. The term “pension” means a periodic payment
made in consideration of past employment or by way of compensation for injuries
received in the course of performance of employment or any payments made under
the social security legislation of either Contracting State.
3. The term “annuity” means a stated sum payable
periodically at stated times during life or during a specified or ascertainable
period of time under an obligation to make the payments in return for adequate
and full consideration in money or money’s worth.
ARTICLE 21 - Students and trainees - 1. An
individual who is a resident of a Contracting State or was a resident of that
State immediately before visiting the other Contracting State and who is
temporarily present in that other State for the primary purpose of :
(a) studying at a University or other accredited or recognised
educational institution in that other Contracting State ; or
(b) securing training required to qualify him to practice a profession
or a professional speciality ; or
(c) studying or doing research as a recipient of a grant, allowance, or
award from a governmental, religious, charitable, scientific, literary or
educational organisation;
shall not be subject to tax by that other Contracting State in respect
of :
(i) gifts from abroad for the purposes of his
maintenance, education, study, research or training ;
(ii) the grant, allowance or award ; and
(iii) income, from personal services rendered in
that other Contracting State (other than any rendered by an articled clerk or
other person undergoing professional training to the person or partnership to
whom he is articled or who is providing the training) not exceeding the sum of
750 pounds sterling or its equivalent in Indian currency during any fiscal
year.
2. The exemptions under paragraph 1 of this
Article shall only extend for such period of time as may be reasonably or
customarily required for the purpose of the visit, but in no event shall any
individual have the benefit of paragraph 1 of this Article for more than 5
years.
3. An individual who is a resident of a
Contracting State or was a resident of that State immediately before visiting
the other Contracting State and who is temporarily present in that other State
for a period not exceeding 12 months as an employee of, or under contract with,
a resident of the first-mentioned Contracting State, for the primary purpose of
:
(a) acquiring technical, professional or business experience from a
person other than that resident of the first-mentioned Contracting State ; or
(b) studying at a University or other accredited or recognised
institution in that other Contracting State;
shall not be
subject to tax by that other Contracting State on his income from personal
services performed in the other Contracting State for that period in an amount
not exceeding 1,500 pounds sterling or its equivalent in Indian currency.
4. An individual who is a resident of a
Contracting State or was a resident of that State immediately before visiting
the other Contracting State and who is temporarily present in that other State
for a period not exceeding 12 months as a participant in a programme sponsored
by the Government of the other Contracting State, for the primary purpose of
training, research or study, shall not be subject to tax by that other
Contracting State in respect of payments made by the Government of the
first-mentioned Contracting State for the purposes of his maintenance,
training, research, or study.
ARTICLE 22 - Teachers - 1. An individual who
visits a Contracting State for a period not exceeding two years for the purpose
of teaching or engaging in research at a University, college or other
recognised educational institution in that State, and who was immediately
before that visit a resident of the other Contracting State, shall be exempted
from tax by the first-mentioned Contracting State on any remuneration for such
teaching or research for a period not exceeding two years from the date he
first visits that State for such purpose.
2. This Article shall only apply to income from
research if such research is undertaken by the individual in the public interest
and not primarily for the benefit of some other private person of persons.
ARTICLE 23 - Other income - 1. Subject to
the provisions of paragraph 2 of this Article, items of income beneficially
owned by a resident of a Contracting State, wherever arising, other than income
paid out of trusts or the estates of deceased persons in the course of
administration, which are not dealt with tin the foregoing Articles of this
Convention, shall be taxable only in that State.
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 the 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 of this Convention, as the case may be,
shall apply.
3. Notwithstanding the provisions of paragraphs
1 and 2 of this Article, items of income of a resident of a Contracting State
not dealt with in the foregoing articles of this Convention, and arising in the
other Contracting State may be taxed in that other State.
ARTICLE 24 - Elimination of double taxation - 1.
Subject to the provisions of the law of the United Kingdom regarding the allowance
as a credit against United Kingdom tax of tax payable in a territory outside
the United Kingdom (which shall not affect the general principle hereof):
(a) Indian tax payable under the laws of India and in accordance with
the provisions of this 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) shall be allowed as a credit against any United Kingdom tax
computed by reference to the same profits, income or chargeable gains by
reference to which the Indian tax is computed.
(b) In the case of a dividend paid by a company which is a resident of
India to a company which is a resident of the United Kingdom and which controls
directly or indirectly at least 10 per cent of the voting power in the company
paying the dividend, the credit shall take into account in [addition to any
Indian tax for which credit may be allowed under the provisions of
sub-paragraph (a) of this paragraph] the Indian tax payable by the
company in respect of the profits out of which such dividend is paid.
2. Subject to the provisions of the law of India
regarding the allowance as a credit against Indian tax of tax paid in a
territory outside India (which shall not affect the general principle hereof),
the amount of the United Kingdom tax paid, under the laws of the United Kingdom
and in accordance with the provisions of this Convention, whether directly or
by deduction, by a resident of India, in respect of income from sources within
the United Kingdom which has been subjected to tax both in India and the United
Kingdom shall be allowed as a credit against the Indian tax payable in respect
of such income but in an amount not exceeding that proportion of Indian tax
which such income bears to the entire income chargeable to Indian tax.
For the
purposes of the credit referred to in this paragraph, where the resident of
India is a company, by which surtax is payable, the credit to be allowed
against Indian tax shall be allowed in the first instance against the
income-tax payable by the company in India and, as to the balance, if any,
against the surtax payable by it in India.
3. Subject to paragraph 5 of this Article, for
the purposes of paragraph 1 of this Article the term “Indian tax payable” shall
be deemed to include :
(a) any amount which would have been payable as Indian tax but for a
deduction allowed in computing the taxable income or an exemption or reduction
of tax granted for that year in question under the provisions of the Income-tax
Act, 1961 (43 of 1961) referred to in paragraph 4(a) or (b) of
this Article;
(b) that proportion of any amount which would have been payable as
Indian tax by a resident of India but for a deduction allowed in computing the
taxable income or an exemption or reduction granted for the year in question
under the provisions of the Income-tax Act, 1961 (43 of 1961) referred to in
paragraph 4(c) of this Article which corresponds to the proportion of
that resident’s total production in that year which was actually sold in the
Indian Domestic Tariff Area under order issued by the Chief Controller of
Import and Export being Nos. 21/90-93, 22/90-93, 23/90-23, 25/90-23, 26/90-23,
27/90-93, dated 30-3-1990 and similar Orders from time to time published in the
Official Gazette by the Central Government under power conferred on it by
section 3 of the Import and Export (Control) Act, 1947 (18 of 1947).
4. The provisions referred to in this paragraph
are :
(a) sections 10(4), 10(4B), 10(6)(viia),
10(15)(iv), 33AB, 80HHD, 80-I and 80-IA;
(b) any other provision which may subsequently be enacted granting an
exemption or reduction from tax which is agreed by the competent authorities of
the Contracting States to be of a substantially similar character to a
provision referred to in sub-paragraph (a) of this paragraph, if it has
not been modified thereafter or has been modified only in minor respects so as
not to affect its general character;
(c) sections 10A and 10B.
5. Relief from United Kingdom tax shall to be
given by virtue of this paragraph 3 of this Article in respect of income from
any source if the income relates to a period starting more than 10 fiscally
years after the deduction in computing taxable income or exemption from, or
reduction of, Indian tax is first granted to the resident of the United Kingdom
or to the resident of India, as the case may be, in respect of that source.
6. Income which in accordance with provisions of
this Convention is not to be subjected to tax in a Contracting State may be
taken into account for calculating the rate of tax to be imposed in that
Contracting State on other income.
7. For the purposes of paragraphs 1 and 2 of
this Article profits, income and chargeable gains, owned by a resident of a
Contracting State which may be taxed in the other Contracting State in
accordance with the provisions of this Convention shall be deemed to arise from
sources in that other Contracting State.
ARTICLE 25 - Partnerships - 1. Where, under any
provision of this Convention, a partnership is entitled, as resident of India,
to exemption from tax in the United Kingdom on any income or capital gains,
that provision shall not be construed as restricting the right of the United
Kingdom to tax any member of the partnership who is a resident of the United
Kingdom on his share of the income and capital gains of the partnership; but
any such income or gains shall be treated for the purposes of Article 24 of
this Convention as income or gains from sources in India.
2. Nothing in Article 11 of this Convention
shall entitle a partnership which is a resident of India to a tax credit in
respect of dividends paid to the partnership by a company which is a resident
of the United Kingdom; but any member of the partnership who is a resident of
India shall be regarded as entitled to the tax credit to which he would have
entitled under that Article, if his share of those dividends has been paid to
him by the company which is a resident of the United Kingdom.
ARTICLE 26 - Non-discrimination - 1. The nationals
of a Contracting State shall not be subjected in the other Contracting State to
any taxation or any requirement connected therewith which is other or more
burdensome than the taxation or any requirement connected therewith which is
other or more burdensome than the taxation and connected requirements to which
nationals of that other State in the same circumstances are or may be
subjected.
2. The taxation on a permanent establishment which
an enterprise of a Contracting State has in the other Contracting State shall
not be less favorably levied in that other State than the taxation levied on
enterprises of that other State carrying on the same activities in the same
circumstances or under the same conditions. This provisions shall not be
construed as preventing a Contracting State from charging the profits of a
permanent establishment which an enterprise of the other Contracting State has
in the first-mentioned State at a rate of tax which is higher than that imposed
on the profits of a similar enterprise of the first-mentioned Contracting
State, nor as being in conflict with the provisions of paragraph 4 of Article 7
of this Convention.
3. Nothing contained in this Article shall be
construed as obliging a Contracting State to grant to individuals not resident
in the State any personal allowances, reliefs and reductions for taxation
purposes which are by law available only to individuals who are so resident.
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
requirement 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.
5. In this Article, the term “taxation” means
taxes which are the subject of this Convention.
ARTICLE 27 - Mutual agreement procedure - 1. Where
a resident of a Contracting State considers that the actions of one or both of
the Contracting State 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 States, 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 Contracting State, with a view to the
avoidance of taxation not in accordance with the Convention.
3. The competent authorities of the Contracting
State shall endeavour to resolve by mutual agreement any difficulties or doubts
arising as to the interpretation or application of the Convention.
4. The competent authorities of the Contracting
State may communicate with each other directly for the purpose of reaching an
agreement in the sense of the preceding paragraphs.
ARTICLE 28 - 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 this
Convention, insofar as the taxation thereunder is not contrary to this
convention, in particular for the prevention of fraud or evasion of such taxes.
The exchange of information is not restricted by Article 1 of this Convention.
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.
However, if the information is originally regarded as secret in the
transmitting State it 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 which are the subject of this
Convention. Such persons or authorities shall use the information only for such
purposes but may disclose the information in public court proceedings or in
judicial decisions. The competent authorities shall, through consultation,
develop appropriate conditions, methods and techniques concerning the matters
in respect of which such exchanges of information shall be made, including,
where appropriate, exchanges of information regarding tax avoidance.
2. In no case shall the provisions of paragraph
1 of this Article be construed so as to impose on a Contracting State the
obligation:
(a) to carry out administrative measures at variance with the laws and
administrative practice of that or of the other Contracting State;
(b) to supply information which is not obtainable under the laws or in
the normal course of the administration of that or of the other Contracting
State;
(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 29 - Diplomatic and consular officials - 1.
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.
2. Notwithstanding the provisions of paragraph 1
of article 4 (Fiscal domicile) of this Convention, an individual who is a
member of the diplomatic, consular or permanent mission of a Contracting State
which is situated in the other Contracting State and who is subject to tax in
that other State only if he derives income from sources therein, shall not be
deemed to be a resident of that other State for the purposes of this
Convention.
ARTICLE 30 - Entry into force - 1. Each of the
Contracting States shall notify to the other the completion of the procedures
required by its law for the bringing into force of the Convention. This
Convention shall entire into force on the date of the later of these
notifications and shall thereupon have effect :
(a) in the United Kingdom :
(i) in respect of income-tax and capital gains
tax, for any year of assessment beginning on or after 6th April in the calendar
year next following that in which the later of the notifications is given;
(ii) in respect of corporation tax, for any
financial year beginning on or after 1 April in the calendar year next
following that in which the later of the notifications is given;
(iii) in respect of petroleum revenue tax, for any
chargeable period beginning on or after 1st January in the calendar year next
following that in which the later of the notifications is given;
(b) in India, in respect of income arising in any fiscal year beginning
on or after the first day of April next following the calendar year in which
the later of the notifications is given.
2. Subject to the provisions of paragraph 3 of
this Article, the Convention between the Government of the United Kingdom of
Great Britain and Northern Ireland and the Government of India for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect
to Taxes on Income and Capital Gains signed in New Delhi on 16th April, 1981
(hereinafter referred to as “the 1981 Convention”) shall terminate and cease to
be effective from the date upon which this Convention has effect in respect of
the taxes to which this Convention applies in accordance with the provisions of
paragraph 1 of this Article.
3. Where any provisions of the 1981 Convention
would have afforded any greater relief from tax than is due under this
Convention, any such provision as aforesaid shall continue to have effect ;
(a) in the United Kingdom, for any year of assessment or financial
year; and
(b) in India, for any fiscal year;
beginning, in
either case, before the entry into force of this Convention.
ARTICLE 31 - Termination - This Convention shall
remain in force until terminated by one of the Contracting State. Either
Contracting State may terminate the Convention, through the diplomatic channel,
by giving notice of termination at least six months before the end of any calendar
year beginning after the expiration of ten years from the date of entry into
force of the Convention. In such event, the Convention shall cease to have
effect;
(a) in the United Kingdom ;
(i) in respect of income-tax and capital gains
tax, for any year of assessment beginning on or after 6th April in the calendar
year next following that in which the notice is given;
(ii) in respect of corporation tax, for any
financial year beginning on or after 1st April in the calendar year next
following that in which the notice is given;
(iii) in respect of petroleum revenue tax, for any
chargeable period beginning on or after 1st January in the calendar year next
following that in which the notice is given;
(b) in India, in respect of income arising in any fiscal year beginning
on or after the first day of April next following the calendar year in which
the notice given.
In witness whereof the
undersigned, duly authorised thereto by their respective Governments, have
signed this Convention.
Done on this
25th day of January, 1993, in New Delhi on two original copies each in the
Hindi and English languages, both text being equally authentic. In case of
divergence between the two texts, the English text shall be the operative one.
For the Government of |
For the Government of the |
|
the
Republic of India: |
United Kingdom of Great |
|
|
Britain and Northern |
|
|
Ireland: |
British high commission
New Delhi, January 25, 1993
Your
Excellency :
I have the honour
to refer to the Convention between the Government of the United Kingdom of
Great Britain and Northern Ireland 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 and capital gains which has been signed today and to
propose on behalf of the Government of the United Kingdom of Great Britain and
Northern Ireland :
(a) that, in applying sub-paragraph (j) of paragraph 2 of
Article 5, for the purpose of determining whether a building site or
construction installation or assembly project or supervisory activity in
connection therewith has continued for a period of more than six months, the
Contracting States shall :
(i) take no account of time previously spent by
employees of the enterprise on other sites or projects which have no connection
with the site or project in question ;
(ii) apply for more than six months test separately
to each site or project which has no connection with any other site or project
and to each group of connected sites or projects; and
(iii) regard a building site as a single site, even
if several contracts have been entered into for the work being done, provided
that if forms a coherent whole commercially and geographically;
(b) that, in applying paragraph 3 of Article 7, for the purpose of
determining whether a permanent establishment has taken an active part in
negotiating, concluding or fulfilling contracts entered into by the enterprise,
the Contracting States shall take into considerations all relevant
circumstances and, in particular, the fact that a contract or order relating to
the purchase or provision of goods or services was negotiated or placed with
the head office of the enterprise, rather than with the permanent establishment,
shall not preclude them from determining that the permanent establishment did
take an active part in negotiating, concluding or fulfilling that contract;
(c) that, in applying paragraph 1 of Article 8, for the purpose of
determining the profits of an enterprise which are derived from the operation
of aircraft in international traffic, the Contracting States shall treat
interest from the investment or deposit of receipt arising directly from the
operation of aircraft in international traffic as being included in those
profits, but shall not treat interest derived from the reinvestment of such
interest as being so included.
If the
foregoing proposal is acceptable to the Government of the Republic of India I
have the honour to suggest that the present Note and Your Excellency’s reply to
that effect should be regarded as constituting an agreement between the two
Governments in this matter.
I avail myself
of this opportunity to renew to Your Excellency the assurances of my highest
consideration.
|
His Excellency
Mr. S. Ramamurti, |
(Nicholas Fenn) |
|
Chairman, |
High Commissioner |
|
Central
Board of Direct Taxes, |
|
|
Ministry
of Finance, |
|
|
Government
of India, |
|
|
New Delhi |
|
GOVERNMENT OF
INDIA
MINISTRY OF
FINANCE
(DEPARTMENT OF
REVENUE)
CENTRAL BOARD
OF DIRECT TAXES
NEW DELHI, JANUARY 25, 1993
Your
Excellency :
I have the
honour to acknowledge receipt of Your Excellency’s Note of today which reads as
follows :
I have the honour to refer to the
Convention between the Government of the United Kingdom of Great Britain and
Northern Ireland 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 and capital gains which has been signed today and to propose on
behalf of the Government of the United Kingdom of Great Britain and Northern
Ireland :
(a) that, in applying sub-paragraph (j) of paragraph 2 of
Article 5, for the purpose of determining whether a building site or
construction, installation or assembly project or supervisory activity in
connection therewith has continued for a period of more than six months, the
Contracting States shall :
(i) take no account of time previously spent by
employees of the enterprise on other sites or projects which have no connection
with the site or project in question;
(ii) apply more than six months test separately to
each site or project which has no connection with any other site or project and
to each group of connected sites or projects; and
(iii) regard a building site as a single site, even
if several contracts have been entered into for the work being done, provided
that it forms a coherent whole commercially and geographically;
(b) that, in applying paragraph 3 of Article 7, for the purpose of determining
whether a permanent establishment has taken an active part in negotiating,
concluding or fulfilling contracts entered into by the enterprise, the
Contracting States shall take into consideration all relevant circumstances
and, in particular, the fact that a contract or order relating to the purchase
or provision of goods or services was negotiated or placed with the head office
of the enterprise, rather than with the permanent establishment, shall not
preclude them from determining that the permanent establishment did take an
active part in negotiating, concluding or fulfilling that contract;
(c) that, in applying paragraph 1 of Article 8, for the purpose of
determining the profits of an enterprise which are derived from the operation
of aircraft in international traffic, the Contracting States shall treat
interest derived from the investment or deposit of receipts arising directly
from the operation of aircraft in international traffic as being included in
those profits, but shall not treat interest derived from the reinvestment of
such interest as being so included.
If the foregoing proposal is
acceptable to the Government of the Republic of India have the honour to
suggest that the present Note and Your Excellency’s reply to that effect should
be regarded as constituting an agreement between the two Government in this
matter.”
In reply, I
have the honour to state that the Government of the Republic of India accepts
the proposal made therein and agrees that Your Excellency’s Note and the
present reply shall constitute an agreement between the Government of Republic
of India and the Government of the United Kingdom of Great Britain and Northern
Ireland in this matter.
I avail myself
of this opportunity to renew to Your Excellency the assurances of my highest
consideration.
|
|
(S. Ramamurti) |
|
|
Chairman |
|
|
Central Board of Direct Taxes |
|
|
India. |
|
His
Excellency |
|
|
Sir
Nicholas Fenn, KCMG |
|
|
British
High Commission |
|
|
in India, |
|
|
New Delhi |
|
Indo-US Double
Taxation Avoidance Convention (DTAC) - Suspension of Collection during Mutual
Agreement Procedure
Article 27 of
the Indo-USA DTAC provides for Mutual Agreement Procedure (MAP) for avoidance
of double taxation. Paragraph 4 of article 27 authorises the competent
authorities to develop appropriate bilateral procedures, conditions, methods
and techniques for implementation of MAP provided for in the article.
Accordingly, with a view to avoid the unintended hardship to the taxpayers, as
well as for the efficient management of collection of revenue, the Competent
Authorities of India and USA had entered into a Memorandum of Understanding
(MoU) regarding suspension of collection during the pendency of MAP.
2. This MoU was brought to the notice of field
formation vide Instruction No. 2/2003, dated 28-4-2003 (F.No.
500/56/99-FTD) wherein it was stated that the collection of outstanding taxes
in the case of a taxpayer, who is a resident of USA and whose request under MAP
is under consideration of the Competent Authorities, shall be kept in abeyance
subject to furnishing of a bank guarantee of an amount equal to the amount of
tax under dispute and interest accruing thereon as per the provisions of the
Income-tax Act.
3. Now references have been received for
extending the applicability of MoU to Indian resident entities in cases where
Mutual Agreement Procedure has been invoked by the
4. On receipt of a formal request for suspension
of collection of outstanding tax in terms of the MoU from a taxpayer being, a
resident of USA or an Indian resident entity, in a case where MAP has been
invoked through US Competent Authority and the same has been admitted by the
Indian Competent Authority, the Assessing Officers are required to keep the
enforcement of collection of outstanding taxes in abeyance in respect of such
taxpayers—
(i) after obtaining a confirmation regarding
pendency of MAP from the Foreign Tax and Tax Research Division of the Central
Board of Direct Taxes and
(ii) on receipt of a bank guarantee in the model
draft format annexed to the MoU for an amount calculated in accordance with the
manner indicated therein.
5. All the other conditions of MoU as enumerated
in Instruction No. 2 of 2003, dated 28-4-2003 shall remain the same.
6. These instructions are issued under section
119 of the Income-tax Act and the same may be brought to the notice of all the
officers in your charge.
Instruction : No. 10/2007, dated 23-10-2007
JUDICIAL ANALYSIS
n In
accordance with article 9(1) of the Agreement for Avoidance of Double Taxation
between India and U.K., entire shipping income of U.K. company which is
resident of U.K. is exempt from tax in India with effect from 1-4-1992—Arabian
Express Line Ltd. of United Kingdom v. Union of India [1994] 120 CTR
(Guj.) 377.
n In order
that a payment may be treated as royalty for the purposes of article XIII of
the Agreement for Avoidance of Double Taxation between India and the U.K. the
person who is the owner of such patents, designs or models, plans, secret
formula or process, etc., retains the property in them and permits the use or
allows the right to use such patents, designs or models, plans, secret formula,
etc.—CIT v. Davy Ashmore India Ltd. [1991] 190 ITR 626 (Cal.).
n Renewal of
deposit with HDFC after date of coming into force of the Convention, amounted
to fresh deposits and rate of tax at 15 per cent would be applicable—CIT v.
Borhat Tea Co. Ltd. [1993] 203 ITR 987 (Cal.).
n
Permanent establishment denotes some place of fixed nature with permanency, and
it does not include in its ambit a moving vessel which operates near a fixed
place and which does not belong to the assessee—Dy. CIT v. Subsea
Offshore Ltd. [1998] 66 ITD 298 (Mum.-Trib.).
n Where
Double Taxation Avoidance Agreement between Government of India and Government
of U.K. came into force with effect from 23-11-1981 and assessee not resident
who had made deposits in India prior to that date, renewed certain deposits
after 23-11-1981, deposit so renewed were to be interpreted as loans first
created within meaning of aforesaid agreement and interest on such deposits
could be charged at rate of 15 per cent only—Borhat Tea Co. Ltd. v.
ITO [1990] 33 ITD 9 (Cal.) (SMC).