DTAA BETWEEN INDIA & IRAN

FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FlSCAL EVASION WITH RESPECT TO TAXES ON INCOME 

The Government of the Republic of India and the Government of the Islamic  Republic of Iran intending to conclude an Agreement for the elimination of double taxation with respect to taxes on income without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including also through treaty- shopping arrangements aimed at obtaining reliefs provided in this Agreement for the indirect benefit of residents of third States have agreed as follows: 

Article 1 

PERSONS COVERED

This Agreement shall apply to persons who are residents of one or both of the Contracting States.

Article 2

TAXES COVERED

1. This Agreement shall apply to taxes on income imposed on behalf of a Contracting State or of its political subdivisions or local authorities, irrespective of the manner in which they are levied. 

2. There shall be regarded as taxes on income all taxes imposed on total income, or on elements of income, including taxes on gains from the alienation of movable or immovable property, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation. 

3. The existing taxes to which the Agreement shall apply are in particular:

a) in the case of the Islamic Republic of Iran - the income tax;

b) in the case of India  - the income tax, including any surcharge thereon.

4. The Agreement shall apply also to any identical or substantially similar taxes  that are imposed after the date of signature of the Agreement in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other within a reasonable period of any significant changes that have been made in their respective taxation laws. 

Article 3

GENERAL DEFINITIONS

1. For the purposes of this Agreement, unless the context otherwise requires:

a) (i) the term “Islamic Republic of Iran” means the territory under the sovereignty and/or jurisdiction of the Islamic Republic of Iran;

 (ii) the term “India” means the territory of India and includes the   territorial sea and airspace above it, as well as any other maritime zone in which India has sovereign rights, other rights and jurisdiction, according to the Indian law and in accordance with international law, a including the U.N. Convention on the Law of the Sea;

b) the term “person" includes:

(i) an individual;

(ii) a company, a body of persons and any other entity which is treated as a taxable unit under the taxation laws in force in the respective Contracting States;

c) the term “company” means any body corporate or any entity that is treated as a body corporate for tax purposes;

d) the terms “Contracting State” and “the other Contracting State” mean  the Islamic Republic of Iran or the Republic of India as the context requires;

e) the terms “enterprise of a Contracting State” and “enterprise of the l other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

f) the term “international traffic” means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;

g) the term “competent authority” means: 

(i) in the case of the Islamic Republic of Iran, the Minister of Economic Affairs and Finance or his authorized representative;

(ii) in India: the Finance Minister, Government of India, or his authorized representative;

h) the term “national”, in relation to a Contracting State, means

(i) any individual possessing the nationality of that Contracting ' ”a  State; and 

(ii) any legal person, partnership or association deriving its status  as such from the laws in force in that Contracting State.

2. As regards the application of the Agreement at any time by a Contracting   A State, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has at that time under the law of that State for the purposes of the taxes to which the Agreement applies and any meaning under the applicable tax  laws of that State prevailing over a meaning given to the term under other laws of  that State. 

Article 4

RESIDENT

1. For the purposes of this Agreement, the term “resident of a Contracting State"  means any person who under the laws of that State is liable to tax therein by reason of his domicile, residence, place of registration, place of incorporation, place of management or any other criterion of a similar nature, and also includes that State and any political subdivision or local authority thereof. This term, however, does not  include any person who is liable to tax in that State in respect only of income from  sources in that State.

2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:

a) he shall be deemed to be a resident only of the State in which he has a permanent home available to him; lf he has a permanent home available to  him in both States, he shall be deemed to be a resident only of the State with  which his personal and economic relations are closer (center of vital interests).

b) if the State in which he has his center of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a  resident only of the state in which he has an habitual abode. 

c) if he has an  habitual abode in  both state or in neither of them he shall be deemed to  be a resident only of the  state of which  he is a national. 

d) if he is a national of neither of the state, and or if under the previous paragraph, he may not be deemed a resident of  one of the contracting  states, then  the competent authorities of the contracting states shall  settle  the question  by mutual agreement. 

3. Where, by reason of the provisions of paragraph 1, a person other than an is individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated.

Article 5

PERMANENT ESTABLISHMENT 

1. For the purposes of this Agreement, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

2. The term “permanent establishment” includes especially:

a) a place of management;

b) a branch

c) an office

d) a factory 

e) a workshop

f) a sales outlet 

g) a warehouse in relation to a person providing storage facilities for others;

h) a farm, plantation or other place where agricultural, forestry, plantation  or related activities are carried on; and 

i) a mine, an oil or gas well, a quarry or any other place of exploration, exploitation and/or extraction of natural resources.

3. a) A building site, a construction, assembly or installation project or  supervisory activities in connection therewith, constitutes a “permanent establishment” but only if such site, project or activities last more than 270 days.

b) The furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose constitutes a “permanent establishment”, but only where activities of that nature continue (for the same or connected project) within the country for a period or periods aggregating more than 90 days within any 12- month period.

4. Notwithstanding the preceding provisions of this Article, the term “permanent establishment" shall be deemed not to include: 

a) the use of facilities solely for the purpose of storage or display of goods or merchandise belonging to the enterprise;

b) the maintenance of a stock of goods or merchandise belonging to the .  enterprise solely for the 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 of collecting information, for the  enterprise

e) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character.

f) the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs a) to e) provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character. 

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person –other than an agent of independent status to whom paragraph 7 applies- is acting in a Contracting State on behalf of an enterprise of the other Contracting State, that enterprise shall be deemed to have a permanent establishment in the first mentioned Contracting State in respect of any activities which that person 

a) has and habitually exercises in that State an authority to conclude contracts in the name of the enterprise, unless the activities of such person  are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph; or

b) has no such authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise; or 

c) habitually secures orders or issues performa invoices in the first- mentioned State, wholly or almost wholly for the enterprise itself

6. Notwithstanding the preceding provisions of this Article, an insurance at enterprise of a Contracting State shall, except in regard to re-insurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in the territory of that other State or insures risks situated therein through a person other than an agent of an independent status to whom paragraph applies. 

7. An enterprise shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in, the ordinary course of their business. However, when the activities of such an agent are devoted wholly  almost wholly on behalf of that enterprise, he will not be considered an agent of an  independent status within the meaning of this paragraph.

8. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent  establishment or otherwise), shall not of itself constitute either company a  permanent establishment of the other.

Articles  6

INCOME FROM  IMMOVABLE PROPERTY

1. Income derived by a resident of a Contracting State from immovable property  (including income from agriculture or forestry) situated in the other Contracting State l may be taxed in that other State. 

2. The term “immovable property” shall have the meaning, which it has under the law of the Contracting State in which the property in question is situated. The  term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of  general law respecting landed property apply, usufruct  of immovable property and  right to variable  or fixed payments are considered for  the working of , or  the right to work , mineral deposits, sources and other natural resources including oil , gas and quarries. Ships and aircraft shall not be regarded  as immovable property. 

3. The provision of paragraphs   1 shall apply to income derived from the direct use, letting, or use  in any other form of immovable property. 

4. The provision of paragraph 1 and 3 shall also apply to the income from  immovable  property of an enterprise and to the income from immovable  property used  for the performance of independent personal services. 

Articles  7

BUSINESS PROFITS 

1. The profit of an enterprise of a contracting state shall be taxable  only in that 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 profit of the enterprise may b taxed in the other contracting state but only so much of them as is attributable to that permanent establishment.  

2.  Subject to the provision of Paragraph 3 where an enterprise of a contracting  state carries on business  in the other contracting  state  through a permanent establishment situated therein, there shall be 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 enterprise of which it is a permanent establishment.

3. In determination of the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the business of the permanent establishment, including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is  situated or elsewhere. However, no such deduction shall be allowed in respect of  amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of  patents, or other rights, or by way of commission for specific services performed or  a for management, or, except in the case of banking enterprises, by way of interest on moneys lent to the permanent establishment. 

Likewise, no account shall be taken, in the determination of the profits of a permanent establishment, for amounts charged  (otherwise than towards reimbursement of actual expenses), by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents, or other rights, or by way of commission or other charges for specific services performed for management, or, except in the case of a banking enterprise, by way of interest  on moneys lent to the head office of the enterprise or any of its other offices. 

4. Insofar 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 that Contracting State from determining the profits to be taxed by such an apportionment as may be customary. The method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in this Article.

5. No profits shall be attributed to a permanent establishment by reason of the  mere purchase by that permanent establishment of goods or merchandise for the enterprise.

6. For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary.

7. Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article.

Article 8

INTERNATIONAL TRAFFIC 

1. Profits derived by an enterprise of a Contracting State from the operation of  ships or aircraft in international traffic shall be taxable only in that State. 

2. For the purposes of this Article, interest on investments directly connected with the operation of ships or aircraft in international traffic shall be regarded as profits derived from the operation of such ships or aircraft if they are integral to the carrying on of such business, and the provisions of Article 11 shall not apply in relation to such interest.

3. The provisions of paragraph 1 of this Article shall also apply to profits from the participation in a pool, a joint business or an international operating agency, but only to so much of the profits so derived as is attributable to the participant in proportion to its share in the joint operation.

Article 9 

ASSOCIATED ENTERPRISES 

1. Where-

a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting a State, or

b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State, and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have so accrued to one of the enterprises, but, by reason of those conditions, have not accrued, may be included in the profits of that enterprise and taxed accordingly.

2. Where a Contracting State includes in the profits of an enterprise of that State  and taxes accordingly- profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the profits so included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of the tax charged therein on those profits. In  determining such adjustment, due regard shall be had to the other provisions of this Agreement and the competent authorities of the Contracting States shall, if necessary consult each other. 

Article 10

DIVIDENDS

1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. 

2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed 10 (ten) per cent of the gross amount of the dividends. This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid. 

3. The term “dividends” as used in this Article means income from shares, if “Joulssance” shares or "Jouissance" rights, founders' shares or other rights (not being debt-claims, participating in profits), as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident. 

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 15, as the case may be, shall apply.

5. Where a company which is a resident of a Contracting State derives profits or  income from the other Contracting State, that other Contracting State may not  impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

Article 11

INTEREST

1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such interest may also be taxed in the Contracting State in which it “in; g arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 10 (ten) per cent of the gross amount of the interest.

3. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be exempt from tax in that State if it is paid to and beneficially owned by the Government of the other Contracting State or its political f subdivision or a local authority thereof, by the Central Bank of the other Contracting  a State, or by an institution wholly owned and controlled by the Government of the other Contracting State.

4. The term “interest” as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage, and whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes it I attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.

5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of 7 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 independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 15, as the case may be, shall apply.

6. Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the interest, whether he is  a resident of a Contracting State or not, has in a Contracting State a permanent  establishment or a fixed base, in connection with which the indebtedness on which  the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

7. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the  absence of such relationship, the provisions of this Article shall apply only to the last mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

Article 12

ROYALTIES

1. Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such royalties may also be taxed in the Contracting State in which  they arise, and according to the laws of that State, but if the beneficial owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed 10 (ten) per cent of the gross amount of the royalties.

3. The term “royalties” as used in this Article means payments of any kind   received as a consideration for the use of, or the right to use, any copyright of  literary, artistic or scientific work including cinematograph films or films or tapes used 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. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of  the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise through a permanent establishment  situated therein, or performs in that other State independent personal services from  fixed base situated therein and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 15, as the case may be, shall apply.

5. a) Royalties shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties was incurred, and such royalties are borne by such permanent establishment, or fixed base, then such  royalties shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated. 

b) Where under sub-paragraph (a) royalties do not "arise in one of the Contracting States, and the royalties relate to the use of, or the right to use, the right or property, in one of the Contracting States, the royalties shall be deemed to arise in that Contracting State. 

6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the  royalties, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship. The provisions of this Article  shall apply only to the last-mentioned amount. In such case, the excess part of the  payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

Article 13 

 FEES FOR TECHNICAL SERVICES

1. Fees for technical services arising in a Contracting State and paid to resident of the other Contracting State may be taxed in that other Contracting State.

2. However, such fees for technical services may also be taxed in the  "Contracting State in which they arise, and according to the laws of that State, but if the recipient is the beneficial owner of the fees for technical services and is a resident of the other Contracting State, the tax so charged shall not exceed 10 (ten) per cent of the gross amount of the fees for technical services.

3. The term “fees for technical services" as used in this Article means payments of any kind, other than those mentioned in Articles 12, 15 and 16 of this Agreement, as consideration for managerial or technical or consultancy services, including the provision of services of technical or other personnel.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of  the fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the fees for technical services arise, through a permanent establishment situated therein, or performs in that other  Contracting State independent personal services from a fixed base situated therein, and the right or property in respect of which the fees for technical services are  paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 15, as the case may be, shall apply. 

5. a) Fees for technical services shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the fees for technical services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the fees for technical services was incurred, and such fees for technical services are borne by such permanent establishment, or fixed base, then such fees for  technical services shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

b) Where under sub-paragraph (a) fees for technical services do not arise in one of the Contracting States, and the fees for technical services relates to services performed in one of the Contracting States, the fees for technical services shall be deemed to arise in that Contracting State. 

6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the   fees for technical services paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement. 

Article 14 

CAPITAL GAINS

1. Gains derived by a resident of a Contracting State from the alienation of  immovable property referred to in Article 6 and situated in the other  Contracting State may be taxed in that other State. 

2. Gains from the alienation of movable property forming part of the business   property of a permanent establishment which an enterprise of a Contracting State  has in the other contracting state or of movable property  pertaining to a fixed base available to a resident of a contracting state in other contracting state for the purpose of performing independent personal services, including such gains from alienation of such permanent  establishment  ( alone or with the whole enterprise) or such fixed base may be taxed in other state. 

3. Gains from alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft  shall be taxable only in the contracting state of which the alienator is a resident. 

4. Gains from alienation of shares of the capital stock of the company , the property  of which  consists  directly of indirectly principally of immovable property situated in a contracting state may be taxed in the state. 

5.Gain from the alienation of shares other than those mentioned in paragraph  4 in a company which is resident of a contracting state  may be taxed in that state. 

6. Gains from the alienation of any property other than that referred to in paragraph 1,2,3,4 and 5 shall be taxed only in contracting state of which the alienator is a resident. 

Article 15 

INDEPENDENT PERSONAL SERVICE

1. Income derived by a resident of a contracting state in respect of professional services or other activities of an independent character shall be taxable only in that state except in the following circumstance when such income may also be taxed in the other contracting state.  

a) if he has fixed base regularly available to him to other contracting state for the purpose of performing his activities  in that case only so much of income as is attributable to that fixed base may be taxed in that  other state or 

b) if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the fiscal year concerned; in that case, only so much of the income as is derived from his activities performed in that other State may be taxed in that other State.

2. The term “professional services” includes especially independent scientific, If literary, artistic, educational or teaching activities as well as the independent activities of physicians, engineers, surgeons, lawyers, architects, dentists and accountants.

Article 16

DEPENDENT PERSONAL SERVICES

1. Subject to the provisions of Articles 17, 19, 20, 21 and 22, salaries, wages E and other similar remuneration derived by a resident of a Contracting State in  respect of an employment shall be taxable only in that state unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.  

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State, if:

a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the fiscal year concerned; and

b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and

c) 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 derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic, by an enterprise of a Contracting State may be taxed in that State.

Article 17

DIRECTORS' FEES

Directors’ fees and other similar payments derived by a resident of a Contracting  State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State. 

Article 18

ARTISTES AND SPORTS PERSONS

1. Notwithstanding the provisions of Articles 15 and 16, income derived by a resident of a Contracting State as an entertainer, such as a theater , motion picture  a radio or television artiste, or a musician, or as a sportsperson from his personal  activities as such exercised in the other Contracting State, may be taxed in that other State.

2. Where income in respect of personal activities exercised by an entertainer or a sportsperson in his capacity as such accrues not to the entertainer or sportsperson himself but to another person, that income may, notwithstanding the provisions of 4 Articles 7, 15 and 16, be taxed in the Contracting State in which the activities of the entertainer or sportsperson are exercised. 

3. The provisions of paragraphs 1 and 2 shall not apply to the income derived  from activities performed in a Contracting State by entertainers or sports persons if  the visit to that state is wholly or mainly supported by public funds of the other State or political subdivisions or local authorities thereof. In such a case, the income is taxable only in the Contracting State of which the entertainers or sports persons are resident.

Article 19

PENSIONS

Subject to the provisions of paragraph 2 of Article 20, pensions and other similar  remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State.

Article 20 

GOVERNMENT SERVICE

1 a) Salaries, wages and other similar remuneration, other than a pension paid by a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State. 

b) However, such salaries, wages and other similar remuneration shall be  taxable only in the other Contracting State if the services are rendered in that other State and the individual is a resident of that State who:

(i) is a national of that State; or

(ii) did not become a resident of that State solely for the purpose of rendering the services. 

2  a) Any pension paid by, or out of funds created by, a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.

b) However, such pension shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that other State. 

3. The provisions of Articles 16, 17, 18 and 19 shall apply to salaries, wages and other similar remuneration and to pensions, in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or a local authority thereof. 

Article 21

PROFESSORS, TEACHERS AND RESEARCH SCHOLARS

1. A professor, teacher or research scholar who is or was a resident of the Contracting State immediately before visiting the other Contracting State for the  purpose of teaching or engaging in research, or both. at a university, college or other similar approved institution in that other Contracting State shall be exempt from tax in that other State on any remuneration for such teaching or research for a period exceeding 2 years from the date of his first arrival in that other State.

 2. This Article shall apply to income from research only if such research is undertaken by the individual in the public interest and not primarily for the benefit of some private person or persons. 

Article 22

STUDENTS

1. A student who is or was a resident of one oi the Contracting States immediately before visiting the other Contracting State and who is present in that other Contracting State solely for the purpose of his education or training, shall  besides grants, loans and scholarships be exempt from tax in that other State on :

a) payments made to him by persons residing outside that other State for  the purpose of his maintenance, education or training; and 

b) remuneration which he derives from an employment which he exercises in the other Contracting State if the employment is directly related to his studies.

2. The benefit of this Article shall extend only for such period of time as may be  reasonably or customarily  required to complete  the education or training  undertaken, but in no event shall any individual have the benefits of this Article ,for more than  seven consecutive years  from the date of his first arrival  for the purpose of his  education or training in that other state. 

Article 23

OTHER INCOME

1. Items of income of a resident of a  Contracting State, where arising , not dealt with in the foregoing article of this agreement  shall be taxable only in that state. 

2. The provision of paragraph  1 shall not apply to income,  other than income from immovable property as defined  in paragraph  2 of  Article  6, if the recipient of such income, being a resident of Contracting State, carries on business in the other Contracting state through a permanent establishment  situated therein, or perform in that other independent personal services from a fixed base situated therein  and the right or property in respect of  which the income is paid is effectively connected with such permanent  establishment or fixed base. In such case, the provision of Article  7 or  Article 15, as the case may be, shall apply. 

3. Notwithstanding the provisions of paragraph 1  and 2, items of income of a resident of a contracting state not dealt with in the foregoing Articles of this agreement and arising in the other contracting state may also be taxed in that other State.

ARTICLE 24

ELIMINATION OF DOUBLE TAXATION

It is agreed that double taxation shall be avoided in accordance with the following paragraph of this Article. 

1.In the case of Islamic Republic of Iran

a) where a resident of Islamic Republic of Iran derives income , which in accordance  with the provision of this agreement , may be taxed in India, the Islamic Republic of Iran shall allow as a deduction from the tax on the income of that resident, an amount equal to the Income Tax paid in India. 

Such deduction shall not , however, exceed the portion of tax , as computed before the deduction given, which is attributable ,to that income which may be tax in India.  

b) Where, in accordance with any of the provision of the agreement income derived by a resident of the Islamic Republic of Iran is exempt  from tax in India, the Islamic Republic of Iran may, notwithstanding the exemption, in  calculating the amount of tax on the remaining income of such resident, take into account the exempted income.

2. In the case of India:

a) Where a resident of India derives income-which, in accordance with the provisions of this Agreement, may be taxed in the Islamic Republic of Iran, India shall allow as a deduction from the tax on the income of that  resident, an amount equal to the tax paid in the Islamic Republic of Iran.

Such deduction shall not, however, exceed that portion of the tax as computed before the deduction is given, which is attributable, to the income which may be taxed in the Islamic Republic of Iran. 

b) Where in accordance with any provision of the Agreement, income derived by a resident of India is exempt from tax in India, India may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income.

Article 25

NON-DISCRIMINATION

1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances, in particular with respect to  residence, are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States. 

2. The taxation on a permanent establishment, which an enterprise of a Contracting State has in the other Contracting State, shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State  carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents. 

3. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and Connected requirements to which other similar enterprises of the first mentioned State are or may be subjected.

4. Except where the provisions of paragraph 1 of Article 9, paragraph 7 of Article 11, paragraph 6 of Article 12 or paragraph 6 of Article 13 apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State. 

5. The provisions of this Article shall apply to taxes covered by this Agreement.

Article 26

MUTUAL AGREEMENT PROCEDURE 

1. Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State  of which he is a resident or, if his case comes under paragraph 1 of Article 25 to that of the Contracting State of which he is a national. The case must be presented  within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Agreement. 

2. The competent authority shall endeavor, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory 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 which is not in accordance with the Agreement. Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States. 

3. The competent authorities of the Contracting States shall endeavor 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 state may communicate  with each other directly  for the purpose of reaching an agreement in the sense of the preceding  paragraph. The competent authorities through, consultation, shall develop appropriate procedure , condition , methods and techniques for  the  implementation of the mutual agreement procedure provided for in this Article

Article 27

EXCHANGE OF INFORMATION 

1.The competent authorities of the contracting state shall exchange such information including such documents , or certified copies of the documents as is foreseeable relevant for carrying out the provision of the agreement or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the contracting states or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to the Agreement. The  exchange of information is not restricted by Articles 1 and 2.

2. Any information received under paragraph 1 of this Article by a Contracting  State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities   (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, the determination of appeals in relation to the taxes referred to in paragraph 1 of this Article, or the oversight of the above. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. Notwithstanding the foregoing, information received by a  Contracting State may be used for other purposes when such information may be used for such other purposes under the laws of both States and the competent . authority of the supplying State authorizes such use. 

3. In no case shall the provisions of paragraphs 1 and 2 of this Article be construed so as to impose on a Contracting State the obligation:

a) to carry out administrative measures at variance with the laws and the administrative practice of that or of the other Contracting State;

b) to supply information which is not obtainable under the laws or in the  normal course of the administration of that or of the other Contracting State;

c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information the disclosure of which would be contrary to public policy (ordre public).

4. If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use its information gathering measures to obtain the requested information, even though that other State may not need such ' information for its own tax purposes. The obligation contained in the preceding sentence is subject to the limitations of paragraph 3 of this Article but in no case shall such limitations be construed to permit a Contracting State to decline to supply information solely because it has no domestic interest in such information. 

5. In no case shall the provisions of paragraph 3 of this Article be construed to permit a Contracting State to decline to supply information solely because the  information is held by a bank, other financial institution, nominee or person acting in 1 an agency or a fiduciary capacity or because it relates to ownership interests in a person.

Article 28

ENTITLEMENT TO BENEFITS

Notwithstanding the other provisions of this Agreement. a benefit under this  Agreement shall not be granted in respect of an item of income if it is reasonable to (if conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of this Agreement.

Article 29

MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS

Nothing in this Agreement shall affect the fiscal privileges of members of diplomatic missions or consular posts under the general rules of international law or under the provisions of special agreements.

Article 30

ENTRY INTO FORCE

1. The Contracting States shall notify each other in writing, through diplomatic channels, of the completion of the procedures required by the respective laws for the entry into force of this Agreement.

2. This Agreement shall enter into force on the date of the later of the  notifications referred to in paragraph 1 of this Article. 

3. The provisions of this Agreement shall have effect: 

a) in the Islamic Republic of Iran, in respect of taxes on income arising in  any fiscal year beginning on or after the 1st day of Farvardin (in India   corresponding to March 21) next following the calendar year in which the g Agreement enters into force;

b) in India, in respect of taxes on income arising in any fiscal year, beginning on or after the 1St day of April (in the Islamic Republic of Iran  corresponding to Farvardin 12) next following the calendar year in which the Agreement enters into force.

Article 31

TERMINATION

This Agreement shall remain in force until it is terminated by a Contracting State.  Either Contracting State may terminate the Agreement, through diplomatic channels  by giving notice of termination at least six months before the end of any calendar year following the period of five years from the date on which the Agreement enters  into force. In such event, the Agreement shall cease to have effect:

a) in the Islamic Republic of Iran, in respect of taxes on income arising in any fiscal year beginning on or after the 1st day of Farvardin (in India  corresponding to March 21) next following the calendar year in which the notice was given.

b) in India, in respect of taxes on income arising in any fiscal year , beginning on or after the 15t day of April (in the Islamic Republic of Iran corresponding to Farvardin 12) next following the calendar year in which the  notice was given.

Done in duplicate at New Delhi on 28/11/1396 solar Hijra corresponding to 17/02/2018 in the Hindi, Persian and English languages, all texts being equally  authentic. In case of any divergence of interpretation, the English text shall prevail.

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UPDATE

Agreement for Avoidance of Double Taxation And Prevention Of Fiscal Evasion With Iran

Whereas the Government of India and the Imperial Government of Iran have conducted an Agreement through exchange of Notes 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 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 in the Union of India. Notification : No. GSR 284(E), dated 28-5-1973.

ANNEX - TEXT OF NOTES, DATED 29-3-1973

AGREED TRANSLATION OF NOTE NO. 127/18, DATED THE 29TH MARCH, 1973 RECEIVED FROM THE IMPERIAL GOVERNMENT OF IRAN BY THE GOVERNMENT OF INDIA

“The Imperial Ministry of Foreign Affairs presents its compliments to the Embassy of India and with reference to the discussions and corresponding notes exchanged regarding the reciprocal exemption of Indian and Iranian airlines from payment of income-tax has the honour to state :

According to the Direct Tax Law of 19th March, 1967, foreign air companies may be exempted from payment of income-tax on a reciprocal basis; and in fact considering that no income-tax has been collected from Iranian air companies in India, the Iranian Government has to this date refrained from collecting income-tax from Indian air companies.

Thus, as the provision of reciprocity prescribed in the Direct Tax Law has been in fact established, as long as the said provision is observed by the Indian Government, Indian air companies will be, as before, exempted from the payment of tax derived from the transportation of goods and passengers.

It is, therefore, proposed that should the above be agreed to, this Note and the Embassy’s reply regarding the application and observance of reciprocity by the Government of India may be considered as a temporary agreement between the two parties in respect of exemption from payment of income-tax by the air companies of both parties.”

NOTE NO. TEH/COM/203/6/70, DATED 1-4-1973, ISSUED BY THE GOVERNMENT OF INDIA TO THE IMPERIAL GOVERNMENT OF IRAN IN REPLY :

“The Embassy of India presents its compliments to the Imperial Ministry of Foreign Affairs and in regard to the question of reciprocal exemption of Indian and Iranian airlines from payment of income-tax has the honour to refer to their Note No. 127/18, dated 29-3-1973, which reads as follows :

“The Imperial Ministry of Foreign Affairs presents its compliments to the Embassy of India and with reference to the discussions and corresponding notes exchanged regarding the reciprocal exemption of Indian and Iranian airlines from payment of income-tax has the honour to state :

According to the Direct Tax Law of 19th March, 1967, foreign air companies may be exempted from payment of income-tax on a reciprocal basis, and in fact considering that no income-tax has been collected from Iranian air companies in India, the Iranian Government has to this date refrained from collecting income-tax from Indian air companies.

Thus, as the provisions of reciprocity prescribed in the Direct Tax Law has been in fact established, as long as the said provision is observed by the Indian Government, Indian air companies will be as before, exempted from the payment of tax derived from the transportation of goods and passengers.

It is, therefore, proposed that should the above be agreed to, this note and the Embassy’s reply regarding the application and observance of reciprocity by the Government of India may be considered as a temporary agreement between the two parties in respect of exemption from payment of income-tax by the air companies of both parties.

With reference to this proposal, the Embassy of India has the honour to inform the Imperial Ministry of Foreign Affairs that the Government of India accepts the terms of the foregoing text and considers that that Note and this Note will constitute an Agreement between the two Governments for the avoidance of double taxation of income of enterprises operating aircraft, which shall enter into force on this date, pending the conclusion of a general agreement for the avoidance of double taxation of income from various sources including civil aviation.

In accord with the purpose of the notes now exchanged, the Embassy of India has the honour to stress the fact that acceptance by the Government of India is based on the understanding that the exemption in respect of income derived from operation of aircraft in international traffic by Indian airline companies and Iranian airline companies, shall be on the basis of reciprocity and shall apply from the beginning of operation of these airlines in Iran and India respectively and that in any case any tax on the aforesaid income has been recovered by either Government as of the date of this Agreement, the same shall be refunded by that Government.

The Embassy of India avails itself of this opportunity to renew to the Imperial Ministry of Foreign Affairs the assurances of its highest consideration.”

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