INTERNATIONAL TAX & FINANCE CONFERENCE 2011

1INTERNATIONAL TAX & FINANCE CONFERENCE 2011

Shri H. Padamchand Khincha, B.Com, LLB, FCA, 5th Rank in B.Com, Bangalore University 25th Rank in CA Final (November 1982). Presently partner in M/s. H. C. Khincha & Co.

Other Activities:

TEACHING:

(a) Visiting Faculty at IIM, Bangalore; (b) Was a Faculty at the intensive coaching classes of ICAI teaching Income Tax for CA final students; (c) Visiting faculty at the Direct Taxes Training Institute of the Income Tax Department.

PROFESSIONAL:

(a) Was writing a monthly column on ‘Tax Patrika’ – a magazine in Hindi devoted to Direct & Indirect Taxes; (b) Presented papers at various Seminars, Conferences all over the country; (c) Was a panel member for answering queries at the ‘NRI Taxation – on line’ of the Economic Times; (d) Was on the advisory board for answering queries of Lex Site.Com a legal portal; (e) Convenor of the Study Group formed to prepare the approach paper on the “Transfer Pricing Guidance Note”.

AUTHORSHIP:

(a) Co-author of “Tax Holiday U/s.10A and 10B – An analysys; (b) Author of Comparitive Analysis of Indian Tax Treaties published by BCAS; (c) Author of three booklets: (i) Capital Gains of Non-Residents; (ii) Tax Deduction at Source; (iii) Concept of Indexation under Capital Gains; (d) Articles published in Current Tax Reporter, BCAJ, Taxwatch, Journal of CA Institute etc;

SPORTS ACHIEVEMENTS:

(a) Was a keen cricket player. Was selected to represent All India Colts Vs the visiting West Indies team at Pune in 1978; (b) Won prizes in middle distance running in St Joseph’s College Athletic Meet.

OTHERS:

Adjudged the ‘Best Outgoing Student’ of St Joseph’s College of Commerce in 1979.

Shri K.K. Chythanya, B.com, FCA, LLB, Eighth Rank in Karnataka State, • First Rank in Mysore University B.com • Forty seventh Rank (All India) in CA Intermediate • Fifteenth Rank (All India) topping Karnataka State in CA Final

Professional :

Articleship in Price Waterhouse Coopers, Bangalore, Industrial Training in Hindustan Lever Limited, Bangalore. Practice as Chartered Accountant for fourteen years specialising in taxation matters, Now as an Advocate in Bangalore

Others :

1. Guest/Visiting Faculty at • IIM, Bangalore • MDP of ICAI, New Delhi • MDP of ICAI, Bangalore • Direct Taxes Training Centre of Income Tax Department

2. Presented papers in Income Tax and VAT at various Metros and other cities

3. Member of Study Group of ICAI for framing Guidance Note on Transfer Pricing.

4. Co-authored a book on Tax Holiday under Sections 10A & 10B published by Wolters Kluwer, a reputed German published and authored a book on Special Economic Zone

5. Contributed articles for the ‘Chartered Accountant’, BCAJ, Taxman, CTR, and other journals.

Case Studies on International Taxation

International Tax & Finance Conference, 2011 1

Case Studies on International Taxation — Panel Discussion

CA H. Padamchand Khincha and Adv. K. K. Chaitanya

CASE STUDY 1

Fact sheet

Name of the assessee Buildcon India Pvt Ltd. (BPL), India

Name of foreign enterprise Moricon AG (MG), Germany

PE MG, Canada

Other information 1. BPL is in construction industry

2. BPL engages MG to render certain management services

3. Canadian PE of MG provides the said services to BPL

4. Canadian PE invoices BPL and receives the consideration

Issues a) Treaty applicability : Which DTA is applicable to the facts of the case : Indo-Canada

or Indo-Germany?

b) Income characterization

i) as per domestic law,

ii) as per Indo-Canada DTA and

iii) as per Indo-Germany DTA?

c) PE creation and attribution

i) Does the stay of MG’s employees in India create a service PE?

ii) Would it make a difference if BPL and MG are closely associated?

iii) Would it make a difference if HO raises the bill and receives the payment?

iv) Transfer pricing vs. Article 7(2) vs. Rule 10.

v) Relevance of Rule 10 in the light of (a) insertion of rules 10A to 10E and (b) Article 7(2)

d) TDS applicability with reference to payment in question

e) Employees tax liability and ‘Employer’ determination


2 International Tax & Finance Conference, 2011

f) Will it make any difference if MG seeks the assistance of Candy Inc, Canada an independent and unrelated company;

a) By outsourcing fully

b) By outsourcing partly

c) By simply seeking manpower assistance

— “Through Secondment”

— Otherwise than through secondment

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CASE STUDY 2

Fact sheet

Name of the assessee Storetech India Pvt Ltd. (SPL), India

Name of foreign enterprise Storetech Inc (SL), Singapore

Relationship SPL is a 100% subsidiary of SL

Other information 1. SL and SPL are storage solution providers

2. SL as part of HR development, organizes seminars/workshops/training in various areas

3. Training could be

• Both general as well as specific

• Long term as well as short-term

• With or without course material

• In-house or outsourced to third party trainer

4. One of the third party trainers is Chang of Singapore and other is Chandru of India

5. SPL’s employees attend some of these programmes both in India as well in Singapore

6. SL cross charges SPL for the costs incurred

Issues a) Treaty applicability

1. When SPL pays SL - Is Indo-Singapore DTA applicable?

2. When SL pays Chang – Is Indo-Singapore DTA applicable?

3. When SL pays Chandru – Is Indo-Singapore DTA applicable?

b) Income characterisation

1. Is reimbursement income?

2. Is training income FTS?

3. Does training make available technology when training is

• Both general as well as specific

• Long term as well as short-term

• With or without course material

• In-house or outsourced to third party trainer

c) Will the tax position change depending on

(a) whether such training is imparted in India or in Singapore?



(b) when such outsourcing is done to an individual, Chang or Chandru?

(c) when SL asks SPL to pay Chang or Chandru directly to the extent of 50% [representing SPL’s share]?

d) Obligation of SL in India

1) Return under sec. 139(1)

2) Tax audit report under sec. 44AB

3) TP documentation under sec. 92D and certificate under sec. 92E

e) Applicability of sections 271F, 271G, 271B and 271BA

f) Transfer pricing

1) SPL and SL both suffer income enhancement due to differential TP treatment in India

a) By two different TPOs

b) Applying Cup for SPL’s expenditure and applying TNMM for SL’s income

2) Applicability of Explanation 7 to section 271(1)(c)

g) PE creation

1. If training is FTS and

• Taxed under Article 12

• Not taxed under Article 12 because of Article 12(5)

2. If training is not FTS

• When only training –

Duration in days

Total India Singapore

28 28 0

28 0 28

35 28 7

• When training as also other services are provided –

Duration in days

Training Other services

Total India Singapore Total India Singapore

28 28 0 14 0 14

28 0 28 14 14 0

35 28 7 14 2 12



• Chandru is in India for 365 days but SL engages him for training in India for 24 days

h) TDS applicability

1) In the following circumstances

• When SPL pays SL

• When SL pays Chang

• When SL pays Chandru

• When SPL pays Chang/Chandru directly

2) Applicability of section 206AA and section 94A [assuming that the country under discussion is Notified Jurisdictional Area [NJA]]

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CASE STUDY 3

Fact sheet

Name of the assessee Globe India Pvt Ltd. (GPL), IndiaName of associated enterprise Globe Inc (GL), USARelationship GPL is a 100% subsidiary of GLAssessment year 2008-09Other tax information 1. GPL is claiming sec. 10A deduction 2. Entire turnover is export turnover 3. Operating costs ` 100 crores 4. GPL’s ALP : 10% 5. TPO’s ALP : 20% 6. Assessment order is appealed against ALP

determination and method of computation of section 10A deduction

7. GL initiates MAP with USA authorities

MAP proceedings are concluded as follows: 1. ALP to be worked at 15% on operating costs2. Operating costs were not disturbed3. GL to send the remittance to India of incremental value of turnover4. GPL to withdraw the appeal in so far as the appeal related to ALP computation5. GL to get credit in USA for taxes paid by GPL AO gives a notice to GPL seeking its consent. GPL gives its consent but asserting its

right to claim deduction under section 10A in respect of income added as a result of ALP adjustment as per MAP. AO finalizes the assessment ignoring the claim under section 10A.

Issues 1. Is the final order of AO appealable?2. Can GPL give a conditional consent for implementing MAP order?3. Need and eligibility of GPL as regards the deduction under sec. 10A in respect of

incremental income?4. Would it make a difference, if the operating costs are increased to ` 130 crores by TPO

but fixed at ` 110 crores by MAP —a) Where ALP is retained at 10%

b) Where ALP is fixed at 15%

5. Would it make a difference if the claim of tax holiday is under section 10AA?

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CASE STUDY 4

Fact sheet

Name of the assessee Mfaber India Pvt Ltd. (MPL), India

Foreign PE Factory in Australia (MA)

Other information 1. MPL is engaged in manufacture of high end pre-fab sheet

2. MA has a factory where the semi finished goods of MPL are imported and sold in local market after finishing

3. MPL invoices MA for sale of semi finished goods

4. MPL debits MA for certain HO expenses and interest

5. MPL also debits MA for 50% of certain payment made by it to one X-Corp in New Zealand for some services provided to MPL and MA

Issues

a) Total Income and its computation1. MPL proposes not to include the profits of MA in its tax return. Is it justified in

its stand?

2. How are profits of MA computed? Should the computation factor the expenses incurred by MPL whether cross charged to MA or not?

3. Would it make a difference if X-Corp was engaged by MA solely for its use and MPL is paying the same [with or without cross charge]?

b) TDS1. Should MA deduct tax in respect of payment of interest to MPL?

2. Should MPL deduct tax in respect of payment made to X-corp?

c) Transfer pricing1. Will transfer pricing provisions apply in respect of transactions between MPL and

MA?

2. Will it make a difference MPL is in Australia and MA is in India?



d) DTA credit – How to compute DTA credit if the following facts are assumed;

India :

Book profits

PE HO Total

100 300 400

Tax profits PE HO Total

120 250 370

Less : Export incentive 180 180

120 70 190

Tax computation

On book profit 74

On tax profit 57

Whichever is higher 74

Total income 400

Rate 18.5

Australia:

Book profit 100

Taxable profit 90

Prefiling arrangement with Aust. Auth. (cost plus) 75

Tax at 35% 26.25

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CASE STUDY 5

Fact sheet

Name of the USA company Orange Inc, USA [Orange] engaged in Bio Tech Industry

Name of the Singapore Crimson Pte, Singapore, [Crimson] specialized in trainingCompany in Bio Technology

Nature of the activity Specialised Training in Bio Technology

Place of training Emerging Pvt Ltd., [Emerging] an Indian company has an extensive Bio tech facility including a training centre in Bangalore where outside trainers are permitted to provide training on professional basis

Other information 1. Orange has engaged Crimson for training its APAC employees (no employees based in India)

2. Part of the training is to be carried out at Emerging’s training centre

3. Three trainers from Crimson visit the training centre in India and train about 20 employees of Orange:

• Classroom training for 10 days

• Training also consists of assignment using trainer’s equipment (for raising molecules) for 30 days

• Consideration payable by Orange to Crimson is as follows:

— For training USD 75,000

— For equipment use USD 30,000

— For comprehensive information in the training module USD 5,000

— For certificates USD 1,000

Issues a) Income characterization

1. In the light of section 9(1)(vi) – Explanation 2(iva) and the applicable DTA

2. In the light of section 9(1)(vii) – Explanation 2 and the applicable DTA

3. Should all types of payments be viewed in isolation or as an aggregate?

4. If viewed in isolation, what is the nature of payment for

• Information in training manual

• Certificates



b) Total income – Place of accrual under IT Act and DTA

1. Which treaty is applicable – Indo-USA or Indo Singapore or Singapore-USA?

2. In the light of Section 5 vs. section 9 (Actual accrual vs. deemed accrual)

3. In the light of Article 12(7)(b) – Its applicability, significance and role

4. In the light of Section 9(1)(vi)(c) and section 9(1)(vii)(c).

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CASE STUDY 6

Facts sheet

Name of the assessee 6Sigma-India Pvt Ltd., India (SPL)

Foreign holding company 6Sigma-Pte, USA (SUK)

Nature of the activity Manufacture and sale of high end tiles and bricks

Other information 1. SPL is a unit entitled to benefit of deduction under section 10AA

2. SPL pays royalty of USD 1 Mn to SUK after deducting tax for technology relating to tiles

3. SPL determines the ALP of the royalty at USD 0.75 Mn resulting in a suo motu addition of USD 0.25 Mn

4. TPO revises the royalty to USD 0.50 Mn resulting in a further addition of USD 0.25 Mn

5. SPL further pays a lump sum of USD 5 Mn to SUK for acquiring technology to manufacture bricks on an exclusive basis for the territory of India with a clause for payment of additional royalty of 1 USD per brick for production in excess 2.5 Mn bricks

Issues a) Royalty for tiles technology

1. Can SPL claim deduction under section 10AA in respect of suo motu addition?

2. Can SPL claim deduction under section 10AA in respect of TPO’s addition?

3. Can SUK claim refund of tax paid on USD 0.5 Mn in India relying on Article 10(2) notwithstanding section 92C(4)?

b) Royalty for bricks technology

1. What is the nature of income of lump sum royalty and additional royalty?

2. Would the tax treatment be different if lump sum royalty is paid by way of allotment of shares?

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Other Case Studies

CASE STUDY 7

Fact sheet

Name and status of the assessee Nita is presently a resident in India and a citizen of India

Receipts during the year 1. Pension from Citibank NA

2. Alimony from Rakesh

3. Payment from Rakesh for Nita’s daughter’s education in USA

4. Capital gains on sale of shares (ESOP shares) allotted to her by Citibank NA

5. Capital gains on sale of shares (ESOP shares) given to her by Rakesh at the time of divorce as part of settlement

Other information 1. Nita worked for Citibank NA for 30 years. During her employment, she was posted in different countries and she was in USA at the time of retirement

2. Nita was married to Rakesh in India and the marriage lasted for 20 years before a divorce in an Indian court

3. Rakesh continues to live in USA whereas Nita has moved to India

Issues1. Is pension taxable? If so, in which country?

2. Is alimony taxable? If so, in which country?

3. Is payment to daughter’s education taxable? If so, in which country?

4. Is capital gain on sale of ESOP shares taxable? If so, quantum thereof and in which country?

5. Will the tax position change if Nita is a citizen of USA and a POI in India?

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CASE STUDY 8

Fact sheet

Name of the assessee Air America Inc, USA (AA)

Nature of business 1. Running Airlines

2. Cargo handling

3. Ticketing

India operations AA runs a sales office in India and

a) sells its tickets as well as of Woodpecker Airlines for international travel (both inbound and outbound)

b) books cargo for itself as well as for other courier companies for international transportation

Issues 1. Does AA have a PE in India?

2. What is the scope of taxation of AA in respect of its India operations?

3. If AA hires Sujay Mallya an Indian resident as a pilot of one of its aircraft, what is the scope of taxation of Sujay Mallya in India?

4. Will Direct Taxes Code make any difference to the above?

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CASE STUDY 9

Fact sheet

Name of the first foreign Eden Pte, Singaporecompany

Name of the second foreign Bush Inc, USAcompany

Other information 1. Eden runs the business of chip design with its branches in Singapore, Hong Kong and India

2. Eden holds shares in a software company in India

3. Eden amalgamates with Bush

Issues 1. What is the scope of taxation in the hands of Eden?

2. What is the scope of taxation in the hands of Bush?

3. Is tax withholding applicable?

4. Will the position change if, instead of amalgamation, Eden demerges its Indian and HK units to Bush?

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CASE STUDY 10

Facts sheet

Name and status of the assessee Ranga is a budding cricketer and a student of commerce

Other information 1. Leads Club of UK identifies Ranga’s talent and offers him a package

2. Package consists of

a) Ranga to move to UK for two years

b) Ranga will continue his studies in UK and Leads will pay for his stay and education

c) Leads pays a monthly stipend of 500 pounds to him

d) Ranga is obliged to play for Leads in the county matches for two years

e) There were 80 matches played during Ranga’s stay. Out of the same, Ranga was not in the playing 11 for 16 matches. He did not play in 8 matches due to injury. 4 matches were not played due to rain

f) Ranga earned prize moneys of 2500 pounds on account of his team’s wins, man of the match awards and overall performance

g) Ranga earned ad money of 1,000 pounds and coaching fee of 1000 pounds

h) Ranga leaves India on 1-9-2009 and returns on 15-8-2011

i) When Ranga returns to India, he was allowed to retain the car which was given for his use during his UK stay.

Issues 1. What is the residential status of Ranga for each of the years?

2. What is the scope of taxation of following incomes;

a) Stipend

b) Cost of stay and education paid by Leads

c) Ad revenue

d) Coaching fee



e) Prize money

f) Use and transfer of car

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Reference Material


Reference Material

CASE STUDY 1: Germany & Canada

Article 12 — Royalties and fees for technical services – Germany1. Royalties and fees for technical services arising in a Contracting State and paid to a resident of

the other Contracting State may be taxed in that other State.

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

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

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

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

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

7. Where, by reason of special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of royalties or fees for technical services paid exceeds the amount which would have been paid in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess

Reference Material


part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

Article 12 — Royalties and fees for included services – Canada1. Royalties and fees for included services arising in a Contracting State and paid to a resident of


2. However, such royalties and fees for included services may also be taxed in the Contracting State in which they arise and according to the laws of that State; but if the beneficial owner of the royalties or fees for included services is a resident of the other Contracting State, the tax so charged shall not exceed :

(a) in the case of royalties referred to in sub-paragraph (a) of paragraph 3 and fees for included services as defined in this Article (other than services described in sub-paragraph (b) of this paragraph) :

(i) during the first five taxable years for which this Agreement has effect,

(A) 15 per cent of the gross amount of the royalties or fees for included services as defined in this Article, where the payer of the royalties or fees is the Government of that Contracting State, a political sub-division or a public sector company; and

(B) 20 per cent of the gross amount of the royalties or fees for included services in all other cases; and

(ii) during the subsequent years, 15 per cent of the gross amount of the royalties or fees for included services; and

(b) in the case of royalties referred to in sub-paragraph (b) of paragraph 3 and fees for included services as defined in this Article that are ancillary and subsidiary to the enjoyment of the property for which payment is received under paragraph 3(b) of this Article, 10 per cent of the gross amount of the royalties or fees for included services.

3. The term ‘royalties’ as used in this Article means :

(a) payment of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work including cinematograph films or work on film tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productivity, use, or disposition thereof; and

(b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial, or scientific equipment, other than payments derived by an enterprise described in paragraph 1 of Article 8 from activities described in paragraph 3(c) or 4 of Article 8.

4. For the purposes of this Article, ‘fees for included services’ means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services :

(a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or

(b) make available technical knowledge, experience, skill, know-how, or processes or consist of the development and transfer of a technical plan or technical design.

Reference Material


5. Notwithstanding paragraph 4, ‘fees for included services’ does not include amount paid:

(a) for services that are ancillary and subsidiary, as well as inextricably and essentially linked, to the sale of property other than a sale described in paragraph 5(a);

(b) for services that are ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in connection with the operation of ships or aircraft in international traffic;

(c) for teaching in or by educational institutions;

(d) for services for the personal use of the individual or individuals making the payment; or

(e) to an employee of the person making the payments or to any individual or firm of individuals (other than a company) for professional services as defined in Article 14.

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

7. Royalties and fees for included services shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a local authority or a resident of that State. Where, however, the person paying the royalties or the fees for included 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 pay the royalties or the fees for included services was incurred, and such royalties or fees for included services are borne by that permanent establishment or fixed base, then such royalties or fees for included services shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

8. Where by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties or fees for included services, having regard to the use, right, information or services for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last mentioned amount. In that case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Agreement.

Article 5 — Permanent Establishment – Germany1. For the purposes of this Agreement, the term “permanent establishment” means a fixed place of

business through which the business of an enterprise is wholly or partly carried on.

2. The term “permanent establishment” includes especially,—

(a) a place of management;

(b) a branch;

(c) an office;

(d) a factory;

(e) a workshop;

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

(g) a warehouse or sales outlet;

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

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

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

4. Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall be deemed not to include,—

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

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

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

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

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

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

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

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

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

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

6. An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business and in their commercial and financial relations to the

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enterprise no conditions are agreed or imposed which differ from those usually agreed between independent persons.

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

Article 5 — Permanent Establishment – Canada1. For the purposes of this Agreement, the term ‘permanent establishment’ means a fixed place of

business through which the business of an enterprise is wholly or partly carried on.

2. The term ‘permanent establishment’ shall include especially :


(b) a branch;

(c) an office;

(d) a factory;

(e) a workshop;

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

(g) a warehouse, in relation to a person providing storage facilities for others;

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

(i) a store or premises used as a sales outlet;

(j) an installation or structure used for the exploration or exploitation of natural resources, but only if so used for a period of more than 120 days in any twelve-month period;

(k) a building site or construction, installation or assembly project or supervisory activities in connection therewith, where such site, project or activities (together with other such sites, projects or activities, if any) continue for a period of more than 120 days in any twelve-month period;

(l) the furnishing of services other than included services as defined in Article 12, within a Contracting State by an enterprise through employees or other personnel, and only if :

(i) activities of that nature continue within that State for a period or periods aggregating to more than 90 days within any twelve-month period; or

(ii) the services are performed within that State for a related enterprise (within the meaning of paragraph 1 of Article 9).

3. Notwithstanding the preceding provisions of this Article, the term ‘permanent establishment’ shall be deemed not to include any one or more of the following :

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

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


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

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

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

(a) he has and habitually exercises in the first-mentioned State an authority to conclude contracts on behalf of the enterprise, unless his activities are limited to those mentioned in paragraph 3 which, if exercised through a fixed place of business, would not make that fixed place of business a permanent establishment under the provisions of that paragraph;

(b) he has no such authority but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise, and some additional activities conducted in that State on behalf of the enterprise have contributed to the sale of the goods or merchandise; or

(c) he habitually secures orders in the first-mentioned State, wholly or almost wholly for the enterprise.

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

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

Rule 10 of the Income-tax Rules, 1962

10. Determination of income in the case of non-residents In any case in which the Assessing Officer is of opinion that the actual amount of the income

accruing or arising to any non-resident person whether directly or indirectly, through or from any business connection in India or through or from any property in India or through or from any asset or source of income in India or through or from any money lent at interest and brought into India in cash or in kind cannot be definitely ascertained, the amount of such income for the purposes of assessment to income-tax may be calculated :—

(i) at such percentage of the turnover so accruing or arising as the Assessing Officer may consider to be reasonable, or

(ii) on any amount which bears the same proportion to the total profits and gains of the business of such person (such profits and gains being computed in accordance with the provisions of the Act), as the receipts so accruing or arising bear to the total receipts of the business, or

(iii) in such other manner as the Assessing Officer may deem suitable.

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Article 7 — Business profits – Germany1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the

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

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

3. In the determination of the profits of a permanent establishment, there shall be allowed as deductions, expenses which are incurred for the purposes of the business of the permanent establishment including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere, and according to the domestic law of the Contracting State in which the permanent establishment is situated.

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

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

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

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

Article 7 — Business profits – Canada1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the

enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on or has carried on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to :

(a) that permanent establishment, and

(b) sales of goods and merchandise of the same or similar kind as those sold, or from other business activities of the same or similar kind as those effected, through that permanent establishment.

2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged

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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 difficulties, the profits attributable to the permanent establishment may be estimated on a reasonable basis provided that the result shall be in accordance with the principles laid down in this Article.

3. In the determination of the profits of a permanent establishment, there shall be allowed those deductible expenses which are incurred for the purposes of the business of the permanent establishment, including executive and general administrative expenses, whether incurred in the State in which the permanent establishment is situated or elsewhere as are in accordance with the provisions of and subject to the limitations of the taxation laws of that State. However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than as a reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents, know-how or other rights, or by way of commission or other charges, for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the permanent establishment. Likewise, no account shall be taken in the determination of the profits of a permanent establishment, for amounts charged (otherwise than towards reimbursement of actual expenses), by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents, know-how or other rights, or by way of commission or other charges for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the head office of the enterprise or any of its other offices.

4. Subject to the provisions of paragraph 3, insofar as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 shall preclude that Contracting State from determining the profits to be taxed by such an apportionment as may be customary; the method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in this Article.


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


CASE STUDY 2: Singapore

Article 12 — Royalties and fees for technical services – Singapore1. Royalties and fees for technical services arising in a Contracting State and paid to a resident of


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

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

(a) any copyright of a literary, artistic or scientific work, including cinematograph film or films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right, property or information ;

(b) any industrial, commercial or scientific equipment, other than payments derived by an enterprise from activities described in paragraph 4(b) or 4(c) of Article 8.

4. The term “fees for technical services” as used in this Article means payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provision of such services through technical or other personnel) if such services :

(a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received ; or

(b) make available technical knowledge, experience, skill, know-how or processes, which enables the person acquiring the services to apply the technology contained therein ; or

(c) consist of the development and transfer of a technical plan or technical design, but excludes any service that does not enable the person acquiring the service to apply the technology contained therein.

For the purposes of (b) and (c) above, the person acquiring the service shall be deemed to include an agent, nominee, or transferee of such person.

5. Notwithstanding paragraph 4, “fees for technical services” does not include payments:



(c) for teaching in or by educational institutions ;

(d) for services for the personal use of the individual or individuals making the payment;

(e) to an employee of the person making the payments or to any individual or firm of individuals (other than a company) for professional services as defined in Article 14;

(f) for services rendered in connection with an installation or structure used for the exploration or exploitation of natural resources referred to in paragraph 2(j) of Article 5;

(g) for services referred to in paragraphs 4 and 5 of Article 5.

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

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

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

Article 5 — Permanent establishment – Singapore1. For the purposes of this Agreement, the term “permanent establishment” means a fixed place of

business through which the business of the enterprise is wholly or partly carried on.

2. The term “permanent establishment” includes especially :


(b) a branch;

(c) an office;

(d) a factory;

(e) a workshop;

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

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

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

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

(j) an installation or structure used for the exploration or exploitation of natural resources but only if so used for a period of more than 120 days in any fiscal year.

3. A building site or construction, installation or assembly project constitutes a permanent establishment only if it continues for a period of more than 183 days in any fiscal year.

4. An enterprise shall be deemed to have a permanent establishment in a Contracting State and to carry on business through that permanent establishment if it carries on supervisory activities in that Contracting State for a period of more than 183 days in any fiscal year in connection with a building site or construction, installation or assembly project which is being undertaken in that Contracting State.

5. Notwithstanding the provisions of paragraphs 3 and 4, and enterprise shall be deemed to have a permanent establishment in a Contracting State and to carry on business through that permanent establishment if it provides services or facilities in that Contracting State for a period of more than 183 days in any fiscal year in connection with the exploration, exploitation or extraction of mineral oils in that Contracting State.

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6. An enterprise shall be deemed to have a permanent establishment in a Contracting State if it furnishes services, other than services referred to in paragraphs 4 and 5 of this Article and technical services as defined in Article 12, within a Contracting State through employees or other personnel, but only if:

(a) activities of that nature continue within that Contracting State for a period or periods aggregating more than 90 days in any fiscal year; or

(b) activities are performed for a related enterprise (within the meaning of Article 9 of this Agreement) for a period or periods aggregating more than 30 days in any fiscal year.

7. Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall be deemed not to include:

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

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


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

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

However, the provisions of sub-paragraphs (a) to (e) shall not be applicable where the enterprise maintains any other fixed place of business in the other Contracting State through which the business of the enterprise is wholly or partly carried on.

8. Notwithstanding the provisions of paragraphs 1 and 2, where a person - other than an agent of an independent status to whom paragraph 9 applies - is acting in a Contracting State on behalf of an enterprise of the other Contracting State that enterprise shall be deemed to have a permanent establishment in the first-mentioned State, if —

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

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

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

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

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

Section 206AA of the Income-tax Act, 1961 — Requirement to furnish Permanent Account Number(1) Notwithstanding anything contained in any other provisions of this Act, any person entitled

to receive any sum or income or amount, on which tax is deductible under Chapter XVIIB (hereafter referred to as deductee) shall furnish his Permanent Account Number to the person responsible for deducting such tax (hereafter referred to as deductor), failing which tax shall be deducted at the higher of the following rates, namely:—

(i) at the rate specified in the relevant provision of this Act; or

(ii) at the rate or rates in force; or

(iii) at the rate of twenty per cent.

(2) No declaration under sub-section (1) or sub-section (1A) or sub-section (1C) of section 197A shall be valid unless the person furnishes his Permanent Account Number in such declaration.

(3) In case any declaration becomes invalid under sub-section (2), the deductor shall deduct the tax at source in accordance with the provisions of sub-section (1).

(4) No certificate under section 197 shall be granted unless the application made under that section contains the Permanent Account Number of the applicant.

(5) The deductee shall furnish his Permanent Account Number to the deductor and both shall indicate the same in all the correspondence, bills, vouchers and other documents which are sent to each other.

(6) Where the Permanent Account Number provided to the deductor is invalid or does not belong to the deductee, it shall be deemed that the deductee has not furnished his Permanent Account Number to the deductor and the provisions of sub-section (1) shall apply accordingly.

Section 94A of the Income-tax Act, 1961 — Special measures in respect of transactions with persons located in notified jurisdictional area(1) The Central Government may, having regard to the lack of effective exchange of information

with any country or territory outside India, specify by notification in the Official Gazette such country or territory as a notified jurisdictional area in relation to transactions entered into by any assessee.

(2) Notwithstanding anything to the contrary contained in this Act, if an assessee enters into a transaction where one of the parties to the transaction is a person located in a notified jurisdictional area, then—

(i) all the parties to the transaction shall be deemed to be associated enterprises within the meaning of section 92A;

(ii) any transaction in the nature of purchase, sale or lease of tangible or intangible property or provision of service or lending or borrowing money or any other transaction having a bearing on the profits, income, losses or assets of the assessee including a mutual agreement or arrangement for allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided by or to the assessee shall be deemed to be an international transaction within the meaning of section 92B,

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and the provisions of sections 92, 92A, 92B, 92C [except the second proviso to sub-section (2)], 92CA, 92CB, 92D, 92E and 92F shall apply accordingly.

(3) Notwithstanding anything to the contrary contained in this Act, no deduction,—

(a) in respect of any payment made to any financial institution located in a notified jurisdictional area shall be allowed under this Act, unless the assessee furnishes an authorisation in the prescribed form authorising the Board or any other income-tax authority acting on its behalf to seek relevant information from the said financial institution on behalf of such assessee; and

(b) in respect of any other expenditure or allowance (including depreciation) arising from the transaction with a person located in a notified jurisdictional area shall be allowed under any other provision of this Act, unless the assessee maintains such other documents and furnishes such information as may be prescribed, in this behalf.

(4) Notwithstanding anything to the contrary contained in this Act, where, in any previous year, the assessee has received or credited any sum from any person located in a notified jurisdictional area and the assessee does not offer any explanation about the source of the said sum in the hands of such person or in the hands of the beneficial owner (if such person is not the beneficial owner of the said sum) or the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory, then, such sum shall be deemed to be the income of the assessee for that previous year.

(5) Notwithstanding anything contained in any other provisions of this Act, where any person located in a notified jurisdictional area is entitled to receive any sum or income or amount on which tax is deductible under Chapter XVII-B, the tax shall be deducted at the highest of the following rates, namely:—

(a) at the rate or rates in force;

(b) at the rate specified in the relevant provisions of this Act;

(c) at the rate of thirty per cent.

(6) In this section,—

(i) “person located in a notified jurisdictional area” shall include,—

(a) a person who is resident of the notified jurisdictional area;

(b) a person, not being an individual, which is established in the notified jurisdictional area; or

(c) a permanent establishment of a person not falling in sub-clause (a) or sub-clause (b), in the notified jurisdictional area;

(ii) “permanent establishment” shall have the same meaning as defined in clause (iiia) of section 92F;

(iii) “transaction” shall have the same meaning as defined in clause (v) of section 92F.

CASE STUDY 3: Indo-US

Article 27 — Mutual agreement procedure (MAP) – USA1. Where a person considers that the actions of one or both of the Contracting States result or will

result for him in taxation not in accordance with the provisions of this Convention, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident or national. This case

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must be presented within three years of the date of receipt of notice of the action which gives rise to taxation not in accordance with the Convention.

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

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

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. The competent authorities, through consultations, shall develop appropriate bilateral procedures, conditions, methods and techniques for the implementation of the mutual agreement procedure provided for in this Article. In addition, a competent authority may devise appropriate unilateral procedures, conditions, methods and techniques to facilitate the above-mentioned bilateral actions and the implementation of the mutual agreement procedure.

Rules 44G and 44H relating to Mutual Agreement Procedure of the Income-tax Rules, 1962

Application for giving effect to the terms of any agreement under clause (h) of sub-section (2) of section 29544G. Where a resident assessee is aggrieved by any action of the tax authorities of any country outside

India for the reason that, according to him, such action is not in accordance with the terms of agreement with such other country outside India, he may make an application to the Competent Authority in India seeking to invoke the mutual agreement procedure, if any, provided therein, in terms of Form No. 34F.

Action by the Competent Authority of India and procedure for giving effect to the decision under the agreement44H. (1) Where a reference has been received from the competent authority of a country outside

India under any agreement with that country with regard to any action taken by any income-tax authority in India, the Competent Authority in India shall call for and examine the relevant records with a view to give his response to the competent authority of the country outside India.

(2) The Competent Authority in India shall endeavour to arrive at a resolution of the case in accordance with such agreement.

(3) The resolution arrived at under mutual agreement procedure, in consultation with the competent authority of the country outside India, shall be communicated, wherever necessary, to the Chief Commissioner or the Director-General of Income-tax, as the case may be, in writing.

(4) The effect to the resolution arrived at under mutual agreement procedure shall be given by the Assessing Officer within ninety days of receipt of the same by the Chief Commissioner or the Director-General of Income-tax, if the assessee,—

(i) gives his acceptance to the resolution taken under mutual agreement procedure; and

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(ii) withdraws his appeal, if any, pending on the issue which was the subject matter for adjudication under mutual agreement procedure.

(5) The amount of tax, interest or penalty already determined shall be adjusted after incorporating the decision taken under mutual agreement procedure in the manner provided under the Income-tax Act, 1961 (43 of 1961), or the rules made thereunder to the extent that they are not contrary to the resolution arrived at.

Explanation.—For the purposes of rules 44G and 44H, “Competent Authority of India” shall mean an officer authorised by the Central Government for the purposes of discharging the functions as such.

Section 92C(4) of the Income-tax Act, 1961 — Computation of arm’s length price(4) Where an arm’s length price is determined by the Assessing Officer under sub-section (3), the

Assessing Officer may compute the total income of the assessee having regard to the arm’s length price so determined:

Provided that no deduction under section 10A or section 10AA or section 10B or under Chapter VI-A shall be allowed in respect of the amount of income by which the total income of the assessee is enhanced after computation of income under this sub-section:

Provided further that where the total income of an associated enterprise is computed under this sub-section on determination of the arm’s length price paid to another associated enterprise from which tax has been deducted or was deductible under the provisions of Chapter XVIIB, the income of the other associated enterprise shall not be recomputed by reason of such determination of arm’s length price in the case of the first mentioned enterprise.

CASE STUDY 4: Australia

Article 7 — Business profits – Australia1. The profits of an enterprise of one of the Contracting States shall be taxable only in that State

unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to :

(a) that permanent establishment; or

(b) sales within that other Contracting State of goods or merchandise of the same or a similar kind as those sold, or other business activities of the same or a similar kind as those carried on, through that permanent establishment.

2. Subject to the provisions of paragraph (3), where an enterprise of one of the Contracting States carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were 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 or with other enterprises with which it deals.

3. In the determination of the profits of a permanent establishment, there shall be allowed as deductions, in accordance with and subject to the limitations of the law relating to tax in the Contracting State in which the permanent establishment is situated, expenses of the enterprise, being expenses which are incurred for the purposes of the business of the permanent establishment (including executive and general administrative expenses so incurred), whether incurred in the Contracting State in which the permanent establishment is situated or elsewhere.

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5. Where the correct amount of profits attributable to a permanent establishment is incapable of determination by the taxation authority of one of the Contracting States or the ascertaining thereof by that authority presents exceptional difficulties, nothing in this Article shall affect the application of any law of that State relating to the determination of the tax liability of a person, provided that the law shall be applied, so far as the information available to that authority permits, in accordance with the principles of this Article.

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


8. Nothing in this Article shall affect the operation of any law of a Contracting State relating to tax imposed on profits from insurance with non-residents provided that if the relevant law in force in either Contracting State at the date of signature of this Agreement is varied (otherwise than in minor respects so as not to affect its general character) the Contracting States shall consult with each other with a view to agreeing to any amendment of this paragraph that may be appropriate.

9. Where :

(a) a resident of one of the Contracting States is beneficially entitled, whether directly or through one or more interposed trust estates, to a share of the business profits of an enterprise carried on in the other Contracting State by the trustee of a trust estate other than a trust estate which is treated in that other State as a company for tax purposes; and

(b) in relation to that enterprise, that trustee would, in accordance with the principles of Article 5, have a permanent establishment in that other Contracting State,

the enterprise carried on by the trustee shall be deemed to be a business carried on in that other Contracting State by that resident through a permanent establishment situated therein and that share of business profits shall be attributed to that permanent establishment.

Article 24 — Methods of elimination of double taxation – Australia1. (a) Subject to the provisions of the law of Australia from time to time in force which relate to

the allowance of a credit against Australian tax or tax paid in a country outside Australia (which shall not affect the general principle hereof), Indian tax paid under the law of India and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in India shall be allowed as a credit against Australian tax payable in respect of that income.

(b) Where a company which is a resident of India and is not a resident of Australia for the purposes of Australian tax pays a dividend to a company which is a resident of Australia and which controls directly or indirectly not less than 10 per cent of the voting power of the first-mentioned company, the credit referred to in sub-paragraph (a) shall include the Indian tax paid by that first-mentioned company in respect of that portion of its profits out of which the dividend is paid.

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2. In paragraph (1), Indian tax paid shall include:

(a) subject to sub-paragraph (b) an amount equivalent to the amount of any Indian tax foregone which, under the law of India relating to Indian tax and in accordance with this Agreement, would have been payable as Indian tax on income but for an exemption from, or reduction of, Indian tax on that income in accordance with:

(i) section 10(4), 10(15)(iv), 10A, 10B, 80HHC, 80HHD or 80-I of the Income-tax Act, 1961, insofar as those provisions were in force on, and have not been modified since, the date of signature of this Agreement, or have been modified only in minor respects so as not to affect their general character; or

(ii) any other provision which may subsequently be made granting an exemption from or reduction of Indian tax which the Treasurer of Australia and the Ministry of Finance of India agree from time to time in letters exchanged for this purpose to be of a substantially similar character, if that provision has not been modified thereafter or has been modified only in minor respects so as not to affect its general character; and

(b) in the case of interest derived by a resident of Australia which is exempted from Indian tax under the provisions referred to in sub-paragraph (a), the amount which would have been payable as Indian tax if the interest had not been so exempt and if the tax referred to in paragraph (2) of Article 11 did not exceed 10 per cent of the gross amount of the interest.

3. Paragraph (2) shall apply only in relation to income derived in any of the first 10 years of income in relation to which this Agreement has effect under sub-paragraph (1)(a)(ii) of Article 28 or in any later year of income that may be agreed by the Contracting States in letters exchanged for this purpose.

4. In the case of India, double taxation shall be avoided as follows :

(a) the amount of Australian tax paid under the laws of Australia and in accordance with the provisions of this Agreement, whether directly or by deduction, by a resident of India in respect of income from sources within Australia which has been subjected to tax both in India and Australia shall be allowed as a credit against the Indian tax payable in respect of such income but in an amount not exceeding that proportion of Indian tax which such income bears to the entire income chargeable to Indian tax; and

(b) for the purposes of the credit referred to in sub-paragraph (a) above, where the resident of India is a company by which surtax is payable, the credit to be allowed against Indian tax shall be allowed in the first instance against the income-tax payable by the company in India and, as to the balance, if any, against the surtax payable by it in India.

5. Where a resident of one of the Contracting States derives income which, in accordance with the provisions of this Agreement shall be taxable only in the other Contracting States, the first-mentioned State may take that income into account in calculating the amount of its tax payable on the remaining income of that resident.

Article 9 — Associated enterprises – Australia1. Where:

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

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

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and in either case conditions operate between the two enterprises in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises dealing wholly independently with one another, then any profits which, but for those conditions, might have been expected to accrue to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

2. Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the tax liability of a person, including determinations in cases where the information available to the taxation authority of that State is inadequate to determine the income to be attributed to an enterprise, provided that that law shall be applied, so far as it is practicable to do so, consistently with the principles of this Article.

3. Where profits on which an enterprise of one of the Contracting States has been charged to tax in that State are also included, by virtue of paragraph (1) or (2), in the profits of an enterprise of the other Contracting State and charged to tax in that other State, and the profits so included are profits which might have been expected to have accrued to that enterprise of the other State if the conditions operative between the enterprises had been those which might have been expected to have operated between independent enterprises dealing wholly independently with one another, then the first-mentioned State shall make an appropriate adjustment to the amount of tax charged on those profits in the first-mentioned State. In determining such an adjustment, due regard shall be had to the other provisions of this Agreement and for this purpose the competent authorities of the Contracting States shall, if necessary, consult each other.

NOTIFICATION NO. 90/2008, DATED 28-8-2008

SECTION 90A OF THE INCOME-TAX ACT, 1961 – DOUBLE TAXATION RELIEF – ADOPTION BY CENTRAL GOVERNMENT OF AGREEMENT BETWEEN SPECIFIED ASSOCIATION FOR DOUBLE TAXATION RELIEF NOTIFIED AGREEMENTIn exercise of the powers conferred by sub-section (3) of section 90A of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that where an agreement entered into by any specified association in India with any specified association in the specified territory outside India and adopted by the Central Government by way of notification in the Official Gazette, for granting relief of tax, or as the case may be, avoidance of double taxation, provides that any income of a resident of India “may be taxed” in the other country, such income shall be included in his total income chargeable to tax in India in accordance with the provisions of the Income-tax Act, 1961 (43 of 1961), and relief shall be granted in accordance with the method for elimination or avoidance of double taxation provided in such agreement.

CASE STUDY 5: USA & Singapore

Article 12 — Royalties and fees for included services – USA1. Royalties and fees for included services arising in a Contracting State and paid to a resident of


2. However, such royalties and fees for included services may also be taxed in the Contracting State in which they arise and according to the laws of that State; but if the beneficial owner of the royalties or fees for included services is a resident of the other Contracting State, the tax so charged shall not exceed:

(a) in the case of royalties referred to in sub-paragraph (a) of paragraph 3 and fees for included services as defined in this Article [other than services described in sub-paragraph (b) of this paragraph]:

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(i) during the first five taxable years for which this Convention has effect,

(a) 15 per cent of the gross amount of the royalties or fees for included services as defined in this Article, where the payer of the royalties or fees is the Government of that Contracting State, a political sub-division or a public sector company; and

(b) 20 per cent of the gross amount of the royalties or fees for included services in all other cases; and

(ii) during the subsequent years, 15 per cent of the gross amount of royalties or fees for included services; and

(b) in the case of royalties referred to in sub-paragraph (b) of paragraph 3 and fees for included services as defined in this Article that are ancillary and subsidiary to the enjoyment of the property for which payment is received under paragraph 3(b) of this Article, 10 per cent of the gross amount of the royalties or fees for included services.

3. The term “royalties” as used in this Article means:

(a) payments of any kind received as a consideration for the use of, or the right to use, any copyright or a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productivity, use, or disposition thereof; and

(b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial, or scientific equipment, other than payments derived by an enterprise described in paragraph 1 of Article 8 (Shipping and Air Transport) from activities described in paragraph 2(c) or 3 of Article 8.

4. For purposes of this Article, “fees for included services” means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services:

(a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or

(b) make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design.

5. Notwithstanding paragraph 4, “fees for included services” does not include amounts paid:



(c) for teaching in or by educational institutions;

(d) for services for the personal use of the individual or individuals making the payments; or

(e) to an employee of the person making the payments or to any individual or firm of individuals (other than a company) for professional services as defined in Article 15 (Independent Personal Services).

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6. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for included services, being a resident of a Contracting State, carries on business in the other Contracting State, in which the royalties or fees for included services arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the royalties or fees for included services are attributable to such permanent establishment or fixed base. In such case the provisions of Article 7 (Business Profits) or Article 15 (Independent Personal Services), as the case may be shall apply.

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

(b) Where under sub-paragraph (a) royalties or fees for included services do not arise in one of the Contracting States, and the royalties relate to the use of, or the right to use, the right or property, or the fees for included services relate to services performed, in one of the Contracting States, the royalties or fees for included services shall be deemed to arise in that Contracting State.

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

CASE STUDY 6: USA

Article 12 — Royalties and fees for technical services – USA

(Refer in Case Study 5: USA & Singapore)

Article 9 – Associated Enterprises – USA1. Where:

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

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

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

2. Where a Contracting State includes in the profits of an enterprise of that State, and taxes accordingly, profits on which an enterprise of the other Contracting State has been charged to tax in that other State, and the profits so included are profits which would have accrued to

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

CASE STUDY 7

Singapore & USA

Article 20 — Private pensions, annuities, alimony and child support – USA1. Any pension, other than a pension referred to in Article 19 (Remuneration and Pensions in

respect of Government Service), or any annuity derived by a resident of a Contracting State from sources within the other Contracting State may be taxed only in the first-mentioned Contracting State.

2. Notwithstanding paragraph 1, and subject to the provisions of Article 19 (Remuneration and Pensions in Respect of Government Service), social security benefits and other public pensions paid by a Contracting State to a resident of the other Contracting State or a citizen of the United States shall be taxable only in the first-mentioned State.

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

4. The term “annuity” means stated sums payable periodically at stated times during life or during a specified or ascertainable number of years, under an obligation to make the payments in return for adequate and full consideration in money or money’s worth (but not for services rendered).

5. Alimony paid to a resident of a Contracting State shall be taxable only in that State. The term “alimony” as used in this paragraph means periodic payments made pursuant to a written separation agreement or a decree of divorce, separate maintenance, or compulsory support, which payments are taxable to the recipient under the laws of the State of which he is a resident.

6. Periodic payments for the support of a minor child made pursuant to a written separation agreement or a decree of divorce, separate maintenance or compulsory support, paid by a resident of a Contracting State to a resident of the other Contracting State, shall be taxable only in the first-mentioned State.

Article 13 — Gains – USAExcept as provided in Article 8 (Shipping and Air Transport) of this Convention, each Contracting State may tax capital gains in accordance with the provisions of its domestic law.

CASE STUDY 8

Article 8 — Shipping and air transport – USA1. Profits derived by an enterprise of a Contracting State from the operation by that enterprise of

ships or aircraft in international traffic shall be taxable only in that State.

2. For the purposes of this Article, profits from the operation of ships or aircraft in international traffic shall mean profits derived by an enterprise described in paragraph 1 from the transportation by sea or air respectively of passengers, mail, livestock or goods carried on by the owners or lessees or charterers of ships or aircraft including—

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(a) the sale of tickets for such transportation on behalf of other enterprises;

(b) other activity directly connected with such transportation ; and

(c) the rental of ships or aircraft incidental to any activity directly connected with such transportation.

3. Profits of an enterprise of a Contracting State described in paragraph 1 from the use, maintenance, or rental of containers (including trailers, barges, and related equipment for the transport of containers) used in connection with the operation of ships or aircraft in international traffic shall be taxable only in that State.

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

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

6. Gains derived by an enterprise of a Contracting State described in paragraph 1 from the alienation of ships, aircraft or containers owned and operated by the enterprise, the income from which is taxable only in that State, shall be taxed only in that State.

Article 16 — Dependent personal services – USA1. Subject to the provisions of Articles 17 (Directors’ Fees), 18 (Income Earned by Entertainers

and Athletes), 19 (Remuneration and Pensions in respect of Government Service), 20 (Private Pensions, Annuities, Alimony and Child Support), 21 (Payments received by Students and Apprentices) and 22 (Payments received by Professors, Teachers and Research Scholars), salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

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

(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the relevant taxable year;

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

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

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

CASE STUDY 10

Section 194E of the Income-tax Act, 1961 - Payments to non-resident sportsmen or sports associationsWhere any income referred to in section 115BBA is payable to a non-resident sportsman (including an athlete) who is not a citizen of India or a non-resident sports association or institution, the person responsible for making the payment shall, at the time of credit of such income to the account of the

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payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent.

Section 115BBA of the Income-tax Act, 1961 — Tax on non-resident sportsmen or sports associations(1) Where the total income of an assessee,—

(a) being a sportsman (including an athlete), who is not a citizen of India and is a non-resident, includes any income received or receivable by way of—

(i) participation in India in any game (other than a game the winnings wherefrom are taxable under section 115BB) or sport; or

(ii) advertisement; or

(iii) contribution of articles relating to any game or sport in India in newspapers, magazines or journals; or

being a non-resident sports association or institution, includes any amount guaranteed to be paid or payable to such association or institution in relation to any game (other than a game the winnings wherefrom are taxable under section 115BB) or sport played in India, the income-tax payable by the assessee shall be the aggregate of—

(i) the amount of income-tax calculated on income referred to in clause (a) or clause (b) at the rate of ten per cent; and

(ii) the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the amount of income referred to in clause (a) or clause (b):

Provided that no deduction in respect of any expenditure or allowance shall be allowed under any provision of this Act in computing the income referred to in clause (a) or clause (b).

(2) It shall not be necessary for the assessee to furnish under sub-section (1) of section 139 a return of his income if—

(a) his total income in respect of which he is assessable under this Act during the previous year consisted only of income referred to in clause (a) or clause (b) of sub-section (1); and

(b) the tax deductible at source under the provisions of Chapter XVII-B has been deducted from such income.

Article 16 — Dependent personal services – UK1. Subject to the provisions of Article 17 (Directors’ fees), 18 (Artistes and athletes), 19

(Governmental remuneration and pensions), 20 (Pensions and annuities), 21 (Students and trainees) and 22 (Teachers) of this Convention, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1 of this Article, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall not be taxed in that other State if:

(a) he is present in the other State for a period or periods not exceeding in the aggregate 183 days during the relevant fiscal year;

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

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(c) the remuneration is not deductible in computing the profits of an enterprise chargeable to tax in that other State.

3. Notwithstanding the preceding provisions of this Article, remuneration in respect of an employment exercised aboard a ship or aircraft in international traffic may be taxed in the Contracting State of which the person deriving the profits from the operation of the ship or aircraft is a resident.

Article 18 — Artistes and athletes – UK1. Notwithstanding the provisions of Articles 15 (Independent personal services) and 16 (Dependent

personal services) of this Convention, income derived by entertainers (such as stage, motion picture, radio or television artistes and musicians) or athletes, from their personal activities as such may be taxed in the Contracting State in which these activities are exercised.

2. Where income arising from personal activities are 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 provisions of Articles 7 (Business profits), 15 (Independent personal services) and 16 (Dependent personal services) of this convention 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 sub-division or local authority of that other State.

Article 21 — Students and trainees – UK1. 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 the primary purpose of:

(a) studying at a University or other accredited or recognised educational institution in that other Contracting State; or

(b) securing training required to qualify him to practice a profession or a professional speciality; or

(c) studying or doing research as a recipient of a grant, allowance, or award from a governmental, religious, charitable, scientific, literary or educational organisation;

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

(i) gifts from abroad for the purposes of his maintenance, education, study, research or training;

(ii) the grant, allowance or award ; and

(iii) income, from personal services rendered in that other Contracting State (other than any rendered by an articled clerk or other person undergoing professional training to the person or partnership to whom he is articled or who is providing the training) not exceeding the sum of 750 pounds sterling or 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 may 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.

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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 of the first-mentioned Contracting State, for the primary purpose of:

(a) acquiring technical, professional or business experience from a person other than that resident of the first-mentioned Contracting State; or

(b) studying at a University or other accredited or recognised institution in that other Contracting 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 exceeding 1,500 pounds sterling or its equivalent in Indian currency.

4. 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 a participant in a programme sponsored by the Government of the other Contracting State, for the primary purpose of training, research or study, shall not be subject to tax by that other Contracting State in respect of payments made by the Government of the first-mentioned Contracting State for the purposes of his maintenance, training, research, or study.

Article 22 — Teachers – UK1. An individual who visits a Contracting State for a period not exceeding two years for the

purpose of teaching or engaging in research at a University, college or other recognised educational institution in that State, and who was immediately before that visit a resident of the other Contracting State, shall be exempted from tax by the first-mentioned Contracting State on any remuneration for 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 only apply to income from research if such research is undertaken by the individual in the public interest and not primarily for the benefit of some other private person of persons.

Article 23 — Other income – UK1. Subject to the provisions of paragraph 2 of this Article, items of income beneficially owned by

a resident of a Contracting State, wherever arising, other than income paid out of trusts or the estates of deceased persons in the course of administration, which are not dealt with tin the foregoing Articles of this Convention, shall be taxable only in that State.

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

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

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Soar!

Once there was a king who received a gift of two magnificent falcons from Arabia. They were peregrine falcons, the most beautiful birds he had ever seen. He gave the precious birds to his head falconer to be trained. Months passed and one day the head falconer informed the king that though one of the falcons was flying majestically, soaring high in the sky, the other bird had not moved from its branch since the day it had arrived.

The king summoned healers and sorcerers from all the land to tend to the falcon, but no one could make the bird fly. He presented the task to the member of his court, but the next day, the king saw through the palace window that the bird had still not moved from its perch. Having tried everything else, the king thought to himself, “May be I need someone more familiar with the countryside to understand the nature of this problem.” So he cried out to his court, “Go and get a farmer.”

In the morning, the king was thrilled to see the falcon soaring high above the palace gardens. He said to his court, “Bring me the doer of this miracle.”

The court quickly located the farmer, who came and stood before the king. The king asked him, “How did you make the falcon fly?” With his head bowed, the farmer said to the king, “It was very easy, your highness. I simply cut the branch where the bird was sitting.”

We are all made to fly -- to realize our incredible potential as human beings. But instead of doing that, we sit on our branches, clinging to the things that are familiar to us. The possibilities are endless, but for most of us, they remain undiscovered. We conform to the familiar, the comfortable, the mundane. So for the most part, our lives are mediocre instead of exciting, thrilling and fulfilling. So let us learn to destroy the branch of fear we cling to and free ourselves to the glory of flight.

-- From the Book “Why walk when you can fly”

Documents

INTERNATIONAL TAX & FINANCE CONFERENCE 2011