Federal Republic Of Germany - Legal Draft

CONVENTION

FOR AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES OF INCOME AND CAPITAL

WITH FEDERAL REPUBLIC OF GERMANYWhereas

the annexed Agreement for the avoidance of double taxation of income between

the Government of India and the Government of the Federal Republic of Germany

has been ratified and the instruments of ratification exchanged as required by

Article XX of the said Agreement;Now,

therefore, in exercise of the powers conferred by section 49A of the Indian Income-tax

Act, 1922 (11 of 1922), the Central Government hereby directs that all the

provisions of the said Agreement shall be given effect to in the Union of

India.Notification:

No. GSR 1090, dated 13th September, 1960.TEXT

OF AGREEMENT DATED 18TH MARCH, 1959 REFERRED TO ABOVEWhereas

the Government of India and the Government of the Federal Republic of Germany

desire to conclude an agreement for the avoidance of double taxation of incomeNow,

therefore, it is hereby agreed as follows:ARTICLE

1. The taxes which are

the subject of the present Agreement are:a. in the Federal

Republic of Germany:i.

the

income-tax (Eimkommensteuer),ii.

the

corporation tax (Koerperschaftsteuer),iii.

the

capital tax (Venmoegensteuer), andiv.

the

trade tax (Gewerbesteuer); (hereinafter referred to as " German tax

");a.b. in India-i.

the

income-tax including any surcharge thereon,ii.

the

surtax, andiii.

the

wealth-tax, (hereinafter referred to as " Indian tax ").1.2. The present Agreement

shall also apply to any other taxes of a substantially similar character

imposed in India or the Federal Republic of Germany subsequent to the date of

signature of the present Agreement.ARTICLE

IA1. For the purposes of

this Agreement, the term " resident of a Contracting State " means

any person who, under the laws of that State, is liable to tax therein by

reason of his domicile, residence, place of management or any other criterion

of a similar nature.2. Where by reason of

the provisions of paragraph (1) an individual is a resident of both Contracting

States, then his status shall be determined as follows:a. he shall be deemed to

be a resident of the State in which he has a permanent home available to him;

if he has a permanent home available to him in both States, he shall be deemed

to be a resident of the State with which his personal and economic relations

are closer (centre of vital interests);b. if the State in which

he has his centre of vital interests cannot be determined, or if he has not a

permanent home available to him in either State, he shall be deemed to be a

resident of the State in which he has an habitual abode;c. if he has an habitual

abode in both States or in neither of them, he shall be deemed to be a resident

of the State of which he is a national;d. if he is a national

of both States or of neither of them, the competent authorities of the

Contracting States shall settle the question by mutual agreement.2.3. Where by reason of

the provisions of paragraph (1) a person other than an individual is a resident

of both Contracting States, then it shall be deemed to be a resident of the

State in which its place of effective management is situated.ARTICLE

II1. In the present

Agreement, unless the context otherwise requires:a. the term "

Federal Republic " means the Federal Republic of Germany, and when used in

a geographical sense, the area in which the tax law of the Federal Republic of

Germany is in force;b. the term " India

" means the Republic of India, and when used in a geographical sense, the

area in which the tax law of the Republic of India is in force;c. the terms " a

Contracting State " and " the other Contracting State " mean the

Federal Republic of India, as the context requires;d. the term "

person " includes naturally persons, companies and all other entities

which are treated as taxable units under the tax laws in force in the

respective territories;e. the term "

company " means any entity which is treated as a body corporate or as a

company for tax purposes;f. the term " tax

" means German tax or Indian tax, as the context requiresg. the terms "

Federal Republic enterprise " and " Indian enterprise " mean,

respectively, an industrial or commercial enterprise or undertaking carried on

by a resident of the Federal Republic, and an industrial or commercial

enterprise or undertaking carried on by a resident of India; and the terms

" enterprise of one of the territories " and " enterprise of the

other territory " mean a Federal Republic enterprise or an Indian

enterprise, as the context requires;h.aa. the term "

permanent establishment " means a fixed place of business through which

the business of an enterprise is wholly or partly carried on.ab.bb. the term "

permanent establishment " includes especially--i.

a

place of management;ii.

a

branch;iii.

an

office;iv.

a

factory;v.

a

workshop;vi.

a

sales outlet;vii.

a

warehouse; andviii.

a

mine, an oil or gas well, a quarry or any other place of extraction of natural

resources.ac.bc.cc. a building site or

construction or installation project constitutes a permanent establishment only

if it lasts more than six months.ad.bd.cd.ad.bd.cd.dd. notwithstanding the

preceding provisions of this Article, the term " permanent establishment

" shall be deemed not to include--i.

the

use of facilities solely for the purpose of storage or display of goods or

merchandise belonging to the enterprise;ii.

the

maintenance of a stock of goods or merchandise belonging to the enterprise

solely for the purpose of storage or display;iii.

the

maintenance of a stock of goods or merchandise belonging to the enterprise

solely for the purpose of processing by another enterprise;iv.

the

maintenance of a fixed place of business solely for the purpose of purchasing

goods or merchandise or of collecting information, for the enterprise;v.

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;vi.

the

maintenance of a fixed place of business solely for any combination of

activities mentioned in sub-paragraphs (i) to (v) provided that the overall

activity of the fixed place of business resulting from this combination is of a

preparatory or auxiliary character.ae.be.ce.de.ee. a person acting in a

Contracting State on behalf of an enterprise of the other Contracting State,

other than an agent of an independent status to whom sub-paragraphaf.bf.cf.df.ef.ff. applies, shall be

deemed to be a permanent establishment of that enterprise in the

first-mentioned Contracting State--i.

if

he has, and habitually exercises in that Contracting State, an authority to

conclude contracts in the name of the enterprise, unless his activities are

limited to the purchase of goods or merchandise for the enterprise; orii.

if

he habitually maintains in the first-mentioned Contracting State a stock of

goods or merchandise belonging to the enterprise from which he regularly

delivers goods or merchandise for or on behalf of the enterprise; oriii.

if

he habitually secures orders in the first-mentioned Contracting State

exclusively, or almost exclusively, for the enterprise itself, or for the

enterprise and other enterprises which are controlled by it or have a

controlling interest in it.bg.cg.dg.eg.fg.gg. 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.ah.bh.ch.dh.eh.fh.gh.hh. 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;a.b.c.d.e.f.g.h.i. the term "

pension " means periodic payments made in consideration of services

rendered or by way of compensation for injuries received;j. the term "

annuity " means a stated sum payable periodically at stated times during

life or during a specified or ascertainable period of time;k. the term "

competent authority " means in the case of India the Central Government in

the Ministry of Finance, Department of Revenue, and in the case of the Federal

Republic of Germany, the Federal Minister of Finance.a.b.c.d.e.f.g.h.i.j.k.l.

the

term " fiscal year " means--i. in relation to Indian

tax, the previous year as defined in the Income-tax Act, 1961;ii. in relation to German

tax, the calendar year.1.2.

In

the application of the provisions of this Agreement in one of the Contracting

States any term not otherwise defined in this Agreement shall, unless the

context otherwise requires, have the meaning which it has under the laws in

force in that Contracting State relating to the taxes which are the subject of

this Agreement.ARTICLE

III1. 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 it has

been customary in a Contracting State to determine the profits to be attributed

to a permanent establishment on the basis of an apportionment of the total

profits of the enterprise to its various parts, nothing in paragraph (2) shall

preclude that Contracting State from determining the profits to be taxed by

such an apportionment as may be customary; the method of apportionment adopted

shall, however, be such that the result shall be in accordance with the

principles contained in this Article.5. No profits shall be

attributed to a permanent establishment by reason of the mere purchase by that

permanent establishment of goods or merchandise for the enterprise.6. For the purposes of

the preceding paragraphs, the profits to be attributed to the permanent

establishment shall be determined by the same method year by year unless there

is good and sufficient reason to the contrary.7. Where profits include

items of income which are dealt with separately in other Articles of this

Agreement, then the provisions of those Articles shall not be affected by the

provisions of this Article.ARTICLE

IVWhere

a resident of a Contracting State carries on business with a resident of the

other Contracting State and it appears to the taxation authorities of the

first-mentioned Contracting State that owing to the close connection between

such persons the course of business is so arranged that the business done

produces to the resident of the first-mentioned Contracting State either no

profits or less than ordinary profits which might be expected to arise in that

business, tax shall be leviable in the former 2 Contracting State on such

profits as may reasonably be deemed to have arisen therefrom.ARTICLE

V1.

Income

derived from the operation of aircraft by an enterprise of one of the

Contracting State shall not be taxed in the other Contracting State unless the

aircraft is operated wholly or mainly between places within that other

Contracting State.2.

Paragraph

(1) shall likewise apply in respect of participations in pools of any kind by

enterprises engaged in air transport.ARTICLE

VI1. Profits derived from

the operation of ships in international traffic shall be taxable only in the

Contracting State in which the place of effective management of the enterprise

is situated.2. Notwithstanding the

provisions of paragraph (1), such profits may be taxed in the other Contracting

State from which they are derived provided that the tax so charged shall not

exceed:a. during the first five

fiscal years after the entry into force of the Protocol signed on June 28,

1984, 50 per cent, andb. during the subsequent

five fiscal years, 25 per cent, of the tax otherwise imposed by the internal

law of that State. Subsequently, only the provisions of paragraph (1) shall be

applicable.1.2.3. The provisions of

paragraphs (1) and (2) shall also apply to profits from the participation in a

pool, a joint business or an international operating agency.4. Paragraphs (1) and

(2) shall not apply to profits arising as a result of coastal traffic. The term

" coastal traffic " means traffic which originates and terminates in

the territorial waters of the same Contracting State.ARTICLE

VII1. Dividends paid by a company

which is a resident of a Contracting State to a resident of the other

Contracting State may be taxed in that other State.2. However, such

dividends may also be taxed in the Contracting State of which the company

paying the dividends is a resident, and according to the laws of that State.

But if the beneficial owner of the dividends is a resident of the other

Contracting State, the tax so charged shall not exceed:a. in the case of the

Federal Republic, 15 per cent of the gross amount of the dividends.b. in the case of India,

where the dividends relate in whole or in part to a new contribution, 15 per

cent of the gross amount of the dividends attributable to the new contribution.In

this Article, the term " new contribution " means any share capital,

other than bonus shares, issued after the date of entry into force of the

Protocol signed on June 28, 1984 by a company which is a resident of India, and

beneficially owned by a resident of the Federal Republic.1.2.3. The term "

dividends " as used in this Article means income from shares, mining

shares, founders' shares, or other rights, not being debt claims, participating

in profits, as well as income from other corporate rights which is subjected to

the same taxation treatment as income from shares by the laws of the State of

which the company making the distribution is a resident, and income derived by

a sleeping partner from his participation as such and distributions on

certificates of an investment trust.4. The provisions of

paragraphs (1) and (2) shall not apply if the beneficial owner of the

dividends, being a resident of a Contracting State, carries on business in the

other Contracting State of which the company paying the dividends is a

resident, through a permanent establishment situated therein, and the holding

in respect of which the dividends are paid is effectively connected with such

permanent establishment. In such case, the provisions of Article III shall

apply.5. Where a company which

is a resident of a Contracting State derives profits or income from the other

Contracting State, but other State may not impose any tax on the dividends paid

by the company, except insofar as such dividends are paid to a resident of that

other State or in so far as the holding in respect of which the dividends are

paid is effectively connected with a permanent establishment situated in that

other State, nor subject the company's undistributed profits to a tax on the

company's undistributed profits even if the dividends paid or the undistributed

profits consist wholly or partly of profits or income arising in such other

State.ARTICLE

VIll1. Interest arising in a

Contracting State and paid to a resident of the other Contracting State may be

taxed in that other State.2. However, such

interest may also be taxed in the Contracting State in which it arises and

according to the laws of that State. But the tax so charged on interest payable

in respect of a loan given or debt created after the date of entry into force

of the Protocol signed on 28th June, 1984 shall not exceed:a. 10 per cent of the

gross amount, if such interest is paid on any loan of whatever kind granted by

a bank; andb. 15 per cent of the

gross amount in all other cases.2.3. Notwithstanding the

provisions of paragraph (2):a. interest arising in

the Federal Republic and paid to the Indian Government or the Reserve Bank of

India shall be exempt from German tax;b. interest arising in

India and paid to the Government of the Federal Republic of Germany, the

Deutsche Budesbank, the Kreditanstalt fur Wiederaufbau or the Deutsche

Gesellschaft fur wirtschaftliche Zusammenarbeit (Entwicklungsgesellschaft)

shall be exempt from Indian tax.2.3.4. The term "

interest " as used in this Article means income from debt-claims of every

kind, whether or not secured by mortgage and whether or not carrying a right to

participate in the debtor's profits, and in particular income from government

securities and income from bonds or debentures, including premiums and prizes

attaching to such securities, bonds or debentures.5. Interest shall be

deemed to arise in a Contracting State when the payer is that State itself, a

Land, a political sub-division, a local authority or a resident of that State.

Where, however, the person paying the interest, whether he is a resident of a

Contracting State or not, has in a Contracting State, a permanent establishment

in connection with which the indebtedness on which the interest is paid was

incurred, and such interest is borne by such permanent establishment, then such

interest shall be deemed to arise in the State in which the permanent

establishment is situated.6. The provisions of

paragraphs (1) and (2) shall not apply if the beneficial owner of the interest,

being a resident of a Contracting State carries on business in the other

Contracting State in which the interest arises through a permanent

establishment situated therein and the debt-claim in respect of which the

interest is paid is effectively connected with such permanent establishment. In

such case, the provisions of Article III shall apply.ARTICLE

VIIIA1. 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 insofar

as the fees for technical services are concerned, the tax so charged shall not

exceed 20 per cent of the gross amount of such fees.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

kind to any person, other than payments to an employee of the person making the

payments, in consideration for services of a managerial, technical or

consultancy nature, including the provision of services of technical or other

personnel.5. The provisions of

paragraphs (1) and (2) of this Article 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, and the right, property or contract in respect

of which the royalties or fees or technical services are paid is effectively

connected with such permanent establishment. In such case, the provisions of

Article III shall apply.6. Royalties and fees

for technical services shall be deemed to arise in a Contracting State where

the payer is that State itself, a land, 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 in connection with

which the obligation to make the payments was incurred and the payments are

home by that permanent establishment, then the royalties or fees for technical

services shall be deemed to arise in the Contracting State in which the

permanent establishment is situated.7. Where, owing to a

special relationship between the payer and some other person, the amount of the

royalties or fees for technical services paid exceeds for whatever reason 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

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

IXIncome

from immovable property may be taxed in the Contracting State in which the

property is situated. For this purpose any rent or royalty or other income

derived from the operation of a mine, quarry, or any other extraction of

natural resources shall be regarded as income from immovable property.ARTICLE

X1. Capital gains arising

from the sale, exchange or tansfer of a capital asset whether movable or

immovable, may be taxed in the Contracting State in which the capital asset is

situated at the time of such sale, exchange or transfer. For this purpose, the

situs of the shares of a company shall be deemed to be in the Contracting State

where the company is incorporated.2. However, gains from

the alienation of ships or aircraft operating in international traffic and

movable property pertaining to the operation of such ships or aircraft shall be

taxable only in the Contracting State in which the place of effective

management of the enterprise is situated.ARTICLE

XI1. Remuneration,

including pensions and annuities, paid out of public funds of India in respect

of present or past services shall not be taxed in the Federal Republic unless

the payment is made to the citizen of the Federal Republic.2. Remuneration,

including pensions and annuities, paid out of public funds of the Federal

Republic or its Leander or political sub-divisions thereof in respect of

present or past services shall not be taxed in India unless the payment is made

to a citizen of India.3. The provisions of

paragraphs (1) and (2) of this Article shall not apply to payments in respect

of services in connection with any trade or business carried on by either of

the Contracting Parties or political sub-divisions thereof for purposes of

profit.4. The provisions of

paragraphs (1) and (2) of this Article shall also apply to remuneration,

including pensions and annuities, paid by the Federal Bank, the Federal

Railways and the Postal Administration of the Federal Republic and the

corresponding organisations of India.ARTICLE

XII1. Profits or

remuneration from professional services (including services as a director) or

from services as an employee derived by an individual who is a resident of one

of the territories may be taxed in the other territory only if such services

are rendered in that other territory.2. An individual who is

a resident of India shall not be taxed in the Federal Republic on profits or

remuneration referred to in paragraph (1), if--a. he is temporarily

present in the Federal Republic for period or a periods not exceeding in the

aggregate 183 days during a taxable year,b. the services are

rendered for or on behalf of a resident of India,c. the profits or

remuneration are subject to Indian tax, andd. the profits or

remuneration are not deducted in computing the profits of an enterprise

chargeable to German tax.2.3. An individual who is

a resident of the German shall not be taxed in India on the profits or

remuneration referred to in paragraph (1), if--a. he is temporarily

present in India for a period or periods not exceeding in the aggregate 183

days during a relevant " previous year ",b. the services are

rendered for or on behalf of a resident of the Federal Republic,c. the profits or

remuneration are subject to German tax, andd. the profits or

remuneration are not deducted in computing the profits of an enterprise chargeable

to Indian tax.2.3.4. Where an individual

permanently or predominantly renders services on ships or aircraft operated by

an enterprise of one of the Contracting States such services shall be deemed to

be rendered in that Contracting State.ARTICLE

XIIIAny

pension or annuity (other than pension or annuities to which Article XI

applies) derived by a resident of one of the Contracting States from sources in

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

XIVA

professor or teacher from one of the Contracting States, who receives

remuneration for teaching during a period of temporary residence not exceeding

two years, at a university, college, school or other educational institution in

the other Contracting State shall not be taxed in that other Contracting State

in respect of that remuneration.ARTICLE

XV1. An individual from

one of the Contracting States who is temporarily present in the other territory

solely-a. as a student at a

recognized university, college or school in such other territory,b. as a business

apprentice (including in the Federal Republic a Volontar or a Praktikant), orc. as the recipient of a

grant, allowance or award for the primary purpose of study or research from a

religious, charitable, scientific or educational organisation, shall not be

taxed in the other Contracting State in respect of remittances from abroad for

the purposes of his maintenance, education or training, in respect of a

scholarship, and in respect of any amount representing remuneration for an employment

in that other Contracting State.1.2. An individual from

one of the Contracting States who is temporarily present in the other

Contracting States for a period not exceeding one year, as an employee of or

under contract with, an enterprise of the former Contracting State or an

organisation referred to in paragraph (1) sub-paragraph (c) above, solely to

acquire technical, professional or business experience from a person other than

such enterprise or organisation, shall not be taxed in that other Contracting

State on remuneration for such period, unless the amount thereof exceeds 15,000

DM or its equivalent in Indian currency.3. An individual from

one of the Contracting States temporarily present in the other territory under

arrangements with the Government of that other Contracting State solely for the

purpose of training, research or study shall not be taxed in that other

Contracting State on remuneration received in respect of such training,

research or study, unless the amount thereof exceeds 25,000 DM or its

equivalent in Indian Currency.ARTICLE

XVA1. Capital represented

by immovable property referred to in Article IX, owned by a resident of a

Contracting State and situated in the other Contracting State, may be taxed in

that other State.2. Capital represented

by movable property forming part of the business property of a permanent

establishment which an enterprise of a Contracting State has in the other

Contracting State, may be taxed in that other State.3. Capital represented

by ships and aircraft operated in international traffic and by movable property

pertaining to the operation of such ships or aircraft shall be taxable only in

the Contracting State in which the place of effective management of the

enterprise is situated.4. Capital represented

by shares in a company shall be taxable in the Contracting State in which such

company is resident.5. All other elements of

capital of a resident of a Contracting State shall be taxable only in that

State.ARTICLE

XVI1. The laws in force in

either of the Contracting States will continue to govern the assessment and

taxation of income in the respective Contracting States except where express

provision to the contrary is made in this Agreement.2. Where a resident of

India derives income or owns capital which, in accordance with the provisions

of this Agreement, may be taxed in the Federal Republic, India shall allow as a

deduction from the tax on the income of that resident an amount equal to the

income-tax paid in the Federal Republic, whether directly or by deduction; and

as a deduction from the tax on the capital of that resident an amount equal to

the capital tax paid in the Federal Republic. Such deduction in either case

shall not, however, exceed that part of the income-tax or capital tax (as

computed before the deduction is given) which is attributable, as the case may

be, to the income or the capital which may be taxed in the Federal Republic.

Further, where such resident is a company by which surtax is payable in India,

the deduction in respect of income-tax paid in the Federal Republic shall be

allowed in the first instance from income-tax payable by the company in India

and as to the balance, if any, from surtax payable by it in India.3. Subject to the

provisions of paragraph (1) above, tax shall be determined in the case of a

resident of the Federal Republic as follows:a. Unless the provisions

of sub-paragraph (b) apply, there shall be excluded from the basis upon which

German tax is imposed any item of income arising in India and any item of

capital situated within India, which, according to this Agreement, may be taxed

in India. The Federal Republic, however, retains the right to take into account

in the determination of its rate of tax the items of income and capital so

excluded.In

the case of income from dividends the foregoing provisions shall apply only to

such dividends as are paid to a company (not including partnerships) being a

resident of the Federal Republic by a company being a resident of India at

least 10 per cent of the capital of which is owned directly by the

first-mentioned company. For the purposes of taxes on capital there shall also

be excluded from the basis upon which German tax is imposed any shareholding,

the dividends of which are excluded or, if paid, would be excluded according to

the immediately foregoing sentence, from the basis upon which German tax is

imposed.b. Subject to the

provisions of German tax law regarding credit for foreign tax (as it may be

amended from time to time without changing the general principle hereof), there

shall be allowed as a credit against German income and corporation tax payable

in respect of the following items of income arising in India the Indian tax

paid under the laws of India and in accordance with this agreement on--aa. profits derived from

the operation of ships in international traffic;ab.bb. dividends not dealt

with in sub-paragraph (a);ac.bc.cc. interest;ad.bd.cd.dd. royalties and fees

for technical services.a.b.c. For the purposes of

items (bb) to (dd) of sub-paragraph (b), the term " Indian tax "

shall be deemed to include any amount which would have been payable as Indian

tax under the laws of India and in accordance with this Agreement for any year

but for an exemption from, or reduction of, tax granted for that year under:aa. sections 10(4),

10(4A), 10(15)(iv) and 80K of the Income-tax Act, 1961;ab.bb. any other provision

of similar character to be agreed between the competent authorities of both

Contracting States.If

this amount is less than 50 per cent of the German tax chargeable on such

income, the term " Indian tax " shall be deemed to be at least this

50 per cent of the German tax.a.b.c.d. The provisions of

sub-paragraph (a) shall not apply to the profits of, and to the capital

represented by, movable and immovable property forming part of the business

property of a permanent establishment and to the gains from the alienation of

such property; to dividends paid by, and to the shareholding in a company

unless the resident of the Federal Republic concerned proves that the receipts

of the permanent establishment or company are derived exclusively or almost

exclusively:--aa. from producing or

selling goods or merchandise giving technical advice or rendering engineering

services, or doing banking or insurance business, within India, orab.bb. from dividends paid

by one or more companies, being residents of India, more than 25 per cent of

the capital of which is owned by the first-mentioned company, which themselves

derive their receipts exclusively or almost exclusively from producing or

selling goods or merchandise, giving technical advice or rendering engineering

services, or doing banking or insurance business, within India.In

such a case, Indian tax payable under the laws of India and in accordance with

this Agreement on the above-mentioned items of income and capital shall,

subject to the provisions of German tax law regarding credit for foreign tax

(as it may be amended from time to time without changing the general principle

hereof), be allowed as a credit against German income or corporation tax

payable on such items of income or against German capital tax payable on such

items of capital.ARTICLE

XVIIThe

competent authorities shall exchange such information (being information which

is at their disposal under their respective taxation laws in the normal course

of administration) as is necessary for carrying out the provisions of the

present Agreement. Any information so exchanged shall be treated as secret and

shall not be disclosed to any persons other than those concerned with the

assessment and collection of the taxes which are the subject of the present

Agreement. No information as aforesaid shall be exchanged by the competent

authority of one of the Contracting States which would disclose any trade,

business, industrial or professional secret or any trade process to the

authority of the other Contracting State.ARTICLE

XVIII1. 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 Agreement, 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. The case must be presented within three years from the first

notification of the action resulting in taxation not in accordance with the

provisions of the Agreement.2. The competent

authority shall endeavour, if the objection appears to it to be justified and

if it is not itself able to arrive at 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 Agreement. Any agreement reached shall be implemented notwithstanding any

time limits in the domestic law of the Contracting States.3. The competent

authorities of the Contracting States shall endeavour to resolve by mutual

Agreement any difficulties or doubts arising as to the interpretation or

application of the agreement. They may also consult together for the

elimination of double taxation in cases not provided for in the Agreement.4. The competent

authorities of the Contracting States may communicate with each other directly

for the purpose of reaching an Agreement in the sense of the preceding

paragraphs.ARTICLE

XIX1. This Agreement shall

apply to Land Berlin provided that the Government of the Federal Republic of

Germany has not delivered a contrary declaration to the Government of India

within three months from the date of entry into force of the Agreement.2. Upon the application

of this Agreement to Land Berlin, references in the agreement to the Federal

Republic shall be deemed also to be references to Land Berlin.ARTICLE

XX1. The present Agreement

shall ratified.2. This instruments of

ratification shall be exchanged at Bonn as soon as possible.3. This Agreement shall

come into force after the expiration of a month following the date on which the

instruments of ratification are exchanged and shall thereupon have effect--a. Inrespect of Indian

tax in relation to the income for any " previous year " relevant to

any year of assessment beginning on or after 1st April, 1958, andb. In respect of the

German tax, for taxes which are levied for the calendar year 1957 and for

subsequent calendar years.ARTICLE

XXIThis

Agreement shall continue in effect indefinitely but either of the Contracting

Parties may on or before the 30th day of June in any calendar year after 1960

give to the other Contracting Party notice of termination, and in such event

this Agreement shall cease to be effective--a. in respect of Indian

tax, in relation to income and capital assessable for the assessment years

commencing on or after the first day of April in the calendar year next

following that in which the notice of termination is given, andb. in respect of German

tax, for taxes which are levied for the calendar years following the year in

which the notice of termination is given.In

witness whereof the undersigned, duly authorised thereto have signed this

Agreement and have affixed thereto their seals.Done

at New Delhi on 18th day of March, 1959, in duplicate, in the English, German

and Hindi languages, all the three texts being authentic, except in the case of

doubt when the English text shall prevail.EXCHANGE

OF NOTES BETWEEN CONTRACTING STATES ON 28TH JUNE 1984With

reference to the Protocol, signed today, amending the Agreement between the

Government of the Federal Republic of Germany and the Government of India for

the Avoidance of Double Taxation of Income, signed in New Delhi on 18 March,

1959, I have the honour on behalf of the Government of the Federal Republic of

Germany to inform you that the two Contracting States have reached agreement on

the following:1. Notwithstanding the

provisions of Articles VII and VIII of the Agreement, dividends and interest

arising in a Contracting State may be taxed in that State and according to the

law of that State--a. if they are derived

from rights or debt claims carrying a right to participate in profit (including

income derived by a sleeping partner from his participation as such and in the

case of the Federal Republic from a " partiarisches Darlehen " and

from " Gewinnobliptionen) ", andb. under the condition

that they are deductible in the determination of profits of the debtor of such

income.2. Where a company being

a resident of the Federal Republic distributes income derived from sources

within India, sub-paragraph (a) of paragraph (3) of Article XVI of the

Agreement shall not preclude the compensatory imposition of corporation tax on

such distributions in accordance with the provisions of German tax law,

designed to ensure the crediting of the underlying tax against the income-tax

payable by the shareholder.3. Notwithstanding the

provisions of paragraph (3) of Article III of the Agreement, no deduction shall

be allowed in respect of amounts paid or 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--a. royalties, fees or

similar payments in return for the use of patents or other similar rights;b. commission for

specific services performed or for management; andc. interest on moneys

lent to the permanent establishment, except in the case of a banking

institution.4. It is understood that

the deductions in respect of the head office expenses as referred to in

paragraph (3) of Article III of the Agreement shall in no case be less than

what are allowable under the Indian Income-tax Act as on the date of entry into

force of this Protocol.5. It is understood that

the taxation of royalty income as consists of lump sum consideration for the

transfer outside India of, or the imparting of information outside India in

respect of, any data, documentation, drawing or specification relating to any

patent, invention, model, design, secret formula or process or trade mark or

similar property, shall not exceed 20 per cent of the gross amount of such

payments.6. It is also understood

that in relation to Article XVII of the Agreement, the term " information

" shall include the documents. It is further understood that the German

tax law provides for the transmission of information under certain conditions

upon request and it would be possible to furnish information to the competent

authority in India under these provisions irrespective of the said Article.I

shall be grateful if you will kindly confirm your agreement to the above; in

such case, this Note and your reply there to shall be deemed to be part of the

Protocol