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REGISTERED NO. D. (D.N.)-72

The Gazette of India

EXTRAORDINARY

PART II—Section 3—Sub-section (i)

PUBLISHED BY AUTHORITY

No. 20] NEW DELHI, WEDNESDAY, JANUARY 18, 1984/PAUSA 28, 1905

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

1319 GI/83

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MINISTRY OF F1NNCE

( Department of Revenue)

(Foreign Tax Division)

New Delhi, the 1 Sth January, ]<)U

NOTIFICATION

INCOME-TAX

G S R. 3M(E).—Whereas the Government of the Republic of India and the Go\eminent uf the Repub- Jie of Zambia have concluded n Convention QS set out in the Annexure licreto, for the avoidance I>1" double taxation and th^ prevention of fiseal evasion with respect to tnxes on income ;

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(ii) the surtax imposed under iht Companies (Profits) Surtax Act, 1%4 (7 of l%4);

(hereinafter referred lo as "Indian tax'¹).

(b) In the case of Zambia :

And whereas all the requiremnls have been comp- leted in India and Zambia as are necessary to give the said Convention tin- force of law in India and Zambia respectively, as required by paragraph J of Article 29 of the said Convention ;

(i) the income tax ;

(ii) the mineral lax. ; and

(iii) the personal levy

And whereas the diplomatic notes to this died have been exchanged between the said two Governments, as required by paragraph 2 of Article 2l) of the said Convention;

AND

CHAPTER I

(g) the term "nationals" means :

Article 5

(i) in respect of India :

PERMANENT ESTABLISHMENT all individuals possessing the nationality of Tndia and all legal persons, partnerships and associations deriving their status from the law in force in India;

1. For the purposes of this Convention, the term "permanent establishment¹'' means u fixed place of business in which the business of the- enterprise is wholly or partly carried on.

(u) in respect of Zambia :

2. The term "permanent establishment" shall In-

clude : —

aJl individuals possessing the nationality of Zambia and all legal persons, partner- ships and associations deriving their status as such from the law in force in Zambia.

(a) a place of management ;

(b) a branch ;

(c) an office ;

(d) a factory ;

(e) a workshop ;

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

Article-4

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

FISCAL DOMICILE

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

deemed to be a permanent establishment of that en- terprise in the lirst-mentioned State if :

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

(ii) he has no such authority but the habitually maintains in the first-mentioned Contract- ing State a stock of goods or merchandise belonging to that enterprise from which he regularly fulfils orders on behalf of the en- terprise.

5. An Insurance enterprise of a Contracting State shall, except in regard to rc-insurancc, be deemed to h a^ a permanent establishment in the other Con- tracting State if it collects premiums in the territory of that other State or insures risks situated therein through an employee or through a representative who is not an agent of independent status within the meaning of paragraph 6.

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

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

8. An enterprise of a Contracting State shall be deemed to have a permanent establishment in the other Contracting State if it carries on a business which consists of providing the services of public entertainers (such as theatre, motion picture, radio or television artistes and musicians) or athletes in that other Contracting State unless the enterprise is directly or indirectly supported wholly or substantial- ly, from the public funds of the Government of the first-mentioned Contracting State in connection with the provision of such services.

CHAPTER III

TAXATION OF INCOME

Article 6

TNCOTvfE FROM IMMOVABLE PROPERTY

I. Income from immovable property may be taxed in the Contracting State in which such property is situated.

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2. The term "immovable property" shall be defin-

ed in accordance with the law and usage of the Con- tracting State in which ihe propert> is situated. The term shall in any case include piuperly accessory to immovable properly, livestock and equipment uicd in agriculture and forestry, rights to which the provi- sions ol general law respecting L-tndai proj erty apply, usufruct of immovable properly and lights to \unable >ir iixed payments as consideration lor the working ol', or the right to work, mineral deposits, oilvvells, quarries and other places of, extracliun ol naiuial re- sources. Ships, boats and aircraft shall not be regar- ded as immovable property.

3. The provisions of paragraph 1 shall apply to in- come derived from the direct us?, letting, or use in any other form of immovable properh',

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

Article 7

BUSINESS PROFITS

1. The profits of an enterprise of a Contracting State shall be taable only in that Contracting State unless the enterprise carried oti business in the other con- tracting State through a permanent establishment situated therein. If the enterorise carries on business as aforesaid, the profits of the enterprise may be tax- ed in the other Contracting State but only so much of them as is attributable 1o that permanent estab- lishment.

2. If an enterprise of a Contracting State, which has a permanent establishment in the oilier Contract- ing State, sells goods or merchandise of the same or similar kind as those sold by the permanent establi- shment or renders services of the same or similar kind as those rendered by the permanent establish- ment, the profits of such activities mav be ^Unbilled to the permanent establishment unles.i the Ltiier^nse proves that such sales or services are not attributable to the activity of the permanent ^stablishu.ent.

3. Where an enterprise of a Contracting State carries on business in the other Contracting State- through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment. In any case, where the correct amount of profits attributable to a permanent establishment is incapable of determination or the ascertainment thereof presents exceptional diffi- culties, the profits attributable to the permanent establishment may be estimated on a reasonable basis.

4. In so far as it has been customary in a Contra- cting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise

to its various parts, nothing; m paragraph 3 shall preclude that Contracting Stale from determining the profits to be taxed by such an apportionment as may be customary; the method of apportionment ad- opted shall, however, be such that the result shall be in aecordun.ee with the principles laid down in this Article.

5. In the determination of the profits of a per- manent establishment, there shall be allowed as dedu- ctions expenses which are incurred for the purposes of the business u[ the permanent establishment inclu- ding executive and general administrative expenses so incurred, whether in the State in which the perma- nent establishment is .situated or elsewhere, but this docs not include anv expenses which, under the law of that State, would not be allowed to be deducted by an enterprise of 'hat State.

6. No profits shall be attiibuted to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the purpose of export to the enterprise of which it is the permanent establishment.

7. For the purposes of the preceding paragraphs, the profits to be attributed to the permanent esta- blishment shall be determined hy the same method year by year unless there is good and sufficient reason to the contrary.

8. The term "business profits" menus income derived by an enterprise from the carrying mi of trade or busi- ness; but docs not include income jn the form of rents, royalties (including rents or royalties in respect of cinematographic films or video tapes for television), fees for technical services, management charges, or remuneration or fees for providing services of techni- cal or other personnel, interest, dividends, capital gains, remuneration for labour or personal (including professional) services or income from the operation of ships or aircraft.

Article 8

AIR TRANSPORT

1. Profits dervicd by an enterprise of a Contracting State from the operation of aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the 'enterprise is situated.

2. The provisions of paragraph 1 of this Article shall also apply to a share of profits from the opera- tion of aircraft in international traffic derived by an enterprise of a Contracting State through participa- tion in a pooled service, in a ioint air transport opera- tion or in an internu'ionaj operating agency.

3. For the purpose of puragiaph 1, interest on funds connected with the operation of aircraft in interna- tional traffic shall be regarded as income from the operation of such aircraft, and the provisions of Article 11 shall not appk in relation to such interest.

Article 9

ASSOCIATED BNTERPRISL.S

Where

(a) an enterprise of. a Contracting State parti- cipates directly or indirectly in the mana- gement, control or capital of an enterprise of the other Contracting State, or

(bj the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Con- tracting State;

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

Article 10

DIVIDENDS

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

2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the law o[ that State, but the tax so charged shall not exceed:

(a) 5 per cent of the cross amount of the divi- dends if the recipient is a company which owns at least 25 per cent of the shares of the company paying the dividends during the period of six months immediaiely pre- ceding the date of payment of the divi- dends;

(b) 15 per cent of the cross amount of the

devidends in all other cases.

3. The term "dividends" as used in this Article means income from shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights assimilated to income from shares or any other item which is deemed to be a dividend or distribution of a company by the taxa- tion law of the Contracting State of which the coni- pany makiug the distribution is a resident.

4. The provisions of paragraphs 1 and 2 shall not apply if the recipient 'of the dividends, being a resident of a Contracting State, has in the other Contracting State, of which the company paying the dividends is a resident, a permanent establishment with which the holding by virtue of which the dividends are paid is effectively connected. In such a case, the provisions of Article 7 shall apply.

5. Where a company which is a resident of a Con-,

trading State derives profits or income from the other Contracting State, that other State may not impose any lax on the dividends paid by the company to

(vroir; who .ire ni.it. tridents of that other State, or subject the. company's undistributed profits to a tax in undistributed profits, even if the dividends paid I>L' the undistributed profits .'Oiisist wholly or partly i i profits or income arising in that other State.

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amount. In that case, the excess part of the- pay- ments shall remain taxable according to the law of each. Contracting State, due regard bein# had to the other provision¹; of this Convention.

Article 12

ROYALTIES

Article 11

INTEREST

1. Interest arising in a Contracting State and paid 10 3 resident of the other Contracting State may be laxcel in that other State.

2. However, such interest may 'ilso be taxed in ihe Contracting Slate in which it arises, and according to the law of that State, but the tax so charged shall not exceed If) per cent of the gross amount o[ the interest.

3. Notwithstanding the provisions of paragraph 2 interest arising in a Contracting State and paid to tho Government of the other Contracting State or local Authority thereof, the Central Bank of that other Contracting State, or any agency wholly owned by that Government or local authority shall be exempt from tax of the first mentioned Contracting State. The competent authorities of the Contracting States may determine bv mutuaj agreement any other governmental institution to which this paragraph shall apply.

4. The term '"interest" as used in Thi> Article mean", income from Government securities, bonds or deben- tures, whether or not secured by mortgage and whether or not carrying a right to participate in pro- fits, and other debt-claims of every kind as well as all other income assimilated to income from money lent hy the taxation law of the Contracting State in which the income arises.

5. The provisions of paragraphs I and 2 shall not apply if the recipient of the interest, being a resident of a Contracting State, has in the other Contracting State in which the interest arises a permanent esta- blishment with which the debt-claim from which the interest arises is effcclivelv connected. In such a case, the provisions of Article 7 shall apply.

6. Interest shall be deemed to arise in a Contracting State when the payer is that Contracting State itself, a political sub-division, a local authority or a resident of that State. Where, however, the person paying the interest whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment in connection with which the indebted- ness on which the interest is paid was incurred, and sueh interest is borne bv that permanent establish- ment, then such interest shall be deemed to arise in the Contracting State in which the permanent estab- lishment is situated.

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

2. However, such royalties may also be taxed in the contracting State in which they -arise, and according to the law ot that State, but the tax so charged shall not exceed 10 per cent of the gro^s amount of the royalties.

3. The term "royalties" as used in this Article means payments of any kind received as a consi- deration for the use of, or the right to uS'_\ any copy- right of literary, artistic or scientific work (includ- ing cinematograph films and films or tapes for radio or television broadcasting), any patent, trade mark, design or model, plan, secret formula or process, or lor the use of, or the right to use, industi i,il, com- mercial or scientific equipment, or for information con- cerning industrial commercial or scientific experience.

4. The provisions of paragraphs 1 and 2 shall not apply if the recipient of the royalties, being a resi- dent of a Contracting State, has in the other Contract- ing State in which tho royalties arises a permanent establishment with which ihe right or property giving rise to the royalties is effectively connected. In such a case, the provisions of Article 7 shall apply.

5. Royalties shall be deemed to arise i,i a Con- tracting State when the paver is that Contracting State itself, a political sub-division, a local authority or a resident of that State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment in conned ion wifli which the liability to pay tic royalties was incurred, and such royalties arc borne of such permanent estab- lishment, then such royalties shall be deemed to arise in the Contracting State in which the permanent establishment is situated,

6. Where, owing to a special relationship between the payer and the recipient or between both of them and some other person, the amount of royalties paici, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the recipient in the absence of such relationship, the provisions of this Article shall apply only to the last mentioned amount. Tn thai case, the excess part of the pay- ments shall remain taxable according to the law of each Contractini: State, due regard beinc had 1o the other provisions of this Convention.

Article 13

7. Where, owing to a special relationship between the paver and the recipient or between both oF them and some other person, the ainoir.it of the in- terest paid, having regard 1o the debt-riaim for which it is paid, exceeds the rimonnt which world have* been agreed upon hv the payer and the recipient in the absence of such relationship, the provisions of this \nick shall apph nnlv tn the last mentioned CAPITAL GAINS

2. Gains from the alicualimi of movable property forming pan of business property of a permanent establishment which an enterprise uf a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resi- dent of a Contracting Slate in the other Contracting State for the purpose of performing professional ser- vices, including such gains from the alienation of such a permanent establishment (alone or together with the whole enterprise) or of such a lix'xl base, may he taxed in that other State.

6. Where, owing to a speC'al rtlationrhip between payer and the recipient or between both of ihem and some other person, the amount ot the management and consultancy lees paid, having re- gard to the services for which it is paid, exceeds the amount which would have been agreed upon by the payer and the recipient in the absence of such relationship, the provisions of this Article shall apply only to the last mentioned amount. In that case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Con- vention.

Article 15

3. Notwithstanding the provisions ot paragraph ?. gains derived by an enterprise of a Contracting State from Ihc alienation of ships and aircraft which it ope- rates in international traffic and movable property pertaining to the operation of such ships and aircraft shall be taxable only in that State.

4. Gains derived by a resident of a Contracting State from the alienation of any property other than those mentioned in paragraphs 1, 2 and 3 shai! be tax- able only in that Slate.

5. The term "alienation" means the sale, exchange, transfer, or relinquishment of the property or the ex- tinguishment of any rights therein or the compulsory acquisition thereof under any law in fi rce in the res- pective Contracting States.

INDEPENDENT PERSONAL SERVICES

1. Subject to the provisions of Article 16, income derived by a resident of a Contracting State in res- pect of professional services or other independent activities of a similar character shall be taxable only in that State unless :

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

Article 14

MANAGEMENT AND CONSULTANCY FEES

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

2. However, such fees may be taxed i,i the Con- tracting State in which they arise, and according to the law of the State, but the tax so charged shall not exceed 10 per cent of the gross amount of the fccF.

3. The term "management and consultancy fees" as used in this Article means payments of any kind to any person, other than to an employee of the person mak- ing the payments, in consideration for ary services of a managerial technical or consultancy nature.

4. The provisions of paragraphs 1 and 2 shall not apply if the recipient of the management and consul- tancy fees, being a resident of a Contracting State, has in the other Contracting State in which the fees arise u permanent establishment with which the services giv- ing rise to the fees are effectively connected. Tn such a case, the provisions of Article 7 shall apply.

fb) he is present in the other Contracting State for the purpose of performing his activities for a period or periods exceeding in the ag- gregate 183 days in relevant "previous year" in the case of India and in the rele- vant "charge year" in the case of Zambia and in which case so much of the income may be taxed in that other State as is attri- butable to the activities performed in that other State.

(c) his remuneration for his services or activities in the other Contracting State derived from residents of that Contracting State cxeteds K 10,000 or its equivalent in Indian cur- rency in the taxable year (not including travel expenses directly related to the services or activities in the other Contracting State), notwithstanding that his stay in that State is for a period or periods amoun- ting to less than 183 days during the taxable year.

2. The term "professional services" includes in- dependant scientific literary, artistic, educational or teaching activites, as well as the independent activities cf physicians, lawyers, engineers, architects, dentists and accountants.

Article 16

5. Management and consultancy fees shall be dee- med to arise in a Contracting State when the payer is that Contracting State itself, a political sub-division, a local authority or a resident of that State. Wheie, however, the person paying the fees, whether he is a resident of that State or not, has in a Contracting State a permanent establishment in connection with which the liability to pay the fee-? was incurred and such fees are borne by such permanent establishment, then such fees shall be deemed to arise in the Con- tracting State in which the permanent establishment is situated.

DEPENDENT PERSONAL SERVICES

1. Subject to the provisions of Articles 17, 18, 19, 20, 21 and 22, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such representation as is derived there- from may be taxed in that other Contracting State.

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

(a) Hie recipient is present in the other Contrac- ting State for a period not exceeding in the aggregate 183 days in the lisuil ycur con- cerned; and

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

(c) the remuneration is not borne by a perma- nent establishment or a lixed base which the employer has in the other Contracting State.

3. Notwithstanding the provisions uf paragraphs ] and 2, remuneration in respect of employment exer- cised aboard a ship or aircraft in international traffic may be taxed only in the Contracting State in which the place of effective management of the enterprise is situated.

Article 17

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3. The provisions of paragraph 1 of this Article shall not apply to payments in respect of services rendered in connection with any business carried on by the Government of either of the Contracting States for the purposes of profit.

4. For the purposes of this Article, the term "Government" shall include any State Government or local authority of either Contracting State and in particular the Reserve Bank of Tndia and the Bank of Zambia.

Article 20

NON-GOVERNMENT PENSIONS AND ANNUITIES

1. Any pension (other than a pension referred to in Article 19) or annuity derived by a resident of u Contracting State from sources within the other Contracting State may be taxed only in the first- mentioned Contracting State.

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

DIRECTORS' FEES

DiroctuiV fees and similar payments derived by a resident ot' 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 ma> be taxed in that other Contracting State.

Article 18

ARTISTES AND ATHLETES

1. Notwithstanding the provisions of Articles 15 and lo, income derived by public entertainers (such as theatre, motion picture. ladio or television artistes and musicians) or athletes, from their personal acti- vities as such may be taxed in the Contracting State in which these activities are exercised :

Provided that such income shall nut he taxed in ihe said Contracting State if the visit of the public enter- tainers or athletes to that State is supported, wholly or subMantialy, from the public funds of the Govern- ment of the other Contracting State.

2. For the purposes of this Article, Ihe term 'Government' includes a Stale Government. ;r political sub-division, or a local or statutory authority of oil her Contracting State

Article 19 GOVERNMENTAL FUNCTIONS

1. Remuneration paid by or out of funds created by a Contracting State, a political sub-division or a local authority thereof, to u citizen of that State in respect of an employment shall be taxable only in that State.

2. Any pension paid by or out of funds created by a Contracting State a political sub-division, or a local authority thereof, to any individual may be taxed in that Contracting State.

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

Article 21

RESEARCH PERSONNEL STUDENTS AND BUSINESS APPRENTICES

1. (a) An individual who is a resident of one of the Contracting States at the time he becomes tem- porarily present in the other Contracting State for the primary purpose of—

(i) studying at a University or other recognised educational institution in that other Con- tracting State, or

(ii) securing training required to qualify him to practise a profession or professional spe- ciality, or

(iii) studying or doing research as a recipient of a grant allowance, or award from a • Gov- ernmental religious, , charitable, scientific, literary, or educational organisation,

shall be exempt from tax by that other Contracting State with respect to amounts described in sub-para¹- graph (b) for a period not exceeding 5 taxable years from the date of his arrival in that other Contracting State

(b) The amounts referred to in sub-paragraph

(a) arc :—

(i) gifts abroad for the purpose of his main- tenance, educational, study, research, or training;

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

(iii) income from personal services performed in that other Contracting State in an amount not in excess of 1,500 Zambian Kwacha or its equivalent Indian Rupees for any tax- able year.

2. An individual who is a resident of one of ihc Contracting States and who is temporarily present in that other Contracting State as an employee of, or under contract with, a resident of the first-mentioned Contracting State, for the primary purpose of—

(a) acquiring technical, professional^ or business experience from a person other tlian tluir resident of the first-mentioned Contracting State or other than a person, related to such resident, or

(b) studying at a University or other tvenLnised educational institution in that other Con- tracting State, shall be exempt from t;ix in that other Contracting State for u period not exceeding 1 year with respect lo his income from personal services in an .Tggre- gate amount not in excess of 2,500 Zambian Kwacha or its equivalent Tndian Rupees.

3, An individual who is a resident of one of the Contracting States and who is temporarily present in that other Contracting State for a period not exceed- ing 1 year, as a particant in a programme sponsored by the Government of that other Contracting State. for the primary purpose of training, research, or study, shall be exempt from tax in that other Contracting State with respect to his income from personal services in respect of such training, research, or study perform- ed in that other Contracting State in an aggiegute amount not in excess of 3,500 Zambian Kwiu'ha, or its equivalent Indian Rupees.

Article 22

PROFESSORS AND TEACHERS

1. A professor or teacher who is, or was immedia- tely before visiting a Contracting State, a resident of the other Contracting State and who is present in the first-mentioned State for a period not exceeding two years for the purpose of carrying out advanced study or rcscach or for teaching :it a university, college, school or other educational institution shall be exempt from tax. in the first-mentioned State in respect of any remuneration which he receives for such work, provided that such remuneration is derived by him from outside that State.

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

3. For the purposes of this Article and Article 21. an individual shall be deemed to be a resident of a Contracting State if he is resident in that Contracting State in the "previous year" or the "charge year¹', as the case may be, in which he visits the other Con- tracting State or in the, immcdintely preceding "previous year" or the "charge year".

Article 23

INCOME NOT EXPRESSLY MENTIONED

Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that State except that if such income arises in the other Contracting State, it may also be taxed in thai other State.

CHAPTER IV

METHOD FOR ELIMINATION OF DOUBLE TAXATION

Article 24

AVOIDANCE OF DOUBLE TAXATION

L The laws in force in cither of the Contracting States will continue to govern the taxation of income in the respective Contracting States except where provisions to the contrary are made in this Conven- tion.

2. (a) The amount of Zambian tax payable, under the laws of Zambia and in accordance with the provisions of this Convention, whether directly or by deduction, by a resident of India, in respect of income from sources within Zambia which has been subjected to tax both in India and Zambia, shall he allowed as a credit against the Indian tax payable in respect of such income provided that such credit shall not exceed Indian tax (as computed before allowing any such credit), which is appropriate to the income derived from sources within Zambia; NO, however, that where such resident is a com- pany by which surtax is payable in India, the credit aforesaid shall be allowed in the first instance against income-tax payable by the company in India, and as to the balance, if any against surtax payable by it in India;

(b) For the purpose of the credit referred to in sub-paragraph (a) above, the term "Zambian tax payable" shall be deemed to include any amount which would have been payable as Zambian tax for any year but for any provisions granting an exemption or reduc- tion of tax which the competent authorities of the Contracting States agree to be for the purpose of economic development,

3. (a) The amount of Indian tax payable, under the laws of India and in accordance with the provisions of this Convention, whether directly or by deduction, by a resident of Zambia in respect of income from sources within India which has been subjected to tax both in India and Zambia shall be allowed as a credit against Zambian tax payable in respect of such income provided that such credit shall not exceed the Zambian tax (as computed before allowing any such credit), which id appropriate to the iric6rric derived from sources within India ;"

(b) For the purposes of the credit referred to in sub-paragraph (a) above, the term "Indian tax payable" shall be deemed to include any amount by which Indian tax has been reduced by the special incentive measures set forth in the following sections of the Income-tax Act, 1961.

(i) Section 10(4)—relating to exemption from tax on interest payable to a non-resident on any security notified by Ihc Govern- ment of India ;

(ii) Section 1O(4A)—relating to exemption from tax on interest payable to a non- resident on moneys in a Non-resident (External) Account;

(iii) Section 10( 15Xiv)—relating to exemption from tax of (a) a non-resident in rcspecL of moneys lent by him to the Government or local authority in India ; (b) an approved foreign financial institution in respect of interest on moneys lent by it to an indus- trial undertaking in India under a loan agreement; and (c) a non-resident in res- pect of interest on moneys lent or credit facilities allowed by him to an industrial undertaking in India for the purchase outside India of raw materials or capital plant and machinery or for industrial development in India;

(iv) Section 32A—relating to investment allowance in respect of ships, aircrafts. machinery or plant;

(v) Section 33A—relating to development allowance for planting or replanting of tea bushes;

(vi) Section 35C—relating to the agricullunil

development allowance;

(vii) Section 54E—relating tL> capital gains ;

(viii) Section 80CC—relating to deduction in respect of investment in certain new shares ;

(jx) Section 80HH—relating to deduction in respect of profits and gains from newly established industrial undertakings or hotel business in backward areas ;

(x) Section 80J—relating to deduction in res- pect of profits and gains from eligible industrial undertakings or ships or hotels:

(xi) Section 80K—relating to deduction in respect of dividends attributable to pro- fits and gains from eligible industrial undertakings or ships or hotels;

(xii) any other provisions which may subse- quently be enacted granting an exemption or reduction of tax which the competent authorities of the contracting States argree to be for the purposes of economic deve- lopment.

4. Income which, in accordance with the provisions of fhis Convention is not to be subjected to tax in a

19

Contracting State, may be taken into account for cal- culating the rate of tax to be imposed in that Contrac- ing State,

CHAPTER V

SPECIAL PROVISIONS

Article 25

NON-D1SCR1 MI NATION

1. The nationals of a Contracting State shall ntfl be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensefme than thc taxation :md connected requirements to which nationals of that other State in. thc same circumstances arc or maj be subjected.

2. The taxation on a permanent cs'iablishmerji which au enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than thc taxation levied on enterprises of that other State carrying on the same activities in the same circumstances.

3. Nothing contained in this Article shall be "ni- strucd as obliging a Contracting State to giant to persons not resident in that State any personal allowances, reliefs and reductions for taxation purposes which are by few available only to persons who ;nr so resident.

4. Enterprises of a Contracting State, the capital ctf 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 Slate to any taxation

5. In this Articfc, the term "taxation" mean;, ta\e*<

which are thc subject of this Convention.

Article 26

MUTUAL AGREEMENT PROCEDURE

1. Where a resident of a Contracting State considers that the action^ of one or both of thc Contracting State;, result or will result for him in taxation not in accor- dance with this Convention, he may notwithstanding the remedies provided by the national laws of those States, present his case to the competent authority of the Contracting State of which he is a resident. This case must be presented within three years of the dale of receipt erf notice of the action which gives rise to taxation not in accordance with the Convention.

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

with the Convention. Any agreement reached shall be implemented notwithstanding any time limits in the national laws of the Contracting States.

3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any diUiculties or doubts arising as to the inter-preta- tkui or application of the Convention, They may also consult each other for the elimination of double taxa- tion in cases not provided for in the Convention.

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

Articlfc 27

EXCHANGE OF INFORMATION

1. The competent authorities of the Contracting States shall exchange such information or document as is necessary for carrying out the provisions of this Convention or for the prevention oT evasion of taxes which arc the subject of this Convention. Any informa- tion "r document so exchanged shall be treated as secret but may be disclosed to persons (including a court or other authorities) concerned with the assess- ment, collection, enforcement, investigation or prose- cution in respect of the taxes which arc the subject of this Convention, or to persons with respect to whom the information or document relates.

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

3. In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the Obligation :

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

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

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

Article 28

DIPLOMATIC AND CONSULAR ACTIVITIES

Nothing in this Convention shall affect the ilscal privileges of diplomatic or consular officials under the general rules of international law at under the piovi- sions of special agreements.

CHAPTER VI

FINAL PROVISIONS

Article 29

ENTRY INTO FORCE

1. This Convention shall come into force on the date when the last of all such things shall have been done in India and Zambia as are necessary to give the Convention the force of law in India and Zambia respectively.

2. The Contracting States shall notify each othei of ihe completion of the requirements mentioned i" paragraph 1 of this Article. The exchange of diplomatic notes certifying that this requirement has been completed shall take place at Lusaka.

3. Upon the exchange of such diplomatic notes, thfs

Convention shall have effect:

(a) In India, in respect of income assessable for any assessment year commencing on or aftei the 1st day of April, 1979.

(b) In Zambia, in respect of income arising for any charge year commencing on or after the 1st day of April, 1979.

Article 30

TERMINATION

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

(a) in Zambia, in respect of income assessable for the assessment year commencing on the l it day of April in the second calendar year next following the calendar year in which the notice is given, and subsequent years ;

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(b) in India, in respect of income arising for ihe

Sd]- ycar of income next following Die calendar HON. S. K. MUSSOKO7 WANE, M.P., year in which the notice of termination it. Minister of Finance given, and subsequent years. Government of the Republic of Zambia. IF. Nd. ]]|11|65-FTD] In witness whereof the undersigned, being duly C. K. T1KKU, Jt. Secy, authorised thereto, have sijmcd the present convention. cji

Done in duplicate at LUSAKA ihh 111! H day of ^H D AR ^N ¹?T : i Y' , , , . „, ,, , • i , , , , Minister or Railways, JUN'. one thousand nine hujnircd and 1-i^hty one m Government of the English langui^c.

Republic of India.

J3I9G1/83-4

P R ( N 1 £ I) BY rHE MAMAGFR, Of A T. OF INDIA PRI SS. RING ROAD, N EW " tl III-] 1 0 0 64

\ M) l l ' D U S m -D BY l I Tt CONTHOLLl-R IIP I'lIIU I C A l l o N S, I 1 E L U I - 1 1 0 0 5 4, 1 9 84