TDS Deduction at flat rate of 20% by Employer not liable on non-furnishing of PAN by Employees

Assessee-employer deducted TDS as per section 192 in respect of salary of the employees who failed to furnish their correct PAN.

AO applied a flat rate of 20% as per section 206AA and held assessee liable for short-deduction of TDS.

ITAT held that as per section 206AA if the deductee fails to furnish PAN, then the deductor shall deduct tax at the rates which is higher of (i) at the rates specified in the relevant provisions of the Act, or (ii) at the rate or rates in force, or (iii) at the rate of twenty percent.

Hence, a careful study of the provisions of section 206AA made it clear that it is not automatic that tax shall be deducted at a flat rate of 20% wherever PAN is not furnished.

Unlike other provisions, TDS on salary cannot be deducted by applying flat rate of tax on gross payment. It is not necessary that all payments would come under 20% flat rate, in some cases the rate of tax may be at 10% and in some cases it may be at 30%. Therefore, unless, this was done, the A.O. could not apply flat rate of 20% and compute the short deduction of tax.

Source: www.taxmann.com

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Important Guidelines for payment towards liability on account of Tax Deducted / Collected at Source

Important Guidelines for payment towards liability on account of Tax Deducted / Collected at Source

Your attention is drawn towards some relevant guidelines related to payment of TDS/ TCS liability.

A. Central Government Account ( Receipts and Payments ) Rules, 1983:

Date of Receipt for Cheques or Drafts: The Central Government Account (Receipts and Payments) Rules, 1983 contain, inter alia, regulate public moneys received by or on behalf of the Government of India. As per clause 20 of Part I (Preliminary and General Principles), the Date of receipt of Government revenues, dues etc. is determined as follows:

20. Date of receipt of Government revenues, dues etc.-
Government dues tendered in the form of a cheque or draft which is accepted under the provisions of rule 19 and is honoured on presentation, shall be deemed to have been paid-

i. where the cheque or draft is tendered to the bank, on the date on which it was cleared and entered in the receipt scroll;

B. Rule 125 of Income Tax Rules, 1962:

Electronic Payment of Tax: Rule 125 of Income Tax Rules, 1962 relates to Electronic Payment of Tax. The relevant provisions are as under:

    The following persons shall pay tax electronically on or after the 1st day of April, 2008:
          a company; and
          a person (other than a company), to whom the provisions of section 44AB are applicable.

    For the purposes of this rule :
        "pay tax electronically" shall mean, payment of tax by way of-
        internet banking facility of the authority bank; or


In the light of the above, it is suggested that the payments towards TDS may kindly be made through e-payment mode. This helps in better reporting of challan by deductors and consequential matching of such challans.

It shall help the deductors in reduction of late payment interest that may arise due to delay in date of tendering of cheques and date of credit to the Government account.

CPC (TDS) is committed to provide best possible services to you.

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Tax is not to be deducted at a higher rate of 20 percent u/s. 206AA of the Income-tax Act when the benefit of tax treaty is available

Recently, the Bangalore Bench of the Income-tax Appellate Tribunal (the Tribunal) held that there is no scope for the tax deduction at source (TDS) at a higher rate of 20 per cent as per the provisions of Section 206AA of the Income Tax Act, 1961 (the Act) when the benefit of tax treaty is available to a non-resident.

Facts of the case

• The taxpayer is engaged in the business of Business Process Outsourcing (BPO). The taxpayer made certain payments to a non-resident on account of royalty and/or Fees for Technical Services (FTS). As the benefit of a tax treaty was available to the non-resident, tax was deducted by applying the beneficial rate prescribed under the tax treaty in terms of the provision of Section 90(2) of the Act.
• The taxpayer filed statements of deduction of tax at source for various quarters of the relevant financial year in respect of payments made to non-resident during the period.
• The Assessing Officer (AO) after processing TDS statement issued intimation under Section 200A of the Act. The AO raised a tax demand on account of the short deduction of tax and interest was also charged on the same. The tax demand was raised on the ground that the taxpayer has not furnished the PAN of the non-resident deductee/recipient. The AO held that if the taxpayer did not furnish PAN, as per the provisions of Section 206AA of the Act, the TDS should have been deducted at the rate of 20 per cent
• The Commissioner of Income-tax Act, 1961 [CIT(A)] rejected the objection of the taxpayer regarding the scope of Section 200A for making the adjustment and consequential demand. However, the CIT(A) decided the matter in favour of the taxpayer and held that payment made to the nonresident recipient was eligible for the tax treaty benefit and by applying the beneficial provisions, the rate of tax to be withheld cannot be more than the tax liability provided in the tax treaty.

Tribunal’s ruling

Applicability of higher TDS under Section 206AA of the Act  

• The Tribunal held that there was no dispute that the benefit of the tax treaty was available to the nonresident recipient. Therefore, the tax liability of the recipient could not be more than the rate prescribed by the tax treaty or the Act, whichever is lower.
• Reliance was placed on the Pune Tribunal’s decision in the case of Serum Institute of India Limited1 wherein the Tribunal observed that Section 206AA of the Act does not override the provisions of Section 90(2) of the Act. The taxpayer had rightly applied the rate of tax as per the tax treaty and not as per Section 206AA of the Act since the provision of the tax treaty was more beneficial.
• The Tribunal observed that the similar view has been taken by the co-ordinate bench in the case of Bosch Ltd.
• The Tribunal relied on the decision of Karnataka High Court in the case of Bharti Airtel Ltd.3 where it was held that the Act is to be read as an integral code. To deduct tax while making payment to a nonresident, the amount paid must be ascertainable as income chargeable to tax in the hands of the nonresident. TDS is a vicarious liability, and it presupposes the existence of primary liability and hence the TDS provisions need to be read in conformity with the charging provisions i.e. Section 4, 5 and 9 of the Act.
• The Tribunal held that provisions of TDS had to be read along with the machinery provisions of computing the tax liability on the sum in questions.
• Following the aforesaid decisions, the Tribunal held that there was no error in the CIT(A)’s order where it was held that there is no scope for deduction of tax at the rate of 20 per cent as provided under the provisions of Section 206AA of the Act when the benefit of tax treaty is available.

Adjustment under Section 200A of the Act

• While making the adjustment under Section 200A of the Act the AO had ignored the provisions of the tax treaty.
• The payment in question was made to the nonresident, and the provisions of tax treaty were applicable. Thus, the issue of applying the rate of tax at 20 per cent and ignoring the provisions of tax treaty is a debatable issue and does not fall into the category of any arithmetical error or incorrect claim apparent from any information in the statement, as per the provisions of Section 200A(1) of the Act.
• On reference to Explanation to Section 200A(1) of the Act it is clear that in respect of deduction of tax at source where such rate is not in accordance with provisions of the Act, it can be considered as an incorrect claim apparent from the statement. However, in the present case it was not a simple case of deduction of tax at source by applying the rate only as per the provisions of the Act, when the benefit of tax treaty was available to the recipient of the amount.
• Therefore, the question of applying the rate of 20 percent as provided under Section 206AA of the Act is an issue which requires a long drawn reasoning and finding. Hence, it was held that applying the rate of 20 per cent without considering the provisions of the tax treaty and consequent adjustment while framing the intimation under Section 200A is beyond the scope of the said provision.
• Thus, the AO had travelled beyond the jurisdiction of making the adjustment as per the provisions of Section 200A of the Act. Accordingly, the issue was decided in favour of the taxpayer.

Source: www.tdsman.com

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Impact of Finance Act, 2015 Changes in Sec. 194C w.e.f. 01.06.2016

Changes in TDS from payments to transporters

Previously, payment to transporters carrying on the business of plying, hiring, or, leasing of goods carriages is not liable to withholding tax if the transporter furnishes her/his permanent account number to the payer. It seems that the intention of having this provision was to exclude small transporters from the rigours of TDS provisions. But because of the way the section was drafted, all transporters were excluded from the TDS provisions if they had a PAN.

With a view to bring back the big transporters back into the TDS fold, from 1st June 2015 onwards, this exemption will be available only to those transporters who own ten or less goods carriages at any time during the previous year. Such a transporter would also need to furnish a declaration to that effect to the payer along with the PAN.

There was also some bit of confusion in the minds of a few people as to whether the said section (and exclusion) applied to payers engaged in the business of transport or to payees engaged in the business of transport. To remove this confusion, it has now been clarified in the Memorandum to the Finance Bill that this exemption is available whether such amount is paid by a person engaged in the business of transport or otherwise.

Source: www.tdaman.com

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Three Simple Steps for Tax Deductors to follow and Important Information regarding TDS Certificates.

Below are the three simple steps for Tax Deductors to follow in case of TDS and TCS:

1. Deduct

1. Correct TDS while making payment as required by law
2. Deduct tax at higher rate in case valid and correct PAN of deductee is not available with you

Failure to deduct /collect tax at source shall result in penalty equal to the amount of tax failed to be deducted/collected.

2. Deposit

i) Non Government Deductors to deposit:

The tax deducted within 7 days from the end of the month in which deduction was made and by 30th April, 2015 where deduction (Other than deduction u/s 194IA) was made in the month of March, 2015.

ii) Government Deductors to deposit:

The tax deducted at source on the same day in case of book transfer & by 7th of the following month if using challan

Non-deposit of tax deducted / collected to the Government account shall invite Prosecution.

3. Issue

TDS certificate in Form 16A on income other than salary for the quarter ended on 31st March, 2015 by 30th May, 2015

TDS certificate in Form 16 for the financial year ended on 31st March, 2015 by 31st May, 2015

Delay in issue of TDS certificate shall result in penalty of Rs. 100/- for each day of default not exceeding amount of tax deductible/collectible.

Important Information for Deductors regarding TDS Certificates

Below are the important information regarding TDS Certificates which deductors should take care of:

Deductors who have deducted TDS and have not deposited the same by the due date, must do so immediately.

• All deductors must register themselves at https://www.tdscpc.gov.in (TRACES Portal)
• TDS certificate in Form 16A and part A of Form 16, containing 7 character TDS certificate number, has to be mandatorily downloaded from https://www.tdscpc.gov.in
• TDS certificate cannot be downloaded from TRACES Portal in case of non/incorrect quoting of PAN
• Quote correctly PAN of the deductee so that they get their due tax credit
• Quote correctly CIN of challan to avoid any short payment default
• Deductors need to first close short payment default, if any, to download TDS certificates

Visit www.tdscpc.gov.in for:

• e-Tutorials
• Frequently Asked Questions (FAQs)
• Online correction of statements

Source: www.tdsman.com

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Verification of TAN's TDS Statements filed for Fin.Year 2011, 2012 and 2013

In the last week, the Centralized Processing Cell (TDS) has issued an Advisory Communications to all TDS Deductors regarding Verification of TAN's TDS Statements filed for Fin.Year 2011, 2012 and 2013.  The CPC (TDS) have been observed that many TDS Deductor's have not put TAN correctly and due this Tax Credits are not shown in 26AS statements of their TDS Deductee.  This cell advice to TDS Deductor with respect to your TAN in the "TDS claimed by the taxpayers in their Income Tax Returns" vis-á-vis "Tax Credits available as per 26AS Statements", for the Financial Years 2011, 2012 and 2013, read the details which are as under :

The above discrepancies have arisen due to the difference in the TDS claimed by the taxpayers in their Income Tax Returns vis-á-vis TDS reported by you in the quarterly TDS Statements. You may be aware that the transactions, available in 26AS statements, are based on the information reported by you in the TDS statements.

The discrepancies observed against your TAN are attached in the following format, to enable you to check your records for respective PANs and take appropriate action.

TAN	TAN Name	TAN Address	PAN	PAN Name	Financial Year	Tax Credit Claimed	Credit available in 26AS Statement

• Your attention is hereby drawn to the Order of the Hon'ble Delhi High Court, dated 14th March 2013, wherein serious note had been taken of the failure of deductors to report correct transactions. The Hon'ble court had observed that the default on part of the deductor causes unwarranted harassment and inconvenience to the taxpayer
• You are, therefore, required to verify the transactions reported by you for these PANs in the TDS statement for the respective Financial Years. You may appreciate that taxpayers are not able to get the credit for erroneous data uploaded by you in TDS statements.
• In order to enable the taxpayers to claim correct TDS, you are advised to take below mentioned action.

Actions to be taken:

• Verify the TDS transactions for these PANs in the TDS statements filed by you for the respective Financial Years.
• If you have actually entered into the transaction and have not reported the same; you are advised to take appropriate corrective action by filing a Correction Statement.
• Please note that TRACES provides a user friendly Online Correction facility with Digital Signatures for correction of PANs. To avail the facility, you are requested to Login to TRACES and navigate to Defaults tab to locate Request for Correction from the drop-down menu. For any assistance, please refer to the e-tutorial available on TRACES.
• If you have not entered into the transactions, as above, then the same should be reported to the respective Field TDS Officers immediately.

For any assistance, you can write to ContactUs@tdscpc.gov.in or call our toll-free number 1800 103 0344.   

CPC (TDS) is committed to provide best possible services to you.

CPC (TDS) TEAM

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Duties of person deducting tax at source and rights of tax payers

The duties of person deducting tax at source and the rights of the tax payers has been given below:

Duties of person deducting tax at source

Deduct Tax at Correct Rate and deposit in Government Account – Sec 200

Every person responsible for deducting tax at source shall at the time of payment or credit of income, whichever is earlier, verify whether the payment being made is to be subject to deduction of tax at source. If it is so, he must deduct such tax as per the prescribed rates. Further he is required to deposit such tax deducted in the Central Government Account within the prescribed time as specified in Rule 30.

Issue a TDS certificate

Further, such person is required to issue a certificate of tax deduction at source u/s 203 to the person from whose income the TDS has been done, in the prescribed proforma i.e. Form No.16A within prescribed time(as discussed earlier).

File Prescribed Return/Quarterly Statement

A return of TDS is a comprehensive statement containing details of payments made and taxes deducted thereon along with other prescribed details. For deductions made prior to 01.04.2005 earlier every deductor was required as per the provisions of Section 206 (read with Rule 36A and 37) to prepare and deliver an annual return, of tax deducted at source. However w.e.f. 01.04.2005 there is no requirement to file annual returns and instead Quarterly statements of TDS are to be submitted in form 26Q by the deductors.

Rights of Tax Payers

Credit of TDS – If tax has been deducted at source u/s 192 to 194 A/B/BB/C/ D/E/EE/F/G/H/I/J/K, 195, 196A/B/C and D, the person from whose income (payment) the tax has been deducted i.e. Payee or assessee shall not be asked upon to pay the tax himself to the extent tax has been deducted (Sec.205). Moreover u/s 199 such tax deducted at source shall be treated as payment of tax on behalf of the payee (assessee).

TDS Certificate – U/s 203 payee (tax payer) is entitled to obtain a certificate from the payer (tax deductor) in Form 16-A specifying the amount of tax deducted and other prescribed particulars.

Form 26AS – As per section 203AA the prescribed income tax authority or the person authorized by such authority (as referred in section 200(3))will be required to deliver to the person from whose income the tax has been deducted/paid, a statement of deduction of tax in the prescribed form. Such statement as per rule 31AB will be required to be furnished in Form no.26AS by the 31st July following the financial year during which the taxes were deducted/paid (also refer Notification no. 928 E dt. 30.6.2005 of CBDT).

Source: www.tdsman.com

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Government TDS Deductors must quot AIN details in the TDS Statements - CPC(TDS)

CPC (TDS) asks government deductors to quote AIN details in TDS Statements. The letter issued by CPC (TDS) is as follows:

Dear Deductor,

As per the records of the Centralized Processing Cell (TDS), it has been observed that the Accounts Office Identification Number (AIN) has not been mentioned in the TDS statements submitted by you.

What is AIN and its relevance:

• AIN is a unique seven digit number allotted by NSDL, to the Pay and Accounts Office (PAO), District Treasury Office (DTO) or Cheque Drawing and Disbursing Office (CDDO). It is mandatory  for the PAO / CDDO / DTO to have an AIN.

Why is AIN important to be quoted in TDS Statement:

• Quoting of AIN in TDS Statement facilitates complete reporting and results into correct mapping of the TAN with the AIN.
• The AIN details in Form 24G, filed by the PAO / CDDO / DTO forms part of G-OLTAS database. CPC (TDS) processes TDS statements on the basis of information contained in G-OLTAS.

In view of the above, you are requested to provide AIN details in point 2(b) of the Forms 24Q and 26Q of the TDS Statements.

CPC (TDS) is committed to provide best possible services to you.

CPC (TDS) TEAM

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Below Taxable Income but TDS Deductor Deduct TDS, What do you do?

There is some confusion in the hand of deductee that deductee income is less than taxable income but deductor is deductor is deducting TDS from his income.  What should he do ?.  The answer of question is explained here with given below two FAQ's :-

Q.1. I have made some deposits with a bank on which annual interest is around 15000. My income is below taxable limit. The banker wants to deduct tax. What do I do?

Ans.: You can file a self-declaration to the banker in Form 15G or 15H (for Senior Citizens) stating that your income is below taxable limit. The form is available with your banker, the local Income Tax office and can be downloaded from the website www.incometaxindia.gov.in This form should be filed before the interest begins to accrue in the fixed deposit account, since the declaration has no retrospective effect.

Q.2. I have let out a property for 20,000 per month. The tenant is deducting tax that is more than my tax liability. What can I do under this circumstance?

Ans.: If you compute your tax liability and find it to be lower than the tax being deducted, you may approach your Assessing Officer by filing Form 13. He will issue a certificate directing the tenant to make TDS at a lesser rate. This form is available with the local Income Tax office or can be downloaded from the website www.incometaxindia.gov.in

Source: www.tdstaxindia.com

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TDS Deductor is not treated as Assessee in default if Deductee has paid the Tax.

It may be noted that Section 156 has been amended so as to incorporate the following proviso only:
 

“Provided that where any sum is determined to be payable by the assessee or by the Deductor under sub- section (1) of section 143 or sub-section (1) of section 200A, the intimation under those section shall be deemed to be a notice of demand for the purpose of this section.”
 

The insertion of the proviso has served only one purpose – that is, of treating the intimation itself as a notice of demand. Forgetting the amendment/proviso, the first part of the section itself empowers the Assessing Officer to issue a notice of demand where any interest, tax, penalty etc is due from the assessee and it has nothing to do with the amendment. In short, even though the Intimation may not be treated as Notice of demand for the purpose of section 156, there is nothing to bar the Assessing Officer from issuing the Demand Notice u/s 156.

As far as the alternate argument that the demand u/s 156 should be for the net amount only is concerned, it may be noted that, after the TDS certificate is issued to the concerned deductees,

• If excess TDS is done, the deductee claims the refund
• If short TDS is done, the Deductee should pay the Self Assessment Tax.

As far as the first part (a) is concerned, it is normally presumed that after the Certificate is issued for the excess amount, it’s the deductee only who is eligible to claim the amount and not the Deductor. As a result of this, the alternate plea that the demand should be for the net amount only looks improper and illogical. I am of the opinion that the demand should be of the total amount of short deductions as is done by the Assessing Officer and could not be of the net amount.

Provision related to Assessee in Default:
Section 201(1) has also been amended by inserting a proviso w.e.f 01.07.2012 so as to provide that any person who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid/credited to a resident shall not be deemed to be an assessee in default in respect of such tax if such resident-

1. has furnished his return of income under section 139;
2. has taken into account such sum for computing income in such return of income; and
3. has paid the tax due on the income declared by him in such return of income,

and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed. Consequent amendment has also been done in section 201(1A) for charging of the interest when the assessee is not deemed to be in default.
 

The amendment has been made applicable w.e.f 01.07.2012. As far as the retrospective application is concerned, it may be noted that there is another provision (section 191) which provides that person shall be deemed to be assessee in default in respect of non/short deduction of tax only in cases where the payee has also failed to pay the tax directly. Effectively, the latest amendment as mentioned above is in line with the existing provision as contained in section 191 and the Deductor cannot be treated to be an assessee in default in respect of non/short deduction of tax if the payee has discharged his tax liability.

It is very relevant here to note that even if the assessee is not treated to be an assessee in default as a result of above amendment, there is no consequential amendment in the penalty provision as contained in section 271C. Effectively, even after the above amendment, penal provision u/s 271C would be applicable. Further, penalty u/s 217C can be waived by virtue of Section 273B if the assessee proves that there was a reasonable cause for the said failure.

Source: The Hitwada

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Tax Deductor can treated as Taxpayer if he has paid the Tax.

Regarding Tax Deduction and amendment in u/s. 156 of TDS, it may noted as to incorporate the following proviso only:

“Provided that where any sum is determined to be payable by the assessee or by the Deductor under sub- section (1) of section 143 or sub-section (1) of section 200A, the intimation under those section shall be deemed to be a notice of demand for the purpose of this section.”
 

The insertion of the proviso has served only one purpose – that is, of treating the intimation itself as a notice of demand. Forgetting the amendment/proviso, the first part of the section itself empowers the Assessing Officer to issue a notice of demand where any interest, tax, penalty etc is due from the assessee and it has nothing to do with the amendment. In short, even though the Intimation may not be treated as Notice of demand for the purpose of section 156, there is nothing to bar the Assessing Officer from issuing the Demand Notice u/s 156.

As far as the alternate argument that the demand u/s 156 should be for the net amount only is concerned, it may be noted that, after the TDS certificate is issued to the concerned deductees,

• If excess TDS is done, the deductee claims the refund
• If short TDS is done, the Deductee should pay the Self Assessment Tax.

As far as the first part (a) is concerned, it is normally presumed that after the Certificate is issued for the excess amount, it’s the deductee only who is eligible to claim the amount and not the Deductor. As a result of this, the alternate plea that the demand should be for the net amount only looks improper and illogical. I am of the opinion that the demand should be of the total amount of short deductions as is done by the Assessing Officer and could not be of the net amount.

Provision related to Assessee in Default:
Section 201(1) has also been amended by inserting a proviso w.e.f 01.07.2012 so as to provide that any person who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid/credited to a resident shall not be deemed to be an assessee in default in respect of such tax if such resident-

• has furnished his return of income under section 139;
• has taken into account such sum for computing income in such return of income; and
• has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed. Consequent amendment has also been done in section 201(1A) for charging of the interest when the assessee is not deemed to be in default.

The amendment has been made applicable w.e.f 01.07.2012. As far as the retrospective application is concerned, it may be noted that there is another provision (section 191) which provides that person shall be deemed to be assessee in default in respect of non/short deduction of tax only in cases where the payee has also failed to pay the tax directly. Effectively, the latest amendment as mentioned above is in line with the existing provision as contained in section 191 and the Deductor cannot be treated to be an assessee in default in respect of non/short deduction of tax if the payee has discharged his tax liability.

It is very relevant here to note that even if the assessee is not treated to be an assessee in default as a result of above amendment, there is no consequential amendment in the penalty provision as contained in section 271C. Effectively, even after the above amendment, penal provision u/s 271C would be applicable. Further, penalty u/s 217C can be waived by virtue of Section 273B if the assessee proves that there was a reasonable cause for the said failure.

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What are the situations to TDS deduction or Non-deduction at lower rate?

Non deduction or deduction at lower rate in certain situations

No Tax has to be deducted for the payment made to Government, RBI, Corporation whose income is exempt from tax or mutual fund specified u/sec. 10(23D). Also in case where deductee produces a non deduction certificate or lower deduction certificate u/sec. 197 of the Income Tax Act 1961.

Self declaration in Forms 15G and 15H can be filed by the deductee if his income doesn't exceed the amount chargeable to tax. This self declaration can be filed for dividends, interest and mutual fund income only. In these cases no tax has to be deducted. However the tax deductor is required to furnish copies of this self declaration to the concerned CCIT or CIT as per the rules.

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Circular Regarding Purchase of Gold by Bank Finance.

RBI has issued a Circular note regarding purchase of Gold by Bank Finance. In the second quarter review of monetary policy,RBI cleared that other than working capital finance banks are not permitted to finance for purchase of gold. RBI issued note no. 57 dated 19 November 2012 which is as under.

Bank finance for purchase of gold

Please refer to paragraphs 102 and 103 (extract enclosed) of the Second Quarter Review of Monetary Policy 2012-13 announced on October 30, 2012, proposing that other than working capital finance, banks are not permitted to finance purchase of gold in any form.

2. In terms of extant guidelines issued vide circular DBOD.No.Leg.BC.74/C.124(P)-78 dated June 1, 1978, no advances should be granted by banks against gold bullion to dealers/traders in gold if, in their assessment, such advances are likely to be utilised for purposes of financing gold purchase at auctions and/or speculative holding of stocks and bullion. In this context, the significant rise in imports of gold in recent years is a cause for concern as direct bank financing for purchase of gold in any formviz., bullion/primary gold/jewellery/gold coin etc. could lead to fuelling of demand for gold. Accordingly, it is advised that no advances should be granted by banks for purchase of gold in any form, including primary gold, gold bullion, gold jewellery, gold coins, units of gold Exchange Traded Funds (ETF) and units of gold Mutual Funds. However, banks can provide finance for genuine working capital requirements of jewellers. The scheme of Gold (Metal) Loan detailed vide our circular DBOD.No.IBS.BC/ 1519/23.67.001/1998-99 dated December 31,1998, as amended from time to time, will continue to be in force.

Yours faithfully,
(Sudha Damodar)
Chief General Manager

Encl: As above

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Duties and Responsiblities of TDS Deductor and Mode of TDS Payment.

PERSONS RESPONSIBLE FOR DEDUCTING TAX AND THEIR DUTIES:

4.1 Section 204 (i) of the Act the "persons responsible for paying" for the purpose of Section 192 means the employer himself or if the employer is a Company, the Company itself including the Principal Officer thereof. Further, as per Section 204(iv), in the case of credit, or as the case may be, if the payment is by or on behalf of Central Government or State Government, the DDO or any other person by whatever name called, responsible for crediting, or as the case may be, paying such sum is the "persons responsible for paying".

4.2 The tax determined as per para 8 should be deducted from the salary u/s 192 of the Act.

4.3. Deduction of Tax at Lower Rate:

If the jurisdictional TDS officer of the Taxpayer issues a certificate of No Deduction or Low Deduction of Tax under section 197 of the Income Tax Act, subsequent to the application filed before him in Form No 13 by the Taxpayer; then the DDO should take into account such certificate and deduct tax on the salary payable at the rates mentioned therein. (see Rule 28AA).

4.4. Deposit of Tax Deducted:

Rule 30 prescribes time and mode of payment of tax deducted at source to the account of Central Government.

4.4.1. Prescribed time of payment/deposit of TDS made to the credit of Central Government account is as under:

(a) In case of an Office of Government:

Sl. No.	Description	Time up to which to be deposited.
1	Tax deposited without Challan [Book Entry]	SAME DAY
2	Tax deposited with Challan	7TH DAY NEXT MONTH
3	Tax on perquisites opt to be deposited by the employer.	7TH DAY NEXT MONTH

(b) In any case other than an Officer of Government

Sl. No.	Description	Time up to which to be deposited.
1	Tax deductible in March	30th APRIL NEXT FINANCIAL YEAR
2	Tax deductible in any other month	7TH DAY NEXT MONTH
3	Tax on perquisites opt to be deposited by the employer	7TH DAY NEXT MONTH

However, if a DDO applies before the jurisdictional Additional/Joint Commissioner of Income Tax to permit quarterly payments of TDS under section 192, the Rule 30(3) allow for payments on quarterly basis and time given in Table below:

Sl. No.	Quarter to the financial year ended on	Date for quarterly payment
1	30th June	7th July
2	30th September	7th October
3	31st December	7th January
4	31st March	30th April next Financial Year

4.4.2 Mode of Payment of TDS

4.4.2.1 Payment by Book Entry:

In the case of an office of the Government, where tax has been paid to the credit of the Central Government without the production of a challan [Book Entry], the Pay and Accounts Officer or the Treasury Officer or the Cheque Drawing and Disbursing Officer or any other person by whatever name called to whom the deductor reports the tax so deducted and who is responsible for crediting such sum to the credit of the Central Government, shall-

(a)  submit a statement in Form No. 24G within ten days from the end of the month to the agency authorized by the Director General of Income-tax (Systems) [TIN Facilitation Centres currently managed by M/s National Securities Depository Ltd.] in respect of tax deducted by the deductors and reported to him for that month; and

(b)  intimate the number (hereinafter referred to as the Book Identification Number or BIN) generated by the agency to each of the deductors in respect of whom the sum deducted has been credited. BIN consist of receipt number of Form 24G, DDO sequence number and date on which tax is deposited.

The procedure of furnishing Form 24G is detailed in Annexure IV. PAOs/DDOs should go through the FAQs therein to understand the correct process to be followed.

4.4.2.2 Payment by an Income Tax Challan:

(i)  In such a case the amount of tax so deducted shall be deposited to the credit of the Central Government by remitting it within the time specified in Table 4.4.1 above into any branch of the Reserve Bank of India or of the State Bank of India or of any authorized bank;

(ii)  In case of a company and a person (other than a company), to whom provisions of section 44AB are applicable, the amount deducted shall be electronically remitted into the Reserve Bank of India or the State Bank of India or any authorised bank accompanied by an electronic income-tax challan.

The amount shall be construed as electronically remitted to the Reserve Bank of India or to the State Bank of India or to any authorized bank, if the amount is remitted by way of:

(a)  internet banking facility of the Reserve Bank of India or of the State Bank of India or of any authorized bank; or

(b)  debit card (Notification No.41/2010, dated 31st May, 2010)

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Benifits in Income Tax of jointly purchase property.

Is it necessary to purchase the property jointly.

Exemption is admissible even if the property is purchased individually:
It is not at all necessary to purchase a joint property to claim an exemption from LTCG. By purchasing two separate property individually also, one can have an exemption from LTCG.

Time Limit to purchase the Property:
Exemption u/s 54 (or u/s 54F,if the asset sold is not a residential house property) is available if the Assessee invests amount of LTCG for purchase of another residental house property.

• within one year before or two years after the date of transfer, or
• constructs a residential house within a period of three years from the date of the transfer of the original house.

Scheme to Deposit:
Although under section 54/54F,the assesee is allowed 2 years to purchase the house property,but the capital gain on transfer of the origional assets is taxable in the previous year in which the transfer took place. The return of income of the previous year is to be filed before the specified date Hence , the assessee will have to take a decision for the purchase/ construction of the house property before the date of furnishing of the return otherwise the capital gain would be taxable.

To avoid the above situation, the income Tax Act has specified an alternative in the form of a Deposit under the Capital Gain Deposit Accounts Scheme-1988 (CGDAS).

The amount of the capital gain, which is not utilized by the assessee for purchase or constructions of the new house before the date of furnishing the return of income, should be deposited by him under the Capital Gain Account Scheme, before the DUE DATE of furnishing the return. After deposits, the amount already utilized by the assessee for purchase/constructions of the new house along with the amount so deposited, shall be eligible for exemption under section 54/54F in the year in which LTCG has arisen.

The investment in the PLAIN FIXED DEPOSITS may not enable you to claim an exemption. Ensure to keep the amount in the CGDAS.

However, one can keep the amount in the plain fixed deposits after the sale of the property and can divert it in the CGDAS before the due date of filling the return of income.

It may be noted that under CGDAS also, two type of accounts can be opened as under-

• Deposit Account A- This is a saving Account.
• Deposit Account B - This is a term Deposit Account

Investment in Capital Gain Bonds:
Exemption can be claimed either by investing in the Bonds u/s. 54EC or u/s. 54 by investing in the house property. Assessee have the choice.

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Deductors must comply for Correct Credit TDS of TDS Deductee with Income Tax Department.

All Deductors other than Government Deductors file their e-TDS Return in due time of Quarterly return, although this, some prediction regarding to credit correct TDS in Income Tax Department which deduct by Deductors on behalf of TDS from Deductee. This it is necessary that the deductors must comply with their obligations to ensure correct credit TDS to persons from whose Income Tax is deducted at source, the full press release is as under:

DEDUCTORS MUST COMPLY WITH THEIR OBLIGATIONS TO ENSURE CORRECT CREDIT TO PERSONS FROM WHOSE INCOME TAX IS DEDUCTED AT SOURCE

Press Release, dated 10-7-2012

All deductors other than Government deductors must file their quarterly TDS statement for the quarter ending 30th June 2012, on or before 15th July 2012 and Government deductors must file their statement on or before 30th July 2012. While submitting their statements, the deductors have to choose correct and relevant form, quote correct PAN against all entries and ensure that correct CIN/BIN is quoted in the TDS statement. Non-quoting of PAN or TAN in TDS statements or delay in filing of TDS statements may lead to levy of penalty.

Filing of TDS statement with correct PAN and CIN/BIN is important because under Rule 37BA of Income Tax Rules, 1962 credit for tax deducted at source is given to the deductees on the basis of TDS statement furnished to the Income-tax Department by the deductor. Filing of TDS statements with incorrect PAN or other details of the deductee would, therefore, cause inconvenience to the deductees (taxpayer).

In case the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, the deductee must file a declaration with the deductor that credit for the TDS shall be given to the other person and not to the deductee. The declaration filed by the deductee must contain the name, address, Permanent Account Number of the person to whom credit is to be given and reasons for giving credit to such person. The deductor must, in the TDS statement, report the tax deduction in the name of such other person and also issue the TDS certificate in the name of the person in whose name credit is shown in the TDS statement.

TDS certificates for deductions on income other than salary income (Form 16A) for the quarter ending 30th June 2012 should be issued on or before 30th July 2012

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Due to wrong quoting of PAN, TDS Deduction not Reflected in 26AS Statement then what will do?

The 26AS Statement shows only these details which TDS Deductor deduct the TDS and submit properly return as Q1, Q2, Q3 and Q4.  Mostly Taxpayee confused to show 26AS statement why their TDS Deductions are not shown in 26AS. The data uploaded against any Acknowledgment number can be viewed by the person with the help of Tax Deduction Account Number (TAN) & Acknowledgment Number of the e-TDS return filed. For this, taxpayee have to login at https://www.tin-nsdl.com/ where in the center of the screen, one can click at below PAN, TAN at “e-TDS/TCS filing” option so as to view the “Quarterly Statement Status”. In the Quarterly Statement Status, any one can view the required details by entering TAN &15 digit numeric acknowledgment numbers. The amount, as mentioned by taxpayee in the query, may not have been reflected in your 26AS due to wrong quoting of PAN or mismatch in the Challans entered by the Deductor while filing TDS return Q1, Q2, Q3 and Q4.

In such case, prima-facie it appears that the bank has made the payment of TDS & has also filed the TDS returns, with either taxpayee's wrong PAN or mismatch in the data of Challans paid as a result of which the amount is not getting reflected in Taxpayee's 26AS. Filing the complaint may not conveniently serve the required purpose in such case. Thus the Taxpayee can file the income tax return by just quoting the acknowledgment number of the TDS return. In normal course, the tax credit is abruptly not granted unless & until the same is reflected in 26AS of the assessee. However, the Assessing Officer in such cases can grant the tax credit after verifying the genuineness of the claim. Then the Taxpayee may intimate all the facts & figures to your Assessing Officer & after verification and will surely get the due credit of the TDS amount.

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No liability of TDS if Contract is not made between Contractor or Subcontractor under section 194C.

As per the order passed by the CIT(A)-24, Mumbai for the quantum of assessment for the assessment year 2006-07. The below order cleared that when any deductor deduct TDS against payment of Contract but if there is no commencement of Contract between Contractor or Subcontractor then there is not liability of Deduction of TDS under Section 1994C.

TAT MUMBAI
Ratnakar Sawant, Dinesh N. Shah & Co. v. ITO
IT Appeal No. 2941 (Mum.) of 2011
[Assessment year 2006-07]
May 11, 2012

ORDER

Amit Shukla, Judicial Member – This appeal has been filed by the assessee against order dated 2-2-2011, passed by the CIT(A)-24, Mumbai for the quantum of assessment for the assessment year 2006-2007.

2. The solitary issue involved in various grounds of appeal relates to addition of Rs. 18,70,375/-, on account of payment made for hiring of vehicles in violation of Section 40(a)(ia). The factual matrix of this ground are that the assessee is an individual and proprietor of two concerns, namely, ‘M/s Ratan Transport’ and ‘M/s Ratan Forklift Hiring Services’, which are engaged in the business of forklift hiring. The hire charges so received from the various parties from hiring of forklift vehicles were either through the forklift vehicles owned by him or taken on hire from outside parties for which he had to make payment to such other parties.

3. The Assessing Officer during the course of the assessment proceedings noted that the assessee had declared-turn over of Rs. 82.73 lacs in M/s Ratan Forklift and Rs. 15.82 lacs in M/s Ratan Transport from hiring business. As against this, the assessee has claimed hire charges paid in both the proprietary concerns aggregating Rs. 81,17,595/-. He proceeded to scrutinize the payment which were made in excess of Rs. 50,000/- to various persons, which amounted to Rs. 18,70,375/-, the details of which has been given at para 11 of the assessment order. The Assessing Officer observed that the assessee had not deducted TDS as per the provision of 194C(2) on these payments and therefore, same is not allowable as expenditure. The assessee contended that he had offered his income u/s 44AE and therefore, such a dis-allowance cannot be made and secondly, provision of Section 40a(ia) will not be applicable to assessee in this year as he is individual not liable to deduct TDS u/s 194C. The Assessing Officer rejected the explanation and held that the assessee was engaged in the business activities of forklift and hiring and had made transactions with various persons and therefore, non-deduction of TDS clearly violates the provision of Section 40(a)(ia) even in this year. Accordingly, sum of Rs. 18,70,375/- was added to the income of the assessee.

4. In the first appeal , the assessee submitted that forklift vehicles were hired from different owners not for any specific job or contract but for carrying out his own obligation as a contractor with the principals. There was no element of contract between the assessee and the parties from whom he had hired the forklift, either oral or written and therefore the provision of Section 194C(2) are not applicable. It was further submitted that individuals are not liable to deduct TDS under Section 194C(2) in respect of payment to sub-contractors under sub-section (2) of Section 194C, which has only come in the statute w.e.f. 1- 6-2007. Further reliance was placed on the following decisions :-

(i) Punjab & Haryana High Court in the case of CIT (TDS) v. United Rice Land Ltd. [2008] 174 Taxman 286.

(ii) Mythri Transport Corporation v. Asstt. CIT [2010] 124 ITD 40 (Visakha.)

(iii) Order of CIT(A) 24 in the case of Janardhan V. Sawant, A.Y. 2007-2008 (Appeal No. CIT(A) 24/ACIT, 13 (2)/337/09-10 dtd.11.06.2010).

5. Learned CIT(A) dismissed the assessee’s contention simply by affirming the finding of the Assessing Officer.

6. Learned AR appearing on behalf of the assessee submitted that firstly, it was not a case for hiring of forklift vehicles from the outsider under a contract and therefore, it does not come within the purview of sub-contract under Section 194C (2), as there was no oral and written agreement and secondly, hiring of forklift vehicles is a machinery which falls within the scope of Section 194(1) and not 194C.Even the Explanation to Section 194(1) provides for TDS liability on hiring of machinery which has come w.e.f. 13-7-2006, hence, does not fall in the impugned assessment year. She also filed copy of decision of ITAT Mumbai Bench in ACIT v. Janardhan V. Sawant, in ITA No.6505/Mum/2010, vide order dated 28-3-2012, wherein on similar facts in the case of assessee’s brother, the Tribunal has dismissed the case of the department.

7. On the other hand, learned Senior DR submitted that there was a clear violation of Section 194C as the assessee has not deducted TDS and the finding given by the Assessing Officer and affirmed by the CIT(A), is liable to be upheld.

8. We have carefully considered the rival submissions and also the findings given in the impugned orders. The assessee is an individual, who has undertaken a contract to provide forklift on hire to his principals, on which he has received hire charges. Besides his own forklift vehicles, he has also hired forklift vehicles from the outside parties for which he has paid hire charges to them and has been claimed as expenditure. In such a case, the assessee is solely responsible for executing the contract with the persons to whom he has given forklift vehicles on hire and it is only for fulfillment of this contract that he has also engaged the forklift vehicles from the outside parties. In case of hiring from outside parties the responsibility and the risk involved for performing the contract work lies with the assessee only and no such risk and responsibility seems to have been transferred to outside parties via-à-vis his principals. The provisions of Section 194C applies to any payment made to a contractor for carrying out any work in pursuance of a contract between the contractor and the specified persons. The contract also includes sub-contract. For application of provisions of Section 194C in this case it has to been seen, whether the assessee has entered into any kind of sub-contract with the outside parties from whom he has hired the forklift vehicles on random basis to fulfil his own commitment towards his principals. There is no material on record to remotely suggest that there was any kind of oral or a written contract or sub-contract with the outside parties from whom he has taken the forklift vehicles. Until and unless risk and responsibility of the contract undertaken by the assessee is shifted to the sub-contractors, it cannot be held that these persons are the sub-contractors of the assessee. The judgments as have been relied upon by the assessee before the CIT(A) clearly clinches the issue in favour of the assessee. The relevant proposition laid down in these cases are given here under :-

United Rice Land Ltd. (supra)

“The assessee-company was engaged in the business of manufacture and export of rice. Whenever there was need for transportation of goods from business premises to the part the assessee used to engage trucks through transporters. The consideration was charged by the transporters from the truck owners or operators and the hire charges were paid by the assessee directly to the truck owners or drivers or through the transporters. There was no contract with any of the local transporters or truck owners. The Assessing Officer treated the assessee as in default for short deduction of tax under Section 201 of the Income-Tax Act, 1961 and levied interest under section 201(IA) of the Act. The Commissioner (Appeals) partly allowed the appeal filed by the assessee. The appeal filed by the revenue was dismissed by the Tribunal. On further appeal:

Held: dismissing the appeal, that the Assessing Officer had held the assessee liable to deduction of tax only on the assumption that the assessee had agreement with the parties through whom trucks were arranged for transportation of goods. The Commissioner (Appeals) had recorded a finding that there was neither an oral nor written agreement between the assessee and the transporters for carriage of goods nor had it been proved that any sum of money regarding freight charges was paid to them in pursuance of a contract for a specific period, quantity or price. This finding of fact was recorded after considering the certificate furnished by the transporters. The tribunal also recorded that this finding of fact had not been controverted by the Department.”

Mythri Transport Corporation (supra)

“In the instant case, there is no material to suggest that the other lorry owners involved themselves in carrying out any part of the work undertaken by the assessee by spending their time, energy and by taking the risks associated with the main contract work. In the absence of the above said characteristics attached to a sub-contract in the instant case, the payment made to the lorry owners stands at par with the payments made towards salaries, rent etc…… Hence, in our considered opinion, it cannot be said that payments made for hired vehicles would fall in the category of payment towards a sub-contract with lorry owners. In that case the assessed is not liable to deduct tax at source, as per provisions of section 194C(2), on payments made to the lorry owners for lorry hire. Consequently, the provisions of section 40(a)(ia) shall not apply to such payments.”

9. This issue has also come up for consideration by the coordinate Bench of the ITAT in the case of Janardhan V. Sawant (supra), which was rendered in the case of the assessee’s brother wherein on similar facts, the appeal of the department has been dismissed.

10. So far as the second contention that hiring of forklift vehicles comes within the purview of hiring of machinery and, therefore, it will fall within purview of Section 194(1), is not adjudicated upon and is left upon to be decided in some other matter. The issues regarding applicability of Section 194C in the cases where income is computed u/s 44AE and also applicability of amendment as contended before the authorities below is also not adjudicated upon as we have already decided the issue on merits.

11. Thus, in view of our finding given above, and also respectfully following the decision of the ITAT in the case Janardhan V. Sawant (supra), we hold that the assessee was not liable to deduct TDS under Section 194C(2) in relation to payment made to the outside parties and accordingly there is no violation of Section 40(ia). Hence, the addition of Rs. 18,70,375/- is deleted.

12. In the result, the appeal filed by the assessee is allowed.

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Notification regarding Double Taxation Agreement - Agreement for Avoidance of Double Taxation and Prevention of fiscal evasion with foreign countries

Section 90 of the Income-tax Act, 1961 - Double Taxation Agreement - Agreement for Avoidance of Double Taxation and Prevention of fiscal evasion with foreign countries - Norway

notification no. 24/2012 [F.NO. 505/3A/81-FTD-I], DATED 19-6-2012

Whereas an Agreement between the Republic of India and the Kingdom of Norway for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital was signed at New Delhi on the 2nd day of February, 2011;

And whereas, the date of entry into force of the said Protocol is the 20th day of December, 2011, being the date of later of the notifications of satisfaction of all legal requirements and procedures as required by the respective laws for entry into force of the Agreement, in accordance with Paragraph 2 of Article 31 of the said Agreement;

And whereas, sub-paragraph (a) of Paragraph 3 of Article 31 of the said Agreement provides that the provisions of the said Agreement shall have effect in India in respect of income derived or capital owned in any fiscal year beginning on or after the first day of April next following the calendar year in which the Agreement entered into force;

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, as set out in the Annexure hereto, shall be given effect to in the Union of India. In respect of income and on Capital arising in any fiscal year beginning on or after the 1st day of April, 2012.

AGREEMENT BETWEEN THE REPUBLIC OF INDIA AND THE KINGDOM OF NORWAY FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL

The Government of the Republic of India and the Government of the Kingdom of Norway, desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital and with a view to promoting economic cooperation between the two countries, 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 and on capital imposed on behalf of a Contracting State or of its political sub-divisions or local authorities, irrespective of the manner in which they are levied.

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

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

(a) in India:

(i) the income tax, including any surcharge thereon; and
(ii) the tax on capital (the wealth tax), including any surcharge thereon (hereinafter referred to as "Indian tax");

(b) in the case of Norway:
(i) the tax on general income;
(ii) the tax on personal income;
(iii) the special tax on petroleum income;
(iv) the resource rent tax on income from production of hydroelectric power;
(v) the withholding tax on dividends;
(vi) the withholding tax on pensions;.
(vii) the tax on remuneration to non-resident artistes, etc.;
(viii) the tax on capital (the wealth tax)

(hereinafter referred to as "Norwegian tax").

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 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) 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, including the U.N. Convention on the Law of the Sea;
(b) the term "Norway" means the Kingdom of Norway, and includes the land territory, internal waters, the territorial sea and the area beyond the territorial sea where the Kingdom of Norway, according to Norwegian legislation and in accordance with international law, may exercise her rights with respect to the seabed and subsoil and their natural resources; the term does not comprise Svalbard, Jan Mayen and the Norwegian dependencies outside Europe;
(c) the terms "a Contracting State" and "the other Contracting State" mean India or Norway, as the context requires;
(d) the term "person" includes an individual, 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;
(e) the term "company" means any body corporate or any entity which is treated as a body corporate for tax purposes;
(f) the term " enterprise" applies to the carrying on of any business;
(g) the terms "enterprise of a Contracting State" and "enterprise of the 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;
(h) 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;
(i) the term "competent authority" means:
(i) in India: the Finance Minister, Government of India, or its authorised representative;
(ii) in Norway: the Minister of Finance or the Minister's authorised representative;
(j) the term "national", in relation to a Contracting State, means:
(i) any individual possessing the nationality of that Contracting State;
(ii) any legal person, partnership or association deriving its status as such from the laws in force in that Contracting State;

(k) the term "tax" means Indian or Norwegian tax, as the context requires, but shall not include any amount which is payable in respect of any default or omission in relation to the taxes to which this Agreement applies or which represents a penalty or fine imposed relating to those taxes;
(1) the term "fiscal year" means:
(i) in the case of India: the financial year beginning on the 1st day of April;
(ii) in the case of Norway: the calendar year.

2. As regards the application of the Agreement at any time by a Contracting State any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the taxes to which the Agreement applies, 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 management or any other criterion of a similar nature, and also includes that State and any political subdivision or local authority thereof, provided, however, that:

(a) this term, does not include any person who is liable to tax in that State in respect only of income from sources in that State; and
(b) in the case of income derived or paid by a partnership, estate, or trust, this term applies only to the extent that the income derived by such partnership, estate, or trust is subject to tax in that state as the income of a resident, either in its hands or in the hands of its partners or beneficiaries.

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; if 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 (centre of vital interests);
(b) if the State in which he has his centre 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 States 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 both States or of neither of them, the competent authorities of the Contracting States shall endeavour to settle the question by mutual agreement.

3. Where by reason of the provisions of paragraph 1 a person other than an 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. If the State in which its place of effective management is situated cannot be determined, then the competent authorities of the Contracting States shall endeavour to settle the question by mutual agreement.

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 extraction of natural resources.

3. The term "permanent establishment" also encompasses:

(a) a building site, a construction, assembly or installation project or supervisory activities in connection therewith, but only where such site, project or activities continue for a period of more than three months together with other such sites, projects or activities, if any;
(b) the furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only where activities of that nature continue (for the same or a connected project) within the country for a period or periods aggregating to more than six months within any 12-months' 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.

However, the provisions of sub-paragraphs a) to e) shall not be applicable where the enterprise maintains any other fixed place of business in the other Contracting State for any purposes other than the purposes specified in the said sub-paragraphs.

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person - other than an agent of an 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 undertakes for the enterprise, if such a 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 in the first-mentioned State, wholly or almost wholly for the enterprise itself or for the enterprise and other enterprises controlling, controlled by, or subject to the same common control as, that enterprise.

6. Notwithstanding the preceding provisions of this Article, an insurance 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 7 applies.

7. An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that 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 or almost wholly on behalf of that enterprise or on behalf of that enterprise and other enterprises controlling, controlled by, or subject to the same common control as, that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph unless the enterprise can demonstrate that the transactions between the said enterprise and the agent are under arm's length conditions.

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.

Article 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 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 (including 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 rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources; ships and aircraft shall not be regarded as immovable property.

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

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

Article 7 : BUSINESS PROFITS - 1. The profits 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 profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.

2. Subject to the provisions 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 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 determining the profits of a permanent establishment, there shall be, allowed as deductions expenses which are incurred for the purposes 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, in accordance with the provisions of and subject to the limitations of the tax laws of that State. 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, know-how or other rights, or by way of commission or other charges for specific services performed or 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, know-how or other rights, or by way of commission or other charges for specific services performed or 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 : SHIPPING AND AIR TRANSPORT - 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. Profits derived by a transportation enterprise which is a resident of a Contracting State from the use, maintenance, or rental of containers (including trailers and other equipment for the transport of containers) used for the transport of goods or merchandise in international traffic shall be taxable only in that Contracting State, except insofar as those containers or trailers and related equipments are used for transport solely between places within the other Contracting State.

3. 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.

4. The provisions of paragraph 1 and 2 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

5. The provisions of paragraphs 1 and 2 shall apply to profits derived by the joint Norwegian, Danish and Swedish air transport consortium Scandinavian Airlines System (SAS), but only insofar as profits derived by SAS Norge AS, the Norwegian partner of the Scandinavian Airlines System (SAS), are in proportion to its share in that organization.

Article 9 : ASSOCIATED ENTERPRISE - 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 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 accrued to one of the enterprises, but, by reason of those conditions, have not so 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 may 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 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 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 and income treated as dividends under the taxation laws of the Contracting 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 14, 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 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 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 per cent of the gross amount of the interest.

3. Notwithstanding the provisions of paragraph 2, any such interest referred to in paragraph 1 shall be taxable only in the Contracting State of which the recipient is a resident, if such resident is the beneficial owner of the interest and if such interest is paid to the Government of a Contracting State, or a political sub-division or a local authority thereof:

(a) In the case of Norway, the term Government encompasses:

(i) the Central Bank of Norway;
(ii) the Government Pension Fund;
(iii) the Norwegian Guarantee Institute for Export Credits;
(iv) Norfund,

to the extent they are wholly owned and controlled by the Government of Norway.

(b) In the case of India, the term Government encompasses:

(i) the Reserve Bank of India;
(ii) the Export-Import Bank of India and the National Housing Bank to the extent they are wholly owned and controlled by the Government of India or the Reserve Bank of India.

(c) to any other institution as may be agreed upon from time to time between the competent authorities of the Contracting States through exchange of letters.

4. The term "interest" as used in this Article means income from debt claims of every kind, whether or not secured by mortgage, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures, as well as income assimilated to income from money lent by the taxation law of the Contracting State in which the income arises. 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 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 14, 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 AND FEES FOR TECHNICAL SERVICES - 1. Royalties or fees for technical services 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 or 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 beneficial owner of the royalties or fees for technical services is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties or fees for technical services.

3. (a) 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 television or radio 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.

(b) The term "fees for technical services" as used in this Article means payments of any kind, other than those mentioned in Articles 14 and 15 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 royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for technical services arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties or fees for technical services are paid is effectively connected with such perrmanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

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

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 or fees for technical services, 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 : 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 the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such fixed base, may be taxed in that other State.

3. Gains from the 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 the alienation of shares in a company which is a resident of a Contracting State may be taxed in that State.

5. Gains from the alienation of any property, other than that referred to in the preceding paragraphs, shall be taxable only in the Contracting State of which the alienator is a resident.

Article 14 : INDEPENDENT PERSONAL SERVICES - 1. Income derived by an individual who is a resident of a Contracting State from the performance of professional services or other independent activities of a similar character shall be taxable only in that State except in the following circumstances when such income may also be taxed in the other Contracting State:

(a) if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the 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 period of 12 months; 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, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, surgeons, dentists and accountants.

Article 15 : DEPENDENT PERSONAL SERVICES - 1. Subject to the provisions of Articles 16, 18 and 19, salaries, wages 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 whose activity does not consist of hiring out of labour, 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. Where a resident of a Contracting States derives remuneration in respect of an employment exercised aboard an aircraft operated in international traffic by the Scandinavian Airlines System (SAS) consortium, such remuneration shall be taxable only in that Contracting State.

Article 16 : 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 or of a similar organ of a company which is a resident of the other Contracting State may be taxed in that other State.

Article 17 : ARTISTES AND SPORTSPERSONS - 1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsperson, from personal activities as such exercised in the other Contracting State, may be taxed 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 Articles 7, 14 and 15, 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 income from activities performed in a Contracting State by entertainers or sportspersons if the activities are substantially supported by public funds of one or both of the Contracting States or of political sub-divisions or local authorities thereof. In such a case, the income shall be taxable only in the Contracting State of which the entertainer or sportsperson is a resident.

Article 18 : NON-GOVERNMENT PENSIONS, ANNUITIES AND ALIMONY - 1. Any pension, other than a pension referred to in Article 19, or any annuity derived by a resident of a Contracting State from sources within the other Contracting State shall be taxable only in the first-mentioned Contracting State.

2. The term "pension" means a periodic payment made in consideration of past services or by way of compensation for injuries received in the course of performance of services.

3. The term "annuity" means a stated sum payable to an individual periodically at stated times during his life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money's worth.

4. Alimony received by a resident of a Contracting State and paid by a resident of the other Contracting State shall be exempt from tax in the first-mentioned State to the extent such payments are not deductible for tax purposes in the other Contracting State.

Article 19 - GOVERNMENT SERVICE - 1. (a) Salaries, wages and other similar remuneration, other than a pension, paid by a Contracting State or a political sub-division or a local authority thereof to an individual in respect of services rendered to that State or sub-division 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 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 sub-division or a local authority thereof to an individual in respect of services rendered to that State or sub-division or authority shall be taxable only in that State.

(b) However, such pension shall be taxable only in the other Contracting State if:

(i) the individual is a resident of, and a national of, that other State; or
(ii) such pension is exempt from tax in the first-mentioned State.

3. The provisions of Articles 15, 16, 17 and 18 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 sub-division or a local authority thereof.

Article 20 : STUDENTS - 1. A student who is or was a resident of one of 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 payments made to him by persons residing outside that other State for the purposes of his maintenance, education or training, and shall in addition be entitled during such education or training to the same exemptions, reliefs, or reductions in respect of taxes available to residents of the State he is visiting.

2. The benefits of this Article shall extend only for such period of time as may be reasonable 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 six consecutive years from the date of his first arrival in that other State.

Article 21 : OFFSHORE ACTIVITIES - 1. The provisions of this Article shall apply notwithstanding any other provision of this Agreement.

2. A person who is a resident of a Contracting State and carries on activities offshore in the other Contracting State in connection with the exploration or exploitation of the seabed or subsoil or their natural resources situated in that other State shall, subject to paragraphs 3 and 4 of this Article, be deemed in relation to those activities to be carrying on business in that other State through a permanent establishment or fixed base situated therein.

3. The provisions of paragraph 2 shall not apply where the activities are carried on for a period not exceeding 30 days in the aggregate in any twelve months period commencing or ending in the fiscal year concerned. However, for the purposes of this paragraph :

(a) where an enterprise of a Contracting State carrying on offshore activities in the other Contracting State is associated with another enterprise carrying on substantially similar offshore activities there, the former enterprise shall be deemed to be carrying on all such activities of the latter enterprise, with the exception of activities which are carried on at the same time as its own activities; and

(b) two enterprises shall be deemed to be associated if one is controlled directly or indirectly by the other, or both are controlled directly or indirectly by a third person or persons;

4. Profits derived by an enterprise of a Contracting State from the transportation of supplies or personnel to or from a location, or between locations, where activities in connection with the exploration or exploitation of the seabed or subsoil or their natural resources are being carried on in the other Contracting State, or from the operation of tugboats and other vessels auxiliary to such activities, shall be taxable only in the Contracting State of which the enterprise is a resident.

Notwithstanding the provisions of this paragraph, profits derived from such operation may also be taxed in the Contracting State in which the operation is carried on; but the tax so charged shall not exceed 50 per cent of the tax otherwise imposed by the domestic law of that State. For the purposes of this paragraph, the amount of such profits subject to tax in India shall not exceed 7.5 per cent of the sums receivable.

5. (a) Subject to sub-paragraph (b) of this paragraph, salaries, wages and similar remuneration derived by a resident of a Contracting State in respect of an employment connected with the exploration or exploitation of the seabed or subsoil" or their natural resources situated in the other Contracting State, to the extent that the duties are performed offshore in that other State, may be taxed in that other State. However, such remuneration shall be taxable only in the first-mentioned State if the employment is carried on offshore for an employer who is not a resident of the other State and provided that the employment is carried on for a period or periods not exceeding in the aggregate 30 days in any twelve-month period commencing or ending in the fiscal year concerned.

(b) Salaries, wages and similar remuneration derived by a resident of a Contracting State in respect of an employment exercised aboard a ship or aircraft engaged in the transportation of supplies or personnel to or from a location, or between locations, where activities connected with the exploration or exploitation of the seabed or subsoil or their natural resources are being carried on in the other Contracting State, or in respect of an employment exercised aboard tugboats or other vessels operated auxiliary to such activities, may be taxed, in the Contracting State of which the enterprise carrying on such activities is a resident.

Article 22 : OTHER INCOME - 1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Agreement shall be taxable only in that State.

2. The provisions 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 a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other State 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 provisions of Article 7 or Article 14, as the case may be, shall apply.

3. Notwithstanding the provisions of paragraphs 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 23 : CAPITAL - 1. Capital represented by immovable property referred to in Article 6, owned by a resident of a Contracting State and situated in the other Contracting State, may be taxed in that other State.

2. Capital represented by 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 by movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, may be taxed in that other State.

3. Capital represented by ships and aircraft operated in international traffic by an enterprise of a Contracting State, and by movable property pertaining to the operation of such ships and aircraft, shall be taxable only in that State.

4. All other elements of capital of a resident of a Contracting State shall be taxable only in that State.

Article 24 : METHODS FOR ELIMINATION OF DOUBLE TAXATION - 1. The laws in force in either of the Contracting States shall continue to govern the taxation of income and capital in the respective Contracting States except where express provisions to the contrary are made in this Agreement.

2. Double taxation shall be eliminated as follows:

(A) In India:

(a) Where a resident of India derives income or owns capital which, in accordance with the provisions of this Agreement, may be taxed in Norway, India shall allow:

(i) as a deduction from the tax on the income of that resident, an amount equal to the income tax paid in Norway on that income;
(ii) as a deduction from the tax on the capital of that resident, an amount equal to the capital tax paid in Norway on that capital;

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

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

(B) In Norway:

(a) Where a resident of Norway derives income or owns elements of capital which, in accordance with the provisions of this Agreement, may be taxed in India, Norway shall allow:

(i) as a deduction from the tax on the income of that resident, an amount equal to the income tax paid in India on that income;
(ii) as a deduction from the tax on the capital of that resident, an amount equal to the capital tax paid in India on elements of capital;

Such deduction in either case shall not, however, exceed that part of the income tax or capital tax as computed before the deduction is given, which is attributable, as the case may be, to the income or the same elements of capital which may be taxed in India.

(b) Where in accordance with any provision of the Agreement, income derived or capital owned by a resident of Norway is exempt from tax in Norway, Norway may nevertheless include such income or capital in the tax base, but shall allow as a deduction from the Norwegian tax on income or capital that part of the income tax or capital tax, as the case may be, which is attributable to the income derived from India or the capital owned in India.

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. This provision shall not be construed as preventing a Contracting State from charging the profits of a permanent establishment which a company of the other Contracting State has in the first mentioned State at a rate of tax which is not more than 10 percentage points higher than that imposed on the profits of a similar company of the first mentioned Contracting State, nor as being in conflict with the provisions of paragraph 3 of Article 7 of this Agreement.

3. Except where the provisions of paragraph 1 of Article 9, paragraph 7 of Article 11, or paragraph 6 of Article 12, 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. Similarly, any debts of an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable capital of such enterprise, be deductible under the same conditions as if they had been contracted to a resident of the first-mentioned State.

4. 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.

5. The provisions of this Article shall, notwithstanding the provisions of Article 2, apply to taxes of every kind and description.

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 endeavour, 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 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 (including documents or certified copies of the documents) as is foreseeably relevant for carrying out the provisions of this 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 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 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 be construed so as to impose on a Contracting State the obligation:

(a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;
(b) to supply information (including documents or certified copies of the documents) 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, 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 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 an agency or a fiduciary capacity or because it relates to ownership interests in a person.

Article 28 : ASSISTANCE IN THE COLLECTION OF TAXES - 1. The Contracting States shall lend assistance to each other in the collection of revenue claims. This assistance is not restricted by Articles 1 and 2. The competent authorities of the Contracting States may by mutual agreement settle the mode of application of this Article.

2. The term "revenue claim" as used in this Article means an amount owed in respect of 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 this Agreement or any other instrument to which the Contracting States are parties, as well as interest, administrative penalties, fine and costs of collection or conservancy related to such amount.

3. When a revenue claim of a Contracting State is enforceable under the laws of that State and is owed by a person who, at that time, cannot, under the laws of that State, prevent its collection, that revenue claim shall, at the request of the competent authority of that State, be accepted for purposes of collection by the competent authority of the other Contracting State. That revenue claim shall be collected by that other State in accordance with the provisions of its laws applicable to the enforcement and collection of its own taxes as if the revenue claim were a revenue claim of that other State.

4. When a revenue claim of a Contracting State is a claim in respect of which that State may, under its law, take measures of conservancy with a view to ensure its collection, that revenue claim shall, at the request of the competent authority of that State, be accepted for purposes of taking measures of conservancy by the competent authority of the other Contracting State. That other State shall take measures of conservancy in respect of that revenue claim in accordance with the provisions of its laws as if the revenue claim were a revenue claim of that other State even if, at the time when such measures are applied, the revenue claim is not enforceable in the first-mentioned State or is owed by a person who has a right to prevent its collection.

5. Notwithstanding the provisions of paragraphs 3 and 4, a revenue claim accepted by a Contracting State for purposes of paragraph 3 or 4 shall not, in that State, be subject to the time limits or accorded any priority applicable to a revenue claim under the laws of that State by reason of its nature as such. In addition, a revenue claim accepted by a Contracting State for the purposes of paragraph 3 or 4 shall not, in that State, have any priority applicable to that revenue claim under the laws of the other Contracting State.

6. Proceedings with respect to the existence, validity or the amount of a revenue claim of a Contracting State shall only be brought before the courts or administrative bodies of that State. Nothing in this Article shall be construed as creating or providing any right to such proceedings before any court or administrative body of the other Contracting State.

7. Where, at any time after a request has been made by a Contracting State under paragraph 3 or 4 and before the other Contracting State has collected and remitted the relevant revenue claim to the first-mentioned State, the relevant revenue claim ceases to be :

(a) in the case of a request under paragraph 3, a revenue claim of the first-mentioned State that is enforceable under the laws of that State and is owed by a person who, at that time, cannot, under the laws of that State, prevent its collection, or
(b) in the case of a request under paragraph 4, a revenue claim of the first-mentioned State in respect of which that State may, under its laws, take measures of conservancy with a view to ensure its collection,

the competent authority of the first-mentioned State shall promptly notify the competent authority of the other State of that fact and, at the option of the other State, the first-mentioned State shall either suspend or withdraw its request.

8. In no case shall the provisions 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 administrative practice of that or of the other Contracting State;
(b) to carry out measures which would be contrary to public policy (ordre public);
(c) to provide assistance if the other Contracting State has not pursued all reasonable measures of collection or conservancy, as the case may be, available under its laws or administrative practice;
(d) to provide assistance in those cases where the administrative burden for that State is clearly disproportionate to the benefit to be derived by the other Contracting State.

Article 29 : LIMITATION OF BENEFITS - Benefits of this Agreement shall not be available to a resident of a Contracting State, or with respect to any transaction undertaken by such a resident, if the main purpose or one of the main purposes of the creation or existence of such a resident or of the transaction undertaken by him, was to obtain the benefits under this Agreement that would not otherwise be available.

Article 30 : MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS - 1. 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.

2. Insofar as, due to fiscal privileges granted to members of diplomatic missions and consular posts under the general rules of international law or under the provisions of special international agreements, income is not subject to tax in the receiving State, the right to tax shall be reserved to the sending State.

Article 31 : 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 India: in respect of income derived or capital owned in any fiscal year beginning on or after the first day of April next following the calendar year in which the Agreement enters into force; and
(b) in Norway: in respect of taxes on income or capital relating to the calendar year (including accounting periods beginning in any such year) next following that in which the Agreement enters into force and subsequent years.

4. The Convention between the Kingdom of Norway and the Republic of India for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income and on capital, signed on 31st December, 1986, shall terminate and cease to have effect in respect of taxes on income and on capital to which the present Agreement applies in accordance with the provisions of paragraph 1 of this Article.

Article 32 : TERMINATION - This Agreement shall remain in force indefinitely until 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 beginning after the expiration of five years from the date of entry into force of the Agreement. In such event, the Agreement shall cease to have effect:

(a) in India, in respect of income derived or capital owned in any fiscal year on or after the first day of April next following the calendar year in which the notice is given;
(b) in Norway: in respect of taxes on income or on capital relating to the calendar year (including accounting periods beginning in such year) next following that in which the notice is given;

IN WITNESS WHEREOF the undersigned, duly authorized thereto, have signed this Agreement.

DONE in duplicate at New Delhi on this Second day of February 2011, each in the Hindi, Norwegian and English languages, all texts being equally authentic. In case of divergence of interpretation, the English text shall prevail.

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