Malta - Legal Draft

SECTION 90 OF THE

INCOME-TAX ACT, 1961 --- DOUBLE TAXATION AGREEMENT AGREEMENT FOR AVOIDANCE OF

DOUBLE TAXATION AND PREVENTION OF FISCAL EVASION WITH FOREIGN COUNTRIES ---

WITH MALTANotification

No. 9908 (F. NO. 503/1/89/FTD), dated 22-11-1995Whereas

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

Republic of Malta for the avoidance of double taxation and the prevention of

fiscal evasion with respect to taxes on income has entered into force on 8th

February, 1995, after the notification by both the Contracting States to each

other of the completion of the procedures required under their laws for

bringing into force of the said Agreement in accordance with paragraph 1 of

Article 29 of the said Agreement;Now,

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

Act, 1961 (43 of 1961), the Central Government hereby directs that all the

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

India.AGREEMENT

BETWEEN THE REPUBLIC OF INDIA AND MALTA FOR THE AVOIDANCE OF DOUBLE TAXATION

AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME THE

GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF MALTADesiring

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

1PERSONAL

SCOPE:This

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

Contracting States.Article

2TAXES

COVERED:1. The existing taxes to

which this Agreement shall apply are:a. in India:the

income-tax including any surcharge thereon;(hereinafter

referred to as " Indian tax ");a.b. in Malta:the

income-tax;(hereinafter

referred to as " Malta tax ").1.2. This Agreement 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 Agreement

in addition to, or in place of, the taxes referred to in paragraph (1). The

competent authorities of the Contracting States shall notify each other of any

significant changes which are made in their respective taxation laws.3. Notwithstanding the

other provisions of this Article, this Agreement shall not apply to tax paid or

payable in Malta in accordance with the provisions of sub-section (11) of

section 31. of the Income-tax Act (Cap. 123), concerning the chargeable income

of any person engaged in the production of petroleum produced in Malta, or any

substantially similar provision which is imposed after the date of signature of

this Agreement.CHAPTER

II DEFINITIONSArticle

3GENERAL

DEFINITIONS:1. For the purposes of

this Agreement, unless the context otherwise requires:a. the term " 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/the U.N. Convention on the Law of the

Sea;b. the term " Malta

" when used in a geographical sense, means the Island of Malta, the Island

of Gozo and the other Islands of the Maltese archipelago including the

territorial waters thereof, and any area outside the territorial sea of Malta

which, in accordance with international law, has been or may hereafter be

designated, under the law of Malta concerning the Continental Shelf, as an area

within when the rights of Malta with respect to the seabed and sub-soil and

their natural resources may be exercised;c. the term "

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

body corporate for tax purposes;d. the term "

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

in the Ministry of Finance (Department of Revenue) or their authorised

representative; and in the case of Malta, the Minister responsible for finance

or his authorised representative;e. the term " a

Contracting State " and " the other Contracting State " mean

India or Malta as the context requires;f. the term "

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;f.(g) the term "

fiscal year " in relation to Indian tax means " previous year "

as defined in the Income-tax Act, 1961 (43 of 1961) and in relation to Malta

tax means the year immediately preceding the " year of assessment " as

defined in the Income-tax Act (Cap. 123);g. the term "

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

by an enterprise of a Contracting State, except when the ship or aircraft is

operated solely between places in the other Contracting State;h. the term " national

" means any individual possessing the nationality of a Contracting State

and any legal person, partnership or association deriving its status from the

laws in force in the Contracting State;i. the term "

person " includes an individual, a company, a body of persons and any

other entity which is treated as a taxable unit under the taxation laws in

force in the respective Contracting States;j. the term " tax

" means Indian tax or Malta tax, as the context requires, but shall not

include any amount which is payable in respect of any default or omission in

relation to the taxes to which this Agreement applies or which represents a

penalty imposed relating to those taxes.1.2. As regards the

application of the Agreement by a Contracting State, any term not defined therein

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

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

applies.Article

4RESIDENT:1. For the purposes of

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

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

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

of a similar nature.2. Where by reason of

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

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

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

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

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

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

he has his centre of vital interests cannot be determined, or if he has no

permanent home available to him in either 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 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 States or of neither of them, the competent authorities of the

Contracting States shall settle the question by mutual agreement.1.2.3. Where by reason of

the provisions of paragraph (1) of 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

ESTABLISHMENT:1. For the purposes of

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

place of business through which the business of the enterprise is wholly or

partly carried on.2. The term "

permanent establishment " includes especially:a. a place of

management;b. a branch;c. an office;d. a factory;e. a workshop;f. a mine, an oil or gas

well, quarry or any other place of extraction of natural resources including an

offshore drilling site;g. a building site or

construction or assembly project or supervisory activities in connection

therewith, where such site, project or activities (together with other such

sites, projects or activities, if any) continues for a period of more than six

months.1.2.3. 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, 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 for 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.1.2.3.4. A person engaged in a

Contracting State in exploration of the seabed and its sub-soil or in

exploitation of natural resources situated there as well as in activities which

are complementary or auxiliary to such activities, is deemed to exercise such

activities through a permanent establishment in that State.5. An enterprise of a

Contracting State shall be deemed to have a permanent establishment in the

other Contracting State if:a. substantial equipment

is in that other State being used or installed by, for or under contract with

the enterprise;b. it carries on

supervisory activities in that State in connection with the use of equipment

referred to in sub-paragraph (a).1.2.3.4.5.6. Notwithstanding the

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

an independent status to whom paragraph (7) applies --- is acting on behalf of

an enterprise and has, and habitually exercises, in a Contracting State an

authority to conclude contracts in the name of the enterprise, that enterprise

shall be deemed to have a permanent establishment in that State in respect of

any activities which that person undertakes for the enterprise, unless the

activities of such person are limited to the purchase of goods or merchandise

for the enterprise.7. 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 the enterprise, he shall not be considered

as agent of an independent status if the transactions between the agent and the

enterprise were not made under arm's length conditions.8. The fact that a

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

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

on business in that other State (whether through a permanent establishment or

otherwise), shall not of itself constitute either company a permanent

establishment of the other.CHAPTER

IIITAXATION

OF INCOMEArticle

6INCOME

FROM IMMOVABLE PROPERTY:1. Income derived by a

resident of a Contracting State from immovable property (including income from

agriculture or forestry) situated in the other Contracting State may be taxed

in that other State.2. The term "

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

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

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

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

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

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

or the right to work or to explore for, mineral deposits, sources and other

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

property.3. The provisions of

paragraph (1) shall also 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 independent personal services.Article

7BUSINESS

PROFITS:1. 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 directly or indirectly attributable to that

permanent establishment. The words " directly or indirectly " mean,

for the purposes of this Article, that where a permanent establishment takes an

active part in negotiating, concluding or fulfilling contracts entered into by

the enterprise, then, notwithstanding that other part of the enterprise have

also participated in those transactions, there shall be attributed to the permanent

establishment that proportion of profits of the enterprise arising out of those

contracts as the contribution of the permanent establishment to those

transactions bears to that of the enterprise as a whole.2. Subject to the

provisions of paragraph (3), where an enterprise of a Contracting State carries

on business in the other Contracting State through a permanent establishment

situated therein, there shall in each Contracting State be attributed to that

permanent establishment the profits which it might be expected to make if it

were a distinct and separate enterprise engaged in the same or similar

activities under the same or similar conditions and dealing wholly

independently with the enterprise of which it is a permanent establishment or

with other associated enterprises with which it deals.3. In the determination

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

deductions expenses of the enterprise, being expenses which are incurred for

the purposes of the permanent establishment (including executive and general

administrative expenses so incurred) and which would be deductible if the

permanent establishment were an independent entity which paid those expenses,

whether incurred in the Contracting State in which the permanent establishment

is situated or elsewhere in accordance with the provisions of and subject to

the limitation of the taxation laws of that State.4. Nothing in this

Article shall affect the application of any law of a Contracting State relating

to the determination of the tax liability of a person, including the

determination of such liability by the exercise of discretion or the making of

an estimate by the competent authority of that State in cases in which, from

the information available to the competent authority of that State, it is not

possible or not practicable to ascertain the profits to be attributed to a

permanent establishment, provided that law shall be applied, so far as the

information available to the competent authority permits, consistently with the

principles of this Article.5. No profits shall be

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

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

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

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

is good and sufficient reason to the contrary. (7) The provisions of this

Article shall not affect the provisions of the law of a Contracting State regarding

the taxation of profits from the business of insurance.7. Where profits include

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

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

provisions of this Article.Article

8SHIPPING

AND AIR TRANSPORT:1. Profits derived by an

enterprise of a Contracting State from the operation by that enterprise of

ships or aircraft in international traffic shall be taxable only in that State.2. For the purposes of

this Article, profits from the operation of ships or aircraft in international

traffic shall mean profits derived by an enterprise described in paragraph 1

from the transportation by sea or air respectively of passengers, mail,

livestock or goods carried on by the owners or lessees or charterers of ships

or aircraft including:a. the sale of tickets

for such transportation on behalf of other enterprises;b. other activity

directly connected with such transportation; andc. the rental of ships

or aircraft incidental to any activity directly connected with such

transportation.1.2.3. Profits of an

enterprise of a Contracting State described in paragraph (1) from the use,

maintenance, or rental of containers (including trailers, barges and related

equipment for the transport of containers) used in connection with the

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

in that State.4. The provisions of

paragraphs (1) and (3) shall also apply to profits from participation in a

pool, a joint business, or an international operating agency.5. For the purposes of

this Article, interest on funds connected with the operation of ships or

aircraft in international traffic shall be regarded as profits derived from the

operation of such ships or aircraft, and the provisions of Article 11

(Interest) shall not apply in relation to such interest.Article

9ASSOCIATED

ENTERPRISES:1. Where:a. an enterprise of a

Contracting State participates directly or indirectly in the management, control

or capital of an enterprise of the other Contracting State, 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. Nothing in this

Article shall affect the application of any law of a Contracting State relating

to the determination of such liability by the exercise of a discretion or the

making of an estimate by the competent authority of that State in cases which,

from the information available to the competent authority of that State, it is

not possible or not practicable to determine the income to be attributed to an

enterprise, provided that law shall be applied, so far as the information

available to the competent authority permits, consistently with the principles

of this Article.3. 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 that 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 Agreement and the competent authorities of the Contracting

States shall if necessary consult each other.Article

10DIVIDENDS:1. 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:a. where the dividends

are paid by a company resident of India to a resident of Malta who is the

beneficial owner thereof, the Indian tax so charged shall not exceed:i.

10

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

company which owns at least 25 per cent of the shares of the company paying the

dividends; andii.

15

per cent of the gross amount of the dividends in all other cases;a.b. where the dividends

are paid by a company which is a resident of Malta to a resident of India who

is the beneficial owner thereof Malta tax on the gross amount of the dividends

shall not exceed that chargeable on the profits out of which the dividends are

paid.This

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

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

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

jouissance " shares or " jouissance " rights, mining shares,

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

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

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

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

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

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

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

resident, through a permanent establishment situated therein, or performs in

that other State independent personal services from a fixed base situated

therein, and the holding in respect of which the dividends are paid is

effectively connected with such permanent establishment or fixed base. In such

a case the provisions of Article 7 or Article 15, as the case may be, shall

apply. (5) Where a company which is a resident of a Contracting State derives

profits or income from the other Contracting State, that other State may not

impose any tax on the dividends paid by the company except insofar as such

dividends are paid to a resident of that other State or insofar as the holding

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

permanent establishment or a fixed base situated in that other State, nor

subject the company's undistributed profits to a tax on the company's

undistributed profits, even if the dividends paid or the undistributed profits

consist wholly or partly or profits or income arising in such other State.Article

11INTEREST:1. 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 be taxed in the Contracting State in which it arises and according

to the laws of that State, but if the recipient is the beneficial owner of the

interest, the tax so charged shall not exceed 10 per cent of the gross amount

of the interest.3. Notwithstanding the

provisions of paragraph (2), interest arising in a Contracting State shall be

exempt from tax in that State if it is derived by the Government of the other

Contracting State or a local authority thereof or any agency or instrumentality

wholly owned and controlled by that Government or local authority.4. The term "

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

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

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

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

attaching to such securities, bonds or debentures.5. 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 15, 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 resident of a

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

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

is paid was incurred, and such interest shall be deemed to arise in the State

in which the permanent establishment of fixed base is situated. (7) Where, by

reason of a special relationship between the payer and the beneficial owner or

between both of them, and some other person, the amount of the interest having

regard to the debt claim for which it is paid, exceeds the amount which would

have been agreed upon by the payer and the beneficial owner in the absence of

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

last-mentioned amount. In such case, the excess part of the payments shall

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

had to the other provisions of this Agreement.Article

12ROYALTIES

AND FEES FOR INCLUDED SERVICES:1. Royalties and fees

for included 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 included services may also be taxed in the Contracting

State in which they arise and according to the laws of that State, but if the

recipient is the beneficial owner of the royalties or fees for included services

the tax so charged shall not exceed 15 per cent of the gross amount of the

royalties or fees for included services.3. The term "

royalties " in this Article means payments or credits, whether periodical

or not, and however described or computed, to the extent to which they are made

as consideration for:a. the use of, or the

right to use any copyright, patent, design or model, plan, secret formula or

process, trademark or other like property or right;b. the use of, or the

right to use, any industrial, commercial or scientific equipment;c. the supply of

scientific, technical, industrial or commercial knowledge or information;d. the use of, or the

right to use:i.

motion

picture films;ii.

films

or video tapes for use in connection with television; oriii.

tapes

for use in connection with radio broadcasting; ora.b.c.d.e. total or partial

forbearance in respect of the use or supply of any property or right referred

to in this paragraph.1.2.3.4. The term " fees

for included services " in this Article means payments or credits, whether

periodical or not, and however described or computed, to the extent to which

they are made as consideration for:a. the supply of any

assistance that is ancillary and subsidiary to, and is furnished as a means of

enabling the application or enjoyment of, any such property or right as is

mentioned in sub-paragraph (a) of paragraph (3), or any such equipment as is

mentioned in sub-paragraph (b) of paragraph (3), or any such knowledge or

information as is mentioned in sub-paragraph (c) of paragraph (3);b. rendering of any

technical or consultancy services (including the provision of technical or

other personnel) if such services make available technical knowledge,

(experience, skill, know-how or process or consist of the development and

transfer of a technical plan or technical design.1.2.3.4.5. The provisions of

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

or fees for included services, being a resident of a Contracting State, carries

on business in the other Contracting State in which the royalties or fees for

included services arise, through a permanent establishment situated therein, or

performs in that other State independent personal services from fixed base

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

fees for included services are paid is effectively connected with such

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

7 or Article 15, as the case may be, shall apply.6. Royalties and fees

for included services shall be deemed to arise in a Contracting State when the

payer is that State itself, a political sub-division, a local authority or a

resident of that State. Where, however, the person paying the royalties or fees

for included services, whether he is a resident of a Contracting State or not,

has in a Contracting State a permanent establishment or fixed base in

connection with which the liability to pay the royalties or fees for included

services was incurred, and such royalties or fees for included services are

borne by such permanent establishment or fixed base, then such royalties shall

be deemed to arise, in the State in which the permanent establishment or fixed

base is situated.7. Where, by reason of a

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

of them and some other person, the amount of the royalties or fees for included

services 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

beneficial owner in the absence of such relationship, the provisions of this

Article shall apply only to the last-mentioned amount. In such case, the excess

part of the payments shall remain taxable according to the laws of each

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

Agreement.Article

13TECHNICAL

FEES:1. Technical fees

arising in a Contracting State which are derived by a resident of the other

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

technical fees may also be taxed in the Contracting State in which they arise,

and according to the laws of that State; but if the recipient is the beneficial

owner of the technical fees, the tax so charged shall not exceed 10 per cent of

the gross amount of the technical fees.3. The term

"technical fees" as used in this Article means payments of any kind

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

consideration for any services of a technical, managerial or consultancy

nature.4. The provisions of paragraphs

(1) and (2) shall not apply if the beneficial owner of the technical fees,

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

Contracting State in which the technical fees arise through a permanent

establishment situated therein, or performs in that other State independent

personal services, and the technical fees are effectively connected with such

permanent establishment or such services. In such case, the provisions of

Article 7 or Article 15, as the case may be, shall apply.5. Technical fees 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 statutory body thereof, or a

resident of that State. Where, however, the person paying the technical fees,

whether he is a resident of a Contracting State or not, has in a Contracting

State a permanent establishment in connection with which the obligation to pay

the technical fees was incurred, and such technical fees are borne by that

permanent establishment, then such technical fees shall be deemed to arise in

the Contracting State in which the permanent establishment is situated.6. Where, by reason of a

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

them and some other person, the amount of the technical fees paid exceeds, for

whatever reason, the amount which would have been agreed upon by the payer and

the beneficial owner in the absence of such relationship, the provisions of

this Article shall apply only to the last-mentioned amount. In such case, the

excess part of the payments shall remain taxable according to the law of each

Contracting State due regard being had to the other provisions of this

Agreement.Article

14ALIENATION

OF PROPERTY:1. Income from gains

from the alienation of immovable property, as defined in paragraph (2) of

Article 6, may be taxed in the Contracting State in which such property is

situated.2. Income from gains

from the alienation of shares or comparable interests in a company, the assets

of which consist wholly or principally of immovable property, may be taxed in

the Contracting State in which the assets or the principal assets of the

company are situated.3. Income from 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

income or gains arising from the alienation of such a permanent establishment

(alone or together with the whole enterprise) or of such fixed base, may be

taxed in the other State.4. Income from gains

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

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

taxable only in the Contracting State of which the alienator is a resident.4.(5) Income from gains

from the alienation of shares other than those mentioned in paragraph (2) in a

company which is a resident of a Contracting State may be taxed in that State.5. Income from gains

from the alienation of any property other than that referred to in paragraphs

(1), (2),(3),(4) and (5) shall be taxable only in the Contracting State of

which the alienator is a resident.Article

15INDEPENDENT

PERSONAL SERVICES:1. Income derived by a

resident of a Contracting State in respect of professional services or other

activities of an independent character shall be taxable only in that State.

However, such income may be taxed in the other Contracting State in the

following circumstances:a. if he has a fixed

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

of performing his activities in which case only so much of the income as is

attributable to that fixed base may be taxed in that other Contracting State;

orb. if his stay in the

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

the aggregate 90 days during any fiscal year.1.2. The term

"professional services" includes especially independent scientific,

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

independent activities of physicians, surgeons, lawyers, engineers, architects,

dentists and accountants.Article

16DEPENDENT

PERSONAL SERVICES:1. Subject to the

provisions of Articles 17, 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 there from may be taxed in that other State.2. Notwithstanding the

provisions of paragraph (1), remuneration derived by a resident of a

Contracting State in respect of an employment exercised in the other

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

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

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

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

andc. the remuneration is

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

in the other State.1.2.3. Notwithstanding the

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

employment exercised aboard a ship or aircraft operated in international

traffic by an enterprise of a Contracting State may be taxed only in that

State.Article

17DIRECTORS'

FEES:Directors'

fees and similar payments derived by a resident of one of the Contracting

States in his capacity as a member of the board of directors, or other

comparable body however described, of a company which is a resident of the

other Contracting State, may be taxed in that other State.Article

18INCOME

EARNED BY ARTISTES & ATHLETES:1. Notwithstanding the

provisions of Articles 15 and 16, income derived by a resident of a Contracting

State as an entertainer such as a theatre, motion picture, radio or television

artiste or a musician or as an athlete from his personal activities as such

exercised in the other Contracting State, may be taxed in that other

Contracting State.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,

15 and 16, be taxed in the Contracting State in which the activities of the

entertainer or athlete are exercised.3. Notwithstanding the

provisions of paragraph 1, income derived by an entertainer or an athlete who

is a resident of a Contracting State from his personal activities as such

exercised in the other Contracting State, shall be taxable only in the

first-mentioned Contracting State, if the activities in the other Contracting

State are supported wholly or substantially from the public funds of the

first-mentioned Contracting State, including any of its political sub-divisions

or local authorities.4. Notwithstanding the

provisions of paragraph (2) and Articles 7, 15 and 16, where income in respect

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

as such in a Contracting State accrues not to the entertainer or athlete

himself but to another person, that income shall be taxable only in the other

Contracting State, if that other person is supported wholly or substantially

from the public funds of that other State, including any of its political

sub-divisions or local authorities.Article

19PENSIONS:1. Subject to the

provisions of paragraph (2) of Article 20, 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 and other payments made under the social

security legislation of a Contracting State shall be taxable only in that

State.Article

20GOVERNMENT

SERVICE:1.a. Remuneration, other

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

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

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

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

services are rendered in that State and the individual is a resident of that

State who:i.

is

a national of that State; orii.

did

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

services.1.2.a. Any pension paid by,

or out of funds created by a Contracting State or a political sub-division or a

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

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

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

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

Articles 16, 17 and 19 shall apply to remuneration and pensions in respect of

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

State or a political sub-division or a local authority thereof.Article

21REMUNERATION

RECEIVED BY TEACHERS:1. Remuneration which a professor

or teacher who is or was immediately before visiting a Contracting State a

resident of the other Contracting State and who is present in the

first-mentioned State for a period not exceeding two years for the purpose of

carrying out advanced study or research or for teaching at a university,

college, school or other educational institution receives for such work shall

not be taxed in that State, provided that such remuneration is derived by him

from outside that 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

22PAYMENTS

RECEIVED BY STUDENTS AND TRAINEES:An

individual who is a resident of a Contracting State immediately before making a

visit to the other Contracting State and is temporarily present in the other

State solely--1. As a student at a

recognised university, college, school or other similar recognised educational

institution in that other State; or2. as a business or

technical apprentice; or3. as a recipient of a

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

training from the Government of either State or from a scientific, educational,

religious, or charitable organisation or under a technical assistance programme

entered into by the Government of either State, shall be exempt from tax in

that other State on:a. all remittances from

abroad for the purposes of his maintenance, education, study, research or

training;b. the amount of such

grant, allowance or award; andc. any remuneration not

exceeding an amount equivalent to US $ 3,000 during any fiscal year in respect

of services in that other State provided the services are performed in

connection with his study, research or training or are necessary for the purpose

of his maintenance.Article

23OTHER

INCOME:1. Items of income of a

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

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

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

property 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 15, 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.CHAPTER

IVELIMINATION

OF DOUBLE TAXATIONArticle

24ELIMINATION

OF DOUBLE TAXATION:1. The laws in force in

either of the Contracting States shall continue to govern the taxation of

income in the respective Contracting States except where express provision to

the contrary is made in this Agreement.2. In the case of India,

double taxation shall be eliminated as follows:Where

a resident of India derives income which, in accordance with the provisions of

this Agreement, may be taxed in Malta, India shall allow as a deduction from

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

in Malta whether directly or by deduction. Such deduction in either case shall

not, however, exceed that part of the income-tax (as computed before the

deduction is given) which is attributable, as the case may be, to the income

which may be taxed in Malta.1.2.3. For the purposes of

paragraph (2), the term "income-tax paid in Malta" shall be deemed to

include the amount of Malta tax which would, under the laws of Malta and in

accordance with this Agreement, have been payable on any income derived from

sources in Malta had the income not been taxed at a reduced rate or exempted

from Malta tax in accordance with:a. the Aids to

Industries Ordinance, 1959 and the Industrial Development Act, 1988 in so far

as they were in force on, and have not been modified since, the date of

signature of this Agreement or have been modified only in minor respects so as

not to affect their general character; orb. any other provisions

in the Income-tax Act (Cap. 123) or in any other legislation which may

subsequently be introduced in Malta in modification of, or in addition to, the

existing special incentive laws so far as they are agreed by the competent

authorities of the Contracting States to be of a substantially similar

character.1.2.3.4. In the case of Malta,

double taxation shall be eliminated as follows:Subject

to the provisions of the law of Malta regarding the allowance of a credit

against Malta tax in respect of foreign tax, where, in accordance with the

provisions of this Agreement, there is included in a Malta assessment income

from sources within India the Indian tax on such income shall be allowed as a

credit against the relative Malta tax payable thereon.1.2.3.4.5. For the purposes of

the deduction referred to in paragraph (4), the term "Indian tax on such

income" shall be deemed to include any amount which would have been

payable as Indian tax under the laws of India and in accordance with this

Agreement for any year but for an exemption from, or reduction of, tax granted

for that year under:a. Sections 10(4),

10(4B), 10(6)(viia), 10(15)(iv), 10A, 10B, 80(1A), 80HHC, 80HHD, 80HHE of the

Income-tax Act, 1961 (43 of 1961), so far as they were in force on, and have

not been modified since, the date of the signature of this Agreement, or have

been modified only in minor respects so as not to affect their general

character; orb. any other provisions

which may be enacted hereafter granting a deduction in computing the taxable

income or an exemption or reduction from tax which the competent authorities of

the Contracting States agree to be for the purposes of the economic development

of India, if it has not been modified thereafter or has been modified only in

minor respects so as not to affect its general character1.2.3.4.5.6. Where the Agreement

provides that income arising in a Contracting State shall be relieved from tax

in that State, either in full or in part, and, under the law in force in the

other Contracting State, such income is subject to tax by reference to the

amount thereof which is remitted to or received in that other State and not by

reference to the full amount thereof, then the relief to be allowed in the

first-mentioned State shall apply only to so much of the income as is remitted

to or received in the other State.7. Income which, in

accordance with the provisions of this Agreement, is not to be subjected to tax

in a Contracting State, may be taken into account for calculating the rate of

tax to be imposed in that Contracting State.CHAPTER

VSPECIAL

PROVISIONSArticle

25NON-DISCRIMINATION:1. 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 are or may be subjected. This

provision shall, notwithstanding the provisions of Article 1, also apply to

persons who are not residents of one or both of the Contracting States.2. The taxation 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 preventing a Contracting State from charging

the profits of a permanent establishment which an enterprise of the other

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

higher than that imposed on the profits of a similar enterprise of the

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

of paragraph (3) of Article 7 of this Agreement.3. Except where the

provisions of paragraph (1) of Article 9, paragraph (7) of Article 11, or

paragraph (6) of Article 12 apply, interest, royalties and fees for included

services and other disbursements paid by an enterprise of a Contracting State

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

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

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

State.4. Enterprises of a

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

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

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

State to any taxation or, any requirements connected therewith which is other

or 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.5. Nothing in this

Article shall be construed as obliging a Contracting State to grant to

individuals who are resident of the other Contracting State any personal

allowances, reliefs and reductions for tax purposes on account of civil status,

family responsibilities or any other personal circumstances which it grants to

its own residents.6. In this Article, the

term "taxation" means taxes which are the subject of this Agreement.Article

26MUTUAL

AGREEMENT PROCEDURE:1. Where a person

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

will result for him in taxation not in accordance with the provisions of this

Agreement, he may, irrespective of the remedies provided by the domestic law of

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

State of which he is a resident or, if his case comes under paragraph (1) of

Article 25, to that of the Contracting State of which he is a national. The

case must be presented within three years from the first notification of the

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

Agreement.2. The competent

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

if it is not itself able to arrive at 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

Agreement. Any agreement reached shall be implemented notwithstanding any time

limits in the national laws of the Contracting States.3. The competent

authorities of the Contracting States shall Endeavour to resolve by mutual

agreement any difficulties or doubts arising as to the interpretation or

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

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

authorities of the Contracting States may communicate with each other directly

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

paragraphs. 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

27EXCHANGE

OF INFORMATION:1.

The

competent authorities of the Contracting States shall exchange such information

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

domestic laws of the Contracting States concerning taxes covered by the

Agreement insofar as the taxation there under is not contrary to the Agreement

in particular for the prevention of fraud or evasion of such taxes. Any

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

same manner as information obtained under the domestic laws of that State.

However, if the information is originally regarded as secret in the

transmitting State, it shall be disclosed only to persons or authorities

(including courts and administrative bodies) involved in the assessment or

collection of, the enforcement