Double Taxation Avoidance Agreement between the Governments of India and Malaysia. - Income Tax - 1283/CBDT

INSTRUCTION NO. 1283/CBDT Dated : October 11, 1979 Attention is invited to Article 18(3) of the Double Taxation Avoidance Agreement between the Governments of India and Malaysia which reads as under :- " Any pension paid by the Government of one of the Contracting States to any individual may be taxed in that Contracting State". 2. A doubt has been raised as to how the pension received by an individual from the Government of Malaysia is to be taxed in view of the provisions of Article 18(3) of the Agreement. One view which has been expressed is that the pension received by any person resident in India from the Government of Malaysia cannot be subjected to tax in India as the Article provides for its taxation only in the country of source i.e. Malaysia. However, the correct view is that since the word used in the Article is "may" and not "shall" , the pension paid by one of the Contracting States may be taxed not only in the country of residence as per the basic law of that State but in the country of source also. Double Taxation in such cases will be relieved by the former country as per Article 22 of the Agreement.