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REGISTERED No. D. (D)-72

The Gazette of India

EXTRAORDINARY

PART II—Section 3—Sub-section (i)

PUBLISHED BY AUTHORITY

No. 377] NEW DELHI, MONDAY, NOVEMBER 23, 1981/AGRAHAYANA 2, 1903

Separate paging is given to this Part in order that it may be filed as a separate

compilation

(1769)

981 GI/81—1

981 Q1/8T— 2

MINISTRY OF FINANCE

(Department of Revtnue)

NOTIFICATION

New Delhi, the 23rd Novemboi, 1981

INCOME-TAX

G.S.R. 612(E).—Whereas the annexed Comertion between the Governmenf of India and the Government of the UniteJ Kingdom of Great Britain and Northern Ireland for the avoidance of double taxation and the prevention of fiscal r.\a- sion with respect to taxes on income and capital gain? has come into force on the notification by both the Contacting States to each other of the completion of the procedures re- quired by their respective laws, as required by Article 27 of the said Convention.

Now, therefore, in exercise of the powers conferred bv sec- tion 90 of the Tncome-tax A;t, 1961 ("43 of 1961) &nd sec- tion 24A of the Companies (Profits) Sur-tax Act, 1964 (7 of J964), the Central Government hereby directs that all the provision* of the said Convention shall be civen effect to in the Union of India,

CONVENTION

BETWEEN

THE GOVERNMENT OF INDIA

AND

THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND

FOR

THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS

The Government of India and the Government of the United

Kingdom of Great Britain and Northern Ireland;

Desiring to conclude a Convention for the avoidance of double taxation and ihe prevention of fiscal evasion with respect to tax"R on income and capital jminir :

Have agreed as follows :

ARTICLE 1

Personal icope

This Convention shall upply to porsong who ai" residents of

one or both of the Contracting "Statoi.

ARTICLE 2

TRXM covtred

(1) The taxes which are the subject of this Convention are:

(a) in the United Kingdom of Great Britain and Northern

Ireland :

(i) the income tax;

(ii) the corporation tax;

(iii) the capital gains tax;

(iv) the petroleum revenue tax; and (v) the development land tax;

(hereinafter referred to ru ''United Kingdom ta\");

(b) in India :

(i) the income-lax and anv surcharge thereon imposed under the Tncome-tax Act, 1961 (43 of 19611: and

(ii) the surtax imposed under the Companies (Picfit?)

Surtax Act, 1964 (7 of 1964); (hereinafter referred 11 as "Tndijn tax").

2. This Convention shall also apply to any identical or substantially similar taxes which are imposed by either Con- trcidins State alter the date of signature of this Convention in addition to, or in place of; the existing taxes. The com- petent authorities of the Contracting States shall notify each other of any substantial changes which are made in their respective taxation laws.

ARTICLE 3

General definition*

1. In this Convention, unleis the context othenvisc reauiies •

(a) the teiin "United Kingdom" means Gieat Britain and Northern Ireland, including any urea outside the territorial sea of the United Kingdom which in accordance with international law has been or may hereinafter be designated, undarl the laws of the United Kingdom conceminc the Continental Shelf, as an area within which the rights of the United Kingdom with respect to the sea bed trad sub- soil and their natural reiowejs may be exercised;

(h) the term "tax" means United Kingdom (;ix or Indian

tax, as the context requires ;

(c) the term "fiscal year" in relation to Indiarptax meant 'previous year' as defined In the Income-tax Act, 1961 (43 of 1961);

(d) the terms "a Contracting State" and "the other Con- tracting State"' mean the United Kingdom or India,

us the context requires;

(e) the term "person" includes un indi\iduu4. u company

and any other body of peisons;

(f) the term "company" means any body corporate or

any entity which is treated as. a company or body corporate for tax purposes;

(a) 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 "competent authority" means, in the case of the" United Kingdom the Commissioners of In- land Revenue or their nuthorised representative, and in the case of India the Central Government in the Department of Revenue;

U) the term "international traffic" means any transport by a ship or aircraft operated by en enterprise which has its place of effective management in a Contract- inn State except when the ship or aircraft is operated solely between places in the other Contracting State;

Ij) the term "Government" means the Government of n Contracting State Or a political iub-divisioii or local authority thereof. In 'relation to the United Kingdom, the term "political sub-division" shall include Northern Ireland

2. A* reguids the application of this Convention by a Contracting State any term not otherwise defined shall, unless the context otherwise requires, hive the meaning which it has under Ihe laws of that Contracting State relating to the taxes which are the subject of this Convention.

ARI1CLE 4

Fiscal domicile

1. For the purposes of this Convention, the term "resident of a Contracting State" means anv person who, undci the law of that State, is liable to taxation therein by reason of his domicile, residence, place of management or mv other criterion of a similar nature.

2. Where by reason of the provisions of paragraph 1 of this Article an individual is a resident of both Contia'cting States, then his status shall be determined in accoi dance with the following rules :

(a) he shall be deemed to be a resident of the Contract- ing State in which he hns a permanent hame 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 rela- tions arle closer (centre of vital interests) ;

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

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

(dl if he* is a national of both Contracting State 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 unrajnaph 1 of this Article a person other than an individual i9 a rc^dent

of bpth Contracting States, then it shall be deemed to be a resident of the Contracting State :n which its place of effec- tive management is situated.

ARTICLE 5

Permanent establishment

For the purposes of this Convention, the term "peinianent establishment" means a fixed place of business in which the business of the enteipriae is whoJIy or raiily canieii on.

2. The lenn "peiiranent establishment" shall include

especially :

(a) a place of management ;

(b) a branch;

(c) an office;

(d) a factory;

(e) a workshop;

(f) premises used as a sales out let or for receiving or

soliciting orders;

(g) a warehouse in relation to a person providing

stoiage facilities for others;

(h) a mine, quarry or other place of extraction of

natural resources;

(i) an installation oi structure used for the eAploration

of natural resources;

(j) a building site or construction, installation or assembly project or supervisory activities in connection there- with, where such site, project or supervisory acti- vity continues for a period oi more than six! months, or where such project or supervisory acti- vity, being incidental to the sale oi' machinery or equipment, continues for .t period not exceeding, six months and the charges payable for the projtct Or supervisoiy 'ictivity exceed 10 per cent of the sale price of the machinery and equipment.

3, The term "permanent establishment" shall not be deemed

to include :

(A) the use of facilities solelv 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 (he enterprise solely for the purpose of processing by another enterprise;

(d) the maintenance of a fixed place of business solely for the purpose .cf purchasing goods or merchandise or for collecting Information, foi the enterpiisi;

(e) the maintenance of a fixed place of business so>eiy for the purpose of advertising, for the supply of information oi tor scientific research, being acti- vities solelv of a preparatory or auxiliary charac- ter m the trade or business of the enterprise. How- ever, this provision shall not be applicable where the enterprise maintains any other fixed place of business in the other Contracting State for anv purpose or purposes other than the purposes speci- fied in this paragraph.

(b) he habitually maintains in the first-mentioned Coi- tractinp S ate a stock of "?oods or rneichandne be- longing to the enterprise iiom which he jegiildily delivers goods or merchandise foi oi OP behnll of the enterprise.

5. An enterprise of a Contacting Slate shall not be deemed to have a permanent establishment in the other Continuing State meiely because it canics on business in that other State through a broker, general commission agent or any other agent of an independent status, wheio such pciiOiis UK acting in the ordinary course of their busmen. However, if the activities of such an agent are cairicd out wholly or almost wholly for the enterpiise (or for the ente;pri*e ;>nd other enterprises which are controlled by it or have a controlling interest in it) he shall not be consideied to be an agent of an independent status for the" purposes of this paragraph.

6. The fact that a company which is a lesident of a Con- tracting State controls or is controlled by a company which is a resiHent of the other Contracting State, or which caiiies on business in that other State (whether tbiough a pcnrrient establishment Or otherwise), shall not ot itself constitute either company a permanent establishment of the other

ARIICLE 6

Income from iininovnble property

1. Income from immovable property may be taxed in

the Contracting State in which such property is situated.

(2) (a) The term '"immovable property" shall, subject to the provisions of sub-paragraph (b) of this paragraph be defined in accordance with the law of the Con- tracting State in which the pioperty in question is situated.

(b) The term "immovable property'¹ shall in any case include property accessory to immovable properly. livestock and equipment used in agriculture and forestry, rights to which the piovisions of geneial law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration fo>* the working of. or the right to work, mineral deposits, souiceg and other natural resources. Ships and aircraft shall not be regarded as immovable propeity.

3. The piovisions of- paragraph 1 of this Article sha'l apply to income derived from the diiect use. letting, or use in any other form of immovable property.

4. The provisions of paragraph 1 and 3 of this Article shall also apply to the income from immovable property of an enterprise and to income from immovable propeity nsed for the performance of professional services.

ARTICLE 7

Business profits

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

preclude that Conti acting State from determining the profits to be taxed by such un apportionment as may be customary; the method of apportionment adopted shall, however, be such that ihe result shall be in accordance with the princi- ples faid down in this Article.

4. (a) in the detei ruination of the profits of a permanent establishment, there shall be allowed as deductions expenses of the enterprise which are incurred for the purposes of the permanent establishment, in- cluding only those executive and general adminis- trative expenses incurred, whether in the State in which the permanent establishment is situated or elsewhere, which are allowed under the provisions of the domestic law of 'he Contracting State in which the permanent establishment is situated.

Provided that where the law of the Contracting State in which the permanent establishment is situa- ted imposes a restriction on the amount of the exe- cut've and general administrative expenses which may be allowed, and that restriction is felaxetf or overriden by any convention between that Contract- ins State and a third State which enters into force after the dale of entry into force of this Conven- tion, the competent authority of that Contracting State shall notify the competent authority of ths other Contracting State of the terms of the corres- ponding paragraph in the Convention with thai third State immediately after the entry into foice of that Convention and, if the competent authority of the other Contracting State so requests, the pro- vision's of this sub-paragraph shall be amended by protocol to reflect such terms.

(b) However, no such deduction shall be allowed in les- pect of amounts, if any, paid (otherwise than to- wards leimbutsement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of ioyaltie". fees or other similar payments in return for the use of patents or other rights, or by way of commission, for specific se; vices performed or for management, or. except in the case of a banking enterprise, fry way of interest on monies lent to the permanent establishment. Likewise, no account shall be taken in the determination of the profits of a permanent establishment of amounts charged (othci- v ise than towards reimbursement of actual ex- penses.) by the peimanent ;stablishmenl to the head office of the enterprise or anv of its other offices, by wav of royalties, fees or other similar payment;- in return for the use of patents or other rights, or by way of commission, for specific services per- formed o; for management, or, except in the case of a banking enterprise, by way of interest on monies lent to the head office of the enterprise or any of "as other offices.

(5) No profits shall be attiibuted to a permanent establisli- mein by reason of the mere purchase by that permanent establishment of aoods or merchandise for the enterprise.

6, Where profit-i include items of income which are. dealt with separately in other Articles of this -'Convention, then the provisions of those Aitides shall not be affected by the .irovisfons of this Article. .

ARTICLE 8

Air transport

1. Income derived fiom the operation of aircraft in inter- national traffic by an enterprise of one of the Contracting State; "hal! not be taxed in the other Contracting State.

2. The provisions, of paragraph 1 of this Article shall likewise app'y in respect of participation in pools of any kind by enJerprises engaged in air transport.

3. loi the purposes of this Article:

fa) interest on funds connected with the operation of aircraft in international traffic shall be regarded as income fiom the operation of such airciaft; and (b) the term "operation of aircraft" shall include trans- portation by air of persons, livestock, goods or ma/1, carried on by the owners or lessees or char- terers of aircraft, including the sale of tickets for such, transportation on behalf of other enterprises, the incidental lease of aircraft on a charter basis and any other activity directly connected with such transportation.

4. Gains derived by an enterprise of a Contracting State from the alienation of aircraft owned and operated by the enterprise, the income from which is taxable only in that State, shall be taxed only in that State.

ARTICLE 9

Shipping

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

2. Notwithstanding the piovisions of paragraph 1 of this Article such income may be taxed in the other Contracting State from which it is derived provided thai :

(a) the income is in respect of any one or moreof the first ten fiscal yea.'s for which this Convention has effect ;

Ib) the tax chargeable on that income shall be 50 per cent ot the,tax which would have been chargeable in the absence of this Convention in respect of the income for the first five fiscal years for which this Convention lva-> effect and 25 per cent of such tax for the next following five years.

3. The provisions, of paragraph 1 and 2 of this Artiyk shall not apply to income fiom journeys between places which are .situated in a Contracting State.

4. For the purposes of this Article, income from the ope- ration of ships includes imome derived from the rental on a bareboat basis of ships if such rental income is incidental to the income described in paragraph 1 of this Article.

5. Notwithstanding the provisions of Article 7 (Business profits), the provisions of ^.rauntphs 1 .'ind 2 and .^ of thri Article shall likewise apply to income of "n enterprise of a Contracting State from the use. maintenance or rental (if containers (including trailers and related equipment for the iiansport of containers) used for the transport of goods or merchandise.

6. The provision;, of Ihii Article shall apply also to in- come derived from participation in ,t pool, a joint business or an interntuioiial operating agency.

7. Gains derived by an enterprise of a Contracting Stytc from the alienation of ships or containers owned and opeiatcd by ihe enterprise shall be fixed only in that State if eithci trie income from the opctaVni of the alienated ships or containers was taxed only in that State, or ihe ships or cr-nltfiners are situated ouf.-idc the other Contracting Stiste at the time of the alienation.

ARTICLE 10

Accodated enterprises

Where :

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

(b) I be same persons participate clirectK or indiiectly

in the management control or capital ot an enter- prise of a Contra.-ting State and an enterprise of the other Contracting State ;

and in erthe: case conditions aie made or imposed between ihe two enterprises in their commecial or financial relations

which differ from those uhkh woirtu be iiSfsde between inde- pendant enterprises, then any profits which would, hut 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. (a) A div.dcnd paid by u company which is a resident •of the United Kingdom lo a resident of India ma>

be taxed in India.

ib) Where under paragiaph 2 of this Article, a resident of India is entitled to a tux ticdit in respect of that dividend, tax may also he charged in the United Kingdom and according to the laws of the United Kingdom on the aggregate of the amount or value of the dividend and the amount of the tax credit, at a rate iot exceeding 15' per cent.

(c) Except as provided in sub-paragraph (b) of this para- graph, a dividend derived fro/n a company which is a resident of the United Kingdom by a resident of India, who is the beneficial owner of lhat dividend shall be exempt from any ta\ in the United King- dom which is chargeable on dividends.

2. A resident of India who receives a dividend from a company which is a resident of the United Kingdom shall, subject to the provisions of paragraph 3 of this Article and provided he is the beneficial owner of the dividend, be entitled to the tax credit in respect of that dividend which an indivi- dual lesident in the United Kingdom would have been entitled to had he received that dividend, and to the payment of any excess of that tax credit over his liability to United Kingdom tax.

3. Paragraph 2 of this Article shall not apply where the beneficial owner of the dividend is a company which either alone or together with one or more associated companies controls directly or indirectly at least 10 per cent of the voting power in ihe company paying the dividend. For this purpose two companies shall be deemed to be associated if one is controlled directly or indirectly by the other, or both are controlled directly or indirectly by a third company.

4. A dividend paid by a company, which is a resident of India tq a resident of the United Kingdom may be taxed in the Uniisd Kingdom. The dividend may also be taxed in India but, where the dividend relates in whole or*in part to a new contribution, the Indian tax so charged; shall not exceed 15 per cent of the gross amount of the dividend attributable to the new contribution.

5. The pieceding paragraphs of this Article shall not affect the taxation of the company in respect of the profits out of which the dividend is paid.

6. The provisions of paragraphs 1, 2 and 3 or, as the case may be, paragraph 4 of this Article shall hot apply if ihe beneficial owner of the dividend, being a resident of a Contracting State, has in the other Contacting State of which the company paying the dividend is a resident, a permanent establishment or fixed base with which the holding by virtue of which the dividend is paid is effectively connected. In such a case the provisions of Article 7 (Business profits) or Article 15 (Independent personal services), as the case may be. shall apply.

8. A-. used ia this Article the term "dividend¹" means in- come from shares oi other rights, not being debt-claims, participating in profits, as well as income from other cor- porate tight* treated in the same m.inner a.s income from shares by the taxation law of the Slate of which the company making the distribution js a resident and any other item • other than interest which tails within the provisions of Article 12) treated as a dividend or distribution under that law.

9. As used in patagtaph 4 of this Aiticle the term "new contribution" means any share capital, other than bonus shares, issued after the date of entry into force of this Con- vention by h company which is a resident of India, and beneficially owned by a resident of the United Kingdom.

ARTICLE 12

Interest

1. Intereit arising in a Contracting State and paid to a resident of the other Contracting State may be ttxed in that othei State.

2. However, such interest may also bs taxed in the Con- necting State in which it arises- and according to the law of that State, provided that where the resident of the other Connecting Stale is the beneficial owner of the interest and it is paid in respect of a loan or debt fi:st created after the date of entry into foice of this Convention, the tax so charged shall not exceed 15 per cent of the gross amount of the interest.

3. Notwithstanding the provisions of- paragraph 2 of this

Article :

(a) where the interest is paid to a bank, carrying on a bona fide banking business which h a resident of the other Contracting Stale and is the beneficial owner of the interest, the tax charged in the Con- tracting State in which the interest arises shall not exceed 10 per cent of the gross amount of the interest :

(b) where the interest is paid to the Government of on© of the Contracting States or a political subdivision or local authority of that State or the Reserve Bank of India, it shall not be subject to tax by the State in which it arises.

4. The term 'interest" as t^ed in this Article means in- come from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to partici- pate in the, debtor's profits, and in particularly, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds- or debentures.

5. The provisions of paragraphs 1. 2 and 3 of this Article i1 rot apply if thg beneficial owner of the interest, being :- esident of a Contracting "State, carries on business in the other Contracting State in which the interest arises through a permanent establishment jituated 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 perma- nent establishment or fixed base. In such case the provisioni of Article 7 (Business profits) or Article 15 (Independent personal services), as the case may be, shall apply.

exceeds lor whatever reason ihe amount which would havs been paid in the absence of such relationship, the provisions of this Article shall apply only 10 the last-mentioned amount, in that case, the excess part of ihe payments shall remain taxable according lo (he law of each Contracting State, due jegard being had to ihe other provisions of this Convention.

ARTICLE 13

Roytiltirs and fees for technical services

1. Royalties and fees for 'cchnical seivices arising in a Contracting State and paid to ,i resident of the other Con- tracting State may be taxed in that other State.

2. However, such royalties ;md foes for technical services may also be taxed in the Contracting State in which they aiise and accoiding to the law of that State ; provided that where the royalties or fees for technical services are paid to a resident of the other Contracting State who is the beneficial owner thereof and they are paid in respect of a right or property which is first granted, or under a contract which is signed, after the date of entry into force of this Convention, the tax so chaiged shall not exceed 30 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 including rentals received as a consi- deration for the use of, or the right to use :

(a) any patent, trademark, design oj- model, plan, secret

formula or process :

(b) industrial, commercial or scientific equipment, or in- formation concerning industrial, commercial or" scientific experience ;

(c) any copyright of literary, artistic or scientific work, cinematographic films, nnd films or tapes for radio or televisions broadcasting ;

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

4. The term "fees for technical services" asvused in this Article means payments of any kind to any person, other than payments to a'n employee of the person making the payments and 'to any individual for independent personal services men- tioned in Article 15 (Independent personal services), in consi- deration for services of a managerial, technical or consul- tancy nature, including the provision of services of technical or other personnel.

5. The provisions of paragraphs 1 and 2 of tiiis .Astide shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of a Contracting State, ca:ries on business in the other Contracting State in which the royalties or fees for technical services arise through a permanent establishment situated therein, or perform 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 esta- blishment or fixed base. In such case, the provisions of Article 7 (Business profits) or Article 15 (Independent per- sonal services), as the case may be, shall apply.

6. Royalties and fees for technical services shall be deemed to arise in a Contracting State where the payer is that State itself, a political subdivision, a local authority or a resident of that State. Where, however, the person paying the royal- ties or fees for technical services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the obligation to make the payments was incurred and the payments are borne by that nermanent establishment or fixed base, then the royalties or fees for technicals services shall ' be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

7. Where, owing to a special relationship between the payer and some other person, the amount of the royalties or fees for technical services paid exceeds for whatever reason the amount which would have bien p^id in Ihe absence of such relationship, the provisions of this Ankle shall apply onlj to the last-mentioned amount. In thru case, thr excels pan of the payments shall remain taxable aeco:dmg to the law of each Contracting State, due regarl being had to the oiher provisions of this Convention.

ARTICLE 14

fapital gains

h'xeept as provided in Articles 8 (Air transport) and 9 (Shipping) of this Convention, euch Contracting State may tax capita] ga:ns in accordance with ihe provisions of its domestic law.

ARTICLE 15

Department. perwnal. servicei

1. Income derived by a resident of a Contracting State in respect of psofessional services or other independent acti- vities of a similar character may be taxed in that State. Such income may also be taxed in the other Contracting Strife if such services are pei formed 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

(bj he has a fixed base regularly available to him in that othcrl State for the purpose of perforing his activities ;

but in each case only so much "of the income as is attributable to those services.

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

ARTICLE 16

Department personal services

1. Subject to the provisions of Articles 17 (Directors' fees), 18 (Artistes and athletes), 19 (Governmental remnneration and pensions), 20 (Students and trainees) and 21 (Teachers), salaries, wages and other similar remuneration derived by a resident -of a Contracting State in respect of an employ- ment shall be taxable only in that State unless the employ- ment is exercised in the other Contracting State. Tf the em- ployment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1 of this Article, remuneration derived by a resident of the United Kingdom in respect of an employment exercised in India shall not be taxed in India if :

(a) he is present in India for a period or periods not exceeding in the aggregate 183 days durina the re- levant fiscal year;

(b) the remuneration is paid by. or on behalf of an

employer who is not a resident of India: and

(c) the remuneration is not deductible in computing the

profits of an enterprise chargeable to Indian tax.

3. Notwithstanding the provisions of paragraph 1 of this Article, remuneration derived bv a resident of India in respect of an emplovment exercised in the United Kingdom =na!l not be taxed in the United Kingdom if :

fa) he is present in the United Kingdom for a period or periods not exceeding in the aggregate 183 davs during the relevant fiscal vear;

(h) the remuneration is paid by. or on behalf of an employer who is not a resident of the United Kingdom; and

(c) the remuneration is not deductible in computing the profits of an enterprise chargeable to United Kingdom tax,

4. Notrfthstanding the preceding provisions of this Article, jemuneratfon in respect of an employment exercised abroad u ship or aircraft in international traffic may be taxed in the I Attracting State of which the person deriving the profits from the operation of the ship or aircraft is a -resident.

ARTICLE 17

Directors¹ tee?

directors.' fees and similar payments derived by a resjtlenT 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,.feat other State,

ARTICLE is

Artiste^'and athletes

1. Notwithstanding/4he' provisions of Articles 15 (Inde- pendent personal services) and 16 (Department personal ser- vices), income jJerived by entertainers (such as stage, motion picture, radicj^br television artists and musicians) or athletes, from theirj^ersonal activities as such may be# taxed in the Contrjj^SSg State in which these activities are exercised.

2. Where income arising from personal activities as such exercised in a Contracting State by an entertainer or athlete accrues not to that entertainer or athlete himself but to another person, that income may, notwithstanding the pro- visions of Articles 7 (Business profits), IS (Independent personal services) and 16 (Department personal services), be taxed in that Contracting State.

3. The provisions of paragraphs 1 and 2 of this Article shall not apply if the visit to a Contracting State of the entertainer or the athlete is directly or indirectly supported, wholly or substantially, from the public funds of the other Contracting State, including a political subdivision or loca! authority of that -other State.

ARTICLE 19

Governmental remuneration and pensions .

1. Remuneration, other than a pension, paid by the Govern- ment of India to any individual who is a national of India in respect of services rendered in the discharge of govern- mental functions in tha United Kingdom shall be exempt from United Kingdom tax.

2. Remuneration, other than a pension, paid by the Government of the United Kingdom to any individual who k a national of the United Kingdom in respect "f services rendered in the discharge of governmental functions in "India shall be exempt from Indian tax.

3. A"y pension paid by the Government of a Contracting State to any individual in respect of services rendered to that Government shall be taxable only in that Contracting State.

4. The provisions of this Article shall not apply to re- rmmej'ation or pension in respect of services rendered in con- nection with any trade or business.

ARTICLE 20

Students and trainees

i. An individual who is a resident of a Contracting State oi was R resident of that State immediately before visiting tho other Contracting State and who is temporarily present in that other State for the primary purpose of :

(a) 'tudyitiE at a university or other accredited or recognised educational institution in that other Con- tracting State; or

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(b) securing training required to qualify him to practise

a Profession or a professional speciality; or

(c) studying or doing research as a recipient of a grant, allowance, or award from a governmental, religious, cttaiitable, scientific, literary or educational organi- sation;

shall not be subject to tax by that other Contracting State in respect of :

(i) gifts from abroad for the purposes of his mainte-

nance, education, study, reseateh or training;

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

(iii) income from personal services icndered in that other Contracting State (other than any rendered by an article clerk or other person undergoing pro- fessional training to the person or oartnership to whom he is articled or who is providing the train- ing) not exceeding the sum of 750 pound* sterling 6r its equivalent in Indian currency during any fiscal year.

2. The exemptions under paragraph 1 of this Article shall only extend for such period of time as rnav be reasonably or customarily required for the purpose of the visit, "but in no event shall any individual have the benefit of paragraph 1 of this Article for more than 5 years.

3. An individual who is a resident of a Contracting State or was a resident of that State immediately before visiting the other Contracting State and who is temporarily present in that other State for a period not exceeding 12 months, as an employee of, or under contract with, a resident Qf the first-mentioned Contractin;: State, for, the primary purpose of ;

(a) acquiring technical, professional or business, experi- ence from a person other than that resident of the firs'-mentioned Contracting State; or

(b) studying at a university or other accredited or re- cognised educational institut'On in that other Con- tracting State;

shall not be subject to tax by that other Contracting State on his income from personal services performed'in the other Contracting State for that period in an amount not exceed- ing 1.500 pounds sterling or its equivalent in Indian currency.

4, An indnidual who is a resident of a Contracting State or was a resident of that Stale immediately before visiting the other, Contractinc; State and who is temporarily! present in that other State for a period not exceeding 12 months as a participant in a programme sponsored bv the Government of the other Contracting Str.te, for the priiriary purpose

ARTICLE 21

Teachers

1. An individual who visits a Contracting State f©r a period not exceeding two years for the purpose of teaching or engaging in research at a university, college ot other re- cognised educational institution in that • State, aaji who was immediately before that visit a resident of the other Con- tracting State, shall be exempted from tax by the fir^t-men- tioned Contracting State on anv remuneration fo# such teaching or research for a period not exceeding- two years from the date he first visits that State, for such purpose.

2. This Article shall onlv anplv to incdme from research it" mch research is undertaken by the individual in the pub'ic interest and not primarily for the benefit of some other private person or persons.

ARTICLE 22

Elimination of donbla taxation

1. Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax of tax payable in a territory outside the United Kingdom (which --halt not affect the flcneral principle hereof) ;

(a) Jndian tax payable under the laws of India and in accordance with the provisions o£, this Convention, whether directly or by deduction, un profits, income or chargeable gains from sources within Tndia (excluding, in the case of a dividend, tax payable in vespect of the profits out of uhich the dividend is paid) shall be allowed as a credit against any United Kingdom tax computed by reference to the same profits, income or charseablo Rains by reference to which the Indian tax is computed.

(b) In the case of a dividend paid by a company which is a resident of India to a company which is a resident of the United Kingdom and which controls directly or indirectly at least 10 per cent of the voting power in the company paving the dividend, the credit shall take into account (in addition to any Indian tax for which credit may be allowed under the provisions of sub-paragraph (a) of this paragraph) the Indian tax payable by (he company in respect of the profits out of which such dividend is paid.

Provided that this paragraph shall not apply to a company which Is a resident ol the United Kinjrdom and is a Pet- roleum Company as defined for the. purposes of Schedule 9 to the Oil Taxation Act 1975.

2. Subject to the provisions of the law of India ivaardinK the allowance as " credit against Indian tax of tax payable In a territory outside India (which shall not affect the ccncrai principle hereof), the amount of United Kingdom tax payable, under the laws of the United Kingdom and in ac- cordance with the provisions of this Convention, whethen directly or by deduction^ by a resident of India, In res- pect of income from sources within the United Kinadom which has been subjected to ta\ both in India and the United Kingdom shall be allowed as a credit against the Indian tax payable in respect vf iuch income but in an amount not exceeding that proportion of Indian tax which such income bears to the entire income chargeable to Indian lax. In no case shall credit for United Kingdom tax bo given nfiainst the additional income-tax on undistributed income of com- panies.

For the purposes of the credit refentd to in this paragraph, where the resident of India li a company by which surtax is payable, the credit 10 be allowed against Indian tax shall b" Hlowed in the first instance -against ihe Income-tax payable by tho company in India and. at 'to the balance, it any, against the surtax payable by it In India.

3. For the purposes of paragraph 1 of ihit Article ihe term Indian tax payable* shall be deemed lo Include any amount which wou'd have been payable as Indian tax Mit for a deduction nilowed in computing the taxable income or an exemption or reduction of tax cranted for that vear under •

(") sections 10(4), 10(4A), 10(6) (vHa), 10(15) (rv), 32A, 33A, 35B, 35CC. 80HH, 80J and 80K of the Income-tax Act, 1961 (43 cf 1961). so far as they were In force on and have not been modified since, the date of signature of thij Contention or have been modified only In minor respect* to nj not to affect their general character ; or

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

Provided that relief from United Kingdom tax shall not be given by virtue of this paragraph in respect of income from anv source if the income relates to ff period starting more than 10 fiscal years after the exemption from, px re- duction of, Indian tax is first granted to the resident'of the United Kingdom or to the resident of India, as the case may be, in respect of that source.

4. Income which in accordance with the provisions tvf this Convention isjibt to be subjected to tax in a Contracting State may bo taken into account for calculating the rate of tax to be imposed in that Contracting State on other income.

5. For the purposes of paragraphs 1 and 2 of this Article profits, income and chargeable gains owned by a resident of a Contracting State which may be taxed in the other Contracting State in accordance with the provision* of this • Convention shall be deemed to arise from sources In that other Contracting State.

6. Whore profits on which an enterprise of a Contracting State has been chanted to tax in that State are also included in the profits of an enterprise of the other State and the profits so included are profits which would have accrued to that enterprise of the other State if the conditions made between the enterprises had been those which would have been made between enterprises dealing wholly independently with each other, the" amount included in the profits of both enterprises sha.ll be treated for the purposes of thia Article as income from a source in the other State of tho enterprise of the first-mentioned State and relief Khali be given ac- cordingly under the provisions of paragraph 1 or paragraph 2 of this Article.

7. For the purposes of this Article the term "in accordance with the provisions of this Convention" shall include taxes which are the subject of this' Convention and imposed on income not expressly mentioned in the Convention.

ARTICLE 23

Non-dlscrfmlnfltlon

1. The nationals of a Contracting Sute shall not be sub- jected in the other Contracting State to any taxation or auy requirement connected theiewith which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same cireiimstancM are or may be subjected.

2. The taxation on ,\ permanent establishment which an enterprise of a Contracting State has in the other Contrait- ing State shall not be less favourably levied in that othd State -than tho taxation levied on enterprises of that other State carrying on the same activities in the same circumitan- ces or under the same conditions. This provision shall not be construed as preventing a Contracting State from charging the profits of a permanent establishment which an enterprise of the other Contracting State has in the first-mentioned State at a rate of tax which is higher than that imposed on the profits of a similar enterprise of the first-mentioned Contract- ing State, nor as being in conflict whh the provUom of para- graph 4 of Article 7 of this Convention.

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

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

5. In this Article, the term "taxation" means taxes which

ore the subject of this Convention.

ARTICLE 24

Mutual agreement procedure

1. Where a resident of a Contracting State considers th.it the actions of one or both of fhe Contracting Srafe* 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- compelent authority of the Contracting State of which he is a resident.

2, The competent authority shall endeavour, if the objec- tion appears to it to be justified and if it is not itself able in 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 difficul- ties or! doubts arising as to the interpretation or application of the Convention.

A, 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 para- graphs.

AKTICJ-E 25

Exchange of Information

The competent authorities of the Contracting States shall exchange such information (being information and docu- ments which are at their disposal under their respective taxa- tion laws and obtained in the normal course of administra- tion) as is necessary for carrying out the provisions of this Convention or for the prevention of fraud or the adminis- tiation of statutory provisions against legal avoidance in relation to the taxes which are the subject of this Conven- tion. Any information or documents so exchanged shall be treated as secret but may be disclosed to persons (including a court or administrative body) concerned with assessment, collection, enforcement or prosecution in respect of taxes which are the subject of this Convention. No information or documents shall be exchanged which would disclose any irade, business, industrial or professional secret or any trade process.

ARTICLE 26

Diplomatic and consular officials

1. Nothing in this Convention shall affect the fiscal pri- • i!ege& of diplomatic or consular officials under the general rules of international law or under the provisions of special agreements.

2. Notwithstanding the provisions of paragraph 1 of Arti-.

cle 4 (Fiscal domicile), an individual who is a member of the •diplomatic, consular or permanent mission of a Contracting State which is situated in the other Contracting State and who is subject to tax in that other State only if he derives income from sources therein, shall not b© deemed to be a resident of that other State for the purposes of this Conven- tion.

ARTICLE 27

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 Convention. This Convention shall enter into force on the date of the later of these notifications and shall thereupon have effect:

(a) in the United Kingdom of Great Britain and Nor-

thern Ireland:

i'i) in respect of income tax and capital gains tax, for any year of assessment beginning on or after 6 April hi the calendar year next following that in which the later of the notifications is given :

'iii in respect of corporation tax, for any iinancial year beginning on or after 1 April in the calen- dar year next following that in which the later of the notifications is given;

mi) in respect of petroleum revenue tax, for a.'i> ehaige- able period beginning on or after 1 January jn the calendar yean next following that in which the later of the notifications is given ;

n'vi in respect of development land tax, for any rea- lised development value accruing on or after 1 April lit the calendar year next following that in which the latei of the notifications is riven;

•b) in India, in respect of incoine arising in arty fiscal year beginning on or after the first day of April next following the calendar year in which the later of the notifications is given,

ARTICLE 28

Termination

This Convention shall remain in force until terminated by one of the Contracting States. Either Contiacting State may terminate the Convention, through the diplomatic channel, by giving notice of termination at least six months before the end of an> calendar year beginning after the expiration of ten years from the date of entry into force of the Conven- tion. In such event, the Convention shall cease to have effect:

la) in the United Kingdom of Great Britain ind Nor-

thern Ireland :

in which the notice is given";

(ii) in respect of corporation tax, for any financial year beginning on or after 1 April in the calen- dar year next following that in'which the notice is given ;

(iii) in respect of petroleum revenue tax, for any charge- able period beginning on or after 1 January in the calendar year next following that in which the notice is given ;

liv) in respect of development land tax, for any rea- lised development value accruing on or after 1 April in the calendar year next following that in which the notice is given; and

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

In witness whereof the undersigned, duly authorised there- to by their respective Governments, have signed this Con- vention.

Done on this 16th Day of April, 1981 in New Delhi on two original copies each in the Hindi and English languages, both the texts being equally authentic. In case of divergence between the two texts, the English text shall be the opera- tive one.

FOR THE GOVERNMENT OF INDIA : G. RAMACHANDRAN

FOR THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND:

J. A. THOMSON

(No. 501/6/75-FTDJ

R. R. KHOSLA, Jt. Secy.

PRINTED BY THB MANAGER, GOVT. OF INDIA PRESS, RING ROAD, NEW DELHI-110064

AND PUBLISHED BY THE CONTROL! PR OF PUBLICATIONS, DELHI-110054, 1981