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ARTICLE 20
PAYMENTS RECEIVED BY STUDENTS AND APPRENTICES
(1) Payments which a student or business apprentice who is or was
immediately before visiting a Contracting State a resident of the other Contracting State
and who is present in the first-mentioned State solely for the purpose of his education or
training receives for the purpose of his maintenance, education or training shall not be
taxed in that State, provided that such payments arise from sources outside that State.
(2) In respect of grants, scholarships and remuneration from employment not covered by
paragraph (1), a student or business apprentice described in paragraph (1) shall, in
addition, be entitled during such education or training to the same exemptions, reliefs or
reductions in respect of taxes available to residents of the State which he is visiting.
101. Scope
This Article deals with payments to a student or business
apprentice for the purpose of his maintenance, education or training. All such payments
received from sources outside the State in which he is staying shall be exempted from tax
in that State. Besides, he is also entitled to the same exemptions, reliefs or reductions
as are available to the residents of that State in respect of grants, scholarships and
remunerations from employment. This Article, therefore, encourages free flow of students
and business apprentices for acquiring knowledge and skills.
102.Payment received by a student is exempt
Paragraph (1) contains the rule regarding ,exemption of the amount received by a
student or business apprentice, froth the sources outside the State in which he has been
staying, provided (1) he is or was immediately before coming to the Contracting State for
education training, resident of the other Contracting State; (2) he is present in the
Contracting State for the purpose of education or training; (3) he receives the aforesaid
amount for the purpose of his maintenance, education or training.
The presence of the word 'immediately' is significant. The benefit under this Article is
intended to be given to a resident of the Contracting State as on now and not to the
person who has been once its resident and presently is the resident of the third State.
Residence has reference to the physical connection of a person with a particular territory
which connection should not be separated by any intervening period when the person visits
the other Contracting State for education or training. The continuity of the physical
connection with the territory of the Contracting State should be existent immediately
before he visits the other Contracting State for education or training.
The expression ‘student’ or ‘business apprentice’ has been left
undefined in the Article. Individual agreement, however, has been limiting or extending
the scope of the Article by giving meaning to these expressions. The word 'student' has
been used with reference to a person studying at university, college or school or
recognised institution and the words 'business apprentice' have been extended to include.
'technical apprentice' and technical, agriculture and forestry agreement with Japan has
defined it to mean an individual having little or no technical or professional experience
and the agreements with Great Britain with reference to securing training required to
qualify him to practise a profession or a professional speciality.
In fact for the qualification of benefit under many agreements, a person need not be a
student or business apprentice. It is enough if he is 'an individual who is recipient of
grant, allowance or award for the primary purpose of study or research from a religious,
charitable, scientific or educational organisation (agreements with Austria, Denmark, FGR,
France, Italy, Japan, Malaysia, Singapore, Sweden, Hungary, 'Great Britain) or who is
recipient of remuneration in respect of training, research or study under the arrangements
with the Government of the Contracting State (agreements with Austria, FGR, France, Japan,
Malaysia, Singapore, Great Britain). Remittance from abroad, grant, scholarship of award,
or remuneration from employment for the purpose of maintenance, education or training are
exempt. The exemption, therefore, relates to:
(a) remuneration and all remittances from abroad for the purposes of maintenance,
education and training;
(b) grants, allowances and award;
(c) amounts representing remuneration from an employment in the Contracting State;
(d) remuneration as an employee of or under a contract with an enterprise of a Contracting
State or governmental, religious, charitable or educational organisation for acquiring
technical, professional or business, experience from a person such an enterprise or
organisation.
For such exemptions, however, the presence of the person has to be temporary and the
amount should also be within the agreed limit. There is thus a limit of period and amount.
Normally such limits are not meant for student or apprentice in respect of remittance from
abroad but are prescribed for an individual who receives remuneration for services
rendered for the purpose of study, research and training, or receives it from the
government for that purpose.
As regards period, it is the period of time as may be reasonably or customarily required
for the visit; the upper limit as prescribed in some agreements is 5 years (see agreements
with Great Britain, Hungary, Indonesia, Korea, Malaysia, Singapore, Mauritius) or 3 years
(see agreements with Kenya and Sweden) or one year in case when an individual from one
territory visits the other territory temporarily as an employee of or under a contract
with an enterprise of the former territory, or a governmental, religious, charitable,
scientific or educational organisation solely to acquire technical, professional or
business experience from a person such an enterprise or organisation (see agreements with
Austria, Belgium, FGR, France, Great Britain, Italy, Japan, Malaysia, Singapore). The
monetary limit has also been provided in majority of the agreements for exemption.
102.1. Solely for the purpose of education and training - The
payment referred to in this Article which qualifies for exemption must be received solely
for the purpose of education and training. ‘Solely’ means only and exclusively.
The proposition 'for' connotes the end result, with reference to which something is done It is, therefore, not enough that a student or
an apprentice should receive the payment, as also that he does with the purpose of his
maintenance, education or training. Purpose means design of effecting something, and is
different from 'motive'. 'Motive’ is a force which impels a person to adopt a
particular course of action which is highly subjective in character and be found mainly
from a course of conduct. But the purpose is more apparent and has immediate connection
with the result which is brought about. What is the result which is brought about by the
amount received by. a student or business apprentice ? If the answer is that the amount
.which enables the student or apprentice to, pursue his education or training it could be
said to have. been done for the purpose of his maintenance, education or training. The expression
'for the purpose of maintenance, education or training' comprehends all acts incidental to
the pursuit of education or training. Its range is wide. It covers not only the pursuit of
education or training but also maintenance of the student or apprentice to enable him to
have the pursuit, for example, food, clothing, shelter, etc. It legitimately comprehends
many other acts incidental to the pursuit of the studies and training. It has, however,
its own limitations which are implicit on it. The purpose must be confined to education or
training, that is to say that the amount is received by him for his maintenance, education
or training. The object, plan and design of which must have connection or relationship
with education or training. To comprehend the implication of this paragraph it is
necessary to explain words 'education', 'training' and 'maintenance’. The following
paras contain the discussion.
102.2. 'Education - Meaning of- Education connotes the process
of training and developing the knowledge, skills, mind and character of students by normal
schooling. The expression is not so wide and
extensive according to which every acquisition of further knowledge constitutes education.
The education may be technical, professional or general. Technical education concerned
with teaching, applied sciences, special training in applied sciences, technical
procedures and skills required for practice of trade or profession, especially those
involving the use of machinery or scientific equipment. Technical education may be
distinguished from profession education which places major emphasis upon the theories,
understanding and principles of a wide body of subject-matter designed to equip the
graduate to practise in such fields as medicine, law and engineering. General education comprises all other learning from pre-school conditioning
to advanced studies in the liberal arts and sciences.
102.3. 'Training’ - Meaning of- "Training"
means practical education in any profession, art or handicraft to bring a person to a
desired state of standard of efficiency.
102.4. Maintenance -- Meaning' of - The word 'maintenance'
means the act maintaining, supporting, continuance or causing to continue and carrying on
or causing to continue education or training as covered under paragraph (1) of the
Article.
103. Income arising in the visiting State - Exemption in respect of
The amount received may be designated as grant or scholarship, may be given other
nomenclature, or may even represent remuneration from employment. So long as its purpose
is for maintenance, education training; the amount would continue qualifying for exemption
from taxation provided other conditions as specified in paragraph (1) are satisfied. One
such condition is that arising of the income is from the sources outside the Contracting
State. But in case the income arises from sources in the visiting State, it also qualifies
for exemption or for rebate in the same manner as in respect of residents of that State.
Paragraph (2) deals with. such grant, scholarship 'or remuneration as is not covered by
paragraph (1). In respect of these the student/apprentice becomes eligible for personal
exemption and other allowances allowed the residents of the visiting State. Exemption for
remuneration even if it connected with the pursuit of education and Study is not unlimited
in term of amount and period.
