Hungary - Legal Draft

Double Taxation

Avoidance AgreementConvention between

the Government of the Republic of India and the Government of the Hungarian

People's Republic for the avoidance of double taxation with respect to taxes on

IncomeNOTIFICATION

No. G.S.R.282(E),dtd.13.03.1987.Whereas

the annexed Convention between the Government of the Republic of India and the

Government of the Hungarian People's Republic for the avoidance of double

taxation with respect to taxes on income has come into force on the 7th January,

1987 on the Notification by both the Contracting States to each other of the

completion of the procedures required by their laws for its bringing into

force, in pursuance of Article 28 of the said Convention;Now,

therefore, in exercise of the powers conferred by section 90 of the Income-tax

Act, 1961 (43 of 1961) and section 24A of the Companies (Profits) Surtax Act,

1964 (7 of 1964), the Central Government hereby directs that all the provisions

of the said Convention shall be given effect to in the Union of India.ANNEXURECONVENTION

BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE

HUNGARIAN PEOPLE'S REPUBLIC FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT

TO TAXES ON INCOMEThe

Government of the Republic of India and the Government of the Hungarian

People's Republic:Desiring

to further expand and facilitate mutual economic relations, have resolved to

conclude a Convention for the avoidance of double taxation with respect to

taxes on income and Have Agreed as Follows:Article

IPERSONAL

SCOPEThis

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

Contracting States.Article

2TAXES

COVERED1. This Convention shall

apply to taxes on income imposed on behalf of each Contracting State or of its

political sub-divisions or local authorities, irrespective of the manner in

which they are levied.2. The taxes to which

this Convention shall apply are:a. In the case of India:1. income-tax including

any surcharge thereon;2. surtax; (hereinafter

referred to as "Indian tax").a.b. In the case of the

Hungarian People's Republic:1. general income-tax

(az a'ltalanos j'o've-dele mado');2. income-tax on

household and auxiliary farms (a h'azta'ji e's Kisegi'td gazdasa'gok jo'vedele

mao 'ja);3. corporation' taxes (a

ta'rsulati aoo'es a tarsa'ji aoo);4. special corporation

tax (a ta'rsulati Kolonacc);5. profit tax of state

enterprises (az allami vella latok nyereso' gaddja);6. town and community

contribution (varosi e's ko'zsegi hozzaja'rula's);7. levy on dividends and

profit distributions of commercial companies (a koreskedelmi ta'rsasa'gok os

nyerse'g kifizete'seiuta'ni illete'k);(hereinafter

referred to as "Hungarian tax").3. The Convention shall

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

either Contracting State after the date of signature of the present Convention

in addition to, or in place of, the taxes referred to in paragraph 2 of this

Article.4. At the end of each

year, the competent authorities of the Contracting States shall notify to each

other any significant changes which have been made in their respective taxation

laws which are the subject of this Convention and furnish copies of relevant

enactment and regulations.Article

3GENERAL

DEFINITIONS1. In this Convention,

unless the context otherwise requires:a. the terms

"India" means the territory of India and includes the territorial sea

and airspace above it, as well as any other maritime zone in which India has

sovereign rights, other rights and jurisdictions, according to the Indian law

and in accordance with international law;b. the term

"Hungarian People's Republic" means the territory of the Hungarian

People's Republic;c. the terms "a

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

or the Hungarian People's Republic; as the context requires;d. the term

"person" comprises an individual, a company and any other body of

persons;e. the term

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

a body corporate for tax purposes;f. 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;g. the term

"national" of a Contracting State means:i.

any

individual possessing the nationality of a Contracting State;ii.

any

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

law in force in a Contracting State;a.b.c.d.e.f.g.h. 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

the places in the other Contracting State:i.

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 Hungarian People's Republic, the Ministry of Finance.1.2. In the application of

the provisions of this Convention by one of the Contracting State, any term not

defined herein shall, unless the context otherwise requires, have the meaning

which it has under the laws in force in that State relating to the taxes which

are the subject of this Convention.Article

4FISCAL

DOMICILE1. For the purposes of

this Convention, 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 of this Article an individual is a resident of

both Contracting States, then his status shall be determined in accordance with

the following rules:a. he shall be deemed to

be a resident of the Contracting State in which he has a permanent home available

to him; if he has a permanent home available to him in both Contracting States,

he shall be deemed to be a resident of the Contracting State in which the

centre of his vital interests is located;b. if the Contracting

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 Contracting State, he

shall be deemed to be a resident of the Contracting State in which he has an

habitual abode;c. if he has an habitual

abode in both Contracting States or in neither of them he shall be deemed to be

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

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

the Contracting State shall settle the question by mutual agreement in

accordance with Article 25.1.2.3. 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

Contracting State in which its place of effective management is situated.Article

5PERMANENT

ESTABLISHMENT1. For the purposes of

this Convention, the term "permanent establishment" means a fixed

place of business or production through which the activities of an enterprise

are wholly or partly carried on.2. The term

"permanent establishment" shall include especially:a. a place of

management;b. a branch;c. an office;d. a factory;e. a workshop or a

warehouse;f. a mine, a quarry, an

oil field or other place of extraction of natural resources;g. a building site or

construction, installation or assembly project or supervisory activities in

connection therewith, where such site, project or supervisory activity

continues for a period of more than six months, or where such project or

supervisory activity, being incidental to the sale of machinery or equipment,

continues for a period not exceeding six months and the charges payable for the

project or supervisory activity exceed 10 per cent of the sale price of the

machinery and equipment.3. 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 or display 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 or display;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 overall activity of the fixed place of

business resulting from this combination is of a preparatory or auxiliary

character.4. Notwithstanding the

provisions of paragraphs 1 and 2, where a person---other than an agent of an

independent status to whom paragraph 5 applies---is acting in a Contracting

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

enterprise shall be deemed to have a permanent establishment in the

first-mentioned Contracting State in respect of any activities which that

person undertakes for the enterprise, if such a person:a. has and habitually

exercises in that State an authority to conclude contracts in the name of the

enterprise, unless the activities of such person are limited to those mentioned

in paragraph 3 which, if exercised through a fixed place of business, would not

make this fixed place of business a permanent establishment under the

provisions of that paragraph; orb. 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.5. An enterprise of a

Contracting State shall not be deemed to have a permanent establishment in the

other Contracting State merely because it carries on business in that other

State through a broker, general commission agent or any other agent of an

independent status, where such persons are acting in the ordinary course of

their business. However, when the activities of such an agent are devoted

wholly or almost wholly on behalf of that enterprise, he will not be considered

an agent of an independent status within the meaning of this paragraph.6. The fact that a

company, which is a resident of a Contracting State controls or is controlled

by a company which is a resident of the other Contracting State, or which

carries on business in that other Contracting State (whether through a

permanent establishment or otherwise), shall not, of itself, constitute for

either company a permanent establishment of the other.Article

6INCOME

FROM IMMOVABLE PROPERTY1. Income from immovable

property may be taxed in the Contracting State in which such property is

situated.2. The term

"immovable property" shall be defined in accordance with the law of

the Contracting State in which the property 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, all India, quarries and other places of extraction of

natural resources. Ships, boats and aircraft shall not be regarded as immovable

property.3. The provisions of

paragraph 1 shall apply to income derived from the direct use, letting or use

in any other form of immovable property.4. The provisions of

paragraphs 1 and 3 shall also apply to the income from immovable property of an

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

professional 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 (a) that permanent establishment;

(b) sales in that other State of goods or merchandise of the same or similar

kind as those sold through that permanent establishment; or (c) other business

activities carried on in that other State of the same or similar kind as those

effected through that permanent establishment.2. 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 so far is 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 laid down in this Article.4. In the determination

of the profits of a permanent establishment, there shall be allowed as

deductions expense 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 as are in accordance with the provisions of and subject

to the limitations of the taxation laws of that State. However, no such

deduction shall be allowed in respect of amounts, if any, paid (otherwise than

towards reimbursement of actual expenses) by the permanent establishment to the

head office of the enterprise or any of its other offices, by way of royalties,

fees or other similar payments in return for the use of patents, know-how or

other rights, or by way of commission or other charges, for specific services

performed or for management, or except in the case of a banking enterprise, by

way of interest on moneys lent to the permanent establishment. Likewise, no

account shall be taken, in the determination of the profits of a permanent

establishment, for amounts charged (otherwise than towards reimbursement of

actual expenses), by the permanent establishment to the head office of the

enterprise or any of its other offices, by way of royalties, fees or other

similar payments in return for the use of patents, know-how or other rights, or

by way of commission or other charges for specific services performed or for

management, or, except in the case of a banking enterprise, by way of interest

on moneys lent to the head office of the enterprise or any of its other

offices.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 purpose of export to

the enterprise of which it is the permanent establishment.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 which are dealt with separately in other Article of this Convention, then

the provisions of those Articles shall not be affected by the provisions of

this Article.Article

8AIR

TRANSPORT1. Income derived from

the operation of aircraft in internations traffic by an enterprise of one of

the Contracting States shall not be taxed in the other Contracting State.2. Paragraph 1 shall

likewise apply in respect of participations in pools of any kind by enterprises

engaged in air transport.3. The provisions of

paragraphs 1 and 2 shall also apply where the enterprise has an office or

agency in the other State for the transportation of goods or persons. However,

this shall only apply to activities directly connected with the business of

aircraft transportation.4. Interest on funds

connected with the operation of aircraft in international traffic as mentioned

in paragraph 1 shall be regarded as income from the operation of such aircraft.Article

9ASSOCIATED

ENTERPRISES1. Wherea. 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.1.2. Where a Contracting

State includes in the profits of an enterprise of that State-and taxes

accordingly-profits on which an enterprise of the other Contracting State has

been charged to tax in that other State and the profits so included are profits

which would have accrued to the enterprise of the first-mentioned State if the

conditions made between the two enterprises had been those which would have

been made between independent enterprises, then that other State shall make an

appropriate adjustment to the amount of the tax charged therein on those

profits. In determining such adjustment, due regard shall be had to the other

provisions of this Convention and the competent authorities of the Contracting

States shall, if necessary, consult each other.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 and the dividends

relate to a new contribution, the tax so charged shall not exceed fifteen per

cent of the gross amount of the dividends if the beneficial owner is a company

which owns at least ten per cent of the shares of the company paying the

dividends.This

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

profits out of which the dividends are paid,3. The term

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

other rights, not being debt-claims, participating in profits, as well as

income from other corporate rights which is subjected to the same taxation

treatment as income from shares by the taxation law of the State of which the

company making the distribution is a resident.4. The provisions of

paragraphs 1 and 2 shall not apply if the recipient of the dividends, being a

resident of a Contracting State, 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 in so far 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 or a

fixed base 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 profit consist wholly or partly of

profits or income arising in such, other State.6. As used in paragraph

2 of this Article, the term "new contribution" means any share

capital, other than bonus shares or shares of a new company formed as a result

of the amalgamation of two or more existing companies, issued after the date of

entry into force of this Convention by a company which is a resident of a

Contracting State, and beneficially owned by a resident of the other Contracting

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 and the interest is paid in respect of a loan or debt first created

after the date of entry into force of this Convention, the tax so charged

shall, not exceed 15 per cent of the gross amount of interest.3. Notwithstanding the

provisions of paragraph 2:-a. interest arising in a

Contracting State shall be exempt from tax in that State provided it is derived

and beneficially owned by:i.

the

Government, a political sub-division or a local authority of the other

Contracting State;ii.

the

Central Bank of the other Contracting State;a.b. interest arising in a

Contracting State shall be exempt from tax in, that State if it is beneficially

owned by a resident of the other Contracting State and is derived in connection

with a loan or credit extended or endorsed by:i.

in

the case of Hungarian People's Republic, the Magyar Kulkereskedelmi Bank Rt.,

to the extent such interest is attributable to financing of exports and imports

only:ii.

in

the case of India, the Export-Import Bank of India (Exim Bank)., to the extent

such interest is attributable to financing of exports and imports only;iii.

any

institution of a Contracting State in charge of public financing of external

trade;iv.

any

other person provided that the loan or credit is approved by the Government of

the first mentioned Contracting State.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 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, 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

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 a fixed base, then such interest shall be deemed to arise in

the Contracting State in which the permanent establishment or the fixed base is

situated.7. Where, owing to a

special relationship between the payer and the beneficial owner or between both

of them and some other person the amount of the interest paid, 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 recipient in the absence of such relationship,

the provisions of this Article shall apply only to the last-mentioned amount.

In that case, the excess part of the payments shall remain taxable according to

the law of each Contracting State, due regard being had to the other provisions

of this Convention.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 law of that State; provided that

where the royalties or fees for technical services are paid to a resident of

the other Contracting State who is the beneficial owner thereof and they are

paid in respect of a right or property which is first granted, or under a

contract which is signed, after the date of entering into force of this

Convention, the tax so charged shall not exceed,----a. in the case of

royalties, 40 per cent of the gross amount thereof;b. in the case of fees

for technical services, 20 per cent of the gross amount thereof.3. The term

"royalties" as used in this Article means payments of any kind

including rentals received as a considerationa. for the use of, or

the right to use, any copyright of literary, artistic or scientific work

including cinematograph films, and films or tapes for television or radio

broadcastingb. for the use of, or

the right to use, any patent, trade mark, design or model, plan, secret formula

or process, or any industrial commercial or scientific equipment;c. 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 and to any individual for independent personal services mentioned in

Article 14 (Independent Personal Services), 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, 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 (Business Profits) or Article

14 (Independent Personal Services), as the case may be, shall apply.6. Royalties and fees

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

the payer is that State itself, a political 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 obligation to make the payments was incurred and the

payments are borne by that permanent establishment or fixed base, then the

royalties or fees for technical services shall be deemed to arise in the

Contracting State in which the permanent establishment or the fixed base is

situated.7. Where, owing to a

special relationship between the payer and beneficial owner or between both of

them 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 Convention.Article

13CAPITAL

GAINS1. Gains derived by a

resident of a Contracting State from the alienation of immovable property

referred to in Article 6 and 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 of with the

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

capital asset being ships or aircraft operated in international traffic or movable

property pertaining to the operation of such ships or aircraft by an enterprise

of a Contracting State 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 of the capital stock of a company the property of which

consists directly or indirectly principally of immovable property situated in 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, 2, 3

and 4 shall be taxable only in the Contracting State of which he 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

personal services in an independent capacity shall be taxable only in that

State unless such services are performed in the other Contracting State, in

which case such income may be taxed in the other Contracting State, ifa. the individual is

present in that other State for a period or periods aggregating more than 90

days in the 'previous year' or 'taxable year', as the case may be, orb. the individual has a

fixed base regularly available to him in that other State for the purpose of

performing his activities, but only so much of the income as is attributable to

that fixed base.1.2. The term

"independent personal 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, 17, 18, 19, 20 and 21, salaries, wages and other

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

an employment shall be taxable only in that State unless the employment is

exercised in the other Contracting State. If the employment is so exercised,

such remuneration as is derived therefrom may be taxed in that other

Contracting State.2. Notwithstanding the

provisions of paragraph 1, remuneration derived by a resident of a Contracting

State in respect of an employment exercise in the other contracting State shall

be taxable only in the first-mentioned State if:a. the recipient is

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

aggregate 183 days in the relevant 'previous year' or 'taxable year' as the

case may be, 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 State1.2.3. Notwithstanding the

preceding provisions of this Article, remuneration in respect of an employment

exercise aboard a ship or aircraft operated in international traffic may be

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

the enterprise is situated.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 or the Supervisory Board or any

other similar organ of a company which is a resident of the other Contracting

State may be taxed in that other State.Article

17ARTISTES

AND ATHLETES1. Notwithstanding the

provisions of Articles 14 and 15, income derived by public entertainers (such

as stage, motion picture, radio or television artistes and musicians) or

athletes, from their personal activities as such may be taxed in the

Contracting State in which these activities are exercised.2. Where income in

respect of personal activities exercised by an entertainer or an athlete in his

capacity as such accrues not to the entertainer or athlete himself but to

another person, that income, may, notwithstanding the provisions of Articles 7,

1. and 15. be taxed in the Contracting State in which the activities of the

entertainer or athlete are exercised.3. Nothwithstanding the

provisions of paragraphs 1 and 2 of this Article, income derived from such

activities shall be exempt from tax in the Contracting State in which these

activities are exercised if the visit of the public entertainers or athletes to

that State is directly or indirectly supported, wholly or substantially, from

the public funds of the Government of the other Contracting State.4. For the purpose of

this Article, the term "Government" includes a State Government, a

political sub-division or a local authority of either Contracting StateArticle

18PENSIONS1. Subject to the

provisions of paragraph 3 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.2. Notwithstanding the

provisions of paragraph 1, pensions paid and other payments made under a public

scheme which is part of the social security system of a Contracting State or a

political sub-division or a local authority thereof shall be taxable only in

that State.Article

19GOVERNMENT

SERVICE1. Remuneration (not

being a pension) paid by the Government of the Republic of India to any

individual who is a citizen of India in respect of services rendered in the

discharge of Governmental functions in the Hungarian People's Republic shall be

exempt from Hungarian tax.2. Remuneration (not

being a pension) paid by the Government of the Hungarian People's Republic to

any individual who is a citizen of the Hungarian People's Republic in respect

of services rendered in the discharge of governmental functions in India shall

be exempt from Indian tax.3. Any pension paid by

the Government of one of the Contracting States to any individual shall be

taxable in that Contracting State.4. The provisions of

paragraphs 1, 2 and 3 of this Article shall not apply to payments in respect of

services rendered in connection with any business carried on by the Government

of either of the Contracting States for the purposes of profit.5. For the purposes of

this Article, the term "Government" shall include any State

Government, a political sub-division or local authority of either Contracting

State and in particular the Reserve Bank of India and the National Bank of

Hungary.Article

20STUDENTS1. An individual who is

or was immediately before visiting the other Contracting State a resident of a

Contracting State and who visits the other Contracting State solely as a

student at an approval university, college, school or other similar approved

institution in that other Contracting State or as a business or technical

apprentice therein, for a period not exceeding five years from the date of his

first arrival in that other Contracting State in connection with that visit

shall be exempt from tax in that other Contracting State ona. all remittances from

abroad for the purposes of his maintenance education or training; andb. any remuneration not

exceeding Rs.20,000 or 75,000 forints, during any 'previous year' or 'taxable

year' as the case may be, for personal services rendered in that other

Contracting State with a view to supplementing the resources available to him

for such purposes.1.2. An individual who is

or was immediately before visiting the other Contracting State a resident of a

Contracting State and who visits the other Contracting State for the purposes

of study, research or training solely as a recipient of a grant, allowance or

award from the Government of either of the Contracting States or from a

scientific, educational or charitable organisation or under a technical

assistance programme entered into by the Government of either of the

Contracting States for a period not exceeding five years from the date of his

first arrival in that other Contracting State in connection with that visit

shall be exempt from tax in that other Contracting State ona. the amount of such

grant, allowances or award;b. all remittances from

abroad for the purposes of his maintenance, education or training; andc. any remuneration not

exceeding Rs25,000 or 90,000 forints during any 'previous year' or 'taxable

year' as the case may be, in respect of services in that other Contracting

State if the services are performed in connection with his study research

training or are incidental thereto.1.2.3. For the purposes of

paragraph 1, "approved university college, school or institution"

means a university college school and an educational or research institution

which has been approved in this regard by the competent authority of the

concerned Contracting State.Article

21PROFESSORS,

TEACHERS AND RESEARCHERS1. An individual who is

a resident of one of the Contracting States and who, at the invitation of the

Government of the other Contracting State or of a university or other approved

institution situated in that other Contracting State, visits that other

Contracting State for the primary purpose of teaching or engaging in research

or both at a university or other approved institution shall be exempt from tax

in that other Contracting State on his income from personal services for

teaching or research at the university or the approved institution for a period

not exceeding 24 months from the date of his arrival in the latter Contracting

State.2. This Article shall

not apply to income from research if such research is undertaken primarily for

the private benefit of a specific person or persons.3. For the purposes of

paragraph 1, "approved institution" means an educational or research

institution which has been approved in this regard by the competent authority

of the concerned Contracting State.Article

22OTHER

INCOME1. Items of income of a

resident of a Contracting State, whereever arising, not dealt with in the

foregoing Articles of this Convention shall be taxable only in that State.2. The provisions of

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

property as defined in, paragraph 2 of Article. 6, if the recipient of such

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

other Contracting State through a permanent establishment situated therein, or

performs in that other State independent personal services from a fixed base

situated therein, and the right or property in respect of which the income is

paid is effectively connected with such permanent establishment or fixed base.

In such case the provisions of Article 7 or Article 14, as the case may be,

shall apply.3. Notwithstanding the

provisions of paragraphs 1, and 2, items, of income of a resident of a

Contracting State not dealt with in the foregoing Articles of this Convention

and arising in the other Contracting State may also be taxed in that other

State.Article

23ELIMINATION

OF DOUBLE TAXATION1. The laws in force

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

taxation of income in the respective Contracting States except where express

provisions to the contrary is made in this Convention.2. The income arising

within the Hungarian People's Republic which in accordance with this Convention

may be subjected to tax in the Hungarian People's Republic either directly or

by deduction, subject to the provisions of sub-paragraphs 4 and 5, shall not be

subject to Indian tax.3. The income arising

within India which in accordance with this Convention may be subjected to tax

in India either directly or by deduction, subject to the provisions of

sub-paragraphs 4 and 5, shall not be subject to Hungarian tax.4. Where a resident of a

Contracting State derives items of income which in accordance with the

provisions of Articles 10, 11 and 12 may be taxed in the other Contracting

State, the first mentioned State shall allow as a deduction from the tax on the

income of that resident an amount equal to the tax paid in that other State.

Such deduction shall not, however, exceed that part of the tax, as computed

before the deduction is given, which is attributable to such items of income

derived from that other State.4.5. Notwithstanding

the provisions of paragraphs 2 and 3 of this Article, the items of income which

under the laws of a Contracting State should be taken into account for

calculating the rate of tax to be imposed in that Contracting State, shall

continue to be so taken into account.Article

24NON-DISCRIMINATION1. The 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.2. The taxation on 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 in the same circumstances or under the same conditions. 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 on account of civil status or family

responsibilities which it grants to its own residents.3. 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 Contracting

State to any taxation or any requirement connected therewith which is more

burdensome than the taxation and connected requirements to which other similar

enterprises of that first-mentioned State are or may be subjected in the same

circumstances and under the same conditions.4. In this Article, the

term "taxation" means taxes which are, the subject of this

Convention.Article

25MUTUAL

AGREEMENT PROCEDURE1. Where a resident of a

Contracting State considers that the actions of one or both of the Contracting

States result or will result for him in taxation not in accordance with this

Convention, he may, notwithstanding the remedies provided by the national laws

of those States, present his case to the competent authority of the Contracting

State of which he is a resident. The claim must be lodged within three years

from the date of the assessment or of the withholding of tax at the source

whichever is the later.2. The competent

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

it it is not itself able to arrive at an appropriate solution, to resolve the

case by mutual agreement with the competent authority of the other Contracting

State, with a view to the avoidance of taxation not in accordance with the

convention. 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 Convention. They may also consult together for the

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

authorities of the Contracting States may communicate with each other directly

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

paragraphs. When it seems advisable in order to reach agreement to have an oral

exchange of opinions, such exchange may take place through a Commission

consisting of representatives of the competent authorities of the Contracting

States.Article

26EXCHANGE

OF INFORMATION1. The competent

authorities of the Contracting States shall exchange such information (being

information and documents which are at their disposal under the respective

taxation laws and obtained in the normal course of administration) as is

necessary for carrying out the provisions of this Convention or for the

prevention of fraud or prevention or detection of evasion or evidence of the

taxes or the administration of statutory provisions against legal avoidance in

relation to the taxes which are the subject of this Convention. Any information

or documents so exchanged, shall be treated as secret but may be disposed to

persons, (including a court or administrative body) concerned with assessment,

collection, enforcement, investigation or prosecution in respect of taxes which

are the subject of this Convention or any fraud connected therewith, or to

persons with respect to whom the information or documents relates.2. The exchange of

information or documents shall be either on a routine basis or on request with

reference to particular cases or both. The competent authorities of the

Contracting States shall agree from time to time on the list of the information

or documents which shall be furnished on a routine basis.3. In no case shall the

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

the obligation:a. to carry out

administrative measures at variance with the laws or administrative practice of

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

or documents which are not obtainable under the laws or in the normal course of

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

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

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

would be contrary to public policy.Article

27MEMBERS

OF DIPLOMATIC OR CONSULAR MISSIONSNothing

in this Convention shall affect the fiscal privileges of members of diplomatic

or consular missions under the general rules of international law or under the

provisions of special agreements.Article

28ENTRY

INTO FORCEEach

of the Contracting States shall notify to the other the completion of the

procedures required by its law for the bringing into force of this Convention.

This Convention shall enter into force on the date of the later of these

notifications and shall thereupon have effect:a.

In

India:In

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

day of April next following the calendar year in which the later of the

notifications is given;a.b. In the Hungarian

People's Republic:In

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

day of January next following the calendar year in which the later of the

notifications is given.Article

29TERMINATIONThis

Convention shall remain in force indefinitely but either of the Contracting

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

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

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

written notice of termination and in such event, this Convention shall cease to

have effect:-a.

In

India:In

respect of income arising in any previous year beginning on or after the 1st

day of April next following the calendar year in which the notice is given;b.

In

the Hungarian People's Republic:In

respect of income arising in any taxable year beginning on or after the 1st day

of January next 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 Convention.Done

in duplicate at New Delhi this Thirtieth day of October one thousand Nine

hundred and eighty six in the English language.Sd/-

Sd/-(Vishwanath

Pratap Singh) (Dr. Istvan Hetenyi)Finance

Minster Finance Minister For theFor

the Government of the Republic of India. Government of the Hungarian People's

Republic.PROTOCOLThe

Government of the Republic of India and the Government of the Hungarian

People's Republic.Having

entered into a Convention for the Avoidance of Double Taxation with respect to

Taxes on Income.Have

agreed, at the time of signing the said Convention, on the following provisions

which shall constitute an integral part there of:Concerning

Article 5, the term permanent establishment shall be deemed not to include the

use of facilities or the maintenance of a stock of goods or of merchandise

solely for the purpose of storage, display or delivery of spare parts or

components required by way of replacement under any warranty provisions of a

contract under which any machinery or equipment is supplied by an enterprise of

a Contracting State to an enterprise of the other Contracting Sate.In

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

present Protocol.Done

in duplicate at New Delhi this Thirtieth day of October 1986 in English

Language.Sd/-

Sd/-(Vishwanath

Pratap Singh) (Dr. Istvan Hetenyi)Finance

Minster Finance Minister For theFor

the Government of the Republic of India. Government of the Hungarian People's

Republic.(No.

7181/F. No. 501/14/73-FTD) V. D. ERADI, Jt. Secy.