Double Taxation Avoidance Agreement: Between India and the U. S. A. - 0626(E) - Income Tax

Double Taxation Avoidance Agreement: Between India and the U. S. A. Notification Number: 0626(E) Dated 15-06-1989 File Number: 501/3/86-FTD Whereas the annexed Agreement through exchange of letters between the Government of India and the Government of the United States of America for the avoidance of double taxation of income of enterprises operating ships and aircraft has entered into force on the 12th April, 1989, the date of signature thereon by the Contracting States; Now, therefore, in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby directs that all the provisions of the said Agreement shall be given effect to in the Union of India. ANNEXURE Embassy of the United States of America, New Delhi April 12, 1989. Excellency, I have the honour to propose that the Government of the United states of America and the Government of India conclude an agreement to exempt from income tax, on a reciproal basis, income derived by residents of the other country from the international operation of ships and aircraft. The terms of the Agreement are as follows: The Government of the United States of America, in accordance with sections 872(b) and 883(a) of the Internal Revenue Code, agrees to exempt from tax gross income derived from the international operation of ships or aircraft by individuals who are residents of India (other than U. S. citizens) and corporations organized in India. This exemption is granted on the basis of equivalent exemptions granted by India to citizens of the United States (who are not residents of India) and to corporations organized in the United States (which are not subject to tax by India on the basis of residence). In the case of a corporation, the exemption shall apply only if the corporation meets either of the following conditions: (1) more than 50 per cent. of the value of the corporation's stock is owned, directly or indirectly, by individuals who are residents of India or of another country which grants a reciprocal exemption to U. S. citizens and corporations; or (2) the corporation's stock is primarily and regularly traded on an established securities market in India or is wholly owned by a corporation whose stock is so traded and which is also organized in India. For purposes of sub-paragraph (1), the Government of India will be treated as an individual resident of India. For purposes of the exemption from U. S. tax, sub-paragraph (1) will be considered to be satisfied if the corporation is a " controlled foreign corporation " under the Internal Revenue Code. Gross income includes all income derived from the international operation of ships or aircraft, including income from the rental of ships or aircraft on a full (time or voyage) basis. It also includes income from the rental on a bareboat basis of ships and aircraft used in international transport, income from the rental of containers and related equipment used in international transport, and gain on the disposition of ships or aircraft, provided in each case that the income is incidental to the international operation of ships or aircraft. Gross income from the international operation of ships or aircraft also includes income derived from participation in a pool, a joint business, or an international operating agency and interest on funds connected with the international operation of ships or aircraft. The Government of the United States of America considers that this Note, together with your reply Note confirming that the Government of India agrees to these terms, constitutes an agreement amending the agreement of November 26, 1976, and the exchange of letters of December 27 and 29, 1976. This agreement shall enter into force on the date of your reply Note and shall have effect with respect to taxable years beginning on or after January 1, 1987. Either Government may terminate this agreement by giving written notice of termination through diplomatic channels. I avail myself of this opportunity to renew to Your Excellency the assurances of my highest consideration. His Excellency John R. Hubbard N. K. Sengupta Ambassador Secretary (Revenue) Ministry of Finance Government of India, Ministry of Finance, Department of Revenue, New Delhi. April 12, 1989. Excellency, I have the honour to acknowledge receipt of your Note of today's date proposing the terms of a reciprocal exemption from income-tax of income derived from the international operation of ships and aircraft. The Government of India agrees to exempt from income-tax gross income derived from the international operation of ships or aircraft by U. S. citizens (who are not residents of India) and corporations organized in the United States (other than corporations which are subject to tax by India on the basis of residence). In the case of a corporation, the exemption shall apply only if the corporation meets either of the following conditions: (1) more than 50 per cent. of the value of the corporation's stock is owned, directly or indirectly, by individuals who are citizens of the United States or residents of another country which grants a reciprocal exemption to Indian residents and corporation; or (2) the corporation's stock is primarily and regularly traded on an established securities market in the United States, or is wholly owned by a corporation whose stock is so traded and which is also organized in the United States. Gross income includes all income derived from the international operation of ships or aircraft, including income from the rental of ships or aircraft on a full (time or voyage) basis. It also includes income from the rental on a bareboat basis of ships and aircraft used in international transport, income from the rental of containers and related equipment used in international transport, and gain on the disposition of ships or aircraft, provided in each case that the income is incidental to the international operation of ships or aircraft. Gross income from the international operation of ships or aircraft also includes income derived from participation in a pool, a joint business, or an international operating agency and interest on funds connected with the international operation of ships or aircraft. I am pleased to confirm that Your Excellency's Note and this reply Note constitute an agreement between the two Governments amending the agreement of November 26, 1976, and the exchange of letters of December 27 and 29, 1976. This agreement shall enter into force on today's date and shall have effect with respect to previous years beginning on or after January 1, 1987. Either Government may terminate this agreement by giving written notice of termination through diplomatic channels. I avail myself of this opportunity to renew to Your Excellency the assurances of my highest consideration. His Excellency N. K. Sengupta Dr. John R. Hubbard Secretary (Revenue) Ambassador United States Embassy New Delhi. (Sd.) P. K. Appachoo Joint Secretary to the Government of India.