Agreement between the Government of India and the Government of the United State of America for the avoidance of double taxation of income of enterprises operating aircraft - 0899(E) - Income Tax

DEPARTMENT OF REVENUE AND BANKING (Revenue Wing) NOTIFICATION INCOME-TAX New Delhi, the 26th November 1976 G.S.R. 899(E). Whereas the Government of India and the Government of the United States of America have concluded an agreement through exchange of letters as set out in the Annexure hereto, for the avoidance of double taxation of income of enterprises operating aircraft; Now, therefore, in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961), and section 24A of the Companies (Profits) Surtax Act, 1964 (7 of 1964), the Central Government hereby directs that all the provisions of the said agreement shall be given effect to the Union of India. ANNEXURE Excellency, I have the honour to refer to the conversations which were recently conducted between representatives of the Government of the United States of America and the representatives of the Government of India relating to the possibility of concluding an agreement between the two Governments with a view to granting the international airlines of the two countries exemption from tax on their earnings on the basis of reciprocity, and to inform you that the Government of the United States of America agrees as follows: (1) The Government of the United States of America shall, on the basis of reciprocal exemption granted by the Government of India to citizens of the United States of America and to corporations organized in the United States of America, exclude from gross income and exempt from income-tax all earnings derived- (a) by a corporation organised in India, or (b) by an individual who is- (i) a citizen of India and (ii) a non-resident alien as to the United States of America, from the operation of aircraft in international traffic. For this purpose, the term operation of aircraft shall mean the business of transportation by air of persons, livestock, goods or mail, carried on by the owners or lessees or charterers of aircraft, including the sale of tickets for such transportation on behalf of other enterprises, the incidental lease of aircraft and any other activity directly connected with such transportation. The exemption herein provided shall also apply in respect of participation in pools of any kind regarding air transport. For the removal of doubts, it is clarified that interest on funds connected with the operation of aircraft in international traffic shall be regarded as income from the operation of such aircraft. (2) This agreement shall be applicable with respect to taxable years beginning on or after the first day of January, 1976. (3) Either of the two Governments may terminate this agreement by giving to the other Government six months prior notice to termination in writing and, in such event, the agreement shall cease to be effective for the taxable years beginning on or after the first day of January next following the expiration of the six-month period. (4) The Government of the United States of America will consider this Note, together with your reply confirming that the Government of India agrees, to terms corresponding to those outlined above, as constituting an agreement between the two Governments, entering into force on the date of your reply. I avail myself of this opportunity to renew to Your Excellency the assurance of my highest consideration. (Sd.) DAVID T. SCHNEIDEH, Charge d Affairs ad interim. His Excellency Shri S. R. Mehta, Additional Secretary to the Government of India. Government of India, Department of Revenue and Banking, New Delhi. November 26, 1976. Excellency, I have the honour to acknowledge the receipt of your Excellency s Note of today s date which reads as follows: I have the honour to refer to the conversations which were recently conducted between representatives of the Government of the United States of America and the representatives of the Government of India relating to the possibility of concluding an agreement between the two Governments with a view to granting the international airlines of the two countries exemption from tax on their earnings on the basis of reciprocity, and to inform you that the Government of the United States of America agrees as follows: (1) The Government of the United States of America shall, on the basis of reciprocal exemption granted by the Government of India to citizens of the United States of America and to corporations organized in the United States of America exclude from gross income and exempt from income-tax all earnings derived- (a) by a corporation organized in India, or (b) by an individual who is- (i) a citizen of India and (ii) a non-resident alien as to the United States of America from the operation of aircraft in international traffic. For this purpose, the term operation of aircraft shall mean the business of transportation by air of persons, livestock, goods or mail, carried on by the owners or lessees or charterers of aircraft, including the sale of tickets for such transportation on behalf of other enterprises, the incidental lease of aircraft and any other activity directly connected with such transportation. The exemption herein provided shall also apply in respect of participation in pools of any kind regarding air transport. For the removal of doubts, it is clarified that interest on funds connected with the operation of aircraft in international traffic shall be regarded as income from the operation of such aircraft. (2) This agreement shall be applicable with respect to taxable years beginning on or after the first day of January, 1976. (3) Either of the two Government may terminate this agreement by giving to the other Government six months prior notice of termination in writing and, in such event, the agreement shall cease to be effective for the taxable years beginning on or after the first day of January next following the expiration of the six-month period. (4) The Government of the United States of America will consider this Note, together with your reply confirming that the Government of India agrees to terms corresponding to those outlined above, as constituting an agreement between the two Governments, entering into force on the date of your reply. I have the honour to confirm that the Government of India agrees, on the basis of reciprocity, to grant exemption from income-tax and surtax on income derived- (a) by a corporation organized in the United States of America, or (b) by an individual who is- (i) a citizen of the United States of America and (ii) non-resident in India. from the operation of aircraft in international traffic. The term taxable year in relation to India shall mean previous year as defined in the Income-tax Act, 1961 (43 of 1961). I have further the honour to confirm on behalf of the Government of India the understandings outlined in Your Excellency s Note and to agree that Your Excellency s Note and my reply thereto shall constitute an agreement between the two Governments. I avail myself of this opportunity to renew to Your Excellency the assurances of my highest consideration. (Sd.) S. R. MEHTA, Addl. Secy. to the Govt. of India. His Excellency Mr. David T. Schneider Charge d Affairs Embassy of the United States of America, New Delhi. [No. 1564/F. No. 501/2/74-FTD] S.R. MEHTA, Addl. Secy.