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UK 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
India. Notification : No.
GSR 91(E), dated 11-2-1994. Annexure Convention between the Government of the republic of
India and 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 United Kingdom : (i) the income-tax; (ii) the corporation tax; (iii) the capital gains tax; and (iv) the petroleum revenue tax; (hereinafter
referred to as United Kingdom tax); (b) in India; 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 Contracting State after the date of signature of
this Convention in addition to, or in place of, the taxes of that Contracting
State referred to in paragraph 1 of this Article. The competent authorities of
the Contracting States shall notify each other of any substantial changes which
are made in their respective taxation laws. ARTICLE
3 - General definitions - 1. In this Convention, unless the context
otherwise requires : (a) the term United Kingdom means Great Britain
and Northern Ireland; (b) the term India means the Republic of India; (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 United Kingdom, the
Commissioners of Inland Revenue or their authorised representative, and in the
case of India, the Central Government in the Ministry of Finance (Department of
Revenue) or their authorised representative;
(j) the term international
traffic means any transport by a ship or aircraft operated by an enterprise of
a Contracting State except when the ship or aircraft is operated solely between
places in the other Contracting State;
(k) the term
Government means the Government of a Contracting State or a political
sub-division or local authority thereof. In relation to the United Kingdom, the
term political sub-division shall include Northern Ireland. 2. A
partnership which is treated as a taxable unit under the Income-tax Act, 1961
(43 of 1961) of India shall be treated as a person for the purposes of this
Convention. 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 Contracting States, then his status shall be determined in
accordance with the following rules :
(a) he shall be deemed
to be a resident of the Contracting State in which he has a permanent home
available to him. If he has a permanent home available to him in both
Contracting State, he shall be deemed to be a resident of the Contracting State
with which his personal and economic relations are closer (centre of vital
interests) ;
(b) if the Contracting
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 Contracting State, he
shall be deemed to be a resident of the Contracting State in which he has an
habitual abode;
(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 Contracting State of which he is a national;
(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 Contracting State in which its place of effective
management is situated. ARTICLE
5 - Permanent establishment - 1. For the purposes of this
Convention, the term permanent establishment means a fixed place of business
through which the business of 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 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 companys 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 Articles 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 companys
undistributed profits to a tax on the companys 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 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 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
definitions 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
moneys 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 residents 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 Exports 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) section 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
State, of which he is a resident. 2. The
competent authority shall endeavour, if the objection appears to it to be
justified and if it is not itself able to arrive at an appropriate solution, to
resolve the case by mutual agreement with the competent authority of the other
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 6 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 Excellencys 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 Excellencys 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 Excellencys 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 Excellencys 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 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 1-4-1992Arabian
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 applicableCIT
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 assesseeDy. 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 onlyBorhat Tea Co. Ltd. v. ITO [1990] 33 ITD 9 (Cal.) (SMC)
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