1780

THE GAZETTE OF TNDIA : EXTRAORDINARY

[PART 11—SEC.3(i)]

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

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 ;

'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

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

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

has not a permanent home available to him

either Contractina Suite, he shall be deemed to be

a resident of the Contracting State in which ho

has an habitual abode ;

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

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

1781

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;

(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

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

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

the enterprise;

(b) the maintenance of a stock of goods or merchandise

belonging to the enterprise solely for the purpose

of storage or display ;

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

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.

4. \ person actinc 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

this Article applies shall be deemed to be a permanent estab-

lishment of that enfei prise in the fiist-mentioned Slate if :

>\i) h? h?«; and habitually exercises in that State,

authority to negotiate and enter into contracts for

or on behalf of the enterprise, unless his activities

are limited to the purchase of goods or merchandise

for the enterprise; or

(b) he habitually maintains in the first-mentioned 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,

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

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.

2. Wheie an enterprise of a Contracting State carries on

business in the other Contract^;ng State through a permanent

establishment situated therein, there shall be in each Con-

tracting State be attribued 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 simi-

lar¹ activities under the same oi similar condition. and dealing

wholly independently with the enterpiise of which it is a

peimancnt eslabl shment.

"* In so far «s if has been customaij in a Conti acting

5tate according to its law to determine the profits to be

attributed to a peimanent establishment on the basis of an

apportionment of the total profits of the enterprise to its

\.uions parts, nothing in paiagraph 2 of this Aititle shall

1782

THE GAZETTE OF INDIA : EXTRAORDINARY

[PART II—SEC. 3 (i)J'

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

.iro^visfons 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^{o n} 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

1783

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.

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

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.

7. Where a fofnpanv which ii a resident of a Contracting

State derives orofits or income from the other Contracting

State, that other State may not impose aay tax on the

dividends paid hy the company,

except

insofar as such

divends are paid to a resident of that other State or insofar

as the holding in respect of which ths dividends ure paid

is effectively connected^ with a permanent establishment or

a fixed base situated in that other State nor siibiect the

company's nadistr^;b»ted profits to a tax on the "company's

undistributed profits, even if the dividends paid or the un-

dist-ibuted profits consist wholly or partly of profits or

income arising in that other State."

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

<V>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.

6. Interest shall be deemed to arise ir • ro-'i'r :!^:p'> "vtV;

when the payer is that State itself. ,> i-¹!¹'^{1 :} '••'• '•'•':>•>,

a local authority or a resident of that •»• •

W.e • '• •»•-

eve:, the person paying the ink-ret, whether he is a resident

of a Oontractins State or not, has in a Contracting State a

permanent establishment or a fixvil bnsc in ronrecf'on with

which the indebtedness on which the interest is r^d was

incurred, and such intererf^;s bone by. that permanent esta-

blishment or fixed b^tse then s>v:h interest shall be deemed to

arise in the Contrartin.s State in which Ihe permanent esta-

blishment or fixed base is situated.

7. Where, owing t0 a special relationship between

the

payer and some other person, the amount of the interest paid

1784

THE,GAZETTE OF INDIA : EXTRAORDINARY

[PART II—SEC. 3 (i)]

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 ;

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" as^vused 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

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

employer who is not a resident of India: and

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

1785

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

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

recognised educational institution in that other Con-

tracting State; or

<>$1 OI/81—3

(b) securing training required to qualify him to practise

a Profession or a professional speciality; or

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 <tf

training, research or study, shall not be subject to tax

that other Contracting State in respect of payments ' madb

by the Government of the first-mentioned Contracting State

for the purposes of his* maintenance, training, research,

itudy.

ARTICLE 21

Teachers

not exceeding two years for the purpose of teaching

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.

1786

THE GAZETTE OF INDIA : EXTRAORDINARY

U'ART U— SEC J (i)j

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

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 o^r 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

2787

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

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 :

<i) in respect of income 'ax and capital gains tax,

for any year of assessment beginning on or after

. 6 April. in the calendar year next following that

in which the 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