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TMI BlogAgreement between the Government of India and the Government of Italy for the Avoidance of Double Taxation and the prevention of fiscal evasion with respect to taxes on incomeX X X X Extracts X X X X X X X X Extracts X X X X ..... TAXES ON INCOME The Government of India and the Government 2[of Italy,] desiring to conclude an agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. Have agreed as follows: CHAPTER I SCOPE OF THE AGREEMENT ARTICLE 1 PERSONAL SCOPE This agreement shall apply to persons who are residents of one or both of the Contracting States. ARTICLE 2 TAXES COVERED 1. The taxes to which this agreement shall apply are: (a) In the case of India: 1. the income-tax including any surcharge thereon imposed under the Income-tax Act, 1961 (43 of 1961); 2. the surtax imposed under the Companies (Profits) Surtax Act, 1964 (7 of 1964); (hereafter referred to as " Indian tax "). (b) In the case of Italy: 1. the personal income-tax (1 ' imposta sul reddito delle persone fisiche); 2. the corporate income-tax (1 ' imposta sul reddito delle persone giuridiche); 3. the local income-tax (1 ' imposta locale 3[sul reddito]); even if they are collected by withholding taxes at the source (hereafter referred to as "Italian tax"). 2. The Agreement shall also apply to any identical or substantial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Act, 1961 (43 of 1961); (i) the term "international traffic" means any transport by a ship or aircraft operated by an enterprise which has its place of effective management in a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State; (j) the term "competent authority" means in the case of India, the Central Government in the Department of Revenue; and in the case of Italy, the Ministry of Finance. 2. In the application of the provisions of this agreement by one of the Contracting State, any term not defined herein shall, unless the context otherwise requires, have the meaning which it has under the laws in force in that State relating to the taxes which are the subject of this agreement. ARTICLE 4 FISCAL DOMICILE 1. For the purposes of this 7[Agreement, the term "resi]-dent of a Contracting State" means any person who is a resident of that State in accordance with the taxation laws of that State. 2. Where by reason of the provisions of paragraph 1, an individual is a resident of both Contracting State, then his residential status for the purposes of this agreement shall be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of storage or display; (c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; (d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or for collecting 10[information, for] the enterprise; (e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information or for scientific research, being activities solely of a preparatory or auxiliary character in the trade or business of the enterprise. 4. A person acting in a Contracting State for or on behalf of an enterprise of the other Contracting State-other than an agent of an independent status to whom paragraph 5 applies-shall be deemed to be a permanent establishment of that enterprise in the first-mentioned State if: (a) he has and habitually exercises in that State, an authority to conclude 11[contracts] for or on behalf of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise; or (b) he habitually maintains in the first-mentioned Contracting State a stock of goods or mercha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enterprise of a Contracting State shall be taxable only in that Contracting State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other Contracting State but only so much of them as is attributable to that permanent establishment. 2. Where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment, the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the 15[enterprise] of which it is a permanent establishment. 3. In so far as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 shall preclude 16[that] Contracti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity directly connected with such transportation. ARTICLE 9 SHIPPING 1. Income of an enterprise of one of the Contracting State derived from the other Contracting State from the operation of ships in international traffic may be taxed in that other Contracting State, but the tax chargeable in that other Contracting State on such income shall be reduced by an amount equal to fifty per cent. of such tax. 2. For the purposes of paragraph 1 of this article, income from the operation of ships in international traffic shall include: (a) profits derived from the rental on a full or bareboat basis of ships if such rental profits are incidental to the operation of ships in international traffic; and (b) profits derived from the use, maintenance or rental of containers (including trailers and related equipment for the transport of containers) in connection with the transport of goods or merchandise in international traffic. 3. Paragraph 1 shall not apply to profits arising as a result of coastal traffic. ARTICLE 10 ASSOCIATED ENTERPRISES 17[where] (a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest. 3. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be exempt from tax in that State if: (a) the payer of the interest is the Government of that Contracting State or a local authority thereof; or (b) the interest is paid to any agency or instrumentality (including a financial institution) which may be agreed upon in this behalf by the two Contracting States. 4. The term "interest" as used in this article means income from Government securities, bonds or debentures, whether or not secured by mortgage and whether or not carrying a right to participate in profits, and debt-claims of every kind as well as all other income assimilated to income from money lent by the taxation law of the State in which the income arises. 5. The provisions of paragraph 1 and 2 shall not apply if the recipient of the interest, being a resident of a Contracting State, carries on business in the other Contracting State, in which the interest arises, through a permanent establishment situated therein, or performs in that other State professional services from a fixed base situated therein, and the debt-claim in respect of which the interest i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd films or tapes for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment or for information concerning industrial, commercial or scientific experience. 4. Where, owing to a special relationship between the payer and the recipient or between both of them and some other person, the amount of the royalties paid, having regard to use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the recipient in the absence of such relationship, the provisions of this article shall apply only to the last mentioned amount. In that case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this agreement. ARTICLE 14 CAPITAL GAINS 1. Subject to the provisions of paragraph 3, gains from the sale, exchange or transfer of a capital asset being immovable property, as defined in paragraph 2 of article 6, or from the sale, exchange or transfer of any movable property, whether tangible or intangible, ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State. 3. Notwithstanding the preceding provisions of this article, remuneration in respect of an employment exercised 21[abroad] a ship or aircraft in international traffic, may be taxed in the Contracting State in which the place of effective management of the enterprise is situated. ARTICLE 17 DIRECTORS' FEES Directors' fees and similar payments derived by a resident of a Contracting State in his capacity as a member of the Board of 22[Directors] of a company which is a resident of the other Contracting State may be taxed in that other Contracting State. ARTICLE 18 ARTISTES AND ATHLETES 1. Notwithstanding the provisions of articles 15 and 16, income derived by public entertainers (such as theatre, motion picture, radio or television artistes and musicians) and by athletes, from their personal activities as such may be taxed in the Contracting State in which these activities are exercised unless the visit to that State is wholly or substantially supported, directly or indirectly, by public funds of the Government of the other Contracting State. 2. Notwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sations, and who is, or immediately before such visit was, a resident of the other Contracting State shall be exempt from tax in the first-mentioned Contracting State in respect of remuneration for such teaching or research. 2. This article shall not apply to income from research if such research is undertaken primarily for the private benefit of a specific person or persons. ARTICLE 22 STUDENTS AND TRAINEES 1. An individual who is a resident of a Contracting State and visits the other Contracting State solely: (a) as a student at a university, college or other recognised educational institution of that other Contracting State, or (b) as a business apprentice, or (c) for the purpose of study, research or training, as a recipient of a grant, allowance or award, from a governmental, religious, charitable, scientific or educational 24[organisation,] shall be exempt from tax in that other Contracting State: (i) on his remuneration and all remittances from abroad for the purposes of maintenance, education or training; (ii) on the grant, allowance or award; and (iii) in respect of the amount, representing remuneration for an employment in that other Contracting State, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this agreement otherwise provide. In such a case, Italy shall deduct from the taxes so calculated the Indian tax on income, but in an amount not exceeding that proportion of the aforesaid Italian tax which such items of income bear to the entire income. On the contrary no deduction will be granted if the item of income is subjected in 28[Italy to a] final withholding tax by request of the recipient of the said income in accordance with the Italian law. (b) For the purpose of paragraph 2 and 3 of this article, where tax on business profits, dividends, interest or royalties arising in a Contracting State is exempted or reduced in accordance with the taxation laws of that State, such tax which has been exempted or reduced shall be deemed to have been paid. 4. Income which in accordance with the provisions of this agreement is not to be subjected to tax in a Contracting State may be taken into account for calculating the rate of tax to be imposed in that Contracting State on other income. CHAPTER V SPECIAL PROVISIONS ARTICLE 25 NON-DISCRIMINATION 1. The nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf able to arrive at an appropriate solution to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation not in accordance with the agreement. 3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the agreement. They may also consult together for the elimination of double taxation in cases not provided for in the agreement. 4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs. When it seems advisable in order to reach agreement to have an oral exchange of opinions, such exchange may take place through a Commission consisting of representatives of the competent authorities of the Contracting States. ARTICLE 27 EXCHANGE OF INFORMATION 1. The competent authorities of the Contracting States shall exchange such information or document as is necessary for carrying out the provisions of this agreement or for the prevention or detection of evasion or avoidan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall cease to have effect upon the entry into force of this agreement. ARTICLE 30 TERMINATION This Agreement shall remain in force 35[indefinitely, but] either of the Contracting States may on or before 30th June in any calendar year beginning after the expiration of a period of five years from the date of its entry into force give to the other Contracting State, through diplomatic channels, written notice of termination. In such event, the agreement shall cease to have effect: (a) in India, in respect of income assessable for any taxable period ("previous year") commencing on or after the 1st day of April in the calendar year next following that in which such notice is given. (b) in Italy, in respect of income assessable for any taxable period commencing on or after the 1st day of January, in the calendar year next following that in which such notice is given. In Witness thereof, the undersigned, duly authorised thereto, have signed the present agreement. Done in duplicate at 36[Rome the] 12th day of January, 1981, in the English, Hindi and Italian languages, all texts being equally authoritative except in the case of doubt when the English text shall prevail. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) any other provision which may subsequently be made granting an exemption or reduction from tax which is agreed by the competent authorities of the Contracting States to be of a substantially similar character if it has not been modified thereafter or has been modified only in minor respects so as not to affect its general character. (f) that, with reference to article 44[26 paragraph 1, the] expression " notwithstanding the remedies provided by the national laws " means that the mutual agreement procedure is not alternative to the national ordinary proceedings which shall 45[be, in] any 46[case, preventively initiated, when] the claim is related with an assessment of taxes not in accordance with this agreement; In witness thereof, the undersigned, duly authorised thereto, have signed the present Protocol. Done in duplicate at 47[Rome the] 12th day of January, 1981, in the English, Hindi and Italian languages, all taxes being equally authoritative except in the case of doubt when the English text shall prevail. For the govt. of India Sd/- (J. C. Ajmani) For the govt. of Italy Sd/- (Maurizio Bucci) N. SUBRAMANIAN, ADDITIONAL SECRETARY D. O. No. 501/10/73-FTD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o propose that the letter and your Excellency's reply concurring therein will constitute an integral part of the Protocol to the agreement mentioned above. " I have the honour to inform you that the Government of Italy agrees on the contents of the letter. Yours Sincerely, Sd/- (Amb. Renato Ruggiero) Mr. N. Subramanian, Additional Secretary, Deptt. of Revenue, Ministry of Finance, Govt. of India. 54[New Delhi] [No. 6647/F. No. 501/10/73-FTD] V. U. ERADI, Jt. Secy. ***************** NOTES:- 1. Corrected vide Notification No. G.S.R. 346(E) dated 31-03-1987 before it was read as, "fical evasio" 2. Corrected vide Notification No. G.S.R. 346(E) dated 31-03-1987 before it was read as, "of Italy" 3. Corrected vide Notification No. G.S.R. 346(E) dated 31-03-1987 before it was read as, "su reddito" 4. Corrected vide Notification No. G.S.R. 346(E) dated 31-03-1987 before it was read as, "place of the" 5. Corrected vide Notification No. G.S.R. 346(E) dated 31-03-1987 before it was read as, "extend" 6. Corrected vide Notification No. G.S.R. 346(E) dated 31-03-1987 before it was read as, " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected vide Notification No. G.S.R. 346(E) dated 31-03-1987 before it was read as, "organisation." 25. Corrected vide Notification No. G.S.R. 346(E) dated 31-03-1987 before it was read as, "with." 26. Corrected vide Notification No. G.S.R. 346(E) dated 31-03-1987 before it was read as, "period to" 27. Corrected vide Notification No. G.S.R. 346(E) dated 31-03-1987 before it was read as, "to, in" 28. Corrected vide Notification No. G.S.R. 346(E) dated 31-03-1987 before it was read as, "Italy a" 29. Corrected vide Notification No. G.S.R. 346(E) dated 31-03-1987 before it was read as, "residet" 30. Corrected vide Notification No. G.S.R. 346(E) dated 31-03-1987 before it was read as, "controlled directly" 31. Corrected vide Notification No. G.S.R. 346(E) dated 31-03-1987 before it was read as, "these" 32. Corrected vide Notification No. G.S.R. 346(E) dated 31-03-1987 before it was read as, "coart" 33. Corrected vide Notification No. G.S.R. 346(E) dated 31-03-1987 before it was read as, "of both" 34. Corrected vide Notification No. G.S.R. 34 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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