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Canada 8. Canada - Agreement for advoidance of double
taxation of income and the prevention of fiscal evasion with Canada Whereas
the agreement between the Government of the Republic of India and the
Government of Canada stated in Annexure below for the avoidance of double
taxation and for the prevention of fiscal evasion with respect to taxes on
income and on capital has entered into force on the 6th May, 1997, after the
notification by both the Contracting States of the completion of the procedures
required under their laws for bringing into force of the said agreement in
accordance with Article 29 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 28(E), dated 15-1-1998.*
Annexure Agreement Between the
Government of the Republic of India and the The
Government of the Republic of India and the Government of Canada desiring to
conclude an Agreement for the avoidance of double taxation and the prevention
of fiscal evasion with respect to taxes on income and on capital, have agreed
as follows : I. Scope of the Agreement 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 each Contracting State, irrespective of the manner 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. 3. The
existing taxes to which the Agreement shall apply are in particular : (a) in the case of Canada : the
taxes imposed under the Income-tax Act of Canada, (hereinafter
referred to as Canadian tax); (b) in the case of India : (i) the income-tax including any surcharge
thereon imposed under the Income-tax Act; (ii) the wealth-tax imposed under the Wealth-tax
Act; (hereinafter
referred to as Indian tax). 4. The
Agreement shall apply also to any identical or substantially similar taxes
which are imposed by either Contracting State after the date of signature of
this Agreement in addition to, or in place of, the existing taxes. 5. At
the end of each year, the Contracting States shall notify each other of any
significant changes which have been made in their respective taxation laws
which are the subject of this Agreement. II. Definitions Article 3 : General
definitions - 1. In this
Agreement, unless the context otherwise requires : (a) the term Canada used in a geographical
sense, means the territory of Canada, including any area beyond the territorial
seas of Canada which, in accordance with international law and the laws of
Canada, is an area within which Canada may exercise rights with respect to the
sea-bed and subsoil and their natural resources; (b) the term India used in a geographical sense,
means the territory of India, including any area beyond the territorial seas of
India which, in accordance with international law and the laws of India, is an
area within which India may exercise rights with respect to the sea-bed and
subsoil and their natural resources; (c) the terms a Contracting State and the
other Contracting State mean, as the context requires, Canada or India; (d) the term person includes an individual, a
partnership, a company and any other entity (including a trust) which is
treated as a taxable unit under the taxation laws of a Contracting State; (e) the term company means any body
corporate or any entity which is treated as a company or a body corporate under
the taxation laws of a Contracting State; (f) 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; (g) the term competent authority means : (i) in the case of Canada, the Minister of
National Revenue or his authorised representative; (ii) in the case of India, the Central Government
in the Ministry of Finance (Department of Revenue) or its authorised
representative; (h) the term national means : (i) any individual possessing the nationality of
a Contracting State; (ii) any legal person, partnership and association deriving its status as such from
the law in force in a Contracting State; (i) the term tax means Canadian tax or Indian
tax, as the context requires, but shall not include any amount payable in
respect of any default or omission in relation to the said taxes or which
represent a penalty imposed relating to those taxes; (j) the term international traffic means any voyage of a ship or
aircraft operated by an enterprise of a Contracting State, except where the
principal purpose of the voyage is to transport passengers or goods between
places in the other Contracting State. As
regards the application of the Agreement by a Contracting State, any term not
defined in this Agreement shall, unless the context otherwise requires, have
the meaning which it has under the laws of that Contracting State relating to
the taxes which are the subject of the Agreement. Article 4 : Residence - 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 other criterion
of a similar nature. 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 in accordance with the
following rules : (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
(hereinafter referred to as his 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. Whereby
reason of the provisions of paragraph 1, a person other than an individual is a
resident of both Contracting States, the competent authorities of the
Contracting States shall by mutual agreement endeavour to settle the question.
In the absence of such agreement, such person shall not be considered to be a
resident of either Contracting State for the purposes of enjoying benefits
under the Agreement. 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 shall include especially : (a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; (f) a mine, an oil or gas well, a quarry or any
other place of extraction of natural resources; (g) a warehouse, in relation to a person providing
storage facilities for others; (h) a farm, plantation or other place where
agriculture, forestry, plantation or related activities are carried on; (i) a store or premises used as a sales outlet; (j) an installation or structure used for the
exploration or exploitation of natural resources, but only if so used for a
period of more than 120 days in any twelve-month period; (k) a building site or construction, installation
or assembly project or supervisory activities in connection therewith, where
such site, project or activities (together with other such sites, projects or
activities, if any) continue for a period of more than 120 days in any
twelve-month period; (l) the furnishing of services other than included
services as defined in Article 12, within a Contracting State by an enterprise
through employees or other personnel, and only if : (i) activities of that nature continue within
that State for a period or periods aggregating to more than 90 days within any
twelve-month period; or (ii) the services are performed within that State
for a related enterprise (within the meaning of paragraph 1 of Article 9). 3.
Notwithstanding the preceding provisions of this Article, the term permanent
establishment shall be deemed not to include any one or more of the following
: (a) the use of facilities solely for the purpose
of storage, display, or occasional 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 occasional 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 advertising, for the supply of information, for
scientific research or for other activities which have a preparatory or
auxiliary character, for the enterprise. 4.
Notwithstanding the provisions of paragraphs 1 and 2, where a person - other
than an agent of an independent status to whom paragraph 5 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 : (a) he has and habitually exercises in the
first-mentioned State an authority to conclude contracts on behalf of the enterprise,
unless his activities are limited to those mentioned in paragraph 3 which, if
exercised through a fixed place of business, would not make that fixed place
of business a permanent establishment under the provisions of that paragraph; (b) he 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,
and some additional activities conducted in that State on behalf of the
enterprise have contributed to the sale of the goods or merchandise; or (c) he habitually secures orders in the
first-mentioned State, wholly or almost wholly for the 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, provided that such persons are acting in
the ordinary course of their business. However, when the activities of such an
agent are devoted wholly or almost wholly on behalf of that enterprise and the
transactions between the agent and the enterprise are not made under arms
length conditions, he shall not be considered an agent of independent status
within the meaning 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. III. Taxation of Income Article 6 : Income from
immovable property - 1. Income from immovable property (including income
from agriculture or forestry) may be taxed in the Contracting State in which
such property is situated. 2. For
the purposes of this Agreement, the term immovable property shall be defined
in accordance with the law and usage 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 and aircraft shall not be regarded as immovable property. 3. The
provisions of paragraph 1 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 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 or has carried 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 : (a) that permanent establishment, and (b) sales of goods and 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. 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. In any case, where the correct amount of profits attributable to
a permanent establishment is incapable of determination or the ascertainment
thereof presents exceptional difficulties, the profits attributable to the
permanent establishment may be estimated on a reasonable basis provided that
the result shall be in accordance with the principles laid down in this
Article. 3. In the
determination of the profits of a permanent establishment, there shall be
allowed those deductible expenses which are incurred for the purposes of the
business of the permanent establishment, including executive and general
administrative expenses, whether incurred in the State in which the permanent
establishment is situated or elsewhere as are in accordance with the provisions
of and subject to the limitations of the taxation laws of that State. However,
no such deduction shall be allowed in respect of amounts, if any, paid (otherwise
than as a 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,
know-how or other rights, or by way of commission or other charges, for
specific services performed or for management, or, except in the case of a
banking enterprise, by way of interest on moneys lent to the permanent
establishment. Likewise, no account shall be taken in the determination of the
profits of a permanent establishment, for amounts charged (otherwise than towards reimbursement of actual expenses),
by the permanent establishment to the head office of the enterprise or any of
its other offices, by way of royalties, fees or other similar payments in
return for the use of patents, know-how or other rights, or by way of
commission or other charges for specific services performed or for management,
or, except in the case of a banking enterprise, by way of interest on moneys
lent to the head office of the enterprise or any of its other offices. 4.
Subject to the provisions of paragraph 3, insofar as it has been customary in a
Contracting State to determine the profits to be attributed to a permanent
establishment on the basis of an apportionment of the total profits of the
enterprise to its various parts, nothing in paragraph 2 shall preclude that Contracting
State from determining the profits to be taxed by such an apportionment as may
be customary; the method of apportionment 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 derived by an enterprise of a
Contracting State from the operation by
that enterprise of ships or aircraft in international traffic shall be taxable
only in that State. 2.
Notwithstanding the provisions of paragraph 1 and of Article 7, profits derived
by an enterprise of a Contracting State from a voyage of a ship or aircraft
where the principal purpose of the voyage is to transport passengers or
property between places in the other Contracting State may be taxed in that
other State. 3. For
the purposes of this Article, profits from the operation of ships or aircraft
in international traffic shall mean profits derived by an enterprise described
in paragraph 1 from the transportation by sea or air respectively of
passengers, mail, livestock or goods carried on by owners or lessees or
charterers of ships or aircraft including : (a) the sale of tickets for such transportation on
behalf of other enterprises; (b) other activity directly connected with such
transportation; and (c) the rental of ships or aircraft incidental to
any activity directly connected with such transportation. 4.
Profits of an enterprise of a Contracting State described in paragraph 1 from
the use, maintenance, or rental of containers (including trailers, barges, and related
equipment for the transport of containers) used in connection with the
operation of ships or aircraft in international traffic shall be taxable only
in that State. 5. The
provisions of paragraphs 1 and 4 shall also apply to profits from participation
in a pool, a joint business, or an international operating agency. 6. 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. 7. The
provisions of this Article shall not apply to a drilling rig or any vessel the principal function of which is the performance
of activities other than the transportation of goods or passengers. Article 9 : 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 differ from those which would be made
between independent enterprises, then any income 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 income of that
enterprise and taxed accordingly. 2. Where
a Contracting State includes in the income of an enterprise of that State -
and taxes accordingly - income on which an enterprise of the other Contracting
State has been charged to tax in that other State and the income so included is
income 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 that
income. In determining such adjustment, due regard shall be had to the other provisions
of this Agreement and the competent authorities of the Contracting States
shall if necessary consult each other. 3. A
Contracting State shall not change the income of an enterprise in the
circumstances referred to in paragraph 1 after the expiry of the time-limits
provided in its national laws and, in any case, after five years from the end
of the year in which the income which would be subject to such charge would,
but for the conditions referred to in
paragraph 1, have accrued to that enterprise. 4. The
provisions of paragraphs 2 and 3 shall not apply in the case of fraud, wilful
default or neglect. 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 : (a) 15 per cent of the gross amount of the
dividends if the beneficial owner is a company which controls directly or indirectly
at least 10 per cent of the voting power in the company paying the dividends; (b) 25 per cent of the gross amount of the
dividends in all other cases. 3. The
provisions of paragraphs 1 and 2 shall not affect the taxation of the company
on the profits out of which the dividends are paid. 4. The
term dividends as used in this Article means income from shares or other rights, not being debt-claims, participating
in profits, as well as income assimilated to income from shares by the taxation
law of the State of which the company making the distribution is a resident. 5. 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. 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
dividends paid by the company, except insofar as such dividends are paid to be
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 the 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 15 per cent of the
gross amount of the interest. 3.
Notwithstanding the provisions of paragraph 2, (a) interest arising in a Contracting State and
paid to a resident of the other Contracting State shall be exempt from tax in
the first-mentioned State if : (i) the payer
of the interest is the Government of that Contracting State or of a
political sub-division or local authority thereof; (ii) the beneficial owner of the interest is the
central bank of the other Contracting State; or (iii) the interest is paid to an agency or
instrumentality (including a financial institution) which may be agreed upon
in letters exchanged between the competent authorities of the Contracting
States. (b) (i) interest arising in India and paid to a
resident of Canada shall be taxable only in Canada if it is paid in respect of
a loan made, guaranteed or insured, or a credit extended, guaranteed or insured
by the Export Development Corporation; or (ii) interest arising in Canada and paid to a
resident of India shall be taxable only in India if it is paid in respect of a
loan made, guaranteed or insured, or a credit extended, guaranteed or insured
by the Export-Import Bank of India (Exim Bank). 4. The
term interest as used in this Article means income from debt-claims of every
kind, whether or not secured by mortgage, and in particular, income from
Government securities and income from bonds or debentures, including premiums
and prizes attaching to such securities, bonds or debentures, as well as
income assimilated to income from money lent by the taxation laws of the State
in which the income arises. However, the term interest does not include income
dealt with in Article 8 or in Article 10. 5. The
provisions of paragraphs 1 and 2 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 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 law of each Contracting State, due regard
being had to the other provisions of this Agreement. Article 12 : Royalties
and fees for included services - 1.
Royalties and fees for included 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 included services may also be taxed in the
Contracting State in which they arise and according to the laws of that State;
but if the beneficial owner of the royalties or fees for included services is a
resident of the other Contracting State, the tax so charged shall not exceed : (a) in the case of royalties referred to in
sub-paragraph (a) of paragraph 3 and fees for included services as
defined in this Article (other than services described in sub-paragraph (b)
of this paragraph) : (i) during the first five taxable years for which
this Agreement has effect, (A) 15 per cent of the gross amount of the
royalties or fees for included services as defined in this Article, where the
payer of the royalties or fees is the Government of that Contracting State, a
political sub-division or a public sector company; and (B) 20 per cent of the gross amount of the
royalties or fees for included services in all other cases; and (ii) during the subsequent years, 15 per cent of
the gross amount of the royalties or fees for included services; and (b) in the case of royalties referred to in
sub-paragraph (b) of paragraph 3 and fees for included services as
defined in this Article that are ancillary and subsidiary to the enjoyment of
the property for which payment is received under paragraph 3(b) of this
Article, 10 per cent of the gross amount of the royalties or fees for included
services. 3. The
term royalties as used in this Article means : (a) payment 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 cinematograph films or work on film
tape or other means of reproduction for use in connection with radio or
television broadcasting, any patent, trademark, design or model, plan, secret
formula or process, or for information concerning industrial, commercial or scientific
experience, including gains derived from the alienation of any such right or
property which are contingent on the productivity, use, or disposition
thereof; 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 payments derived by an enterprise described in paragraph
1 of Article 8 from activities described in paragraph 3(c) or 4 of
Article 8. 4. For
the purposes of this Article, fees for included services means payments of
any kind to any person in consideration for the rendering of any technical or
consultancy services (including through the provision of services of technical
or other personnel) if such services : (a) are ancillary and subsidiary to the
application or enjoyment of the right, property or information for which a
payment described in paragraph 3 is received; or (b) 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.
Notwithstanding paragraph 4, fees for included services does not include
amount paid : (a) for services that are ancillary and
subsidiary, as well as inextricably and essentially linked, to the sale of
property other than a sale described in paragraph 5(a); (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 personal 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 firm of individuals (other than a company) for
professional services as defined in Article 14. 6. The
provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the
royalties or fees for included services, being a resident of a Contracting
State, carries on business in the other Contracting State in which the
royalties or the fees for included 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 included services are
paid is effectively connected with such permanent establishment or fixed base.
In such a case the provisions of Article 7 or Article 14, as the case may be,
shall apply. 7.
Royalties and fees for included services 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 royalties or the fees for included 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 pay the royalties or the fees for included services was incurred, and such
royalties or fees for included services are borne by that permanent
establishment or fixed base, then such royalties or fees for included services
shall be deemed to arise in the Contracting State in which the permanent
establishment or fixed base is situated. 8. Where
by reason of a special relationship between the payer and the beneficial owner
or between both of them and some other person, the amount of the royalties or
fees for included services, having regard to the use, right, information or
services for which they are paid, exceeds the amount which would have been
agreed upon by the payer and the beneficial owner in the absence of such
relationship, the provisions of this Article shall apply only to the last
mentioned amount. In 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 Agreement. Article 13 : Capital
gains - 1. Gains
from the alienation of ships or aircraft operated in international traffic by
an enterprise of a Contracting State and movable property pertaining to the
operation of such ships or aircraft, shall be taxable only in that State. 2. Gains
from the alienation of any property, other than those referred to in paragraph
1 may be taxed in both Contracting States. Article 14 : Independent
personal services - 1. Income
derived by an individual or a firm of individuals (other than a company) who is
a resident of a Contracting State in respect of professional services or other
independent activities of a similar character shall be taxable only in that
State. However, in the following circumstances, such income may be taxed in the
other Contracting State, that is to say : (a) if he has or had 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 Contracting State; or (b) if his stay in the other Contracting State is
for a period or periods amounting to or exceeding in the aggregate 183 days in
the relevant fiscal year; or (c) if the remuneration for the services in the
other Contracting State is either derived from residents of that other
Contracting State or is borne by a permanent establishment which a person not
resident in that other Contracting State has in that other Contracting State
and such remuneration exceeds two thousand five hundred Canadian dollars ($2,500)
or its equivalent in Indian currency in the relevant fiscal year. 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 and 19, 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, 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
Contracting State for a period or periods not exceeding in the aggregate 183
days in the relevant fiscal year; (b) the remuneration is paid by, or on behalf of,
an employer who is not a resident of the other State; and (c) the remuneration is not borne by a permanent
establishment or a fixed base which the employer has in the other State. 3.
Notwithstanding the preceding provisions of this Article, remuneration in
respect of an employment exercised aboard a ship or aircraft operated in
international traffic by an enterprise of a Contracting State, may be based in
that State. Article 16 : Directors
fees - Directors fees and
other similar payments derived by a resident of a Contracting State in his
capacity as a member of the board of directors or a similar capacity of a
company which is a resident of the other Contracting State may be taxed in that
other State. Article 17 : Artistes
and athletes - 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 an athlete, 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 in a Contracting State by an
entertainer or an athlete accrues not to the entertainer or athlete himself but
to another person which provides the activities in that State, that income may,
notwithstanding the provisions of Articles 7, 14 and 15, be taxed in that
Contracting State unless the entertainer, athlete, or other person establishes
that neither the entertainer or athlete nor persons related thereto participate
directly or indirectly in the profits of that other person in any manner,
including the receipt of deferred remuneration, bonuses, fees, dividends,
partnership distributions, or other
distributions. 3. The
provisions of paragraphs 1 and 2 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 any political sub-division, local authority or statutory body of that
other State. Article 18 : Pensions - 1. Pensions arising in a
Contracting State shall be taxable only in that State. 2.
Pensions 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. Article 19 : Government
service - 1. (a)
Salaries, wages and similar remuneration, other than a pension, paid by a
Contracting State or a political sub-division or a local authority thereof to
an individual in respect of services rendered to that State or sub-division or
authority, in any other State (including the other Contracting State) shall be
taxable only in the first-mentioned State. (b)
However, such salaries, wages or similar remuneration shall be taxable only in
the other Contracting State if the services are rendered in that other State
and the individual is a resident of that other State who : (i) is a national of that other State ; or (ii) did not become a resident of that other State
solely for the purpose of rendering the services. 2. The
provisions of paragraph 1 shall not apply to salaries, wages and similar
remuneration in respect of services rendered in connection with a business
carried on by a Contracting State or a political sub-division or a local
authority thereof. Article 20 : Students
and apprentices - Payments
which a student, apprentice or business trainee who is, or was immediately
before visiting a Contracting State, a resident of the other Contracting State
and who is present in the first-mentioned State solely for the purpose of his
education or training receives for the purpose of his maintenance, education or
training shall not be taxed in the first-mentioned State, provided that such
payments are made to him from sources outside that State. 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 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 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 paragraphs 1 and 2, items of income of a
resident of a Contracting State not dealt with in the foregoing Articles, and
arising in the other Contracting State, may be taxed in that other State.
However, in the case of income derived from an estate or a trust (other than a
trust to which contributions were deductible for tax purposes), the tax so
charged shall, provided that the income is taxable in the Contracting State in
which the beneficiary is a resident, not exceed 15 per cent of the gross amount
of the income. IV. Taxation Of Capital Article 22 : Capital - 1. Capital represented by ships
and aircraft operated by a resident of a Contracting State in international traffic
and by movable property pertaining to the operation of such ships and aircraft,
shall be taxable only in that state. 2. All
other elements of capital of a resident of a Contracting State may be taxed in
both Contracting States. V. Methods For Prevention Of Double Taxation Article 23 : Elimination
of double taxation - 1. The
laws in force in either of the Contracting States will continue to govern the
taxation of income in the respective Contracting States except where provisions
to the contrary are made in this Agreement. 2. In the
case of Canada, double taxation shall be avoided as follows : (a) Subject to the existing provisions of the law
of Canada regarding the deduction from tax payable in Canada of tax paid in a
territory outside Canada and to any subsequent modification of those provisions
- which shall not affect the general principle hereof - and unless a greater
deduction or relief is provided under the laws of Canada, tax payable in India
on profits, income or gains arising in India shall be deducted from any
Canadian tax payable in respect of such profits, income or gains. (b) Subject to the existing provisions of the law
of Canada regarding the determination of the exempt surplus of a foreign
affiliate and to any subsequent modification of those provisions - which shall
not affect the general principle hereof - for the purpose of computing Canadian
tax, a company which is a resident of Canada shall be allowed to deduct in
computing its taxable income any dividend received by it out of the exempt
surplus of a foreign affiliate which is a resident of India. (c) Where a resident of Canada owns capital which,
in accordance with the provisions of the Agreement may be taxed in India,
Canada shall allow as a deduction from the tax on capital of that resident an
amount equal to the capital tax paid in India. Such deduction shall not,
however, exceed that part of the capital tax (as computed before the deduction
is given) which is attributable to the capital which may be taxed in India. (d) Where in accordance with any provision of the
Agreement, income derived or capital owned by a resident of Canada is exempt
from tax in Canada, Canada may nevertheless, in calculating the amount of tax
on the remaining income or capital of such resident, take into account the
exempted income or capital. 3. In the
case of India, double taxation shall be avoided as follows : (a) The amount of Canadian tax paid, under the
laws of Canada and in accordance with the provisions of the Agreement, whether
directly or by deduction, by a resident of India, in respect of income from
sources within Canada which has been subjected to tax both in India and Canada
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. (b) Where a resident of India owns capital, which,
in accordance with the provisions of the Agreement, may be taxed in Canada,
India shall allow as a deduction from the tax on the capital of that resident
an amount equal to the capital tax paid in Canada. Such deduction shall not,
however, exceed that part of the capital tax (as computed before the deduction
is given) which is attributable to the capital which may be taxed in Canada : Provided
that income which in accordance with the provisions of the Agreement is not to
be subjected to tax may be taken into account in calculating the rate of tax
imposed. 4. For
the purposes of paragraph 2(a), the term tax payable in India shall,
with respect to a company which is a resident of Canada, be deemed to include
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 under : (a) sections 10(15)(iv), 10A, 32A
(but not the part dealing with ships and aircraft), 80HH, 80HHD and 80-IA (but
not the part dealing with ships) of the Income-tax Act, 1961, as amended, so
far as they were in force on and have not been modified since the date of
signature of the Agreement, or have been modified only in minor respects so as
not to affect their general character. (b) any other provision which may subsequently be
made 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, if it has not been modified thereafter or has been modified
only in minor respects so as not to affect its general character : Provided that relief from
Canadian tax shall not be given by virtue of this paragraph in respect of
income from any source if the income relates to a period starting more than ten
fiscal years after the exemption from, or reduction of, Indian tax is first
granted to the resident of Canada, in respect of that source. 5. For
the purposes of this Article, profits, income or gains of a resident of a
Contracting State which are taxed in the other Contracting State in accordance
with the Agreement shall be deemed to arise from sources in that other State. VI. Special Provisions 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 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 favourably levied in that
other State than the taxation levied on enterprises of that other State
carrying on the same activities. 3.
Nothing in this Article shall be construed as obliging a Contracting State to
grant to residents of the other Contracting State any personal allowances,
reliefs and reductions for taxation purposes on account of civil status or
family responsibilities which it grants to its own residents. 4. (a)
Nothing in this Agreement shall be construed as preventing Canada from
imposing on the earnings of a company, which is a resident of India,
attributable to a permanent establishment in Canada, a tax in addition to the
tax which would be chargeable on the earnings of a company which is a national
of Canada, provided that any additional tax so imposed shall not exceed the
rate specified in sub-paragraph 2(a) of Article 10 of the amount of such
earnings which have not been subjected to such additional tax in previous
taxation years. For the purpose of this provision, the term earnings means
the profits attributable to a permanent establishment in Canada in a year and
previous years after deducting therefrom all taxes, other than the additional
tax referred to herein, imposed on such profits by Canada. The
provisions of this sub-paragraph shall also apply with respect to earnings from
the disposition of immovable property situated in Canada by a company carrying
on a trade in immovable property without a permanent establishment in Canada
but only insofar as these earnings may be taxed in Canada under the provisions
of Article 6 or paragraph 2 of Article 13. (b)
A company which is a resident of Canada may be subject to tax in India at a
rate higher than that applicable to Indian domestic companies. The difference
in tax rate shall not, however, exceed 15 percentage points. 5.
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, the capital of which, wholly or
partly owned or controlled, directly or indirectly, by one or more residents
of a third State, are or may be subjected. 6. In
this Article, the term taxation means taxes which are the subject of this
Agreement. Article 25 : Mutual
agreement procedure - 1. Where
a resident of a Contracting State 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 in
writing to the competent authority of the Contracting State of which he is a
resident. The case must be presented within two years from the first
notification of the action which gives rise to taxation not in accordance with
the Agreement. 2. The
competent authority referred to in paragraph 1 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 the Agreement. 3. The
competent authorities of the Contracting States shall endeavour to resolve by
mutual agreement any difficulties or doubts arising as to the interpretation or
application of the Agreement. 4. The
competent authorities of the Contracting States may consult together for the
elimination of double taxation in cases not provided for in the Agreement. Article 26 : Exchange
of information - 1. The
competent authorities of the Contracting States shall exchange such information
as is necessary for the carrying out of this Agreement or of the domestic laws
of the Contracting States (including the provisions thereof dealing with the
prevention of fiscal evasion or fraud) concerning taxes covered by the Agreement
insofar as the taxation thereunder is not contrary to the Agreement. The
exchange of information is not restricted by Article 1. 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 in
respect of, or the determination of appeals in relation to, the taxes covered by
the 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 the 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 (ordre public). 3. If
information is requested by a Contracting State in accordance with the
provisions of this Article, the other Contracting State shall endeavour to
obtain the information to which the request relates in the same way as if its
own taxation was involved notwithstanding the fact that the other State does
not, at that time, need such information. If specifically requested by the
competent authority of a Contracting State, the competent authority of the
other Contracting State shall endeavour to provide information under this
Article in the form requested, such as depositions of witnesses and copies of
unedited original documents (including books, papers, statements, records,
accounts or writings), to the same extent such depositions and documents can be
obtained under the laws and administrative practices of that other State with
respect to its own taxes. Article 27 : Diplomatic
agents and consular officers - Nothing
in this Agreement shall affect the fiscal privileges of diplomatic agents or
consular officers under the general rules of international law or under the
provisions of special agreements. Article 28 : Miscellaneous
rules - 1. The
provisions of this Agreement shall not be construed to restrict in any manner
any exclusion, exemption, deduction, credit or other allowance now or hereafter
accorded by the laws of a Contracting State in the determination of the tax
imposed by that State. 2. The
competent authorities of the Contracting States may communicate with each
other directly for the purpose of applying the Agreement. 3. With
respect to paragraph 3 of Article XXII of the General Agreement on Trade in
Services, the Contracting States agree that, notwithstanding that paragraph,
any dispute between them as to whether a measure relating to a tax to which any
provision of this Agreement applies falls within the scope of this Agreement
may be brought before the Council for Trade in Services, as provided by that
paragraph, only with the consent of both Contracting States. VII. Final Provisions Article 29 : Entry
into force - 1. The
Governments of the Contracting States shall notify each other that the
constitutional requirements for the entry into force of this Agreement have
been complied with. 2. The
Agreement shall enter into force upon the date of the later of the
notifications referred to in paragraph 1 and its provisions shall have effect : (a) in Canada : (i) in respect of tax withheld at the source on
amounts paid or credited to non-residents on or after the first day of January
in the calendar year next following that in which the Agreement enters into
force; and (ii) in
respect of other Canadian tax for taxation years beginning on or after the
first day of January in the calendar year next following that in which the
Agreement enters into force; (b) in India : (i) in respect of income arising in any taxable
year beginning on or after the first day of April in the calendar year next
following that in which the Agreement enters into force; and (ii) in respect of capital which is held at the end of any fiscal year
beginning on or after the first day of April in the calendar year next
following that in which the Agreement enters into force. 3. The
provisions of the Agreement between the Government of India and the Government
of Canada for the avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on income signed at New Delhi on the 30th day of
October, 1985 (hereinafter referred to as the 1985 Agreement) shall cease to
have effect with respect to taxes to which this Agreement applies in
accordance with the provisions of paragraph 2. 4. The
1985 Agreement shall terminate on the last day on which it has effect in
accordance with the foregoing provisions of this Article. Article 30 : Termination - This Agreement shall continue in effect
indefinitely but either Contracting State may, on or before June 30 in any
calendar year after expiry of five years from the year in which it enters into
force, give notice of termination to the other Contracting State and in such
event, the Agreement shall cease to have effect : (a)
in Canada : (i) in respect of tax withheld at the source on
amounts paid or credited to non-residents on or after the first day of January
in the next following calendar year; and (ii) in respect of other Canadian tax for taxation
years beginning on or after the first day of January in the next following
calendar year; (b) in India : (i) in respect of income arising in any taxable
year beginning on or after the first day of April in the next following calendar year; and (ii) in respect of capital which is held at the
end of any fiscal year beginning on or after the first day of April in the next
following calendar year. In witness whereof the undersigned, duly
authorised to that effect, have signed this Agreement. Done in duplicate at New Delhi this 11th day of
January, 1996 in the English, French and Hindi languages, each version being
equally authentic.
Protocol At the
signing of the Agreement between the Government of the Republic of India and
the Government of Canada for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital,
the undersigned have agreed upon the following provisions which shall be an
integral part of the Agreement : 1. It is
understood that the term fiscal year in relation to Indian tax, means
previous year as defined in the Income-tax Act, 1961. 2. It is
understood that the provisions of paragraph 1 of Article 6, also apply to
income, other than capital gains, derived from the alienation of immovable
property. 3. It is
understood that where an enterprise of a Contracting State has a permanent
establishment in the other Contracting State in accordance with the provisions
of paragraph 2(j), 2(k), or 2(l) of Article 5, and the
time period referred to in that paragraph extends over two taxable years, a
permanent establishment shall not be deemed to exist in a year, if any, in
which the use, site, project or activity, as the case may be, continues for a
period or periods aggregating less than 30 days in that taxable year. A permanent establishment will exist
in the other taxable year, and the enterprise will be subject to tax in that
other Contracting State in accordance with the provisions of Article 7, but
only on income arising during that other taxable year. 4. With
reference to Article 13, it is understood that the term alienation includes a
transfer within the meaning of Indian taxation laws. 5. It is
understood that nothing in the Agreement shall be construed as preventing a
Contracting State from imposing a tax on amounts included in the income of a
resident of that Contracting State with respect to a partnership, trust, or
controlled foreign affiliate, in which he has an interest. In witness whereof the undersigned, duly
authorised to that effect, have signed this Protocol. Done in duplicate at New Delhi, this 11th day of
January, 1996 in the English, French
and Hindi languages each version being equally authentic.
annex to 1986 agreement Amendment
of provisions relating to rate of tax on royalties and fees for technical
services under Double Taxation Agreement with Canada 1. The existing
tax treaty with Canada was signed on 30-10-1985 and notified on 25-9-1986, Para
2 of Article 13 of the Agreement provides the rate of taxation at 30 per cent
in respect of royalties and fees for technical services in the country where
the same arises. Para 4 of the Protocol to the said Agreement reads as below : With
reference to paragraph 2 of Article 13, in the event that pursuant to an
Agreement or a Convention concluded with a State which is a member of the
Organisation for Economic Co-operation and Development after the date of
signature of this Agreement India would accept a rate lower than 30 per cent
for the taxation of royalties or fees for technical services paid by a resident
of India to a resident of that State, it is understood that such lower rate
will automatically be applied for the taxation of royalties and fees for
technical services paid by a resident of India to a resident of Canada where
the royalties or fees for technical services are paid in respect of a right or
property which is first granted, or under a contract which is signed, after the
date of entry into force of the first-mentioned Agreement or Convention. 2.
Subsequent to the signing of the Agreement with Canada, India has entered into
Agreements with other OECD countries wherein the rate of taxation in respect of
royalties and fees for technical services has been agreed at 20 per cent of the
gross amount. The revised Agreement with Sweden, which came into force on
12-12-1988, is the first of such Agreements. Accordingly, after consultation
with the Canadian Government, a notification has been issued on 24-6-1992,
notifying that the rate of tax of 20 per cent will be applicable to royalties
and fees for technical services paid by a resident of India to a resident of
Canada. This reduced rate will be applicable to payments made in respect of the
right or property which is first granted or under a contract which is signed,
after 12-12-1988. A copy of the notification bearing GSR No. 635(E), dated
24-6-1992 is enclosed. 3. The
Canadian Government have also passed Remission Order dated 3-12-1991 making the
revised rate as above applicable to Indian residents as well in respect of
royalties or fees for technical services paid by a Canadian resident. A copy of
this order is enclosed. Explanatory note (This
note is not part of the Order) This remission order
effectively lowers the rate of non-resident withholding tax payable under Part
XIII of the Income-tax Act from 25 per cent to 20 per cent with respect to royalties
or fees paid or credited in respect of a right or property which is first
granted, or under a contract which is signed, after 12-12-1988 to residents of
India for technical services. Canada and India are
reviewing their tax treaty and will be re-examining rates of non-resident
withholding tax. Pending conclusion of those negotiations, this remission
order will provide residents of India with the same rate of non-resident
withholding tax on fees or royalties for technical services as it provided by
India for residents of Canada on such fees or royalties. Statistics are not
available on the annual levels of royalty payments distributed to Indian
residents and the associated withholding taxes. Therefore, the annual revenue
cost of a five percentage point reduction in the withholding tax levied on
such royalties must be based on a breakdown of related but more aggregated
data. Using the best information available, the annual cost of this remission
order would almost certainly be less than $ 1 million and would likely not
exceed $ 50,000. Order respecting the remission of income-tax, interest
and penalties Short
title 1. This
Order may be cited as the residents of India Remission Order. Interpretation 2. In
this Order, Act means the
Income-tax Act; (Loi) Agreement means the
Agreement between the Government of Canada and the Government of India for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect
to Taxes on income set out in Schedule III to Chapter 7 of the Statutes of
Canada, 1986; (Accord) Person has the meaning
assigned by paragraph 1(c) of Article 3 of the Agreement (personne). Remission 3.
Remission is hereby granted to any person who is a resident of India, within
the meaning of the Agreement, for any amount paid or credited to that person in
respect of royalties in relation to a right or property that is granted after
12-12-1988 or in respect of fees for technical services under a contract that
is signed after that date, of an amount equal to the amount by which (a) the
aggregate of the taxes, interest and penalties payable by that person under the
Act with respect to the amount so paid or credited, exceeds (b) the
aggregate of the taxes, interest and penalties that would have been payable by
that person under the Act with respect to the amount so paid or credited, if
the reference to a rate of 30 per cent in paragraph 2 of Article 13 of the
Agreement were read as a reference to a rate of 20 per cent. His Excellency the
Governor General in Council, considering that it is in the public interest on
the recommendation of the Minister of Finance pursuant to section 23(2) of the
Financial Administration Act is pleased hereby to make the annexed Order
respecting the remission of income-tax, interest and penalties on royalties or
fees received from Canada by residents of India for technical services. Notification
: No. GSR 635(E), dated 24-6-1992. Whereas paragraph 4 of the
Protocol to the Agreement between the Government of India and the Government of
Canada for the avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on income which was notified by the Government of
India in the Ministry of Finance (Department of Revenue) in the Gazette of
India, Extraordinary, Part II, section 3, sub-section (i) vide
No. GSR 1108(E), dated 25-9-1986, provides that in the event that pursuant to
an Agreement or a Convention concluded with a State which is a member of the
Organisation for Economic Co-operation and Development after the date of
signature of the Agreement, that is 30-10-1985. India would accept a rate lower
than 30 per cent for the taxation of royalties or fees for technical services
paid by a resident of India to a resident of that State, such lower rate would
automatically be applied for the taxation of royalties and fees for technical
services paid by a resident of India to a resident of Canada where such payment
is made in respect of a right or property which is first granted, or under a
contract which is signed after the date of entry into force of the
first-mentioned agreement. And whereas in the
Convention with the Government of the Kingdom of Sweden, which is a member of
the Organisation for Economic Co-operation and Development, and which entered
into force on 12-12-1988, the Government of India has accepted the rate of 20
per cent for the taxation of royalties and fees for technical services; Now, therefore, in
exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43
of 1961) and section 24A of the Companies (Profits) Surtax Act, 1964 (7 of
1964), the Central Government hereby directs that the rate of taxation of
royalties and fees for technical services paid by a resident of India to a
resident of Canada, where such payment is made in respect of a right or
property which is first granted, or under a contract which is signed, after
12-12-1988 shall be twenty per cent. Circular : No.
638, dated 28-10-1992.
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