INDONESIA

Agreement between the Republic of India and the Republic of Indonesia for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income

Notification No. 7747 [F.N. 11/30/69-FTD], dated 4 February, 1988 as corrected by Notification No. GSR 540(E),dated 3 May, 1988

G.S.R. 77(E).--Whereas the annexed Agreement between Government of the Republic of India and the Government of the Republic of Indonesia for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income has entered into force on the 19th December, 1987 on the notification by both the Contracting States to each other of the completion of the procedures required by their laws, as specified by 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 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.

ANNEXURE

The Government of the Republic of India and the Government of the Republic of Indonesia.

Desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

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 India :

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

(ii) the surtax imposed under the Companies (Profits) Surtax Act, 1964 (7 of 1964);

(hereinafter referred to as "Indian tax")

(b) in Indonesia :

the income-tax imposed under the Undangundang Pajak Penghasilan 1984 (Law No. 7 of 1983) and to the extent provided in such income-tax law, the company tax imposed under the Ordonansi Paiak Perseroan 1925 (State Gazette No. 319 of 1925 as lastly amended by Law No. 8 of 1970) and the tax imposed under the Undangundang Pajak atas Bunga, Dividend dan Royalty 1970 (Law No. 10 of 1970).

(hereinafter referred to as "Indonesian 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.—

1. In this Agreement, 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 has sovereignty, sovereign rights, other rights and jurisdiction according to the Indian law and in accordance with International law, particularly the United Nations Convention on the Law of the Sea, 1982;

(b) the term "Indonesia" comprises the territory of the Republic of Indonesia as defined in its laws and includes the territorial sea and air space above in adjacent areas over which the Republic of Indonesia has sovereignty, sovereign rights or jurisdiction in accordance with international law, particularly the provisions of the United Nations Conventions on the Law of the Sea, 1982;

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

(d) the term "tax" means Indian tax or Indonesian 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;

(e) 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;

(f) 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;

(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 "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.

(i) 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 Indonesia, the Minister of Finance or his authorized representative;

(j) 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 the 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 under the law of that State concerning the tax 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. 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.

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, 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, the competent authorities of the Contracting States shall settle the question by mutual agreement keeping in view of its place of incorporation, place of effective management and other relevant factors.

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;

(g) a building site or construction, installation or assembly project or supervisory activities in connection therewith, but only where such site, project or activity continues for a period of more than 183 days.

3. 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 similar activities which have a preparatory or auxiliary character for the enterprise.

4. Where a person (other than an agent of an independent status to whom the provisions of paragraph 7 apply) 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 in respect of any activities which that person undertakes for the enterprise, if:

(a) that person has, and habitually exercises in the first-mentioned State, an authority to conclude contracts on behalf of the enterprise; or

(b) that person 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 on behalf of the enterprise.

5. An enterprise of a Contracting State shall be deemed to have a permanent establishment in the other Contracting State if it furnishes services, including consultancy services in that other Contracting State through employee or other personnel--other than an agent of an independent status to whom the provisions of paragraph 7 apply,--provided that activities of that nature continue (for the same or a connected project) within the country for a period or periods aggregating more than 91 days in any twelve months period.

6. An insurance enterprise of a Contracting State shall, except with regard to reinsurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in that other State or insures risks situated therein through an employee or through a representative who is not an agent of an independent status within the meaning of paragraph 7.

7. 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, he will 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 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 general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources. Ships, boats and aircraft shall not be regarded as immovable property.

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 the 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.

3. In determining 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. 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 its other offices.

4. In so far as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 shall preclude that Contracting State from determining the profits to be taxed by such an apportionment as may be customary, the method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in this Article.

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

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

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

ARTICLE 8: Shipping and air transport.—

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

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

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 term "operation of ships or aircraft" shall mean business of transportation of passengers, mail, livestock or goods carried on by the owners or lessees or charterers of ships or aircraft, including the sale of tickets for such transportation on behalf of other enterprises, the incidental lease of ships or aircraft and any other activity directly connected with such transportation.

ARTICLE 9: Associated enterprises.—

1. Where--

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

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

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

2. Where a Contracting State includes in the profits of an enterprise of that State--and taxes accordingly--profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the profits so included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between the independent enterprises, then that other State shall make an appropriate adjustment to the amount of the tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of the agreement and the competent authorities of the Contracting States shall, if necessary, consult each other.

ARTICLE 10: 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.

(a) 10 per cent of the gross amount of dividends if the beneficial owner is a company which owns at least twenty-five per cent of the shares of the company paying the dividends;

(b) 15 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, carried 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 the 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 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.

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 or any agency or instrumentality (including a financial institution) wholly owned by the other Contracting State or political sub-division or local authority thereof.

(b) interest arising in a Contracting State shall be exempt from tax in that Contracting State to the extent approved by the Government of the 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 "interest" as used in this article means income from debt-claim of every kind (including interest on deferred payment sales), 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 permanent establishment or fixed base. In such case, the provision 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 Contracting State itself, a political sub-division, a local authority or a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

7. Where, by reason of a special relationship between both the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this article shall apply only to the last mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

ARTICLE 12: Royalties.—

1. Royalties 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 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, the tax so charged shall not exceed 15 per cent of the gross amount of the royalties.

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, trademark, 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 provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties 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 of property in respect of which the royalties 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. Royalties 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, 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 was incurred, and such royalties are borne by such permanent establishment or fixed base, then such royalties 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 beneficial owner or between both of them and some other person, the amount of royalties, having regard to the use, right or information 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 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 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 a 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 any property other than that mentioned in paragraphs 1, 2 and 3 shall be taxable only in the Contracting State of which the alienator is a resident.

ARTICLE 14: 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 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 attribute 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 91 days in any twelve month period; 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 independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants.

ARTICLE 15: Dependent personal services.—

1. Subject to the provisions of Articles 16, 17, 18, 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 any twelve month period, 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 shall be taxable only in that State.

ARTICLE 16: Directors' fees.--Directors' fees and similar payments derived by a resident of a Contracting State in his capacity as a member of the Board of Directors (by whatever name called) of a company which is a resident of the other Contracting State may be taxed in that State.

ARTICLE 17: Entertainers and athletes.—

1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainers 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. While 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, 14 and 15, 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 in the first-mentioned Contracting State if:

(a) 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-divisions or local authorities, or

(b) the activities in the other Contracting State are in pursuance of a special programme for cultural exchange agreed upon between the Governments of the two Contracting States.

4. Notwithstanding the provision of paragraph 2 and Articles, 7, 14 and 15, 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:

(a) that other person is supported wholly or substantially from the public funds of that other State, including any of its political sub-divisions or local authorities, or

(b) the activities are exercised by an individual, being a resident of the other Contracting State, in pursuance of a special programme for cultural exchange agreed upon between the Governments of the two Contracting States and that other person to whom income therefrom accrues is a resident of the other Contracting State.

ARTICLE 18: Remuneration and pensions in respect of government service.—

1. 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. 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 :

(a) is a national of that State; or

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

2. Any pension paid by, or out of funds created by a Contracting State of 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. 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 17 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 a local authority thereof.

ARTICLE 19: Non-Government pensions and annuities.—

1. Any pension, other than a pension referred to in Article 18, 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. Notwithstanding the provisions of paragraph 1, pensions paid out of a pension fund approved by the Government of a Contracting State (or its authorised Agency) to a resident of the other Contracting State in consideration of past employment may be taxed in the first-mentioned State.

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

4. 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 20: 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. 20,000 or Rs. 2,000,000 during any twelve months period, 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 the Article shall extend only for such period to 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 five consecutive years from the date of his first arrival in that other Contracting State.

ARTICLE 21: 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 institutions 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 of 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 20, an individual shall be deemed to be a resident of a Contracting State if he is resident in that Contracting State in the year of income, in which he visits the other Contracting State or in the immediately preceding year to 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 22: 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 the fixed base situated therein, and the right of 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 of Article 14, as the case may be, shall apply.

3. Notwithstanding the provisions of paragraphs 1 and 2, items of income of a resident of a Contracting State not dealt with in the foregoing articles of this Agreement and arising in the other Contracting State may also taxed in that other State.

ARTICLE 23: Elimination of double taxation.—

1. The laws in force in either of the Contracting State shall continue to govern the taxation of income in the respective Contracting States except where provisions to the contrary are made in this Agreement.

2. The amount of Indonesian tax payable, under the laws of Indonesia and in accordance with the provisions of this Agreement, whether directly or by deduction, by a resident of India, in respect of profits or income arising in Indonesia, which have been subjected to tax both in India and in Indonesia, shall be allowed as a credit against the Indian tax payable in respect of such profits or income provided that such credit shall not exceed the Indian tax (as computed before allowing any such credit) which is appropriate to the profits or income arising in Indonesia. Further, where such resident is a company by which surtax is payable in India, the credit aforesaid shall be allowed in the first instance against income-tax payable by the company in India and as to the balance, if any, against surtax payable by it in India.

3. The term "Indonesian tax payable" shall be deemed to include the amount of Indonesian tax which would have been paid if the Indonesian tax had not been exempted or reduced in accordance with the special incentive measures under Article 33 of Law No. 7 of 1983 (Undangundang Pajak Penghasilan 1984) which are designed to promote economic development in Indonesia, effective on the date of signature of this Agreement, or which may be introduced in the future in modification of, or in addition to, the existing provisions for promoting economic development in Indonesia, and such other incentive measures which may be agreed upon from the time to time by the Contracting States.

4. The amount of Indian tax payable under the laws of India and in accordance with the provisions of this Agreement, whether directly or by deduction, by a resident of Indonesia, in respect of profits or income arising in India, which has been subjected to tax both in India and in Indonesia, shall be allowed as a credit against Indonesian tax payable in respect of such profits or income provided that such credit shall not exceed the Indonesian tax (as computed before allowing any such credit) which is appropriate to the profits or income arising in India.

5. The term "Indian tax payable" shall be deemed to include the amount of Indian tax which would have been paid it the Indian tax had not been exempted or reduced in accordance with the special incentive measures under the provisions of the Indian Income-tax Act, 1961 (43 of 1961), which are designed to promote economic development in India, effective on the date of signature of this Agreement, or which may be introduced in the future in modification of, or in addition to, the existing provisions for promoting economic development in India, and such other incentive measures which may be agreed upon from time to time by the Contracting States.

ARTICLE 24: 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.

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.

5. In this article, the term "taxation" means taxes which are the subject of this Agreement.

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 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. 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 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 the 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 26: Exchange of information.—

1. The competent authorities of the Contracting State 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 the 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 request with reference to particular cases or both. The competent authorities of the Contracting States shall agree from time to time on the list of the 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 27: 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 28: Entry into force.--Each of the Contracting States shall notify to the other the completion of the procedures required by its law for the bringing into force of this Agreement. This Agreement shall enter into force on the date of the later of these notifications and shall thereupon have effect :--

(a) in India, in respect of income arising in any previous year beginning on or after the first day of April next following the calendar year in which the later of the notifications is given,

(b) in Indonesia, in respect of income arising in any year of income beginning on or after the first day of January next following the calendar year in which the later of notifications is given.

ARTICLE 29: Termination.--This Agreement shall remain in force 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 of effect :--

(a) in India, in respect of income arising in any previous year beginning on or after the 1st day of April next following the calendar year in which the notice is given;

(b) in Indonesia, 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 Jakarta this Seventh day of August, one thousand nine hundred and eighty-seven in Hindi, Bahasa Indonesia and English languages, all texts being equally authentic. In the case of divergence of interpretation the English text shall prevail.

For the Government of For the Government of the

the Republic of India Republic of Indonesia

Sd/- Sd/-

(Vinod C. Khanna) (Rusli Noor)

Ambassador of India Director General for Foreign

Economic Relations.

PROTOCOL

The Government of the Republic of India and the Government of the Republic of Indonesia, having entered into an Agreement for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income, have agreed, at the time of signing the said Agreement, on the following provisions which shall constitute an integral part thereof :

1. For purposes of Article 7 where a company which is a resident of a Contracting State has a permanent establishment in the other Contracting State, the profits attributable to the permanent establishment may be subjected to an additional tax in that other State in accordance with its law, but the additional tax so charged shall not exceed 10% of the amount of such profits after deducting therefrom income-tax and other income imposed thereon in that other Contracting State.

2. The provisions of paragraph 1 shall not affect the provisions contained in any production sharing contracts and contracts of work (or any other similar contracts) relating to oil and gas sector or other mining sector negotiated and concluded by the Government of Indonesia, its instrumentality, its relevant state oil and gas company or any other entity thereof before the first day of January, 1984, with a person who is resident of India.

3. The provisions of paragraph 2 of Article 11 shall also apply to interest arising to a branch of a resident of a Contracting State in any Third Country.

1. Notwithstanding the provisions of Article 24, the provisions of this Agreement shall not be construed to restrict in any manner any exclusion, exemption, deduction, credit, or other allowance now or hereafter accorded :--

(a) by the laws of one of the Contracting States in the determination of the tax imposed by that Contracting State, or

(b) by any other special arrangement on taxation in connection with the economic or technical co-operation between the two Contracting States.

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

Done in duplicate at Jakarta this Seventh day of August, one thousand nine hundred and eighty-seven in Hindi Bahasa Indonesia and English languages, all texts being equally authentic. In the case of divergence of interpretation the English text shall prevail.

For the Government of For the Government of

the Republic of India the Republic of Indonesia

Sd/- Sd/-

(Vinod C. Khanna) (Rusli Noor)

Ambassador of India Director General of Foreign

Economic Relations

IRAN

Agreement between the Government of India and the Government of Iran through exchange of notes for theavoidance of double taxation of income of enterprises operating aircraft

Notification No. 353 [F. No. 11/15/66-FTD], dated 28 May, 1973

G.S.R. 284(E).--Whereas the Government of India and the Imperial Government of Iran have concluded an agreement through exchange of notes as set out in the Annexure hereto, for the avoidance of double taxation of income of enterprises operating aircraft;

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.

ANNEXURE

Agreed translation of the Note No. 127/18, dated the 29th March, 1973 received from the Imperial Government of Iran by the Government of India :--

“The Imperial Ministry of Foreign Affairs presents its compliments to the Embassy of India and with reference to the discussions and corresponding notes exchanged regarding the reciprocal exemption of Indian and Iranian airlines from payment of income-tax has the honour to state;

According to the Direct Tax Law of 19 March, 1967, foreign air companies may be exempted from payment of income-tax on a reciprocal basis; and in fact considering that no income-tax has been collected from Iranian air companies in India, the Iranian Government has to this date refrained from collecting income-tax from Indian air companies.

Thus, as the provisions of reciprocity prescribed in the Direct Tax Laws, has been in fact established, as long as the said provision observed by the Indian Government, Indian air companies will be, as before, exempted from the payment of tax derived from the transportation of goods and passengers.

It is, therefore, proposed that should the above be agreed to, this Note and the Embassy’s reply regarding the application and observance of reciprocity by the Government of India may be considered as a temporary agreement between the two parties in respect of exemption from payment of income-tax by the air companies of both parties.”

Note No. TEH/COM/203/6/70, dated the 1st April, 1973 issued by the Government of India to the Imperial Government of Iran in reply :

“The Embassy of India presents its compliments to the Imperial Ministry of Foreign Affairs and in regard to the question of reciprocal exemption of Indian and Iranian airlines from payment of income-tax, has the honour to refer to their Note No. 127/18, dated March 29, 1973, which reads as follows :--

According to the Direct Tax Law of 19 March, 1967, foreign air companies may be exempted from payment of income-tax on a reciprocal basis, and in fact considering that no income-tax has been collected from Iranian air companies in India, the Iranian Government has to this date refrained from collecting income-tax from Indian air companies.

Thus, as the provisions of reciprocity prescribed in the Direct Tax Laws, has been in fact established, as long as the said provision is observed by the Indian Government, Indian air companies will be, as before, exempted from the payment of tax derived from the transportation of goods and passengers.

With reference to this proposal, the Embassy of India has the honour to inform the Imperial Ministry of Foreign Affairs that the Government of India accepts the terms of the foregoing text and considers that that Note and this Note will constitute an agreement between the two Governments for the avoidance of double taxation of income of enterprises operating aircraft, which shall enter into force on this date, pending the conclusion of a general agreement for the avoidance of double taxation of income from various sources including civil aviation.

In accord with the purpose of the Notes now exchanged, the Embassy of India has the honour to stress the fact that acceptance by the Government of India is based on the understanding that the exemption in respect of income derived from operation of aircraft in international traffic by Indian airline companies and Iranian airline companies, shall be on the basis of reciprocity and shall apply from the beginning of operation of these airlines in Iran and India respectively and that in case any tax on the aforesaid income has been recovered by either Government as of the date of this agreement, the same shall be refunded by that Government.

The Embassy of India avails itself of this opportunity to renew to the Imperial Ministry of Foreign Affairs the assurances of its highest consideration.”

IRELAND

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

Notification No. 45/2002 [F. No. 503/6/99-FTD], dated 20-2-2002 as amended by the Notification No. 59/2002 [F.No. 503/6/91-FTD], dated 19-3-2002

Whereas the annexed Convention between the Government of the Republic of India and the Government of Ireland for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income and capital gains has entered into force on 26th December, 2001, thirty days after the receipt of the later of the notifications by both the Contracting States to each other of the completion of the procedure required by their respective laws, as required by Article 28 of the said Convention;

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

The Government of the Republic of India and the Government of Ireland, desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains and with a view to promoting economic co-operation between the two countries.

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. This Convention shall apply to taxes on income and capital gains imposed on behalf of a Contracting State or of its political sub-divisions or local authorities irrespective of the manner in which they are levied.

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

3. The existing taxes to which the Convention shall apply are in particular:

(a) In India:

the income-tax, including any surcharge thereon;

(hereinafter referred to as "Indian tax");

(b) In Ireland:--

(i) the income-tax;

(ii) the corporation tax; and

(iii) the capital gains tax

(hereinafter referred to as "Irish tax").

4. 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 referred to in paragraph 3. 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 "India" means the territory of India and includes the territorial sea and airspace above it, as well as any other maritime zone in which India has sovereign rights, other rights and jurisdiction, according to the Indian law and in accordance with international law, including the U.N. Convention on the Law of the Sea;

(b) the term "Ireland" includes any area outside the territorial waters of Ireland which, in accordance with international law, has been or may hereafter be designated under the laws of Ireland concerning the Continental Shelf, as an area within which the rights of Ireland with respect to the sea and subsoil and their natural resources may be exercised;

(c) the term "person" includes an individual, a company, a trust, a partnership which is treated as a taxable unit under the Income-tax Act, 1961 (43 of 1961) of India, a body of persons 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 body corporate for tax purposes;

(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 "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;

(g) the term "competent authority" means:--

(i) in the case of India: the Central Government in the Ministry of Finance (Department of Revenue) or their authorised representative;

(ii) in the case of Ireland: the Revenue Commissioners or their authorised representative;

(h) the term "national" means:--

(i) in relation to Ireland, any citizen of Ireland and any legal person, association or other entity deriving its status as such from the laws in force in Ireland;

(ii) in relation to India, (A) any individual possessing the nationality of India; (B) any legal person, partnership or association deriving its status as such from the laws in force in India;

(i) the term "fiscal year" means:--

(i) in the case of India, "previous year" as defined under section 3 of the Income-tax Act, 1961;

(ii) in the case of Ireland, the calendar year;

(j) the term "tax" means Indian tax or Irish tax, as the context requires, but shall not include any amount which is payable in respect of any default or omission in relation to the taxes to which this Convention applies or which represents a penalty or fine imposed relating to those taxes;

(k) the terms "a Contracting State", "one of the Contracting States" and "the other Contracting State" mean Ireland or the Republic of India, as the context requires and the term "Contracting States" means Ireland and the Republic of India.

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 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 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:--

(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, if the State in which its place of effective management is situated cannot be determined, then the competent authorities of the Contracting States shall settle the question by mutual agreement.

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, an oil or gas well, a quarry or any other place of extraction or exploration of natural resources;

(g) an installation or structure used for the exploration or exploitation of natural resources;

(h) a sales outlet;

(i) a warehouse in relation to a person providing storage facilities for others; and

(j) a farm, plantation or other place where agricultural, forestry, plantation or related activities are carried on.

3. A building site or construction or assembly project or supervisory activities in connection therewith constitute a permanent establishment only if such site, project or activity last more than six months.

4. 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.

5. Notwithstanding the previous provisions of this Article, the term "permanent establishment" shall be deemed not to include:--

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

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

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

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

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

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

6. Notwithstanding the provisions of paragraphs 1 and 2, where a person -- other than an agent of an independent status to whom paragraph 8 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 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 5 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; or

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

7. 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 8 applies.

8. 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, if the activities of such an agent are carried out wholly or almost wholly for the enterprise and the conditions made or imposed between them in their commercial and financial relations differ from those which would have been made or imposed if this had not been the case, that agent shall not be considered to be an agent of an independent status for the purpose of this paragraph.

9. 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 (including income from agriculture or forestry) situated in the other Contracting State may also be taxed in that other State.

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

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

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

Article 7

Business profits

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 permanent establishment, whether in the State in which the permanent establishment is situated or elsewhere. Executive and general administrative expenses shall be allowed as deductions in accordance with the taxation laws of that State. Nothing in this paragraph shall, however, authorise a deduction for expenses which would not be deductible if the permanent establishment were a separate enterprise.

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 Convention, then the provisions of those Articles shall not be affected by the provisions of this Article.

Article 8

Shipping and air transport

1. Profits derived by an enterprise of a Contracting State from the operation or rental of ships or aircraft in international traffic and the rental of containers and related equipment which is incidental to the operation of ships or 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 purposes of this Article, interest on funds connected directly 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, provided that such funds are incidental to that operation.

4. Notwithstanding the preceding provisions of this Article, profits derived by an enterprise of a Contracting State from the operation of ships between the ports of the other Contracting State and the ports of third countries may be taxed in that other Contracting State, but the tax imposed in that other State shall be reduced by an amount equal to two-thirds thereof.

Article 9

Associated enterprises

1. Where--

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

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

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

2. Where a Contracting State includes in the profits of an enterprise of that State and taxes accordingly profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the profits so included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of the tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of this Convention and the competent authorities of the Contracting States shall if necessary consult each other.

Article 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 includes 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 dividend 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 consist wholly or partly of profits or income arising in such other State.

Article 11

Interest

1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed 10 per cent of the gross amount of the interest. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation.

3. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be exempt from tax in that Contracting State provided it is derived and beneficially owned by, or derived in connection with a loan or credit extended, guaranteed or insured by:--

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

(b) (i) in the case of India, the Reserve Bank of India, the Industrial Financial Corporation of India, the Industrial Development Bank of India, the Export-Import Bank of India, the National Housing Bank, the Small Industries Development Bank of India and the Industrial Credit and Investment Corporation of India (ICICI); and

(ii) in the case of Ireland, the Central Bank of Ireland; or

(c) any other similar institution as may be agreed from time to time between the Competent Authorities of the Contracting States.

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 but does not include any income which is treated as a dividend under Article 10. 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 permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

6. Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a local authority or a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the 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 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 12

Royalties and fees for technical services

1. Royalties or 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 or 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 fees for technical services.

3. (a) 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 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, other than an aircraft, or for information concerning industrial, commercial or scientific experience;

(b) The term "fees for technical services" means payment of any kind in consideration for the rendering of any managerial, technical or consultancy services including the provision of services by technical or other personnel but does not include payments for services mentioned in Articles 14 and 15 of this Convention.

4. 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 or property 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.

5. Royalties or 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.

6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties or fees for technical services, having regard to the use, right or information 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 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

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 also 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 also be taxed in that other State.

3. Gains derived by an enterprise of a Contracting State 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 that State.

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 Contracting State.

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

Article 14

Independent personal services

1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent 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 State is for a period or periods aggregating 183 days or more in any 12 month period commencing or ending in the fiscal year concerned; 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 especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, surgeons, dentists and accountants.

Article 15

Dependent Personal Services

1. Subject to the provisions of Articles 16, 18, 19 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 there from may be taxed in that other State.

(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any 12-month period commencing or ending 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 abroad a ship or aircraft operated in international traffic by an enterprise of a Contracting State may be taxed in that State.

Article 16

Directors' Fees

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

Article 17

Artistes and Sports Persons

1. Notwithstanding the provisions of Articles 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 some other 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. The provisions of paragraphs 1 and 2, shall not apply to income from activities performed in a Contracting State by entertainers or sportspersons if the visit to that State is substantially supported by public funds of one or both of the Contracting States or of political sub-divisions or local authorities thereof. In such a case, the income is taxable only in the Contracting State of which the entertainer or sportsperson is a resident.

Article 18

Pensions and Annuities

1. Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment and any annuity paid to such a resident in consideration of past employment shall be taxable only in that State.

2. 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 19

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 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 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 or a political sub-division or a local authority thereof.

Article 20

Students and Apprentices

1. A student or business apprentice who is or was a resident of a 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 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 to the extent that it does not exceed the amount which is exempt from tax under the laws of that other Contracting State for any fiscal year, provided that such employment is directly related to his studies or is undertaken for the purposes of his maintenance.

2. The benefit 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 21

Professors, Teachers and Research Scholars

1. A professor, teacher or 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 or other similar 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 first arrival in that other State for such purpose.

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 20, an individual shall be deemed to be a resident of a Contracting State if he is a resident in that Contracting State in the fiscal year in which he visits the other Contracting State or in the immediately preceding fiscal year.

Article 22

Other Income

1. 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.

2. The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein or performs in that other State independent personal services from a fixed base situated therein and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

3. Notwithstanding the provisions of paragraph 1, if a resident of a Contracting State derives income from sources within the other Contracting State in the form of winnings from 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 23

Elimination of Double Taxation

1. The laws in force in either of the Contracting States will continue to govern the taxation of income in the respective Contracting States except where provisions to the contrary are made in this Convention.

2. Subject to the provisions of the laws of India regarding the allowance as a credit against Indian tax of tax paid in a territory outside India (which shall not affect the general principle hereof), the amount of Irish tax paid, under the laws of Ireland and in accordance with the provisions of this Convention, whether directly or by deduction, by a resident of India, in respect of income from sources within Ireland which has been subjected to tax both in India and Ireland 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.

3. Subject to the provisions of the laws of Ireland regarding the allowance as a credit against Irish tax of tax payable in a territory outside Ireland (which shall not affect the general principle hereof):--

(a) Indian tax payable under the laws of India and in accordance with this Convention, whether directly or by deduction, on profits, income and gains from sources within India (excluding in the case of a dividend tax payable in respect of the profits out of which the dividend is paid) shall be allowed as a credit against any Irish tax computed by reference to the same profits, income and gains by reference to which Indian tax is computed.

(b) In the case of a dividend paid by a company which is a resident of India to a company which is a resident of Ireland and which controls directly or indirectly 25 per cent or more of the voting power in the company paying the dividend, the credit shall take into account (in addition to any Indian tax creditable under the provisions of sub-paragraph (a)) Indian tax payable by the company in respect of the profits out of which such dividend is paid.

4. (a) For the purposes of sub-paragraph (b) of paragraph 3, the term "Indian tax payable" shall be deemed to include 75 per cent of the Indian tax which would have been paid but for any exemption or reduction of tax granted under incentive provisions contained in Indian law designed to promote economic development to the extent that such exemption or reduction is granted for profits from industrial or manufacturing activities, or from the development, maintenance and operation of infrastructure facilities, or from agriculture, fishing or tourism (including restaurants and hotels), provided that such incentive provisions remains in substance unchanged since the date of signature of this Convention and that the activities have been carried out within India.

(b) The provisions of sub-paragraph (a) shall cease to apply after twelve years from the date of entry into force of this Convention.

(c) Should India amend in substance its incentive provisions in relation to the activities specified in sub-paragraph (a) or introduce any new incentive provisions in relation to such activities, India may request in writing that this paragraph should apply to such amended or new provisions. Likewise, India may request in writing an extension of the time-limit in sub-paragraph (b). Upon receipt of such request, Ireland shall enter into negotiations with India for such purposes.

5. For the purposes of paragraphs 2 and 3, profits, income and gains owned by a resident of a Contracting State which may be taxed in the other Contracting State in accordance with the provisions of this Convention shall be deemed to arise from sources in that other Contracting State.

6. Income which in accordance with the provisions of this Convention is not to be subjected to tax in a Contracting State may be taken into account for calculating the rate of tax to be imposed in that Contracting State on other income.

Article 24

Non-Discrimination

1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances are or may be subjected. 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.

3. 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 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.

4. Except where the provisions of paragraph 1 of Article 9, paragraph 7 of Article 11, or paragraph 6 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.

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 Convention, he may, irrespective of the remedies provided by the domestic laws 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 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. 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 Convention. They may also consult together for the elimination of double taxation in cases not provided for in the Convention.

Article 26

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 State concerning taxes covered by the Convention insofar as the taxation thereunder is not contrary to the Convention in particular for the prevention of fraud or evasion of such taxes. The exchange of information is not restricted by Article 1.

Any information so exchanged 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) concerned with the assessment or collection of, the enforcement or 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 the 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 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 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 27

Diplomatic Agents and Consular Officials

Nothing in this Convention shall affect the fiscal privileges of diplomatic agents or consular officials under the general rules of international law or under the provisions of special agreements.

Article 28

Entry into Force

1. The Contracting States shall notify each other in writing, through diplomatic channels, of the completion of the procedure required by the respective laws for the entry into force of this Convention.

2. This Convention shall enter into force thirty days after the receipt of the later of the notifications referred to in paragraph 1.

3. The provisions of this Convention shall have effect:--

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

(b) in Ireland:--

(i) in respect of income-tax and capital gains tax, for any year of assessment beginning on or after the first day of January in the year next following the date on which this Convention enters into force;

(ii) in respect of corporation tax, for any financial year beginning on or after the first day of January in the year next following the year in which this Convention enters into force.

Article 29

Termination

This Convention shall remain in force indefinitely unless 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 beginning after the expiration of five years from the date of entry into force of the Convention. In such event, the Convention shall ceases to have effect:--

(a) in India, in respect of income arising in any fiscal year on or after the first day of April next following the calendar year in which the notice is given;

(b) in Ireland:

(i) in respect of income-tax and capital gains tax, for any year of assessment beginning on or after the first day of January in the year next following the calendar year in which the notice is given;

(ii) in respect of corporation tax, for any financial year beginning on or after the first day of January next following the calendar year in which the notice is given.

IN WITNESS WHEREOF the undersigned, being duly authorised thereto, have signed this Convention.

DONE in duplicate at New Delhi on this 6th day of November in 2000, in the Hindi and English languages, both the texts being equally authentic. In case of divergence between the two texts, the English text shall prevail.

PROTOCOL

At the signing of the Convention between the Government of the Republic of India and the Government of Ireland for the Avoidance of Double Taxation and for the Prevention of Fiscal Evasion with respect to taxes on income and capital gains, the undersigned have agreed that the following shall form an integral part of the Convention:

1. With reference to Articles 3 and 23

Where a person resident in Ireland is a member of a partnership which is resident in India and by virtue of this Convention any profits, income or gains of the partnership are relieved from tax in Ireland, the Convention shall not affect any liability to tax in Ireland of such person in respect of such person's share of any profits, income or gains of the partnership; any such share of profits, income or gains shall be treated for the purposes of Article 23 as profits, income or gains from sources in India and the appropriate part of the Indian tax borne by the partnership shall be allowed as a credit against any Irish tax computed by reference to the said share of the profits, income or gains.

2. With reference to Article 7

If, in accordance with the laws of a Contracting State, profits are attributed to a permanent establishment of an enterprise carrying on insurance business, 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; the method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in Article 7.

3. With reference to Article 24

The provisions of this Article shall not be construed as preventing India from charging the profits of a permanent establishment of an Irish company in India at a rate of tax which is higher than that imposed on the profits of a similar Indian company, nor as being in conflict with the provisions of paragraph 3 of Article 7 of this Convention.

4. With reference to collection assistance

It is understood that at the date of signature of this Convention, the laws of Ireland do not permit it to lend assistance in the collection of taxes on income, profits or gains of another country. However, if after the date of signature of this Convention, the laws of Ireland in this respect change and Ireland enters into an arrangement with another country to permit such assistance in collection, then Ireland shall inform the Indian competent authority and, if requested by such authority, shall immediately enter into negotiations for the purpose of incorporating provisions with regard to collection assistance in this Convention.

IN WITNESS WHEREOF the undersigned, being duly authorised thereto, have signed this Convention.

STATE OF ISRAEL

Convention between the Republic of India and the State of Israel for the avoidance of double taxation and forthe prevention of fiscal evasion with respect to taxes on income and on capital

Notification No. 10134 [F. No. 503/5/92-FTD], dated 26-6-1996

Whereas the annexed Convention between the Government of the Republic of India and the Government of the State of Israel for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income and on capital has entered into force on the 15th May, 1996, after the notification by both the Contracting States to each other of the completion of the procedures required under their laws for bringing into force of the said Convention in accordance with 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), 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 State of Israel,

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. This Convention shall apply to taxes on income imposed on behalf of a Contracting State or of its political sub-divisions or local authorities and to taxes on capital imposed on behalf of a Contracting State, irrespective of the manner in which they are levied.

2. There shall be regarded as taxes on income and on capital all taxes imposed on total income, on total capital, or on elements of income or of capital, including taxes on gains from the alienation of movable or immovable property, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation.

3. The existing taxes to which the Convention shall apply are in particular:

(a) In India:

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

(ii) the wealth-tax;

(hereinafter referred to as "Indian tax");

(b) In Israel:

(i) the income-tax;

(ii) the company tax;

(iii) the capital gains tax;

(iv) the tax imposed upon gains from the alienation of immovable property according to the Land Appreciation Tax Law; and

(v) taxes imposed on real property according to the Property Tax Law,

(hereinafter referred to as "Israeli tax").

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:

(b) the term "Israel" means the State of Israel, and when used in a geographical sense, means the territory and the territorial sea over which it exercises its state sovereignty and jurisdiction, as well as the continental shelf, the exclusive economic zone and that part of the seabed and subsoil under the sea over which it exercises sovereign rights according to the international law;

(c) the term "person" includes an individual, a company, a body of persons 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 body corporate for tax purposes;

(e) the terms "a Contracting State" and "the other Contracting State" mean the Republic of India or the State of Israel as the context requires;

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

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

(h) the term "competent authority" means:

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

(ii) in Israel: the Minister of Finance or his authorised representative.

(i) the term "national" means:

(i) any individual possessing the nationality of a Contracting State;

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

(j) the term "fiscal year" means:

(i) in the case of India, the twelve-month period beginning on the 1st of April;

(ii) in the case of Israel, the twelve-month period beginning on the 1st of January;

(k) the term "tax" means Indian tax or Israeli tax, as the context requires, but shall not include any amount which is payable in respect of any default or omission in relation to the taxes to which this Convention applies or which represents a penalty imposed relating to those taxes.

2. (a) 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 State concerning the taxes to which the Convention applies.

(b) If as a result of the application of sub-paragraph (a), the meaning of a term under the laws of a Contracting State is different from the meaning of that term under the laws of the other Contracting State, or if the meaning of such term is not readily determinable under the laws of one of the Contracting States, the competent authorities of the Contracting States may agree upon a common meaning of that term.

(c) If, in a particular case, the application of the Convention fails to prevent double taxation because the Contracting States have differing rules with respect to the source of the category of income involved, the competent authorities of the Contracting States may reach agreement as to the source of income in the particular case so as to eliminate double taxation.

Article 4

Resident

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:

(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. If the State in which its place of effective management is situated cannot be determined, then the competent authorities of the Contracting States shall settle the question by mutual agreement.

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; and

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

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;

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 on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for 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.

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 with 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

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 general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources; ships, boats and aircraft shall not be regarded as immovable property.

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.

Article 7

Business profits

3. 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 State in which the permanent establishment is situated or elsewhere.

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.

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

Shipping and air transport

1. Profits from the operation of ships and aircraft in international traffic shall be taxable only in the Contracting State of which the enterprise is a resident.

2. The term "profits" shall include income derived by the enterprise from the rental of ships and aircraft operated in international traffic. Such term shall also include income derived by the enterprise from the use, maintenance or rental of containers operated in international traffic (including trailers, barges and related equipment for the transport of such containers) if such income is incidental to the profits of the enterprise from the operation of ships and aircraft in international traffic.

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

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

5. The term "operation of ships and aircraft" shall mean business of transportation by ships or air of passengers, mail, livestock or goods carried on by the owners or lessees or charterers of ships and aircraft, including the sales of tickets for such transportation on behalf of other enterprises, the incidental lease of ships and aircraft and any other activity directly connected with such transportation.

Article 9

Associated enterprises

1. Where

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

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

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

2. Where a Contracting State includes in the profits of an enterprise of that State -- and taxes accordingly -- profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the profits so included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of the tax charged therein on those profits where that other State consider the adjustment justified. In determining such adjustment, due regard shall be had to the other provisions of this Convention and the competent authorities of the Contracting States shall if necessary consult each other.

Article 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.

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, "jouissance" shares or "jouissance" rights, 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.

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 15, 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 consist wholly or partly of profits or income arising in such other State.

Article 11

Interest

1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

3. Notwithstanding the provisions of paragraphs 1 and 2, interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State, if the interest is paid in respect of:

(a) a bond, debenture or other similar obligation of the Government of the first-mentioned Contracting State or a political sub-division or local authority thereof; or

(b) a loan made, refinanced, guaranteed or insured, or a credit extended, refinanced, guaranteed or insured by--

(i) in the case of India, the Reserve Bank of India,

(ii) in the case of Israel, the Bank of Israel, or

(iii) other Governmental agencies or lending institutions as may be specified and agreed in an exchange of notes between the competent authorities of the Contracting States.

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

Article 12

Royalties

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

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, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties 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 of property in respect of which the royalties are paid in 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, 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, having regard to the use, right or information 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 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

Fees for Technical Services

1. 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 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 fees for technical services, the tax so charged shall not exceed 10 per cent of the gross amount of the fees for technical services.

3. The term "fees for technical services" as used in this Article means payments of any kind received as a consideration for services of a 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 16 of this Convention.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the 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 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.

5. Fees for technical services shall be deemed to arise in a Contracting State when the services are rendered in that State and 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 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 fees for technical services was incurred, and such fees for technical services are borne by such permanent establishment or fixed base, then such fees for technical services shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

6. 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 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 Convention.

7. The provisions of paragraphs 1 to 6 of this Article shall not apply to payments relating to services mentioned hereinbelow:

(i) Services that are ancillary and subsidiary, and inextricably and essentially linked, to a sale of property;

(ii) 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;

(iii) Teaching in or by an educational institution;

(iv) Services for the personal use of the individual or individuals making the payments; or

(v) Professional services as defined in Article 15.

Article 14

Capital gains

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 also 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 enterprise is a resident.

4. Gains from the alienation of shares or similar rights being shares in a company, the assets of which consist principally of immovable property situated in a Contracting State, may be taxed in that State. Gains from the alienation of an interest in a partnership, trust or estate, the property of which consists principally of immovable property situated in a Contracting State, may also be taxed in that State.

5. Gains derived by a resident of a Contracting State from the sale, exchange or other disposition, directly or indirectly, of shares other than those mentioned in paragraph 4, or similar rights in a company which is a resident of the other Contracting State may also be taxed in that other State.

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

Article 15

Independent personal services

(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 State is for a period or periods exceeding in the aggregate 183 days in any twelve-months period commencing or ending in the fiscal year concerned; 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 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 there from may also be taxed in that other State.

(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending 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 also be taxed in the Contracting State of which the enterprise is a resident.

Article 17

Directors' fees

Article 18

Artistes and sportspersons

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 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 sportsman 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 sportsperson are exercised.

3. Notwithstanding the provisions of paragraph 1, income derived by an entertainer or a sportsperson 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 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-divisions 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 a sportsperson in his capacity as such in a Contracting State accrues not to the entertainer or sportsperson 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 State, including any of its political sub-divisions or local authorities.

Article 19

Pensions

Subject to the provisions of paragraph 2 of Article 20, 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 20

Government service

(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.

(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 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 political sub-division or a local authority thereof.

Article 21

Professors, teachers and students

1. Remuneration received for education or scientific research by an individual 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 for the purpose of scientific research or for teaching at an educational institution shall be exempt from tax in the first-mentioned State. This exemption shall be granted for a period that shall not exceed two years from the date on which the teacher or researcher first entered the first-mentioned State for the purpose of engaging in scientific research or for teaching. This Article shall not apply to income from research if such research is undertaken not in the public interest but primarily for the private benefit of a specific person or persons.

2. (a) Payments which a student or business 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.

(b) Payments which a student or business apprentice receives as remuneration from employment in the first-mentioned State, in an amount not exceeding a sum equivalent to 3,000 U.S. dollars in the currency of the first-mentioned State during any fiscal year shall be exempt from tax in the first-mentioned State.

The benefit of this paragraph 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 paragraph for more than three consecutive years from the date of his first arrival in the first-mentioned Contracting State.

Article 22

Other income

1. 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.

2. The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 15, as the case may be, shall apply.

3. Notwithstanding the provisions of paragraph 1, any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any form or nature whatsoever may also be taxed in the Contracting State where they arise.

Article 23

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 also 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 and aircraft, shall be taxable only in the Contracting State of which the enterprise is a resident.

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

Article 24

Elimination of double taxation

1. Subject to the laws of Israel from time to time in force regarding the allowance as a credit against Israeli tax or tax paid in any country other than Israel (which shall not affect the general provision contained in this paragraph), Indian tax paid in respect of income derived from or capital owned in India shall be allowed as a credit against Israeli tax payable in respect of that income or capital. The credit shall not, however, exceed that portion of Israeli tax which the income or capital from sources within India bears to the entire income or capital, as the case may be, subject to Israeli tax.

2. Where a resident of India derives income or owns capital which, in accordance with the provisions of this Convention, may be taxed in Israel, India shall allow:

(a) as a deduction from the tax on the income of that resident, an amount equal to the income-tax paid in Israel, whether directly or by deduction.

(b) as a deduction from the tax on the capital of that resident, an amount equal to the capital tax paid in Israel.

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 Israel.

3. Notwithstanding the provisions of paragraphs 1 and 2 of this Article, where a resident of a Contracting State derives income by way of dividends on shares of companies resident in the other Contracting State, the first-mentioned Contracting State shall allow credit of 15 per cent of the gross amount of such dividend from the tax payable.

4. Notwithstanding the provisions of paragraphs 1 and 2 of this Article, where a resident of a Contracting State derives income by way of interest from any source in the other Contracting State, the first-mentioned Contracting State shall allow a credit of 10 per cent of the gross amount of such interest from the tax payable.

5. Where in accordance with any provision of the Convention 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 25

Non-discrimination

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. 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 provision of paragraph 3 of Article 7 of this Convention.

3. Except where the provisions of paragraph 1 of Article 9, paragraph 7 of Article 11, paragraph 6 of Article 12, or paragraph 6 of Article 13 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 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 presented 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. 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 Convention. They may also consult together for the elimination of double taxation in cases not provided for in the Convention.

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 in particular for the prevention of fraud or evasion of such 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 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 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 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;

Article 28

Diplomatic agents and consular officers

Nothing in this Convention shall affect the fiscal privileges of diplomatic agents or consular officers under the general rules of international law or under the provisions of special agreements.

Article 29

Entry into force

1. Each Contracting State shall notify the other Contracting State in writing, through diplomatic channels, upon the completion of their respective legal procedures to bring this Convention into force.

2. The Convention shall enter into force on the date of the latter of such notifications and its provisions shall have effect:

(a) in the Republic of India:

(i) in respect of taxes withheld at source on dividends, interest, royalties and fees for technical services, as defined in Articles 10, 11, 12 and 13, respectively, for amounts paid or credited on or after the first day of the month next following that in which the Convention enters into force;

(ii) in respect of taxes on income, and taxes on capital, for fiscal years beginning on or after the first day of April, 1994; and

(b) in the State of Israel:

(ii) in respect of taxes on income, and taxes on capital, for taxable periods beginning on or after the first day of January, 1994.

Article 30

Termination

This Convention shall remain in force 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 the entry into force of the Convention, 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 the Republic of India:

(i) in respect of taxes withheld at source on dividends, interest, royalties and fees for technical services, as defined in Articles 10, 11, 12 and 13, respectively, for amounts paid or credited on or after the first day of April next following the calendar year in which the notice of termination is given; and

(ii) in respect of taxes on income, and taxes on capital, for fiscal year beginning on or after the first day of April next following the calendar year in which the notice of termination is given; and

(b) in the State of Israel:

(i) in respect of taxes withheld at source on dividends, interest, royalties and fees for technical services, as defined in Articles 10, 11, 12 and 13, respectively, for amounts paid or credited on or after the first day of January next following the calendar year in which the notice of termination is given; and

(ii) in respect of taxes on income, and taxes on capital, for taxable periods beginning on or after the first day of January next following the calendar year in which the notice of termination is given.

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

Done at New Delhi on 29th January, 1996 in two original copies, each in the Hindi, Hebrew and English languages, all the texts being equally authentic. In the case of any divergence in interpretation, the English text shall prevail.

For the Government of For the Government of

The Republic of India The State of Israel

Manmohan Singh A. Shochat

Minister of Finance Minister of Finance

PROTOCOL

At the signing today of the Convention between the Republic of India and the State of Israel for the Avoidance of Double Taxation and for the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital, the undersigned have agreed upon the following provisions, which shall form an integral part of the Convention.

1. Nothing in the provisions of paragraph 3 of Article 7 shall be interpreted as precluding a Contracting State from determining executive and administrative expenses of a head office incurred outside that Contracting State according to the provisions of internal laws as they exist at the time of the signing of this Convention. However, should future changes in the domestic law of a Contracting State further restrict the deduction of such expenses in any manner, then the two Contracting States shall consult each other for purposes of amending this paragraph.

2. The competent authorities of the Contracting States shall initiate the proper procedure to review the provisions of Articles 12 and 13 (Royalties and fees for technical services, respectively) after a period of five years from the date of entry into force of this Convention. However, if under any convention or Agreement between India and any third State which enters into force after 1-1-1995, India limits its taxation at source on Royalties or Fees for Technical Services or Interest or Dividends to a rate lower or a scope more restricted than the rate or scope provided for in this Convention, the same rate or scope as provided for in that Convention or Agreement on the said items of income shall also apply under this Convention with effect from the date on which the present Convention comes into force or the relevant Indian Convention or Agreement, whichever enters into force later.

3. In respect of paragraph 2 of Article 25, it is understood that if India enters into an Agreement or Convention for the avoidance of double taxation with a third State after 1-1-1995, whereby the difference in the rates of tax between enterprises of a permanent establishment of a company of a country other than India and that of India is removed or reduced, then, a corresponding reduction shall be effected in respect of rates of taxes on profits according to the enterprises of a company which is a resident of Israel.

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

For the Government of For the Government of

The Republic of India The State of Israel

Manmohan Singh A. Shochat

Minister of Finance Minister of Finance

ITALY

Agreement between the Government of India and the Government of Italy for the avoidance of double taxationand the prevention of fiscal evasion with respect to taxes on income

Notification No. 6647 [F. No. 501/10/73-FTD], dated 8 April, 1986

G.S.R. 608(E).--Whereas the annexed Agreement between the Government of India and the Government of Italy for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income has been ratified and the instruments of ratification exchanged, as required by Article 29 of the said Agreement;

ANNEXURE

The Government of India and the Government of Italy,

Desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

Have agreed as follows :

CHAPTER I

Scope of the agreement

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

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

(a) In the case of India :

1. the income-tax including any surcharge thereon imposed under the Income-tax Act, 1961 (43 of 1961);

2. the surtax imposed under the Companies (Profits) Surtax Act, 1964 (7 of 1964);

(hereafter referred to as “Indian tax”).

(b) In the case of Italy :

1. the personal income-tax (1 ‘imposta sul reddito delle persone fisiche);

2. the corporate income-tax (1 ‘imposta sul reddito delle persone giuridiche);

3. the local income-tax (1 ‘imposta locale su reddito); even if they are collected by withholding taxes at the source.

(hereafter referred to as “Italian 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 of this Article.

3. At the end of each year, the competent authorities of the Contracting States shall notify to each other any changes which have been made in their respective taxation laws which are the subject to this Agreement and furnish copies of relevant enactments and regulations.

CHAPTER II

Definitions

ARTICLE 3: General definitions.--For the purposes of this Agreement, unless the context otherwise requires--

(a) the term “India” means the territory of India and includes the territorial sea and airspace above it as well as any other maritime zone which, according to the internal law of India, is a maritime zone in which India has certain rights and to the extent that those rights can be exercised therein as if such maritime zone is a part of the territory of India;

(b) the term “Italy” means the Republic of Italy including the territorial waters of Italy and airspace above them, as well as any area beyond the said territorial waters, specifically it includes the sea-bed and the sub-soil contiguous to the territory of the peninsula and the Italian islands situated beyond the territorial waters with bounds indicated by the Italian law on the exploration and the exploitation of their natural resources;

(c) the terms “a Contracting State” and “the other Contracting State” mean India or Italy, as the context requires;

(d) the term “tax” means Indian tax or Italian tax, as the context requires;

(e) the term “person” shall have the meaning assigned to it in the taxation laws in force in the respective Contracting States;

(f) the term “Company” means any body corporate or any entity which is treated as a company or a body corporate under the taxation laws of the respective Contracting States;

(g) the term “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 “fiscal year” in relation to Indian tax means ‘previous year’ as defined in the Income-tax Act, 1961 (43 of 1961);

(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 India, the Central Government in the Department of Revenue, and in the case of Italy, the Ministry of Finance.

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

ARTICLE 4: Fiscal domicile.--1. For the purposes of this Agreement the term “resident of a Contracting State” means any person who is a resident of that State in accordance with the taxation laws of that State.

2. Where by reason of the provisions of paragraph 1, an individual is a resident of both Contacting States, then his residential status for the purposes of this Agreement shall be determined in accordance with the following rules :

(a) He shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (hereinafter referred to as his “centre of vital interests”);

(b) If the Contracting State in which he has his centre of vital interest cannot be determined, or if he does not have 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 the 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 Agreement, the term “permanent establishment” means a fixed place of business in which the business of the enterprise is wholly or partly carried on.

2. The term “permanent establishment” shall include specifically :

(a) a place of management;

(b) a branch;

(c) an office;

(d) a factory;

(e) a workshop;

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

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

(h) a building site or construction, installation or assembly, project or supervisory activities in connection therewith, where such site, project or supervisory activity continues for a period of more than three months.

3. The term “permanent establishment” shall not be deemed to include :

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

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

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

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

(e) the maintenance of a fixed place of business solely for the purpose of advertising for the supply of information or for scientific research, being activities solely of a preparatory or auxiliary character in the trade or business of the enterprise.

4. A person acting in a Contracting State for or on behalf of an enterprise of the other Contracting State--other than an agent of an independent status to whom paragraph 5 applies--shall be deemed to be a permanent establishment of that enterprise in the first-mentioned State if :

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

(b) he habitually maintains in the first-mentioned Contracting State a stock of goods or merchandise belonging to the enterprise from which he regularly delivers goods or merchandise for or on behalf of the enterprise.

5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carried on business in that other State through a broker, general commission agent or any other agent of an independent status, where such persons are acting in the ordinary course of their business. However, if the activities of such an agent are carried out wholly or almost wholly for the enterprise (or for the enterprise and other enterprises which are controlled by it or have a controlling interest in it) he shall not be considered to be an agent of “an independent status” for the purpose of this paragraph.

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

CHAPTER III

Taxation of income

ARTICLE 6: Income from immovable property.--1. Income from immovable property may be taxed in the Contracting State in which such property is situated.

2. The term “immovable property” shall be defined in accordance with the law and usage of the Contracting State in which the property is situated. The term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the rights to work, mineral deposits, oil wells, quarries and other places of extraction of natural resources. Ships and aircraft shall not be regarded as immovable property.

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

4. The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of professional services.

ARTICLE 7: Business profits.--1. The profits of an enterprise of a Contracting State 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. 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 so far 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 laid down in this article. In any case, where the correct amount of profits attributable to a permanent establishment is incapable of determination or the ascertainment thereof presents exceptional difficulties, the profits attributable to the permanent establishment may be estimated on a reasonable basis.

4. 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.

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 purpose of export to the enterprise of which it is the permanent establishment.

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: Air Transport.--1. Income derived from the operation of aircraft in international traffic by an enterprise of one of the Contracting States shall not be taxed in the other Contracting State.

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

3. For the purposes of this Article :

(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 mean business of 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 and any other activity directly connected with such transportation.

ARTICLE 9: Shipping.--1. Income of an enterprise of one of the Contracting States derived from the other Contracting State from the operation of ships in international traffic may be taxed in that other Contracting State, but the tax chargeable in that other Contracting State on such income shall be reduced by an amount equal to fifty per cent of such tax.

2.For the purpose of paragraph 1 of this Article, income from the operation of ships in international traffic shall include :

(a) profits derived from the rental on a full or bareboat basis of ships if such rental profits are incidental to the operation of ships in international traffic; and

(b) profits 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. 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,

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 both the Contracting States.

2. The terms “dividends” as used in this article means income from shares, “jouissance” shares or “jouissance” rights, 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 taxation law of the State of which the company making the distribution is a resident.

3. 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, or subject the company’s undistributed profits to a tax on 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 both the Contracting States. Notwithstanding the provisions of paragraph 1, the tax chargeable in a Contracting State on interest arising in that State and paid to a resident of the other Contracting State in respect of loans or debts shall not exceed 15 per cent of the gross amount of such interest.

3.Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be exempt from tax in that State if :

(a) the payer of the interest is the Government of that Contracting State or a local authority thereof; or

(b) the interest is paid to any agency or instrumentality (including a financial institution) which may be agreed upon in this behalf by the two Contracting States.

4. The term “interest” as used in this article means income from Government securities, bonds or debentures, whether or not secured by mortgage and whether or not carrying a right to participate in profits, and debt-claims of every kind as well as all other income assimilated to income from money lent by the taxation law of the State in which the income arises.

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 professional 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 a case, the interest is taxable in that other Contracting State according to its own law.

6. Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political or administrative sub-division, a local authority or a resident of that State. Where, however, the persons 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 Contracting State in which the permanent establishment is situated.

7. Where, owing to a special relationship between the payer and the recipient or between both of them and some other person, the amount of the interest paid, 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 that case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Agreement.

ARTICLE 13: Royalties.--1. Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in both the Contracting States.

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

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 and films or tapes 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. Where, owing to a special relationship between the payer and the recipient or between both of them and some other person, the amount of the royalties paid, having regard to use, right or information for which they are 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 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 14: Capital gains.--1. Subject to the provisions of paragraph 3, gains from the sale, exchange or transfer of a capital asset being immovable property, as defined in paragraph 2 of Article 6, or from the sale, exchange or transfer of any movable property, whether tangible or intangible may be taxed in the Contracting State in which such property is situated immediately before such sale, exchange or transfer.

2. For the purpose of this article, the situs of the shares in a company shall be deemed to be in the Contracting State in which the company is incorporated.

3. Capital gains derived from the sale, exchange or transfer of a capital asset being a ship or aircraft operated by an enterprise of a Contracting State 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 for a period or periods aggregating 90 days 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 only so much of the income as is attributable to that fixed base.

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 and 20, 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.

(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 in respect of an employment exercised aboard a ship or aircraft 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 similar payments derived by a resident of a Contracting State in his capacity as a member of the Board of Director of a company which is a resident of the other Contracting State may be taxed in that other Contracting State.

ARTICLE 18: Artistes and athletes.--1. Notwithstanding the provisions of Articles 15 and 16, 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 may be taxed in the Contracting State in which these activities are exercised unless the visit to that State is wholly or substantially supported, directly or indirectly, by public funds of the Government of the other Contracting State.

2. Notwithstanding anything contained in this Agreement, where the services mentioned in paragraph 1 are provided in a Contracting State by an enterprise of the other Contracting State, the profits derived from providing these services by such enterprise may be taxed in the first-mentioned State unless the enterprise is wholly or substantially supported directly or indirectly, by public funds of the Government of the other Contracting State in connection with the provision of such services.

3. For the purpose of this article, the term “public funds of the Government” shall include public funds created by the Government or a political or administrative sub-division or a local authority thereof.

ARTICLE 19: Pensions.--Subject to the provisions of paragraph 2 of Article 20, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment may be taxed in both the Contracting States.

ARTICLE 20: Government service.--1. (a) Remuneration, other than a pension, paid by a Contracting State or a political or an administrative sub-division or a local authority thereof to any individual in respect of services rendered to that State or sub-division or local authority thereof 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 recipient is a resident of that other Contracting State who is a national of that State.

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

ARTICLE 21: Professors, teachers and researchers.--1. A professor or teacher who makes a temporary visit to a Contracting State for a period not exceeding two years for the purpose of teaching or conducting research at a university, college, school or other educational institution, owned by the Government or non-profit organisations, and who is, or immediately before such visit was, a resident of the other Contracting State shall be exempt from tax in the first-mentioned Contracting State in respect of remuneration for such teaching or research.

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.

ARTICLE 22: Students and trainees.--1. An individual who is a resident of a Contracting State and visits the other Contracting State solely :

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

(b) as a business apprentice, or

(c) for the purpose of study, research or training, as a recipient of a grant, allowance or award, from a government, religious, charitable, scientific or educational organisation.

shall be exempt from tax in that other Contracting State :

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

(ii) on the grant, allowance or award; and

(iii) in respect of the amount, representing remuneration for an employment in that other Contracting State, to the extent such remuneration does not exceed 2,200,000 Italian Liras or its equivalent in Indian Rupees, as the case may be, in any year.

2. An individual who is a resident of a Contracting State and who visits the other Contracting State for a period not exceeding one year as an employee of, or under contract with, an enterprise of the first-mentioned Contracting State or an organisation referred to in paragraph 1 for the primary purpose of acquiring technical, professional or business experience from a person other than such enterprise or organisation shall be exempt from tax in that other Contracting State in respect of remuneration for an employment in that other Contracting State for such period to the extent such remuneration does not exceed 2,500,000 Italian Liras or its equivalent in Indian Rupees, as the case may be, in any year.

ARTICLE 23: Other income.--Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing articles of this Agreement may be taxed in both the Contracting States.

CHAPTER IV

ARTICLE 24: Method for elimination of double taxation.--1. It is agreed that double taxation shall be avoided in accordance with the following paragraphs of this Article :

2. (a) The amount of Italian tax payable, under the laws of Italy and in accordance with the provisions of this Agreement, whether directly or by deduction, by a resident of India, in respect of income from sources within Italy which has been subjected to tax both in India and Italy, 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 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 Indian tax shall be allowed in the first instance against the income-tax payable by the company in India and, as to the balance, if any, against the surtax payable by it in India.

3. (a) If a resident of Italy owns items of income which are taxable in the Republic of India, Italy, in determining its income taxes specified in Article 2 of this Agreement, may include in the basis upon which such taxes are imposed the said items of income, unless specific provisions of this Agreement otherwise provide.

In such a case, Italy shall deduct from the taxes so calculated the Indian tax on income, but in an amount not exceeding that proportion of the aforesaid Italian tax which such items of income bear to the entire income. On the contrary no deduction will be granted if the item of income is subjected in Italy a final withholding tax by request of the recipient of the said income in accordance with the Italian law.

(b) For the purposes of paragraphs 2 and 3 of this article, where tax on business profits, dividends, interest or royalties arising in a Contracting State is exempted or reduced in accordance with the taxation laws of that State, such tax which has been exempted or reduced shall be deemed to have been paid.

4. Income which in accordance with the provisions of the Agreement is not to be subjected to tax in a Contracting State may be taken into account for calculating the rate of tax to be imposed in that Contracting State on other income.

CHAPTER V

Special provisions

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 and under the same conditions are or may be subjected.

2.The term “nationals of a Contracting State” means :

(a) all individuals possessing the nationality of that Contracting State;

(b) all legal persons, partnerships and associations deriving their status as such from the law in force in that Contracting State.

3. 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.

4.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 and reductions for taxation purposes which are by law available only to persons who are so resident.

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 Contracting State in 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.

6.In this Article, the term “taxation” means taxes which are the subject of this Agreement.

ARTICLE 26: 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 these States, present his case to the competent authority of the Contracting State of which he is a resident. The claim must be lodged within two years from the date of assessment or of the withholding of tax at the source whichever is the later.

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 Agreement.

3.The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Agreement. 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 27: Exchange of information.--1. The competent authorities of the Contracting States shall exchange such information or document as is necessary for carrying out the provisions of this Agreement or for the prevention or detection of evasion or avoidance of the taxes which are the subject of this Agreement. Any information or document so exchanged shall be treated as secret but may be disclosed to persons (including a court or administrative body) concerned with the assessment, collections, enforcement, investigation or prosecution in respect of the taxes which are the subject of this Agreement, or any frauds connected therewith, or to persons with respect to whom the information or documents relates.

2.The exchange of information or documents shall be either on a routine basis or on request with reference to particular cases of both. The competent authorities of the Contracting States shall agree from time to time on the list of the 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 28: 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.

CHAPTER VI

Final provisions

ARTICLE 29: Entry into force.--1. This Agreement shall be ratified and the instruments of ratification shall be exchanged at New Delhi as soon as possible.

2. This Agreement shall enter into force on the date of the exchange of the instruments of ratification and its provisions shall have effect :

(a) in India, in respect of income assessable for any taxable period (“previous year”) commencing on or after the 1st day of April, 1977.

(b) in Italy, in respect of income assessable for any taxable period commencing on or after the 1st January, 1977.

3. The existing Agreement for the avoidance of double taxation of income of enterprise operating aircraft dated the 3rd February, 1970 shall cease to have effect upon the entry into force of this Agreement.

ARTICLE 30: Termination.--This Agreement shall remain in force indefinitely but either of the Contracting States may on or before 30th June in any calendar year beginning after the expiration of a period of five years from the date of its entry into force give to the other Contracting State, through diplomatic channels written notice of termination.

In such event the Agreement shall cease to have effect :

(a) in India, in respect of income assessable for any taxable period (“previous year”) commencing on or after the 1st day of April in the calendar year next following that in which such notice is given.

(b) in Italy, in respect of income assessable for any taxable period commencing on or after the 1st day of January in the calendar year next following that in which such notice is given.

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

Done in duplicate at Rome, the 12th day of January, 1981, in the English, Hindi and Italian languages, all texts being equally authoritative except in the case of doubt when the English text shall prevail.

For the Government of India For the Government of Italy

Sd/- Sd/-

(J. C. Ajmani) (Maurizio Bucci)

PROTOCOL

To the Agreement between the Republic of India and the Republic of Italy for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

At the signing of the Agreement concluded today, between the Republic of India and the Republic of Italy for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, the undersigned have agreed upon the following additional provision which shall form an integral part of the said Agreement :

It is understood :

(a) that with reference to Article 5, paragraph 2,

-- a warehouse in relation to a person providing storage facilities normally for others; and

-- and installation or structure used for the exploration or natural resources.

shall be deemed as a permanent establishment;

(b) that with reference to Article 7, paragraph 4, the expression “expenses which are incurred for the purposes of the business of the permanent establishment” means:

-- the expenses directly connected with the activity of the permanent establishment, and

-- royalties, commission and interest to the extent of the actual amount of expenses reimbursed. And in both cases as admissible in accordance with the provisions of the taxation laws of the Contracting State in which the permanent establishment is situated.

(c) that, with reference to Article 12, paragraph 2, the expression “loans or debts” means, in the case of India, loans or debts approved in this behalf by the Government of India;

(d) that with reference to Article 23, the expression “other income” includes fees for technical services;

(e) that, with reference to Article 24, paragraph 4, “tax exempted or reduced” means in the case of India any amount which would have been payable [in respect of taxable year] 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 :--

(i) sections 10(4), 10(4A), 10(15) (iv), 32A, 33A, 80HH, 80J and 80K 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 signature of this Agreement or have been modified only in minor respects so as not to affect their general character;

(ii) any other provision which may subsequently be made granting an exemption or reduction from tax which is agreed by the competent authorities of the Contracting States to be of a substantially similar character if it has not been modified thereafter or has been modified only in minor respects so as not to affect its general character.

(f) that, with reference to Article 26, paragraph 1, the expression “notwithstanding the remedies provided by the national laws” means the mutual agreement procedure is not alternative to the national ordinary proceeding which shall be in any case preventively initiative when the claim is related with an assessment of taxes not in accordance with this Agreement.

In witness thereof the undersigned, duly authorised thereto, have signed the present Protocol.

For the Government of India For the Government of Italy

Sd/- Sd/-

(J. C. Ajmani) (Maurizio Bucci)

ITALY

Agreement between the Government of India and the Government of Italy for the avoidance of double taxation of income of enterprises operating aircraft

Notification No. 877 [F. No. 501/10/73-FTD], dated 16 April, 1975

G.S.R. 201(E).--Whereas the annexed Agreement between the Government of India and the Government of Italy for the avoidance of double taxation of income of enterprises operating aircraft has been ratified and the instruments of ratification exchanged, as required by paragraph (1) of Article V of the said Agreement :

ANNEXURE

Whereas the Government of India and the Government of Italy desire to conclude an agreement for the avoidance of double taxation of income of enterprises operating aircraft chargeable to tax in the said countries in accordance with their respective laws;

Now, therefore, the said two Governments do hereby agree as follows :

ARTICLE I: (1) The taxes to which this Agreement shall apply are :

(a) in the case of India :

(i) the income-tax including any surcharge on income-tax imposed under the Income-tax Act, 1961 (43 of 1961) as amended; and

(ii) the surtax imposed under the Companies (Profits) Surtax Act, 1964 (7 of 1964) as amended (hereinafter referred to as “Indian tax”);

(b) in the case of Italy :

(i) the tax on income from movable wealth (imposta sui redditi di ricchezza mobile);

(ii) the complementary tax (imposta complementare progressiva sul reddito);

(iii) the tax on companies in so far as the tax is charged on income and not on capital (imposta sulle societa, per la parte che grava sul reddito e non sul patrimonio); and

(iv) the taxes on income imposed on behalf of Provinces, Municipalities, Chambers of Commerce (imposte provinciali, comunali, e camerali sul reddito).

(hereinafter referred to as “Italian tax”).

(2) This Agreement shall also apply to any identical or substantially similar taxes which are imposed after the date of the signature of this Agreement in addition to, or in place of, the existing taxes.

ARTICLE II: (1) In this Agreement, unless the context otherwise requires :

(a) the term “India” shall have the meaning assigned to it in Article I of the Constitution of India;

(b) the term “Italy” means the Italian Republic;

(c) the terms “a Contracting State” and the “other Contracting State” mean India or Italy, as the context requires;

(d) the term “tax” means “Indian tax” or “Italian tax”, as the context requires;

(e) the term “enterprise of a Contracting State” means :

(i) an airline designated by the Government of that State in pursuance of the Agreement dated the 16th July, 1959, as may be amended or revised from time to time, between the Government of India and the Government of Italy relating to air services; or

(ii) an airline which is authorised by the Government of that State by a general or special arrangement between the two Contracting States to operate chartered flights between or beyond their territories.

(f) the expression “operation of aircraft” means a business of transportation by air of persons, livestock, goods or mail, carried on by the owners or leasers or charterers of aircraft, including the sale of tickets for such transportation on behalf of other enterprises and any other activity directly connected with such transportation.

(2) In the application of the provisions of this Agreement by one of the Contracting States, any term used but not defined herein shall, unless the context otherwise requires, have the meaning which it has under the laws in force in that State relating to the taxes to which this Agreement applies.

ARTICLE III: (1) Income derived from the operation of aircraft in international traffic by an enterprise of one of the Contracting States shall be exempt from tax in 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 IV: The laws in force in either of the Contracting States will continue to govern the assessment and taxation of income in the Contracting States except where express provision to the contrary is made in this Agreement.

(1) This Agreement shall be ratified and the instruments of ratification shall be exchanged at New Delhi as soon as possible.

(2) This Agreement shall enter into force on the date of the exchange of the instruments of ratification and its provisions shall have effect :

(a) in India, in respect of income assessable for the year of assessment commencing on or after the 1st day of April, 1960;

(b) in Italy in respect of income assessable for the year of assessment commencing on or after the 1st day of January, 1960.

ARTICLE VI: This Agreement shall continue in effect indefinitely but either of the Contracting States may, within the 30th day of June of any calendar year after the year 1973, give notice of termination to the other Contracting State and in such event this Agreement shall cease to be effective :

(a) in India, in respect of income assessable for the year of assessment commencing on or after the 1st day of April of the calendar year following that year in which the notice is given;

(b) in Italy, in respect of income assessable for the year of assessment commencing on or after the 1st day of January of the calendar year following that year in which the notice is given.

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

Done at Rome, on the 3rd day of February, 1970, in two originals, each in the English and Italian languages, both texts being equally authoritative.

For the Government of India For the Government Italy

(Sd.) Jai Kumar Atal (Sd.) Dr. Cesidio Guazzaroni

Excellency Rome, 3rd February, 1970

With reference to the Agreement which is being signed today between the Government of India and the Government of Italy for the avoidance of double taxation of income of enterprises operating aircraft, I have honour to make the following proposals on behalf of the Government of India :

Since the above-mentioned Agreement envisages the exemption from taxation in either Contracting State, in the matter of income derived from international air transport by an enterprise belonging to the other Contracting State; and since such exemption is to be effective in India for the assessment year 1960-61 and subsequent years, and in Italy for the assessment year 1960 and subsequent years, the two Contracting States agree as follows :

(1) Alitalia being an enterprise of Italy, any taxes paid by it or any deposits made by it towards its tax dues in India in respect of its income relating to any assessment year for which it is exempt from tax in accordance with the Agreement aforesaid shall be refunded by the Government of India to Alitalia on an application in this behalf by Alitalia within six months from the date on which the Agreement aforesaid enters into force, and any proceeding already initiated for the taxation of such income shall be terminated.

(2) Air India being an enterprise of India, any taxes paid by it or any deposits made by it towards its tax dues in Italy in respect of its income relating to any assessment year for which it is exempt from tax in accordance with the Agreement aforesaid shall be refunded by the Government of Italy to Air India on an application in this behalf by Air India within six months from the date on which the Agreement aforesaid enters into force, and any proceeding already initiated for the taxation of such income shall be terminated.

I shall be grateful if Your Excellency will let me know if he agrees on what has been stated above; and, in such case, this note and the reply Your Excellency will kindly send me, shall be deemed to be part of the Agreement aforesaid.

Please accept, Your Excellency, the assurances of my highest consideration.

(Sd.) Jai Kumar Atal

Minister Plenipotentiary

Dr. Cesidio Guazzaroni

Rome

Rome, 3rd February, 1970

Excellency,

I have the honour to acknowledge receipt of your letter of today reading as follows :

“With reference to the Agreement which is being signed today between the Government of India and the Government of Italy for the avoidance of double taxation of income of enterprises operating aircraft. I have the honour to make the following proposals on behalf of the Government of India :

Since the above-mentioned agreement envisages the exemption from taxation in either Contracting State, in the matter of income derived from international air transport by an enterprise belonging to the other Contracting State; and since such exemption is to be effective in India for the assessment year 1960-61 and subsequent years, and in Italy for the assessment year 1960 and subsequent years, the two Contracting States agree as follows :

I shall be grateful if Your Excellency will let me know if he agrees on what has been stated above; and in such case, this note the reply Your Excellency will kindly send me, shall be deemed to be part of the agreement aforesaid”.

I have the honour to inform you that my Government agrees on the foregoing.

Please accept, Excellency, the assurances of my highest consideration.

(Sd.) Dr. Cesidio Guazzaroni

His Excellency Jai Kumar Atal

Ambassador of India

ROME

ITALY

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

Notification No. 10075 [F. No. 505/2/86-FTD], dated 25-4-1996

Whereas the annexed Convention between the Government of the Republic of India and the Government of the Republic of Italy for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income has entered into force on 23-11-1995 after the exchange of instruments of ratification by the Contracting States in accordance with paragraph 1 of Article 30 of the said Convention;

The Government of the Republic of India and the Government of the Republic of Italy.

Desiring to conclude an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income

Have agreed as follows:

CHAPTER I

Scope of the Convention

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 the Convention shall apply are:

(a) in the case of India:

1 the income-tax including any surcharge thereon; and

2 the surtax;

(hereafter referred to as "Indian Tax");

(b) in the case of Italy:

1 the personal income-tax;

2 the corporate income-tax; and

3 the local income-tax;

even if they are collected by withholding taxes at the source.

(hereafter referred to as "Italian 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 of this Article.

3. At the end of each year, the competent authorities of the Contracting States shall notify to each other any changes which have been made in their respective taxation laws which are the subject of this Convention and furnish copies of relevant enactments and regulations.

CHAPTER II

Definitions

Article 3

General definitions

1. For the purposes of this Convention, unless the context otherwise requires:

(a) the term "India" means the territory of India and includes the territorial sea and airspace above it, as well as any other maritime zone in which India has sovereign rights, other rights and jurisdictions, according to the Indian law and in accordance with International Law;

(b) the term "Italy" means the Republic of Italy including the territorial waters of Italy and airspace above them, as well as any area beyond the said territorial waters, specifically it includes the sea-bed and the sub-soil contiguous to the territory of the peninsula and the Italian islands situated beyond the territorial waters within bounds indicated by the Italian law on the exploration and the exploitation of their natural resources;

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

(d) the term "tax" means Indian tax or Italian tax, as the context requires, but shall not include any amount which is payable in respect of any default or omission in relation to the taxes to which this Convention applies or which represents a penalty imposed relating to those taxes;

(e) the term "person" shall have the meaning assigned to it in the taxation laws in force in the respective Contracting States;

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

(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 "fiscal year" in relation to Indian tax means "previous year" as defined in the Income-tax Act, 1961 (43 of 1961);

(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;

(k) 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 Italy, the Ministry of Finance.

2. In the application of the provisions of this Convention by one of the Contracting States, any term not defined herein shall, unless the context otherwise requires, have the meaning which it has under the laws in force in that State relating to the taxes which are the subject of this Convention.

Article 4

Fiscal domicile

1. For the purposes of this Convention, the term "resident of a Contracting State" means any person who is a resident of that State in accordance with the taxation laws of that State.

2. Where by reason of the provisions of paragraph 1, an individual is a resident of both Contracting States, then his residential status for the purposes of this Convention shall be determined in accordance with the following rules:

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

(b) if the Contracting State in which he has his centre of vital interests cannot be determined, or if he does not have 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.

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 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;

(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 or for receiving or soliciting orders;

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

(j) a building site or construction, installation or assembly project or supervisory activities in connection therewith, where such site, project or activities, (together with other such sites, projects or activities, if any) continue for a period of more than six months, or where such project or supervisory activity, being incidental to the sale of machinery or equipment, continues for a period not exceeding six months and the charges payable for the project or supervisory activity exceed 10 per cent of the sale price of the machinery and equipment:

Provided that for the purpose of this paragraph an enterprise shall be deemed to have a permanent establishment in a Contracting State and to carry on business through that permanent establishment if it provides services or facilities in connection with or supplies plant and machinery on hire used or to be used in, the prospecting for, or extraction or production of mineral oils in the State.

3. 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 similar activities which have a preparatory or auxiliary character, for the enterprise.

However, the provisions of sub-paragraphs (a) to (e) shall not be applicable where the enterprise maintains any other fixed place of business in the other Contracting State for the 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 enterprise controlling, controlled by, or subject to the same common control, as that enterprise,

(d) in so acting, he manufactures or processes in that State for the enterprise goods or merchandise belonging to the enterprise.

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

CHAPTER III

Taxation of income

Article 6

Income from immovable property

1. Income derived by a resident of a Contracting State from immovable property (including income form 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 general law respecting landed property apply. Usufruct of immovable property and rights to variable or fixed payments as considertion for the working of, or the right to work, mineral deposits, sources and other natural resources shall also be considered as "immovable property". Ships, boats 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.

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 establishenmt; (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 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.

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 purpose of export to the enterprise of which it is the permanent establishment.

Article 8

Air transport

1. Income derived from the operation of aircraft in international traffic by an enterprise of one of the Contracting States shall not be taxed in the other Contracting State.

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

3. For the purposes of this Article:

(a) interest of 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 mean business of 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 and any other activity directly connected with such transportation.

Article 9

Shipping

1. Income of an enterprise of s Contracting State from the operation of ships 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 engaged in the operation of ships.

3. For the purpose of this Article 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 interests.

4. For the purpose of paragraph 1 of this Article, income from the operation of ships in international traffic shall include:

(a) profits derived form the rental on a full or bareboat basis of ships if such rental profits are incidental to the operation of ships in international traffic, and

5. 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 laws of that State but if the recipient is the beneficial owner of the dividends, the tax so charged shall not exceed:

(a) 15 per cent of the gross amount of the dividends if the beneficial owner is a company which owns at least 10 per cent of the shares of the company paying the dividends;

(b) 25 per cent of the gross amount of the 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 paragraph 2(a) would apply in respect of dividends arising out of the investment made after the date of signature of the Convention.

4. The term "dividends" as used in this Article means income from shares, "jouissance" shares or "jouissance" rights, 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 taxation 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 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 dividends shall be taxable in that other Contracting State according to its own laws.

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 in so far as such dividends are paid to a resident of that other 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 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 both the Contracting State.

2. Notwithstanding the provisions of paragraph 1, the tax chargeable in a Contracting State on interest arising in that State and paid to a resident of the other Contracting State in respect of loans or debts shall not exceed 15 per cent of the gross amount of such interest.

3. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be exempt from tax in that State if:

(a) the payer of the interest is the Government of that Contracting State or a local authority thereof, or

(b) the interest is paid to any agency or instrumentality (including a financial institution) which may be agreed upon in this behalf by the two Contracting States.

4. The term "interest" as used in this Article means income from Government securities, bonds or debentures, whether or not secured by mortgate and whether or not carrying a right to participate in profits, and debt-claims of every kind as well as all other income assimilated to income from money lent by the taxation law of the State in which the income arises.

5. The provisions of paragraphs 1 and 2 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 a case, the interest shall be taxable in that other Contracting State according to its own law.

6. Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political or administrative 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, owing to a special relationship between the payer and the recipient or between both of them and some other person, the amount of the interest paid, 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 that case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Convention.

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 20 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 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 the person making payments, in consideration for the 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 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 a case the royalties or fees for technical services shall be taxable in that other Contracting State according to its own law.

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 or administrative 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 a 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 Convention.

Article 14

Capital gains

1. Gains derived by a resident of a Contracting State from the alientation 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 and aircraft, shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

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 referred to 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 a resident of a Contracting State in respect of professional services or other independent activities of a similar character may be taxed in that State. Such income may also be taxed in the other Contracting State if such services are performed in that other State and if:

(a) he is present in that other State for a period or periods aggregating 183 days 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 only so much of the income as is attributable to that fixed base.

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 and 20 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. In the employment is so exercised, such remuneration as is derived there from may be taxed in that other State.

(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 concerning; 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 in respect of an employment exercised aboard a ship or aircraft 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 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

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 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 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 subdivision 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 State, including any of its political subdivision or local authorities.

Article 19

Pensions

Subject to the provisions of paragraph 2 of Article 20, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment may be taxed in both the Contracting States.

Article 20

Government service

1. (a) Remuneration, other than a pension, paid by a Contracting State or a political or

administrative subdivision or a local authority thereof to any individual in respect of services rendered to that State or subdivision 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, or out of funds created by, a Contracting State or a political or administrative subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision 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 national of and a resident of that State.

3. The provisions of Articles 16, 17, 18 and 19 shall apply to remunerations and pensions in respect of services rendered in connection with a business carried on by a Contracting State or a political or administrative subdivision or a local authority thereof.

Article 21

Professors, teachers and researchers

1. A professor or teacher who makes a temporary visit to a Contracting State for a period not exceeding two years for the purpose of teaching or conducting research at a university, college, school or other educational institution, owned by the Government or non-profit organizations, and who is, or immediately before such visit was, a resident of the other Contracting State shall be exempt from tax in the first-mentioned Contracting State in respect of remuneration for such teaching or research.

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.

Article 22

Students and trainees

1. An individual who is a resident of a Contracting State and visits the other Contracting State solely:

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

(b) as a business apprentice, or

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

shall be exempt from tax in that other Contracting State:

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

(ii) on the grant, allowance or award; and

(iii) in respect of remuneration for an employment in that other Contracting State for such period of time as may be necessarily required for the completion of study, research or training, as the case may be.

2. An individual who is a resident of a Contracting State and who visits the other Contracting State for a period not exceeding one year as employee of, or under contract with, an enterprise of the first-mentioned Contracting State or an organisation referred to in paragraph 1 for the primary purpose of acquiring technical, professional or business experience from a person other than such enterprise or organisation shall be exempt from tax in that other Contracting State in respect of remuneration for an employment in that other Contracting State for such period, to the extent such remuneration does not exceed 50,00,000 Italian Lires or its equivalent in Indian Rupees, as the case may be, in any year.

Article 23

Other income

Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention may be taxed in both the Contracting States.

CHAPTER IV

Article 24

Method for elimination of double taxation

2. It is agreed that double taxation shall be avoided in accordance with the following paragraphs of this Article.

3. (a) The amount if Italian tax payable under the laws of Italy and in accordance with the provisions of this Convention, whether directly or by deduction, by a resident of India, in respect of income from sources within Italy which has been subjected to tax both in India and Italy, 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 chargeble 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 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.

4. (a) If a resident of Italy owns items of income which are taxable in India, Italy, in determing its income taxes specified in Article 2 of this Convention, may include in the basis upon which such taxes are imposed the said items of income, unless specific provisions of this Convention otherwise provide.

On the contrary no deduction will be granted if the item of income is subjected in Italy to a final withholding tax by request of the recipient of the said income in accordance with the Italian law.

(b) For the purposes of paragraphs 3 and 4 of this Article, where tax on business profits, dividends, interests, royalties or fees for technical services arising in a Contracting State is exempted or reduced in accordance with the taxation laws of that State, such tax which has been exempted or reduced shall be deemed to have been paid.

5. Income which in accordance with the provisions of this Convention is not to be subjected to tax in a Contracting State may be taken into account for calculating the rate of tax to be imposed in that Contracting State on other income.

CHAPTER V

Special provisions

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 and under the same conditions are or may be subjected.

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 and reductions 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 Convention.

Article 26

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 laws of those States, present his case to the competent authority of the Contracting State of which he is a resident. The claim must be lodged within two years from the date of the assessment or of the withholding of tax at the source whichever is the later.

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

3. The competent authorities of the Contracting 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.

Article 27

Exchange of information

1. The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by this Convention in so far as the taxation thereunder is not contrary to the Convention as well to prevent fraud or evasion of such 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 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 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 States the obligation:

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

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

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

Article 28

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 special agreements.

Article 29

Refunds

1. Tax withheld at source in a Contracting State shall be refunded on application by or on behalf of the taxpayer or by the State of which he is a resident if such resident is entitled to a refund of that tax under the provisions of this Convention.

2. Application for refund shall be made within the time limit fixed by the law of the Contracting State in which the tax has been withheld and shall be accompanied by a certificate of the Contracting State of which the taxpayer is a resident certifying that the conditions required for entitlement to the refund have been fulfilled.

3. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this Article, in accordance with the provisions of Article 26 of this Convention.

CHAPTER VI

Final provisions

Article 30

Entry into force

1. This Convention shall be ratified and the instruments of ratification shall be exchanged at Rome as soon as possible.

2. This Convention shall enter into force on the date of exchange of instruments of ratification and its provisions shall have effect:

(a) in India, in respect of income assessable in any "previous year" commencing on or after the first day of April of the calendar year next following the calendar year in which the Convention enters into force;

(b) in Italy, in respect of income assessable in any taxable period commencing on or after the first day of January of the calendar year next following the calender year in which the Convention enters into force.

3. The existing Agreement between the Government of India and the Government of Italy for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income signed at Rome on 12th January, 1981 shall cease to have effect at the time when the provisions of this Convention shall be effective in accordance with the provisions of paragraph 2.

Article 31

Termination

This Convention shall remain in force indefinitely, but either of the Contracting States may on or before 30th June in any calendar year beginning after the expiration of a period of five years from the date of its entry into force give to the other Contracting State, through diplomatic channels, written notice of termination.

In such event the Convention shall cease to have effect:

(a) in India, in respect of income assessable for any taxable period ("previous year") commencing on or after the 1st day of April in the calender year next following that in which such notice is given;

(b) in Italy, in respect of income assessable for any taxable period commencing on or after the 1st day of January in the calendar year next following that in which such notice is given.

In witness thereof the undersigned, duly authorised thereto by their respective Governments, have signed the present.

Done in duplicate at New Delhi the 19th day of February, 1993, in the Hindi, Italian and English languages, all texts being equally authoritative except in the case of doubt when the English text shall prevail.

For the Government of For the Government of

the Republic of India the Republic of Italy

Sd/- Sd/-

(M.V. Chandrashekara Murthy) (Claudio Vitalone)

PROTOCOL

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

At the signing of the Convention concluded today between the Government of the Republic of Italy and the Government of the Republic of India for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, the undersigned have agreed upon the following additional provisions which shall form an intergral part of the said Convention.

It is understood:

(a) that, with reference to Article 7, paragraph 3, the expression "expenses which are incurred for the purposes of the business of the permanent establishment" means the expenses directly connected with the activity of the permanent establishment, and royalties, commission and interest to the extent of the actual amount of expenses reimbursed, and in both cases as admissible in accordance with the provisions of the taxation laws of the Contracting State in which the permanent establishment is situated;

(b) that, with reference to Article 12, paragraph 2, the expression "loans or debts" means, in the case of India, loans or debts approved in this behalf by the Government of India;

(c) that, with reference to Article 20, the remuneration paid to an individual in respect of services rendered to the Bank of Italy, to the Italian State Railways (FF.SS.), to the Italian State Post undertaking (PP. TT.), to the Italian Foreign Trade Institution (I.C.E), to the Italian Tourism body (E.N.I.T.), and to any corresponding Indian body or institution, are covered by the provisions concerning government service and, consequently, by paragraphs 1 and 2 of the aforesaid Article.

Other public bodies or institutions may also be included in the preceding list by mutual agreement between the competent authorities of the Contracting States;

(d) that, with reference to Article 24, paragraph 4(b), tax exempted or reduced means, in the case of India, any amount which would have been payable, in respect of a taxable year 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:

(i) sections 10(4), 10(4A), 10(4B), 10(15)(iv), 10A, 32AB, 80HH, 80HHC, 80-I and 80-O 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 signature of this Convention or have been modified only in minor respects so as not to affect their general character;

(ii) any other provision which may subsequently be made granting an exemption or reduction from tax which is agreed by the competent authorities of the Contracting States to be of a substantially similar character, if it has not been modified thereafter or has been modified only in minor respects so as not to affect its general character;

(e) that, with reference to Article 26, paragraph 1, the expression "notwithstanding the remedies provided by the national laws" means that the mutual agreement procedure is not alternative to the national ordinary proceedings which shall be, in any case, preventively initiated, when the claim is related with an assessment of taxes not in accordance with this Convention;

(f) that, with reference to paragraph 3 of Article 29, the provisions herein contained shall not be construed as preventing the competent authorities of the Contracting States from mutually agreeing upon a different procedure for the granting of tax benefits provided by this Convention.

In witness thereof the undersigned, duly authorised thereto by their respective Governments, have signed the present Protocol.