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Germany 16. Germany - Agreement for avoidance of double
taxation and prevention of fiscal evasion with Germany Whereas
the annexed Agreement between the Government of the Republic of India and the
Government of the Federal Republic of Germany for the avoidance of double
taxation with respect to taxes on income and capital has been concluded ; And
whereas the aforesaid Agreement was brought into force on the 26th day of
October, 1996 after the completion by both the Contracting States to each
other of the procedure required under their laws in accordance with article 28
of the said Agreement ; Now,
therefore, in exercise of the powers conferred by section 90 of the Income-tax
Act, 1961 (43 of 1961) and section 44A of the Wealth-tax Act, 1957 (27 of
1957), the Central Government hereby directs that all the provisions of the
said Agreement shall be given effect to in the Union of India. Notification
: No. SO
836(E) dated 29-11-1996.
ANNEXURE Agreement between the
republic of India and the Federal Republic Whereas
the Government of the Federal Republic of Germany and the Government of the
Republic of India desire to conclude an Agreement for the avoidance of double
taxation with respect to taxes on income and capital and for promoting their
mutual economic relations ; Now,
therefore, it is hereby agreed as follows : ARTICLE
1 - Personal scope - This Agreement shall apply to persons who are
residents of one or both of the Contracting States. ARTICLE
2 - Taxes covered - 1. This Agreement shall apply to taxes
on income and on capital imposed on behalf of a Contracting State, of a land or
a political sub-division or local authority thereof, irrespective of the
procedure in which they are levied. 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, and the
pay roll tax. 3. The
existing taxes to which this Agreement shall apply are in particular : (a) in the Federal Republic of Germany : the
Einkommensteuer (income-tax), the
Korperschaftsteuer (corporation-tax), the
Vermogensteuer (capital tax), and the
Gewerbesteuer (trade tax) (hereinafter
referred to as German tax); (b) in the Republic of India, the
income-tax including any surcharge tax thereon (Einkommensteuer, einschl,
darauf entfallender Zusatzsteuern), and the wealth-tax (Vermogensteuer) (hereinafter
referred to as Indian tax). 4. This
Agreement shall apply also to any identical or substantially similar taxes
which are imposed after the date of signature of this Agreement in addition
to, or in place of, the existing taxes. The competent authorities of the
Contracting States shall notify each other of changes of importance which have
been made in their respective taxation laws. ARTICLE
3 - General definitions - 1. For the purposes of this
Agreement, unless the context otherwise requires, (a) the term Federal Republic of Germany means
the area in which the tax law of the Federal Republic of Germany is in force
including the area of the sea-bed, its sub-soil and the superjacent water
column adjacent to the territorial sea, insofar as the Federal Republic of
Germany exercises their sovereign rights and jurisdiction in conformity with
international law and its national legislation ; (b) the term Republic of India means the
territory of the Republic of India and includes the territorial sea and
airspace above it. For the purposes of this Agreement the term shall also cover
any other maritime zone in which the Republic of India has sovereign rights,
other rights and jurisdictions, according to the Indian law and in accordance
with international law in particular as laid down in the UN Convention of the
Law of the Sea ; (c) the terms a Contracting State and the other
Contracting State mean the Federal Republic of Germany or the Republic of
India as the context requires ; (d) 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 ; (e) the term company means any body corporate or
any entity which is treated as a company or body corporate under the taxation
laws in force in the respective Contracting States ; (f) the term immovable property has the meaning
which it has under the law of the Contracting State in which the property in
question is situated. The term shall in any case include property accessory to
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 payments as
consideration for the working of, or the right to work, mineral deposits,
sources and other natural resources; ships, boats and aircraft shall not be
regarded as immovable property ; (g) 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 ; (h) the term national means, (i) in respect of the Federal Republic of Germany
any German within the meaning of Article 116, paragraph (1), of the Basic Law
for the Federal Republic of Germany and any legal person, partnership and
association deriving its status as such from the law in force in the Federal
Republic of Germany ; (ii) in respect of the Republic of India any
national of the Republic of India and any legal person, partnership and association
deriving its status as such from the law in force in the Republic of
India ; (i) 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 Contracting State except when the ship or aircraft
is operated solely between places in the other Contracting State ; (j) the term competent authority means in the
case of the Federal Republic of Germany the Federal Ministry of Finance, and in
the case of the Republic of India the Central Government in the Ministry of
Finance (Department of Revenue) or its authorised representative ; (k) the term fiscal year means, (i) in relation to Indian tax, the previous year
as defined in the Income-tax Act, 1961 ; (ii) in relation to German tax, the calendar
year ; (l) the term tax means German tax or Indian tax
as the context requires but shall not include interest or penalty imposed in
relation to such taxes. 2. As
regards the application of this Agreement by a Contracting State any term not
defined therein shall, unless the context otherwise requires, have the meaning which
it has under the law of that State concerning the taxes to which this Agreement
applies. ARTICLE
4 - Resident - 1. For the purposes of this Agreement, the
term resident of a Contracting State means any person who, under the laws of
that State, is liable to tax therein by reason of his domicile, residence,
place of management or any 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 an individual is a resident of both
Contracting States, then his status shall be determined as follows : (a) he shall be deemed to be a resident of the
State in which he has a permanent home available to him, if he has a permanent
home available to him in both States, he shall be deemed to be a resident of
the State with which his personal and economic relations are closer (centre of
vital interests) ; (b) if the State in which he has his centre of
vital interests cannot be determined, or if he has not a permanent home
available to him in either State, he shall be deemed to be a resident of the
State in which he has an habitual abode ; (c) if he has an habitual abode in both States or
in neither of them, he shall be deemed to be a resident of the State of which
he is a national ; (d) if he is a national of both States or of
neither of them, the competent authorities of the Contracting States shall
settle the question by mutual agreement. 3. Where
by reason of the provisions of paragraph 1 a person other than an individual is
a resident of both Contracting States, then it shall be deemed to be a resident
of the State in which its place of effective management is situated. ARTICLE
5 : Permanent establishment - 1. For the purposes of this
Agreement, the term permanent establishment means a fixed place of business
through which the business of an enterprise is wholly or partly carried on. 2. The
term permanent establishment includes especially, (a) a place of management ; (b) a branch ; (c) an office ; (d) a factory ; (e) a workshop ; (f) a mine, an oil or gas well, a quarry or any
other place of extraction of natural resources, including an installation or structure
used for the exploration or exploitation ; (g) a warehouse or sales outlet ; (h) a farm, plantation or other place where
agricultural, forestry, plantation or related activities are carried on ;
and (i) a building site or construction, installation
or assembly project or supervisory activities in connection therewith, where
such site, project or activities continue for a period exceeding six months. 3. 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 for or to be used in the prospecting for or extraction
or exploitation of mineral oils in that State. 4.
Notwithstanding the preceding provisions of this Article, the term permanent
establishment shall be deemed not to include, (a) the use of facilities solely for the purpose of
storage, display or delivery of goods or merchandise belonging to the
enterprise ; (b) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of storage,
display or delivery ; (c) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of processing by
another enterprise ; (d) the maintenance of a fixed place of business
solely for the purpose of purchasing goods or merchandise or of collecting
information, for the enterprise ; (e) the maintenance of a fixed place of business
solely for the purpose of carrying on, for the enterprise, any other activity
of a preparatory or auxiliary character ; (f) the maintenance of a fixed place of business
solely for any combination of activities mentioned in sub-paragraphs (a)
to (e), provided that the overall activity of the fixed place of
business resulting from this combination is of a preparatory or auxiliary
character. 5.
Notwithstanding the provisions of paragraphs 1 and 2, where a person - other
than an agent of an independent status to whom paragraph 6 applies - is acting
in a Contracting State on behalf of an enterprise of the other Contracting
State that enterprise shall be deemed to have a permanent establishment in the
first-mentioned State, if this person, (a) has and habitually exercises in that State an
authority to conclude contracts on behalf of the enterprise, unless his
activities are limited to the purchase of goods or merchandise for the
enterprise ; (b) has no such authority, but habitually
maintains in the first-mentioned State a stock of goods or merchandise from
which he regularly delivers goods or merchandise on behalf of the
enterprise ; or (c) habitually secures orders in the
first-mentioned State, wholly or almost wholly for the enterprise itself or for
the enterprise and other enterprises controlling, controlled by, or subject to
the same common control, as that enterprise. 6. An
enterprise shall not be deemed to have a permanent establishment in a
Contracting State merely because it carries on business in that State through a
broker, general commission agent or any other agent of an independent status,
provided that such persons are acting in the ordinary course of their business
and in their commercial and financial relations to the enterprise no conditions
are agreed or imposed which differ from those usually agreed between
independent persons. 7. The
fact that a company which is a resident of a Contracting State controls or is
controlled by a company which is a resident of the other Contracting State or
which carries on business in that other State (whether through a permanent
establishment or otherwise), shall not of itself constitute either company a
permanent establishment of the other. ARTICLE
6 - Income from immovable property - 1. Income derived by a
resident of a Contracting State from immovable property situated in the other
Contracting State may be taxed in that other State. 2. The
provisions of paragraph 1 shall apply to income derived from the direct use,
letting, or use in any other form of immovable property. 3. The
provisions of paragraphs 1 and 2 shall also apply to the income from immovable
property of an enterprise and to income from immovable property used for the
performance of independent personal services. ARTICLE
7 - Business profits - 1. The profits of an enterprise of a
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 enterprise may be taxed in the other State but only so much of
them as is attributable to that permanent establishment. 2.
Subject to the provisions of paragraph 3, where an enterprise of a Contracting
State carries on business in the other Contracting State through a permanent
establishment situated therein, there shall in each Contracting State be
attributed to that permanent establishment the profits which it might be
expected to make, if it were a distinct and separate enterprise engaged in the
same or similar activities under the same or similar conditions and dealing
wholly independently with the enterprise of which it is a permanent
establishment. 3. In the
determination of the profits of a permanent establishment, there shall be
allowed as deductions, 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, and according to the
domestic law of the Contracting State in which the permanent establishment is
situated. 4.
Insofar as in a Contracting State and in exceptional cases the determination of
the profits to be attributed to a permanent establishment in accordance with
paragraph 2 is impossible or gives rise to unreasonable difficulties, nothing
in paragraph 2 shall preclude the determination of the profits to be attributed
to a permanent establishment by means of either apportioning the total profits
of the enterprise to that permanent establishment or estimating on any other
reasonable basis; the method of apportionment or estimation adopted shall,
however, be such that the result shall be in accordance with the principles
contained in this Article. 5. No
profits shall be attributed to a permanent establishment by reason of the mere
purchase by that permanent establishment of goods or merchandise for the
enterprise. 6. For
the purposes of the preceding paragraphs, the profits to be attributed to the
permanent establishment shall be determined by the same method year by year
unless there is good and sufficient reason to the contrary. 7. Where
profits include items of income which are dealt with separately in other
Articles of this Agreement, then the provisions of those Articles shall not be
affected by the provisions of this Article. ARTICLE
8 - Shipping and air transport - 1. Profits from the
operation of ships or aircraft in international traffic shall be taxable only
in the Contracting State in which the place of effective management of the
enterprise is situated. 2. 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
Contracting State of which the operator of the ship is a resident. 3. For
the purposes of this Article, interest on funds connected with the operation of
ships or aircraft in international traffic shall be regarded as profits derived
from the operation of such ships or aircraft, and the provisions of Article 11
shall not apply in relation to such interest. 4. The provisions
of paragraph 1 shall also apply to profits from the participation in a pool, a
joint business or an international operating agency. ARTICLE
9 - Associated enterprises - 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 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. ARTICLE
10 : Dividends - 1. Dividends paid by a company which is a
resident of a Contracting State to a resident of the other Contracting State
may be taxed in that other State. 2.
However, such dividends may also be taxed in the Contracting State of which the
company paying the dividends is a resident and according to the laws of that
State, but if the recipient is the beneficial owner of the dividends, the tax
so charged shall not exceed 10 per cent of the gross amount of the dividends. This
paragraph shall not affect the taxation of the company in respect of the
profits out of which the dividends are paid. 3. The
term dividends as used in this Article means (a) dividends on shares including income from
shares, jouissance shares or jouissance rights, mining shares, founders shares
or other rights, not being debt-claims, participating in profits, and (b) other income which is subjected to the same
taxation treatment as income from shares by the laws of the State of which the
company making the distribution is a resident. 4. The
provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the
dividends, being a resident of a Contracting State, carries on business in the
other Contracting State of which the company paying the dividends is a
resident, through a permanent establishment situated therein, or performs in
that other State independent personal services from a fixed base, situated
therein, and the holding in respect of which the dividends are paid is
effectively connected with such permanent establishment or fixed base. In such
case, the provisions of Article 7 or Article 14, as the case may be, shall
apply. 5. Where
a company which is a resident of a Contracting State derives profits or income
from the other Contracting State, that other State may not impose any tax on
the dividends paid by the company, except insofar as such dividends are paid to
a resident of that other State or insofar as the holding in respect of which
the dividends are paid is effectively connected with a permanent establishment
or a fixed base situated in that other State, nor subject the companys
undistributed profits to a tax on the companys 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 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 Contracting State in which it
arises and according to the laws of that State, but if the recipient is the
beneficial owner of the interest the tax so charged shall not exceed 10 per
cent of the gross amount of the interest. 3.
Notwithstanding the provisions of paragraphs 1 and 2 (a) interest arising
in the Federal Republic of Germany and paid to the Government of the Republic
of India, the Reserve Bank of India, the Industrial Finance Corporation of
India, the Industrial Development Bank of India, the Export-Import Bank of
India, National Housing Bank and Small Industries Development Bank of India
shall be exempt from German tax; (b) interest arising
in the Republic of India and paid to the Government of the Federal Republic of
Germany, the Deutsche Bundesbank, the Kreditanstat fur Wiederaufbau or the
Deutsche Investitions-und Entwicklungsgesellschaft (DEG) and interest paid in
consideration of a loan guaranteed by HERMES-Deckung shall be exempt from
Indian tax. 4. The
term interest as used in this Article means income from debt-claims of every
kind, whether or not secured by mortgage and whether or not carrying a right to
participate in the debtors profits, and in particular, income from Government
securities and income from bonds or debentures, including premiums and prizes
attaching to such securities, bonds or debentures. Penalty charges for late
payment shall not be regarded as interest for the purpose of this Article. 5. The
provisions of paragraphs 1, 2 and 3 shall not apply if the beneficial owner of
the interest, being a resident of a Contracting State, carries on business in
the other Contracting State in which the interest arises, through a permanent
establishment situated therein, or performs in that other State independent
personal services from a fixed base situated therein, and the debt-claim in
respect of which the interest is paid is effectively connected with such
permanent establishment or fixed base. In such case, the provisions of Article
7 or Article 14, as the case may be, shall apply. 6.
Interest shall be deemed to arise in a Contracting State when the payer is that
State itself, a land or 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 such
permanent establishment or fixed base, then such interest shall be deemed to
arise in the State in which the permanent establishment or fixed base is
situated. 7. Where,
by reason of a special relationship between the payer and the beneficial owner
or between both of them and some other person, the amount of the interest,
having regard to the debt-claim for which it is paid, exceeds the amount which
would have been agreed upon by the payer and the beneficial owner in the
absence of such relationship, the provisions of this Article shall apply only
to the last-mentioned amount. In such case, the excess part of the payments
shall remain taxable according to the laws of each Contracting State, due
regard being had to the other provisions of this Agreement. ARTICLE
12 - 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 laws of that
State, but if the recipient is the beneficial owner of the royalties, or fees
for technical services, the tax so charged shall not exceed 10 per cent of the
gross amount of the royalties or the fees for technical services. 3. The
term royalties as used in this Article means payments of any kind received as
a consideration for the use of, or the right to use, any copyright of literary,
artistic or scientific work, including cinematograph films or films or tapes
used for radio or television 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
term fees for technical services as
used in this Article means payments of any amount in consideration for the
services of managerial, technical or consultancy nature, including the
provision of services by technical or other personnel, but does not include
payments for services mentioned in Article 15 of this Agreement. 5. The
provisions of paragraphs 1 and 2 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 or Article 14, as the case may be,
shall apply. 6. Royalties
and fees for technical services shall be deemed to arise in a Contracting State
when the payer is that State itself, a land or 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 liability to pay the royalties or
fees for technical services was incurred, and such royalties or fees for
technical services are borne by such permanent establishment or fixed base,
then such royalties or fees for technical services shall be deemed to arise in
the State in which the permanent establishment or fixed base is situated. 7. Where,
by reason of special relationship between the payer and the beneficial owner or
between both of them and some other person, the amount of royalties or fees for
technical services paid exceeds the amount which would have been paid in the
absence of such relationship, the provisions of this Article shall apply only
to the last-mentioned amount. In such case, the excess part of the payments
shall remain taxable according to the laws of each Contracting State, due
regard being had to the other provisions of this Agreement. ARTICLE
13 - Capital gains - 1. Gains derived by a resident of a
Contracting State from the alienation of immovable property situated in the
other Contracting State may be taxed in that other State. 2. Gains
from the alienation of movable property forming part of the business property
of a permanent establishment which an enterprise of a Contracting State has in
the other Contracting State or of movable property pertaining to a fixed base
available to a resident of a Contracting State in the other Contracting State
for the purpose of performing independent personal services, including such
gains from the alienation of such a permanent establishment (alone or with the
whole enterprise) or of such fixed base, may 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 Contracting State in which the place of effective
management of the enterprise is situated. 4. Gains
from the alienation of shares in a company which is a resident of a Contracting
State may be taxed in that State. 5. Gains
from the alienation of any property other than that referred to in paragraphs 1
to 4 shall be taxable only in the Contracting State of which the alienator is a
resident. ARTICLE
14 - Independent personal services - 1. Income derived by an
individual who is a resident of a Contracting State from the performance of
professional services or other independent activities of a similar character
shall be taxable only in that State except in the following circumstances when
such income may also be taxed in the other Contracting State : (a) if he has a fixed base regularly available to
him in the other Contracting State for the purpose of performing his
activities, in that case, only so much of the income as is attributable to
that fixed base may be taxed in that other State ; or (b) if his stay in the other Contracting State is
for a period or periods amounting to or exceeding in the aggregate 120 days in
the relevant fiscal year; in that case, only so much of the income as is
derived from his activities performed in that other State may be taxed in that
other State. 2. The
term professional services includes independent scientific, literary,
artistic, educational or teaching activities, as well as the independent
activities of physicians, surgeons, lawyers, engineers, architects, dentists
and accountants. ARTICLE
15 - Dependent personal services - 1. Subject to the
provisions of Articles 16, 18, 19 and 20, salaries, wages and other similar
remuneration derived by a resident of a Contracting State in respect of an
employment shall be taxable in the other Contracting State only if the
employment is exercised there. 2.
Notwithstanding the provisions of paragraph 1, remuneration derived by a
resident of a Contracting State in respect of an employment exercised in the
other Contracting State shall be taxable only in the first-mentioned State
if :
(a) the recipient is
present in the other State for a period or periods not exceeding in the
aggregate 183 days in the fiscal year concerned,
(b) the remuneration
is paid by, or on behalf of, an employer who is not a resident of the other
State, and
(c) the remuneration
is not borne by a permanent establishment or a fixed base which the employer
has in the other State. 3.
Notwithstanding the preceding provisions of this Article, remuneration derived
in respect of an employment exercised aboard a ship or aircraft operated in
international traffic may be taxed in the Contracting State of which the
enterprise operating the ship or aircraft is a resident. ARTICLE
16 - Directors fees - 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
17 - Artistes and sportspersons - 1. Notwithstanding the
provisions of Articles 7, 14 and 15, income derived by a resident of a
Contracting State as an entertainer, such as a theatre, motion picture, radio
or television artiste, or a musician, or as a sportsperson, from his personal
activities as such exercised in the other Contracting State, may be taxed in
that other State. 2. Where
income in respect of personal activities exercised by an entertainer or a
sportsperson in his capacity as such accrues not to the entertainer or
sportsperson 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 sportsperson are exercised.
3. However, such income shall not be taxed in the State mentioned
in paragraph 1 if the said activities are exercised during a visit to that
State by a resident of the other Contracting State and where such visit is
financed directly or indirectly by that other State, a land, a political
sub-division or a local authority thereof or by an organisation which in that
other State is recognised as charitable organisation.
ARTICLE
18 - Non-Government pensions - Subject
to the provisions of Article 19, pensions and other similar remuneration paid
to a resident of a Contracting State in consideration of past employment shall
be taxable only in that State.
ARTICLE
19 - Government service - 1.
(a) Remuneration other than a pension, paid by a Contracting State, a
land, a political sub-division or a local authority thereof to an individual in
respect of services rendered to that State, Land, sub-division or authority
shall be taxable only in that State.
(b)
However, such remuneration shall be taxable only in the other Contracting
State, if the services are rendered in that State and the individual is a
resident of that State who :
(i) is a national of
that State ; or
(ii) did not become a
resident of that State solely for the purpose of rendering the services. 2.
(a) Any pension paid by a Contracting State, a Land, a
political sub-division or a local authority thereof to an individual in
respect of services rendered to that State, Land, sub-division or authority
shall be taxable only in that State. (b) However, such
pension shall be taxable only in the other Contracting State if the individual
is a resident of and a national of that other State. 3. The provisions of Articles 15, 16 and 18 shall apply to
remuneration and pensions in respect of services rendered in connection with a
business carried on by a Contracting State, a Land, a political sub-division or
a local authority thereof. 4. The provisions of paragraph 1 shall likewise apply in
respect of remuneration paid, under a development assistance programme of a
Contracting State, a Land, a political sub-division or a local authority
thereof, out of funds exclusively supplied by that State, Land, political
sub-division or local authority, to a specialist or volunteer seconded to the
other Contracting State with the consent of that other State. ARTICLE 20 - Teachers, students and trainees - 1. An
individual who visits a Contracting State at the invitation of that State or of
a university, college, school, museum or other cultural institution of that
State or under an official programme of cultural exchange for a period not
exceeding two years solely for the purpose of teaching, giving lectures or
carrying out research at such institution and who is, or was immediately before
that visit, a resident of the other Contracting State shall be exempt from tax
in the first-mentioned State on his remuneration for such activity during the
period of the first year from the date of his arrival and in the next year the
exemption will be only in respect of remuneration derived by him from outside
that State. 2. An individual who is present in a Contracting State solely : (a) as a student at a university, college or
school in that Contracting State, (b) as a business apprentice (including in the
case of the Federal Republic of Germany a Volontar or a Praktikant), (c) as the recipient of a grant, allowance or
award for the primary purpose of study or research from a religious, charitable,
scientific or educational organisation, or (d) as a member of a technical cooperation
programme entered into by the
Government of that Contracting State, and who is, or was immediately
before visiting that State, a resident of the other Contracting State, shall be
exempt from tax in the first-mentioned Contracting State in respect of (i) remittances from abroad for the purposes of
his maintenance, education or training, and (ii) remuneration from employment in that other State,
in an amount not exceeding DM 7,200 (seven thousand two hundred Deutsche Mark)
or its equivalent in Indian currency during any fiscal year, as the case may be
provided that such employment is directly related to his studies or is
undertaken for the purpose of his maintenance. ARTICLE 21 - Other income - 1. Items of income of
a resident of a Contracting State, wherever arising, not dealt with in the foregoing
Articles of this Agreement shall be taxable only in that State. 2. The provisions of paragraph 1 shall not apply to income,
other than income from immovable property, if the recipient of such income,
being a resident of a Contracting State, carries on business in the other
Contracting State through a permanent establishment situated therein, or performs
in that other State independent personal services from a fixed base situated
therein and the right or property in respect of which the income is paid is
effectively connected with such permanent establishment or fixed base. In such
case the provisions of Article 7 or Article 14, as the case may be, shall
apply. 3. Notwithstanding the provisions of paragraph 1, if a resident
of a Contracting State derives income from sources within the other Contracting
State in the form of lotteries, crossword puzzles, races including horse races,
card games and other games of any sort or gambling or betting of any form or
nature whatsoever, such income may be taxed in the other Contracting State. ARTICLE 22 - Capital - 1. Capital represented by
immovable property, owned by a resident of a Contracting State and situated in
the other Contracting State, may be taxed in that other State. 2. Capital represented by movable property forming part of the
business property of a permanent establishment which an enterprise of a
Contracting State has in the other Contracting State or by movable property
pertaining to a fixed base available to a resident of a Contracting State in
the other Contracting State for the purpose of performing independent personal
services, may be taxed in that other State. 3. Capital represented by ships and aircraft operated in international
traffic and by movable property pertaining to the operation of such ships or
aircraft, shall be taxable only in the Contracting State in which the place of
effective management of the enterprise is situated. 4. All other elements of capital of a resident of a Contracting
State shall be taxable only in that State. ARTICLE 23 - Relief from Double taxation - 1. Tax shall be
determined in the case of a resident of the Federal Republic of Germany as
follows : (a) Unless foreign tax credit is to be allowed
under sub-paragraph (b), there shall be exempted from German tax any
item of income arising in the Republic of India and any item of capital
situated within the Republic of India, which, according to this Agreement, may
be taxed in the Republic of India. The Federal Republic of Germany, however,
retains the right to take into account in the determination of its rate of tax
the items of income and capital so exempted. In the case of dividends
exemption shall apply only to such dividends as are paid to a company (not
including partnerships) being a resident of the Federal Republic of Germany by
a company being a resident of the Republic of India at least 10 per cent of the
capital of which is owned directly by the German company. There shall be exempted from
taxes on capital any shareholdings the dividends of which are exempted or, if
paid, would be exempted, according to the immediately foregoing sentence. (b) Subject to the provisions of German tax law
regarding credit for foreign tax, there shall be allowed as a credit against
German tax payable in respect of the following items of income arising in the
Republic of India and the items of capital situated there, the Indian tax paid
under the laws of the Republic of India and in accordance with this Agreement
on : (i) dividends not dealt with in sub-paragraph (a) ; (ii) interest ;
(iii) royalties and
fees for technical services ;
(iv) income in the
meaning of paragraph 4 of Article 13 ;
(v) directors
fees ;
(vi) income of
artistes and sports persons.
(c) For the purpose of
credit referred to in letter (ii) of sub-paragraph (b), the
Indian tax shall be deemed to be 10 per cent of the gross amount of the
interest, if the Indian tax is reduced to a lower rate or totally waived
according to domestic law, irrespective of the amount of tax actually paid.
(d) The provisions of
sub-paragraph (c) shall apply for the first 12 fiscal years for which
this Agreement is effective.
(e) Notwithstanding
the provisions of sub-paragraph (a) items of income dealt with in
Articles 7 and 10 and gains derived from the alienation of the business
property of a permanent establishment as well as the items of capital
underlying such income shall be exempted from German tax only if the resident
of the Federal Republic of Germany can prove that the receipts of the permanent
establishment or company are derived exclusively or almost exclusively from
active operations.
In the
case of items of income dealt with the Article 10 and the items of capital
underlying such income the exemption shall apply even if the dividends are
derived from holdings in other companies being residents of the Republic of
India which carry on active operations and in which the company which last made
a distribution has a holding of more than 25 per cent.
Active
operations are the following; producing or selling goods or merchandise, giving
technical advice or rendering engineering services, or doing banking or
insurance business, within the Republic of India.
If
this is not proved, only the credit procedure as per sub-paragraph (b)
shall apply.
2. Tax shall be determined in the case of a resident of the Republic
of India as follows :
Where
a resident of the Republic of India derives income or owns capital which, in
accordance with the provisions of this Agreement, may be taxed in the Federal
Republic of Germany, the Republic of India shall allow as a deduction from the
tax on such income of that resident an amount equal to the income-tax paid in
the Federal Republic of Germany, whether directly or by deduction, and as a
deduction from the tax on such capital of that resident an amount equal to the
capital tax paid in the Federal Republic of Germany. Such deduction in either
case shall not, however, exceed that part of the income-tax or capital tax (as
computed before the deduction is given) which is attributable, as the case may
be, to the income or the capital which may be taxed in the Federal Republic of
Germany.
3. 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 where express provision to the contrary is made in
this Agreement.
ARTICLE
24 - Non-discrimination - 1.
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 and connected requirements to
which nationals of that other State in the same circumstances and under the
same conditions are or may be subjected. This provision shall, notwithstanding
the provisions of Article 1, also apply to persons who are not residents of one
or both of the Contracting States. 2. The taxation of a permanent establishment which an
enterprise of a Contracting State has in the other Contracting State shall not
be less favourably levied in that other State than the taxation levied on
enterprises of that other State carrying on the same activities. This provision
shall not be construed as preventing a Contracting State from charging the
profits of a permanent establishment which a company 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 company of the first-mentioned
Contracting State, nor as being in conflict with the provisions of paragraph 3
of Article 7 of this Agreement. Further, this provision shall not be construed
as obliging Contracting State to grant to residents of the other Contracting
State any personal allowances, reliefs and reductions for taxation purposes
which it grants only to its own residents. 3. Except where the provisions of Article 9, paragraph 7 of
Article 11, or paragraph 7 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 Contracting State to a resident of the other Contracting
State shall, for the purpose of determining the taxable capital of such
enterprise, be deductible under the same conditions as if they had been
contracted to a resident of the first-mentioned State. 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. ARTICLE 25 - 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 Agreement, 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 24, 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 this Agreement. 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 Contracting State, with a view to the
avoidance of taxation which is not in accordance with this Agreement. Any
agreement reached shall be implemented notwithstanding any time limits in the
domestic law of the Contracting States. 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 this Agreement. They may also consult
together for the elimination of double taxation in cases not provided for in
this Agreement. 4. The competent authorities of the Contracting States may
establish by mutual agreement the mode of application of the provisions of this
Agreement regarding the exemption or reduction of taxes. 5. 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. ARTICLE 26 - 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 Agreement. Any information
received by a Contracting State shall be treated as secret in the same manner
as information obtained under the domestic laws of that State and shall be
disclosed only to persons or authorities (including courts and administrative
bodies) involved in the assessment or collection of, the enforcement or
prosecution in respect of, or the determination of appeals in relation to, the taxes covered by this
Agreement. Such persons or authorities shall use the information only for such
purposes. They may disclose the information in public court proceedings or in
judicial decisions. 2. In no case shall the provisions of paragraph 1 be construed
so as to impose on a 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 ; and (c) to supply information which would disclose any
trade, business, industrial, commercial or professional secret or trade
process, or information, the disclosure of which would be contrary to public
policy (ordre public). ARTICLE 27 - Diplomatic and Consular Privileges - Nothing in
this Agreement shall affect the fiscal privileges of members of a diplomatic
mission, a consular post or an international organisation under the general
rules of international law or under the provision of special agreements. ARTICLE 28 - Entry into force - 1. The Government of the contracting States shall notify to
each other that the legal requirements for the entry into force of this
Agreement have been complied with. 2. This Agreement shall enter into force one month after
receipt of the latter of the notifications referred to in paragraph 1 and shall
have effect : (a) in the Federal Republic of Germany : (i) in the case of taxes withheld at source on
dividends, interest, royalties and fees for technical services, in respect of
amounts paid on or after the first day of January of the calendar year next following
that in which this Agreement enters into force ; (ii) in the case of other taxes, in respect of
taxes levied for periods beginning on or after the first day of January of the
calendar year next following that in which this Agreement enters into force ; (b) in the Republic of India : (i) in respect of income arising in any fiscal
year beginning on or after the first day of April following the calendar year
in which this Agreement enters into force ; (ii) in respect of capital which is held on the
last day of any fiscal year beginning on or after the first day of April
following the calendar year in which this Agreement enters into force. 3. Upon the entry into force of this Agreement, the Agreement
between the Government of the Federal
Republic of Germany and the Government of India for the Avoidance of Double
Taxation of Income signed on 18th March, 1959 and the Protocol amending the
Agreement between the Government of the
Federal Republic of Germany and the Government of India for the Avoidance of
Double Taxation of Income signed on 28th June, 1984, along with the Exchange of
Notes of the same date shall expire and shall cease to have effect as from the
date on which the provisions of this Agreement commence to have effect. ARTICLE 29 - Termination - This Agreement shall continue in
effect indefinitely but either of the Contracting States may, on or before the
thirtieth day of June, in any calendar year beginning after the expiration of a
period of five years from the date of its entry into force, give the other
Contracting State, through diplomatic channels, written notice of termination
and, in such event, this Agreement shall cease to have effect : (a) in the Federal Republic of Germany : (i) in the case of taxes withheld at source on
dividends, interest, royalties and fees for technical services, in respect of
amounts paid on or after the first day of January of the calendar year next
following that in which notice of termination is given ; (ii) in the case of other taxes, in respect of
taxes levied for periods beginning on or after the first day of January of the
calendar year next following that in which notice of termination is given, (b) in the Republic of India : (i) in respect of income arising in any fiscal
year beginning on or after the first day of April following the calendar year
in which the notice of termination is given ; (ii) in respect of capital which is held on the
last day of any fiscal year beginning on or after the first day of April
following the calendar year in which the notice of termination is given. In witness whereof the
undersigned being duly authorised thereto, have signed the present Agreement. Done at Bonn on June 19th, 1995
in two originals, each in the German, Hindi and English languages, all three
texts being authentic. In case of divergent interpretation of the German and
the Hindi texts, the English text shall prevail.
Protocol The Republic of India and the
Federal Republic of Germany have agreed at the signing at Bonn on 19th June,
1995 of the Agreement between the two States for the avoidance of double
taxation with respect to taxes on income and capital upon the following provisions
which shall form an integral part of the said Agreement. With reference to Article 7 1. (a) In the determination of the profits
of a building site or construction, assembly or installation project there
shall be attributed to that permanent establishment in the Contracting State in
which the permanent establishment is situated only the profits resulting from
the activities of the permanent establishment as such. If machinery or
equipment is delivered from the head office or another permanent establishment
of the enterprise (situated outside that Contracting State) or a third person
(situated outside the Contracting State) in connection with those activities or
independently therefrom there shall not be attributed to the profits of the
building site or construction, assembly or installation project the value of
such deliveries. (b) Income derived by a resident of a Contracting
State from planning, project, construction or research activities as well as
income from technical services exercised in that State in connection with a
permanent establishment situated in the other Contracting State, shall not be
attributed to that permanent establishment. (c) In respect of paragraph 1 of Article 7,
profits derived from the sale of goods or merchandise of the same or similar
kind as those sold, or from other business activities of the same or similar
kind as those effected, through that permanent establishment, may be
considered attributable to that permanent establishment if it is proved that : (i) this transaction has been resorted to in
order to avoid taxation in the Contracting State where the permanent establishment
is situated, and (ii) the permanent establishment in any way was
involved in this transaction. (d) It is understood that the deductions in
respect of the head office expenses as referred to in paragraph 3 of Article 7
shall in no case be less than those allowable under the Indian Income-tax Act
as on the date of entry into force of this Agreement. (e) No deduction shall be allowed in respect of
amounts paid or 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 : (i) royalties, fees or other similar payments in
return for the use of patents or other rights ; (ii) commission for specific services performed or
for management ; and (iii) interest on moneys lent to the permanent
establishment except in case of a banking institution. With reference to Article 8 2. For the purposes of Article 8, income from the operation of
ships includes income derived from the use, maintenance or rental of containers
(including trailers and related equipment for the transport of containers) in
connection with the transport of goods or merchandise in international traffic. With reference to Article 10 3. For the purpose of taxation in the Federal Republic of Germany,
the term dividends includes income derived by a sleeping partner (stiller
Gesellschafter) from his participation as such and distributions on
certificates of an investment fund or investment trust. For the purpose of taxation
in the Republic of India, any income of a similar kind will be treated alike. With reference to Articles 10
and 11 4. Notwithstanding the provisions of these Articles, dividends
and interest may be taxed in the Contracting State in which they arise, and
according to the law of that State, (a) if they are derived from rights or debt claims
carrying a right to participate in profits (including income derived by a
sleeping partner from his participation as such, from a partiarisches
Darlehen and from Gewinnobligationen within the meaning of the tax law of
the Federal Republic of Germany) and (b) under the condition that they are deductible
in the determination of profits of the debtor of such income. With reference to Article 13 5. In view of the position confirmed on behalf of the
Government of the Federal Republic of Germany that the Deutsche Investitionsund
Entwicklungsgesellschalt (DEG) is wholly owned by the Government of the
Federal Republic of Germany and is exempted from paying income-tax in Germany,
it is agreed that the long-term capital gains arising to the DEG due to alienation of shares in Indian
companies will be exempt from taxation in India. With reference to Article 23 6. (a) The
exemption provided for in sub-paragraph (a) of paragraph 1 of Article
23 is granted irrespective of whether the income or capital concerned is
effectively taxed in the Republic of India or not. (b) Where a company being a resident of the
Federal Republic of Germany distributes incomes derived from sources within
the Republic of India paragraph 1 of Article 23 shall not preclude the
compensatory imposition of corporation tax on such distributions in accordance
with the provisions of German tax law. (c) The Federal Republic of Germany shall avoid
double taxation by a tax credit as provided for in paragraph (1b) of Article
23, and not by a tax exemption under paragraph (1a) of Article 23, (aa) if in the Contracting States income is placed
under differing provisions of the Agreement or attributed to different persons
(other than under Article 9) and this conflict cannot be settled by procedure
pursuant to Article 25 and (i) if as a result of such placement or
attribution the relevant income would be subject to double taxation ; or (ii) if as a result of such placement or
attribution the relevant income would remain untaxed or be subject only to inappropriately
reduced taxation in the Republic of India and would (but for the application of
this paragraph) remain exempt from tax in the Federal Republic of
Germany ; or (bb) if the Federal Republic of Germany has, after
due consultation and subject to the limitations of its internal law, notified
the Republic of India through diplomatic channels of other items of income to
which it intends to apply this paragraph in order to prevent the exemption of
income from taxation in both Contracting States or other arrangements for the
improper use of the Agreement. In the case of a notification
under sub-paragraph (bb), the Republic of India may, subject to notification
through diplomatic channels, characterise such income under the Agreement
consistently with the characterisation of that income by the Federal Republic
of Germany. A notification made under this paragraph shall have effect only
from the first day of the calendar year following the year in which it was
transmitted and any legal prerequisites under the domestic law of the notifying
State for giving it effect have been fulfilled. With reference to Article 26 7. (a) It is also understood that in relation to
the Agreement, the term information shall include documents. It is further
understood that the German tax law provides for the transmission of information
in terms of paragraph 3 of Article 117 of the Fiscal Code (Abgabenordnung) -
upon request - and it would be possible to furnish information to the competent
authority in the Republic of India under these provisions irrespective of this
Article. (b) If personal data is exchanged under this
Article, the following additional provisions shall apply subject to the domestic
laws of each Contracting State : (i) The data supplying Contracting States shall
be responsible for the accuracy of the data they supply. If it emerges that
inaccurate data or data which should not have been supplied have been
communicated, the receiving State shall be notified of this without delay. That
State shall be obliged to correct or destroy said data; (ii) The Contracting States shall be obliged to
keep official records of the transmission and receipt of personal data ; (iii) The Contracting States shall be obliged to
take effective measures to protect the personal data communicated against
unauthorised access, unauthorised alteration and unauthorised
disclosure ; (iv) Upon application, the person concerned shall be
informed of the information stored about him and of the use planned to be made
of it. There shall be no obligation to give this information if on balance it
appears that the public interest in withholding if outweighs the interest of
the person concerned in receiving it. In all other respects, the right of the
person concerned to be informed of the data stored about him shall be governed
by the domestic law of the Contracting State in whose sovereign territory the
application for the information is made. Done at Bonn on 19th June, 1995
in two originals, each in the German, Hindi and English languages, all three
texts being authentic. In case of divergent interpretation of the German and
the Hindi text, the English text shall prevail. Judicial analysis See the following cases
dealing with old agreements :
n Words subject to the provisions of paragraph
(3) in article III(1) of Double Taxation Avoidance Agreement (between Federal
Republic of Germany and India) would indicate that while industrial or commercial
income of the foreign enterprise are not taxable in India, the rents,
royalties, interests, dividends, etc., derived by the foreign enterprise from
sources in India are taxable - CIT v.Visakhapatnam Port Trust
[1983] 144 ITR 146 (AP).
n Words any other form of indebtedness from
sources in the other territory could only mean interest arising or accruing as
a separate source of income -CIT v.Visakhapatnam Port Trust
[1983] 144 ITR 146 (AP).
n Mere supply of a plant by a foreign company whose
assembly and erection are undertaken by purchaser under supervision of engineer
deputed by supplier does not amount to foreign company having a permanent
establishment - CIT v.Visakhapatnam Port Trust [1983] 144 ITR
146 (AP).
n A sub-contractor cannot be treated as an agent
within meaning of article II(1)(i)(dd) of Double Taxation
Avoidance Agreement between Federal Republic of Germany and India - CIT v.Visakhapatnam
Port Trust [1983] 144 ITR 146 (AP).
n Where supplier of machinery had a permanent
establishment in Germany where press was manufactured and certain services were
rendered in connection with setting up of that press in India, this could not
be treated as personal service in any way even if agreement for rendering
service was embodied in a separate agreement; as such in view of agreement for
avoidance of double taxation between Germany and India, tax was not deductible
at source from amount paid to German company for such services - Andrew Yule
& Co. Ltd. v. CIT [1994] 207 ITR 899 (Cal.).
n Fees for technical services is industrial or
commercial profit and, therefore, would be entitled to exemption as per article
III of DTA between India and Germany - AEG Telefunken v. CIT
[1998] 233 ITR 129/101 Taxman 109 (Kar.). n In case of a
non-resident, who is a resident of Germany, income arising to him in India by
way of royalties or technical charges could be taxed in IndiaDy. CIT v.
UHDE GmbH [1996] 54 TTJ (Bom. - Trib.) 355. n Expression
laws in force occurring in Article XVI, para 1 of Agreement for Avoidance of
Double Taxation between India and Federal German Republic, must mean the laws
in force at the time the construction of a term is to be done and the term is
not restricted to the law in force at the time of execution of the AgreementITO
v. Leonhardt Andra UND Partner [1987] 21 ITD 607 (Cal. - Trib.). n Where assessee
German resident had adopted calendar year for his assessment in Germany, for
purpose of assessment of his income in India also, same should be taken as
previous year in view of article II(1)(g) of Agreement for Avoidance of
Double Taxation between Germany and India and financial year could not be taken
as previous year on ground that he did not maintain accountsM.G.K. Blum v.
Second ITO [1984] 7 ITD 643 (Bang. - Trib.). n Where assessee
was not concerned with actual installation of plant but mere supervision of same, which was not same thing as
installation of project, assessee could not be said to be having a permanent
establishment in India within the meaning of article II(1)(h)(cc)
of AADT between Germany and IndiaUDHE GmbH v. Dy. CIT [1997] 57
TTJ (Mum. - Trib.) 447. n Where under
supply and service agreement with Indian company for establishing a
fertiliser project, assessee, a West
German company, purchased bulk material for Indian company and charged from
Indian company cost plus 4 per cent as procurement fee, procurement fee
was not assessable as royalty and fee for technical services but was to be
treated as industrial and commercial profit which was not taxable in view of
Double Taxation Agreement between India and West GermanyLinde A.G. v.
ITO [1997] 62 ITD 330 (Mum. - Trib.). n There is no
merit in contention that only that amount of royalty that was derived from the
operation of a mine, quarry, or any other extraction of natural resources as
stated in article IX of the Double Taxation Avoidance Agreement alone was to be
excluded from industrial and commercial profits and there being no provision
for exclusion of other kinds of royalties, any other receipt of royalty was
not subject to taxation. As provided in article XVI(I), the law of respective
States shall apply unless contrary is provided in the DTA. It means that if
there was no provision for the treatment to be given to the royalty, other than
the royalty under Article IX of the DTA, the same would be subject to Indian
taxation and taxable in India under section 9(1)(viii) of the Act. DTA
does not provide that any receipt, which does not fall in any of the clauses,
would be taxable under the Income-tax Act or would be excluded from the purview
of Indian taxationG.U.J. Jaeger GmbH v. ITO [1991] 37 ITD 64
(Bom. - Trib.). n The contention
that the consideration pertaining to the provision of recurring know-how would
also be a part of industrial and commercial profits has no force. It would be
in the nature of royalty and there being a specific exclusion of royalty from
the definition of industrial and commercial profits, by Article III(3) of
DTA, it would not enjoy the exemption on the ground that the assessee had no
permanent establishment in IndiaG.U.J. Jaeger GmbH v. ITO [1991]
37 ITD 64 (Bom. - Trib.). n Rendering of
consultancy service in India by non-resident in connection with industrial
project would not amount to doing industrial or commercial activity within
meaning of Double Taxation Avoidance Agreement between Federal Republic of
Germany and India so as to make section 195 inapplicable to payments made by
assessee to non-residentGujarat Narmada Valley Fertilisers Co. Ltd. v.
ITO [1982] 2 ITD 515 (Ahd.).
n Under no circumstances executive authority can
make an item of income as of taxable nature with retrospective effect if the
same is not provided in the protocol - Tata Iron & Steel Co. Ltd. v.
Dy. CIT [1990] 100 Taxman 51 (Mag.)/62 TTJ (Mum.) 17. n Words subject
to the provisions of paragraph (3) in article III(1) of Double Taxation
Avoidance Agreement (between Federal Republic of Germany and India) would
indicate that while industrial or commercial income of the foreign
enterprise are not taxable in India, the rents, royalties, interest, dividends,
etc., derived by the foreign enterprise from sources in India are taxableCIT
v. Visakhapatnam Port Trust [1983] 144 ITR 146 (AP). n Words any
other form of indebtedness from sources in the other income could only mean
interest arising or accruing as a separate source of incomeCIT v.
Visakhapatnam Port Trust [1983] 144 ITR 146 (AP). n Mere supply of
a plant by a foreign company whose assembly and erection are undertaken by
purchaser under supervision of engineer deputed by supplier does not amount to
foreign company having a permanent establishmentCIT v.
Visakhapatnam Port Trust [1983] 144 ITR 146 (AP). n A
sub-contractor cannot be treated as an agent within meaning of article II(I)(i)(dd)
of Double Taxation Avoidance Agreement between Federation Republic
of Germany and IndiaCIT v. Visakhapatnam Port Trust [1983]
144 ITR 146 (AP). n Where supplier
of machinery had a permanent establishment in Germany where press was
manufactured and certain services were rendered in connection with setting up
of that press in India, this could not be treated as personal service in any
way even if agreement for rendering service was embodied in a separate agreement;
as such in view of agreement for avoidance of double taxation between Germany
and India, tax was not deductible at source from amount paid to German company
for such servicesAndrew Yule & Co. Ltd. v. CIT [1994] 207
ITR 899 (Cal.). n Amendment to 1959/60 DTAA between India
and Federal Republic of Germany by GSR No. 680(E), dated 26-8-1985 could not be
made effective from 1-4-1984Tata
Iron & Steel Co. Ltd. v. Dy. CIT [1998] 100 Taxman 51 (Mum. -
Trib.) (Tax. Mag.).
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