Exchange of Notes by Government of India and Japan. - Income Tax - 1010/CBDT

INSTRUCTION NO. 1010/CBDT Dated : September 22, 1976 The Government of India and the Government of Japan have concluded an Agreement through exchange of Notes on 30-11-1974 for modifying the existing Double Taxation Avoidance Agreement between India and Japan as modified and supplemented by the Protocol signed on 8th April, 1969. The relevant notification GSR No. 671(E), dated 30th November, 1974 containing the text of the Letters exchanged was circulated to all the Commissioners of Income-tax under Board's letter of even number dated 19th February, 1975. 2. The modifications to the existing Agreement brought about by the said notification dated 30-11-1974 are described below:- (i) In terms of the Double Taxation Avoidance Agreement with Japan signed in 1960, the tax payable in India by a Japanese enterprise on profits derived from the operation of ships, is to be reduced by 59% in terms of Article V(2), unless the ships are operated wholly or mainly between places within India. Under the Protocol signed in 1969, the two countries had agreed to grant a higher tax reduction of 55% (instead of 50%) on a reciprocal basis for a period of five years ending with the assessment year 1971-72 in India. In terms of the Letters exchanged on 30-11-1974, the said reduction of 55% is to be continued on a reciprocal basis, for a further period of five years commencing with the assessment year 1972-73 in India, i.e., upto and including the assessment year 1976-77. (ii) Article XII of the existing Agreement with Japan provided that the "competent authorities" of the two Contracting States shall exchange such information as is necessary for carrying out the provision of the Agreement. The scope of this provision has been enlarged to enable the exchange of information not merely for carrying out the provisions of the Agreement but also for the prevention or detection of evasion or avoidance of income-tax and surtax. The exchange of information can include documents also. Any information so exchanged is to be treated as secret but can be disclosed to persons (including a court or administrative body) concerned with the assessment, collection, enforcement or prosecution in respect of the taxes which are the subject of the Agreement or to persons with respect to whom the information relates. The exchange of information will be either on a routine basis or on request with reference to particular cases. 3. The mechanics of routine exchange of information will be worked out separately. As far as exchange of information in specific cases is concerned, this will be relevant in cases of residents of India having transacations with Japanese concerns or cases of residents of Japan having taxable income in India and the Income-tax Officer/Commissioner of Income-tax is of the view that there is substantial tax avoidance/evasion and it will help investigations if information is obtained from the Government of Japan under the revised Article XII of the Agreement. In such cases, a detailed note may be sent by the Commissioner of Income-tax concerned to the Board setting out all the relevant facts, reasons for the view that there is substantial tax avoidance/evasion and the nature of information that is required to be obtained from the Government of Japan will be helpful in pursuing the investigations further. The Board desire that, for obvious reasons, proper care should be exercised at the initial stage and a strictly selective approach adopted in referring such cases to the Board.