United Kingdom - Legal Draft

CONVENTION

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

UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND FOR THE AVOIDANCE OF

DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON

INCOME AND CAPITAL GAINSNotification

No. G. S. R. 91(E), dated 11th February, 1994.Whereas

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

Government of the United Kingdom of Great Britain and Northern Ireland for the

avoidance of double taxation and the prevention of fiscal evasion with respect

to taxes on income and capital gains has entered into force on 26th October,

1993, on the notification by both the Contracting States to each other of the

completion of the procedures required by their respective laws, as required by

Article 30 of the said Convention.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 Convention shall be given effect to in the Union of

India.ANNEXURECONVENTION

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

UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND FOR THE AVOIDANCE OF

DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON

INCOME AND CAPITAL GAINSThe

Government of the Republic of India and the Government of the United Kingdom of

Great Britain and Northern IrelandDesiring

to conclude a new Convention for the avoidance of double taxation and the

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

agreed as follows:Article

1SCOPE

OF THE CONVENTION1. This Convention shall

apply to persons who are residents of one or both of the Contracting States.2. This Convention

extends to the territory of each Contracting State, including its territorial

sea, and to those areas of the exclusive economic zone or the continental shelf

adjacent to the outer limit of the territorial sea of each State over which it

has, in accordance with international law, sovereign rights for the purpose of

exploration and exploitation of the natural resources of such areas, and

references in this Convention to the Contracting State or to either of them

shall be construed accordingly.Article

2TAXES

COVERED1. The taxes which are

the subject of this Convention are:a. in the United Kingdom;i.

the

income-tax;ii.

the

corporation tax;iii.

the

capital gains tax; andiv.

the

petroleum revenue tax;(hereinafter

referred to as "United Kingdom tax")a.b. in India:the

income-tax including any surcharge thereon;(hereinafter

referred to as "Indian tax").1.2. This Convention shall

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

either Contracting State after the date of signature of this Convention in

addition to, or in place of, the taxes of that Contracting State referred to in

paragraph 1 of this Article. The competent authorities of the Contracting

States shall notify each other of any substantial changes which are made in

their respective taxation laws.Article

3GENERAL

DEFINITIONS1. In this Convention,

unless the context otherwise requires:a. the term "United

Kingdom" means Great Britain and Northern Ireland;b. the term

"India" means the Republic of India;c. the term

"tax" means United Kingdom tax or Indian 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 Convention applies or which

represents a penalty imposed relating to those taxes;d. 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 United Kingdom tax

means a year beginning with 6th April, in one year and ending with 5th April,

in the following year;e. the terms "a

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

or the United Kingdom, as the context requires;f. the term

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

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

Contracting States, but, subject to paragraph 2 of this article, does not

include a partnership;g. the term

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

a company or body corporate for tax purposes;h. the terms

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

Contracting State" mean respectively an enterprise carried on by a

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

the other Contracting State;i. the term

"competent authority" means, in the case of the United Kingdom, the

Commissioners of Inland Revenue or their authorised representative, and, in the

case of India, the Central Government in the Ministry of Finance (Department of

Revenue) or their authorised representative;j. 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;k. the term

"Government" means the Government of a Contracting State or a

political sub-division or local authority thereof. In relation to the United

Kingdom, the term "political sub-division" shall include Northern

Ireland.1.2. A partnership which

is treated as a taxable unit under the Income-tax Act, 1961 (43 of 1961), of

India shall be treated as a person for the purposes of this Convention3. As regards the

application of this Convention by a Contracting State any term not otherwise

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

has under the laws of that Contracting State relating to the taxes which are

the subject of this Convention.Article

4FISCAL

DOMICILE1. For the purposes of

this Convention, the term "resident of a Contracting State" means any

person who, under the law of that State, is liable to taxation therein by

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

of a similar nature.2. Where by reason of

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

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

the following rules:a. he shall be deemed to

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

available to him. If he has a permanent home available to him in both

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

State with which his personal and economic relations are closer (centre of

vital interests);b. if the Contracting

State in which he has his centre of vital interests cannot be determined, or if

he has not a permanent home available to him in either Contracting State, he

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

habitual abode;c. if he has an habitual

abode in both Contracting States or in either of them, he shall be deemed to be

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

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

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

the provisions of paragraph 1 of this Article a person other than an individual

is a resident of both Contracting States, then it shall be deemed to be a

resident of the Contracting State in which its place of effective management is

situated.Article

5PERMANENT

ESTABLISHMENT1. For the purposes of

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

of business through which the business of an enterprise is wholly or partly

carried on.2. The term

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

management;b. a branch;c. an office;d. a factory;e. a workshop;f. premises used as a

sales outlet or for receiving or soliciting orders;g. a warehouse in

relation to a person providing storage facilities for others;h. a mine, an oil or gas

well, quarry or other place of extraction of natural resources;i. an installation or structure

used for the exploration or exploitation of natural resources;j. a building site or

construction, installation or assembly project or supervisory activities in

connection therewith, where such site, project or supervisory activity

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

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

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

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

machinery and equipment;k. the furnishing of

services including managerial services, other than those taxable under Article

13 (Royalties and fees for technical services), within a Contracting State by

an enterprise through employees or other personnel, but only if:i.

activities

of that nature continue within that State for a period or periods aggregating

to more than 90 days within any twelve-month period; orii.

services

are performed within that State for an enterprise within the meaning of

paragraph 1 of Article 10 (Associated enterprises) and continue for a period or

periods aggregating to more than 30 days within any twelve-month period:Provided

that for the purposes of this paragraph an enterprise shall be deemed to have a

permanent establishment in a Contracting State and to carry on business through

that permanent establishment if it provides services or facilities in

connection with, or supplies plant and machinery on hire used or to be used in,

the prospecting for, or extraction or production of, mineral oils in that

State.1.2.3. The term

"permanent establishment" shall not be deemed to include:a. the use of facilities

solely for the purpose of storage or display of goods or merchandise belonging

to the enterprise;b. the maintenance of a

stock of goods or merchandise belonging to the enterprise solely for the

purpose of storage or display;c. the maintenance of a

stock of goods or merchandise belonging to the enterprise solely for the

purpose of processing by another enterprise;d. the maintenance of a

fixed place of business solely for the purpose of purchasing goods or

merchandise, or for collecting information, for the enterprise;e. the maintenance of a

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

of information or for scientific research, being activities solely of a

preparatory or auxiliary character 'in the trade or business of the enterprise.

However, this provision shall not be applicable where the enterprise maintains

any other fixed place of business in the other Contracting State for any

purpose or purposes other than the purposes specified in this paragraph;f. the maintenance of a

fixed place of business solely for any combination of activities mentioned in

sub-paragraphs (a) to (e) of this paragraph, provided that the overall activity

of the fixed place of business resulting from this combination is of a

preparatory or auxiliary character.1.2.3.4. A person acting in a

Contracting State for or on behalf, of an enterprise of the other Contracting

State--other than an agent of an independent status to whom paragraph 5 of this

article applies--shall be deemed to be a permanent establishment of that enterprise

in the first-mentioned State if:a. he has, and

habitually exercises in that State, an authority to negotiate and enter into

contracts for or on behalf of the enterprise, unless his activities are limited

to the purchase of goods or merchandise for the enterprise; orb. he habitually

maintains in the first-mentioned Contracting State a stock of goods or

merchandise from which he regularly delivers goods or merchandise for or on

behalf of the enterprise; orc. he habitually secures

orders in the first-mentioned State, wholly or almost wholly for the enterprise

itself or for the enterprise and other enterprises controlling, controlled by,

or subject to the same common control, as that enterprise.1.2.3.4.5. An enterprise of a

Contracting State shall not be deemed to have 4 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, if the activities of such an agent are carried out

wholly or almost wholly for the enterprise (or for the enterprise and other

enterprises which are controlled by it or have a controlling interest in it or

are subject to same common control) he shall not be considered to be an agent

of an independent status for the purposes 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 State (Whether through a permanent establishment or

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

establishment of the other.7. For the purposes of

this article the term "control", in relation to a company, means the

ability to exercise control over the company's affairs by means of the direct

or indirect holding of the greater part of the issued share capital or voting

power in the company.Article

6INCOME

FROM IMMOVABLE PROPERTY1. Income from immovable

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

situated.2.a. The term

"immovable property" shall, subject to the provisions of

sub-paragraph (b) of this paragraph, be defined in accordance with the law of

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

"immovable property" 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 payment as

consideration for the working of, or the right to work, mineral deposits,

sources and other natural resources. Ships and aircraft shall not be regarded

as immovable property.1.2.3. The provisions of

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

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

paragraphs 1 and 3 of this Article 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 directly or indirectly attributable to that

permanent establishment.2. Where an enterprise

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

through a permanent establishment situated therein, the profits which that

permanent establishment 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 shall be treated for the purposes of

paragraph 1 of this Article as being the profits directly attributable to that

permanent establishment.3. Where a permanent establishment

takes an active part in negotiating, concluding or fulfilling contracts entered

into by the enterprise, then, notwithstanding that other parts of the

enterprise have also participated in those transactions, that proportion of

profits of the enterprise arising out of those contracts which the contribution

of the permanent establishment to those transactions bears to that of the

enterprise as a whole shall be treated for the purposes of paragraph 1 of this

Article as being the profits indirectly attributable to that permanent

establishment.4. In so far as it has

been customary in a Contracting State according to its law 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 paragraphs 1 and 2 of this Article shall preclude that Contracting

State from determining the profits to be taxed by such an apportionment as may

be necessary; the method of apportionment adopted shall, however, be such that

the result shall be in accordance with the principles laid down in this

Article.5. Subject to paragraphs

6 and 7 of this Article, in the determination of the profits of a permanent

establishment, there shall be allowed as deductions expenses which are incurred

for the purposes of the business of the permanent establishment, including

executive and general administrative expenses so incurred, whether in the State

in which the permanent establishment is situated or elsewhere, which are

allowed under the provisions of and subject to the limitations of the domestic

law of the Contracting State in which the permanent establishment is situated.6. Where the law of the

Contracting State in which the permanent establishment is situated imposes a

restriction on the amount of the executive and general administrative expenses

which may be allowed, and the restriction is relaxed or overridden by any

Convention between that Contracting State and a third State which is a member

of the Organisation for Economic Co-operation and Development or a State in a

comparable stage of development, and that Convention enters into force after

the date of entry into force of this Convention, the competent authority of

that Contracting State shall notify the competent authority of the other

Contracting State of the terms of the relevant paragraph in the Convention with

that third State immediately after the entry into force of that Convention and,

if the competent authority of the other Contracting State so requests, the provisions

of this Convention shall be amended by protocol to reflect such terms.7. Paragraph 5 of this

article shall not apply to amounts, if any, paid (otherwise than towards

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

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

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

by way of commission, for specific services performed or for management, or,

except in the case of a banking enterprise, by way of interest on monies lent

to the permanent establishment; nor shall account be taken in the determination

of the profits of a permanent establishment of amounts charged (otherwise than

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

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

fees or other similar payments in return for the use of patents or other

rights, or by way of commission, for specific services performed or for

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

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

offices.8. 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.9. Where profits include

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

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

provisions of this Article.Article

8AIR

TRANSPORT1. Profits derived from

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

the Contracting States shall not be taxed in the other Contracting State.2. The provisions of

paragraph 1 of this Article shall likewise apply in respect of participation in

pools of any kind by enterprises engaged in air transport.3. For the purposes of

this article the term "operation of aircraft" shall include

transportation by air of persons, livestock, goods or mail, carried on by the

owners or lessees or charterers of aircraft, including the sale of tickets for

such transportation on behalf of other enterprises, the incidental lease of

aircraft on a charter basis and any other activity directly connected with such

transportation.4. Gains derived by an

enterprise of a Contracting State from the alienation of aircraft owned and

operated by the enterprise, the income from which is taxable only in that

State, shall be taxed only in that State.Article

9SHIPPING1. Income of an

enterprise of a Contracting State from the operation of ships in international

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

paragraph 1 of this Article shall not apply to income from journeys between

places which are situated in a Contracting State.3. For the purposes of

this article, income from the operation of ships includes income derived from

the rental on a bare-boat basis of ships if such rental income is incidental to

the income described in paragraph 1 of this Article.4. Notwithstanding the

provisions of Article 7 (Business profits) of this Convention, the provisions

of paragraphs 1 and 2 of this Article shall likewise apply to income of an

enterprise of a Contracting State from the use, maintenance or rental of

containers (including trailers and related equipment for the transport of

containers) used for the transport of goods or merchandise.5. The provisions of

this Article shall apply also to income derived from participation in a pool, a

joint business or an international operating agency.6. Gains derived by an

enterprise of a Contracting State from the alienation of ships or containers

owned and operated by the enterprise shall be taxed only in that State if

either the income from the operation of the alienated ships or containers was

taxed only in that State, or the ships or containers are situated outside the

other Contracting State at the time of the alienation.Article

10ASSOCIATED

ENTERPRISES1. 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. Where a Contracting

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

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

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

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

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

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

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

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

provisions of this Convention and the competent authorities of the Contracting

States shall if necessary consult each other.Article

11DIVIDENDS1.a. A dividend paid by a

company which is a resident of the United Kingdom to a resident of India may be

taxed in India.b. Where under paragraph

2 of this Article, a resident of India is entitled to a tax credit in respect

of that dividend, tax may also be charged in the United Kingdom and according

to the laws of the United Kingdom on the aggregate of the amount or value of

the dividend and the amount of the tax credit, at a rate not exceeding 15 per

cent.c. Except as provided in

sub-paragraph (b) of this paragraph, a dividend derived from a company which is

a resident of the United Kingdom by a resident of India, who is the beneficial

owner of that dividend, shall be exempt from any tax in the United Kingdom

which is chargeable on dividends.1.2. An individual who is

a resident of India and who receives a dividend from a company which is a

resident of the United Kingdom shall, provided he is the beneficial owner of

the dividend, be entitled to the tax credit in respect of that dividend which

an individual resident in the United Kingdom would have been entitled to had he

received that dividend, and to the payment of any excess of that tax credit

over his liability to United Kingdom tax.3. A dividend paid by a

company which is a resident of India to a resident of the United Kingdom may be

taxed in the United Kingdom. The dividend may also be taxed in India but the

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

dividend.4. The preceding

paragraphs of this Article shall not affect the taxation of the company in

respect of the profits out of which the dividend is paid.5. The provisions of

paragraphs 1 and 2 or, as the case may be, paragraph 3 of this Article shall

not apply if the beneficial owner of the dividend, being a resident of a

Contracting State, has, in the other Contracting State of which the company

paying the dividend is a resident, a permanent establishment or fixed base with

which the holding by virtue of which the dividend is paid is effectively

connected. In such a case the provisions of Article 7 (Business profits) or

Article 15 (Independent personal services) of this Convention, as the case may

be, shall apply.6. 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 that other State.7. As used in this

Article the term "dividend" means income from shares or other rights,

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

corporate rights treated in the same manner as income from shares by the

taxation law of the State of which the company making the distribution is a

resident and any other item treated as a dividend or distribution under that

law.Article

12INTEREST1. 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 law of that State, provided that where the resident of the

other Contracting State 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 of this Article:a. where the interest is

paid to a bank carrying on a bona fide banking business which is a resident of

the other Contracting State and is the beneficial owner of the interest, the

tax charged in the Contracting State in which the interest arises shall not

exceed 10 per cent. of the gross amount of the interestb. where the interest is

paid to the Government of one of the Contracting States or a political

sub-division or local authority of that State or the Reserve Bank of India, it

shall not be subject to tax by the State in which it arises1.2.3.4. Notwithstanding the

provisions of Article 7 of this Convention and of paragraphs 2 and 3 of this

Article:a. interest arising in

India which is paid to and beneficially owned by a resident of the United

Kingdom shall be exempt from tax in India if it is paid in respect of a loan

made, guaranteed or insured, or any other debt-claim or credit guaranteed or

insured by the United Kingdom Export Credits Guarantee Department; andb. interest arising in

the United Kingdom which is paid to and beneficially owned by a resident of

India shall be exempt from tax in the United Kingdom if it is paid in respect

of a loan made, guaranteed or insured, or any other debt-claim or credit

guaranteed or insured by the Export Credits and Guarantee Corporation of India

and/or Export-Import Bank of India.1.2.3.4.5. 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 but, subject to

the provisions of paragraph 9 of this Article, shall not include any item which

is treated as a distribution under the provisions of Article 11 (Dividends) of

this Convention.6. The provisions of

paragraphs 1, 2 and 3(a) of this Article 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 (Business profits) or Article 15 (Independent personal services) of

this Convention, as the case may be, shall apply.7. Interest shall be

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

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

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

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

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

is paid was incurred, and such interest is borne by that 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.8. Where, owing to a

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

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

whatever reason the amount which would have been paid in the absence of such

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

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

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

had to the other provisions of this Convention.9. Any provision in the

laws of either Contracting State relating only to interest paid to a

non-resident company shall not operate so as to require such interest paid to a

company which is a resident of the other Contracting State to be treated as a

distribution or dividend by the company paying such interest or to be left out

of account as a deduction in computing the taxable profits of the company

paying the interest. The preceding sentence shall not apply to interest paid to

a company which is a resident of one of the Contracting States in which more

than 50 per cent. of the voting power is controlled, directly or indirectly, by

a person or persons who are residents of the other Contracting State.10. The relief from tax

provided for in paragraph 2 of this Article shall not apply if the beneficial

owner of the interest:a. is exempt from tax on

such income in the Contracting State of which he is a resident; andb. sells or makes a

contract to sell the holding from which such interest is derived within three

months of the date such beneficial owner acquired such holding.1.2.3.4.5.6.7.8.9.10.11. The provisions of

this Article shall not apply if it was the main purpose or one of the main

purposes of any person concerned with the creation or assignment of the

debt-claim in respect of which the interest is paid to take advantage of this

Article by means of that creation or assignment.Article

13ROYALTIES

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 State2. However, such

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

State in which they arise and according to the law of that State; but if the

beneficial owner of the royalties or fees for technical services is a resident

of the other Contracting State, the tax so charged shall not exceed:a. in the case of

royalties within paragraph 3(a) of this Article, and fees for technical

services within paragraphs 4(a) and (c) of this Article;i.

during

the first five years for which this Convention has effect;aa. 15 per cent. of the

gross amount of such royalties or fees for technical services when the payer of

the royalties or fees for technical services is the Government of the

first-mentioned Contracting State or a political sub-division of that State,

andab.bb. 20 per cent. of the

gross amount of such royalties or fees for technical services in all other

cases; andi.ii.

during

subsequent years, 15 per cent. of the gross amount of such royalties or fees

for technical services;anda.b. in the case of

royalties within paragraph 3(b) of this Article and fees for technical services

defined in paragraph 4(b) of this Article, 10 per cent. of the gross amount of

such royalties and fees for technical services.1.2.3. For the purposes of

this Article, the term "royalties" meansa. payments of any kind

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

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

work on films, tape or other means of reproduction for use in connection with radio

or television broadcasting, any patent, trademark, design or model, plan,

secret formula or process, or for information concerning industrial, commercial

or scientific experience; andb. payments of any kind

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

commercial or scientific equipment, other than income derived by an enterprise

of a Contracting State from the operation of ships or aircraft in international

traffic.1.2.3.4. For the purposes of

paragraph 2 of this Article, and subject to paragraph 5 of this Article, the

term "fees for technical services" means payments of any kind to any

person in consideration for the rendering of any technical or consultancy services

(including the provision of services of technical or other personnel) which:a. are ancillary and

subsidiary to the application or enjoyment of the right, property or

information for which a payment described in paragraph 3(a) of this Article is

received; orb. are ancillary and

subsidiary to the enjoyment of the property for which a payment described in

paragraph 3(b) of this Article is received; orc. make available

technical knowledge, experience, skill, knowhow or processes, or consist of the

development and transfer of a technical plan or technical design.1.2.3.4.5. The definitions of

fees for technical services in paragraph 4 of this Article shall not include

amounts paid:a. for services that are

ancillary and subsidiary, as well as inextricably and essentially linked, to

the sale of property, other than property described in paragraph 3(a) of this

Article;b. for services that are

ancillary and subsidiary to the rental of ships, aircraft, containers or other

equipment used in connection with the operation of ships, or aircraft in

international traffic;c. for teaching in or by

educational institutions;d. for services for the

private use of the individual or individuals making the payment; ore. to an employee of the

person making the payments or to any individual or partnership for professional

services as defined in Article 15 (Independent personal services) of this

Convention.1.2.3.4.5.6. The provisions of

paragraphs 1 and 2 of this Article shall not apply if the beneficial owner of

the royalties or fees for technical services, being a resident of a Contracting

State, carries on business in the other Contracting State in which the royalties

or fees for technical services arise through a permanent establishment situated

therein, or performs in that other State independent personal services from a

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

which the royalties or fees for technical services are paid is effectively

connected with such permanent establishment or fixed base. In such case, the

provisions of Article 7 (Business profits) or Article 15 (Independent personal

services) of this Convention, as the case may be, shall apply7. Royalties and fees

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

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

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

fees for technical services, whether he is a resident of a Contracting State or

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

connection with which the obligation to make payments was incurred and the

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

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

Contracting State in which the permanent establishment or fixed base is

situated.8. Where, owing to a

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

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

technical services paid exceeds for whatever reason the amount which would have

been paid in the absence of such relationship, the provisions of this Article

shall apply only to the last-mentioned amount. In that case, the excess part of

the payments shall remain taxable according to the law of each Contracting

State, due regard being had to the other provisions of this Convention.9. The provisions of

this Article shall not apply if it was the main purpose or one of the main

purposes of any person concerned with the creation or assignment of the rights

in respect of which the royalties or fees for technical services are paid, to

take advantage of this Article by means of that creation or assignment.Article

14CAPITAL

GAINSExcept

as provided in Articles 8 (Air transport) and 9 (Shipping) of this Convention,

each Contracting State may tax capital gains in accordance with the provisions

of its domestic law.Article

15INDEPENDENT

PERSONAL SERVICES1. Income derived by an

individual, whether in his own capacity or as a member of a partnership, who is

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

independent activities of a similar character may be taxed in that State. Such

income may also be taxed in the other Contracting State if such services are

performed in that other State and if:a. he is present in that

other State for a period or periods aggregating to 90 days in the relevant

fiscal year; orb. he, or the

partnership, has a fixed base regularly available to him, or it, in that other

State for the purpose of performing his activities;but

in each case only so much of the income as is attributable to those services.1.2. For the purposes of

paragraph 1 of this Article an individual who is a member of a partnership

shall be regarded as being present in the other State during days on which,

although he is not present, another individual member of the partnership is so

present and performs professional services or other independent activities of a

similar character in that State.3. The term

"professional services" includes independent scientific, literary,

artistic, educational or teaching activities as well as the independent

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

and accountants.Article

16DEPENDENT

PERSONAL SERVICES1. Subject to the

provisions of Articles 17 (Directors' fees), 18 (Artistes and athletes), 19

(Governmental remuneration and pensions), 20 (Pensions and annuities), 21

(Students and trainees) and 22 (Teachers) of this Convention, 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 of this Article, remuneration derived by a resident

of a Contracting State in respect of an employment exercised in the other

Contracting State shall not be taxed in that other State, if:a. he is present in that

other State for a period or periods not exceeding in the aggregate 183 days

during the relevant fiscal year;b. the remuneration is

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

andc. the remuneration is

not deductible in computing the profits of an enterprise chargeable to tax in

that other State.1.2.3. Notwithstanding the

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

exercised aboard a ship or aircraft in international traffic may be taxed in

the Contracting State of which the person deriving the profits from the

operation of the ship or aircraft is a resident.Article

17DIRECTORS'

FEESDirectors'

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

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

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

18ARTISTES

AND ATHLETES1. Notwithstanding the

provisions of Articles 15 (Independent personal services) and 16 (Dependent

personal services) of this Convention, income derived by entertainers (such as

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

from their personal activities as such may be taxed in the Contracting State in

which these activities are exercised.2. Where income arising

from personal activities are such as exercised in a Contracting State by an

entertainer or athlete accrues not to that entertainer or athlete himself but

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

7 (Business profits), 15 (Independent personal services) and 16 (Dependent

personal services) of this convention, be taxed in that Contracting State.3. The provisions of

paragraphs 1 and 2 of this Article shall not apply if the visit to a

Contracting State of the entertainer or the athlete is directly or indirectly

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

Contracting State, including a political sub-division or local authority of

that other State.Article

19GOVERNMENTAL

REMUNERATION AND PENSIONS1. Remuneration, other

than a pension, paid by the Government of a Contracting State to any individual

who is a national of that State in respect of services rendered in the

discharge of governmental functions in the other Contracting State shall be

exempt from tax in that other Contracting State.2. Any pension paid by

the Government of a Contracting State to any individual in respect of services

rendered to that Government shall be taxable only in that Contracting State.3. The provisions of

this Article shall not apply to remuneration or pensions in respect of services

rendered in connection with any trade or business.Article

20PENSIONS

AND ANNUITIES1. Any pension, other

than a pension referred to in Article 19(2) of this Convention, or annuity paid

to a resident of a Contracting State shall be taxable only in that State.2. The term

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

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

performance of employment or any payments made under the social security

legislation of either Contracting State.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 or money's worth.Article

21STUDENTS

AND TRAINEES1. An individual who is

a resident of a Contracting State or was a resident of that State immediately

before visiting the other Contracting State and who is temporarily present in

that other State for the primary purpose of:a. studying at a

university or other accredited or recognised educational institution in that

other Contracting State; orb. securing training

required to qualify him to practise a profession or a professional speciality;

orc. studying or doing

research as a recipient of a grant, allowance, or award from a governmental,

religious, charitable, scientific, literary or educational organisation;shall

not be subject to tax by that other Contracting State in respect of:i.

gifts

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

training;ii.

the

grant, allowance or award; aniii.

income

from personal services rendered in that other Contracting State (other than any

rendered by an articled clerk or other person undergoing professional training

to the person or partnership to whom he is articled or who is providing the

training) not exceeding the sum of 750 pounds sterling or its equivalent in

Indian currency during any fiscal year.1.2. The exemptions under

paragraph 1 of this Article shall only extend for such period of time as may be

reasonably or customarily required for the purpose of the visit, but in no

event shall any individual have the benefit of paragraph 1 of this Article for

more than five years.3. An individual who is

a resident of a Contracting State or was a resident of that State immediately

before visiting the other Contracting State and who is temporarily present in

that other State for a period not exceeding 12 months, as an employee of, or

under contract with, a resident of the first-mentioned Contracting State, for

the primary purpose of:a. acquiring technical,

professional or business experience from a person other than that resident of

the first-mentioned Contracting State, orb. studying at a

university or other accredited or recognised institution in that other

Contracting State; shall not be subject to tax by that other Contracting State

on his income from personal services performed in the other Contracting State

for that period in an amount not exceeding 1,500 pounds sterling or its

equivalent in Indian currency.1.2.3.4. An individual who is

a resident of a Contracting State or was a resident of that State immediately

before visiting the other Contracting State and who is temporarily present in

that other State for a period not exceeding 12 months as a participant in a programme

sponsored by the Government of the other Contracting State, for the primary

purpose of training, research or study, shall not be subject to tax by that

other Contracting State in respect of payments made by the Government of the

first-mentioned Contracting State for the purposes of his maintenance,

training, research, or study.Article

22TEACHERS1. An individual who

visits a Contracting State for a period not exceeding two years for the purpose

of teaching or engaging in research at a university, college or other

recognised educational institution in that State, and who was immediately

before that visit a resident of the other Contracting State, shall be exempted

from tax by the first-mentioned Contracting State on any remuneration for such

teaching or research for a period not exceeding two years from the date he

first visits that State for such purpose.2. This Article shall

only apply to income from research if such research is undertaken by the

individual in the public interest and not primarily for the benefit of some

other private person or persons.Article

23OTHER

INCOME1. Subject to the

provisions of paragraph 2 of this Article, items of income beneficially owned

by a resident of a Contracting State, wherever arising, other than income paid

out of trusts or the estates of deceased persons in the course of

administration, which are not dealt with in the foregoing Articles of this

Convention, shall be taxable only in that State.2. The provisions of

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

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

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

other Contracting State through a permanent establishment situated therein, or

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

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

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

In such case, the provisions of Article 7 or Article 15 of this Convention, as

the case may be, shall apply.3. Notwithstanding the

provisions of paragraphs 1 and 2 of this Article, 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 be taxed in that other State.Article

24ELIMINATION

OF DOUBLE TAXATION1. Subject to the

provisions of the law of the United Kingdom regarding the allowance as a credit

against United Kingdom tax of tax payable in a territory outside the United

Kingdom (which shall not affect the general principle hereof):a. Indian tax payable

under the laws of India and in accordance with the provisions of this

Convention, whether directly or by deduction, on profits, income or chargeable

gains from sources within India (excluding, in the case of a dividend, tax

payable in respect of the profits out of which the dividend is paid) shall be

allowed as a credit against any United Kingdom tax computed by reference to the

same profits, income or chargeable gains by reference to which the Indian tax

is computed.b. In the case of a

dividend paid by a company which is a resident of India to a company which is a

resident of the United Kingdom and which controls directly or indirectly at

least 10 per cent. of the voting power in the company paying the dividend, the

credit shall take into account (in addition to any Indian tax for which credit

may be allowed under the provisions of sub-paragraph (a) of this paragraph) the

Indian tax payable by the company in respect of the profits out of which such

dividend is paid.1.2. Subject to the

provisions of the law of India regarding the allowance as a credit against

Indian tax of tax paid in a territory outside India (which shall not affect the

general principle hereof), the amount of the United Kingdom tax paid, under the

laws of the United Kingdom and in accordance with the provisions of this

Convention, whether directly or by deduction, by a resident of India, in

respect of income from sources within the United Kingdom which has been

subjected to tax both in India and the United Kingdom shall be allowed as a

credit against the Indian tax payable in respect of such income but in an

amount not exceeding that proportion of Indian tax which such income bears to

the entire income chargeable to Indian tax.For

the purposes of the credit referred to in this paragraph, where the resident of

India is a company by which surtax is payable, the credit to be allowed against

Indian tax shall be allowed in the first instance against the income-tax

payable by the company in India and, as to the balance, if any,