Germany - Legal Draft

Double Taxation

Avoidance AgreementNotification under

section 90: Agreement between the Government of the Republic of India and the

Government of the Federal Republic of Germany for the avoidance of double

taxation with respect to taxes on income and capitalNotification

No. S. O. 836(E), dtd. 29.11.1996.WHEREAS the annexed

Agreement between the Government of the Republic of India and the Government of

the Federal Republic of Germany for the avoidance of double taxation with

respect to taxes on income and capital has been concluded:AND

WHEREAS the

aforesaid agreement was brought into force on the 26th day of October, 1996,

after the completion by both the Contracting States to each other of the

procedure required under their laws in accordance with Article 28 of the said

Agreement:Now,

THEREFORE, in exercise of the powers conferred by section 90 of the

Income-tax Act, 1961 (43 of 1961), and section 44A of the Wealth-tax Act, 1957

(27 of 1957), the Central Government hereby directs that all the provisions of

the said Agreement shall be given effect to in the Union of India.AGREEMENT

BETWEEN THE REPUBLIC OF INDIA AND THE FEDERAL REPUBLIC OF GERMANY FOR THE

AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME AND CAPITALWHEREAS

the

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

Republic of India desire to conclude an Agreement for the avoidance of double

taxation with respect to taxes on income and capital, and for promoting their

mutual economic relations:NOW,

THEREFORE,

it is hereby agreed as follows:Article

1PERSONAL

SCOPEThis

Agreement shall apply to persons who are residents of one or both of the

Contracting States.Article

2TAXES

COVERED1. This Agreement shall

apply to taxes on income and on capital imposed on behalf of a Contracting

State, of a land or political sub-division or local authority thereof,

irrespective of the procedure in which they are levied.2. There shall be

regarded as taxes on income and on capital all taxes imposed on total income,

on total capital, or on elements of income or of capital, including taxes on

gains from the alienation of movable or immovable property, and the pay roll

tax.3. The existing taxes to

which this Agreement shall apply are in particular:a. In the Federal

Republic of Germany:the

Einkommensteuer (income-tax),the

Korperschaftsteuer (corporation tax),the

Vermogensteuer (capital tax), andthe

Gewerbesteuer (trade tax)(hereinafter

referred to as "German tax")a.b. In the Republic of

India:the

income-tax including any surcharge tax thereon (Einkommensteuer, einschl,

darauf entfallender Zusatzsteuern), and the wealth-tax (Vermogensteuer)(hereinafter

referred to as "Indian tax").1.2.3.4. This Agreement shall

apply also to any identical or substantially similar taxes which are imposed

after the date of signature of this Agreement in addition to, or in place of,

the existing taxes. The competent authorities of the Contracting States shall

notify each other of changes of importance which have been made in their

respective taxation laws.Article

3GENERAL

DEFINITIONS1. For the purposes of

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

"Federal Republic of Germany" means the area in which the tax law of

the Federal Republic of Germany is in force including the area of the sea-bed,

its sub-soil and the superjacent water column adjacent to the territorial sea,

in so far as the Federal Republic of Germany exercises their sovereign rights

and jurisdiction in conformity with international law and its national

legislation;b. the term

"Republic of India" means the territory of the Republic of India and

includes the territorial sea and airspace above it. For the purposes of this

Agreement the term shall also cover any other maritime zone in which the Republic

of India has sovereign rights, other rights and jurisdictions, according to the

Indian Law and in accordance with international law in particular as laid down

in the UN Convention of the law of the Sea;c. the terms "a

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

Federal Republic of Germany or the Republic of India as the context requires;d. the term

"person" includes an individual, a company and any other entity which

is treated as a taxable unit under the taxation laws in force in the respective

Contracting States;e. the term

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

a company or body corporate under the taxation laws in force in the respective

Contracting States.f. the term

"immovable property" has the meaning which it has under the law of

the Contracting State in which the property in question is situated. The term

shall in any case include property accessory to immovable property, livestock

and equipment used in agriculture and forestry, rights to which the provisions

of general law respecting landed property apply, usufruct of immovable property

and rights to variable or fixed payments as consideration for the working of,

or the right to work, mineral deposits, sources and other natural resources

ships, boats and aircraft shall not be regarded as immovable property;g. the terms

"enterprise of a Contracting State" and "enterprise of the other

Contracting State" mean respectively an enterprise carried on by a

resident of a Contracting State and an enterprise carried on by a resident of

the other Contracting State;h. the term

"national" means:i.

in

respect of the Federal Republic of Germany any German within the meaning of

Article 116, paragraph (1), of the Basic Law for the Federal Republic of

Germany and any legal person, partnership and association deriving its status

as such from the law in force in the Federal Republic of Germany;ii.

in

respect of the Republic of India any national of the Republic of India and any

legal person, partnership and association deriving its status as such from the

law in force in the Republic of India;a.b.c.d.e.f.g.h.i. the term

"international traffic" means any transport by a ship or aircraft

operated by an enterprise which has its place of effective management in a

Contracting State except when the ship or aircraft is operated solely between

places in the other Contracting State;j. the term

"competent authority" means in the case of the Federal Republic of

Germany the Federal Ministry of Finance, and in the case of the Republic of

India the Central Government in the Ministry of Finance (Department of Revenue)

or its authorised representative;k. 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;2. the term

"tax" means German tax or Indian tax as the context requires but

shall not include interest or penalty imposed in relation to such taxes.3. As regards the

application of this Agreement by a Contracting State any term not defined

therein shall, unless the context otherwise requires, have the meaning which it

has under the law of that State concerning the taxes to which this Agreement

applies.Article

4RESIDENT1. 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 criterion of a similar

nature. But this term does not include any person who is liable to tax in that

State in respect only of income from sources in that State or capital situated

therein.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 Sate, 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.1.2.3. 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

5PERMANENT

ESTABLISHMENT1. 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;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; andi. 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.1.2.3. 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.2.3.4.5. 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; orc. 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.5.6. 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 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

6INCOME

FROM IMMOVABLE PROPERTY1. Income derived by a

resident of a Contracting State from immovable property situated in the other

Contracting State may be taxed in that other State.2. The provisions of paragraph

1 shall apply to income derive from the direct use, letting, or use in any

other form of immovable property.3. The provisions of

paragraphs 1 and 2 shall also apply to the income from immovable property of an

enterprise and to income from immovable property used for the performance of

independent personal services.Article

7BUSINESS

PROFITS1. 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. In so far 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

8SHIPPING

AND AIR TRANSPORT1. Profits from the

operation of ships or aircraft in international traffic shall be taxable only

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

enterprise is situated.2. If the place of

effective management of a shipping enterprise is aboard a ship, then it shall

be deemed to be situated in the Contracting State in which the home harbour of

the ship is situated, or, if there is no such home harbour, in the Contracting

State of which the operator of the ship is a resident.3. 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 shall not

apply in relation to such interest.4. The provisions of paragraph

1 shall also apply to profits from the participation in a pool, a joint

business or an international operating agency.Article

9ASSOCIATED

ENTERPRISESWhere--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, orb. 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 would, but for

those conditions, have accrued to one of the enterprises, but, by reason of

those conditions, have not so accrued, may be included in the profits of that

enterprise and taxed accordingly.Article

10DIVIDENDS1. 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 recipient is the beneficial owner of the dividends, the tax so charged

shall not exceed 10 per cent. of the gross amount of the dividends.This

paragraph shall not affect the taxation of the company in respect of the

profits out of which the dividends are paid.1.2.3. The term

"dividends" as used in this article means--a. dividends on shares

including income from shares, "jouissance" shares or

"jouissance" rights, mining shares, founders' shares or other rights,

not being debt-claims, participating in profits, andb. other income 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.1.2.3.4. 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, or performs in that other

State independent personal services from a fixed base situated therein, and the

holding in respect of which the dividends 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.5. Where a company which

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

Contracting State, that 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 insofar as the holding in respect of which the dividends

are paid is effectively connected with a permanent establishment or a fixed

base situated in that other State, nor subject to 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

11INTEREST1. 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 if the recipient is the beneficial

owner of the interest, the tax so charged shall not exceed 10 per cent. of the

gross amount of the interest.3. Notwithstanding the

provisions of paragraphs 1 and 2--a. interest arising in

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

the Reserve Bank of India, the Industrial Finance Corporation of India, the

Industrial Development Bank of India, the Export-Import Bank of India, National

Housing Bank and Small Industries Development Bank of India shall be exempt

from German tax;b. interest arising in

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

Germany, the Deutsche Bundesbank, the Kreditanstat fur Wiederaufbau or the

Deutsche Investitions-und Entwicklungsgesellschaft (DEG) and interest paid in

consideration of a loan guaranteed by HERMES--Deckung shall be exempt from the

Indian tax.1.2.3.4. 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. Penalty charges

for late payment shall not be regarded as interest for the purpose of this

article.5. The provisions of

paragraphs 1, 2 and 3 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, or performs in that other State independent

personal services from a fixed base situated therein, and the debt-claim in

respect of which the interest is paid is effectively connected with such permanent

establishment or fixed base. In such case the provisions of Article 7 or

Article 14, as the case may be, shall apply.6. Interest shall be

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

land or 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

or a fixed base in connection with which the indebtedness on which the interest

is paid was incurred, and such interest is borne by such permanent

establishment or fixed base, then such interest shall be deemed to arise in the

State in which the permanent establishment or fixed base is situated.7. 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 interest, having regard to the

debt-claim for which it is 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 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

12ROYALTIES

AND FEES FOR TECHNICAL SERVICES1. 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

receive 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 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 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

13CAPITAL

GAINS1. Gains derived by a

resident of a Contracting State from the alienation of immovable property

situated in the other Contracting State may be taxed in that other State.2. Gains from the

alienation of 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 or of movable property pertaining to a fixed base

available to a resident of a Contracting State in the other Contracting State

for the purpose of performing independent personal services, including such

gains from the alienation of such a permanent establishment (alone or with the

whole enterprise) or of such fixed base, may be taxed in that other State.3. Gains from the

alienation of ships or aircraft operated in international traffic or 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. Gains from the

alienation of shares in a company which is a resident of a Contracting State

may be taxed in that State.5. Gains from the

alienation of any property other than that referred to in paragraphs 1 to 4

shall be taxable only in the Contracting State of which the alienator is a

resident.Article

14INDEPENDENT

PERSONAL SERVICES1. Income derived by an

individual who is a resident of a Contracting State from the performance of

professional services or other independent activities of a similar character

shall be taxable only in that State except in the following circumstances when

such income may also be taxed in the other Contracting State:a. if he has a fixed

base regularly available to him in the other Contracting State for the purpose

of performing his activities, in that case, only so much of the income as is attributable

to that fixed base may be taxed in that other State; orb. if his stay in the

other Contracting State is for a period or periods amounting to or exceeding in

the aggregate 120 days in the relevant fiscal year; in that case, only so much

of the income as is derived from his activities performed in that other State

may be taxed in that other State.1.2. The term

"professional services" includes independent scientific, literary,

artistic, educational or teaching activities, as well as the independent activities

of physicians, surgeons, lawyers, engineers, architects, dentists and

accountants.Article

15DEPENDENT

PERSONAL SERVICES1. Subject to the

provisions of Articles 16, 18, 19 and 20, salaries, wages and other similar

remuneration derived by a resident of a Contracting State in respect of an

employment shall be taxable in the other Contracting State only if the

employment is exercised there.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 ifa. the recipient is

present in the other State for a period or periods not exceeding in the

aggregate 183 days in the fiscal year concerned, andb. the remuneration is

paid by, or on behalf of, an employer who is not a resident of the other State,

andc. the remuneration is

not borne by a permanent establishment or a fixed base which the employer has

in the other State.1.2.3. Notwithstanding the

preceding provisions of this article, remuneration derived in respect of an

employment exercised aboard a ship or aircraft operated in international

traffic may be taxed in the Contracting State of which the enterprise operating

the ship or aircraft is a resident.Article

16DIRECTORS'

FEESDirectors'

fees and similar payments derived by a resident of a Contracting State in his

capacity, as a member of the board of directors of a company which is a

resident of the other Contracting State may be taxed in that other State.Article

17ARTISTS

AND SPORTSPERSONS1. Notwithstanding the

provisions of Articles 7, 14 and 15, income derived by a resident of a

Contracting State as an entertainer, such as a theatre, motion picture, radio

or television artiste, or a musician, or as a sportsperson, from his personal

activities as such exercised in the other Contracting State, may be taxed in

that other State.2. Where income in

respect of personal activities exercised by an entertainer or a sportsperson in

his capacity as such accrues not to the entertainer or sportsperson himself but

to another person, that income may, notwithstanding the provisions of Articles

7, 14, and 15, be taxed in the Contracting State, in which the activities of

the entertainer or sportsperson are exercised.3. However, such income

shall not be taxed in the State mentioned in paragraph 1 if the said activities

are exercised during a visit to that State by a resident of the other

Contracting State and where such visit is financed directly or indirectly by

that other State, a land, a political subdivision or a local authority thereof

or by an organisation which in that other State is recognised as a charitable

organisation.Article

18NON-GOVERNMENT

PENSIONSSubject

to the provisions of Article 19, pensions and other similar remuneration paid

to a resident of a Contracting State in consideration of past employment shall

be taxable only in that State.Article

19GOVERNMENT

SERVICE1.a. Remuneration other

than a pension, paid by a Contracting State, a land, a political sub-division

or a local authority thereof to an individual in respect of services rendered

to that State, land, sub-division or authority shall be taxable only in that

State.b. However, such

remuneration shall be taxable only in the other Contracting State, if the services

are rendered in that State and the individual is a resident of that State who:i.

is

a national of that State; orii.

did

not become a resident of that State solely for the purpose of rendering the

services.1.2.a. Any pension paid by a

Contracting State, a land, a political sub-division or a local authority

thereof to an individual in respect of services rendered to that State, land,

sub-division or authority shall be taxable only in that State.b. However, such pension

shall be taxable only in the other Contracting State if the individual is a

resident of and a national of that other State.1.2.3. The provisions of

Articles 15, 16 and 18 shall apply to remuneration and pensions in respect of

services rendered in connection with a business carried on by a Contracting

State, a land, a political sub-division or a local authority thereof.4. The provisions of

paragraph 1 shall likewise apply in respect of remuneration paid, under a

development assistance programme of a Contracting State, a land, a political

sub-division or a local authority thereof, out of funds exclusively supplied by

that State, land, political sub-division or local authority, to a specialist or

volunteer seconded to the other Contracting State with the consent of that

other State.Article

20TEACHERS,

STUDENTS AND TRAINEES1. An individual who

visits a Contracting State at the invitation of that State or of a university,

college, school, museum or other cultural institution of that State or under an

official programme of cultural exchange for a period not exceeding two years

solely for the purpose of teaching, giving lectures or carrying out research at

such institution and who is, or was immediately before that visit, a resident

of the other Contracting State shall be exempt from tax in the first-mentioned State

on his remuneration for such activity during the period of the first year from

the date of his arrival and in the next year the exemption will be only in

respect of remuneration derived by him from outside that State.2. An individual who is

present in a Contracting State solely:a. as a student at a

university, college or school in that Contracting State;b. as a business

apprentice (including in the case of the Federal Republic of Germany a

"Volontar" or a "Praktikant");c. 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; or,d. as a member of a

technical co-operation programme entered into by the Government of that

Contracting State, and who is, or was immediately before visiting that State, a

resident of the other Contracting State, shall be exempt from tax in the

first-mentioned Contracting State in respect of--i. remittances from

abroad for the purposes of his maintenance, education or training; andii. remuneration from

employment in that other State, in an amount not exceeding DM 7,200 (seven

thousand two hundred Deutsche Mark) or its equivalent in Indian currency during

any fiscal year, as the case may be, provided that such employment is directly

related to his studies or is undertaken for the purpose of his maintenance.Article

21OTHER

INCOME1. Items of income of a

resident of a Contracting State, wherever arising, not dealt within the

foregoing articles of this Agreement shall be taxable only in that State.2. The provisions of

paragraph 1 shall not apply to income, other than income from immovable

property, 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 therein, and the right of property

in respect of which the income is 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.3. Notwithstanding the

provisions of paragraph 1, if a resident of a Contracting State derives income

from sources within the other Contracting State in the form of lotteries,

crossword puzzles, races including horse races, card games and other games of

any sort of gambling or betting of any form or nature whatsoever, such income

may be taxed in the other Contracting State.Article

22CAPITAL1. Capital represented

by immovable property, 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 or by movable property pertaining to a fixed base available

to a resident of a Contracting State in the other Contracting State for the

purpose of performing independent personal services, 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. All other elements of

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

State.Article

23RELIEF

FROM DOUBLE TAXATION1. Tax shall be

determined in the case of a resident of the Federal Republic of Germany as

follows:a. Unless foreign tax

credit is to be allowed under sub-paragraph (b), there shall be exempted from

German tax any item of income arising in the Republic of India and any item of

capital situated within the Republic of India, which, according to this

Agreement, may be taxed in the Republic of India. The Federal Republic of

Germany, however, retains the right to take into account in the determination

of its rate of tax the items of income and capital so exempted.In the case of dividends exemption shall apply only to such dividends as are

paid to a company (not including partnerships) being a resident of the Federal

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

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

company.There shall be exempted from taxes on capital any shareholding the dividends of

which are exempted or, if paid, would be exempted, according to the immediately

foregoing sentence.a.b. Subject to the

provisions of German tax law regarding credit for foreign tax, there shall be

allowed as a credit against German tax payable in respect of the following

items of income arising in the Republic of India and the items of capital

situated there, the Indian tax paid under the laws of the Republic of India and

in accordance with this Agreement on:i. dividends not dealt

with in sub-paragraph (a);ii. interest;iii. royalties and fees

for technical services;iv. income in the meaning

of paragraph 4 of Article 13;v. directors' fees;vi. income of artistes

and sportspersons.a.b.c. For the purpose of

credit referred to in letter (ii) of sub-paragraph (b) the Indian tax shall be

deemed to be 10 per cent. of the gross amount of the interest, if the Indian

tax is reduced to a lower rate or totally waived according to domestic law,

irrespective of the amount of tax actually paid.d. The provisions of

sub-paragraph (c) shall apply for the first 12 fiscal years for which this

Agreement is effective.e. Notwithstanding the

provisions of sub-paragraph (a) items of income dealt with in Articles 7 and 10

and gains derived from the alienation of the business property of a permanent

establishment as well as the items of capital underlying such income shall be

exempted from German tax only if the resident of the Federal Republic of

Germany can prove that the receipts of the permanent establishment or company

are derived exclusively or almost exclusively from active operations.In

the case of items of income dealt with in Article 10 and the items of capital

underlying such income the exemption shall apply even if the dividends are

derived from holdings in other companies being residents of the Republic of

India which carry on active operations and in which the company which last made

a distribution has a holding of more than 25 per cent.Active

operations are the following:Producing

or selling goods or merchandise, giving technical advice or rendering

engineering services, or doing banking or insurance business, within the

Republic of India.If

this is not proved, only the credit procedure as per sub-paragraph (b) shall

apply.1.2. Tax shall be

determined in the case of a resident of the Republic of India as follows:Where

a resident of the Republic of India derives income or owns capital which, in accordance

with the provisions of this Agreement, may be taxed in the Federal Republic of

Germany, the Republic of India shall allow as a deduction from the tax on such

income of that resident an amount equal to the income-tax paid in the Federal

Republic of Germany, whether directly or by deduction, and as a deduction from

the tax on such capital of that resident an amount equal to the capital tax

paid in the Federal Republic of Germany. 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 of

Germany.3.

The

laws in force in either of the Contracting States shall continue to govern the

taxation of income and capital in the respective Contracting States except

where express provision to the contrary is made in this Agreement.Article

24NON-DISCRIMINATION1. Nationals of a

Contracting State shall not be subjected in the other Contracting State to any

taxation or any requirement connected therewith which is other or more

burdensome than the taxation and connected requirements to which nationals of

that other State in the same circumstances and under the same conditions are or

may be subjected. This provision shall, notwithstanding the provisions of

Article 1, also apply to persons who are not residents of one or both of the

Contracting States.2. The taxation of a

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

other Contracting State shall not be less favourably levied in that other State

than the taxation levied on enterprises of that other State carrying on the

same activities. This provision shall not be construed as preventing a Contracting

State from charging the profits of a permanent establishment which a company of

the other Contracting State has in the first-mentioned State at a rate of tax

which is higher than that imposed on the profits of a similar company of the

first-mentioned Contracting State, nor as being in conflict with the provisions

of paragraph 3 of Article 7 of this Agreement. Further, this provision shall

not be construed as obliging a Contracting State to grant to residents of the

other Contracting State any personal allowances, reliefs and reductions for

taxation purposes which it grants only to its own residents.3. Except where the

provisions of Article 9, paragraph 7 of Article 11, or paragraph 7 of Article

12, apply, interest, royalties and other disbursements paid by an enterprise of

a Contracting State to a resident of the other Contracting State shall, for the

purpose of determining the taxable profits of such enterprise, be deductible

under the same conditions as if they had been paid to a resident of the first-mentioned

State. Similarly, any debts of an enterprise of a Contracting State to a

resident of the other Contracting State shall, for the purpose of determining

the taxable capital of such enterprise, be deductible under the same conditions

as if they had been contracted to a resident of the first-mentioned State.4. Enterprises of a

Contracting State, the capital of which is wholly or partly owned or

controlled, directly or indirectly, by one or more residents of the other

Contracting State, shall not be subjected in the first-mentioned State to any

taxation or any requirement connected therewith which is other or more

burdensome than the taxation and connected requirements to which other similar

enterprises of the first mentioned State are or may be subjected.Article

25MUTUAL

AGREEMENT PROCEDURE1. 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 or, if his case comes under paragraph 1 of

Article 24, to that of the Contracting State of which he is a national. 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 this

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

this 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 this Agreement. They may also consult together for the

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

authorities of the Contracting States may establish by mutual agreement the

mode of application of the provisions of this Agreement regarding the exemption

or reduction of taxes.5. 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

26EXCHANGE

OF INFORMATION1. The competent

authorities of the Contracting States shall exchange such information as is

necessary for carrying out the provisions of this Agreement. Any information

received by a Contracting State shall be treated as secret in the same manner

as information obtained under the domestic laws of that State and shall be

disclosed only to persons or authorities (including courts and administrative

bodies) involved in the assessment or collection of, the enforcement or

prosecution in respect of, or the determination of appeals in relation to, the

taxes covered by this Agreement. Such persons or authorities shall use the

information only for such purposes. They may disclose the information in public

court proceedings or in judicial decisions.2. In no case shall the

provisions of paragraph 1 be construed so as to impose on a Contracting State

the obligation:a. to carry out

administrative measures at variance with the laws and administrative practice

of that or of the other Contracting State;b. to supply information

which is not obtainable under the laws or in the normal course of the

administration of that or of the other Contracting State;c. to supply information

which would disclose any trade, business, industrial, commercial or

professional secret or trade process, or information, the disclosure of which

would be contrary to public policy (order public)Article

27DIPLOMATIC

AND CONSULAR PRIVILEGESNothing

in this Agreement shall affect the fiscal privileges of members of a diplomatic

mission, a consular post or an international organisation under the general

rules of international law or under the provisions of special agreements.Article

28ENTRY

INTO FORCE1. The Governments of

the Contracting States shall notify to each other that the legal requirements

for the entry into force of this Agreement have been complied with.2. This Agreement shall

enter into force one month after receipt of the latter of the notifications

referred to in paragraph 1 and shall have effect:a. In the Federal

Republic of Germany:i. in the case of taxes

withheld at source on dividends, interest, royalties and fees for technical

services, in respect of amounts paid on or after the first day of January, of

the calendar year next following that in which this Agreement enters into

force;ii. in the case of other

taxes, in respect of taxes levied for periods beginning on or after the first

day of January, of the calendar year next following that in which this

Agreement enters into force;a.b. in the Republic of

India:i. in respect of income

arising in any fiscal year beginning on or after the first day of April,

following the calendar year in which this Agreement enters into force;ii. in respect of capital

which is held on the last day of any fiscal year beginning on or after the

first day of April, following the calendar year in which this Agreement enters

into force.1.2.3. Upon the entry into

force of this Agreement 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 on 18th March, 1959, and the Protocol 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 on

28th June, 1984, along with the Exchange of Notes of the same date shall expire

and shall cease to have effect as from the date on which the provisions of this

Agreement commence to have effect.Article

29TERMINATIONThis

Agreement shall continue in effect indefinitely but either of the Contracting

States may, on or before the thirtieth day of June, in any calendar year

beginning after the expiration of a period of five years from the date of its

entry into force, give the other Contracting State, through diplomatic

channels, written notice of termination and, in such event, this Agreement

shall cease to have effect:a. In the Federal

Republic of Germany:i.

in

the case of taxes withheld at source on dividends, interest, royalties and fees

for technical services, in respect of amounts paid on or after the first day of

January, of the calendar year next following that in which notice of

termination is given;ii.

in

the case of other taxes, in respect of taxes levied for periods beginning on or

after the first day of January, of the calendar year next following that in

which notice of termination is given;a. In the Republic of

India:i.

in

respect of income arising in any fiscal year beginning on or after the first

day of April, following the calendar year in which the notice of termination is

given;ii.

in

respect of capital which is held on the last day of any fiscal year beginning

on or after the first day of April, following the calendar year in which the

notice of termination is given.In

witness whereof the undersigned being duly authorised thereto, have signed the

present Agreement.Done

at Bonn on June 19th 1995, in two originals, each in German, Hindi and English

languages, all three texts being authentic. In case of divergent interpretation

of t