The Double Taxation Relief (Taxes on Income) (India) Order 1993

PART II EXCHANGE OF NOTES

Your Excellency

New Delhi

25th January 1993

I have the honour to refer to the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains which has been signed today and to propose on behalf of the Government of the United Kingdom of Great Britain and Northern Ireland:

(a) that, in applying sub-paragraph (j) of paragraph (2) of Article 5, for the purpose of determining whether a building site or construction, installation or assembly project or supervisory activity in connection therewith has continued for a period of more than six months, the Contracting States shall:

(i) take no account of time previously spent by employees of the enterprise on other sites or projects which have no connection with the site or project in question;

(ii) apply the more than six months test to each site or project which has no connection with any other site or project and to each group of connected sites or projects; and

(iii) regard a building site as a single site, even if several contracts have been entered into for the work being done, provided that it forms a coherent whole commercially and geographically;

(b) that, in applying paragraph (3) of Article 7, for the purpose of determining whether a permanent establishment has taken an active part in negotiating, concluding or fulfilling contracts entered into by the enterprise, the Contracting States shall take into consideration all relevant circumstances and, in particular, the fact that a contract or order relating to the purchase or provision of goods or services was negotiated or placed with the head office of the enterprise, rather than with the permanent establishment, shall not preclude them from determining that the permanent establishment did take an active part in negotiating, concluding or fulfilling that contract;

(c) that, in applying paragraph (1) of Article 8, for the purpose of determining the profits of an enterprise which are derived from the operation of aircraft in international traffic, the Contracting States shall treat interest derived from the investment or deposit of receipts arising directly from the operation of aircraft in international traffic as being included in those profits, but shall not treat interest derived from the reinvestment of such interest as being so included.

If the foregoing proposal is acceptable to the Government of the Republic of India I have the honour to suggest that the present Note and Your Excellency’s reply to that effect should be regarded as constituting an agreement between the two Governments in this matter.

Nicholas Fenn

His Excellency the High Commissioner of the United Kingdom of Great Britain and Northern Ireland

Your Excellency

New Delhi

25th January 1993

I have the honour to acknowledge receipt of Your Excellency’s Note of today which reads as follows:

“I have the honour to refer to the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains which has been signed today and to propose on behalf of the Government of the United Kingdom of Great Britain and Northern Ireland:

(a) that, in applying sub-paragraph (j) of paragraph (2) of Article 5, for the purpose of determining whether a building site or construction, installation or assembly project or supervisory activity in connection therewith has continued for a period of more than six months, the Contracting States shall:

(i) take no account of time previously spent by employees of the enterprises on other sites or projects which have no connection with the site or project in question;

(ii) apply the more than six months test to each site or project which has no connection with any other site or project and to each group of connected sites or projects; and

(iii) regard a building site as a single site, even if several contracts have been entered into for the work being done, provided that it forms a coherent whole commercially and geographically;

(b) that, in applying paragraph (3) of Article 7, for the purpose of determining whether a permanent establishment has taken an active part in negotiating, concluding or fulfilling contracts entered into by the enterprise, the Contracting States shall take into consideration all relevant circumstances and, in particular, the fact that a contract or order relating to the purpose of provision of goods or services was negotiated or placed with the head office of the enterprise, rather than with the permanent establishment, shall not preclude them from determining that the permanent establishment did take an active part in negotiating, concluding or fulfilling that contract;

(c) that, in applying paragraph (1) of Article 8, for the purpose of determining the profits of an enterprise which are derived from the operation of aircraft in international traffic, the Contracting States shall treat interest derived from the investment or deposit or receipts arising directly from the operation of aircraft in international traffic as being included in those profits, but shall not treat interest derived from the reinvestment of such interest as being so included.

If the foregoing proposal is acceptable to the Government of the Republic of India I have the honour to suggest that the present Note and Your Excellency’s reply to that effect should be regarded as constituting an agreement between the two Governments in this matter.”

In reply, I have the honour to state that the Government of the Republic of India accepts the proposal made therein and agrees that Your Excellency’s Note and the present reply shall constitute an agreement between the Government of the Republic of India and the Government of the United Kingdom of Great Britain and Northern Ireland in this matter.

I avail myself of this opportunity to renew to Your Excellency the assurances of my highest consideration.

S Ramamurti

His Excellency the Chairman of the Central Board of Direct Taxes India