FINLAND

 

Convention between the Republic of India and the Republic of Finland for the avoidance of double taxation with respect to taxes on income and on capital

Notification F. No. 501/13/80-FTD, dated 20 November, 1984

 

G.S.R. 786(E).--Whereas the annexed Convention between the Government of the Republic of India and the Government of the Republic of Finland for avoidance of double taxation with respect to taxes on income and on capital has come into force on the notification by both the Contracting States to each other of the compliance of the constitutional requirements, as required by paragraph 1 of Article 29 of the said Convention;

 

Now, therefore, in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961), section 24A of the Companies (Profits) Surtax Act, 1964 (7 of 1964) and section 44A of the Wealth-tax Act, 1957 (27 of 1957), the Central Government hereby directs that all the provisions of the said Convention shall be given effect to in the Union of India.

 

ANNEXURE

 

The Government of the Republic of India and the Government of the Republic of Finland,

 

Desiring to conclude a new Convention for the avoidance of double taxation with respect to taxes on income and on capital.

 

Have agreed as follows :

 

ARTICLE 1: Personal scope.--This Convention shall apply to persons who are residents of one or both of the Contracting States.

 

ARTICLE 2: Taxes covered.--(1) The taxes which are the subject of the present Convention are :

 

(a)        in Finland :

 

(i)         the state income and capital tax;

            (ii)        the communal tax;

            (iii)       the church tax;

            (iv)       the sailors' tax; and

            (v)        the tax withheld at source from non-residents' income;

                        (hereinafter referred to as "Finnish tax").

 

(b)        in India :

 

(i)         the income-tax including any surcharge thereon;

            (ii)        the surtax; and

            (iii)       the wealth-tax;

 

(hereinafter referred to as "Indian tax")

 

2.         The Convention shall apply also to any identical or substantially similar taxes which are imposed after the date of signature of the Convention in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of significant changes which have been made in their respective taxation laws.

 

ARTICLE 3: General definitions.—

 

(1)        For the purposes of this Convention, unless the context otherwise requires,--

 

(a)        the term "person" includes an individual, a company and any other body of persons;

(b)        the term "company" means any body corporate or any entity which is treated as a body corporate for tax purposes;

(c)        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;

(d)        the term "national" means any individual possessing the nationality of a Contracting State, and any legal person, partnership and association deriving its status as such from the laws in force in a Contracting State;

(e)        the term "international traffic" means any transport by a ship or aircraft operated by an enterprise a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;

            (f)        the term "competent authority" means :

 

(i)         in Finland, the Ministry of Finance or its authorised representative;

            (ii)        in India, the Ministry of Finance (Deptt of Revenue).

 

2.         As regards the application of the Convention by a Contracting State any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the laws of that State concerning the taxes to which the Convention applies.

 

ARTICLE 4: Fiscal domicile.—

 

(1)        For the purposes of this Convention, 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 its status shall be determined as follows:

 

(a)        he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interest);

           

(b)        if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode;

 

(c)        if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;

 

(d)        if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

 

3.         Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the State in which its place of effective management is situated.

 

ARTICLE 5: Permanent establishment.—

 

(1)        For the purposes of this 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" includes especially :

 

(a)        a place of management;

            (b)        a branch;

            (c)        an office;

            (d)        a factory;

            (e)        a workshop;

            (f)        a mine, a quarry or any other place of extraction of natural resources;

            (g)        warehouse; and

            (h)        premises used as a sales outlet or for receiving or soliciting orders.

 

3.         The term "permanent establishment" also includes :

 

(a)        a building site, a construction, assembly or installation project or supervisory activities in connection therewith, but only where such site, project or activities continue for a period of more than six months;

(b)        a building site, a construction, assembly or installation project or supervisory activity being incidental to the sale of machinery of equipment, where such site, project or activity 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 or equipment.

 

4.         Notwithstanding the preceding provisions of this Article, the term "permanent establishment" shall be deemed not to include :

 

(a)        the use of facilities solely for the purpose of storage 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 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 or for scientific research, being activities solely of a preparatory or auxiliary character in the business of the enterprise.

 

5.         Notwithstanding the provisions of paragraphs 1 and 2, where a person--other than an agent of an independent status to whom paragraph 7 applies--is acting in 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 Contracting State in respect of any activities which that person undertakes for the enterprise, if such a person :

 

(a)        has and habitually exercises in that State an authority to conclude contracts in the name of the enterprise, unless the activities of such person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business would not make this fixed place of business a permanent establishment under the provisions of that paragraph; or

(b)        has no such authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise.

 

6.         Notwithstanding the preceding provisions of this Article, an insurance enterprise of a Contracting State shall, except in regard to re-insurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in the territory of that other State or insures risks situated therein through a person other than an agent of an independent status to whom paragraph 7 applies.

 

7.         An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost on behalf of that enterprise, he shall not be considered an agent of an independent status within the meaning of this paragraph.

 

8.         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 or a permanent establishment of the other.

 

ARTICLE 6: Income from immovable property.—

 

1.         Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.

 

2.         (a)        The term "immovable property" shall, subject to the provisions of sub-paragraphs (b) and (c) have the meaning which it has under 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 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.

            (c)        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.         Where the ownership of shares or other corporate rights in a company entitles the owner of such shares or corporate rights to the enjoyment of immovable property held by the company, the income from the direct use letting, or use in any other form of such right of enjoyment may be taxed in the Contracting State in which the immovable property is situated.

 

5.         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 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; (b) sales in that other State of goods or merchandise of the same or similar kind as those sold through that permanent establishment; or (c) other business activities carried on in that other State 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.

 

3.         In determining the profits of a permanent establishment, there shall be allowed as deduction expenses which are incurred for the purposes 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 the domestic law of the Contracting State in which the permanent establishment is situated. However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission, for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on money lent to the permanent establishment. Likewise no account shall be taken, in determining the profits of a permanent establishment, for amounts charged (otherwise then towards reimbursement of actual expenses), by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission for specific services performed or for management or, except in the case of a banking enterprise by way of interest on money lent to the head office of the enterprise or any of its other offices.

 

4.         Insofar as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 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 Convention, then the provisions of those articles shall not be affected by the provisions of this Article.

 

ARTICLE 8: Air transport.—

 

1.         Income derived by an enterprise of a Contracting State from the operation of aircraft in international traffic shall be taxable only in that State.

 

2.         Paragraph 1 shall likewise apply in respect of participations in pools of any kind by enterprise engaged in air transport.

 

3.         For the purposes of this Article :

 

(a)        interest on funds connected with the operation of aircraft in international traffic shall be regarded as income from the operation of such aircraft; and

(b)        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 charter basis and any other activity directly connected with such transportation.

 

ARTICLE 9: Shipping.—

 

1.         Income of an enterprise of a Contracting State derived from the other Contracting State from the operation of ships in international traffic may be taxed in that other State, but the tax chargeable in that other State on such income shall be reduced by an amount equal to fifty per cent of such tax.

 

2.         Paragraph 1 shall not apply to profits arising as a result of coastal traffic.

 

ARTICLE 10: Associated enterprises.--Where--

 

(a)        an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State; or

(b)        the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,

 

and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

 

ARTICLE 11: Dividends.—

 

1.         Dividends paid by a company which is 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 law of the State, but the tax so charged shall not exceed :

 

(a)        15 per cent of the gross amount of the dividends if the recipient is a company (other than a partnership) which holds directly at least 10 per cent of the capital of the company paying the dividends.

            (b)        25 per cent of the gross amount of the dividends in all other cases.

 

This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

 

3.         The provisions of sub-paragraph (a) of paragraph 2 would apply in respect of dividends arising out of investments made after the date of signature of this Convention.

 

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 from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident.

 

5.         The provisions of paragraphs 1 and 2 shall not apply if the recipient 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 15, as the case may be, shall apply.

 

6.         Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

 

ARTICLE 12: Interest.—

 

1.         Interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in the first-mentioned State, provided, however, the tax so charged shall not exceed 15 per cent of the gross amount of the interest.

 

2.         The provisions of paragraph 1 would apply in respect of interest payable arising out of investments made after the date of signature of this Convention.

 

3.         The term "interest" as used in this article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, and in particular, income from Government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds and debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this article.

 

4.         The provisions of paragraph 1 shall not apply if the recipient 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 15, as the case may be, shall apply.

 

5.         Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a statutory body, 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.

 

6.         Where, by reason of a special relationship between the payer and the recipient 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 recipient in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.

 

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 laws of that State; provided that where the royalties or fees for technical services are paid to a resident of the other Contracting State who is the beneficial owner thereof and they are paid in respect of a right or property which is first granted, or under a contract which is signed, after the date of signature of this Convention, the tax so charged shall not exceed 30 per cent of the gross amount of the royalties and fees for technical services.

 

3.         The term "royalties" as used in this Article means payments of any kind including rentals received as a consideration for the use of, or the right to use :

 

(a)        any patent, trademark, design or model, plan, secret formula or process;

(b)        industrial, commercial or scientific equipment or information concerning industrial, commercial or scientific experience;

(c)        any copyright of literary, artistic or scientific work, cinematograph films or tapes for radio or television broadcasting;

 

but does not include royalties or other amounts paid in respect of the operation of mines or quarries or of the extraction or removal of natural resources.

 

4.         The term "fees for technical services" as used in this Article means payments of any kind to any person, other than payments to an employee of the person making the payments and to any individuals for independent personal services mentioned in Article 15, in consideration for services of a managerial, technical or consultancy nature, including the provision of services of technical or other personnel.

 

5.         The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for technical services arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 15, as the case may be, shall apply.

 

6.         Royalties and fees for technical services shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a statutory body, 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 the payments was incurred, and such payments are borne by such permanent establishment or fixed base, then such royalties or fees for technical services shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

 

7.         Where, by reason of a special relationship between the payer and the recipient or between both of them and some other person, the amount of the royalties or fees for technical services 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 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 Convention.

 

ARTICLE 14: Capital gains.—

 

1.         Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in paragraph 2 of Article 6 and situated in the other Contracting State may be taxed in that other State.

 

2.         Gains derived by a resident of a Contracting State from the alienation of shares or other corporate rights may be taxed in the Contracting State in which the company is registered.

 

3.         Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such fixed base, may be taxed in that other State.

 

4.         Gains from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft, shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

 

ARTICLE 15: Independent personal services.—

 

1.         Income derived by 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 or a period or periods aggregating 90 days or more in the relevant fiscal year; or

(b)        he has a fixed base regularly available to him 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.         The term "professional services" includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants.

ARTICLE 16: Dependent personal services.—

 

1.         Subject to the provisions of Articles 17, 19, 20 and 21, 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 State for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned, and

(b)        the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and

(c)        the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

 

3.         Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic, may be taxed in the Contracting State in which the place of effective management of the enterprise is situated.

 

ARTICLE 17: 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 any other similar organ 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 and 16, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as 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 by an entertainer or an athlete in his capacity as such accrues not to the entertainer or athlete himself but to another person, that income may, notwithstanding the provisions of Articles 7, 15 and 16, be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised.

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 a political sub-division, of a statutory body or a local authority of that other State.

 

ARTICLE 19: Pensions and social security payments.--Subject to the provisions of paragraph 2 of Article 20 pensions and other similar remuneration in consideration of past employment paid by a resident of, and pensions and other payments made under a public scheme which is part of the social security system of a Contracting State to a resident of the other Contracting State shall be taxable only in the first-mentioned State.

 

ARTICLE 20: Government service.—

1. (a) Remuneration, other than a pension, paid by a Contracting State or a statutory body or a local authority thereof to an individual in respect of services rendered to that State or body or authority shall be taxable only in that State.

 

(b)      However, such remuneration shall be taxable only in the Contracting State of which the individual is a resident if the services are rendered in that State and the individual :

 

(i)         is a national of that State; or

            (ii)        did not become a resident of that State solely for the purpose of rendering the services.

 

2.         (a)        Any pension paid by, or out of funds created by, a Contracting State or a statutory body or a

local authority thereof to an individual in respect of services rendered to that State or body or authority shall be taxable only in that State.

 

(b)        However, such pension shall be taxable only in the Contracting State of which the individual is a resident if he is a national of that State.

 

3.         The provisions of Articles 16, 17 and 19 shall apply to remuneration and pensions in respect of services rendered in connection with a business carried on by a Contracting State or a statutory body or a local authority thereof.

 

ARTICLE 21: Students and apprentices.—

 

1.         Payments which a student or business, technical, agricultural or forestry apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned state solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State.

 

2.         A student at a university or other institution for higher education in a Contracting State, or a business, technical, agricultural or forestry apprentice who is or was immediately before visiting the other Contracting State a resident of the first-mentioned State and who is present in the other Contracting State for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned, shall not be taxed in that other State in respect of remuneration for services rendered in that State, provided that the services are in connection with his studies or training and the remuneration constitutes earnings necessary for his maintenance. If he is present in that other State for a period or periods aggregating 183 days or  more in the calendar year concerned, he shall be entitled to the same exemptions, reliefs or reductions in respect of taxes as are granted to residents of that State.

 

ARTICLE 22: Other income.--Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing articles of this Convention shall be taxable only in that State except that, if such income is derived from sources in the other Contracting State it may also be taxed in accordance with the law of that other State.

 

ARTICLE 23: Capital.—

 

1.         Capital represented by immovable property referred to in paragraph 2 of Article 6, owned by a resident of a Contracting State and situated in the other Contracting State, may be taxed in that other State.

 

2.         Capital represented by shares or other corporate rights referred to in paragraph 4 of Article 6 and owned by a resident of a Contracting State may be taxed in the Contracting State in which the immovable property held by the company is situated.

 

3.         Capital represented by movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or by movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, may be taxed in that other State.

 

4.         Capital represented by ships and aircraft operated in international traffic, and by movable property pertaining to the operation of such ships and aircraft, shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

 

5.         Elements of capital of a resident of a Contracting State not dealt with in the foregoing paragraphs of this Article shall be taxable only in that State except that, if such elements are situated in the other Contracting State they may also be taxed in accordance with the law of that other State.

 

ARTICLE 24: Elimination of double taxation.—

 

1.         In Finland double taxation shall be eliminated as follows :

 

(a)        Where a resident of Finland derives income or owns capital which in accordance with the provisions of this Convention may be taxed in India, Finland shall, subject to the provisions of sub-paragraph (b), allow :

 

(i)         as a deduction from the tax on income of that person, as amount equal to the tax on income paid in India.

(ii)        as a deduction from the tax on capital of that person, an amount equal to the tax on capital paid in India.

 

Such deduction in either case shall not, however, exceed that part of the tax on income or on capital, as computed before the deduction is given, which is attributable, as the case may be, to the income or the capital which may be taxed in India.

 

(b)        Dividends paid by a company which is a resident of India to a company which is a resident of Finland shall be exempt from Finnish tax to the extent that the dividends would have been exempt from tax under Finnish taxation law if both companies had been residents of Finland.

(c)        Notwithstanding any other provision of this Convention, an individual who is a resident of India and under Finnish taxation law with respect to the Finnish taxes referred to in Article 2 also is regarded as a resident of Finland may be taxed in Finland. However, Finland shall allow any Indian tax paid on the income or the capital  as a deduction from Finnish tax in accordance with the provisions of sub-paragraph (a). The provisions of this sub-paragraph shall apply only to nationals of Finland.

(d)        Where in accordance with any provisions of the Convention income derived or capital owned by a resident of Finland is exempt from tax in Finland, Finland 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.

 

2.         For the purposes of paragraph 1, taxes paid in India shall 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(4), 10(4A), 10(6)(viia), 10(15)(iv), 32A, 33A, 35B, 35C, 80HH,  80-I, 80J and 80K of the Income-tax Act, 1961 (No. 43 of 1961), so far as they were in force on and have not been modified since the date of signature of this Convention, or have been modified only in minor respects so as not to affect their general character; or

(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 two Contracting States.

 

3.         In India double taxation shall be eliminated as follows :

 

(a)        The amount of Finnish tax payable under the laws of Finland and in accordance with the provisions of this Convention, whether directly or by deduction, by a resident of India, in respect of income which has been subjected to tax both in India and Finland 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)        For the purposes of the credit referred to in sub-paragraph (a) above, where the resident of India is a company by which surtax is payable, the credit to be allowed against the 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:

 

Provided that income which in accordance with the provisions of this Convention is not to be subjected to tax may be taken into account in calculating the rate of tax to be imposed.

 

ARTICLE 25: 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 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 in the same circumstances or under the same conditions. This provision shall not be construed as preventing a Contracting State from charging 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 3 of Article 7.

 

3.         Nothing contained in this Article shall be construed as obliging a Contracting State to grant to individuals not resident in that State any personal allowances, reliefs and reductions for taxation purposes which are by law available only to individuals who are so resident.

 

4.         Nothing contained in this Article shall be construed as obliging a Contracting State to compute the shipping profits in the same manner as is done in the case of enterprises of that State.

 

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 connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected.

 

6.         The provisions of this Article shall apply to all taxes which are covered by this Convention.

 

ARTICLE 26: Mutual agreement procedure.—

 

1.         Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Convention, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 25, to that of the  Contracting State of which he is a national. The case must be present within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Convention.

 

2.         The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with the Convention.

 

3.         The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention. In particular, they may consult together for the purpose of reaching an agreement on the allocation of income in cases referred to in Article 10. They may also consult together for the elimination of double taxation in cases not provided for in the Convention.

 

4.         In the event the competent authorities reach an agreement referred to in paragraphs 2 and 3, taxes shall be imposed on such income, and refund or credit of taxes shall be allowed by the Contracting States in accordance with such agreement. It shall be implemented notwithstanding any time limits in the domestic law of the Contracting States.

 

5.         The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs. When it seems advisable in order to reach agreement to have an oral exchange of opinions, such exchange may take place through a Commission consisting of representatives of the competent authorities of the Contracting States.

 

ARTICLE 27: Exchange of information.—

 

1.         The competent authorities of the Contracting States shall exchange such information (including documents) as is necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention insofar as the taxation thereunder is not contrary to the Convention or for the prevention of fraud or evasion of taxes. 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 the State and shall be disclosed only to persons or authorities (including courts and administrative bodies involved in the assessment or collection of the enforcement of prosecution in respect of, or the determination of appeals in relation to, the taxes covered by the Convention. 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 of the administrative practice of that or of the other Contracting States;

(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 States;

(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 (order, public).

 

ARTICLE 28: Diplomatic agents and consular officers.--Nothing in the Convention shall affect the fiscal privileges of diplomatic agents or consular officers under the general laws of international law or under the provisions of special agreements.

 

ARTICLE 29: Entry into force.—

 

1.         The Government of the Contracting States shall notify each other that the constitutional requirements for the entry into force of this Convention have been complied with.

 

2.         The Convention shall enter into force thirty days after the date of the later of the notifications referred to in paragraph 1 and its provisions shall have effect :

 

(a)        In Finland,

 

(i)         in respect of taxes withheld at source to income derived on or after 1 January in the calendar year next following the year in which the Convention enters into force;

(ii)        in respect of other taxes on income, and taxes on capital, to taxes chargeable for any taxable year beginning on or after 1 January, in the calendar year next following the year in which the Convention enters into force;

 

(b)        In India, in respect of taxes for assessment years beginning on or after 1 April of the calendar year next following the year in which the Convention enters into force.

 

3.         The Agreement between Finland and India for the avoidance of double taxation of income, signed at New Delhi on 23 June, 1961, as amended by exchange of notes on 16 August, 1979, shall cease to have effect at the time that the provisions of this Convention shall be effective in accordance with the provisions of paragraph 2.

 

ARTICLE 30: Termination.--This Convention shall remain in force until terminated by a Contracting State. Either Contracting State may terminate the Convention, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year following after the period of five years from the date on which the Convention enters into force. In such event, the Convention shall cease to have effect :

 

(a)        In Finland :

 

(i)         in respect to taxes withheld at source, to income derived on or after 1 January in the calendar year next following the year in which the notice is given;

(ii)        in respect of other taxes on income, and taxes on capital, to taxes chargeable for any taxable year beginning on or after 1 January in the calendar year next following the year in which the notice is given;

 

(b)        In India, in respect of taxes for any assessment year beginning on or after 1 April of the second calendar year following that in which the notice is given.

 

In witness whereof the undersigned, duly authorised thereto, have signed this Convention.

 

Done in duplicate at Helsinki on this 10th day of June, 1983, in the Hindi, Finnish and English languages, all the texts being equally authentic, except that in the case of divergence of interpretation the English text shall prevail.

 

Sd/-                                                                                                      Sd/-

(M. Rasgotra)                                                                                    (Matti Tuovinen)

For the Government                                                                          For the Government

of the Republic of India :                                                                   of the Republic of Finland :

 

 

FINLAND

 

Protocol to amend the Convention between the Republic of India and the Republic of Finland for the avoidance of double taxation with respect to taxes on income and on capital

 

Notification No. 10671 [F. No. 501/13/80-FTD], dated 13-8-1998

 

Whereas the Convention between the Government of the Republic of India and the Government of Republic of Finland for the avoidance of double taxation with respect to taxes on income and on capital came into force on the notification by the Contracting States to each other of the compliance of the constitutional requirements, as required by Paragraph 1 of Article 29 of the said Convention;

And whereas the Central Government, in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961), section 24A of the Companies (Profits) Surtax Act, 1964 (7 of 1964), and section 44A of the Wealth-tax Act, 1957 (27 of 1957), directed, by Notification of the Government of India in the Ministry of Finance (Department of Revenue) (Foreign Tax Division) Number G.S.R. 786(E), dated the 20th November 1984, that all the provisions of the Convention annexed to the said Notification shall be given effect to in the Union of India;

 

And whereas the Government of Republic of Finland and the Government of Republic of India desired to amend the said Convention between the Contracting States;

 

And whereas the annexed Protocol to amend the aforesaid Convention between the Government of the Republic of India and the Government of the Republic of Finland for the avoidance of double taxation with respect to taxes on income and on capital has come into force on 10th January, 1998, thirty days after date of later of notifications referred to in and as required by Article VII of the said Protocol.

 

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 Protocol shall be given effect to in the Union of India and the aforesaid Convention shall stand amended to the extent mentioned in the annexed Protocol.

 

Annexure

 

The Government of the Republic of India and the Government of the Republic of Finland,

 

Desiring to conclude a Protocol to amend the Convention between the Contracting Parties for the avoidance of double taxation with respect to taxes on income and on capital, signed at Helsinki on 10 June, 1983.

 

Have agreed as follows:

 

Article I

 

Paragraph 1 of Article 2 of the Convention shall be deleted and replaced by the following:

 

"1. The taxes which are the subject of the present Convention are:

 

(a)        in Finland:

 

(i)         the state income taxes;

            (ii)        the corporate income tax;

            (iii)       the communal tax;

            (iv)       the church tax;

            (v)        the tax withheld at source from interest;

            (vi)       the tax withheld at source from non-residents' income' and

            (vii)      the state capital tax;

 

(hereinafter referred to as "Finnish Tax");

 

(b)        in India:

 

(i)         the income-tax including any surcharge thereon; and

            (ii)        the wealth-tax;

                        (hereinafter referred to as "Indian tax")."

 

Article II

 

Sub-paragraph (f) of paragraph 1 of Article 3 of the Convention shall be deleted and replaced by the following, and the following new sub-paragraphs (g) and (h) shall be inserted after sub-paragraph (f):

 

"(f)      the term "competent authority" means:

 

(i)         in Finland, the Ministry of Finance, its authorised representative or the authority which, by the Ministry of Finance, is designated as competent authority;

(ii)        in India, the Central Government in the Ministry of Finance (Department of Revenue), or their authorised representative;

 

(g)        the term "fiscal year" means:

 

(i)         in Finland, the "tax year" as defined in the taxation laws of Finland relating to income-tax;

            (ii)        in India, the "previous year" as defined in Section 3 of the Income-tax Act, 1961;

 

(h)        the term "tax" means Finnish 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 the Convention applies or which represents a penalty or interest imposed relating to those taxes."

 

Article III

 

Paragraphs 1, 2 and 3 of Article 11 of the Convention shall be deleted and replaced by the following:

 

"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. 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 the tax so charged shall not exceed 15 per cent of the gross amount of the dividends.

 

2.         However, as long as an individual resident in Finland is entitled to a tax credit in respect of dividends paid by a company resident in Finland, the following provisions of this paragraph shall apply in Finland instead of the provisions of paragraph 1:

 

Dividends paid by a company which is a resident of Finland to a resident of India shall be exempt from Finnish tax on dividends.

 

3.         The provisions of paragraphs 1 and 2 shall not affect the taxation of the company in respect of the profits out of which the dividends are paid."

 

Article IV

 

Paragraphs 1, 2, 3 and 4 of Article 12 of the Convention shall be deleted and replaced by the following, and the existing paragraphs 5 and 6 shall be renumbered as paragraphs 6 and 7, respectively:

 

"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 the tax so charged shall not exceed 10 per cent of the gross amount of the interest.

 

3.         Notwithstanding the provisions of paragraphs 1 and 2,

 

(a)        interest arising in India shall be exempt from India tax if the interest is paid to

 

(i)         the Bank of Finland; and

 

(ii)        the Finnish Fund for Industrial Cooperation Ltd. (FINNFUND) or any other similar institution, as may be agreed upon from time to time between the competent authorities of the Contracting States;

 

(b)        interest arising in Finland shall be exempt from Finnish tax if the interest is paid to

 

(i)         the Reserve Bank of India;

            (ii)        National Housing Bank;

            (iii)       Small Industries Development Bank of India (SIDBI); and

            (iv)       EXIM Bank;

 

(c)        interest arising in a Contracting State on a loan guaranteed by any of the bodies mentioned or referred to in sub-paragraphs (a) or (b) and paid to a resident of the other Contracting State shall be exempt from tax in the first mentioned State.

 

4.         The term "interest" as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds and debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.

 

5.         The provisions of paragraphs 1 and 2 shall not apply if the recipient 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 15, as the case may be, shall apply."

 

Article V

 

Paragraphs 2, 3 and 4 of Article 13 of the Convention shall be deleted and replaced by the following and the existing paragraphs 5, 6 and 7 shall be renumbered as paragraphs 6, 7 and 8, respectively:

 

"2.       However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the laws of that State, but the tax so charged shall not exceed:

 

(a)        in the case of royalties within sub-paragraph (a) of paragraph 3, and fees for technical services within sub-paragraphs (a) and (c) of paragraph 4;

 

(i)         during the years 1997 to 2001:

 

(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; 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 sub-paragraph (b) of paragraph 3 and fees for technical services defined in sub-paragraph (b) of paragraph 4, 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 cinematograph films or work on film, tape or otherwise 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 a 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, and subject to paragraph 5, the term "fees for technical services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including the provision of services of 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 sub-paragraph (a) of paragraph 3 is received; or

(b)        are ancillary and subsidiary to the enjoyment of the property for which a payment described in sub-paragraph (b) of paragraph 3 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 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 sub-paragraph (a) of paragraph 3;

(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."

 

Article VI

 

1.         Sub-paragraph (b) of paragraph 1 of Article 24 of the Convention shall be deleted and replaced by the following:

 

"(b) Dividends paid by a company being a resident of India to a company which is a resident of Finland and which controls directly at least 10 per cent of the voting power in the company paying the dividends shall be exempt from Finnish tax."

 

2.         Sub-paragraph (a) of paragraph 2 of the Article shall be deleted and replaced by the following:

 

"(b) sections 10(4), 10(4A), 10(5B), 10(15(iv) and 80-IA of the Income-tax Act, 1961 so far as they are in force or as modified only in minor respects so as not to affect their general character; or"

 

Article VII

 

1.         The Contracting Parties shall notify each other that the constitutional requirements for the entry into force of this Protocol have been complied with.

 

2.         The Protocol shall enter into force thirty days after the date of the later of the notifications referred to in paragraph 1 and its provisions shall have effect:

 

(a)        in Finland:

 

(i)         in respect of taxes withheld at source, on income derived on or after 1 January in the calendar year next following the year in which the Protocol enters into force;

(ii)        in respect of other taxes on income, and tax on capital, for taxes chargeable for any fiscal year beginning on or after 1 January in the calendar year next following the year in which the Protocol enters into force;

 

(b)        in India, in respect of taxes for any fiscal year beginning on or after 1 April of the calendar year next following the year in which the Protocol enters into force.

 

In witness whereof the undersigned, duly authorised thereto, have signed this Protocol.

 

Done in duplicate at New Delhi this ninth day of April, 1997 in the Finnish, Hindi and English languages, all the texts being equally authentic, except that in the case of divergence of interpretation the English text shall prevail.

 

 

FRANCE

 

 

Agreement between the Government of the Republic of India and the Government of the French Republic forthe avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and oncapital

 

Notification No. 9602 [F. No. 501/16/80-FTD], dated 7-9-1994 as amended by Notification No. 11438 [F. No.501/16/80-FTD], dated 10-7-2000

 

Whereas the annexed Convention between the Government of the Republic of India and the Government of the French Republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital has come into force on the 1st day of August, 1994 on the notification by both the Contracting States to each other of the completion of the procedures required under their law for bringing into force of the said Convention in accordance with paragraph 1 of Article 30 of the said Convention;

 

2.         Now, therefore, in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961), section 24A of the Companies (Profits) Sur-tax Act,  1964 (7 of 1964) and section 44A of the Wealth-tax Act, 1957 (27 of 1957), the Central Government hereby directs that all the provisions of the said Convention shall be given effect to in the Union of India.

 

Convention between the Government of the Republic of India and the Government of the French Republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital.

 

The Government of the Republic of India and the Government of the French Republic, desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital;

Have agreed as follows:

 

ARTICLE 1: Personal scope.--This Convention shall apply to persons who are residents of one or both of the Contracting States.

 

ARTICLE 2: Taxes covered.—

 

1.         The taxes to which this Convention shall apply are:

 

(a)        in India:

 

(i)         the income-tax including any surcharge thereon;

            (ii)        the surtax; and

            (iii)       the wealth-tax,

 

(hereinafter referred to as "Indian tax");

 

(b)        in France:

 

(i)         the income-tax (1 'impôt sur le revenue) including any withholding tax, pre-payment (précompte) or advance payment with respect thereto;

(ii)        the corporation tax (1 'impôt sur less societies) including any withholding tax, pre-payment (précompte) or advance payment with respect thereto; and

            (iii)       the wealth-tax (1' impôt de solidarité sur la fortune).

 

(hereinafter referred to as "French tax").

 

2.         The Convention shall also apply to any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of the present Convention in addition to, or in place of, the taxes referred to in paragraph 1. 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 "India" means the territory of India and includes the territorial sea and air space above it, as well as any other maritime zone in which India, according to the Indian law, has sovereign rights, of other rights and jurisdictions in accordance with international law;

(b)        the term "France" means the European and overseas departments of the French Republic including the territorial sea and the air space above it as well as the areas within which, in accordance with International law, the French Republic has sovereign rights for the purpose of exploring and exploiting the natural resources of the sea-beas and its sub-soil and of the superjacent waters;

 

(c)        the terms "a Contracting State" and "the other Contracting State" mean India or France as the context requires;

(d)        the term "person" includes an individual, a company and any other entity which is treated as a taxable unit under the taxation laws in force in the respective Contracting States;

(e)        the term "company" means any body corporate or any entity which is treated as a company or body corporate under the taxation laws in force in the respective Contracting States;

(f)        the terms "enterprise of a Contracting State" and "enterprise of the other Contracting State" means 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 in the case of India, the Central Government in the Ministry of Finance (Department of Revenue) or their authorised representative; and in the case of France, the Minister in charge of the Budget or his authorised representative;

(h)        the term "national" means any individual possessing the nationality of a Contracting State and any legal person, partnership or association deriving its status from the laws in force in that Contracting State;

(i)         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;

(j)         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 French Income-tax means calendar year;

(k)       the term "tax" means Indian tax or French tax as the context requires.

 

2.         As regards the application of the Convention by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the law of that Contracting State concerning the taxes to which the Convention applies.

 

ARTICLE 4: Resident.—

 

1.         For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the laws of that Contracting 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 as follows:

 

(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 States, 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 neither 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, 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" includes especially:

 

(a)        a place of management;

            (b)        a branch;

            (c)        an office;

            (d)        a factory;

            (e)        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 premises used as a sales outlet;

(i)         an installation or structure used for the exploration of natural resources provided that the activities continue for more than 183 days.

 

3.         A building site or construction, installation or assembly project constitutes a permanent establishment only where such site or project continues for a period of more than six months.

 

4.         Notwithstanding the preceding provisions of this Article, the term "permanent establishment" shall be deemed not to include:

 

(a)        the use of facilities solely for the purpose of storage 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 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;

(f)        the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs (a) to (e), provided that the overall activity of the fixed place of business resulting from this combination is of preparatory or auxiliary character.

 

5.         Notwithstanding the provisions of paragraphs 1 and 2, where a person other than an agent of an independent status to whom paragraph 6 applies is acting in one of the Contracting States on behalf of an enterprise of the other Contracting State, that enterprise shall be deemed to have a permanent establishment in the first-mentioned Contracting State, if:

 

(a)        he has and habitually exercises in that Contracting State an authority to conclude contracts on behalf of the enterprise, unless, his activities are limited to the purchase of goods or merchandise for the enterprise; or

(b)        he has no such authority, but habitually maintains in the first mentioned Contracting State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise.

 

6.         An enterprise of one of the Contracting States shall not be deemed to have a permanent establishment in the other Contracting States merely because it carries on business in that other Contracting 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, he will not be considered an agent of an independent status within the meaning of this paragraph if it is shown that the transactions between the agent and the enterprise were not made under at arm's-length conditions.

 

7.         The fact that a company which is a resident of one of the Contracting States controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other Contracting State (whether through a permanent establishment or otherwise) shall not of itself constitute either company a permanent establishment of the other.

 

ARTICLE 6: Income from Immovable Property.—

 

1.         Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other Contracting State.

 

2.         The term "immovable property" shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property, rights to which the provisions of general law respecting landed or, property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources. Ships, boats and aircrafts shall not be regarded as immovable property.

 

3.         The provisions of paragraph 1 shall also 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 one of the Contracting States shall be taxable only in that Contracting State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other Contracting State but only so much of them as is attributable to that permanent establishment.

 

2.         Subject to the provisions of paragraph 3, where an enterprise of one of the Contracting States carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed 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 determination thereof presents exceptional difficulties, the profits attributable to the permanent establishment may be estimated on the basis of an apportionment of the total profits of the enterprise to its various parts, provided, however, that the result shall be in accordance with the principles contained in this Article.

 

3.(a)     In determining the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent establishment, including executive and general administrative expenses so incurred, whether in the Contracting State in which the permanent establishment is situated or elsewhere, in accordance with the provisions of and subject to the limitations of the taxation laws of that Contracting State. Provided that 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 that restriction is relaxed or overridden by any Convention, Agreement or Protocol signed after 1-1-1990 between that Contracting State and a third State which is a member of the OECD, the competent authority of that Contracting State shall notify the competent authority of the other Contracting State of the terms of the corresponding paragraph in the Convention, Agreement or Protocol with that third State immediately after the entry into force of that Convention, Agreement or Protocol and, if the competent authority of the other Contracting State so requests, the provisions of that paragraph shall apply under this Convention from that entry into force.

 

(b)        However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on 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 or other rights, or by way of commission for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the head office of the enterprise or any of the other offices.

 

4.         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.

 

5.         For the purpose 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.

 

6.         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 by an enterprise of a Contracting State from the operation of aircraft in international traffic shall be taxable only in that Contracting State.

 

2.         The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

 

3.         For the purpose of this article, interest on funds connected with the operation of aircraft in international traffic shall be regarded as profits derived from the operation of such aircraft, and the provisions of article 12 shall not apply in relation to such interest.

 

4.         The term "operation of aircraft" shall mean business of transportation by air of passengers, mail, livestock or goods 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 and any other activity directly connected with such transportation.

 

ARTICLE 9: Shipping.—

 

1.         Profits derived by an enterprise of a Contracting State from the operation of ships in international traffic shall be taxable only in that Contracting State.

 

2.         Notwithstanding the provisions of paragraph 1, such profits may be taxed in the other Contracting State from which they are derived provided the tax so charged shall not exceed:

 

(a)        during the first five fiscal years after the entry into force of this Convention, 50 per cent, and

(b)        during the subsequent five fiscal years, 25 per cent of the tax otherwise imposed by the internal law of that Contracting State. Subsequently, only the provisions of paragraph 1 shall be applicable.

 

3.         The provisions of paragraphs 1 and 2 shall also apply to profits from the participation in a pool, a joint business or an international operating agency engaged in the operation of ships.

 

4.         For the purposes of this article interest arising on funds connected with the operation of ships in international traffic shall be regarded as profits derived from the operation of such ships, and the provisions of article 12 shall not apply in relation to such interest.

 

ARTICLE 10: Associated enterprises.--Where:

 

(a)        an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or

(b)        the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,

 

and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

 

ARTICLE 11: Dividends.—

 

1.         Dividends paid by a company which is resident of a Contracting State to a resident of the other Contracting State may be taxed in that other Contracting 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 Contracting State, but if the recipient is the beneficial owner of the dividends, the tax so charged shall not exceed 10 per cent of the gross amount of the dividends. [with effect from 1-4-1997]

 

This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

 

3. (a)    A resident of India who receives dividends from a company which is a resident of France which, if received by a resident of France, would entitle such resident to a tax credit (avoir fiscal), shall be entitled from the French Treasury to a payment equal to such tax credit (avoir fiscal) subject to the deduction  of tax as provided for under paragraph 2 of this article.

 

   (b) The provisions of sub-paragraph

 

(a)        of this paragraph shall apply only to a resident of India who is

 

(i)         an individual; or

(ii)        a company which holds directly or indirectly less than 10 per cent of the capital of French company paying the dividends.

 

(c)          The provisions of sub-paragraph (a) of this paragraph shall not apply if the recipient of the payment 

from the French Treasury provided for in sub-paragraph (a) of this paragraph is not subject to Indian tax in respect of the payment.

(d)      Payments from the French Treasury provided for under sub-paragraph (a) of this paragraph shall be deemed to be dividend for the purposes of this Convention.

 

4.         When the prepayment (precompte) is levied in respect of dividends paid by a company which is a resident of France to a resident of India who is not entitled to the payment from the French Treasury referred to in paragraph 3 of this article with respect to such dividends, such resident shall be entitled to the refund of that prepayment, subject to the deduction of the withholding tax with respect to the refunded amount in accordance with paragraph 2 of this article.

 

5.         As used in this article the term "dividends" means income from shares or other rights, not being debt-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 Contracting State of which the company making the distribution is a resident and any other item (other than interest which falls within the provisions of article 12) treated as a dividend or distribution under that law.

 

6.         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 Contracting 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 15, as the case may be shall apply.

 

7.         Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other Contracting State may not impose any tax on the dividends paid by the company except in so far as such dividends are paid to a resident of that other Contracting State or in so far 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 Contracting State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other Contracting State.

 

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 Contracting State.

 

[With effect from 1-4-1995]

 

2.         However, such interest may also be taxed in the Contracting State in which it arise, 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:

 

(a)        10 per cent of the gross amount of the interest on loans made or guaranteed by a bank or other financial institution carrying on bona fide banking or financial business or an insurance company or by an enterprise which holds directly or indirectly at least 10 per cent of the capital of the company paying interest:

            (b)        15 per cent of the gross amount of the interest in all other cases.

[With effect from 1-4-1997]

 

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 10 per cent of the gross amount of the interest.

 

3.         Notwithstanding the provisions of paragraph 2:

 

(a)        interest arising in a Contracting State shall be exempt from tax in that Contracting State provided it is derived and beneficially owned by:

 

(i)         the Government, a political sub-division or local authority of the other Contracting State; or

(ii)        the "Reserve Bank of India" in the case of India and the "Banque de France" in the case of France; or

(iii)       any other institution as may be agreed from time to time between the competent authorities of the Contracting State;

 

(b)        interest arising in a Contracting State shall be exempt from tax in that Contracting State if it is beneficially owned by a resident of the other Contracting State and is derived in connection with a loan or credit extended or endorsed by:

 

(i)         in the case of France, the Banque Francaise du Commerce Exteriur, or the Compagnie Francaise d'Assurance pour le Commerce Exterieur (COFACE);

            (ii)        in the case of India, the Export-Import Bank of India;

(iii)       any institution of the other Contracting State in charge of the public financing of external trade.

 

4.         The term "interest" was used in this article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this article.

 

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 Contracting 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 15, as the case may be, shall apply.

 

6.         Interest shall be deemed to arise in a Contracting State when the payer is that Contracting State itself, a political sub-division, a local authority or a resident of that Contracting 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, than such interest shall be deemed to arise in the Contracting 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 to the last mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.

 

ARTICLE 13: Royalties and fees for technical services and payments for the use of equipment.—

 

1.         Royalties, fees for technical services and payments for the use of equipment arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other Contracting State.

 

[With effect from 1-4-1995]

 

2.         However, such royalties, fees and payments may also be taxed in the Contracting State in which they arises and according to the laws of that Contracting State, but if the receipient is the beneficial owner of these categories of income, the tax so charged shall not exceed:

 

(a)        in the case of royalties and fees 20 per cent of the gross amount of such royalties or fees; and

(b)        in the case of payments referred to in paragraph 5 of this Article, 10 per cent of the gross amount of such payments.

 

[With effect from 1-4-1997]

 

2.         However, such royalties, fees and payments may also be taxed in the Contracting State in which they arise, and according to the laws of that Contracting State, but if the recipient is the beneficial owner of these categories of income, the tax so charged shall not exceed 10 per cent of the gross amount of such royalties, fees and payments.

 

3.         The term "royalties" as used in this article means payments of any kind received as a consideration for the use of, or he right to use, any copyright of literary, artistic or scientific work including cinematograph films, or films or tapes used for radio or television broadcasting, any patent, trade mark, design, or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience.

 

4.         The term "fees for technical services" as used in this Article means payments of any kind to any person, other than payments to an employee of the person making the payments and to any individual for independent personal services mentioned in article 15, in consideration for services of a managerial, technical or consultancy nature.

 

5.         The term "payments for the use of equipment" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, industrial, commercial or scientific equipment.

 

6.         The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, fees for technical services or the payments for the use of equipment being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties, fees for the technical services or the payments for the use of equipment arise, through a permanent establishment situated therein, or performs in that other Contracting State independent personal services from a fixed base situated therein, and the royalties, fees for technical services or the payments for the use of equipment are effectively connected with such permanent establishment or fixed base. In such case the provisions of article 7 or article 15, as the case may be, shall apply.

 

7.         Royalties, fees for technical services or payments for the use of equipment shall be deemed to arise in a Contracting State when the payer is that Contracting State itself, a political sub-division, local authority or a resident of that Contracting State. Where however, the person paying the royalties, fees for technical services or the payments for the use of equipment, 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 contract under which the royalties, fees for technical services or the payments for the use of equipment are paid was concluded, and such royalties, fees for technical services or payments for the use of equipment are borne by such permanent establishment or fixed base, than such royalties, fees for technical services or payments for the use of equipment 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, fees for technical services or the payments for the use of equipment, having regard to the royalties, technical services or the use of equipment for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last mentioned amount. In such case, the excess part of the payment shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.

 

ARTICLE 14: Capital gains.—

 

1.         Gains derived by a resident of a Contracting State from the alienation of immovable property, referred to in article 6, and situated in the other Contracting State may be taxed in that other Contracting State.

 

2.         Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or together with the whole enterprise) or of such fixed base, may be taxed in that other Contracting State.

 

3.         Gains from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State of which the alienator is a resident.

 

4.         Gains from the alienation of shares of the capital stock of a company the property of which consists directly or indirectly principally of immovable property situated in a Contracting State may be taxed in that Contracting State. For the purposes of this provision, immovable property pertaining to the industrial or commercial operation of such company shall not be taken into account.

 

5.         Gains from the alienation of shares other than those mentioned in paragraph 4 representing a participation of at least 10 per cent in a company which is a resident of a Contracting State may be taxed in that Contracting State.

 

6.         Gains from the alienation of any property other than that mentioned in paragraphs 1, 2, 3, 4 and 5 shall be taxable only in the Contracting State of which the alienator is a resident.

 

ARTICLE 15: Independent personal services.—

 

1.         Income derived by an individual or a partnership of individuals who is a resident of a Contracting State from the performance of professional services or other independent activities of a similar character shall be taxable only in that Contracting State except in the following circumstances when such income may also be taxed in the other Contracting State:

 

(a)        if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other 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"; in that case, only so much of the income as is derived from his activities performed in that other Contracting State may be taxed in that other Contracting State.

 

2.         The term "professional services" includes independent scientific, literary, artistic, educational or teaching activities, as well as the independent activities of physicians, surgeon, lawyers, engineers, architects, dentists, and accountants.

 

ARTICLE 16: Dependent personal services.—

 

1.         Subject to the provisions of articles 17, 18, 19, 20, 21 and 22, 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 Contracting 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 Contracting 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 Contracting 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"; and

(b)        the remuneration is paid by, or on behalf of, an employer who, is not a resident of the other Contracting State; and

(c)        the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other Contracting State.

 

3.         Notwithstanding the preceding provisions of this article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic by an enterprise of a Contracting State may be taxed in that Contracting State.

 

ARTICLE 17: Directors' fees.--Directors' fees and similar payments derived by a resident of a Contracting State in his capacity as a member of the Board of Directors of a company which is a resident of the other Contracting State may be taxed in that other Contracting State.

 

ARTICLE 18: Income earned by entertainers and athletes.—

 

1.         Notwithstanding the provisions of articles 15 and 16, income derived by a resident of a Contracting State as an entertainer such as a theatre, motion picture, radio or television artiste or a musician or as an athlete, from his personal activities as such exercised in the other Contracting State may be taxed in that other Contracting State.

 

2.         Where income in respect of personal activities exercised by an entertainer or athlete in his capacity as such accrues not to the entertainer or athlete himself but to another person, that income may, notwithstanding the provisions of articles 7, 15 and 16, be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised.

 

3.         Notwithstanding the provisions of paragraph 1, income derived by an entertainer or an athlete who is a resident of a Contracting State from his personal activities as such exercised in the other Contracting State, shall be taxable only in the first-mentioned Contracting State, if the activities in the other Contracting State are supported wholly or substantially from the public funds of the first-mentioned Contracting State, including any of its political sub-division or local authorities.

 

4.         Notwithstanding the provisions of paragraph 2 and articles 7, 15 and 16, where income in respect of personal activities exercised by an entertainer or an athlete in his capacity as such in a Contracting State accrues not to the entertainer or athlete himself but to another person, that income shall be taxable only in the other Contracting State, if that other person is supported wholly or substantially from the public funds of that other Contracting State, including any of its political sub-divisions or local authorities.

 

ARTICLE 19: Remuneration and pensions in respect of Government service.—

 

1. (a)    Remuneration, other than a pension, paid by a Contracting State or a political sub-division or a local authority thereof or out of public funds of that Contracting State to an individual in respect of services rendered to that Contracting State or sub-division or authority shall be taxable only in that Contracting State.

 

(b)      However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other Contracting State and the individual is a resident of that other Contracting State who is a national of that other Contracting State without being a national of the Contracting State to which the services are rendered.

 

2.         Any pension paid by, or out of funds created by a Contracting State or a political sub-division or a local authority thereof to an individual in respect of services rendered to that Contracting state or sub-division or authority shall be taxable only in that Contracting State.

 

3.         The provisions of articles 16, 17 and 20 shall apply to remuneration and pensions in respect of services rendered in connection with a business carried on by a Contracting State or a political sub-division or local authority thereof.

 

ARTICLE 20: Non-Government pensions and annuities.—

 

1.         Any pension, other than a pension referred to in article 19, or any annuity derived by a resident of a Contracting State from sources within the other Contracting State shall be taxable only in the first-mentioned Contracting State.

 

2.         The term "pension" means a periodic payment made in consideration of past services or by way of compensation for injuries received in the course of performance of services.

 

3.         The term "annuity" means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time, under an obligation to make the payments in return for adequate and full consideration in money or money's worth.

 

4.         Notwithstanding the provisions of paragraph 1, pensions paid and other payments made under a public scheme which is a part of the social security system of a Contracting State or a political sub-division or a local authority thereof shall be taxable only in that Contracting State.

 

ARTICLE 21: Payments received by students and apprentices.--A student or business apprentice who is or was a resident of one of the Contracting State immediately before visiting the other Contracting State and who is present in that other Contracting State solely for the purpose of his education or training, shall be exempt from tax in that other Contracting State on payments made to him by persons residing outside that other Contracting State for the purposes of his maintenance, education or training.

 

ARTICLE 22: Payments received by professors, teachers and research scholars.—

 

1.         A professor, teacher, or a research scholar who is or was a resident of one of the Contracting States immediately before visiting the other Contracting State for the purpose of teaching or engaging in research, or both, at a university college, school or other approved institution in that other Contracting State shall be taxable only in the first-mentioned Contracting State on any remuneration for such teaching or research for a period not exceeding two years from the date of his arrival in that other Contracting State.

 

2.         This article shall not apply to income from research if such research is undertaken primarily for the private benefit of a specific person or persons.

 

3.         For the purposes of this article and article 21, an individual shall be deemed to be a resident of a Contracting State if he is resident in that Contracting State in the "fiscal year" in which he visits the other Contracting State or in the immediately preceding "fiscal year".

 

4.         For the purposes of paragraph 1, "approved institution" means an institution which has been approved as an educational or research institution by the appropriate authority of the concerned Contracting State.

 

ARTICLE 23: Other income.—

 

1.         Subject to the provisions of paragraph 2, items of income of a resident of a Contracting State, wherever arising, which are not expressly dealt with in the foregoing articles of this Convention, shall be taxable only in that Contracting State.

 

2.         The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 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 Contracting 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 15, 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 of this Convention, and arising in the other Contracting State may be taxed in that other Contracting State.

 

ARTICLE 24: Capital.—

 

1.         Capital represented by immovable property referred to in article 6 or rights treated as immovable property, owned by a resident of a Contracting State and situated in the other Contracting State, may be taxed in that other Contracting State.

 

2.         Capital represented by shares of the capital stock of a company the property of which consists directly or indirectly principally or immovable property situated in a Contracting State may be taxed in that Contracting State. For the purposes of this provision, immovable property pertaining to the industrial or commercial operation of such company shall not be taken into account.

 

3.         Capital represented by movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or by movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services may be taxed in that other Contracting State.

 

4.         Capital represented by ships and aircraft operated in international traffic and by movable property pertaining to the operation of such ships and aircraft shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

 

5.         All other elements of capital of a resident of a Contracting State shall be taxable only in that Contracting State.

 

ARTICLE 25: Elimination of double taxation.--Double taxation shall be avoided in the following manner:

 

1.         In the case of India:

 

(a)        Where a resident of India derives income or owns capital which, in accordance with the provisions of this Convention, may be taxed in France, India shall allow as a deduction from the tax on the income of that resident an amount equal to the income-tax paid in France, whether directly or by deduction; and as a deduction from the tax on the capital of that resident an amount equal to the capital tax paid in France. Such deduction in either case shall not, however, exceed that part of the income-tax or capital tax (as computed before the deduction is given) which is attributable, as the case may be, to the income or the capital which may be taxed in France. Further, where such resident is a company by which surtax is payable in India, the deduction in respect of income-tax paid in France shall be allowed in the first instance from income-tax payable by the company in India and as to the balance, if any, from surtax payable by it in India.

 

(b)        Where a resident of India derives income which, in accordance with the provisions of this Convention, shall be taxable only in France, India may include this income in the tax base but shall allow as a deduction from the income-tax that part of the income-tax which is attributable to the income derived from France.

 

2.         In the case of France:

 

(a)        Profits and other positive income arising in India and which are taxable in that Contracting State in accordance with the provisions of this Convention, are taken into account for the computation of the French tax where such income is received by a resident of France. The Indian tax shall not be deductible from such income. The beneficiary shall be entitled to a tax credit against French tax attributable to such income. Such tax credit shall be equal:

 

(i)         in the case of income referred to in paragraph 2 of article 9, articles 11, 12, 13, paragraph 5 of article 14, paragraph 3 of article 16, article 17, paragraphs 1 and 2 of article 18, and paragraph 3 of article 23, to the amount of tax paid in India in accordance with the provisions of those articles. However, it shall not exceed the amount of French tax attributable to such income;

(ii)        in the case of other income, to the amount of French tax attributable to such income, which is thus exempted. This provision shall apply also to remuneration referred to in article 19 and in paragraph 4 of article 20.

 

(b)        As regards the application of sub-paragraph (1) to income referred to in articles 12 and 13, where the amount of tax paid in India in accordance with the provisions of these articles exceeds the amount of French tax attributable to such income, the resident of France receiving such income may present his case to the French competent authority. If it appears that such a situation results in taxation which is not comparable to taxation on net income, that competent authority may allow the non-credit amount of tax paid in India as a deduction from the French tax levied on other income from foreign sources derived by that resident. The provisions of this sub-paragraph shall not apply where tax is deemed to be paid in India according to the provisions of sub-paragraphs (c) and (d).

 

(c)        For the purposes of the tax credit referred to in sub-paragraph (a)(i) the term "tax paid in India" shall be deemed to include any amount which would have been payable as Indian tax under the laws of India, and within the limits provided for by this Convention, for any year but for an exemption from or reduction of, tax granted for that year under:

 

(i)         Sections 10(4), 10(4B), 10(15)(iv) covering interest, section 10(6)(viia) covering salaries and section 80L covering interest and dividends, of the Income-tax Act, 1961 (43 of 1961), so far as they were in force on and have not been modified since, the date of the signature of this Convention, or have been modified only in minor respects so as not to affect their general character; or

(ii)        any other provisions which may be enacted after this Convention enters into force granting a deduction in computing the taxable income or an exemption or reduction from tax which the competent authorities of the Contracting States agreed to be for the purposes of the economic development of India, if it has not been modified thereafter or has been modified only in minor respects so as not to affect its general character.

 

(d)        For the purposes of tax credit referred to in sub-paragraph (c), where the Indian tax actually levied on interest arising in India is lower than the tax India may levy according to sub-paragraphs (a) and (b) of paragraph 2 of article 12, then the amount of the tax paid in India on such interest shall be deemed to have been paid at the rates of tax mentioned in the said provisions.

 

However, if the general tax rates under Indian law applicable to the aforementioned interest are reduced below those mentioned in the foregoing sentence these lower rates shall apply for the purposes of that sentence.

 

(e)        Notwithstanding the provisions of sub-paragraphs (a) and (c), dividends paid by a company which is a resident of India to a company which is a resident of France, shall be exempt from French Corporation tax to the extent that the dividends would have been exempt under French law if both companies had been residents of France.

 

(f)        Residents of France who own capital taxable in India may also be taxed in France on such capital. The French tax is computed by allowing a tax credit equal to the amount of tax paid in India in accordance with the provisions of Article 24. However, such credit shall not exceed the French tax attributable to such capital.

 

ARTICLE 26: Non-discrimination.—

 

1.         Nationals of one of the Contracting States 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 the other Contracting State in the same circumstances are or may be subjected. The provision shall, notwithstanding the provisions of article 1, also apply to persons who are not residents of one or both of the Contracting States.

 

2.         Except where the provisions of paragraph 3 of article 7 apply the taxation on a permanent establishment which an enterprise of one of the Contracting States has in the other Contracting State shall not be less favourably levied in that other Contracting State than the taxation levied on enterprises of that other Contracting State carrying on the same activities.

 

3.         The provision of paragraph 2 shall not be construed as obliging one of the Contracting States 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.         Except where the provisions of article 10, paragraph 7 of article 12 or paragraph 8 of article 13, apply, interest, royalties and other disbursements paid by an enterprise of one of the Contracting States to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first mentioned Contracting State. Similarly, any debts of an enterprise of one of the Contracting States to a resident of the other Contracting State shall, for the purpose of determining the taxable capital of such enterprise, be deductible under the same conditions as if they had been contracted to a resident of the first-mentioned Contracting State.

 

5.         Enterprises of one of the Contracting States, 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 the first mentioned Contracting State are or may be subjected.

 

ARTICLE 27: 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 this Convention, he may, notwithstanding the remedies provided by the national law of those Contracting States, present his case to the competent authority of the Contracting State of which he is a resident. This case must be presented within three years of the date of receipt of notice of the action which gives rise to taxation not in accordance with the Convention.

 

2.         The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at an appropriate solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to avoidance of taxation not in accordance with the Convention. Any agreement reached shall be implemented notwithstanding any time limits in the national laws of the Contracting States.

 

3.         The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention. They may also consult together for the elimination of double taxation in cases not provided for in the Convention.

 

4.         The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs. When it seems advisable in order to reach agreement to have an oral exchange of opinions, such exchange may take place through a Commission consisting of representatives of the competent authorities of the Contracting States.

 

5.         The competent authorities of the Contracting States may, jointly or separately, if they consider it necessary, settle the mode of application of the Convention and, especially the requirements to which the residents of Contracting State shall be subjected in order to obtain, in the other Contracting State, the tax reliefs or exemptions provided for by the convention.

 

ARTICLE 28: Exchange of information.—

 

1.         The competent authorities of the Contracting States shall exchange such information (including documents) as is necessary for carrying out the provisions of the Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention, in so far as the taxation thereunder is not contrary to the Convention, in particular for the prevention of fraud or evasion of such taxes. 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 Contracting 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 the 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.

 

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 or administrative practice of that or of the other Contracting State;

(b)        to supply information or documents which are 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 or documents 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 activities.--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 agreement concluded between the parties to this Convention.

 

ARTICLE 30: Entry into force.—

 

1.         Each of the Contracting States shall notify to the other the completion of the procedure required by its law for the bringing into force of this Convention. This Convention shall enter into force on the first day of the second month following the date of reception of the later of these notifications and shall thereupon have effect:

 

(a)        in India:

 

(i)         in respect of income arising in any fiscal year beginning on or after the first day of April following the calendar year in which the Convention enters into force;

(ii)        in respect of capital which is held on the last day of any fiscal year beginning on or after the first day of April following the calendar year in which the Convention enters into force;

 

(b)        in France:

 

(i)         in respect of income arising in any calendar year or accounting period beginning on or after the first of January following the calendar year in which the Convention enters into force;

(ii)        in respect of capital owned on the first day in any calendar year following the calendar year in which the Convention enters into force.

 

2.         The Agreement between the Government of French Republic and the Government of the Republic of India for the avoidance of double taxation in respect of taxes on income signed in Paris on March 26, 1969 shall be terminated and its provisions shall cease to have effect when the corresponding provisions of this Convention shall become effective.

 

ARTICLE 31: Termination.--This Convention shall remain in force indefinitely. However, either Contracting State may, on or before the thirtieth day of June in any calendar year beginning after the expiration of a period of five years from the date of its entry into force, give the other Contracting State through diplomatic channels, written notice of termination and, in such event, this Convention shall cease to have effect:

 

(a)        in India:

 

(i)         in respect of income arising in any fiscal year beginning on or after the first day of April following the calendar year in which the notice of termination is given;

(ii)        in respect of capital which is held on the last day of any fiscal year beginning on or after the first day of April following the calendar year in which the notice of termination is given.

 

(b)        in France:

 

(i)         in respect of income arising in any calendar year or accounting period beginning on or after the first of January following the calendar year in which the notice of termination is given;

(ii)        in respect of capital owned on the first day of any calendar year following the calendar year in which the notice of termination is given.

 

In witness whereof the undersigned, being duly authorised thereto, have signed the present Convention.

 

Done in duplicate at ........... this ......... day of ....... one thousand nine hundred and ........ in the French, Hindi and English languages, all the texts being equally authentic.

 

For the Government of the                            For the Government of the

Republic of India                                            French Republic

 

 

Protocol.--At the time of proceeding to the signature of the Convention between France and India for the avoidance of double taxation with respect to taxes on income and on capital, the undersigned have agreed on the following provisions which form an integral part of the Convention.

 

1.         For the purposes of this Convention, it is understood that the words "political sub-division" wherever they occur shall mean political sub-division of India.

 

2.         With respect to paragraph 1 of article 7 (Business Profits), it is understood that if in both India's new tax Conventions, Agreements or Protocols with the United Kingdom and Federal Republic of Germany, it is provided that the profits of an enterprise of a Contracting State carrying on business through a permanent establishment in the other Contracting State may be taxed in that other Contracting State as are attributable directly or indirectly to that permanent establishment or attributable to: (a) Sales in that other Contracting State of goods or merchandise of the same or similar kind as those sold through that permanent establishment; or (b) other business activities carried on in that other State, of the same or similar kind as those effected through that permanent establishment, such provisions shall also apply to the extent so provided to the present Convention with effect from the date from which the later of those two Conventions, Agreements or Protocols between India and United Kingdom and the Federal Republic of Germany enters into force. It is understood that only the provisions included in both new Conventions, Agreements or Protocols between India and United Kingdom and Federal Republic of Germany shall apply to the present Convention.

 

3.         In respect of paragraphs 1 and 2 of article 7, where an enterprise of one of the Contracting States sells goods or merchandise or carries on business in the other Contracting State through a permanent establishment situated therein, the profits of that permanent establishment shall not be determined on the basis of the total amount received by the enterprise, but shall be determined only on the basis of the remuneration which is attributable to the actual activity of the permanent establishment for such sales or business. Especially, in the case of contracts for the survey, supply, installation or construction of industrial, commercial or scientific equipment or premises, or of public works, when the enterprise has a permanent establishment, the profits of such permanent establishment shall not be determined on the basis of the total amount of the contract, but shall be determined only on the basis of that part of the contract which is effectively carried out by the permanent establishment in the Contracting State where the permanent establishment is situated. The profits related to that part of the contract which is carried out by the head office of the enterprise shall be taxable only in the Contracting State of which the enterprise is a resident.

 

4.         It is understood that with respect to paragraph 2 of article 7, no profits shall be attributed to a permanent establishment by reason of the facilitation of the conclusion of foreign trade or loan agreements or the mere signing thereof.

 

5.         Where the law of the Contracting State in which a permanent establishment is situated imposes in accordance with the provisions of sub-paragraph (a) of paragraph 3 of article 7 a restriction on the amount of the executive and general administrative expenses which may be allowed as a deduction in determining the profits of such permanent establishment, it is understood that in determining the profits of such permanent establishment, the deduction in respect of such executive and general administrative expenses in no case shall be less than what is allowable under the Indian Income-tax Act as on the date of signature of this Convention.

 

6.         Where tax has been levied at source in excess of the amount of tax chargeable under the provisions of article 11, 12 or 13, applications for the refund of the excess amount of tax have to be lodged with the competent authority of the Contracting State having levied the tax, within a period of three years after the expiration of the calendar year in which the tax has been levied.

 

7.         In respect of articles 11 (Dividends), 12 (Interest) and 13 (Royalties, fees for technical services and payments for the use of equipment), if under any Convention, Agreement or Protocol signed after 1-9-1989, between India and a third State which is a member of the OECD, India limits its taxation at source on dividends, interest, royalties, fees for technical services or payments for the use of equipment to a rate lower or a scope more restricted than the rate of scope provided for in this Convention on the said items of income, the same rate of scope as provided for in that Convention, Agreement or Protocol on the said items income shall also apply under this Convention, with effect from the date on which the present Convention or the relevant Indian Convention, Agreement or Protocol enters into force, whichever enters into force later.

 

8.         It is understood that 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 is not considered as an interest for the purposes of article 12 (Interest) and is not considered as tax for the purpose of article 25 (Elimination of Double Taxation).

 

9.         In respect of article 13 (Royalties, Fees for Technical Services and payments for the use of equipment), notwithstanding the provisions of paragraph 2 of this Article, royalties, fees for technical services and payments for the use of equipment arising in France and paid to a resident of India, shall not be taxable in France.

 

10.       It is understood that in case India applies a levy, not being a levy covered by article 2, such as the Research and Development Cess on payments meant in article 13, and if after the signature of this Convention under any Convention or Agreement or Protocol between India and third State which is a member of the OECD, India should give relief from such levy, directly by reducing the rate or the scope of the levy, either in full or in part, or, indirectly by reducing the rate or the scope of the Indian tax allowed under the Convention, Agreement or Protocol in question on payments as meant in Article 13 of this Convention with the levy, either in full or in part, then, as from the date on which the relevant Indian Convention, Agreement or Protocol enters into force, such relief as provided for in that Convention, Agreement or Protocol shall also apply under this Convention.

 

11.       As regards article 16 (Dependent Personal Services), it is understood that the provisions of this article apply to remuneration derived by a resident of a Contracting State in his capacity as an official in a top level managerial position of a company which is a resident of the other Contracting State. It is clear that in respect of the remuneration due from a resident of this other Contracting State, the provisions of paragraph 2 of article 16 shall not apply.

 

12.       As regards the application of paragraph 1 of article 26, it is understood that an individual, legal person, partnership or association which is a resident of a Contracting State shall not be deemed to be in the same circumstances as an individual, legal person, partnership or association which is a resident of the other Contracting State. This shall also apply where such individuals, legal persons partnership or associations are, in applying paragraph 1.h of article 3 (General Definitions), deemed to be nationals of the Contracting State of which they are residents.

 

13.       In respect of article 25 (Elimination of Double Taxation), it is understood that for the purpose of sub-paragraph 2(a)(ii), income which is exempt totally or partially in India shall also be considered as income taxable in India.

 

Done in duplicate at .......................... this ................... day of ................, one thousand nine hundred and ............................, in French, Hindi and English languages, all the texts being equally authentic.

 

For the Government of the                                        For the Government of the

Republic of India                                                        French Republic

 

 

FRANCE

 

Agreement between the Government of India and the Government of the French Republic for the avoidance of double taxation in respect of taxes on income

 

Notification No. 20 [F. No. 11 (33-a) 63-TPL], dated 18 February, 1970 as corrected by Notification No. GSR 394,dated 17 March, 1971

 

G.S.R. 260.--Whereas the annexed Agreement between the Government of India and the Government of the French Republic for the avoidance of double taxation in respect of taxes on income has been approved in accordance with the laws in force in each of the two Contracting States and the diplomatic notes to this effect have been exchanged today, as required by paragraph (1) of Article XXV 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 24A of the Companies (Profits) Surtax Act, 1964 (7 of 1964), the Central Government hereby directs that all the provisions of the said Agreement shall be given effect to in the Union of India thirty days after this date.

 

ANNEXURE

 

The Government of India and the Government of the French Republic, Desiring to conclude an Agreement for the avoidance of double taxation in respect of taxes on income. Have agreed as follows :

 

ARTICLE I: (1) The taxes which are the subject of the present Agreement are :

 

(a)        in India :

 

--the income-tax and any surcharge on income-tax levied under the Income-tax Act, 1961 (43 of 1961), and

 

--the surtax levied under the Companies (Profits) Surtax Act, 1964 (7 of 1964),

 

(hereinafter referred to as "Indian tax");

 

(b)        in France :

 

--the income-tax on individuals (import sur le revenue des personnes physiques),

           

--the complementary tax (taxe complementaire),

 

--the tax on the profits of companies and other legal entities (import sur les        benefices des societes et autres personnes morales),

 

(hereinafter referred to as "French tax").

 

(2)        The present Agreement shall also apply to any identical or substantially similar taxes, which are subsequently imposed in addition to, or in place of the existing taxes. At the beginning of each year, the competent authorities of India and France shall notify to each other any changes which have been made in their respective taxation laws in the preceding year.

 

ARTICLE II: (1) In the present Agreement :

 

(a)        The term "India", when used in a geographical sense, means all the territory in which the laws relating to Indian tax are in force;

(b)        The term "France", when used in a geographical sense, means the European departments and the overseas departments (Guadeloupe Guiana, Martinique and Reunion);

(c)        The terms "one of the Contracting States" and "the other Contracting State" mean India or France, as the context requires;

(d)        The term "person" includes natural persons, companies and all other entities which are treated as taxable units under the tax laws in force in the respective Contracting States;

(e)        The term "company" means any body corporate and includes any entity which is treated as a body corporate or a company for tax purposes under the laws of the respective Contracting States;

            (f)        The term "tax" means Indian tax or French tax as the context requires;

(g)        The terms "resident of India" and "resident of France" mean respectively any person who is resident in India for the purposes of Indian tax and not resident in France for the purposes of French tax, and any person who is resident in France for the purposes of French tax, and not resident in India for the purposes of Indian tax. A company shall be regarded as resident in India if it is incorporated in India or its business is wholly managed and controlled in India. A company shall be regarded as resident in France if it is incorporated in France or its business is wholly managed and controlled in France;

(h)        The terms "Indian enterprise" and "French enterprise" mean respectively an industrial or commercial enterprise or undertaking carried on by a resident of India and an industrial or commercial enterprise or undertaking carried on by a resident of France; and the terms "enterprise of one of the Contracting States" and "enterprise of the other Contracting State" mean an Indian enterprise or a French enterprise as the context requires;

(i)         The term "permanent establishment" means a fixed place of business in which the business of the enterprise is wholly or partly carried on :

 

(aa)      The term "fixed place of business" shall include a place of management, a branch, an office, a factory, a workshop, a warehouse, a mine, a quarry or other place of extraction of natural resources.

(bb)      An enterprise of one of the Contracting States shall be deemed to have a fixed place of business in the other Contracting State if it carries on in that other Contracting State a construction, installation or assembly project or the like.

(cc)      The use of mere storage facilities or the maintenance of a place of business exclusively for the purchase of goods or merchandise and not for any processing of such goods or merchandise in the country of purchase, shall not constitute a permanent establishment.

(dd)      A person acting in one of the Contracting States for or on behalf of an enterprise of the other Contracting State shall be deemed to be a permanent establishment of that enterprise in the first-mentioned Contracting State, if--

 

1.         he has and habitually exercises in the first-mentioned Contracting State, a general authority to negotiate and enter into contracts for or on behalf of the enterprise, unless the activities of the person are limited exclusively to the purchase of goods or merchandise for or on behalf of the enterprise, or

2.         he habitually maintains in the first-mentioned Contracting State a stock of goods or merchandise belonging to the enterprise from which the person regularly fulfils orders for or on behalf of the enterprise, or

3.         he habitually secures orders in the first-mentioned Contracting State, exclusively or almost exclusively, for the enterprise itself or for the enterprise and other enterprises which are controlled by it or have a controlling interest in it. A person from one of the Contracting States who is present in the other Contracting States for not more than three months in the taxable year for the purpose of securing orders shall not be deemed to be habitually securing orders within the meaning of this sub-paragraph.

 

(ee)      A broker, a commission agent or other agent of a genuinely independent status who merely acts as an intermediary between an enterprise of one of the Contracting States and a prospective customer in the other Contracting State shall not be deemed to be a permanent establishment in that other Contracting State in cases where such activities do not involve securing of orders within the meaning of sub-paragraph (dd) (3) above.

(ff)       The fact that a company which is a resident of one of the Contracting States, has a subsidiary company which either is a resident of the other Contracting State or carries on a trade or business in that other Contracting State shall not, of itself, constitute that subsidiary company a permanent establishment of its parent company;

 

(j)         The term "competent authority" means :

 

--In the case of India, the Central Government in the Ministry of Finance, Department of Revenue, or its authorised representative.

 

--in the case of France, for the purpose of interpretation of the present Agreement, the Minister of

Foreign Affairs and for any other purposes, the  Minister of Finance or his authorised representative.

 

2.         In the application of the provisions of the present Agreement in either Contracting State, any term not otherwise defined in the present Agreement shall, unless the context otherwise requires, have the meaning which it has under the laws in force in that Contracting State relating to the taxes which are the subject of the present Agreement.

 

ARTICLE III:

 

(1)        The industrial or commercial profits (excluding the profits derived from the operation of ships or aircraft) of an enterprise of one of the Contracting States shall not be subjected to tax in the other Contracting State unless the enterprise has a permanent establishment situated in that other Contracting State. If it has such a permanent establishment, the profits attributable thereto shall be subjected to tax only in that other Contracting State.

 

(2)        Where an enterprise of one of the Contracting States has a permanent establishment situated in the other Contracting State, there shall be attributed to such permanent establishment the industrial or commercial profits which it might be expected to derive in that other Contracting State, if it were an independent enterprise engaged in the same or similar activities under the same or similar conditions and dealing on an independent basis with the enterprise of which it is a permanent establishment.

 

(3)        In determining the industrial or commercial profits of a permanent establishment, there shall be allowed as deductions all expenses, wherever incurred, reasonably allocable to such permanent establishment, including executive and general administrative expenses so allocable.

(4)        In a case where the ascertainment of the correct amount of the industrial or commercial profits of a permanent establishment presents difficulties, such profits may be reasonably estimated with reference to the extent to which the activities of such permanent establishment have contributed to earning of profits.

(5)        The term "industrial or commercial profits", as used in this Article, shall not include income in the form of dividends, interest, rents, royalties and similar payments as referred to in paragraph (2) of Article VII, capital gains, remuneration for personal services, or fees for technical services.

 

ARTICLE IV: Where--

 

(a)        an enterprise of one of the Contracting States participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or

(b)        the same persons participated directly or indirectly in the management, control or capital of an enterprise of one of the Contracting States and an enterprise of the other Contracting State,

 

and, in either case, conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which but for those conditions would have accrued to one of the enterprises but by reason of those conditions have not so accrued may be included in the profits of that enterprise and taxed accordingly.

 

ARTICLE V:

 

(1)        Profits derived by an enterprise of one of the Contracting States from the operation of aircraft shall not be subjected to tax in the other Contracting State unless the aircraft is operated wholly or mainly between places within that other Contracting State.

(2)        The provisions of paragraph (1) shall likewise apply in respect of participations in a pooled service, in a joint air transport operating organisation or an international operating agency.

 

ARTICLE VI:

 

(1)        Where an enterprise of one of the Contracting States derives profits through shipping operations carried on in the other Contracting State, the tax leviable on such profits in the other Contracting State shall be reduced by an amount equal to fifty per cent thereof and the reduced amount of tax payable in that other Contracting State on such profits shall be allowed as a credit against, but in an amount not exceeding, the tax charged in respect of such profits in the first-mentioned Contracting State.

 

(2)        Paragraph (1) shall not apply to profits arising as a result of coastal traffic. The term "coastal traffic" means traffic which originates and terminates in the territorial waters of the same Contracting State.

 

(3)        This Article shall not, in the case of India, affect the provisions of sub-sections (1) to (6) of section 172 of the Income-tax Act, 1961, relating to the assessment of profits from occasional shipping or tramp steamers. When an adjustment is to be made under sub-section (7) of section 172 of the said Act in the case of occasional shipping or tramp steamers, the provisions of paragraph (1) shall apply.

 

ARTICLE VII:

 

(1)        Royalties derived by a resident of one of the Contracting States from sources in the other Contracting State may be taxed in both the Contracting States.

(2)        In this Article, the term "Royalties" means payment of any kind received as consideration for the use of; or for the right to use, any copyrights of literary, artistic or scientific works, cinematographic films, patents, models, designs, plans, secret processes or formulae, trade marks or for the use of, or for the right to use, industrial, commercial or scientific equipment or for information concerning industrial, commercial or scientific experience, but does not include any royalty or similar payments in respect of the operation of mines, quarries, or other places of extraction of natural resources.

 

ARTICLE VIII: Interest on bonds, securities notes, debentures or any other form of indebtedness derived by a resident of one of the Contracting States from sources in the other Contracting States may be taxed in both the Contracting States.

 

ARTICLE IX: Dividends paid by a company which is a resident of one of the Contracting States to a resident of the other Contracting State may be taxed in both the Contracting States.

 

ARTICLE X:

 

(1)        Income from immovable property may be subjected to tax only in the Contracting State in which the property is situated.

 

(2)        For the purposes of paragraph (1), any royalty or other income derived from the operation of a mine, quarry, or other place of extraction of natural resources shall be regarded as income from immovable property.

 

ARTICLE XI: Capital gains arising from the sale, exchange or transfer of a capital asset, whether movable or immovable, may be taxed only in the Contracting State in which the capital asset is situated at the time of such sale, exchange or transfer. For this purpose, the situs of the shares of a company shall be deemed to be in the Contracting State where the company is incorporated.

 

ARTICLE XII:

(1)        Remuneration paid by or out of the funds created by a Contracting State or any political sub-division thereof or a local authority therein to any individual in respect of services rendered to the State or sub-division or local authority shall be taxed only in that Contracting State.

(2)        The provisions of paragraph (1) shall not apply:

 

(a)        where remuneration is paid by a Contracting State or a political sub-division thereof or a local authority therein to any individual who is a national of the other Contracting State without being a national of the first-mentioned Contracting State, the remuneration in such a case being taxable only in the Contracting State in which the individual is resident;

(b)        to remuneration paid in respect of services rendered in connection with any trade or business carried on for the purpose of profit by a Contracting State or a political sub-division thereof or a local authority therein referred to in paragraph (1).

 

(3)        The provisions of paragraph (1) and sub-paragraph (a) of paragraph (2) of this article shall also apply to remuneration paid by the Reserve Bank of India, the Public Railways Authorities and the Postal Administration of India and the corresponding organisations in France.

 

ARTICLE XIII:

 

(1)        Any pension or annuity derived from sources within one of the Contracting States by an individual who is a resident of the other Contracting State shall be taxable only in the first-mentioned Contracting State.

 

(2)        The term "pension", as used in this Article, means periodic payments made in consideration of services rendered or by way of compensation for injuries received.

 

(3)        The term "annuity", as used in this Article, means a stated sum payable periodically at stated times, during life or during a specified or ascertainable period of time, under an obligation to make the payments in return for adequate and full consideration in money or money's worth.

 

ARTICLE XIV:

 

(1)        Subject to the provisions of Article XII, salaries, wages or other similar remuneration for services as an employee performed in one of the Contracting States by an individual who is a resident of the other Contracting State may be taxed only in the Contracting State in which such services are rendered.

 

(2)        Notwithstanding the provisions of paragraph (1) of this Article, salaries, wages, or other similar remuneration paid to an individual who is a resident of one of the Contracting States for services performed in the other Contracting State shall not be subjected to tax in that other Contracting State and may be subjected to tax in the former Contracting State, if--

 

(a)        he is present in that other Contracting State for a period or periods not exceeding in the aggregate 183 days in the taxable year concerned, and

(b)        the remuneration is paid by or on behalf of an employer who is not a resident of that other Contracting State, and

(c)        the remuneration is not deducted in computing the profits of a permanent establishment chargeable to tax in that other Contracting State.

 

(3)        Notwithstanding the provisions of paragraphs (1) and (2) of this Article, remuneration for personal services performed aboard a ship or aircraft operated by an enterprise of one of the Contracting States in international traffic shall be taxed only in that Contracting State.

 

ARTICLE XV:

 

(1)        Income derived by a resident of a Contracting State in respect of professional services or other independent activities of a similar character shall be subjected to tax only in the Contracting State where such services or activities are performed.

 

(2)        Income derived by public entertainers, such as theatre, motion picture, radio or television artistes and musicians, and by athletes from their personal activities as such shall be subjected to tax only in the Contracting State in which such activities are exercised.

 

ARTICLE XVI: Amounts paid by an enterprise of one of the Contracting States for technical services furnished by an enterprise of the other Contracting State shall not be subjected to tax in the first-mentioned Contracting State except in so far as such amounts are attributable to activities actually performed in the first-mentioned Contracting State. In computing the income so subjected to tax there shall be allowed as deductions the expenses incurred in the first-mentioned Contracting State in connection with the activities performed in that Contracting State.

 

ARTICLE XVII:

 

(1)        A resident of one of the Contracting States, who, at the invitation of a university, college, school or other recognised educational institution in the other Contracting State, visits that other Contracting State solely for the purpose of teaching or engaging in research at such educational institution for a period not exceeding two years shall not be taxed in that other Contracting State on his remuneration for such teaching or research.

(2)        This article shall apply to an individual engaged in research only if the results of such research are freely available to the general public.

 

ARTICLE XVIII:

 

(1)        An individual who is a resident of one of the Contracting States and is temporarily present in the other Contracting State solely,--

 

(a)        as a student at a recognised university, college or school in that other Contracting State, or

            (b)        as a business apprentice, or

(c)        as the recipient of a grant, allowance or reward for the primary purpose of study or research from a governmental, religious, charitable, scientific, literary or educational organisation of the former Contracting State,

 

shall not be subjected to tax in that other Contracting State--

 

(i)         on the remittances from abroad for the purposes of his maintenance, education, training study or research, and

(ii)        with respect to any amount representing remuneration for an employment in that other Contracting State if that employment is related with his studies or his training or if it is necessary for his maintenance; and

            (iii)       the grant, allowance or award,

 

as the case may be.

 

(2)        An individual who is a resident of one of the Contracting States and is temporarily present in the other Contracting State for a period not exceeding one year as an employee of, or under contract with, an enterprise of the former Contracting State or an organisation referred to in paragraph (1)(c) above solely to acquire technical, professional or business experience from a person other than such enterprise or organisation, shall not be subjected to tax in that other Contracting State on the remuneration for such period in an amount not exceeding 12,000 new French Francs (or its equivalent sum in Indian currency at the official rate of exchange) including remuneration from such person in the other Contracting State.

 

(3)        An individual who is resident in one of the Contracting States and is temporarily present in the other Contracting State under arrangements with a Government in that other Contracting States except where express provision to the contract of training, study or orientation shall not be subjected to tax in that other Contracting State on remuneration, received from abroad or paid in that other Contracting State for his services directly related to such training, study or orientation, in an amount not exceeding the sum of 15,000 new French Francs (or its equivalent sum in Indian currency at the official rate of exchange) during any taxable year.

 

ARTICLE XIX:

 

(1)        The laws in force in either of the Contracting States will continue to govern the taxation of increase in the respective Contracting States except where express provision to the contrary is made in the present Agreement. However, a company which is a resident of India and has a permanent establishment in France and which is liable to the tax on income from movable capital under Article 109.2 of the General Code of Taxes of France shall not be charged to that tax on income exceeding the profits attributable to such permanent establishment in accordance with Article III of the present Agreement.

 

(2)        Subject to the provisions of Article VI and paragraph (1) above, where, in the case of a resident of India, any income from sources within France is subjected to tax both in India and in France, India shall allow against the Indian tax payable in respect of such income and within the limit of such Indian tax, a credit of French tax payable in respect of such income; so, however, that where such resident is a company by which surtax is payable in India, the credit aforesaid shall be allowed in the first instance, against 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 the provisions of Article VI and paragraph (1) above, in respect of income subject to tax in both the Contracting States, tax shall be determined in the case of a resident of France as follows :

 

(a)        On royalties mentioned in Article VII derived from sources within India and which have been subjected to tax in India, France shall allow, against the French tax payable in respect of such royalties and within the limit of such French tax, a credit of Indian tax payable  in respect of such royalties.

            (b)        On interest mentioned in Article VIII derived from sources within India :

 

(i)         in cases where such interest has been subjected to tax in India, France shall allow, against the French tax payable in respect of such interest and within the limit of such French tax, a credit of Indian tax payable in respect of such interest.

(ii)        in cases where, owing to the operation of section 10(15)(iv) of the Income-tax Act, 1961, no Indian tax is payable on such interest, France shall reduce the French tax payable in respect of such interest by any amount equal to fifty per cent thereof.

 

(c)        On dividends, mentioned in Article IX, derived from sources within India, France shall allow, against the French tax payable in respect of such dividends and within the limit of such French tax, a credit of an amount equal to thirty per cent of the gross amount of such dividends. In computing the French tax on such dividends in cases where the Indian tax thereon has been reduced or exempted by the operation of sections 80L, 80K and 80M of the Income-tax Act, 1961, it shall be deemed that the amount by which the Indian tax has been reduced or exempted has been actually paid in India.

 

(4)        Income which, in accordance with the provisions of the present Agreement, is not to be subjected to tax in any Contracting State, may be included in the amount of income to be taken into account for calculating the rate of tax to be imposed in that Contracting State.

 

ARTICLE XX: The competent authorities of the Contracting States shall upon request, exchange such information (being information available under the respective taxation laws of the Contracting States) as is necessary for carrying out the provisions of the present Agreement. Any information so exchanged shall be treated as secret and shall not be disclosed to any persons other than those concerned with the assessment and collection of taxes which are the subject of a present Agreement. No information shall, however, be exchanged which would disclose any trade, business, industrial or professional secret or any trade process.

 

ARTICLE XXI: The nationals of one of the Contracting States 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 Contracting State in the same circumstances are or may be subjected. In particular, the citizens of one Contracting State who are subjected to tax in the other Contracting State shall be entitled to the same extent as the citizens of that other Contracting State, to any exemption, deduction, credit or other allowance accorded in consideration of the family circumstances.

 

ARTICLE XXII:

 

(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 present Agreement, he may, notwithstanding the remedies provided by the national laws of the Contracting 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 present Agreement.

 

(3)        The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties arising as to the interpretation or application of the present Agreement.

 

(4)        The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs.

 

ARTICLE XXIII:

 

(1)        The present Agreement may be extended, either in its entirety or with necessary modifications, to overseas Territories of the French Republic, which impose taxes substantially similar in character to those to which the present Agreement applies. Any such extension shall take effect from such date and subject to such modifications and conditions (including conditions as to termination) as may be specified and agreed to between the Contracting States in notes to be exchanged through diplomatic channels.

 

(2)        Unless otherwise agreed to by both Contracting States the termination of the present Agreement by one of the Contracting States under paragraph (3) of Article XXV shall also terminate the application of the present agreement to any territory to which it has been extended under this Article.

 

ARTICLE XXIV: The competent authorities of the two Contracting States may consult together as may be necessary to prescribe regulations necessary to carry into effect the present Agreement within the respective Contracting States. They may communicate with each other directly for the purpose of giving effect to the present Agreement.

 

ARTICLE XXV:

 

(1)        The present Agreement shall be approved in accordance with the laws in force in each of the two States. It shall enter into force thirty days after the exchange of letters certifying that the proper procedure was fulfilled in each State. The exchange of letters shall take place at New Delhi.

(2)        The present Agreement shall thereupon be applicable :

 

(a)        In India, in respect of income derived during the "previous years" beginning on or after the first day of January of the calendar year in which the exchange of letters takes place.

(b)        In France, in respect of income derived during the years of assessment beginning on or after the first day of January of the calendar year in which the exchange of letters takes place.

 

(3)        This Agreement shall continue in effect indefinitely but either of the Contracting States may, on or before the thirtieth day of June in any calendar year after 1971, give to the other Contracting State notice of termination, and in such event, the present Agreement shall cease to be effective :

 

(a)        In India, in respect of income derived during the "previous year" beginning on or after the first day of January of the calendar year next following the calendar year in which such notice is given,

(b)        In France, in respect of income derived during the years of assessment beginning on or after the first day of Janurary of the calendar year next following the calendar year in which such notice is given.

 

In witness whereof the undersigned, duly authorised thereto, have signed the present Agreement.

 

Done at Paris on the 26th day of March, 1969 in duplicate in the French and Hindi languages, both texts being equally authentic.

 

For the Government of India.                                                For the Government of the French Republic

Sd./-     D.N. Chatterjee                                                                     Sd/-      Herve Alphand

Paris

 

26th March, 1969

 

Monsieur le Ministre,

 

The Agreement between the Governments of India and the Republic of France for the avoidance of double taxation in respect of taxes on income, being signed today, I have the honour, on behalf of my Government, to propose as follows :

 

(1)        Where a resident of one of the Contracting States fulfils an order for sale of machinery to a resident of the other Contracting State and it is incidental to the sale of the machinery that a person or persons employed by the resident of the first-mentioned Contracting State should proceed to the other Contracting State for assisting in the installation of the machinery therein, such activity shall not be deemed to constitute a permanent establishment unless it is carried on for a period exceeding three months or the expenses incurred on such activity are more than 10 per cent of the total sale price for the order.

 

(2)(a)   Where a person, who is a resident of India, visits France in connection with any activity under the terms of the Agreement dated 7th June, 1966, concerning Cultural, Scientific and Technical Co-operation between the Government of India and the Government of the French Republic, he shall not be taxable in France in respect of the remuneration received by him in connection with such activity.

(b)      Where a person, who was domiciled in France, visits India in connection with any activity under the terms of the Agreement, dated 7th June, 1966, concerning Cultural, Scientific and Technical Co-operation between the Government of India and the Government of the French Republic, he shall not be taxable in India in respect of the remuneration received by him in connection with such activity. In that case, the part of such remuneration received from French sources shall be subject to French income-tax.

 

I shall be grateful if you confirm your agreement to the above proposals and that in such case, this letter and your reply thereto, shall be deemed to be part of the Agreement.

 

Please accept, Monsieur le Ministry, the assurance of my highest consideration.

 

Sd/- D. N. Chatterjee

 

Monsieur Herve Alphand,

 

Secretary General,

 

Ministry of External Affairs, Paris.

 

Paris

 

26th March, 1969.

 

Monsieur I’Ambassadeur,

 

By your letter of today’s date, you on behalf of the Government of India, informed me of the following :--

 

“The Agreement between the Governments of India and the Republic of France for the avoidance of double taxation in respect of taxes on income, being signed today, I have the honour, on behalf of my Government, to propose as follows :

 

(1)        Where a resident of one of the Contracting States fulfils an order for sale of machinery to a resident of the other Contracting State and it is incidental to the sale of the machinery that a person or persons employed by the resident of the first-mentioned Contracting State should proceed to the other Contracting State for assisting in the installation of the machinery therein,                        such activity shall not be deemed to constitute a permanent establishment unless it is carried on for a period exceeding three months or the expenses incurred on such activity are more than 10 per cent of the total sale price for the order.

 

(2)        (a)        Where a person, who is a resident of India, visits France in connection with any activity under the terms of the Agreement, dated 7th June, 1966, concerning Cultural, Scientific and Technical Co-operation between the Government of India and the Government of the French Republic, he shall not be taxable in France in respect of the remuneration received by him in connection with such activity.

 

(b)        Where a person, who was domiciled in France, visits India in connection with any activity under the terms of the Agreement, dated 7th June, 1966, concerning Cultural, Scientific and Technical Co-operation between the Government of India and the Government of the French Republic, he shall not be taxable in India in respect of the remuneration received by him in connection with such activity. In that case, the part of such remuneration recieved from French sources shall be subject to French income-tax.”

 

I have the honour to inform you that this proposal meets with the approval of the Government of the French Republic. It is, therefore, confirmed that your letter of today’s date and my reply thereto shall form part of the Agreement.

 

Please accept, Monsieur I’Ambassadeur, the assurance of my highest consideration.

 

Sd./- Herve Alphand

 

His Excellency Shri D. N. Chatterjee,

 

Ambassador of India, Paris.

 

 

GERMANY

 

Agreement between the Republic of India and the Federal Republic of Germany for the Avoidance of DoubleTaxation with respect to Taxes on Income and Capital

Notification No. 10235 [F. No. 500/47/90-FTD], dated 29-11-1996

 

Whereas the annexed Agreement between the Government of the Republic of India and the Government of the Federal Republic of Germany for the avoidance of double taxation with respect to taxes on income and capital has been concluded;

 

And Whereas the aforesaid Agreement was brought into force on the 26th day of October, 1996 after the completion by both the Contracting States to each other of the procedure required under their laws in accordance with article 28 of the said Agreement;

 

Now, therefore, in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961) and section 44A of the Wealth-tax Act, 1957 (27 of 1957), the Central Government hereby directs that all the provisions of the said Agreement shall be given effect to in the Union of India.

 

Whereas the Government of the Federal Republic of Germany and the Government of the Republic of India desire to conclude an Agreement for the avoidance of double taxation with respect to taxes on income and capital, and for promoting their mutual economic relations:

 

Now, therefore, it is hereby agreed as follows:

 

Article 1

Personal scope

 

This Agreement shall apply to persons who are residents of one or both of the Contracting States.

 

Article 2

Taxes covered

 

(1)        This Agreement shall apply to taxes on income and on capital imposed on behalf of a Contracting State, of a Land or a political sub-division or local authority thereof, irrespective of the procedure in which they are levied.

 

(2)        There shall be regarded as taxes on income and on capital all taxes imposed on total income, on total capital, or on elements of income or of capital, including taxes on gains from the alienation of movable or immovable property, and the payroll tax.

 

(3)        The existing taxes to which this Agreement shall apply are in particular:

 

(a)        in the Federal Republic of Germany:

 

(i)         the Einkommensteuer (income-tax),

            (ii)        the Korperschaftsteuer (corporation tax),

            (iii)       the Vermogensteuer (capital tax), and

            (iv)       the Gewerbesteuer (trade tax).

 

(hereinafter referred to as "German tax");

 

(b)        in the Republic of India:

 

(i)         the income-tax including any surcharge tax thereon (Einkommensteuer, einschl, darauf entfallender Zusatzsteuern), and

            (ii)        the wealth-tax (Vermogensteuer)

 

(hereinafter referred to as "Indian tax").

 

(4)        This Agreement shall apply also to any identical or substantially similar taxes which are imposed after the date of signature of this Agreement in addition to, or in place of, the existing taxes. The competent authorities of the Contracting State shall notify each other of changes of importance which have been made in their respective taxation laws.

 

Article 3

 

General definitions

 

(1)        For the purposes of this Agreement, unless the context otherwise requires:

 

(a)        the term "Federal Republic of Germany" means the area in which the tax law of the Federal Republic of Germany is in force including the area of the sea-bed, its sub-soil and the superjacent water column adjacent to the territorial sea, insofar as the Federal Republic of Germany exercises their sovereign rights and jurisdiction in conformity with international law and its national legislation;

 

(b)        the term "Republic of India" means the territory of the Republic of India and includes the territorial sea and airspace above it. For the purposes of this Agreement the term shall also cover any other maritime zone in which the Republic of India has sovereign rights, other rights and jurisdictions, according to the Indian law and in accordance with international law in particular as laid down in the UN Conversion of the Law of the Sea;

(c)        the terms "a Contracting State" and "the other Contracting State" mean the Federal Republic of Germany or the Republic of India as the context requires;

 

(d)        the term "person" includes an individual, a company and any other entity which is treated as a taxable unit under the taxation laws in force in the respective Contracting States;

(e)        the term "company" means any body corporate or any entity which is treated as a company or body corporate under the taxation laws in force in the respective Contracting States;

(f)        the term "immovable property" has the meaning which it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respective landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources; ships, boats and aircraft shall not be regarded as immovable property;

 

(g)        the terms "enterprise of a Contracting State" and "enterprise of the other Contracting State" mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

            (h)        the term "national" means:

 

(i)         in respect of the Federal Republic of Germany and German within the meaning of Article 116, paragraph (1), of the Basic Law for the Federal Republic of Germany and any legal person, partnership and association deriving its status as such from the law in force in the Federal Republic of Germany;

(ii)        in respect of the Republic of India and national of the Republic of India and any legal person, partnership and association deriving its status as such from the law in force in the Republic of India;

 

(i)         the term "international traffic" means any transport by a ship or aircraft operated by an enterprise which has its place of effective management in a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;

(j)         the term "competent authority" means in the case of the Federal Republic of Germany the Federal Ministry of Finance, and in the case of the Republic of India the Central Government in the Ministry of Finance (Department of Revenue) or its authorised representative;

 

(k)       the term "fiscal year" means:

 

(i)         in relation to Indian tax, the previous year as defined in the Income-tax Act, 1961;

 

(ii)        in relation to German tax, the calender year;

 

(l)         the term "tax" means German tax or Indian tax as the context requires but shall not include interest or penalty imposed in relation to such taxes.

 

(2)        As regards the application of this Agreement by a Contracting State any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the law of that State concerning the taxes to which this Agreement applies.

 

Article 4

 

Resident

 

(1)        For the purposes of this Agreement, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any criterion of a similar nature. But this term does not include any person who is liable to tax in that State in respect only of income from sources in that State or capital situated therein.

 

(2)        Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:

 

(a)        he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests);

(b)        if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode;

 

(c)        if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;

(d)        if he is a national of both States or of neither of them, the competent authorities of the Contracting State shall settle the question by mutual agreement.

 

(3)        Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the State in which its place of effective management is situated.

 

Article 5

 

Permanent establishment

 

(1)        For the purposes of this Agreement, the term "permanent establishment" means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

 

(2)        The term "permanent establishment" includes especially:

 

(a)        a place of management;

            (b)        a branch;

            (c)        an office;

            (d)        a factory;

            (e)        a workshop;

(f)        a mine, an oil or gas well, a quarry or any other place of extraction of natural resources, including an installation or structure used for the exploration or exploitation;

            (g)        a warehouse or sales outlet;

(h)        a farm, plantation or other place where agricultural, forestry, plantation or related activities are carried on; and

(i)         a building site or construction, installation or assembly project or supervisory activities in connection therewith, where such site, project or activities continue for a period exceeding six months.

 

(3)        An enterprise shall be deemed to have a permanent establishment in a Contracting State and to carry on business through that permanent establishment if it provides services or facilities in connection with, or supplies plant and machinery on hire used for or to be used in the prospecting for, or extraction or exploitation of mineral oils in that State.

 

(4)        Notwithstanding the preceding provisions of this Article, the term "permanent establishment" shall be deemed not to include:

 

(a)        the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;

(b)        the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;

(c)        the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

(d)        the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise;

(e)        the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character;

(f)        the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs (a) to (e), provided that the overall activity of the fixed place of business resulting from his combination is of a preparatory or auxiliary character.

 

(5)        Notwithstanding the provisions of paragraphs 1 and 2, where a person -- other than an agent of an independent status to whom paragraph 6 applies -- is acting in a Contracting State on behalf of an enterprise of the other Contracting State that enterprise shall be deemed to have a permanent establishment in the first-mentioned State, if this person:

 

(a)        has and habitually exercises in that State an authority to conclude contracts on behalf of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise;

(b)        has no such authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise; or

(c)        habitually secures orders in the first-mentioned State, wholly or almost wholly or the enterprise itself or for the enterprise and other enterprises controlling, controlled by, or subject to the same common control, as that enterprise.

 

(6)        An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business and in their commercial and financial relations to the enterprise no conditions are agreed or imposed which differ from those usually agreed between independent persons.

 

(7)        The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

 

Article 6

 

Income from immovable property

 

(1)        Income derived by a resident of a Contracting State from immovable property situated in the other Contracting State may be taxed in that other State.

 

(2)        The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property.

 

(3)        The provisions of paragraphs 1 and 2 shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services.

 

Article 7

 

Business profits

 

(1)        The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.

 

(2)        Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

 

(3)        In the determination of the profits of a permanent establishment, there shall be allowed as 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, and according to the domestic law of the Contracting State in which the permanent establishment is situated.

 

(4)        Insofar as in a Contracting State and in exceptional cases the determination of the profits to be attributed to a permanent establishment in accordance with paragraph 2 is impossible or gives rise to unreasonable difficulties, nothing in paragraph 2 shall preclude the determination of the profits to be attributed to a permanent establishment by means of either apportioning the total profits of the enterprise to that permanent establishment or estimating on any other reasonable basis; the method of apportionment or estimation adopted shall, however, be such that the result shall be in accordance with the principles contained in this Article.

 

(5)        No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

 

(6)        For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary.

 

(7)        Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those articles shall not be affected by the provisions of this Article.

 

Article 8

 

Shipping and air transport

 

(1)        Profits from the operation of ships or aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

 

(2)        If the place of effective management of a shipping enterprise is aboard a ship, then it shall be deemed to be situated in the Contracting State in which the home harbour of the ship is situated, or, if there is no such home harbour, in the Contracting State of which the operator of the ship is a resident.

 

(3)        For the purposes of this Article, interest on funds connected with the operation of ships or aircraft in international traffic shall be regarded as profits derived from the operation of such ships or aircraft, and the provisions of Article 11 shall not apply in relation to such interest.

 

(4)        The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

 

Article 9

 

Associated enterprises

 

Where

 

(a)        an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or

(b)        the same person participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,

 

and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

 

Article 10

 

Dividends

 

(1)        Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

 

(2)        However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the recipient is the beneficial owner of the dividends, the tax so charged shall not exceed 10 per cent of the gross amount of the dividends.

 

This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

 

(3)        The term "dividends" as used in this Article means--

 

(a)        dividends on shares including income from shares, "jouissance" shares on "jouissance" rights, mining shares, founders' shares or other rights, not being debt-claims, participating in profits, and

(b)        other income which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident.

 

(4)        The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

 

(5)        Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consists wholly or partly of profits or income arising in 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 10 per cent of the gross amount of the interest.

 

(3)        Notwithstanding the provisions of paragraphs 1 and 2:

 

(a)        interest arising in the Federal Republic of Germany and paid to the Government of the Republic of India, the Reserve Bank of India, the Industrial Finance Corporation of India, the Industrial Development Bank of India, the Export-Import Bank of India, National Housing Bank and Small Industries Development Bank of India shall be exempt from German tax;

(b)        interest arising in the Republic of India and paid to the Government of the Federal Republic of Germany, the Deutsche Bundesbank, the Kreditanstalt fur Wiederaufbau or the Deutsche Investitions and Entwicklungsgesellschaft (DEG) and interest paid in consideration of a loan guaranteed by HERMES-Deckung shall be exempt from Indian tax.

 

(4)        The term "interest" as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying on right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.

 

(5)        The provisions of paragraphs 1, 2 and 3 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

 

(6)        Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a land, 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 payment shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

 

Article 12

 

Royalties and fees for technical services

 

(1)        Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

 

(2)        However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the recipient is the beneficial owner of the royalties, or fees for technical services, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties or the fees for technical services.

 

(3)        The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work, including cinematograph films or films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.

 

(4)        The term "fees for technical services" as used in this Article means payments of any amount in consideration for the services of managerial, technical or consultancy nature, including the provision of services by technical or other personnel, but does not include payments for services mentioned in Article 15 of this Agreement.

 

(5)        The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for technical services arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

 

(6)        Royalties and fees for technical services shall be deemed to arise in a Contracting State when the payer is that State itself, a land or a political sub-division, a local authority or a resident of that State. Where, however, the person paying the royalties or fees for technical services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties or fees for technical services was incurred, and such royalties or fees for technical services are borne by such permanent establishment or fixed base, then such royalties or fees for technical services shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

 

(7)        Where, by reason of special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of royalties or fees for technical services paid exceeds the amount which would have been paid in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

 

Article 13

 

Capital gains

 

(1)        Gains derived by a resident of a Contracting State from the alienation of immovable property situated in the other Contracting State may be taxed in that other State.

 

(2)        Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such fixed base, may be taxed in that other State.

 

(3)        Gains from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

 

(4)        Gains from the alienation of shares in a company which is a resident of a Contracting State may be taxed in that State.

 

(5)        Gains from the alienation of any property other than that referred to in paragraphs 1 to 4 shall be taxable only in the Contracting State of which the alienator is a resident.

 

Article 14

 

Independent personal services

 

(1)        Income derived by an individual who is a resident of a Contracting State from the performance of professional services or other independent activities of a similar character shall be taxable only in that State except in the following circumstances when such income may also be taxed in the other Contracting State:

 

(a)        if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities, in that case, only so much of the income as is attributable to that fixed base may be taxed in that other State; or

(b)        if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 120 days in the relevant fiscal year, in that case, only so much of the income as is derived from his activities performed in that other State may be taxed in that other State.

 

(2)        The term "professional services" includes independent scientific, literary, artistic, educational or teaching activities, as well as the independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants.

 

Article 15

 

Dependent personal services

 

(1)        Subject to the provisions of Articles 16, 18, 19 and 20 salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable in the other Contracting State only if the employment is exercised there.

 

(2)        Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

 

(a)        the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the fiscal year concerned, and

(b)        the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and

(c)        the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

 

(3)        Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic may be taxed in the Contracting State of which the enterprise operating the ship or aircraft is a resident.

 

Article 16

 

Director's fees

 

Director's fees and similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State.

 

Article 17

 

Artistes and sportspersons

 

(1)        Notwithstanding the provisions of Articles 7, 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsperson, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State.

 

(2)        Where income in respect of personal activities exercised by an entertainer or a sportsperson in his capacity as such accrues not to the entertainer or sportsperson himself but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or sportsperson are exercised.

 

(3)        However, such income shall not be taxed in the State mentioned in paragraph 1 if the said activities are exercised during a visit to that State by a resident of the other Contracting State and where such visit is financed directly or indirectly by that other State, a land, a political sub-division or a local authority thereof or by an organisation which in that other State is recognised as a charitable organisation.

 

Article 18

 

Non-government pensions

 

Subject to the provisions of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State.

 

Article 19

 

Government service

 

(1) (a) Remuneration other than a pension, paid by a Contracting State, a land, a political sub-division or a local authority thereof to an individual in respect of services rendered to that State, land, sub-division or authority shall be taxable only in that State;

 

    (b) However, such remuneration shall be taxable only in the other Contracting State, if the services are   rendered in that State and the individual is a resident of that State who:

 

(i)         is a national of that State; or

            (ii)        did not become a resident of that State solely for the purpose of rendering the services.

 

(2) (a) Any pension paid by a Contracting State, a land, a political sub-division or a local authority thereof to an individual in respect of services rendered to that State, land, sub-division or authority shall be taxable only in that State.

 

(b)        However, such pension shall be taxable only in the other Contracting State if the individual is a resident of and a national of that other State.

 

(3)        The provisions of Articles 15, 16 and 18 shall apply to remuneration and pensions in respect of services rendered in connection with a business carried on by a Contracting State, a land, a political sub-division or a local authority thereof.

 

(4)        The provisions of paragraph 1 shall likewise apply in respect or remuneration paid, under a development assistance programme of a Contracting State, a land, a political sub-division or a local authority thereof, out of funds exclusively supplied by that State, land, political sub-division or local authority, to a specialist or volunteer seconded to the other Contracting State with the consent of that other State.

 

Article 20

 

Teachers, students and trainees

 

(1)        An individual who visits a Contracting State at the invitation of that State or of a university, college, school, museum or other cultural institution of that State or under an official programme of cultural exchange for a period not exceeding two years solely for the purpose of teaching, giving lectures or carrying out research at such institution and who is, or was immediately before that visit, a resident of the other Contracting State shall be exempt from tax in the first-mentioned State on his remuneration for such activity during the period of the first year from the date of his arrival and in the next year of the exemption will be only in respect of remuneration derived by him from outside that State.

 

(2)        An individual who is present in a Contracting State solely:

 

(a)        as a student at a university, college or school in that Contracting State,

(b)        as a business apprentice (including in the case of the Federal Republic of Germany a "Volontar" or a "Praktikant"),

(c)        as the receipt of a grant, allowance or award for the primary purpose of study or research from a religious, charitable, scientific or educational organisation, or

(d)        as a member of a technical cooperation programme entered into by the Government of that Contracting State, and who is, or was immediately before visiting that State, a resident of the other Contracting State, shall be exempt from tax in the first-mentioned Contracting State in respect of

 

(i)         remittances from abroad for the purposes of his maintenance, education or training; and

(ii)        remuneration from employment in that other State, in an amount not exceeding DM 7,200 (seven thousand and two hundred Deutsche Mark) or its equivalent in Indian currency during any fiscal year, as the case may be, provided that such employment is directly related to his studies or is undertaken for the purpose of his maintenance.

 

Article 21

 

Other income

 

(1)        Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Agreement shall be taxable only in that State.

 

(2)        The provisions of paragraph 1 shall not apply to income, other than income from immovable property, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

 

(3)        Notwithstanding the provisions of paragraph 1, if a resident of a Contracting State derives income from sources within the other Contracting State in the form of lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any form or nature whatsoever, such income may be taxed in the other Contracting State.

 

Article 22

 

Capital

 

(1)        Capital represented by immovable property, owned by a resident of a Contracting State and situated in the other Contracting State, may be taxed in that other State.

 

(2)        Capital represented by movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or by movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, may be taxed in that other State.

 

(3)        Capital represented by ships and aircraft operated in international traffic and by movable property pertaining to the operation of such ships or aircraft, shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

 

(4)        All other elements of capital of a resident of a Contracting State shall be taxable only in that State.

 

Article 23

 

Relief from double taxation

 

Tax shall be determined in the case of a resident of the Federal Republic of Germany as follows:

 

(a)        Unless foreign tax credit is to be allowed under sub-paragraph (b), there shall be exempted from German tax any item of income arising in the Republic of India and any item of capital situated within the Republic of India, which, according to this Agreement, may be taxed in the Republic of India. The Federal Republic of Germany, however, retains the right to take into account in the determination of its rate of tax the items of income and capital so exempted.

 

In the case of dividends exemption shall apply only to such dividends as are paid to a company (not including partnerships) being a resident of the Federal Republic of Germany by a company being a resident of the Republic of India at least 10 per cent of the capital of which is owned directly by the German company.

                        There shall be exempted from taxes on capital any shareholding the dividends of which are exempted or, if paid, would be exempted, according to the immediately foregoing sentence.

 

(b)        Subject to the provisions of German tax law regarding credit for foreign tax, there shall be allowed as a credit against German tax payable in respect of the following items of income arising in the Republic of India and the items of capital situated there the Indian tax paid under the laws of the Republic of India and in accordance with this Agreement on:

 

(i)         dividends not dealt with in sub-paragraph (a);

            (ii)        interest;

            (iii)       royalties and fees for technical services;

            (iv)       income in the meaning of paragraph 4 of Article 13;

            (v)        director's fees;

            (vi)       income of artistes and sportspersons.

 

(c)        For the purpose of credit referred to in letter (ii) of sub-paragraph (b) the Indian tax shall be deemed to be 10 per cent of the gross amount of the interest, if the Indian tax is reduced to a lower rate or totally waived according to domestic law, irrespective of the amount of tax actually paid.

(d)        The provisions of sub-paragraph (c) shall apply for the first 12 fiscal year for which this Agreement is effective.

(e)        Notwithstanding the provisions of sub-paragraph (a) items of income dealt with in Articles 7 and 10 and gains derived from the alienation of the business property of a permanent establishment as well as the items of capital underlying such income shall be exempted from German tax only if the resident of the Federal Republic of Germany can prove that the receipts of the permanent establishment or company are derived exclusively or almost exclusively from active operations.

 

In the case of items of income dealt with in Article 10 and the items of capital underlying such income the exemption shall apply even if the dividends are derived from holdings in other companies being residents of the Republic of India which carry on active operations and in which the company which last made a distribution has a holding of more than 25 per cent.

           

Active operations are the following: producing or selling goods or merchandise, giving technical advice or rendering engineering services, or doing banking or insurance business, within the Republic of India.

 

If this is not proved, only the credit procedure as per sub-paragraph (b) shall apply.

 

(2)        Tax shall be determined in the case of a resident of the Republic of India as follows:

 

Where a resident of the Republic of India derives income or owns capital which, in accordance with the provisions of this Agreement, may be taxed in the Federal Republic of Germany, the Republic of India shall allow as a deduction from the tax on such income of that resident an amount equal to the income-tax paid in the Federal Republic of Germany, whether directly or by deduction, and as a deduction from the tax on such capital of that resident an amount equal to the capital tax paid in the Federal Republic of Germany. Such deduction in either case shall not, however, exceed that part of the income-tax or capital tax (as computed before the deduction is given) which is attributable, as the case may be, to the income or the capital which may be taxed in the Federal Republic of Germany.

 

(3)        The laws in force in either of the Contracting States shall continue to govern the taxation of income and capital in the respective Contracting States except where express provision to the contrary is made in this Agreement.

 

Article 24

 

Non-discrimination

 

(1)        Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances and under the same conditions are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States.

 

(2)        The taxation of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities. This provision shall not be construed as preventing a Contracting State from charging the profits of a permanent establishment which a company of the other Contracting State has in the first-mentioned State at a rate of tax which is higher than that imposed on the profits of a similar company of the first-mentioned Contracting State, nor as being in conflict with the provisions of paragraph 3 of Article 7 of this Agreement. Further this provision shall not be construed as obliging a Constructing State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes which it grants only to its own residents.

 

(3)        Except where the provisions of Article 9, paragraph 7 of Article 11, or paragraph 7 of Article 12, apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State. Similarly, any debts of an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable capital of such enterprise, be deductible under the same conditions as if they had been contracted to a resident of the first-mentioned State.

 

(4)        Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected.

 

Article 25

 

Mutual agreement procedure

 

(1)        Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 24, to that of the Contracting State of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of this Agreement.

 

(2)        The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with this Agreement. Any Agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States.

 

(3)        The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of this Agreement. They may also consult together for the elimination of double taxation in cases not provided for in this Agreement.

 

(4)        The competent authorities of the Contracting States may establish by mutual agreement the mode of application of the provisions of this Agreement regarding the exemption of reduction of taxes.

 

(5)        The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs.

 

Article 26

 

Exchange of information

 

(1)        The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Agreement. Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in the assessment or collection of the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by this Agreement. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions.

 

(2)        In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation:

 

(a)        to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;

(b)        to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;

(c)        to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (ordre public).

 

Article 27

 

Diplomatic and consular privileges

 

Nothing in this Agreement shall affect the fiscal privileges of members of a diplomatic mission, a consular post or an international organisation under the general rules of international law or under the provisions of special agreements.

 

Article 28

 

Entry into force

 

(1)        The Governments of the Contracting States shall notify to each other that the legal requirements for the entry into force of this Agreement have been complied with.

 

(2)        This Agreement shall enter into force one month after receipt of the latter of the notifications referred to in paragraph 1 and shall have effect:

 

(a)        In the Federal Republic of Germany

 

(i)         in the case of taxes withheld at source on dividends, interest, royalties and fees for technical services, in respect of amounts paid on or after the first day of January of the calendar year next following that in which this Agreement enters into force;

(ii)        in the case of other taxes, in respect of taxes levied for periods beginning on or after the first day of January of the calendar year next following that in which this Agreement enters into force;

 

(b)        In the Republic of India

 

(i)         in respect of income arising in any fiscal year beginning on or after the first day of April following the calendar year in which this Agreement enters into force;

(ii)        in respect of capital which is held on the last day of any fiscal year beginning on or after the first day of April following the calendar year in which this Agreement enters into force.

 

(3)        Upon the entry into force of this Agreement the Agreement between the Government of Federal Republic of Germany and the Government of India for the Avoidance of Double Taxation of Income signed on 18th March, 1959 and the Protocol amending the Agreement between the Government of the Federal Republic of Germany and the Government of India for the Avoidance of Double Taxation of income signed on 28th June, 1984 along with the Exchange of Notes of the same date shall expire and shall cease to have effect as from the date on which the provisions of this Agreement commence to have effect.

 

Article 29

 

Termination

 

This Agreement shall continue in effect indefinitely but either of the Contracting States may, on or before the thirtieth day of June in any calendar year beginning after the expiration of a period of five years from the date of its entry into force, give the other Contracting State, through diplomatic channels, written notice of termination and, in such event, this Agreement shall cease to have effect:

 

(a)        In the Federal Republic of Germany:

 

(i)         in the case of taxes withheld at source on dividends, interest, royalties and fees for technical services, in respect of amounts paid on or after the first day of January of the calendar year next following that in which notice of termination is given;

(ii)        in the case of other taxes in respect of taxes levied for periods beginning on or after the first day of January of the calendar year next following that in which notice of termination is given.

 

(b)        In the Republic of India

 

(i)         in respect of income arising in any fiscal year beginning on or after the first day of April following the calendar year in which the notice of termination is given;

(ii)        in respect of capital which is held on the last day of any fiscal year beginning on or after the first day of April following the calendar year in which the notice of termination is given.

 

In witness whereof the undersigned being duly authorised thereto, have signed the present Agreement.

 

Done at Bonn on June 19th, 1995 in two originals, each in the German, Hindi and English languages, all three texts being authentic. In case of divergent interpretation of the German and the Hindi text the English text shall prevail.

 

Protocol

 

The Republic of India and the Federal Republic of Germany

 

have agreed at the signing at Bonn on June 19th, 1995 of the Agreement between the two States for the avoidance of double taxation with respect to taxes on income and capital upon the following provisions which shall form an integral part of the said Agreement.

 

1.         With reference to Article 7

 

(a)        In the determination of the profits of a building site or construction, assembly or installation project there shall be attributed to that permanent establishment in the Contracting State in which the permanent establishment is situated only the profits resulting from the activities of the permanent establishment as such. If machinery or equipment is delivered from the head office or another permanent establishment of the enterprise (situated outside that Contracting State) or a third person (situated outside that Contracting State) in connection with those activities or independently therefrom there shall not be attributed to the profits of the building site or construction, assembly or installation project the value of such deliveries.

 

(b)        Income derived by a resident of a Contracting State from planning, project, construction or research activities as well as income from technical services exercised in that State in connection with a permanent establishment situated in the other Contracting State, shall not be attributed to that permanent establishment.

 

(c)        In respect of paragraph 1 of Article 7, profits derived from the sale of goods or merchandise of the same or similar kind as those sold, or from other business activities of the same or similar kind as those effected, through that permanent establishment, may be considered attributable to that permanent establishment if it is proved that:

 

(i)         this transaction has been resorted to in order to avoid taxation in the Contracting State where the permanent establishment is situated, and

            (ii)        the permanent establishment in any way was involved in this transaction.

 

(d)        It is understood that the deductions in respect of the head office expenses as referred to in paragraph 3 of Article 7 shall in no case be less than those allowable under the Indian Income-tax Act as on the date of entry into force of this Agreement.

 

(e)        No deduction shall be allowed in respect of amounts paid or charged (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of:

 

(i)         royalties, fees or other similar payments in return for the use of patents or other rights;

            (ii)        commission for specific services performed or for management; and

(iii)       interest on moneys lent to the permanent establishment except in case of a banking institution.

 

2.         With reference to Article 8

 

For the purposes of Article 8 income from the operation of ships includes income derived from the use, maintenance or rental of containers (including trailers and related equipment for the transport of containers) in connection with the transport of goods or merchandise in international traffic.

 

3.         With reference to Article 10

 

For the purpose of taxation in the Federal Republic of Germany, the term dividends includes income derived by a sleeping partner ("stiller Gesellschafter") from his participation as such and distributions on certificates of an investment fund or investment trust. For the purpose of taxation in the Republic of India any income of a similar kind will be treated alike.

 

4.         With reference to Articles 10 and 11

 

Notwithstanding the provisions of these Articles, dividends and interest may be taxed in the Contracting State in which they arise, and according to the law of that State:

 

(a)        if they are derived from rights or debt claims carrying a right to participate in profits (including income derived by a sleeping partner from his participation as such, from a "partiarisches Dariehen" and from "Gewinnobligationen" within the meaning of the tax law of the Federal Republic of Germany), and

(b)        under the condition that they are deductible in the determination of profits of the debtor of such income.

 

5.         With reference to Article 13

 

In view of the position confirmed on behalf of the Government of the Federal Republic of Germany that the Deutsche Investitions und Entwicklungsgesellschaft (DEG) is wholly owned by the Government of the Federal Republic of Germany and is exempted from paying income-tax in Germany, it is agreed that the long-term capital gains arising to the DEG be to alienation of shares in Indian companies will be exempt from taxation in India.

 

6.         With reference to Article 23

 

(a)        The exemption provided for in sub-paragraph (a) of paragraph 1 of Article 23 is granted irrespective of whether the income or capital concerned is effectively taxed in the Republic of India or not.

(b)        Where a company being a resident of the Federal Republic of Germany distributes incomes derived from sources within the Republic of India, paragraph 1 of Article 23 shall not preclude the compensatory imposition of corporation tax on such distributions in accordance with the provisions of German tax law.

(c)        The Federal Republic of Germany shall avoid double taxation by a tax credit as provided for in paragraph 1(b) of Article 23, and not by a tax exemption under paragraph 1(a) of Article 23.

 

(aa)      if in the Contracting State income is placed under differing provisions of the Agreement or attributed to different persons (other than under Article 9) and this conflict cannot be settled by procedure pursuant to Article 25, and

 

(i)         if as a result of such placement or attribution the relevant income would be subject to double taxation; or

(ii)        if as a result of such placement or attribution the relevant income would remain untaxed or be subject only to inappropriately reduced taxation in the Republic of India and would (but for the application of this paragraph) remain exempt from tax in the Federal Republic of Germany; or

 

(bb)      if the Federal Republic of Germany has, after due consultation and subject to the limitation of its internal law, notified the Republic of India through diplomatic channels of other items of income to which it intends to apply this paragraph in order to prevent the exemption of income from taxation in both Contracting States or other arrangements for the improper use of the Agreement.

 

In the case of a notification under sub-paragraph (bb) the Republic of India may, subject to notification through diplomatic channels, characterise such income under the Agreement consistently with the characterisation of that income by the Federal Republic of Germany. A notification made under this paragraph shall have effect only from the first day of the calender year following the year in which it was transmitted and any legal prerequisites under the domestic law of the notifying State for giving it effect have been fulfilled.

 

7.         With reference to Article 26

 

(a)        It is also understood that in relation to the Agreement, the term "information" shall include documents. It is further understood that the German tax law provides for the transmission of information in terms of paragraph 3 of Article 117 of the Fiscal Code (Abgabenordnung) -- upon request -- and it would be possible to furnish information to the competent authority in the Republic of India under these provisions irrespective of this Article.

(b)        If personal data is exchanged under this Article, the following additional provisions shall apply subject to the domestic laws of each Contracting State:

 

(i)         The data supplying Contracting State shall be responsible for the accuracy of the data they supply. If it emerges that inaccurate data or data which should not have been supplied have been communicated, the receiving State shall be notified of this without delay. That State shall be obliged to correct or destroy said data;

(ii)        The Contracting States shall be obliged to keep official records of the transmission and receipt of personal data;

(iii)       The Contracting States shall be obliged to take effective measures to protect the personal data communicated against unauthorised access, unauthorised alteration and unauthorised disclosure;

(iv)       Upon application the person concerned shall be informed of the information stored about him and of the use planned to be made of it. There shall be no obligation to give this information if on balance it appears that the public interest in withholding it outweighs the interest of the person concerned in receiving it. In all other respects the right of the person concerned to be informed of the data stored about him shall be governed by the domestic law of the Contracting State in whose sovereign territory the application for the information is made.

 

Done at Bonn on June 19th, 1995 in two originals, each in the German, Hindi and English languages, all three texts being authentic. In case of divergent interpretation of the German and the Hindi text the English text shall prevail.

 

 

GERMAN DEMOCRATIC REPUBLIC

 

 

(i)         Agreement between the Government of the Republic of India and the Government of the GermanDemocratic Republic for the avoidance of double taxation with respect to taxes on income and on capital

 

Notification No. [F. No. 501/10/78-FTD] dated 2nd March, 1990

 

G.S.R. 107(E).--Whereas the annexed agreement between the Government of the Republic of India and the Government of the German Democratic Republic for the avoidance of double taxation with respect to taxes on income and on capital has come into force on the 24th November, 1989, on the notification by both the Contracting States to each other of the approval of the agreement under their laws in accordance with Article 31 of the said agreement;

 

Now, therefore, in exercise of the powers conferred by section 44A of the Wealth-tax Act, 1957 (27 of 1957), and section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby directs that all the provisions of the said agreement shall be given effect to in the Union of India.

 

ANNEXURE

 

The Government of the Republic of India and the Government of the German Democratic Republic;

 

Desiring to promote economic co-operation between the two States through an Agreement for the avoidance of double taxation with respect to taxes on income and on capital;

 

Have agreed as follows:

 

ARTICLE 1 : Personal scope.--This agreement shall apply to persons who are residents of one or both of the Contracting States.

 

ARTICLE 2 : Taxes covered.--1. The taxes to which this Agreement shall apply are:

 

(a)        in the Republic of India:

 

(i)         the income-tax including any surcharge thereon imposed under the income-tax Act, 1961 (43 of 1961); and

(ii)        the wealth-tax imposed under the Wealth-tax Act, 1957 (27 of 1957) (hereinafter referred to as "Indian tax").

 

(b)        in the German Democratic Republic:

 

(i)         Einkommensteuer (income-tax);

            (ii)        Koerperschaftsteuer (corporate income-tax);

            (iii)       Gewinnabfuhrungen der Staatlichen Betriebe (revenue transfer by public enterprises);

            (iv)       Lohnsteuer (tax on wages);

            (v)        Steuer auf Lizenzgebuhren (tax on royalties);

            (vi)       Gewerbesteuer (trade-tax); and

            (vii)      Vermogensteuer (property-tax)

 

(hereinafter referred to as "German Democratic Republic tax").

 

2.         The Agreement shall also apply to any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of the present Agreement in addition to, or in place of, the taxes referred to in paragraph 1.

 

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.--In this Agreement, unless the context otherwise requires:

 

(a)        the term "a Contracting State" and "the other Contracting State" mean Republic of India or the German Democratic Republic as the context requires;

(b)        the term "tax" means Indian tax or German Democratic Republic 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 Agreement applies or which represents a penalty imposed relating to those taxes;

(c)        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;

(d)        the term "company" means any body corporate or any entity which is treated as a company or body corporate under the taxation laws in force in the respective Contracting States;

(e)        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;

(f)        the term "competent authority" means in the case of India, the Central Government in the Ministry of Finance (Department of Revenue) or their authorised representative; and in the case of the German Democratic Republic, the Ministry of Finance;

            (g)        the term "national" means:

 

(i)         any individual possessing the nationality of a Contracting State under the laws in force in that State; and

(ii)        any legal person, partnership or organisation deriving its status from the laws in force in the Contracting State;

 

(h)        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.

 

2.         As regards the application of the Agreement by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has for the purposes of the law of that State concerning the taxes to which the Agreement applies.

 

ARTICLE 4 : Resident.—

 

1.         For the purposes of this Agreement, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any 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 as follows:

 

(a)        he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests);

(b)        if the State in which he has his centre of vital interests cannot be determined, as if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode;

 

(c)        if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;

(d)        if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

 

3.         Where by reason of the provisions of paragraph 1, person other than an individual is a resident of both Contracting States then it shall be deemed to be a resident of the State in which its place of effective management is situated.

 

ARTICLE 5 : Permanent establishment.—

 

1.         For the purposes of this Agreement, the term "permanent establishment" means a fixed place of business through which the business of the enterprise is wholly or partly carried on.

 

2.         The term "permanent establishment" includes especially:

 

(a)        a place of management;

            (b)        a branch;

            (c)        an office;

            (d)        a factory;

            (e)        a workshop or a warehouse;

            (f)        a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;

            (g)        a farm or plantation;

            (h)        a premises used as a sales outlet or for receiving or soliciting orders;

            (i)         an installation or structure used for the exploration or development of natural resources;

(j)         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 six months.

 

3.         Notwithstanding the preceding provisions of this article, the term "permanent establishment" shall be deemed not to include:

 

(a)        a temporary building site or construction or installation project executed by the Government of a Contracting State in the other State;

(b)        the use of facilities solely for the purpose of storage or display of goods or merchandise belonging to the enterprise;

(c)        the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage or display;

(d)        the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

(e)        the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise;

(f)        the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research, or for similar activities which have a preparatory or auxiliary character, for the enterprise.

 

However, the provisions of sub-paragraphs (b) to (f) shall not be applicable where the enterprise maintains any other fixed place of business in the other Contracting State for any purposes other than the purposes specified in the said sub-paragraphs.

 

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 that State an authority to conclude contracts on behalf of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise;

(b)        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; or

(c)        he habitually secures orders in the first-mentioned State, wholly or almost wholly for the enterprise itself or for the enterprise and other enterprises controlling, controlled by, or subject to the same common control as, that enterprise.

 

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 itself or on behalf of that enterprise and other enterprises controlling, controlled by, or subject to the same common control, as that enterprise, he will not be considered an agent of an 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 Contracting State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

 

ARTICLE 6 : Income from immovable property.—

 

1.         Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.

 

2.         The term "immovable property" shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of the law of the Contracting State respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources.

 

Ships, boats and aircraft shall not be regarded as immovable property.

 

3.         The provisions of paragraphs 1 shall also 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 business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as are attributable to (a) that permanent establishment; (b) sales in that other State of goods or merchandise of the same or similar kind as those sold through that permanent establishment; or (c) other business activities carried on in that other State 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 determination thereof presents exceptional difficulties, the profits attributable to the permanent establishment may be estimated on a reasonable basis.

 

3.         In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the business of the permanent establishment including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere, 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 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 permanent establishment. Likewise, no account shall be taken, in the determination of the profits of a permanent establishment, for amount 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.         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.

 

5.         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.

 

6.         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 : Air transport.—

 

1.         Profits derived by an enterprise of a Contracting State from the operation of aircraft in international traffic shall be taxable only in that State.

 

2.         The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

 

3.         For the purposes of this article, interest on the funds connected with the operation of aircraft in international traffic shall be regarded as profits derived from the operation of such aircraft, and the provisions of article 12 shall not apply in relation to such interest.

 

4.         The term "operation of aircraft" shall mean business of transportation by air of passengers, mail, livestock or goods 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 and any other activity directly connected with such transportation.

 

ARTICLE 9 : Shipping.—

 

1.         Income derived by an enterprise of a Contracting State from the operation of ships in international traffic may be taxed in the other Contracting State.

 

2.         No income-tax and/or turnover-tax shall be levied or collected by the Government of the German Democratic Republic on the freight earnings and/or profits on national cargo carried by the Indian vessels including those under time-charter between ports of the two States, and, similarly, no income-tax and/or turnover-tax shall be levied or collected by the Government of the Republic of India on the freight earnings and/or profits on national cargo carried by the vessels of the German Democratic Republic including those under time-charter between ports of the two States.

 

3.         Income derived by an enterprise of a Contracting State from the operation of ships in international traffic for the transport of cargo other than that belonging to either Contracting State may be taxed also in that other Contracting State; but such tax shall be restricted to 50 per cent of the tax otherwise leviable in the source country.

 

4.         The provisions of this article shall also apply to profits from the participation in a pool, a joint business or an international operating agency engaged in the operation of ships.

 

5.         For the purposes of this article:

 

(a)        interest on funds connected with the operation of ships in international traffic shall be regarded as income from the operation of such ships and the provisions of article 12 shall not apply in relation to such interest; and

(b)        income from the operation of ships includes income derived from the use, maintenance or rental of containers (including trailers and related equipment for the transport of containers) in connection with the transport of goods or merchandise in international traffic.

 

ARTICLE 10 : Associated enterprises.--Where :

 

(a)        an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or

(b)        the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,

 

and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

 

ARTICLE 11 : 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 as charged shall not exceed:

 

(a)        15 per cent of the gross amount of the dividends if the beneficial owner is a company which owns at least 25 per cent of the shares of the company paying the dividends;

            (b)        25 per cent of the gross amount of the dividends in all other cases.

 

This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

 

3.         The term "dividends" as used in this article means income from shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident.

 

4.         The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of article 7 or article 15, as the case may be, shall apply.

 

5.         Where a company which is 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 in so far as such dividends are paid to a resident of that other State or so far as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

 

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 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 shall be exempt from tax in that State provided it is derived and beneficially owned by:

 

(i)         the Government, a political sub-division or a local authority of the other Contracting State; or

            (ii)        the Central Bank of the other Contracting State;

 

(b)        interest arising in a Contracting State shall be exempt from tax in the Contracting State to the extent approved by the Government of that State if it is derived and beneficially owned by any person other than a person referred to in sub-paragraph (a) who is a resident of the other Contracting State provided that the transaction giving rise to the debt-claim has been approved in this regard by the Government of the first-mentioned Contracting State.

 

4.         The term "interests" as used in this article means income from debt claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, and in particular, income from Government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this article.

 

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 a permanent establishment or fixed base. In such case, the provisions of article 7 or article 15, as the case may be, shall apply.

 

6.         Interest shall be deemed to arise in a Contracting State when the payer is that Contracting State itself, a political sub-division, a local authority or a resident of the 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 Contracting 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 to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

 

ARTICLE 13 : Royalties and fees for technical services.—

 

1.         Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

 

2.         However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the recipient is the beneficial owner of the royalties, or fees for technical services, the tax so charged shall not exceed 22.5 (twenty-two and a half) per cent of the gross amount of the royalties or fees for technical services.

 

3.         The term "royalties" as used in this article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work, including cinematograph films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.

 

4.         The term "fees for technical services" as used in this article means payments of any amount to any person other than payments to an employee of a person making payments, in consideration for the services of a managerial, technical or consultancy nature, including the provision of services of technical or other personnel.

 

5.         The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for technical services arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of article 7 or article 15, as the case may be, shall apply.

 

6.         Royalties and fees for technical services shall be deemed to arise in a Contracting State when the payer is that State  itself, a political sub-division, a local authority or a resident of that State. Where, however, the person paying the royalties or fees for technical services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties or fees for technical services was incurred, and such royalties or fees for technical services are borne by such permanent establishment or fixed base, then such royalties or fees for technical services shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

 

7.         Where, by reason of special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of royalties or fees for technical services paid exceeds the amount which would have been paid in the absence of such relationship, the provisions of this article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this agreement.

 

ARTICLE 14 : Capital gains.—

 

1.         Gains derived by a resident of a Contracting State from the alienation of immovable property, referred to in article 6, and situated in the other Contracting State may be taxed in that other State.

 

2.         Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or together with the whole enterprise) or of such fixed base, may be taxed in that other State.

 

3.         Gains from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State of which the alienator is a resident.

 

4.         Gains from the alienation of shares of the capital stock of a company the property of which consists directly or indirectly principally of immovable property situated in a Contracting State may be taxed in that State.

 

5.         Gains from the alienation of shares other than those mentioned in paragraph 4, in a company which is a resident of a Contracting State may be taxed in that State.

 

6.         Gains from the alienation of any property other than that mentioned in paragraphs 1, 2, 3, 4 and 5 shall be taxable only in the Contracting State of which the alienator is a resident.

 

ARTICLE 15 : Independent personal services.—

 

1.         Income derived by an individual who is a resident of a Contracting State from the performance of professional services or other independent activities of a similar character shall be taxable only in that State except in the following circumstances when such income may also be taxed in the other Contracting State:

 

(a)        if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other State; or

 

(b)        if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 90 days in the relevant "previous year" or "year of income", as the case may be; in that case, only so much of the income as is derived from his activities performed in that other State may be taxed in that other State.

 

2.         The term "professional services" includes independent scientific, literary, artistic, educational or teaching activities, as well as the independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants.

 

ARTICLE 16:  Dependent personal services.—

 

1.         Subject to the provisions of articles 17, 18, 19, 20, 21 and 22 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 State for a period or periods not exceeding in the aggregate 183 days in the relevant "fiscal year", as the case may be; and

(b)        the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and

(c)        the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

 

3.         Notwithstanding the preceding provisions of this article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic by an enterprise of a Contracting State may be taxed in that State.

 

4.         Experts of either Contracting State delegated to the other Contracting State under Agreements for Scientific Exchanges and co-operation between India and the German Democratic Republic in force from time to time, shall be exempted by the other State from payment of income-tax on the salaries and allowances paid to them by their respective States.

 

ARTICLE 17: Directors' fees and remuneration of top level managerial officials.—

 

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.

 

2.         Salaries, wages and other similar remuneration derived by a resident of a Contracting State in his capacity as an official in a top-level managerial position of a company which is a resident of the other Contracting State may be taxed in that other State.

 

ARTICLE 18: Income earned by entertainers.--Notwithstanding the provisions of articles 15 and 16, 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 from his personal activities as such exercised in the other Contracting State may be taxed in that other State:

 

Provided that income derived by individuals or groups of persons from activities exercised in the framework of cultural exchanges agreed between the Contracting States on a bilateral or multilateral basis may be taxed only in the State of which they are residents.

 

ARTICLE 19: Remuneration and pensions in respect of Government service.—

 

1. (a)    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 shall be taxable only in that State.

 

(b)        However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other State and the individual is a resident of that State who:

 

(i)         is a national of that State; or

            (ii)        did not become a resident of that State solely for the purpose of rendering the services.

 

2.         (a)        Any pension paid by, or out of, funds created 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 shall be taxable only in that State.

(b)        However, such pension shall be taxable only in the other Contracting State if the individual is a resident of and a national of, that other State.

 

3.         The provisions of articles 16, 17 and 18 shall apply to remuneration and pensions in respect of services rendered in connection with a business carried on by a Contracting State or a political sub-division or local authority thereof.

 

ARTICLE 20: Non-Government pensions and annuities.—

 

1.         Any pension, other than a pension referred to in article 19, or any annuity derived by a resident of a Contracting State from sources within the other Contracting State may be taxed only in the first-mentioned Contracting State.

 

2.         The term "pension" means a periodic payment made in consideration of past services or by way of compensation for injuries received in the course of performance of services.

 

3.         The term "annuity" means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time, under an obligation to make the payments in return for adequate and full consideration in money or money's worth.

 

ARTICLE 21: Payments received by students and apprentices.—

 

1.         A student or business apprentice who is or was a resident of one of the Contracting States immediately before visiting the other Contracting State and who is present in that other State solely for the purpose of his education or training, shall be exempt from tax in that other State on:

 

(a)        payments made to him by persons residing outside that other State for the purposes of his maintenance, education or training; and

(b)        remuneration from employment in that other State in an amount not exceeding Rs. 15,000 or its equivalent in "Mark of the GDR" during any "previous year" or the "year of income", as the case may be, provided that such employment is directly related to his studies or is undertaken for the purpose of his maintenance.

 

2.         The benefits of this article shall extend only for such period of time as may be reasonable or customarily required to complete the education or training undertaken, but in no event shall any individual have the benefits of this article, for more than six consecutive years from the date of his first arrival in that other Contracting State.

 

ARTICLE 22: Payments received by professors, teachers and research scholars.—

 

1.         A professor or teacher who is or was a resident of one of the Contracting States immediately before visiting the other Contracting State for the purpose of teaching or engaging in research, or both, at a university, college, school or other approved institution in that other Contracting State shall be exempt from tax in that other State on any remuneration for such teaching or research for a period not exceeding two years from the date of his arrival in that other State.

 

2.         This article shall not apply to income from research if such research is undertaken primarily for the private benefit of a specific person or persons.

 

3.         For the purposes of this article and article 21, an individual shall be deemed to be a resident of a Contracting State if he is resident in that Contracting State in the "previous year" or the "year of income", as the case may be, in which he visits the other Contracting State or in the immediately preceding "previous year" or the "year of income".

 

4.         For the purposes of paragraph 1, "approved institution" means an institution which has been approved in this regard by the competent authority of the concerned Contracting State.

 

ARTICLE 23: Other income.—

 

1.         Subject to the provisions of paragraph 2, items of income of a resident of a Contracting State, wherever arising, which are not expressly dealt with in the foregoing articles of this Agreement, shall be taxable only in that Contracting 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 a case, the provisions of article 7 or article 15, as the case may be, shall apply.

 

3.         Notwithstanding the provisions of paragraphs 1 and 2, items of income of resident of a Contracting State not dealt with in the foregoing articles of the Agreement and arising in the other Contracting State may be taxed in that other State.

 

ARTICLE 24: Capital.—

 

1.         Capital represented by immovable property referred to in article 6, owned by a resident of a Contracting State and situated in the other Contracting State, may be taxed in that other State.

 

2.         Capital represented by movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or by movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, may be taxed in that other State.

 

3.         Capital represented by ships or aircraft, operated in international traffic and by movable property pertaining to the operation of such ships or aircraft shall be taxed only in the Contracting State of which the enterprise owning such property is a resident.

 

4.         All other elements of capital of a resident of a Contracting State may be taxed in both Contracting States.

 

ARTICLE 25: Elimination of double taxation.—

 

1.         The laws in force in either of the Contracting States shall continue to govern the taxation of income and capital in the respective Contracting States except where an express provision to the contrary is made in this Agreement.

 

2.         Where a resident of a Contracting State derives income or owns capital which, in accordance with the provisions of this Agreement may be taxed in the other Contracting State, the first-mentioned State shall, subject to the provisions of paragraph 3, exempt such income or capital from tax.

 

3.         Where in accordance with any provision of the Agreement income derived or capital owned by a resident of a Contracting State is exempt from tax in that State, such State 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.

 

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 and connected requirements to which nationals of that other State in the same circumstances and under the same conditions 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 in the same circumstances and under the same conditions.

 

3.         Nothing contained in this article shall be construed as obliging a Contracting State to grant to persons not resident in that State any personal allowances, reliefs, reductions and deductions for taxation purposes which are by law available only to persons 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 in the same circumstances and under the same conditions.

 

5.         In this article, the term "taxation" means taxes which are the subject of this Agreement.

 

ARTICLE 27: 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 this Agreement, 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. The case must be presented within three years of receipt of notice of the action which gives rise to taxation not in accordance with the Agreement.

 

2.         The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at an appropriate solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to avoidance of taxation not in accordance with the Agreement. Any agreement reached shall be implemented notwithstanding any time limits in the national laws of the Contracting States.

 

3.         The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Agreement. They may also consult together for the elimination of double taxation in cases not provided for in the Agreement.

 

4.         The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs. When it seems advisable in order to reach Agreement to have an oral exchange of opinions, such exchange may take place through a Commission consisting of representatives of the competent authorities of the Contracting States.

 

ARTICLE 28: Exchange of information.—

 

1.         The competent authorities of the Contracting States shall exchange such information (including documents) as is necessary for carrying out the provisions of the Agreement or of the domestic laws of the Contracting States concerning taxes covered by the Agreement, in so far as the taxation thereunder is not contrary to the Agreement, in particular for the prevention of fraud or evasion of such taxes. 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 the Agreement. 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 exchange of information shall be made, including, where appropriate, exchange of information regarding tax avoidance.

 

2.         The exchange of information or documents shall be either on a routine basis or on a request with reference to particular cases or both. The competent authorities of the Contract States shall agree from time to time on the list of information or documents which shall be furnished on a routine basis.

 

3.         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 or administrative practice of that or of the other Contracting State;

(b)        to supply information or documents which are 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 or documents 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: Assistance in collection.—

 

1.         The Contracting States undertake to lend assistance and support to each other, in the collection of the taxes to which this Agreement relates, in the cases where the taxes are definitely due according to the laws of the State making the request.

 

2.         In the case of a request for enforcement of collection, tax claims of either of the Contracting States which have been finally determined will be accepted for enforcement by the other Contracting State to which the request is made and collected in that State in accordance with the laws applicable to the enforcement and collection of its taxes.

 

3.         In the case of Indian tax, the request will be sent by the Central Board of Direct Taxes, Department of Revenue to the Ministry of Finance of the German Democratic Republic, and will be accompanied by such certificate as is required by the laws of India to establish that the taxes have been finally determined on the basis of the relevant domestic laws and are due from the taxpayer.

 

4.         In the case of the German Democratic Republic tax, the request will be sent by the Ministry of Finance to the Central Board of Direct Taxes, Department of Revenue, in India and will be accompanied by such certificate as is required by the laws of the German Democratic Republic to establish that the taxes have been finally determined on the basis of the relevant domestic laws, and are due from the taxpayer.

 

5.         Where the tax claim has not become final by reason of its being subject to appeal or any other proceeding, a Contracting State may, in order to protect its revenues, request the other Contracting State to take such interim measures in this behalf as are lawful under the laws of that other Contracting State.

 

6.         A request for assistance in collection of taxes due from a taxpayer shall be made only if adequate income or assets of that taxpayer are not available for recovering the taxes from him in the Contracting State making the request.

 

7.         The Contracting State in which tax is recovered in pursuance of paragraphs 1, 2 and 5 of this article shall immediately thereafter remit the amount so recovered to the Contracting State which made the request but it shall be entitled to reimbursement of costs, if any, incurred in the course of rendering assistance in the recovery of such tax but in no event, such costs shall exceed 10 per cent of the amount so recovered.

 

ARTICLE 30: Diplomatic and consular activities.--Nothing in this Agreement shall affect the fiscal privileges of diplomatic or consular officials under the general rules of international law or under the provisions of special agreements.

 

ARTICLE 31: Entry into force.—

 

1.         This Agreement shall be ratified or approved in accordance with the laws in force in the two Contracting States.

 

2.         This Agreement shall enter into force upon the exchange of notes notifying the approval or ratification of the Agreement in accordance with the laws in force.

 

3.         The provisions of the Agreement shall apply:

 

(a)        in the Republic of India, to taxes covered by this Agreement which are levied for any year of assessment beginning on or after the first day of April, 1985;

(b)        in the German Democratic Republic, to taxes covered by this Agreement which are levied for any year of assessment, beginning on or after the first day of January, 1985.

 

ARTICLE 32: Period of validity.—

 

1.         This Agreement is concluded for unlimited duration but either Contracting State may terminate the Agreement by giving written notice after five years from the day of its entry into force, so however, that at least six months remain before the end of the calendar year in which the notice is given.

 

2.         In such event, the Agreement shall cease to have effect:

 

(a)        in the Republic of India, in respect of income arising in any previous year beginning on or after the 1st day of January next following the calendar year in which the notice is given;

(b)        in the German Democratic Republic in respect of income arising in any year of income beginning on or after the 1st day of January next following the calendar year in which the notice of termination is given.

 

In witness whereof the undersigned, being duly authorised thereto, have signed the present Agreement.

 

Done in duplicate at New Delhi this twenty-sixth day of July one thousand nine hundred and eighty-nine in the Hindi, German and English languages, all the texts being equally authentic. In case of divergence between any of the two texts, the English text shall be the operative one.

 

For the Government of the Republic                                                For the Government of the German

of India                                                                                               Democratic Republic

(Sd.)................                                                                                    (Sd.)........................

 

GERMAN DEMOCRATIC RUPUBLIC

 

(ii)        Agreement between the Government of German Democratic Republic and the Government of the Republicof India on co-operation in the field of merchant shipping

 

Notification F. No. 11/3/69-FTD, dated 27 April, 1979

 

G.S.R. 282(E).--Whereas the annexed Agreement between the Government of German Democratic Republic and the Government of the Republic of India on Co-operation in the Field of Merchant Shipping has been concluded;

 

And whereas Article 9 of the said Agreement provides for the avoidance of double taxation in respect of taxes on income derived from the freight earnings or profits or both on national cargo carried by the vessels of the respective countries including those under time-charter between ports of the two States;

 

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) Sur-tax Act, 1964 (7 of 1964), the Central Government hereby directs that the provisions of the said Article of the said Agreement shall be given effect to in the Union of India.

 

ANNEXURE 1

 

The Government of the German Democratic Republic and the Government of the Republic of India (hereinafter called the Contracting Parties); being desirous of,

 

Strengthening the friendly relations between the German Democratic Republic and the Republic of India according to the principles of international law, especially the principle of sovereign equality of States and the principle of non-interference in internal affairs; and Developing and extending co-operation in the field of merchant shipping;

 

Have agreed as follows:

 

ARTICLE I: The Contracting Parties agreed to develop the relations between the German Democratic Republic and the Republic of India in the field of merchant shipping on the basis of equal rights and mutual benefit.

 

ARTICLE II: For the purposes of this Agreement;

 

(a)        The term "vessel" shall mean any merchant vessel flying under the national flag of a Contracting Party and registered in the Contracting State of the German Democratic Republic and in the Contracting State of the Republic of India respectively or time chartered by the national shipping companies in the two States.

 

This definition excludes warships and fishing vessels from the scope of application of this Agreement.

 

(b)        The term "member of the crew" shall mean any person actually employed for duties on board during a voyage in connection with the operation or service of the vessel and included in the crew list.

 

ARTICLE III:

 

(1)        The Contracting Parties shall further develop co-operation between their authorities responsible for maritime affairs according to their respective national laws and regulation. In particular, the Contracting Parties shall promote mutual consultations and exchange of information on reciprocal basis between these authorities as well as co-operation between the respective shipping organisations and enterprises.

 

(2)        The Contracting Parties shall grant all possible assistance to each other's vessels and shall not take any action which may cause hindrance for the development of merchant shipping between the German Democratic Republic and the Republic of India.

 

(3)        The provisions of this Agreement shall be applicable to bilateral shipping and shipping relations between the two Contracting Parties.

 

ARTICLE IV:

 

(1)        The Contracting Parties agree to strengthen the existing regular liner shipping service between the ports of the German Democratic Republic and the ports of the Republic of India to cater for the movement of national general cargo between the two States.

 

The Contracting Parties further agree that the national shipping companies in the two States operating bilateral liner shipping service should observe the principle of party in liftings of national general cargoes and freight earnings thereof. Imbalance, if any, in this respect, shall be determined the financial terms at the end of each year and settlement effected in accordance with the procedure agreed among the national lines.

 

(2)        The Contracting Parties agree to the participation of their respective shipping enterprises in the carriage of national bulk cargoes in the bilateral trade on the principles of party and equality.

 

Details of arrangements concerning the carriage of bulk cargoes in the bilateral trade shall be worked out by the competent organisations to be nominated for this purpose by the Contracting Parties.

 

(3)        In case the shipping companies of one of the Contracting Parties are not able to undertake the carriage in accordance with the provisions of this Article, such carriage will be offered to vessels of the other Contracting Party. If that Contracting Party cannot make available the required suitable tonnage on acceptable conditions, the first-mentioned Contracting Party is entitled to use vessels under the flag of third countries for the carriage of its share of cargo.

 

ARTICLE V:

 

(1)        The vessels of one Contracting Party and their crew and cargo shall be subject to the same conditions as ships, crew and cargo of the most-favoured nation when entering into, sailing from or staying in the ports of the other Contracting Party.

 

(2)        The vessels, crew, passengers and cargo of one Contracting Party, whilst within the Contracting State of the State of the other Contracting Party, shall be subject to laws, rules and regulations of the latter mentioned Contracting Party.

 

(3)        All port dues and charges for services rendered to the vessels operating under the provisions of this Agreement shall be regulated in accordance with the national laws and regulations applicable at the respective ports from time to time.

 

(4)        The provisions of this Article shall not apply to activities legally reserved by each of the Contracting Parties to its organisations or enterprises including, in particular, coastal navigation and pilot service and also shall not affect the rules concerning entry and stay of foreigners.

 

ARTICLE VI: The Contracting Parties shall adopt within the limits or their concerned national laws and regulations all appropriate measures to facilitate and expedite maritime traffic, to prevent delays to vessels and to simplify and expedite as much as possible the carrying out of customs and other formalities required in ports.

 

ARTICLE VII:

 

(1)        The documents relating to nationality and registration of vessels, tonnage certificates, certificates of seaworthiness and other ship documents issued or recognised by the competent authorities of one Contracting Party shall be recognised by the competent authorities of the other Contracting Party.

 

(2)        Vessels of one Contracting Party in possession of duly issued tonnage certificates shall not be subject to re-measurement in the ports of the other Contracting Party.

 

ARTICLE VIII:

 

(1)        Each of the Contracting parties shall recognise the seamen's identity documents issued by the competent authorities of the other Contracting Party.

 

These seamen's identity documents are:

 

--for nationals of the German Democratic Republic "Seefahrtsbuch der Deutschen Demokratischen Republic".

 

--for seamen of the Indian vessels "Continuous Discharge Certificate".

 

(2)        Holders of the seamen's identity documents specified in paragraph (1) above shall be permitted in the case of members of the crew of the vessel to land on temporary shore leave without visa during stay of the vessel in port of the other Contracting Party, provided that the master had submitted the crew list to the competent authorities in accordance with the regulations in force in that port. While landing and returning to the vessel, the said persons shall be subject to frontier and customs control in force in that port.

 

(3)        When a member of the crew possessing an identity document and the prescribed permission, disembarks in the port of the other Contracting Party due to illness, official reasons or other reasons, the latter shall allow his being put up at a hospital, his being repatriated or returning to his home country or his being moved to another port in order to be accommodated in another vessel. The identity documents shall be accompanied by an official order issued, under seal and signature, by the competent officer of the shipping organisations or by the master of the vessels under his signature.

 

(4)        Holders of the seamen's identity documents shall be permitted to enter, move through by any means of transport in the Contracting State of the other Contracting Party in order to be able to join a vessel of their country in a port of the other Contracting Party with the approval of the appropriate authorities of that Contracting Party. In all such cases, the seamen shall be required to have proper visa of the other Contracting Party which shall be granted by the concerned authorities within the shortest possible time.

 

(5)        For the purpose of regulation of shipping affairs, the master of the vessel staying in the port of the other Contracting Party or a person authorised by him shall be permitted to contact or visit the consular official or the representative of the shipping company.

 

ARTICLE IX: No income-tax and/or turnover tax shall be levied or collected by the Government of the German Democratic Republic on the freight earnings and/or profits on national cargo carried by the Indian vessels including those under time charter between ports, of the two States, and similarly no income-tax and/or turnover tax shall be levied or collected by the Government of the Republic of India on the freight earnings and/or profits on national cargo carried by the vessels of the German Democratic Republic including those under time charter between ports of the two States.

 

ARTICLE X:

 

(1)        Each Contracting Party shall allow in its Contracting State the establishment of representations of the shipping organisations of the other Contracting Party for looking after the requirements of the vessels of the shipping companies of the other Contracting Party in accordance with its laws and regulations. The said representation and their personnel shall enjoy the same rights and privileges which are granted to similar representations and their personnel of the most favoured nation.

 

(2)        Each Contracting Party shall grant to the representatives of shipping enterprises with offices in the Contracting State of the other Contracting Party unhindered entry into is sea ports, according to the national laws and regulations in force, in order to enable them to perform their official duties with regard to the care of vessels, crew and cargo and shall permit them to board vessels.

 

ARTICLE XI:

 

(1)        If a vessel of one of the Contracting Parties suffers shipwreck, runs aground, is cast ashore or suffers any other accident within the Contracting State of the State of the other Contracting Party, the vessel, the crew, the passengers and the cargo shall receive, in the Contracting State of the latter Contracting Party, the same assistance which is accorded by the Contracting Party to its national vessel, crew, passengers and cargo.

 

(2)        VEB Deufracht Seereederei, Rostock and the Shipping Party against a shipwrecked vessel, its cargo or store of the other Contracting Party unless they are delivered for use in the Contracting State of the first-mentioned Contracting Party.

 

(3)        Nothing in the provisions of this Article shall prevent the application of the laws and regulations of the Contracting Parties and their international obligations.

 

ARTICLE XII: All payments and expenses under the Agreement arising from the operation of vessels shall be made according to the provisions of the Trade and Payments Agreement between the Contracting Parties that may in force from time to time.

 

ARTICLE XIII:

 

(1)        For the purpose of evaluating, supervising and reviewing the overall working of this Agreement and resolving any outstanding issues, the Contracting Parties agree to set up an Inter-Governmental Joint Committee on Shipping which will meet as often as necessary, in the German Democratic Republic and in the Republic of India, alternatively. The Ministry of Transport of the German Democratic Republic and the Ministry of Shipping and Transport of the Republic of India will nominate their representatives to the Joint Committee.

 

(2)        VEB Deufracht/Seereederei, Rostock and the Shipping Corporation of India Ltd Bombay will be the competent organisations authorised to deal with day-to-day shipping operational issues between the two States, such as distribution of cargoes, fixation of sailings, tariff matters and similar other issues arising out of their operations. Each Contracting Party may nominate any other organisation in addition to the above by notifying to other Contracting Party.

 

ARTICLE XIV: The Contracting Parties agree that their competent authorities will consult each other in all matters relating to international Conferences and Agreements in the field of maritime traffic in which both Contracting Parties are interested. In particular, this relates to co-operation in International Organisations and Conventions in the field of maritime traffic.

 

ARTICLE XV: The provisions of this Agreement do not affect the rights and obligations of the Contracting Parties arising out of International Conventions on maritime law and shipping.

 

ARTICLE XVI: Any differences of opinion with regard to interpretation of application of this Agreement shall be settled by the Inter-governmental Joint Committee on Shipping mentioned in Article 13, para 1. In case the said Joint Committee is unable to come to an agreement on any issue, the same shall be settled by reference to the respective Governments.

 

ARTICLE XVII:

 

(1)        This agreement supersedes all previous Agreements signed between the two Contracting Parties in the field of merchant shipping with effect from its entry into force.

 

(2)        All the previous commercial level arrangements between the competent institutions and organisations and the national shipping companies in the States of the two Contracting Parties shall continue to remain in force insofar as they are not inconsistent with the provisions of this Agreement.

 

ARTICLE XVIII:

 

(1)        This agreement shall enter into force 30 days after the exchange of notes signifying the approval of the agreement in accordance with the national laws and regulations.

 

(2)        This Agreement shall be valid for a period of five years. It shall be automatically renewed for a further one-year period at a time unless either of the Contracting Parties gives written notice of termination of the Agreement not later than six months before the expiry of such period.

 

In witness whereof the undersigned duly empowered by their respective Governments, have signed this Agreement.

 

Done at New Delhi on 9th January, 1979 in two originals each in German, Hindi and English languages, all the text being equally authentic. In case of discrepancy in the German and Hindi texts, the English text shall prevail.

 

Sd./-                                                                                                                             Sd./-

(Oskar Fischer),                                                                                                         (Chand Ram)

For the Government of the                                                                            For the Government of the

German Democratic Republic                                                                                   Republic of India

 

 

ANNEXURE 1

 

New Delhi

 

9th January, 1979

 

Excellency,

 

I have the honour to invite your attention to Article 12 of the Agreement between the Government of the Republic of India and the Government of the German Democratic Republic on co-operation in the field of merchant shipping. Article 12 reads with clause (3) of Article 3 of this Agreement provides that all payments and expenses, under the said Agreement arising from the operation of vessels between the two countries shall be made according to the provisions of Trade and Payments Agreement between the two countries that may be in force for the time being. This is to clarify that this clause would be applicable only in respect of payment of freight earnings and expenses arising from the carriage of cargo between the two countries.

 

I shall be grateful if you kindly confirm that the above correctly sets out the understanding reached between the Government of India and the Government of the German Democratic Republic.

Assuring you of my highest consideration.

 

Yours sincerely,

Sd/- Chand Ram

Minister of Shipping and Transport

Government of India.

 

New Delhi.

 

His Excellency Mr. Oskar Fischer,

 

Minister of External Affairs

 

of the German Democratic Republic

 

ANNEXURE II

 

New Delhi

 

9th January, 1979

 

Excellency,

 

I acknowledge the receipt of your letter of 9th January, 1979 which reads as follows:

 

"I have the honour to invite your attention to Article 12 of the Agreement between the Government of the Republic of India and the Government of the German Democratic Republic on co-operation in the field of merchant shipping. Article 12 reads with clause (3) of Article 3 of this Agreement provides that all payments and expenses, under the said Agreement, arising from the operation of vessels between the two countries shall be made according to the provisions of Trade and Payments Agreement between the two countries that may be in force for the time being. This is to clarify that this clause would be applicable only in respect of payment of freight earnings and expenses arising from the carriage of cargo between the two countries.

 

I shall be grateful if you kindly confirm that the above correctly sets out the understanding reached between the Government of India and the Government of the German Democratic Republic."

 

I, have the honour to confirm that the contents of your letter correctly set out the understanding reached between the Government of the German Democratic Republic and the Government of India.

 

Assuring you of my highest consideration.

 

Yours sincerely,

 

Sd./- Oskar Fischer,

 

Minister of External Affairs,

 

of the German Democratic Republic.

 

His Excellency Mr. Chand Ram,

 

Minister of Shipping and Transport,

 

Government of India,

 

New Delhi.

 

GERMANY

 

 

 Application of agreement between the Government of India and the Government of the Federal Republic of Germany for avoidance of double taxation of income and capital over the unified territories of Federal Republic of Germany and the German Democratic Republic.

 

Circular No. 659, dated 8 September, 1993.

 

The unification of the Federal Republic of Germany with the German Democratic Republic took place on 3rd October, 1990. Under the unification treaty, the tax law in force in the Federal Republic of Germany is applicable in the territory of the former German Democratic Republic from 1st January, 1991.

 

2. Under Article XVIII of the Agreement between the Government of India and the Government of the Federal Republic of Germany for Avoidance of Double Taxation of Income (as notified vide Notification No. 87 (25/33/57-IT), dated 13th September, 1960, and subsequently amended by a protocol notified, vide Notification No. 6387 (F. No. 501/2/90-FTD), and exchange of notes dated 28th June, 1984, mutual agreement has been reached for application of this agreement with effect from 1st January, 1991, in the territory of five new States as well as part of the Land Berlin where Basic Law was not valid before the coming into force of the German merger. The existing Agreement between the Government of India and the Government of the German Democratic Republic for the avoidance of double taxation with respect to taxes on income and on capital (as notified vide Notification No. GSR 107(E), dated 2nd March 1990) will be applied only until 31st December, 1990.

 

3. A similar intention has also been expressed by the Government of the Federal Republic of Germany for extension of the aforesaid agreement to the five new States as well as part of Land Berlin, vide their Circular No. 2/95, dated 4th January, 1993.

 

 

FEDERAL REPUBLIC OF GERMANY

 

Agreement between the Republic of India and the Federal Republic of Germany for the avoidance of double taxation with respect to taxes on income and capital

 

Notification No. 87 [25/33/57-IT], dated 13 September, 1960 amended by Notification No. 6387 [F. No. 501/2/80-FTD], dated 26 August, 1985 as corrected by Notification No. 7374 [F. No. 501/2/80-FTD], dated 30 June, 1987

 

G.S.R. 1090.--Whereas the annexed agreement for the avoidance of double taxation of income between the Government of India and the Government of the Federal Republic of Germany has been ratified and the Instruments of Ratification exchanged as required by Article XX of the said Agreement:

Now, therefore, in exercise of the powers conferred by section 49A of the Indian Income-tax Act, 1922 (11 of 1922), the Central Government hereby directs that all provisions of the said Agreement shall be given effect to in the Union of India.

 

ANNEXURE

 

Whereas the Government of India and the Government of the Federal Republic of Germany desire to conclude an Agreement for the avoidance of double taxation of income;

 

Now, therefore, it is hereby agreed as follows:--

 

ARTICLE I: (1) The taxes which are the subject of the present Agreement are:

 

"(a)     in the Federal Republic of Germany;

 

(i)         the income-tax (Eimkommensteuer),

            (ii)        the corporation tax (Koerperschaftsteuer),

            (iii)       the capital tax (Vermoegensteur), and

            (iv)       the trade tax (Gewerbesteuer)

 

(hereinafter referred to as "German tax");

 

(b)        in India:

 

(i)         the income-tax including any surcharge thereon,

            (ii)        the surtax, and

            (iii)       the wealth-tax

 

(hereinafter referred to as "Indian tax")

 

(2)        The present Agreement shall also apply to any other taxes of a substantially similar character imposed in India or the Federal Republic of Germany subsequent to the date of signature of the present Agreement.

 

ARTICLE IA:

 

(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 as follows:

 

(a)        he shall be deemed to be a resident of the State in which he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests);

(b)        if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode;

(c)        if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;

(d)        if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

 

(3)        Where by reason of the provisions of paragraph (1) a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the State in which its place of effective management is situated.

 

ARTICLE II: (1) In the present Agreement, unless the context otherwise requires,--

 

(a)        the term "Federal Republic" means the Federal Republic of Germany, and when used in a geographical sense, the area in which the tax law of the Federal Republic of Germany is in force;

(b)        the term "India" means the Republic of India, and when used in a geographical sense, the area in which the tax law of the Republic of India is in force;

(c)        the terms "a Contracting State" and "the other Contracting State" mean the Federal Republic of India, as the context requires.

 

(d)        the term "person" includes natural persons, companies and all other entities which are treated as taxable units under the tax laws in force in the respective Contracting States;

(e)        the term "company" means any entity which is treated as a body corporate or as a company for tax purposes;

            (f)        the term "tax" means German tax or Indian tax, as the context requires;

(g)        the terms "Federal Republic enterprise" and "Indian enterprise" mean, respectively, an industrial or commercial enterprise or undertaking carried on by a resident of the Federal Republic, and an industrial or commercial enterprise or undertaking carried on by a resident of India; and the terms "enterprise of one of the Contracting States" and "enterprise of the other Contracting State" mean a Federal Republic enterprise or an Indian enterprise, as the context requires;

(h)        (aa)      the term "permanent establishment" means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

 

(bb)      the term "permanent establishment" includes especially:

 

(i)         a place of management;

            (ii)        a branch;

            (iii)       an office;

            (iv)       a factory;

            (v)        a workshop;

            (vi)       a sales outlet;

            (vii)      a warehouse; and

            (viii)     a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

 

(cc)      A building site or construction or installation project constitutes a permanent establishment only if it lasts more than six months.

(dd)      Notwithstanding the preceding provisions of this Article, the term "permanent establishment" shall be deemed not to include:

 

(i)         the use of facilities solely for the purpose of storage or display of goods or merchandise belonging to the enterprise;

(ii)        the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage or display;

(iii)       the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise.

(iv)       the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise;

(v)        the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character;

(vi)       the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs (i) to (v) provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.

(ee)      A person acting in a Contracting State on behalf of an enterprise of the other Contracting State, other than an agent of an independent status to whom sub-paragraph (ff) applies, shall be deemed to be a permanent establishment of that enterprise in the first-mentioned Contracting State.

 

(i)         if he has, and habitually exercises in that Contracting State, an authority to conclude, unless contracts in the name of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise; or

(ii)        if he habitually maintains in the first-mentioned Contracting State a stock of goods or merchandise belonging to the enterprise from which he regularly delivers goods or merchandise for or on behalf of the enterprise; or

(iii)       if he habitually secures orders in the first-mentioned Contracting State exclusively, or almost exclusively, for the enterprise itself, or for the enterprise and other enterprises which are controlled by it or have a controlling interest in it.

 

(ff)       An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in the 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.

(gg)      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;

 

(i)         the term "pension" means periodic payments made in consideration of services rendered or by way of compensation for injuries received;

(j)         the term "annuity" means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time;

(k)       the term "competent authority" means in the case of India, the Central Government in the Ministry of Finance, Department of Revenue, and in the case of the Federal Republic of Germany, the Federal Ministry of Finance.

 

"(l)      the term "fiscal year" means:

 

(i)         in relation to Indian tax, the previous year as defined in the Income-tax Act, 1961;

            (ii)        in relation to German tax, the calendar year.

 

(2)        In the application of the provisions of this Agreement in one of the Contracting States any term not otherwise defined in this Agreement shall, unless the context otherwise requires, have the meaning which it has under the laws in force in that Contracting State relating to the taxes which are the subject of this Agreement.

 

ARTICLE III:

 

(1)        The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.

 

(2)        Subject to the provisions of paragraph (3), where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

 

(3)        In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the business of the permanent establishment including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere, and according to the domestic law of the Contracting State in which the permanent establishment is situated.

 

(4)        Insofar as 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 IV: Where a resident of one of the Contracting States carries on business with a resident of the other Contracting State and it appears to the taxation authorities of the first-mentioned Contracting State that owing to the close connection between such persons the course of business is so arranged that the business done produces to the resident of the first-mentioned Contracting State either no profits or less than ordinary profits which might be expected to arise in that business, tax shall be leviable in the former Contracting State on such profits as may reasonably be deemed to have arisen there from.

 

ARTICLE V:

 

(1)        Income derived from the operation of aircraft by an enterprise of one of the Contracting States shall not be taxed in the other Contracting State, unless the aircraft is operated wholly or mainly between places within that other Contracting State.

(2)        Paragraph (1) shall likewise apply in respect of participations, in pools of any kind by enterprises engaged in air transport.

 

ARTICLE VI:

 

(1)        Profits derived from the operation of ships in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

 

(2)        Notwithstanding the provisions of paragraph (1), such profits may be taxed in the other Contracting State from which they are derived provided that the tax so charged shall not exceed:

 

(a)        during the first five fiscal years after the entry into force of the Protocol signed on June 28, 1984, 50 per cent, and

            (b)        during the subsequent five fiscal years, 25 per cent,

 

of the tax otherwise imposed by the internal law of that State. Subsequently, only the provisions of paragraph (1) shall be applicable.

 

(3)        The provisions of paragraphs (1) and (2) shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

 

(4)        Paragraphs (1) and (2) shall not apply to profits arising as a result of coastal traffic. The term "coastal traffic" means traffic which originates and terminates in the territorial waters of the same Contracting State.

 

ARTICLE VII:

 

(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 beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:

 

(a)        in the case of the Federal Republic, 15 per cent of the gross amount of the dividends;

            (b)        in the case of India, where the dividends relate in whole or in part to a new contribution,

 

15 per cent of the gross amount of the dividends attributable to the new contribution.

 

In this Article, the term "new contribution" means any share capital, other than bonus shares, issued after the date of entry into force of the Protocol signed on June 28, 1984 by a company which is a resident of India, and beneficially owned by a resident of the Federal Republic.

 

(3)        The term "dividends" as used in this article means income from shares, mining shares, founders' shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident, and income derived by a sleeping partner from his participation as such and distributions on certificates of an investment trust.

 

(4)        The provisions of paragraphs (1) and (2) shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment. In such case the provisions of Article III shall apply.

 

(5)        Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly or profits or income arising in such other State.

 

ARTICLE VIII:

 

(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 the tax so charged on interest payable in respect of a loan given or debt created after the date of entry into force of the Protocol and signed on June 28, 1984 shall not exceed:

 

(a)        10 per cent of the gross amount, if such interest is paid on any loan of whatever kind granted by a bank, and

            (b)        15 per cent of the gross amount in all other cases.

 

(3)        Notwithstanding the provisions of paragraph (2).

 

(a)        interest arising in the Federal Republic and paid to the Indian Government or the Reserve Bank of India shall be exempt from German tax;

(b)        interest arising in India and paid to the Government of the Federal Republic of Germany, the Deutsche Bundesbank bank, the Kreditanstalt fur Wiederaufbau or the Deutsche Gesellschaft fur wirtschaftliche Zusmmenarbeit (Entwicklungsgelsell-schaft) shall be exempt from Indian tax.

 

(4)        The term "interest' as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures.

 

(5)        Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a land, 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 in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment, then such interest shall be deemed to arise in the State in which the permanent establishment is situated.

 

(6)        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, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment. In such case, the provisions of Article III shall apply.

 

ARTICLE VIIIA:

 

(1)        Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

 

(2)        However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise, and according to the laws of that State. But insofar as the fees for technical services are concerned, the tax so charged shall not exceed 20 per cent of the gross amount of such fees.

 

(3)        The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, or films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.

 

(4)        The term "fees for technical services" as used in this Article means payments of any kind to any person, other than payments to an employee of the person making the payments,  in consideration for services of a managerial, technical or consultancy nature, including the provisions of services of technical or other personnel.

 

(5)        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, 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. In such case, the provisions of Article III shall apply.

 

(6)        Royalties and fees for technical services shall be deemed to arise in a Contracting State where the payer is that State itself a land, 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 in connection with which the obligation to make the payments was incurred and the payments are borne by that permanent establishment, then the royalties or fees for technical services shall be deemed to arise in the Contracting State in which the permanent establishment is situated.

 

(7)        Where, owing to a special relationship between the payer 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 Agreement.

 

ARTICLE IX: Income from immovable property may be taxed in the Contracting State in which the property is situated. For this purpose any rent or royalty or other income derived from the operation of a mine, quarry or any other extraction of natural resources shall be regarded as income from immovable property.

 

ARTICLE X:

 

(1)        Capital gains arising from the sale, exchange or transfer of a capital asset, whether movable or immovable, may be taxed in the Contracting State in which the capital asset is situated at the time of such sale, exchange or transfer. For this purpose the situs of the shares of a company shall be deemed to be in the Contracting State where the company is incorporated.

 

(2)        However, gains from the alienation of ships or aircraft operating in international traffic and movable property pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

 

ARTICLE XI:

 

(1)        Remuneration, including pensions and annuities, paid out of public funds of India in respect of present or past services shall not be taxed in the Federal Republic unless the payment is made to a citizen of the Federal Republic.

 

(2)        Remuneration, including pensions and annuities, paid out of public funds of the Federal Republic or its Lender or political sub-divisions thereof in respect of present or past services shall not be taxed in India unless the payment is made to a citizen of India.

 

(3)        The provisions of paragraphs (1) and (2) of this Article shall not apply to payments in respect of services in connection with any trade or business carried on by either of the Contracting Parties or political sub-divisions thereof for purposes of profit.

 

(4)        The provisions of paragraphs (1) and (2) of this Article shall also apply to remuneration, including pensions and annuities, paid by the Federal Bank, the Federal Railways and the Postal Administration of the Federal Republic and the corresponding organisations of India.

 

ARTICLE XII:

 

(1)        Profits or remuneration from professional services (including services as a director) or from services as an employee derived by an individual who is a resident of one of the Contracting States may be taxed in the other Contracting State only if such services are rendered in that other Contracting State.

 

(2)        An individual who is a resident of India shall not be taxed in the Federal Republic on profits or remuneration referred to in paragraph (1) if:

 

(a)        he is temporarily present in the Federal Republic for a period or periods not exceeding in the aggregate 183 days during a taxable year,

            (b)        the services are rendered for or on behalf of a resident of India,

            (c)        the profits or remuneration are subject to Indian tax, and

(d)        the profits or remuneration are not deducted in computing the profits of an enterprise chargeable to German tax.

 

(3)        An individual who is a resident of the Federal Republic shall not be taxed in India on the profits or remuneration referred to in paragraph (1) if:

 

(a)        he is temporarily present in India for a period or periods not exceeding in the aggregate 183 days during a relevant "previous year",

            (b)        the services are rendered for or on behalf of a resident of the Federal Republic

            (c)        the profits or remuneration are subject to German tax, and

(d)        the profits or remuneration are not deducted in computing the profits of an enterprise chargeable to Indian tax.

 

(4)        Where an individual permanently or predominantly renders services on ships or aircraft operated by an enterprise of one of the Contracting States such services shall be deemed to be rendered in that Contracting State.

 

ARTICLE XIII: Any pension or annuity (other than pension or annuities to which Article XI applies) derived by a resident of one of the Contracting States from source in the other Contracting State may be taxed in that other Contracting State.

 

ARTICLE XIV: A professor or teacher from one of the Contracting States, who receives remuneration for teaching, during a period of temporary residence not exceeding two years, at a university, college, school or other educational institution in the other Contracting State, shall not be taxed in that other Contracting State in respect of that remuneration.

 

ARTICLE XV:

 

(1)        An individual from one of the Contracting States who is temporarily presents in the other Contracting State solely.

 

(a)        as a student at a recognized university, college or school in such other Contracting State,

            (b)        as a business apprentice (including in the Federal Republic a Volontar or a Praktikant), or

(c)        as the recipient of a grant, allowance or award for the primary purpose of study or research from a religious, charitable, scientific or educational organisation,

 

shall not be taxed in the other Contracting State in respect of remittances from abroad for the purposes of his maintenance, education or training, in respect of a scholarship, and in respect of any amount representing remuneration for an employment in that other Contracting State.

 

(2)        An individual from one of the territories who is temporarily present in the other Contracting State for a period not exceeding one year, as an employee of, or under contract with, an enterprise of the former Contracting State or an organisation referred to in paragraph (1) sub-paragraph (c) above, solely to acquire technical, professional or business experience from a person other than such enterprise or organisation, shall not be taxed in that other Contracting State on remuneration for such period, unless, the amount thereof exceeds 15,000 DM or its equivalent in Indian currency.

 

(3)        An individual from one of the Contracting States temporarily present in the other Contracting State under arrangements with the Government of that other Contracting State solely for the purpose of training, research or study shall not be taxed in that other Contracting State on remuneration received in respect of such training, research or study, unless the amount thereof exceeds 25,000 DM or its equivalent in Indian currency.

 

ARTICLE XVA:

 

(1)        Capital represented by immovable property referred to in Article IX, owned by a resident of a Contracting State and situated in the other Contracting State, may be taxed in that other State.

 

(2)        Capital represented by movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State may be taxed in that other State.

 

(3)        Capital represented by ships and aircraft operated in international traffic and by movable property pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

 

(4)        Capital represented by shares in a company shall be taxable in the Contracting State in which such company is resident.

 

(5)        All other elements of capital of a resident of a Contracting State shall be taxable only in that State.

 

ARTICLE XVI:

 

(1)        The laws in force in either of the Contracting States will continue to govern the assessment and taxation of income in the respective Contracting States except where express provision to the contrary is made in this Agreement.

 

(2)        Where a resident of India derives income or owns capital which, in accordance with the provisions of this Agreement, may be taxed in the Federal Republic, India shall allow as a deduction from the tax on the income of that resident an amount equal to the income-tax paid in the Federal Republic, whether directly or by deduction; and as a deduction from the tax on the capital of that resident an amount equal to the capital tax paid in the Federal Republic. Such deduction in either case shall not, however, exceed that part of the income-tax or capital tax (as computed before the deduction is given) which is attributable, as the case may be, to the income or the capital which may be taxed in the Federal Republic. Further, where such resident is a company by which surtax is payable in India, the deduction in respect of income-tax paid in the Federal Republic shall be allowed in the first instance from income-tax payable by the company in India and as to the balance, if any, from surtax payable by it in India.

 

(3)        Subject to the provision of paragraph (1) above, tax shall be determined in the case of a resident of the Federal Republic as follows:

 

(a)        Unless the provisions of sub-paragraph (b), apply, there shall be excluded from the basis upon which German tax is imposed any item of income arising in India and any item of capital situated within India, which, according to this Agreement, may be taxed in India. The Federal Republic, however, retains the right to take into account in the determination of its rate to tax the items of income and capital so excluded.

 

In the case of income from dividends the foregoing provisions shall apply only to such dividends as are paid to a company (not including partnerships) being a resident of the Federal Republic by a company being a resident of India at least 10 per cent of the capital of which is owned directly by the first-mentioned company. For the purposes of taxes on capital there shall also be excluded from the basis upon which German tax is imposed any shareholding, the dividends of which are excluded or, if paid, would be excluded, according to the immediately foregoing sentence, from the basis upon which German tax is imposed.

 

(b)        Subject to the provisions of German tax law regarding credit for foreign tax (as it may be amended from time to time without changing the general principle hereof), there shall be allowed as a credit against German income and corporation tax payable in respect of the following items of income arising in India the Indian tax paid under the laws of India and in accordance with this Agreement on:

 

(aa)      profits derived from the operation of ships in international traffic;

            (bb)      dividends not dealt with in sub-paragraph (a);

            (cc)      interest;

            (dd)      royalties and fees for technical services.

 

(c)        For the purpose of It. (bb) to (dd) of sub-paragraph (b), the term "Indian tax" shall be deemed to include any amount which would have been payable as Indian tax under the laws of India and in accordance with this Agreement for any year but for an exemption from, or reduction of, tax granted for that year under:

 

(a)        sections 10(4), 10(4A), 10(15)(iv) and 80K of the Income-tax Act, 1961

(b)        any other provision of similar character to be agreed between the competent authorities of both Contracting States.

 

If this amount is less than 50 per cent of the German tax chargeable on such volume, the term "Indian tax" shall be deemed to be at least this 50 per cent of the German tax.

 

(d)        The provisions of sub-paragraph (a) shall not apply to the profits of, and to the capital represented by, movable and immovable property forming part of the business property of a permanent establishment and to the gains from the alienation of such property; to dividends paid by, and to the shareholding in a company unless the resident of the Federal Republic concerned proves that the receipts of the permanent establishment or company are derived exclusively or almost exclusively.

 

(aa)      from producing or selling goods or merchandise, giving technical advice or rendering engineering services, or doing banking or insurance business, within India, or

(bb)      from dividends paid by one or more companies, being residents of India, more than 25 per cent of the capital of which is owned by the first-mentioned company, which themselves derive their receipts exclusively or almost exclusively from producing or selling goods or merchandise, giving technical advice or rendering engineering services, or doing banking or insurance business, within India.

 

In such a case, Indian tax payable under the laws of India and in accordance with this Agreement on the above-mentioned items of income and capital shall, subject to the provisions of German tax law regarding credit for foreign tax (as it may be amended from time to time without changing the general principle hereof), be allowed as a credit against German income or corporation tax payable on such items of income or against German capital tax payable on such items of capital.

 

ARTICLE XVII: The competent authorities shall exchange such information (being information which is at their disposal under their respective taxation laws in the normal course of administration) as is necessary for carrying out the provisions of the present Agreement. Any information so exchanged shall be treated as secret and shall not be disclosed to any persons other than those concerned with the assessment and collection of the taxes which are the subject of the present Agreement. No information as aforesaid shall be exchanged by the competent authority of one of the Contracting States which would disclose any trade, business, industrial or professional secret or any trade process to the authority of the other Contracting State.

 

ARTICLE XVIII:

 

(1)        Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement he may, irrespective of the remedies provided by the domestic law of those States present his case to the competent authority of the Contracting State of which he is a resident. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Agreement.

 

(2)        The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with the Agreement. Any Agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States.

 

(3)        The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Agreement. They may also consult together for the elimination of double taxation in cases not provided for in the Agreement.

 

(4)        The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs.

 

ARTICLE XIX:

 

(1)        This Agreement shall apply to Land Berlin provided that the Government of the Federal Republic of Germany has not delivered a contrary declaration to the Government of India within three months from the date of entry into force of the Agreement.

 

(2)        Upon the application of this Agreement to Land Berlin, references in the Agreement to the Federal Republic shall be deemed also to be references to Land Berlin.

 

ARTICLE XX:

 

(1)        The present Agreement shall be ratified.

 

(2)        The instruments of ratification shall be exchanged at Bonn as soon as possible.

 

(3)        This Agreement shall come into force after the expiration of a month following the date on which the instruments of ratification are exchanged and shall thereupon have effect:--

 

(a)        in respect of Indian tax in relation to the income for any "previous year" relevant to any year of assessment beginning on or after the 1st April, 1958, and

(b)        in respect of the German tax, for taxes which are levied for the calendar year 1957 and for subsequent calendar years.

 

ARTICLE XXI: This Agreement shall continue in effect indefinitely but either of the Contracting Parties may on or before the 30th day of June in any calendar year after 1960 give to the other Contracting Party notice of termination and in such event this Agreement shall cease to be effective:--

 

(a)        in respect of Indian tax, in relation to income and capital assessable for the assessment years commencing on or after the first day of April, in the calendar year next following that in which the notice of termination is given, and

(b)        in respect of German tax, for taxes which are levied for the calendar years following the year in which the notice of termination is given.

 

In witness whereof the undesigned duly authorised thereto have singed this Agreement and have affixed thereto their seals.

 

Done at New Delhi on 18th March, 1959 in duplicate, in the English, German and Hindi languages, all the three texts being equally authentic, except in the case of doubt, when the English text shall prevail.

 

(DR. B. GOPALA REDDY),                                                             (DR. W. MELCHERS),

Minister for Revenue and Civil Expenditure,                                  Ambassador of the Federal

Government of India.                                                                         Republic of Germany in India,

 

New Delhi, the 18th day of March, 1959.

 

Dear Sir,

 

The Agreement between the Government of India and the Government of the Federal Republic of Germany for the Avoidance of Double Taxation of Income being signed today, I have the honour, on behalf of the Government of India, to inform you that the two Contracting Parties have agreed that the provisions referred to shall be applied as follows:

 

1.         Article II (1)(i)(dd).--The term "person" as used in the provision referred to includes an employee as well as person who, though being of independent status, performs activities similar to those of an employee.

 

2.         Article II (1)(i)(dd)(3).--The term "almost exclusively" shall be understood to mean that the person's activities for or on behalf of enterprises other than those referred to therein are of such minor importance in relation to his activities for or on behalf of the enterprises mentioned therein that for all practical purposes such person may be regarded as working solely for or on behalf of the latter enterprises.

 

Enterprises controlled by the same person shall be treated as one enterprise.

 

I should be grateful if you would confirm your Agreement with the above definitions and that, in such case, this note and your reply thereto should be deemed to be part of the Agreement.

 

Please accept, Mr. Ambassador, the assurance of my high consideration.

 

DR. B. Gopala Reddy.

 

To

His Excellency Dr. W. Melchers,

 

Ambassador of the Federal Republic of Germany in India, New Delhi

 

New Delhi, the 18th March, 1959

 

Mr. Minister,

 

With reference to the Agreement, signed to-day, between the Government of the Federal Republic and the Government of India for the Avoidance of Double Taxation of Income, you on behalf of the Government of India informed me of the following:

"The Agreement between the Government of India and the Government of the Federal Republic of Germany for the Avoidance of Double Taxation of Income being signed to-day, I have the honour, on behalf of the Government of India, to inform you that the two Contracting Parties have agreed that the provisions referred to below shall be applied as follows:

 

1.         Article II(1)(i)(dd).--The term "person" as used in the provision referred to includes an employee as well as a person who, though being of independent status, performs activities similar to those of an employee.

2.         Article II(1)(i)(dd)(3).--The term "almost exclusively" shall be understood to mean that the person's activities for or on behalf of enterprises other than those referred to therein are of such minor importance in relation to his activities for or on behalf of the enterprises mentioned therein that for all practical purposes such person may be regarded as working solely for or on behalf of the latter enterprises.

 

Enterprises controlled by the same person shall be treated as one enterprise.

I should be grateful if you would confirm your Agreement with the above definitions and that, in such case, this note and your reply thereto should be deemed to be part of the Agreement.

I have the honour to inform you that this proposal meets with the approval of the Government of the Federal Republic of Germany. Your note of today's date and my reply thereto shall therefore be part of the Agreement.

 

Accept, Mr. Minister, the assurance of my high consideration.

 

DR. W. Melchers

 

To

 

Dr. B. Gopala Reddy,

Minister for Revenue and Civil Expenditure, New Delhi.

 

 

GREECE

 

Agreement between the Government of India and the Government of Greece for the avoidance of double taxation of income

Notification No. 19, [F. No. 11(6)63/TPL], dated 17 March, 1967

 

G.S.R. 394.--Whereas the annexed agreement between the Government of India and the Government of Greece for the avoidance of double taxation of income has been ratified and the instruments of ratification exchanged, as required by Article XX of the said Agreement.

 

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 Agreement shall be given effect to in the Union of India.

 

ANNEXURE

 

Whereas the Government of India and the Government of Greece desire to conclude an agreement for the avoidance of double taxation of income:

 

Now, therefore, it is hereby agreed as follows:

 

ARTICLE I: (1) The taxes which are the subject of the present agreement are:

 

(a)        in India:

                        the income-tax,

                        the super-tax,

                        the surcharge,

 

imposed under the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as "Indian tax");

 

(b)        In Greece:

 

the tax on physical persons and the income-tax on legal entities, and any special tax levied in Greece with reference to freight earned by shipping enterprises by the carriage of passengers, livestock or goods, imposed under the Royal Decrees No. 3323/1955 and 3843/1958 and the Law No. 1880/1951 (hereinafter referred to as "Greek tax").

 

(2)        The present agreement shall also apply to any other taxes of a substantially similar character imposed in India or Greece subsequent to the date of signature of the present Agreement.

 

ARTICLE II:

 

(1)        In the present agreement, unless the context otherwise requires--

 

(a)        the term "Greece" means the Contracting State of the Kingdom of Greece;

(b)        the terms "one of the Contracting States" and "the other Contracting State" mean Greece or India as the context requires;

(c)        the term "person" includes natural persons, companies and all other entities which are treated as taxable units under the tax laws in force in the respective Contracting States;

(d)        the term "company" means any entity which is treated as a body corporate or as a company for tax purposes;

(e)        the term "tax" means the Greek tax or Indian tax, as the context requires;

(f)        the terms "resident of Greece" and "resident of India" mean, respectively, a person who is resident in Greece for the purposes of Greek tax and not resident in India for the purposes of Indian tax, and a person who is resident in India for the purposes of Indian tax and not resident in Greece for the purposes of Greek tax. A company shall be regarded as resident in Greece if it is incorporated in Greece or its business is wholly managed and controlled in Greece; a company shall be regarded as resident in India if it is incorporated in India or its business is wholly managed and controlled in India.

(g)        the terms "Greek enterprise" and "Indian enterprise" mean, respectively, an industrial or commercial enterprise or undertaking carried on by a resident of Greece and an industrial or commercial enterprise or undertaking carried on by a resident of India; and the terms "enterprise of one of the Contracting States" and "enterprise of the other Contracting State" mean a Greek enterprise or an Indian enterprise, as the context requires;

(h)        the term "permanent establishment" means a fixed place of business in which the business of the enterprise is wholly or partly carried on;

 

(aa)      the term "fixed place of business" shall include a place of management, a branch, an office, a factory, a workshop, a warehouse, a mine, quarry or other place of extraction of natural resources;

(bb)      an enterprise of one of the Contracting States shall be deemed to have a fixed place of business in other territory if it carries on in that other territory a construction, installation or assembly project or the like;

(cc)      the use of mere storage facilities or the maintenance of a place of business exclusively for the purchase of goods or merchandise and not for any processing of such goods or merchandise in the territory of purchase, shall not constitute a permanent establishment;

(dd)      a person acting in one of the Contracting States for or on behalf of an enterprise of the other territory shall be deemed to be a permanent establishment of that enterprise in the first-mentioned territory, only if:

 

1.         he has and habitually exercises in the first-mentioned territory a general authority to negotiate and enter into contracts for or on behalf of the enterprise, unless the activities of the person are limited exclusively to the purchase of goods or merchandise for the enterprise, or

2.         he habitually maintains in the first-mentioned territory a stock of goods or merchandise belonging to the enterprise from which the person regularly delivers goods or merchandise for or on behalf of the enterprise, or

 

3.         he habitually secures orders in the first-mentioned territory wholly or almost wholly for the enterprise itself or for the enterprise and other enterprise which are controlled by it or have a controlling interest in it.

 

(ee)      A broker of a genuinely independent status who merely acts as an intermediary between an enterprise of one of the Contracting States and a prospective customer in the other territory shall not be deemed to be a permanent establishment of the enterprise in the last-mentioned territory.

(ff)       The fact that a company, which is a resident of one of the Contracting States, has a subsidiary company which either is a resident of the other territory or carries on a trade or business in that other territory (whether through a permanent establishment or otherwise) shall not, of itself constitute that subsidiary company a permanent establishment of its parent company.

 

(i)         the term "pension" means a periodic payment made in consideration of services rendered or by way of compensation for injuries received;

(j)         the term "annually" means a stated sum payable periodically at stated time during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money's worth;

(k)       the term "competent authority" means in the case of India, the Central Government in the Ministry of Finance, Department of Revenue, or its authorised representative and in the case of Greece, the Ministry of Finance or its authorised representative.

(2)        In the application of the provisions of this agreement in one of the territories any term not otherwise defined in this Agreement shall, unless the context otherwise requires, have the meaning which it has under the laws in force in that territory relating to the taxes which are the subject of this Agreement.

 

ARTICLE III:

 

(1)        Subject to the provisions of paragraph (3) below, tax shall not be levied in one of the territories on the industrial or commercial profits of an enterprise of the other territory unless profits are derived in the first-mentioned territory through a permanent establishment of the said enterprise situated in the first-mentioned territory. If profits are so derived, tax may be levied in the first-mentioned territory on the profits attributable to the said permanent establishment.

 

(2)        There shall be attributed to the permanent establishment of an enterprise of one of the territories situated in the other territory the industrial or commercial profits which it might be expected to derive in that other territory if it were an independent enterprise engaged in the same or similar activities under the same or similar conditions and dealing at arm's length 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 establishment may be estimated on a reasonable basis.

 

(3)        For the purpose of this agreement the term "industrial or commercial profits" shall not include income in the form of rents, royalties, interest, dividends, management charges, remuneration for labour or personal services or income from the operation of ships or aircraft.

 

ARTICLE IV: Where--

 

(a)        an enterprise of one of the territories, participates directly or indirectly in the management, control or capital of an enterprise of the other territory, or

(b)        the same persons participate directly or indirectly in the management, control or capital of an enterprise of one of the territories and an enterprise of the other territory, and

 

in either case conditions are made or imposed between the two enterprises, in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which but for those conditions would have accrued to one of the enterprises but by reason of those conditions have not so accrued may be included in the profits of that enterprise and taxed accordingly.

 

ARTICLE V:

 

(1)        Income derived from the operation of aircraft by an enterprise of one of the territories shall not be taxed in the other territory, unless the aircraft is operated wholly or mainly between places within that other territory.

 

(2)        Paragraph (1) shall likewise apply in respect of participations in pools of any kind by enterprises engaged in air transport.

 

ARTICLE VI:

 

(1)        When a resident of Greece, operating ships, derives profits from India through such operations carried on in India, such profits may be taxed in Greece as well as in India; but the tax so charged in India shall be reduced by an amount equal to 50 per cent thereof, and the reduced amount of Indian tax payable on the profits shall be allowed as a credit against Greek tax charged in respect of such income. The credit aforesaid shall not exceed the Greek tax charged in respect of such income.

 

(2)(a)   When a resident of India; operating ships, derives profits from Greece, through such operations carried on in Greece, such profits may be taxed in Greece as well as in India; but the tax so charged in Greece shall be reduced by an amount equal to 50 per cent thereof and the reduced amount of Greek tax payable shall be allowed as a credit against Indian tax charged in respect of such income. The credit aforesaid shall not exceed the Indian tax charged in respect of such income.

 

(b)      Sub-clause (a) of clause (2) shall not, however, apply as long as the laws in Greece do not impose any tax on income derived from the operation of ships belonging to foreign enterprises operating in the Greek territory, in such cases, the only in India.

(3)        Paragraphs (1) and (2) shall not apply to profits arising as a result of coastal traffic.

(4)        The provisions of clause (1) shall not in case of India affect the application of sub-sections (1) to (6) of section 172 of the Income-tax Act, 1961 for the assessment of profits from occasional shipping or tramp steamers; but the provisions of that clause will be applied, when an adjustment is to be made under sub-section (7) of the aforesaid section of the Income-tax Act, 1961 in such cases.

 

ARTICLE VII: Royalties derived by a resident of a Contracting State from sources in the other territory may be taxed only in that other territory.

 

In this Article, the term "Royalty" means any royalty or other like amount received as consideration for the right to use copyrights, artistic or scientific works, cinematographic films, patents, models, designs, plans, secret processes or formulae, trade-marks and other like property or rights, but does not include any royalty or other like amount in respect of the operation of mines, quarries or other natural resources.

 

ARTICLE VIII: Dividends paid by a company which is a resident of a Contracting State to a resident of the other territory may be taxed only in the first-mentioned territory.

ARTICLE IX: Interest on bonds, securities, notes, debentures or any other form of indebtedness, derived by a resident of a Contracting State from sources in the other territory may be taxed only in that other territory.

 

ARTICLE X: Income from immovable property may be taxed only in the territory in which the property is situated. For this purpose any rent or royalty or other income derived from the operation of a mine, quarry or any other place of extraction of natural resources shall be regarded as income from immovable property.

 

ARTICLE XI: Capital gains derived from the sale, exchange or transfer of a capital asset, whether movable or immovable, may be taxed only in the territory in which the capital asset is situated at the time of such sale, exchange or transfer.

 

ARTICLE XII:

 

(1)        Remuneration other than pensions and annuities, paid in Greece for services rendered therein out of public funds of India shall not be taxed in Greece unless the payment is made to a citizen of Greece.

(2)        Remuneration other than pensions and annuities, paid in India for services rendered therein out of public funds of  Greece shall not be taxed in India unless the payment is made to a citizen of India.

 

(3)        The provisions of paragraphs (1) and (2) of this Article shall not apply to payments in respect of services in connection with any trade or business carried on by either of the Contracting Parties or political sub-divisions thereof for purposes of profit.

(4)        The provisions of paragraphs (1) and (2) of this Article shall also apply to remuneration other than pensions and annuities paid by the Reserve Bank of India, the Public Railways Authorities and the Postal Administration of India and by the Bank of Greece, Greek State Railways and the Greek Postal and Telegraphic Administration.

 

ARTICLE XIII: Any pension or annuity derived by a resident of a Contracting State from sources in the other territory may be taxed only in that other territory.

 

ARTICLE XIV:        

(1)        Profits or remuneration for professional services or for services as an employee (including services as a director) performed in one of the territories by an individual who is a resident of the other territory may be taxed only in the territory in which such services are performed.

(2)        An individual who is a resident of India shall not be taxed in Greece on profits or remuneration referred to in paragraph (1) if--

 

(a)        he is temporarily present in Greece for a period or periods not exceeding in the aggregate 183 days during the calendar year immediately preceding the relevant fiscal year,

            (b)        the services are performed for or on behalf of a resident of India,

            (c)        the profits or remuneration are subject to Indian tax, and

(d)        the profits or remuneration are not deducted in computing the profits of an enterprise chargeable to Greek tax.

 

(3)        An individual who is a resident of Greece shall not be taxed in India on the profits or remuneration referred to in paragraph (1) if--

 

(a)        he is temporarily present in India for a period or periods not exceeding in the aggregate 183 days during the relevant "previous year",

            (b)        the services are rendered for or on behalf of a resident of Greece,

            (c)        the profits or remuneration are subject to Greek tax, and

(d)        the profits or remuneration are not deducted in computing the profits of an enterprise chargeable to Indian tax.

 

(4)        Where an individual permanently or predominantly performs services on ships or aircraft in international traffic operated by an enterprise of one of the territories, profits or remuneration from such services may be taxed only by the country of which the individual is resident.

 

ARTICLE XV: A professor or teacher from one of the territories, who receives remuneration for teaching, during a period of temporary residence not exceeding two years, at a university, college, school or other educational institution in the other territory, shall not be taxed in that other territory in respect of that remuneration.

 

ARTICLE XVI: An individual from one of the territories who is temporarily present in the other territory solely--

 

(a)        as a student at a university, college or school in such other territory,

            (b)        as a business apprentice, or

(c)        as the recipient of a grant, allowance or award for the primary purpose of study or research from a religious, charitable, scientific or educational organisation shall not be taxed in the other territory in respect of remittances from abroad for the purposes of his maintenance, education or training in respect of a scholarship, and in respect of any amount representing remuneration for services rendered in that other territory, provided that such services are in connection with his studies or training or are necessary for the purpose of his maintenance.

 

ARTICLE XVII:

 

(1)        The laws in force in either of the territories will continue to govern the assessment and taxation of income in the respective territories except where express provision to the contrary is made in this Agreement.

 

(2)        Subject to the provisions of Article VI income from sources within Greece which under the laws of Greece and in accordance with this agreement is subject to tax in Greece either directly or by deduction shall not be subject to Indian tax.

 

(3)        Subject to the provisions of Article VI income from sources within India which under the laws of India and in accordance with this agreement is subject to tax in India either directly or by deduction shall not be subject to Greek tax.

 

(4)        The graduated rate of Greek tax to be imposed on residents of Greece and the graduated rate of Indian tax to be imposed on residents of India may be calculated as though income which under this agreement is not subject to Greek or Indian tax, as the case may be, were included in the amount of the total income.

 

ARTICLE XVIII: The competent authorities shall exchange such information (being information which is at their disposal under their respective taxation laws in the normal course of administration) as is necessary for carrying out the provisions of the present Agreement. Any information so exchanged shall be treated as secret and shall not be disclosed to any persons other than those concerned with the assessment and collection of the taxes which are the subject of the present Agreement. No information as aforesaid shall be exchanged by the competent authority of one of the territories which would disclose any trade, business, industrial or professional secret or any trade process to the authority of the other territory.

 

ARTICLE XIX: Where a resident of a Contracting State shows proof that the action of the taxation authorities of the other territory has resulted or will result in double taxation contrary to the provisions of the present Agreement, he shall be entitled to present his case to the competent authority of the territory of which he is resident. Should his claim be deemed worthy of consideration, the competent authority to which the claim is made shall endeavour to come to an agreement with the competent authority of the other territory with a view to avoiding double taxation.

 

ARTICLE XX:

 

(1)        The present agreement shall be ratified and the instruments of ratification shall be exchanged at New Delhi as soon as possible.

 

(2)        Upon exchange of the instruments of ratification, the present Agreement shall have effect:--

 

(a)        in India, for any year of assessment beginning on or after the 1st April, 1964

            (b)        in Greece, for any fiscal year, beginning on or after the 1st January, 1964.

 

ARTICLE XXI: This agreement shall continue in effect indefinitely but either of the Contracting Parties may on or before the 30th day of June in any calendar year after 1965 give to the other Contracting Party notice of termination, and in such event this Agreement shall cease to be effective--

 

(a)        in India, for any year of assessment beginning on or after the 1st April in the calendar year next following such written notice of termination,

(b)        in Greece, for any fiscal year beginning on or after the 1st January next following such written notice of termination.

 

In witness whereof the undersigned duly authorised thereto have signed this agreement and have affixed thereto their seals.

 

Done at New Delhi on the 11th February, 1965; in duplicate in the English language.

 

For the Republic of India:                                                     For the Royal Government of Greece:

Sd/- Rameshwar Sahu,                                                           Sd/-George Warsamy,

Deputy Minister of Finance,                                                 Ambassador of Greece,

 

Government of India. New Delhi.