Malaysia - Legal Draft

Notification

No. 1705/F. No. 11(43)/46-FTD dt. 1-4-1977.G.S.R.

167(E).----Whereas the Government of India and the Government of Malaysia have

concluded an Agreement, as set out in the Annexure hereto, for the avoidance of

double taxation and the prevention of fiscal evasion with respect to taxes on

income;And

where as all the requirements have been completed in Malaysia and India as are

necessary to give the said Agreement the force of law in Malaysia and India

respectively, as required by paragraph 1 of Article 27 of the said Agreement;And

whereas the diplomatic notes of this effect have been exchanged between the

said two Governments, as required by paragraph 2 of Article 27 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 24A of the Companies (Profits) Surtax Act,

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

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

BETWEEN THE GOVERNMENT OF INDIA AND THE GOVERNMENT OF MALAYSIA FOR THE

AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT

TO TAXES ON INCOMEThe

Government of India and the Government of Malaysia,Desiring

to conclude an Agreement for the Avoidance of Double Taxation and the

Prevention of Fiscal Evasion with respect to Taxes on Income.Have

agreed as follows:CHAPTER

ISCOPE

OF THE AGREEMENTARTICLE

IPersonal

ScopeThis

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

Contracting States.ARTICLE

IITaxes

covered1. The taxes which are

the subject of this Agreement are:a. in Malaysia:i.

the

income-tax;ii.

the

supplementary income-tax, that is, tin profits tax, development tax and timber

profits tax; andiii.

the

petroleum income-tax;(hereinafter

referred to as "Malaysian tax");a.b. in India:i.

the

income-tax and any surcharge on income-tax imposed under the Income-tax Act,

1961 (43 of 1961);ii.

the

surtax imposed under Companies (Profits) surtax Act, 1964 (7 of 1964),(hereinafter

referred to as "Indian tax").1.2. The Agreement shall

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

referred to in the preceding paragraph imposed in either Contracting State

after the date of signature of this Agreement.3. 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.CHAPTER

IIDEFINITIONSARTICLE

IIIGeneral

Definitions1. In this Agreement,

unless the context otherwise requires:----a. the term

"Malaysia" means the Federation of Malaysia and includes any area

adjacent to the territorial waters of Malaysia which, in accordance with

international law, has been or may hereafter be designated under the laws of

Malaysia concerning the Continental Shelf as an area within which the rights of

Malaysia with respect to the sea bed and sub-soil and their natural resources

may be exercised;b. the term

"India" means the territory of India and includes any area adjacent

to the territorial waters of India which, in accordance with international law,

has been or may hereafter be designated under the laws of India as an area

within which the rights of India with respect to the sea bed and sub-soil and

their natural resources may be exercised;c. the terms "one

of the Contracting States" and "the other Contracting State"

means Malaysia or India, as the context requires;d. the term

"tax" means Malaysian tax or Indian tax, as the context requires;e. the term

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

a body corporate for tax purposes under the taxation laws of the respective

Contracting States;f. the term

"person" shall have the meaning assigned to it in the taxation laws

in force in the respective Contracting States;g. the terms

"Malaysian enterprise" and "Indian enterprise" mean

respectively an enterprise carried on by a resident of Malaysia and an

enterprise carried on by a resident of India;h. the terms

"enterprise of one of the Contracting States" and "enterprise of

the other Contracting State" mean a Malaysian enterprise or an Indian

enterprise, as the context requires;i. the term

"competent authority" means, in the case of Malaysia, the Minister of

Finance or his authorised representative; and in the case of India, the Central

Government in the Ministry of Finance (Department of Revenue and Insurance).1.2. In the application of

this Agreement by one of the Contracting States any term not otherwise defined

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

under the laws of that Contracting State relating to the tax which are the

subject of this Agreement.ARTICLE

IVFiscal

Domicile1. In this Agreement,

unless the context otherwise requires:----a. the term "resident

of Malaysia" meansi.

an

individual who is ordinarily resident in Malaysia; orii.

a

person other than individual who is resident in Malaysia; for the basis year

for a year of assessment for the purpose of Malaysian tax;a.b. the term

"resident of India" means a person who is treated as a resident of

India in the previous year for the relevant assessment year for the purpose of

Income-tax;c. the terms

"resident of one of the Contracting States" and "resident of the

other Contracting State" mean a resident of Malaysia or a resident of

India, as the context requires.1.2. Where by reason of

the provisions of paragraph 1 of this Article an individual is a resident of

both Contracting States, then his residential 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 with which his personal and economic relations are closer;b. if the Contracting

State, with which his personal and economic relations are closer 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 citizen;d. if he is a citizen of

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

Contracting States shall determine the question by mutual agreement.1.2. Where by reason of

the provisions of paragraph 1 of this Article 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

VPermanent

Establishment1. For the purposes of

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

place of business in which the business of the enterprise is 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;f. a warehouse;g. a mine, oil well,

quarry or other place of extraction of natural resources;h. a building site or

construction, installation or assembly project which exists for more than six

months;i. a farm or plantation;j. a place of extraction

of timber or forest produce.3. The term

"permanent establishment" shall not be deemed 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 collecting information, for the enterprise;e. the maintenance of a

fixed place of business solely for the purpose of advertising, for the supply

of information, for scientific research or for similar activities which has a

preparatory or auxiliary character, for the enterprise.1.2.3.4. An enterprise of one

of the Contracting States shall be deemed to have a permanent establishment in

the other Contracting State if:a. it carries on

supervisory activities in that other Contracting State for more than six months

in connection with a construction, installation or assembly project which is

being undertaken in that other Contracting State;b. it carries on a

business which consists of providing the services of public entertainers (such

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

athletes in that other Contracting State unless the enterprise is directly or

indirectly supported, wholly or substantially, from the public funds of the

Government of the first-mentioned Contracting State in connection with the

provision of such services.1.2. Subject to the

provisions of paragraph 6 of this Article, a person acting in one of the

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

shall be deemed to be a permanent establishment in the first-mentioned

Contracting State if:a. he has, and

habitually exercises in that first-mentioned Contracting 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; orb. he maintains in the

first-mentioned Contracting State a stock of goods or merchandise belonging to

the enterprise from which he regularly fills orders on behalf of the

enterprise.1.2.3. An enterprise of one

of the Contracting States shall not be deemed to have a permanent establishment

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

other Contracting 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.4. The fact that a

company which is a resident of one of the Contracting States controls or is

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

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

permanent establishment or otherwise shall not of itself constitute either

company a permanent establishment of the other.CHAPTER

IIITAXATION

ON INCOMEARTICLE

VIIncome

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 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, oil wells, quarries and other places of

extraction of natural resources or of timber or forest produce. Ships, boats

and aircraft shall not be regarded as immovable property.3. The provisions of

paragraph 1 of this Article shall apply to income derived from the direct use,

letting, or use in any other form of immovable property.4. The provisions of

paragraph 1 and 3 of this Article shall also apply to the income from immovable

property of an enterprise.ARTICLE

VIIBusiness

Profits1. The income or profits

of an enterprise of one of the Contracting States shall be taxable only in that

Contracting 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, tax may be imposed in that other

Contracting State on the income or profit of the enterprise but only on so much

of that income or profit as is attributable to that permanent establishment.2. Where an enterprise

of one of the Contracting States carries on business in the other Contracting

State through a permanent establishment situated therein, there shall be in

each Contracting State be attributed to that permanent establishment the income

or 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 income or profits of a permanent establishment, there shall be allowed

as deductions expenses which are incurred for the purposes 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.4. In so far as it has

been customary in a Contracting State to determine the income or profits to be

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

total income or profits of the enterprise to its various parts, nothing in

paragraph 2 or paragraph 3 of this Article shall preclude such Contracting

State from determining the income or profits to be taxed by such an

apportionment as may be cutomary; the method of apportionment adopted shall,

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

laid down in this Article.5. No income or 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

expert to the enterprise of which it is the permanent establishment.6. Where income or

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

VIIIShipping1. Income of an

enterprise of one of the Contracting States derived from the other Contracting

State from the operation of ships in international traffic may be taxed in that

other Contracting State, but the tax chargeable in that Contracting State on

such income shall be reduced by an amount equal to fifty per cent of such tax.2. For the purposes of

paragraph 1 of this Article income derived from the other Contracting State

shall mean income from the carriage of passengers, mail, livestock or goods

shipped in that other Contracting State:Provided

that there shall be excluded the income accruing from the carriage of

passengers, mail, livestock or goods which are brought to that other

Contracting State solely for transhipment or for transfer from an aircraft to a

ship or from a ship to another ship.1.2.3. Where income from the

operation of ship in international traffic is derived by an enterprise of one

of the Contracting States from a State other than the Contracting States, such

income shall be taxable only in the Contracting State of which the interprise

is a resident.4. The provisions of

paragraphs 1, 2 and 3 of this Article shall likewise apply to income arising

from participation in shipping pools of any kind by such enterprise engaged in

shipping operations.ARTICLE

IXAir

Transport1. Income of an

enterprise of one of the Contracting States derived from the other Contracting

State from the operation of aircraft in international traffic shall not be

taxed in the other Contracting State.2. For the purposes of

paragraph 1 of this Article, income derived from the other Contracting State

shall mean income from the carriage of passengers, mail, livestock or goods

from the other Contracting State.3. Where income from the

operation of aircraft in international traffic is derived by an enterprise of

one of the Contracting States from a State other than the Contracting States,

such income shall be taxable only in the Contracting State of which the

enterprise is a resident.4. The provisions of

paragraphs 1, 2 and 3 of this Article shall likewise apply, to income arising

from participation in aircraft pools of any kind by such enterprise engaged in

air transport operations.ARTICLE

XAssociated

EnterprisesWhere----a. an enterprise of one

of the Contracting States participates directly or indirectly in the

management, control or capital of an enterprise of the other Contracting State;

orb. the same persons

participate directly or indirectly in the management, control or capital of an

enterprise of one of the Contracting States and of an enterprise of 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 income or 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 income or

profits of that enterprise and taxed accordingly.ARTICLE

XIDividends1. 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 the first-mentioned Contracting State.2. Where a dividend was

paid by a company which was resident in both Malaysia and Singapore and the meeting

at which the dividend was declared was held in Malaysia, or where a dividend

was paid by a company which was resident in Singapore and at the time of

payment of that dividend the company declared itself to be a resident of

Malaysia for the purposes of Article VII of the Agreement between the

Government of Malaysia and the Government of the Republic of Singapore for the

Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect

to Taxes on Income signed in Singapore on 26th December, 1968, the dividend

shall be deemed to have been paid by a company resident in Malaysia.3. Where a dividend was

paid by a company which was resident in both Malaysia and Singapore and the

meeting at which the dividend was declared was held in Singapore, or where a

dividend was paid by a company which was resident in Malaysia and at the time

of payment of that dividend, the company declared itself to be a resident of

Singapore for the purposes of Article VII of the Agreement between the

Government of Malaysia and the Government of the Republic of Singapore for the

Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect

to Taxes on Income signed in Singapore on 26th December, 1968, the dividend

shall be deemed to have been paid by a company not resident in Malaysia.4. Nothing in this

Article shall affect the provisions of the law in Malaysia under which the tax

in respect of a dividend paid by a company resident in Malaysia from which

Malaysian tax has been, or has been deemed to be, deducted may be adjusted by

reference to the rates of tax appropriate to the year of assessment immediately

following that in which the dividend was paid.5. Where a company which

is a resident of one of Contracting States derives income or profits from

sources within the other Contracting State, there shall not be imposed in that

other Contracting State any form of taxation on dividends paid by the company

to persons not resident in that other Contracting State any form of taxation on

dividends paid by the company to persons not resident in that other Contracting

State or any tax in the nature of an undistributed profits tax on the

undistributed profits of the company, whether or not those dividends represent,

in whole or in part, income or profits so derived.ARTICLE

XIIInterest1. Interest derived by a

resident of one of the Contracting States from the other Contracting State may

be taxed in that other Contracting State.2. Interest shall be

deemed to be derived from a Contracting State if the payer is the Government, a

State Government, a political sub-division, a local authority or a resident of

that Contracting State. Where, however, the payer has in the other Contracting

State a permanent establishment with which the loan or other indebtedness in

respect of which the interest is paid, is effectively connected and such

interest is borne by such permanent establishment, then such interest shall be

deemed to be derived from the Contracting State in which the permanent

establishment is situated. In such a case, the provisions of Article 7 shall

apply.3. Where, owing to a

special relationship between the payer and the recipient, or between both of

them and some other persons, 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 be taxed according to the

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

this Agreement.4. The term

"interest" as used in this Article means income from Government

securities, bonds or debentures, whether or not secured by mortgage and whether

or not carrying a right to participate in profits, and debt-claims of every

kind as well as all other income assimilated to income from money lent by the

taxation law of the State in which the income arises.ARTICLE

XIIIRoyalties1. Royalties derived by

a resident of one of the Contracting State from the other Contracting State may

be taxed in that other Contracting State.2. Notwithstanding the

provisions of paragraph 1 of this Article, royalties of the kind mentioned in

clauses (a) and (b) of paragraph 5 of this Article and derived from Malaysia by

a resident of India shall be exempt from tax in Malaysia, if the agreement

under which such royalties are payable is approved by the Government of

Malaysia after this Agreement is signed.3. Royalties shall be

deemed to be derived from a Contracting State if the payer is the Government, a

State Government, a political sub-division, a local authority or a resident of

that Contracting State. Where, however, the payer has in the other Contracting

State a permanent establishment with which the right or property giving rise to

the royalties is effectively connected, then, such royalties shall be deemed to

be derived from the Contracting State in which the permanent establishment is

situated. In such a case, the provisions of Article 7 shall apply.4. Where, owing to a

special relationship between the payer and the recipient, or between both of

them and some other person, the amount of the royalties having regard to the

use, right or information for which they are paid, exceeds the amount which

would have been agreed upon by the payer and the recipient in the absence of

such relationship, the provisions of this Article shall apply only to the last

mentioned amount. In that case, the excess part of the payments shall be taxed

according to the laws of each Contracting State, due regard being had to the

other provisions of this Agreement.5. The term

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

received as a consideration for the use of, or the right to use---a. any patent, trademark

design or model, plan, secret formula or process;b. industrial,

commercial, or scientific equipment, or information concerning industrial,

commercial or scientific experiencec. any copyright of

literary, artistic or scientific work, cinematograph films, or tapes for

television or broadcasting. but does not include royalties or other amounts

paid in respect of operation of mines or quarries or of the extraction or

removal of natural resources.ARTICLE

XIVDependent

Personal Services1. Subject to the provisions

of Articles 15, 17 and 18, salaries, wages and other similar remuneration

derived by a resident of one of the Contracting States in respect of an

employment shall be taxable only in that Contracting 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 of this Article, an individual who is a resident of

Malaysia shall be exempt from tax in India on remuneration in respect of an

employment exercised in any previous year in India, if-----a. he is present in

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

that previous year; andb. any period for which

he is present within India does not form part of a continuous period of more

than 183 days throughout which he is present within India; andc. the remuneration is

paid by, or on behalf of, an employer who is not a resident of India; andd. the amount of

remuneration is not deductible in computing the income or profits of an

enterprise chargeable to Indian tax.1.2.3. Notwithstanding the

provisions of paragraph 1 of this Article, an individual who is a resident of

India shall be exempt from tax in Malaysia on remuneration in respect of an

employment exercised in any basis year for a year of assessment in Malaysia,

if----a. he is present in

Malaysia for a period or periods not exceeding in the aggregate 183 days during

that basis year; andb. any period for which

he is present within Malaysia does not form part of a continuous period of more

than 183 days throughout which he is present within Malaysia; andc. the remuneration is

paid by or on behalf of an employer who is not a resident of Malaysia; andd. the amount of remuneration

is not deductible in computing the income or profits of an enterprise

chargeable to Malaysian tax.1.2.3.4. Notwithstanding the

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

exercised aboard a ship or aircraft engaged in international traffic and

operated by an enterprise of one of the Contracting States may be taxed in that

Contracting State.5. In relation to

remuneration of a director of a company derived from the company, the

provisions of this Article shall apply as if the remuneration were remuneration

of an employee in respect of an employment.ARTICLE

XVDirectors

FeesNotwithstanding

the provisions of Article 14, directors' fees and similar payments derived by a

resident of one of the 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 Contracting State.ARTICLE

XVIArtistes

and Athletes1.

Notwithstanding

the provisions of Article 14, 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:Provided

that such income shall not be taxed in the said Contracting State 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.1.2. For the purposes of

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

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

State.ARTICLE

XVIINon-Government

Pensions and AnnuitiesAny

pension (other than a pension of the kind referred to in Article 18) or any

annuity in respect of past services derived by an individual who is a resident

of one of the Contracting States from the other Contracting State shall be

taxable only in the first-mentioned Contracting State.ARTICLE

XVIIIGovernment

Remuneration and Pension1. Remuneration (not

being a pension) paid by the Government of Malaysia to any individual who is a

citizen of Malaysia in respect of services rendered in the discharge of

governmental functions in India shall be exempt from Indian tax.2. Remuneration (not

being a pension) paid by the Government of India to any individual who is a

citizen of India in respect of services rendered in the discharge of

governmental functions in Malaysian shall be exempt from Malaysian tax.3. Any pension paid by

the Government of one of the Contracting State to any individual may be taxed

in that Contracting State.4. The provisions of

paragraphs 1 and 2 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 or local or statutory authority of either Contracting State and in

particular the Bank Negara Malaysia and the Reserve Bank of India.ARTICLE

XIXStudents

and Apprentices1. An individual who is

a resident of one of the Contracting States and who visits the other

Contracting State solely as a student at a recognised university, college,

school or other similar recognised education 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 on----a. all remittances from

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

exceeding 3,000 Malaysian dollars or 7,500 Indian Rupees during any basic year

or previous year, as the case may be, for any year of assessment) 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

a resident of one of the Contracting States 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, religious 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 on----a. the amount of such

grant, allowance or award;b. all remittances from

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

exceeding 3,000 Malyasian Dollars or 7,500 Indian Rupees for any basic year or

previous year, as the case may be, for any year of assessment) 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. An individual who is

a resident of one of the Contractng States and who visits the other Contracting

State solely as an employee of or under contract with, the Government of an

enterprise of the first-mentioned Contracting State solely for the purpose of

acquiring technical, professional or business experience for a period not

exceeding twelve months from the date of his first arrival in that other

Contracting State in connection with that visit shall be exempt in that other

Contracting State on:---a. all remittances from

abroad for the purposes of maintenance, education or training; andb. any remuneration, so

far as it is not in excess of 5,000 Malaysian Dollars or 12,500 Indian Rupees,

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

State, provided such services are in connection with his studies or training or

are incidental thereto.1.2.3.4. For the purposes of

this Article and Article 20:----i.

the

term "Government" shall have the same meaning as in paragraph 5 of

Article 18;ii.

an

individual shall be deemed to be a resident of a Contracting State if he is

resident in that Contracting State in the basic year or the previous year, as

the case may be, in which he visits the other Contracting State or in the

immediately preceding basic year or the previous year.ARTICLE

XXProfessors,

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

recognised educational 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 recognised educational

institution shall be exempt from tax in that other Contracting State on his

income from personal services for teaching or research or both at the

university or the recognised educational institution, for a period not

exceeding two years from the date of his arrival in that other 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.ARTICLE

XXIIncome

of Government Institutions1. The Government of one

of the Contracting States shall be exempt from tax in the other Contracting

State in respect of any income derived by such Government from that other

Contracting State.2. For the purpose of

paragraph 1 of this Article, the term "Government":----a. in the case of

Malaysia means the Government of Malaysia and shall include:----i.

the

Governments of the States;ii.

the

Bank of Negara Malaysia;iii.

any

such institution or body as may be agreed from time to time between the two

Contracting States;a.b. in the case of India

means the Government of India and shall include:----i.

the

Government of the States and the Union territories of India;ii.

the

Reserve Bank of India;iii.

any

such institution or body as may be agreed from time to time between the two

Contracting States.CHAPTER

IVELIMINATION

OF DOUBLE TAXATIONARTICLE

XXII1. The laws in force in

either of the Contracting States will continue to govern the taxation of income

in the respective Contracting States except where provisions to the contrary

are made in this Agreement.2.a. The amount of

Malaysian tax payable, under the laws of Malaysia, and in accordance with the

provisions of this Agreement, whether directly or by deduction, by a resident

of India, in respect of income from sources within Malaysia which has been

subjected to tax both in India and Malaysia, shall be allowed as a credit

against the Indian tax payable in respect of such income but in an amount not

exceeding that proportion of Indian tax which such income bears to the entire

income chargeable to Indian tax.b. For the purposes of

the credit referred to in sub-paragraph (a) above, there shall be deemed to

have been paid by the resident of India:----i.

the

amount of tax which would have been paid in respect of royalties but for the

exemption provided in paragraph 2 of Article 13; and (ii) the amount of tax

which would have been paid if the Malaysian tax had not been reduced or

relieved in accordance with the special incentive measures designed to promote

economic development in Malaysia----aa. which are set forth

in section 21, 22 and, 26 of the Investment Incentives Act, 1968 of Malaysia;

orab.bb.ab.bb. which may be

introduced in future in Income-Tax Act 1967, Supplementary Income-Tax Act,

1967, Petroleum (Income-Tax) Act, 1967 or Investment Incentives Act, 1968 in

modification of or in addition to the existing measures;Provided

an agreement is made between the two Contracting States in respect of the scope

of the benefit accorded by the said measures.1.2.3.a. The amount of Indian

tax payable, under the laws of India and in accordance with the provisions of

this Aareement, whether directly or by deduction, by a resident of Malaysia, in

respect of income from sources within India which has been subjected to tax

both in India and Malaysia, shall be allowed as a credit against Malaysian tax

payable in respect of such income, but in an amount not exceeding that

proportion of Malaysian tax which such income bears to the entire income

chargeable to Malaysian tax.b. For the purposes of

the credit referred to in sub-paragraph (a) above, there shall be deemed to

have been paid by the resident of Malaysia the amount which would have been

paid if the Indian tax had not been reduced or relieved in accordance with the

special incentive measures designed to promote economic development in

India----i.

in

relation to royalties, as set forth in the relevant annual Finance Act of

India; andii.

in

relation to other income as set forth in the following sections of the

Income-tax Act, 1961 of India or which may be introduced in future in the

Indian tax laws in modification of or in addition to the existing measures,

provided that an agreement is made between the two Government in respect of the

scope of the benefit accorded by the said measures:---ae. (aa) Section 10 (15)

(iv) (b) and (c)----relating to exemption from tax of (a) an approved foreign

financial institution in respect of interest on moneys lent by it to an

industrial undertaking in India under a loan agreement; and (b) a non-resident

in respect of interest on moneys lent or credit facilities allowed by him to an

industrial undertaking in India for the purchase outside India of raw materials

or capital plant and machinery;ab.bb. Section 33---relating

to development rebate in respect of ships, machinery or plant;be.ce. Section

80J---relating to deduction in respect of profits and gains from eligible

industrial undertaking or ships or hotels;ad.bd.cd.dd. Section

80K----relating to deduction in respect of dividends attributable to profits

and gains from eligible industrial undertakings or ships or hotels; andde.ee. Section

80M---relating to deduction in respect of certain dividends received by a

company from a domestic company. This Sub-clause shall apply in relation to a

company which is a resident of Malaysia only if such company beneficially holds

shares (either singly or together with any company controlling it or any

company controlled by it) carrying not less than ten per cent of the voting

power in the domestic company and the domestic company is an industrial

company,i.ii.iii.

any

other incentive measure as may be agreed from time to time between the two

Contracting States.CHAPTER

VSPECIAL

PROVISIONSARTICLE

XXIIINon-Discrimination1. Citizens or nationals

of one of the Contracting States 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 citizens or nationals of that other Contracting State in the same

circumstances and under the same conditions are or may be subjected. This

provision shall not be construed as obliging one of the Contracting States to

grant to citizens of the other Contracting State not resident in the first-mentioned

Contracting State those personal allowances, relief and reductions for tax

purposes which are by law available only to citizens of that first-mentioned

Contracting State and to such other persons as may be specified in such law who

are not resident in that first-mentioned Contracting State.2. The taxation on a

permanent establishment which an enterprise of one of the Contracting States

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

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

Contracting State carrying on the same activities in the same circumstances and

under the same conditions.3. Enterprises of one of

the Contracting States, 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 in other or

more burdensome than the taxation and connected requirements to which other

similar enterprises of that first-mentioned Contracting State are or may be

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

term "citizens or nationals" in relation to a Contracting State

means:---a. all individuals

possessing the citizenship or nationality of that Contracting State;b. all legal persons,

partnerships, associations and other entities deriving their status as such

from the law in force in that Contracting State.ARTICLE

XXIVMutual

Agreement Procedure1. Where a resident of

one of the Contracting States, considers that the actions of one or both of the

Contracting States result, or will result in taxation not in accordance with

this Agreement, he may notwithstanding the remedies provided by the taxation

laws in force in the Contracting States present his case to the competent

authority of the Contracting State of which he is a resident.2. The competent

authority of the first-mentioned Contracting State shall endeavour, if the

objection appears to it to be justified and if it is not itself able to arrive

at an appropriate solution, to resolve that case by the 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.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.4. The competent

authorities of the Contracting States may communicate with each other directly

for the purposes of giving effect to the provisions of this Agreement.ARTICLE

XXVExchange

of Information1. The competent

authorities of the Contracting States shall exchange such information or

document as is necessary for carrying out the provisions of this Agreement or

for the prevention or detection of evasion or avoidance of the taxes which are

the subject of this Agreement. Any information or document so exchanged shall be

treated as secret but may be disclosed to persons (including a court or

administrative body) concerned with the assessment collection, enforcement, or

prosecution in respect of taxes which are the subject matter of this Agreement

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

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

reference to particular cases. The competent authorities of the Contracting

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

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

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

the obligation:a. to carry out

administrative measures at variance with the laws of 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

XXVIDiplomatic

and Consumer OfficialsNothing

in this Convention shall affect the fiscal privileges of diplomatic or consular

officials under the general rules of international law or under the provisions

of special agreements.CHAPTER

VIFINAL

PROVISIONSARTICLE

XXVIIEntry

into Force1. This Agreement shall

come into force on the date when the last of all such things shall have been

done in Malaysia and India as are necessary to give the Agreement the force of

law in Malaysia and India respectively.2. The Contracting

States shall notify each other of the completion of the requirements mentioned

in paragraph 1 of this Article. The exchange of diplomatic notes certifying

that this requirement has been completed shall take place at Kuala Lumpur.3. Upon the exchange of

such diplomatic notes this Agreement shall have effect.a. in Malaysia----as

respect Malaysian tax for the year of assessment beginning on 1st January,

1973, and subsequent years of assessment;a.b. in India,-----as

respects Indian tax for the assessment year commencing on the 1st day of April,

1973, and subsequent years of assessment.ARTICLE

XXVIIITermination1. This Agreement shall

continue in effect indefinitely, but either of the Contracting States may, on

or before 30th June in any calendar year after the year 1975 give to the other

Contracting State written notice of termination and in such event this

Agreement shall cease to be effective----a. in India----as

respects Indian tax for the year of assessment commencing on the 1st day of

April of the calendar year next following the calendar year in which such

notice is given and subsequent years of assessment;a.b. in Malaysia-----as

respects Malaysia tax for the year of assessment next following the calendar

year in which such notice is given and subsequent years of assessment.IN

WITNESS whereof the undersigned, duly authorised thereto, have signed this

Agreement.Done

in duplicate at New Delhi, this twenty-fifth day of October one thousand nine

hundred and seventy-six in the Hindi, Malay and English languages, all the

texts being equally authentic, except that in the case of divergence of

interpretation the English text shall prevail.(Sd/-)

PRANAB KUMAR MUKHERJEE.For

the Government of the Republic of India(Sd/-)

TAN SRI HAJI ABDUL KHALID BIN AWANG OSMAN.For

the Government of Malaysia.PROTOCOLAt

the time of signing the Agreement between the Government of India and the

Government of Malaysia for the Avoidance of Double Taxation and the Prevention

of Fiscal Evasion with respect to Taxes on Income, the undersigned have agreed

that as regards income derived from a Contracting State by a resident of the

other Contracting State from the operation of ships in international traffic

the competent authority of the first-mentioned Contracting State shall accept a

certificate issued by the competent authority of the other Contracting State

for the purpose of Article 8 of the Agreement.1.2. The certificate shall

show the following:----a. the gross income from

wherever derived;b. income or loss in

respect of shipping operations computed for the purpose of taxation in the

other Contracting State; andc. the total

depreciation allowances (excluding any allowance brought forward from a

previous period) given by the competent authority of that other Contracting

State.1.2.3. Further, it is also

agreed that this Protocol shall constitute an integral part of the Agreement.IN

WITNESS WHEREOF the undersigned, duly authorised thereto, have signed this

Protocol.DONE

in duplicate at New Delhi on the 25th day of October, 1976 in the Hindi, Malay

and English languages, all the texts being equally authentic, except that in

the case of divergence of interpretation the English text shall prevail.(Sd/-)

PRANAB KUMAR MUKHERJEE,For

the Govt. of India.Sd/-)

TAN SRI HAJI ABDULKHALID

BIN AWANG OSMAN,For

the Govt. of Malaysia