Double Taxation Agreement - Volume II

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India
AGREEMENT FOR THE AVOIDANCE OF DOUBLE TAXATION OF INCOME BETWEEN PAKISTAN AND INDIA

S.R.O. 1, date 10th December, 1947.- In exercise of the powers conferred by section 49AA of the Income tax Act, 1922 (IX) of 1922) Section 11A of the Excess Profit Tax Act, 1940 (XV of 1940) and section 18A of the Business Profits Tax Act, 1947 (XXI of 1947), as adapted by the Pakistan (Adaptation of Income Tax, Profits Tax Revenue Recovery Acts) Order, 1947 the Central Government has made the following Agreement with India for the avoidance of double taxation of income chargeable in the two Dominions.

AGREEMENT OF THE AVOIDANCE OF DOUBLE TAXATION OF INCOME BETWEEN THE GOVERNMENT OF THE DOMINION OF INDIA AND THE GOVERNMENT OF THE DOMINION OF PAKISTAN.

Whereas the Government of the Dominion of India and the Government of the Dominion of Pakistan desire to conclude and agreement for the avoidance of double taxation of income chargeable in the two dominions in accordance with their respective laws:

Now, THEREFORE, the said Government do hereby agree as follows:

Article I. - The taxes which are the subject of the present Agreement are the taxes imposed in the Dominions of India and Pakistan by the Income-tax Act, 1022 (XI of 1922), the Excess Profit Tax 1940 (XV of 1940), and the Business Profits Tax Act, 1947 (XXI of 1947), as adapted in the respective Dominions.

Ariticle II. -- Subject to the privision of Article IX this Agreement shall continue in force so long as the basis of residence and scope of the charging provisions in the aforesaid Acts as adapted remain unaltered in both the Dominions and shall apply to the following assessments made under the said Acts in the two dominions--

(i) Assessments made on or after the 15th day of August, 1947 for the assessment year 1947-48 (for the corresponding chargeable accounting period).

(ii) All other assessments made on or after 1st day of April, 1948, excepting excess profits tax assessments for chargeable accounting periods for which provisional assessment have been made before 1st day of April, 1948.

Article III. -- Save under the provisions of Sections 34 of the Income-tax Act, 1922, and section 15 of the Excess Profit Tax Act, 1940, as adapted neither Dominion shall charge to tax any income of a person whose assessment (Whether regular or provisional) including such income had been completed before the 15th day of August, 1947, or 1st day of April, 1948, as the case may be an Income Tax Officer of Excess Profits Tax Officer functioning respectively under be by an Income Tax Act, 1922, or the Excess Profits Tax Profits Tax Act, 1940, or under those Acts as adapted and applied to any Areas or to either Dominion

Article IV. - Each Dominion shall make assessment in the ordinary way under its own laws; and, where either Dominion under the operation of its laws charges any income from the sources or categories of transactions specified in column I of the Schedule to this Agreement (hereinafter referred to as the Schedule) in excess of the amount calculated according to the percentage specified in columns 2 and 3 thereof, that Dominion shall allow an abatement equal to the lower amount of tax payable on such excess in their Dominion as provided for in Article VI.

Article V. - Where any income accruing or arising without the territories of the Dominion is chargeable to tax in both the Dominions, each Dominion shall allow an abatement equal to one-half of the lower amount of tax payable in either Dominion on such-doubly taxed income.

Article VI. - (a) For the purposes of the abatement to be allowed under Article IV or V, the tax payable in each Dominion on the excess or the doubly taxed income as the case may be, shall be such proportion of the tax payable in each Dominion as, the excess or the doubly taxed income bears to the total income of the assessee in each Dominion.

(b) Where at the time of assessment in one Dominion, the tax payable on the total income in the other Dominion is not known, the first Dominion shall make a demand without allowing the abatement but shall hold in abeyance for a period of one year (or such longer period as may be allowed by the Income Tax Officer in his discretion) the collection of a portion of the demand equal to the estimated abatement. If the assessee produces a certificate of assessment in the other Dominion within the period of one year or any longer period allowed by the Income Tax Officer the uncollected portion of the demand will be adjusted against the abatement allowable under this Agreement; if no certificate is produced, the abatement shall cease to be operative and the outstanding demand shall be collected forthwith.

Article VII. -- (a) Nothing in this Agreement shall be construed as modifying or interpreting in any manner the provisions of the relevant Taxation laws in force in either Dominion.

(b) If any question arises as to whether any income falls within any one of the items specified in the schedule and if so under which item the question shall be decided without any reference to the treatment of such income in the assessment made by the other Dominion.

Article VIII. - The Schedule to this Agreement may be modified from time to time by agreement between the Central Boards of Revenue of the two Dominions and references to the Schedule in the foregoing Articles shall be read as references to the Schedule as modified.

Article IX. - Either of the Contracting Parties may, six months before the beginning of any financial year (beginning on the 1st day of April) give to the other Contracting Party, through diplomatic channels, notice of termination and in such event this Agreement shall cease to have effect in relation to any assessment to income-tax for the financial year beginning with the first day of April next following and in relation to assessments to any other tax on the income of the corresponding chargeable accounting period.

THE SCHEDULE
(See Article IV)

Source of income or nature of transaction from which income is derived	Percentage of income Which each Dominion is entitled to charge under the agreement		Remarks
1	2	3	4
1. (a) Salaries paid by employers other than Government.	100 per cent by the Dominion in which the salary is earned by service.	Nil by the other.
(b) Salaries paid by Government.	100 per cent by the Dominion which pays the salary	Nil by the other.
2. (a) Interest on Government Securities.	100 per cent by the Dominion where the securities are enforced for payment of interest and principal.	Nil by the other.
(b) Interest on securities other than government securities.	100 per cent by the Dominion in which the investment is used	Nil by the other.
3. Income from property.	100 per ten! by the Dominion in which the property is situated.	Nil by the other.
4. Income from profession or vocation.	100 per cent by the Dominion in which professional service is rendered.	Nil by the other.
5. (a) Income from "Business" or "other Sources"(a) Rent or royalty from lease, renting or hire of property.
(b) Rent or royalty or licence fees or any like consideration from rights conceded in respect of property.	100 per cent by the Dominion in which the property is situated.	Nil by the other.
(c) Rent or royalty or any hike consideration from any interest in property.
(d) Profits or gains from dealings in property growing out of the ownership or use of or interest in such property.
(e) Rent or royalty for the use of or for the privilege of using patents, copyrights, goodwill, trade marks and other like property.	100 per cent by the Dominion in which the asset is used.	Nil by the other.
(f) Income derived from any money lent at interest and brought into a dominion in cash or in kind.	100 per cent by the Dominion into which the money is brought.	Nil by the other.
(g) Transport Ships, Air Road.	100 per cent by the Dominion in which the traffic originates.	Nil by the other.
6. Capital gains: (a) From sale, exchange or transfer of an immovable capital asset and any rights pertaining thereto.	100 per cent by the Dominion in which the capital asset is situated.	Nil by the other.
(b) From the sale, exchange or transfer of other assets.	100 per cent by the Dominion in which the sale, exchange or transfer takes place.	Nil by the other.
7. (a) Goods purchased in one Dominion and sold in the other in the same condition without any manufacturing process so as to change the identity of the goods.	10 per cent of the profits by the Dominion in which goods are purchased provided there is a branch or regular purchasing agency in the Dominion.	90 per cent by the other.	If there is no regular Purchasing agency 100 per cent shall be chargeable by the Dominion in which goods are sold and nil by the other.
(b) Goods, merchandise or commodities manufactured in one Dominion and delivered by the manufacturer to a buyer in the same Dominion.	100 per cent by the Dominion in which the goods are manufactured.	Nil by the other.
(c) Goods, merchandise or commodities manufactured in one dominion and sold by the manufacturer in the other without any further process and without having a selling establishment or regular agency in the latter Dominion.	75 per cent by the Dominion in which goods are manufactured.	25 per cent by the Dominion in which goods are sold.
(d) Goods, merchandise or commodities manufactured in one Dominion and sold by manufacturer in the other through a selling establishment or regular agency.	50 per cent by the Dominion in which goods are manufactured.	50 per cent by the Dominion in which goods are sold
(e) Goods, merchandise or commodities manufactured by the assessees partly in one Dominion and partly in the other.	50 per cent of the profits by each Dominion.	50 per cent of the profits by each Dominion.
(f) Metal ores, minerals, mineral oils and forest produce extracted in one Dominion and delivered by the extractor to a buyer in the same Dominion.	100 per cent by the Dominion in which the minerals are extracted.	Nil by the other.
(g) Metal ores, minerals, mineral oils and forest produce extracted in one Dominion and sold in the other without any further manufacturing process and without selling establishment or a regular agency.	75 per cent of the profits by the Dominion in which minerals are extracted.	25 per cent by the Dominion in which goods are sold.
(h) As above but sold in the other Dominion through a branch or selling establishment or regular agency.	50 per cent of the profits by the Dominion in which minerals are extracted.	50 per cent of the profits by the Dominion in which goods are sold.
8. Dividends	By each Dominion in proportion to the profits of the company chargeable by each Dominion under this Agreement.	(As in preceding Column).	Relief in respect of any excess incomes tax deemed to be paid by the shareholders shall be allowed by each Dominion in proportion to the profit of the company chargeable by each under this agreement.
9. Any income derived from a source or category of transactions not mentioned in any of the foregoing items of this schedule.	100 per cent by the Dominion in which the income actually accrues or arises.	Nil by the other.

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