Mongolia - Legal Draft

Notification

No. S. O. 635(E), dated 16th September, 1996.Whereas

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

Government of Mongolia for the avoidance of double taxation and the prevention

of fiscal evasion with respect to taxes on income and on capital has entered

into force on the 29th March, 1996, on the notification by both the Contracting

States to each other of the completion of the procedures required under their

laws for the bringing into force of the said Agreement in accordance with

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), and section 44A of the Wealth-tax Act, 1957 (27 of

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

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

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

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

RESPECT TO TAXES ON INCOME AND ON CAPITAL.The

Government of the Republic of India and the Government of Mongolia,Desiring

to conclude an Agreement for the avoidance of double taxation and the

prevention of fiscal evasion with respect to taxes on income and on capital:Have

agreed as follows:Article

1PERSONAL

SCOPEThis

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

Contracting States.Article

2TAXES

COVERED1. The taxes to which

this Agreement shall apply are:a. in Mongolia:i.

the

individual income-tax;ii.

the

corporate income-tax;(hereinafter

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

the

income-tax including any surcharge thereon;ii.

the

wealth-tax;(hereinafter

referred to as "Indian tax").1.2. The present 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 substantial changes which are made in their respective taxation laws within

a reasonable period of time after such change.Article

3GENERAL

DEFINITIONS1. In 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, and other maritime zones in which India has sovereign

rights, other rights and jurisdictions according to the Indian law and in accordance

with international law.b. the term

"Mongolia" means when used in a geographical sense, all the territory

of Mongolia, the area which the tax law of the Contracting State in force, in

so far as the State concerned exercises there in conformity with international

law, sovereign rights to exploit its natural resources;c. the terms

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

Mongolia or India as the context requires;d. the term

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

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

Contracting States;e. the term

"competent authority" means in the case of Mongolia, the Ministry of

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

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

authorised representative;f. the terms

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

Contracting State" mean respectively an enterprise carried on by a

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

other Contracting State;g. the term "fiscal

year" means:i.

in

the case of Mongolia, the calendar year from 1 of January to 31 of December of

the year under review;ii.

in

the case of India, the "previous year" as defined under section 3 of

the Income-tax Act, 1961.a.b.c.d.e.f.g.h. the term

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

land vehicle operated by an enterprise of a Contracting State except when the

ship, aircraft or land vehicle is operated solely between places in the other

Contracting State;i. 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;j. 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;k. the term

"tax" means Indian tax or Mongolian 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 the Agreement

applies.2.Article 4RESIDENT1. For the purposes of

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

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

his domicile, residence, place of management or any 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 that State in which he has a permanent home available to him;

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

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

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

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

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

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

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

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

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

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

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

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

State in which his place of effective management is situated.Article

5PERMANENT

ESTABLISHMENT1. For the purposes of

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

of business, through which the business of 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;g. a building site or a

construction or an assembly project or supervisory activities in connection

therewith; but only where such site, project or activity continues for a period

of more than nine 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 of collecting information, for the enterprise;e. the maintenance of a

fixed place of business solely for the purpose of carrying on for the

enterprise, any other activity of a preparatory or auxiliary character.1.2.3.4. Notwithstanding the

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

status to whom paragraph 5 applies---is acting on behalf of an enterprise and

has, and habitually exercises, in a Contracting State an authority to conclude

contracts on behalf 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 those mentioned in paragraph 3 of this article, which if exercised

through a fixed place of business would not make this fixed place of business a

permanent establishment under the provisions of that paragraph.5. An enterprise of a

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

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

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

independent status, provided that such persons are acting in the ordinary

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

devoted wholly or almost wholly on behalf of that enterprise; he will not be

considered an agent of an independent status within the meaning of this

paragraph.6. The fact that a

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

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

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

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

company a permanent establishment of the other.Article

6INCOME

FROM IMMOVABLE PROPERTY1. Income derived by a

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

agricultural 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, mineral deposits, sources and other

natural resources. Ships, land vehicles and aircraft shall not be regarded as

immovable property.3. The provisions of

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

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

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

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

independent personal services.Article

7BUSINESS

PROFITS1. The profits of an

enterprise of a Contracting State shall be taxable only in that State unless

the enterprise carries on business in the other Contracting State through a

permanent establishment situated therein. If the enterprise carries on business

as aforesaid, the profits of the enterprise may be taxed in the other State but

only so much of them as is attributable to:a. that permanent

establishment; orb. sales in that other

State of goods or merchandise of the same or similar kind as those sold through

that permanent establishment; orc. other business

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

effected through that permanent establishment.1.2. Subject to the

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

on business in the other Contracting State through a permanent establishment

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

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

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

activities under the same or similar conditions and dealing wholly

independently with the enterprise of which it is a permanent establishment.3. In determining the

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

expenses which are incurred for the purposes of the business of the permanent

establishment, including executive and general administrative expenses so

incurred, whether in the State in which the permanent establishment is situated

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

limitations of the tax laws of that State.4. In so far as it has

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

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

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

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

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

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

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

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

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

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

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

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

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

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

provisions of this article.Article

8SHIPPING,

AIR AND LAND TRANSPORT1. Profits derived by an

enterprise registered and having its headquarters (i.e., effective management)

in a Contracting State from operation of ships, aircraft or land vehicles in

international traffic shall be taxable only in that State.2. The provisions of

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

joint business or an international operating agency.3. For the purposes of

this article, interest on funds connected with the operation of ships, aircraft

of land vehicles in international traffic shall be regarded as profits derived

from the operation of such ship, aircraft or land vehicles, and the provisions

of Article 11 shall not apply in relation to such interest.4. The term

"operation of aircraft" shall mean business of transportation by air

passengers, mail, livestock or goods carried on by the owners or lessees or

charterers of aircraft, including the sale of tickets for such transportation

on behalf of other enterprise, the incidental lease of aircraft and any other

activity directly connected with such transportation.5. The term

"operation of ships" shall include:a. the use, maintenance

or rental of containers (including trailers and related equipment for the

transport of containers) in connection with the transport of goods or

merchandise in international traffic;b. rental on a full or

bareboat basis of ships if operated in international traffic.Article

9ASSOCIATED

ENTERPRISESWhere,---a. an enterprise of a

Contracting State participates directly or indirectly in the management,

control or capital of an enterprise of the other Contracting State, orb. the same persons

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

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

State,and

in either case conditions are made or imposed between the two enterprises in

their commercial or financial relations which differ from those which would be

made between independent enterprises, then any profits which would, but for

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

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

enterprise and taxed accordingly.Article

10DIVIDENDS1. Dividends, paid by

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

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

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

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

but if the recipient is the beneficial owner of the dividends the tax so

charged shall not exceed 15 per cent. of the gross amount of the dividends.This

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

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

"dividends" as used in this article means income from shares or from

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 case, the provisions

of Article 7 or Article 14 as the case may be, shall apply.5. Where a company which

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

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

paid by the company except in so far as such dividends are paid to a resident

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

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

fixed base situated in that other State, nor subject the company's

undistributed profits to a tax on the company's undistributed profits even if

the dividends paid or the undistributed profits consist wholly or partly of

profits or income arising in such other State.Article

11INTEREST1. Interest arising in a

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

taxed in that other State.2. However, such

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

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

owner of the interest the tax so charged shall not exceed 15 per cent. of the

gross amount of the interest.3. Notwithstanding the

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

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

and beneficially owned by:i.

the

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

Contracting State; orii.

the

Central Bank of the other Contracting State; oriii.

the

Trade and Development Bank of Mongolia in the case of Mongolia, and the

Industrial Development Bank of India in the case of India.a.b. interest arising in a

Contracting State shall be exempt from tax in that Contracting State to the

extent approved by the Government of that State if it is derived and

beneficially owned by any person other than a person referred to in

sub-paragraph (a) who is a resident of the other Contracting State provided

that the transaction giving rise to the debt-claim has been approved in this

regard by the Government of the first-mentioned Contracting State.1.2.3.4. The term

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

every kind, whether or not secured by mortgage and whether or not carrying a

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

Government securities and income from bonds or debentures, including premiums

and prizes attaching to such securities, bonds or debentures. Penalty charges

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

article.5. The provisions of

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

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

Contracting State in which the interest arises, through a permanent

establishment situated therein, or performs in that other State independent

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

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

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

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

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

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

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

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

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

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

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

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 interest having regard to the

debt-claim for which it is paid, exceeds the amount which would have been

agreed upon by the payer and the beneficial owner, in the absence of such

relationship, the provisions of this article shall apply only to the

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

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

being had to the other provisions of this Agreement.Article

12ROYALTIES

AND FEES FOR TECHNICAL SERVICES1. Royalties and fees

for technical services arising in a Contracting State and paid to a resident of

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

royalties and fees for technical services may also be taxed in the Contracting

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

recipient is the beneficial owner of royalties, or fees for technical services,

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

royalties or fees for technical services.3. The term

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

received as a consideration for the use of, or the right to use, any copyright

of literary, artistic or scientific work, including cinematograph films or

films or tapes used for radio or television broadcasting, any patent, trade

mark, design or model, plan, secret formula or process, or for the use of, or

the right to use, industrial, commercial or scientific equipment, or for information

concerning industrial, commercial or scientific experience.4. The term "fees

for technical services" as used in this article means payments of any

amount to any person other than payments to an employee of a person making

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

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

personnel.5. The provisions of

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

fees for technical services, being a resident of a Contracting State, carries

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

technical services arise, through a permanent establishment situated therein,

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

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

royalties or fees for technical services are paid is effectively connected with

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

Article 7, or Article 14, as the case may be, shall apply.6. Royalties and fees

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

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

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

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

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

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

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

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

fees for technical services shall be deemed to arise in the State in which the

permanent establishment or fixed base is situated.7. Where, by reason of a

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

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

services paid exceeds the amount which would have been paid in the absence of

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

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

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

being had to the other provisions of this Agreement.Article

13CAPITAL

GAINS1. Gains derived by a

resident of a Contracting State from the alienation of immovable property,

referred to in Article 6 and situated in the other Contracting State may be

taxed in that other Contracting State.2. Gains from the

alienation of movable property forming part of the business property of a

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

other Contracting State or of movable property pertaining to a fixed base

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

for the purposes of performing independent personal services, including such

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

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

alienation of ships, aircraft or land vehicles operated in international

traffic or movable property pertaining to the operation of such ships, aircraft

or land vehicles shall be taxable only in the Contracting State in which the

enterprise is registered and having its headquarters (i.e. effective

management).4. Gains from the

alienation of shares of the capital stock of a company the property of which

consists directly or indirectly principally of immovable property situated in a

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

alienation of shares, other than those mentioned in paragraph 4, in a company

which is a resident of a Contracting State may be taxed in that State.6. Gains from the

alienation of any property, other than that mentioned in paragraphs 1, 2, 3, 4

and 5 shall be taxable only in the Contracting State of which the alienator is

a resident.Article

14INDEPENDENT

PERSONAL SERVICES1. Income derived by a

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

independent activities of a similar character shall be taxable only in that

State except in the following circumstances when such income may also be taxed

in the other Contracting State:a. if he has a fixed

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

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

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

orb. if his stay in the

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

the aggregate 183 days in the relevant fiscal year; in that case, only so much

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

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

"professional services" includes especially independent scientific,

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

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

dentists, accountants and other such professions.Article

15DEPENDENT

PERSONAL SERVICES1. Subject to the

provisions of Articles 16, 17, 18, 19, 20 and 21, salaries, wages and other

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

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

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

such remuneration as is derived therefrom may be taxed in that other 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 Contracting State for a period or periods not exceeding in

the aggregate of 183 days in the relevant fiscal year; andb. the remuneration is

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

Contracting State; andc. the remuneration is

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

in the other Contracting State.1.2.3. Notwithstanding the

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

employment exercised aboard a ship or aircraft or land vehicle operated in

international traffic by an enterprise of a Contracting State shall be taxable

only in that State.Article

16DIRECTORS'

FEESDirectors'

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

capacity as a member of the board of directors or similar organ of a company,

which is a resident of the other Contracting State, may be taxed in that other

State.Article

17INCOME

EARNED BY ENTERTAINERS AND SPORTSPERSONS1. Notwithstanding the

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

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

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

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

that other State.2. Where income in

respect of personal activities exercised by an entertainer or sportsperson in

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

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

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

entertainer or sportsperson are exercised.3. Notwithstanding the

provisions of paragraph 1, income derived by an entertainer or a sportsperson

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, 14 and 15, where income in respect of

personal activities exercised by an entertainer or a sportsperson in his

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

sportsperson 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

18REMUNERATION

AND PENSIONS IN RESPECT OF GOVERNMENT SERVICE1.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 other State and the individual is a resident of

that State who:---i.

is

a national of that State; orii.

did

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

services.1.2.a. Any pension paid by,

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

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

that State or sub-division or local authority thereof shall be taxable only in

that State.b. However, such pension

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

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

Articles 15, 16 and 17 shall apply to remuneration and pensions in respect of

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

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

19NON-GOVERNMENT

PENSIONS AND ANNUITIES1. Any pension, other

than a pension referred to in Article 18, or any annuity derived by a resident

of a Contracting State from sources within the other Contracting State may be

taxed only in the first-mentioned Contracting State.2. The term

"pension" means a periodic payment made in consideration of past

services or by way of compensation for injuries received in the course of

performance of services.3. The term

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

during life or during a specified or ascertainable period of time, under an

obligation to make the payments in return for adequate and full consideration

in money's worth.Article

20PAYMENTS

RECEIVED BY STUDENTS AND APPRENTICES1. A student or business

apprentice who is or was a resident of a Contracting State immediately before

visiting the other Contracting State and who is present in that other

Contracting State solely for the purpose of his education or training shall be

exempt from tax in that other State on:---a. payments made to him

by persons residing outside that other State for the purposes of his

maintenance, education or training;b. grants, scholarships

or awards supplied by the Government, or a scientific, educational, cultural or

other tax-exempt organisation; andc. income derived from

personal services performed in that Contracting State for the purpose of his

maintenance.1.2. The benefits of this

article shall extend only for such period of time as may be reasonable or

customarily required to complete the education or training undertaken, but in

no event shall any individual have the benefits of this article for more than

five consecutive years from the date of his first arrival in that other Contracting

State.Article

21PAYMENTS

RECEIVED BY PROFESSORS, TEACHERS AND RESEARCH SCHOLARS1. A professor or

teacher who is, or was a resident of the Contracting State immediately before

visiting the other Contracting State for the purpose of teaching or engaging in

research, or both, at a university, college, school or other approved

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

other State on any remuneration for such teaching or research for a period not

exceeding two years from the date of his arrival in that other State.2. This article shall

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

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

this article and Article 20 an individual shall be deemed to be a resident of a

Contracting State if he is resident in that State or in the immediately

preceding fiscal year.4. For the purposes of

paragraph 1, "approved institution" means an institution which has

been approved in this regard by the competent authority of the concerned

Contracting State.Article

22OTHER

INCOME1. Subject to the

provisions of paragraph 2, items of income of a resident of a Contracting

State, wherever arising, which are not expressly dealt with in the foregoing articles

of this Agreement, shall be taxable only in that Contracting 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 a case the provisions of Article 7 or Article 14, as the case may be,

shall apply.3. Notwithstanding the

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

Contracting State not dealt with in the foregoing articles of this Agreement

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

Contracting State.Article

23CAPITAL1. Capital represented

by immovable property referred to in Article 6, owned by a resident of a

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

that other State.2. Capital represented

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

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

Contracting State or by movable property pertaining to a fixed base available

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

purpose of performing independent personal services may be taxed in that other

State.3. Capital represented

by ships, aircraft or land vehicles operated in international traffic and by

movable property pertaining to the operation of such ships, aircraft or land

vehicles, shall be taxable only in the Contracting State of which the

enterprise owning such property is a resident.4. All other elements of

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

State.Article

24AVOIDANCE

OF DOUBLE TAXATION1. 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. Where a resident of

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

of this Agreement, may be taxed in Mongolia, India shall allow as a deduction

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

paid in Mongolia, whether directly or by deduction; and as a deduction from the

tax on the capital of that resident an amount equal to the capital tax paid in

Mongolia. Such deduction in either case shall not, however, exceed that part of

income-tax or tax on capital (as paid before the deduction is given), which is

attributable to the income or the capital which may be taxed in Mongolia.3. In the case of

Mongolia the double taxation shall be avoided by a method which is identical to

that mentioned in paragraph 2.4. The tax payable in

the Contracting State mentioned in paragraphs 2 and 3 of this article shall be

deemed to include the tax which would have been payable but for the tax

incentives granted under the laws of the Contracting State and which are

designed to promote economic development.5. 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.Article

25NON-DISCRIMINATION1. Nationals of a

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

taxation or any requirement connected therewith which is other or more

burdensome than the taxation and connected requirements to which nationals of

that other State in the same circumstances are or may be subjected.2. The taxation on a

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

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

than the taxation levied on enterprise of that other State carrying on the same

activities in the same circumstances. 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 Contracting State at a rate higher than that imposed on the

profits of a similar enterprise of the first-mentioned State, nor as being in

conflict with the provisions of paragraph 3 of Article 7 of this Agreement.3. Nothing contained in

this article shall be construed as obliging a Contracting State to grant to

persons not resident in that State any personal allowances, reliefs, reductions

and deductions for taxation purposes which are by law available only to persons

who are so resident.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 requirement 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. In this article, the

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

26MUTUAL

AGREEMENT PROCEDURE1. Where a resident of a

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

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

Agreement, he may notwithstanding the remedies provided by the national laws of

those States, present his case to the competent authority of the State of which

he is a resident. The case must be presented within three years from the date

of receipt of the first notice of the action resulting in taxation not in

accordance with the provisions of the Agreement.2. The competent

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

if it is not itself able to arrive at a satisfactory solution, to resolve the

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

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

Agreement. Any agreement reached shall be implemented notwithstanding any time

limits in the national laws of the Contracting State.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 representatives of

the competent authorities of the Contracting States.Article

27EXCHANGE

OF INFORMATION1. The competent

authorities of the Contracting States shall exchange such information

(including documents) as is necessary for carrying out the provisions of the

Agreement or of the domestic laws of the Contracting States concerning taxes

covered by the Agreement in so far as the taxation thereunder 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 or prosecution in respect of, or the

determination of appeals in relation to, the taxes which are the subject of the

Agreement. Such persons or authorities shall use the information only for such

purposes. They may disclose the information in public court proceedings in

judicial decisions. The competent authorities shall through consultation,

develop appropriate conditions, methods and techniques concerning the matter in

respect of which such exchange of information shall be made, including, where

appropriate, exchange of information regarding tax avoidance.2. The exchange of

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

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

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

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

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

the obligation:a. to carry out

administrative measures at variance with the laws and the 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

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

28DIPLOMATIC

AND CONSULAR ACTIVITIESNothing

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

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

of special agreements.Article

29ENTRY

INTO FORCEEach

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

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

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

notifications and shall thereupon have effect:a. In India: in respect

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

1994, and in respect of capital which is held at the expiry of any previous

year beginning on or after 1st April, 1994.b. In Mongolia: in

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

January, 1994, and in respect of capital which is held at the expiry of any

year of income beginning on or after the 1st January, 1994.Article

30TERMINATIONThis

Agreement shall remain in force indefinitely but either of the Contracting

States may, on or before 30th June, in any calendar year beginning after the

expiration of a period of five years from the date of its entry into force,

give the other Contracting State through diplomatic channels, written notice of

termination and, in such event, this Agreement shall cease to have effect:a. In India: in respect

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

following the calendar year in which the notice is given and in respect of

capital which is held at the expiry of any previous year beginning on or after

the 1st April next following the calendar year in which the notice of

termination is given;b. In Mongolia: in

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

January, next following the calendar year in which the notice is given and in

respect of capital which is held at the expiry of any year of income next

following the calendar year in which the notice of termination is given.In

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

present Agreement.Done

in duplicate this 22nd day of February, one thousand nine hundred and ninety

four in the Hindi, Mongolian and English languages, all the texts being equally

authentic. In case of divergence between any of the texts, the English text

shall be the operative one.For

the Government of the Republic of India.Manmohan

Singh,Minister

of Finance.For

the Government of Mongolia.T.

S. Tsogt,Minister

for Trade and Industry.[Notification

No. 10190/96-F. No. 503/4/93-FTD.]