DTC Agreement Between India and Sri Lanka

1/6/2017
IncomeTaxDepartment
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SECTION90OFTHEINCOMETAXACT,1961DOUBLETAXATIONAGREEMENTAGREEMENTFOR
AVOIDANCEOFDOUBLETAXATIONANDPREVENTIONOFFISCALEVASIONWITHFOREIGNCOUNTRIES
SRILANKA
NOTIFICATIONNO.23/2014[F.NO.503/8/2005FTDII]/SO956(E),DATED2832014
Whereas the annexedAgreement between the Government of the Republic of India and the Government of the Democratic
SocialistRepublicofSriLankafortheavoidanceofdoubletaxationandthepreventionoffiscalevasionwithrespecttotaxes
onincome(hereinafterreferredtoasDTAA)signedinIndiaonthe22nddayofJanuary,2013shallenterintoforceonthe22nd
dayofOctober,2013,beingthedateofthelaterofthenotificationsaftercompletionoftheproceduresasrequiredbythelaws
oftherespectivecountriesfortheentryintoforceofDTAA,inaccordancewithArticle30ofthesaidDTAA.
Now, therefore, in exercise of the powers conferred by section 90 of the Incometax Act, 1961 (43 of 1961), the Central
Government hereby notifies that the provisions of DTAA annexed hereto shall be given effect to in the Union of India with
effectfromthe1stdayofApril,2014.
Annexure
AGREEMENTBETWEENTHEGOVERNMENTOFTHEREPUBLICOFINDIAANDTHEGOVERNMENTOF
THEDEMOCRATICSOCIALISTREPUBLICOFSRILANKAFORTHEAVOIDANCEOFDOUBLETAXATION
ANDTHEPREVENTIONOFFISCALEVASIONWITHRESPECTTOTAXESONINCOME
TheGovernmentoftheRepublicofIndiaandtheGovernmentoftheDemocraticSocialistRepublicofSriLanka,desiringto
conclude anAgreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on
incomeandwithaviewtopromotingeconomiccooperationbetweenthetwocountries,haveagreedasfollows:
ARTICLE1
PERSONSCOVERED
ThisAgreementshallapplytopersonswhoareresidentsofoneorbothoftheContractingStates.
ARTICLE2
TAXESCOVERED
1.ThisAgreementshallapplytotaxesonincomeimposedonbehalfofa ContractingStateorofitspoliticalsubdivisionsor
localauthorities,irrespectiveofthemannerinwhichtheyarelevied.
2.Thereshallberegardedastaxesonincomealltaxesimposedontotalincome,oronelementsofincome,includingtaxeson
gains from the alienation of movable or immovable property and taxes on the total amounts of wages or salaries paid by
enterprises.
3.TheexistingtaxestowhichtheAgreementshallapplyareinparticular:
(a)
inIndia:theincometax,includinganysurchargethereon(hereinafterreferredtoas"Indiantax")
(b)
inSriLanka:theincometax,includingtheincometaxbasedontheturnoverofenterpriseslicensedbythe
BoardofInvestment(hereinafterreferredtoas"SriLankatax")
4.TheAgreementshallapplyalsotoanyidenticalorsubstantiallysimilar taxesonincomewhichareimposedafterthedateof
signature of theAgreement in addition to, or in place of, the existing taxes. The CompetentAuthorities of the Contracting
Statesshallnotifyeachotherofanysignificantchangesthathavebeenmadeintheirrespectivetaxationlaws.
ARTICLE3
GENERALDEFINITIONS
1.ForthepurposesofthisAgreement,unlessthecontextotherwiserequires:
(a)
the term "India" means the territory of India and includes the territorial sea and airspace above it, aswell as any
othermaritimezoneinwhichIndiahassovereignrights,otherrightsandjurisdiction,accordingtotheIndianlaw
http://www.incometaxindia.gov.in/_layouts/15/dit/Pages/viewer.aspx?path=http://www.incometaxindia.gov.in/dtaa/comprehensive%20agreements/10869000000
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andinaccordancewithinternationallaw,includingtheU.N.ConventionontheLawoftheSea
(b)
the term "Sri Lanka" means the territory of the Democratic Socialist Republic of Sri Lanka, including its land
territory, internal waters and territorial sea, air space above them as well as the exclusive economic zone and
continental shelf where the Democratic Socialist Republic of Sri Lanka exercises or may hereafter exercise
sovereignrightsandjurisdictioninconformitywithinternationallawanditsnationallegislation
(c)
the terms "Contracting State" and "the other Contracting State" mean the Republic of India or the Democratic
SocialistRepublicofSriLankaasthecontextrequires
(d)
theterm"person"includesanindividual,acompany,abodyofpersonsandanyotherentitywhichistreatedasa
taxableunitunderthetaxationlawsinforceintherespectiveContractingStates
(e)
theterm"company"meansanybodycorporateoranyentitythatistreatedasabodycorporatefortaxpurposes
(f)
theterm"enterprise"appliestothecarryingonofanybusiness
(g)
theterms"enterpriseofaContractingState"and"enterpriseoftheotherContractingState"mean respectively an
enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other
ContractingState
(h)
theterm"internationaltraffic"meansanytransportbyashiporaircraftoperatedbyanenterpriseofaContracting
State,exceptwhentheshiporaircraftisoperatedsolelybetweenplacesintheotherContractingState
(i)
theterm"competentauthority"means:
(i)
in India: The Finance Minister, Government of India, or his authorized

representative
(ii)
inSriLanka:TheCommissionerGeneralofInlandRevenue
(j)
theterm"national"means:(i)anyindividualpossessingthenationalityofaContractingState
(ii)anylegalperson,partnershiporassociationderivingitsstatusassuchfromthelawsinforce
inaContractingState
(k)
theterm"tax"meansIndiantaxorSriLankatax,asthecontextrequires,butshallnotinclude
anyamountwhichispayableinrespectofanydefaultoromission in relation to the taxes to
whichthisAgreementappliesorwhich representsapenaltyorfineimposedrelatingtothose
taxes
(l)
theterm"fiscalyear"means:
(i)
in the case of India: the financial year

beginningonthe1stdayofApril
(ii)
inthecaseofSriLanka:theassessment
yearbeginningonthe1stdayofApril.
2.AsregardstheapplicationoftheAgreementatanytimebyaContracting Stateanytermnotdefinedthereinshall,unlessthe
contextotherwiserequires,havethemeaningthatithasatthattimeunderthelawofthatStateforthepurposesofthetaxesto
whichtheAgreementappliesandanymeaningunder theapplicabletaxlawsofthatStateprevailingoverameaninggivento
thetermunderotherlawsofthatState.
ARTICLE4
RESIDENT
1.ForthepurposesofthisAgreement,theterm"residentofaContractingState"meansanypersonwho,underthelawsofthat
State, is liable to tax therein by reason of his domicile, residence, place ofincorporation, place of management or any other
criterion of a similar nature and also includes that State and any political subdivision or local authority thereof. This term,
however,doesnotincludeanypersonwhoisliabletotaxinthatStateinrespectonlyofincomefromsourcesinthatState.
2.Wherebyreasonoftheprovisionsofparagraph1anindividualisaresidentofbothContractingStates,thenhisstatusshall
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bedeterminedasfollows:
1.(a)
heshallbedeemedtobearesidentonlyoftheStateinwhichhehasapermanenthomeavailabletohim
ifhehasapermanenthomeavailabletohiminbothStates,heshallbedeemedtobearesidentonlyofthe
Statewithwhichhispersonalandeconomicrelationsarecloser(centreofvitalinterests)
(b)
iftheStateinwhichhehashiscentreofvitalinterestscannotbedetermined,orifhehasnotapermanent
homeavailabletohimineitherState,heshallbedeemedtobearesidentonlyoftheStateinwhichhehas
anhabitualabode
(c)
ifhehasanhabitualabodeinbothStatesorinneitherofthem,heshallbedeemedtobearesidentonlyof
theStateofwhichheisanational
(d)
ifheisanationalofbothStatesorofneitherofthem,thecompetentauthoritiesoftheContractingStates
shallsettlethequestionbymutualagreement.
3.Wherebyreasonoftheprovisionsofparagraph1,apersonotherthananindividualisaresidentofbothContractingStates,
thenitshallbedeemedtobearesidentonlyoftheStateinwhichitsplaceofeffectivemanagementissituated.IftheStatein
which its place of effective management is situated cannot be determined, then the competent authorities of the Contracting
Statesshallsettlethequestionbymutualagreement.
ARTICLE5
PERMANENTESTABLISHMENT
1.ForthepurposesofthisAgreement,theterm"permanentestablishment" meansafixedplaceofbusinessthroughwhichthe
businessofanenterpriseiswhollyorpartlycarriedon.
2.Theterm"permanentestablishment"includesespecially:
(a)
aplaceofmanagement
(b)
abranch
(c)
anoffice
(d)
afactory
(e)
aworkshop
(f)
amine,anoilorgaswell,aquarryoranyotherplaceofextractionofnaturalresources
(g)
afarm,plantationorotherplacewhereagricultural,forestry,plantationorrelatedactivitiesarecarriedon
(h)
asalesoutlet
(i)
awarehouseinrelationtoapersonprovidingstoragefacilitiesforothers.
3.(a)Abuildingsite or construction, installationor assembly projectoradrilling rig orsupervisory activitiesinconnection

therewithconstitutesapermanentestablishmentonlyifsuchsite,projectoractivitieslastmorethan183days.
(b)Thefurnishingofservices,includingconsultancyservices,byanenterprisethroughemployeesorotherpersonnelengaged
bytheenterpriseforsuchpurposeconstitutesaPermanentEstablishment,butonlywhereactivitiesofthatnaturecontinue(for
thesameorconnectedproject)withintheContractingStateforaperiodorperiodsaggregatingmorethan90dayswithinany
12monthperiod.
4.NotwithstandingtheprecedingprovisionsofthisArticletheterm"permanentestablishment"shallbedeemednottoinclude:
(a)
theuseoffacilitiessolelyforthepurposeofstorageordisplayofgoodsormerchandisebelongingtothe
enterprise
(b)
themaintenanceofastockofgoodsormerchandisebelongingtotheenterprisesolelyforthepurposeof
storageordisplay
(c)
themaintenanceofastockofgoodsormerchandisebelongingtotheenterprisesolelyforthepurposeof
processingbyanotherenterprise
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(d)
themaintenanceofafixedplaceofbusinesssolelyforthepurposeofpurchasinggoodsormerchandiseor
ofcollectinginformation,fortheenterprise
(e)
themaintenanceofafixedplaceofbusinesssolelyforthepurposeofcarryingon,fortheenterprise,any
otheractivityofapreparatoryorauxiliarycharacter
(f)
the maintenance of a fixed place of business solely for any combination of activities mentioned in
subparagraphs(a)to(e),providedthattheoverallactivityofthefixedplaceofbusinessresultingfromthis
combinationisofapreparatoryorauxiliarycharacter.
5.Notwithstandingtheprovisionsofparagraphs1and2,whereapersonotherthananagentofanindependentstatustowhom
paragraph7appliesisactinginaContractingStateonbehalfofanenterpriseoftheotherContractingState,thatenterprise
shallbedeemedtohaveapermanentestablishmentinthefirstmentionedContractingStateinrespectofanyactivitieswhich
thatpersonundertakesfortheenterprise,ifsuchaperson:
(a)
hasandhabituallyexercisesinthatStateanauthoritytoconcludecontractsinthenameoftheenterprise,
unless the activities of such person are limited to those mentioned in paragraph 4 which, if exercised
throughafixedplaceofbusiness,wouldnotmakethisfixedplaceofbusinessapermanentestablishment
undertheprovisionsofthatparagraph,or
(b)
has no such authority, but habitually maintains in the firstmentioned State a stock of goods or
merchandisefromwhichheregularlydeliversgoodsormerchandiseonbehalfoftheenterprise
(c)
habituallysecuresordersinthefirstmentionedState,whollyoralmostwhollyfortheenterpriseorforthe
enterprise and other enterprises which are controlling , controlled by , or subject to the same common
controlasthatenterprise.
6. Notwithstanding the preceding provisions of this Article, an insurance enterprise of a Contracting State shall, except in
regardtoreinsurance,bedeemedtohaveapermanentestablishmentintheotherContractingStateifitcollectspremiumsin
theterritoryofthatotherStateorinsuresriskssituatedthereinthroughapersonotherthananagentofanindependentstatusto
whomparagraph7applies.
7.An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on
businessinthatStatethroughabroker,generalcommissionagentoranyotheragentofanindependentstatus,providedthat
such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted
whollyoralmostwhollyonbehalfofthatenterprise,heshallnotbeconsideredanagentofanindependentstatuswithinthe
meaningofthisparagraph.
8.ThefactthatacompanywhichisaresidentofaContractingStatecontrolsoriscontrolledbyacompanywhichisaresident
oftheotherContractingStateorwhichcarriesonbusinessinthatotherState(whetherthroughapermanentestablishmentor
otherwise),shallnotofitselfconstituteeithercompanyapermanentestablishmentoftheother.
ARTICLE6
INCOMEFROMIMMOVABLEPROPERTY
1.IncomederivedbyaresidentofaContractingStatefromimmovablepropertysituatedintheotherContractingStatemaybe
taxedinthatotherContractingState.
2.The term "immovable property" shall have the meaning which it has under the law of the Contracting State in which the
property in question is situated.The term shall in any case include property accessory to immovable property, livestock and
equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply,
usufruct of immovable property and 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, boats and aircraft shall not be regarded as immovable
property.
3.Theprovisionsofparagraph1ofthisarticleshallapplytoincomederivedfromthedirectuse,letting,oruseinany.other
formofimmovableproperty.
4.Theprovisionsofparagraphs1and3ofthisarticleshallalsoapplytotheincomefromimmovablepropertyofanenterprise
andtoincomefromimmovablepropertyusedfortheperformanceofindependentpersonalservices.
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ARTICLE7
BUSINESSPROFITS
1.TheprofitsofanenterpriseofaContractingStateshallbetaxableonlyinthatStateunlesstheenterprisecarriesonbusiness
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
permanentestablishment.
2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other
ContractingStatethroughapermanentestablishmentsituatedtherein,thereshallineachContractingStatebeattributedtothat
permanentestablishmenttheprofitswhichitmightbeexpectedtomakeifitwereadistinctandseparateenterpriseengagedin
the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of
whichitisapermanentestablishment.
3.Indeterminingtheprofitsofapermanentestablishment,thereshallbeallowedasdeductionsexpenseswhichareincurredfor
thepurposesofthepermanentestablishment,includingexecutiveandgeneraladministrativeexpensessoincurred,whetherin
theStateinwhichthepermanentestablishmentissituatedorelsewhere,inaccordancewiththeprovisionsofandsubjecttothe
limitations of the tax laws of that State. However, no such deduction shall be allowed in respect of amounts, if any, paid
(otherwisethantowardsreimbursementofactualexpenses)bythepermanentestablishmenttotheheadofficeoftheenterprise
oranyofitsotheroffices,bywayofroyalties,feesorothersimilarpaymentsinreturnfortheuseofpatents,Knowhowor
otherrights,orbywayofcommissionorotherchargesforspecificservicesperformedorformanagement,or,exceptinthecase
ofbankingenterprises,bywayofinterestonmoneyslenttothepermanentestablishment.Likewise,noaccountshallbetaken,
inthedeterminationoftheprofitsofapermanentestablishment,foramountscharged(otherwisethantowardreimbursementof
actual expenses), by the permanent establishment to the head office of the enterprise or any of its other offices, by way of
royalties,feesorothersimilarpaymentsinreturnfortheuseofpatents,knowhoworotherrights,orbywayofcommissionor
other charges for specific services performed or for management, or, except in the case of a banking enterprise, by way of
interestonmoneyslenttotheheadofficeoftheenterpriseoranyofitsotheroffices.
4.InsofarasithasbeencustomaryinaContractingStatetodeterminetheprofitstobeattributedtoapermanentestablishment
onthebasisofanapportionmentofthetotalprofitsoftheenterprisetoitsvariousparts,nothinginparagraph2shallpreclude
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.Noprofitsshallbeattributedtoapermanentestablishmentbyreasonofthemerepurchasebythatpermanentestablishment
ofgoodsormerchandisefortheenterprise.
6.Forthepurposesoftheprecedingparagraphs,theprofitstobeattributedtothepermanentestablishmentshallbedetermined
bythesamemethodyearbyyearunlessthereisgoodandsufficientreasontothecontrary.
7. Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the
provisionsofthoseArticlesshallnotbeaffectedbytheprovisionsofthisArticle.
ARTICLE8
SHIPPINGANDAIRTRANSPORT
1.ProfitsderivedbyanenterpriseofaContractingStatefromtheoperationofaircraftininternationaltrafficshallbetaxable
onlyinthatState.
2. Profits derived in a Contracting State by an enterprise of the other Contracting State from the operation of ships in
internationaltrafficmaybetaxedinthefirstmentionedState,butthetaxsochargedshallbereducedbyanamountequalto50
percentthereof.
3.Iftheplaceofeffectivemanagementofashippingenterpriseisaboardaship,thenitshallbedeemedtobesituatedinthe
ContractingStateinwhichthehomeharbouroftheshipissituated,or,ifthere is no such home harbour, in the Contracting
Stateofwhichtheoperatoroftheshipisaresident.
4.ProfitsderivedbyatransportationenterprisewhichisaresidentofaContractingStatefromtheuse,maintenance,orrentalof
containers (including trailers and other. equipment for the transport of containers) used for the transport of goods or
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merchandiseininternationaltrafficwhichisincidentaltoitsinternationaloperationsofaircraftsorshipsshallberegardedas
profitsderivedfromtheoperationofsuchaircraftsorshipsininternationaltrafficandwouldbetaxedsubjecttotheprovisions
ofparagraph1and2respectively,unlessthecontainersareusedsolelywithintheothercontractingState.
5. For the purposes of this Article interest on investments directly connected with the operation of ships or aircraft in
internationaltrafficshallberegardedasprofitsderivedfromtheoperationofsuchshipsoraircraftiftheyareintegraltothe
carryingonofsuchbusiness,andtheprovisionsofArticle11shallnotapplyinrelationtosuchinterest.
6.Theprovisionsofparagraph1shallalsoapplytoprofitsfromtheparticipationinapool,ajointbusinessoraninternational
operatingagency.
ARTICLE9
ASSOCIATEDENTERPRISES
1.Where
(a)
anenterpriseofaContractingStateparticipatesdirectlyorindirectlyinthemanagement,controlorcapital
ofanenterpriseoftheotherContractingState,or
(b)
thesamepersonsparticipatedirectlyorindirectlyinthemanagementcontrolorcapitalofanenterpriseof
aContractingStateandanenterpriseoftheotherContractingState,
andineithercaseconditionsaremadeorimposedbetweenthetwoenterprisesirtheircommercialorfinancialrelationswhich
differ from those which would be made between independent enterprises, then any profits which would, but for those
conditions,haveaccruedtooneoftheenterprises,but,byreasonofthoseconditions,havenotsoaccrued,maybeincludedin
theprofitsofthatenterpriseandtaxedaccordingly.
2.WhereaContractingStateincludesintheprofitsofanenterpriseofthatStateandtaxesaccordinglyprofitsonwhichan
enterpriseoftheotherContractingStatehasbeenchargedtotaxinthatotherStateandtheprofitssoincludedareprofitswhich
wouldhaveaccruedtotheenterpriseofthefirstmentionedStateiftheconditionsmadebetweenthetwoenterpriseshadbeen
thosewhichwouldhavebeenmadebetweenindependententerprises,thenthatotherStateshallmakeanappropriateadjustment
totheamountofthetaxchargedthereinonthoseprofits.Indeterminingsuchadjustment,dueregardshallbehadtotheother
provisionsofthisAgreementandthecompetentauthoritiesoftheContractingStatesshallifnecessaryconsulteachother.
ARTICLE10
DIVIDENDS
1.DividendspaidbyacompanywhichisaresidentofaContractingStatetoaresidentoftheotherContractingStatemaybe
taxedinthatotherState.
2.However,suchdividendsmayalsobetaxedintheContractingStateofwhichthecompanypayingthedividendsisaresident
andaccordingtothelawsofthatState,butifthebeneficialownerofthedividendsisaresidentoftheotherContractingState,
thetaxsochargedshallnotexceed7.5percentofthegrossamountofthedividends.Theprovisionsofthisparagraphshallnot
affectthetaxationofthecompanyinrespectoftheprofitsoutofwhichthedividendsarepaid.
3.Theterm"dividends"asusedinthisArticlemeansincomefromsharesorotherrights,notbeingdebtclaims,participatingin
profits,aswellasincomefromothercorporaterightswhichissubjectedtothesametaxationtreatmentasincomefromshares
bythelawsoftheStateofwhichthecompanymakingthedistributionisaresident.
4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a
ContractingState,carriesonbusinessintheotherContractingStateofwhichthecompanypayingthedividendsisaresident,
throughapermanentestablishmentsituatedtherein,orperformsinthatotherStateindependentpersonalservicesfromafixed
basesituatedtherein,andtheholdinginrespectofwhichthedividendsarepaidiseffectivelyconnectedwithsuchpermanent
establishmentorfixedbase.InsuchcasetheprovisionsofArticle7orArticle14,asthecasemaybe,shallapply.
5.WhereacompanywhichisaresidentofaContractingStatederivesprofitsorincomefromtheotherContractingState,that
other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a
residentofthatotherStateorinsofarastheholdinginrespectofwhichthedividendsarepaidiseffectivelyconnectedwitha
permanentestablishmentorafixedbasesituatedinthatotherState,norsubjectthecompany'sundistributedprofitstoataxon
thecompany'sundistributedprofits,evenifthedividendspaidortheundistributedprofitsconsistwhollyorpartlyofprofitsor
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incomearisinginsuchotherState.
ARTICLE11
INTEREST
1.InterestarisinginaContractingStateandpaidtoaresidentoftheotherContractingStatemaybetaxedinthatotherState.
2.However,suchinterestmayalsobetaxedintheContractingStateinwhichitarises,andaccordingtothelawsofthatState,
butifthebeneficialowneroftheinterestisaresidentoftheotherContractingState,thetaxsochargedshallnotexceed10per
centofthegrossamountoftheinterest.
3.Notwithstandingtheprovisionsofparagraph2,interestarisinginaContractingStateshallbeexemptfromtaxinthatState,
providedthatitisderivedandbeneficiallyownedby:
(a)
theGovernment,apoliticalsubdivisionoralocalauthorityoftheotherContractingStateor
(b)
(i)inthecaseofIndia,theReserveBankofIndia,theExportImportbankofIndia,theNationalHousing
Bankand

(c)
(ii)inthecaseofSriLanka,theCentralBankofSriLankaor
any other institution the capital of which is wholly owned by the Government of that State, as may be
agreed upon from time to time between the Competent authorities of the Contracting States through
exchangeofletters.
4.Theterm"interest"asusedinthisArticlemeansincomefromdebtclaimsofeverykind,whetherornotsecuredbymortgage
andwhetherornotcarryingarighttoparticipateinthedebtor'sprofits,andinparticular,incomefromgovernmentsecurities
and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures.
PenaltychargesforlatepaymentshallnotberegardedasinterestforthepurposeofthisArticle.
5.Theprovisionsofparagraphs1and2shallnotapplyifthebeneficialowneroftheinterest,beingaresidentofaContracting
State,carriesonbusinessintheotherContractingStateinwhichtheinterestarises,throughapermanentestablishmentsituated
therein,orperformsinthatotherStateindependentpersonalservicesfromafixedbasesituatedtherein,andthedebtclaimin
respectofwhichtheinterestispaidiseffectivelyconnectedwithsuchpermanentestablishmentorfixedbase.Insuchcasethe
provisionsofArticle7orArticle14,asthecasemaybe,shallapply.
6.InterestshallbedeemedtoariseinaContractingStatewhenthepayerisaresidentofthatState.Where,however,theperson
payingtheinterest,whetherheisaresidentofaContractingStateornot,hasinaContractingStateapermanentestablishment
orafixedbaseinconnectionwithwhichtheindebtednessonwhichtheinterestispaidwasincurred,andsuchinterestisborne
bysuchpermanentestablishmentorfixedbase,then,suchinterestshallbedeemedtoariseintheStateinwhichthepermanent
establishmentorfixedbaseissituated.
7.Where,byreasonofaspecialrelationshipbetweenthepayerandthe beneficialownerorbetweenbothofthemandsome
otherperson,theamountoftheinteresthavingregardtothedebtclaimforwhichitispaid,exceedstheamountwhichwould
havebeenagreeduponbythepayerandthebeneficialownerintheabsenceofsuchrelationship,theprovisionsofthisArticle
shallapplyonlytothelastmentionedamount.Insuchcase,theexcesspartofthepaymentsshallremaintaxableaccordingto
thelawsofeachContractingState,dueregardbeinghadtotheotherprovisionsofthisAgreement.
ARTICLE12
ROYALTIESANDFEESFORTECHNICALSERVICES
1.RoyaltiesorfeesfortechnicalservicesarisinginaContractingStateandpaidtoresidentoftheotherContractingStatemay
betaxedinthatotherState.
2.However,suchroyaltiesorfeesfortechnicalservicesmayalsobetaxedintheContracting Stateinwhich they arise, and
accordingtothelawsofthatState,butifthebeneficialowneroftheroyaltiesorfeesfortechnicalservicesisaresidentofthe
otherContractingStatethetaxsochargedshallnotexceed10percentofthegrossamountoftheroyaltiesorfeesfortechnical
services.
3.(a)Theterm"royalties"asusedinthisArticlemeanspaymentsofanykindreceivedasaconsiderationfortheuseof,orthe
righttouse,anycopyrightofliterary,artisticorscientificworkincludingcinematographfilmsorfilmsortapsordiscsusedfor
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televisionorradiobroadcasting,anypatent,trademark,designormodel,plan,secretformulaorprocess,orfortheuseof,or
therighttousindustrial,commercialorscientificequipment,orforinformationconcerningindustrial,commercialorscientific
experience.
(b)Theterm"feesfortechnicalservices"asusedinthisArticlemeanspaymentsofanykind, otherthanthosementionedin
Articles 14 and 15 of this Agreement as consideration for managerial or technical or consultancy services, including the
provisionofservicesoftechnicalorotherpersonnel.
4.Theprovisionsofparagraph1and2shallnotapplyifthebeneficialowneroftheroyaltiesorfeesfortechnicalservicesbeing
aresidentofaContractingState,carriesonbusinessintheotherContractingStateinwhichtheroyaltiesorfeesfortechnical
servicesarise,throughapermanentestablishmentsituatedtherein,orperformsinthatotherStateindependentpersonalservices
fromafixedbasesituatedtherein,andtherightorpropertyinrespectofwhichtheroyaltiesorfeesfortechnicalservicesare
paid is effectively connected with such permanent establishment or fixed base. In such case the provisions ofArticle 7 or
Article14,asthecasemaybe,shallapply.
5.(a)RoyaltiesandfeesfortechnicalservicesshallbedeemedtoariseinaContractingStatewhenthepayeristhatStateitself,
apoliticalsubdivision,alocalauthority,oraresidentofthatState.Where,however,thepersonpayingtheroyaltiesorfeesfor
technicalservices,whetherheisaresidentofaContractingStateornothasinaContractingStateapermanentestablishmentor
a fixed base in connection with which the liability to pay the royalties or fees for technical services was incurred, and such
royaltiesorfeesfortechnicalservicesarebornbysuchpermanentestablishmentorfixedbase,thensuchroyaltiesorfeesfor
technical services shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is
situated.
(b)Whereundersubparagraph(a)royaltiesorfeesfortechnicalservicesdonotariseinoneoftheContractingStates,andthe
royalties relate to the use of or the right to use, the right or property, or the fees for technical services relate to services
performed, in one of the Contracting States, the royalties or fees for technical services shall be deemed to arise in that
ContractingState.
6.Where,byreasonofaspecialrelationshipbetweenthepayerandthe beneficialownerorbetweenbothofthemandsome
otherperson,theamountoftheroyaltiesorfeesfortechnicalservices,havingregardtotheuse,rightorinformationforwhich
theyarepaid,exceedstheamountwhichwouldhavebeenagreeduponbythepayerandthebeneficialownerintheabsenceof
suchrelationship,theprovisionsofthisArticleshallapplyonlytothelastmentionedamount.Insuchcase,theexcesspart of
thepaymentsshallremaintaxableaccordingtothelawsofeachContractingState,dueregardbeinghadtotheotherprovisions
ofthisAgreement.
ARTICLE13
CAPITALGAINS
1.GainsderivedbyaresidentofaContractingStatefromthealienationofimmovablepropertyreferredtoinparagraph2of
Article6andsituatedintheotherContractingStatemaybetaxedinthatotherState.
2.Gainsfromthealienationofmovablepropertyformingpartofthebusinesspropertyofapermanentestablishmentwhichan
enterpriseofaContractingStatehasintheotherContractingStateorofmovablepropertypertainingtoafixedbaseavailableto
aresidentofaContractingStateintheotherContracting State for the purpose of performing independent personal services,
includingsuchgainsfromthealienationofsuchapermanentestablishment(aloneorwiththewholeenterprise)orofsuchfixed
base,maybetaxedinthatotherState.
3.Gainsfromthealienationofshipsoraircraftoperatedininternationaltraffic,ormovablepropertypertainingtotheoperation
ofsuchshipsoraircraftshallbetaxableonlyintheContractingStateofwhichthealienatorisaresident.
4.Gainsfromthealienationofsharesofthecapitalstockofacompanythe propertyofwhich consistsdirectlyorindirectly
principallyofimmovablepropertysituatedinaContractingStatemaybetaxedinthatState.
5. Gains from the alienation of shares other than those mentioned in paragraph 4 in a company which is a resident of a
ContractingStatemaybetaxedinthatState.
6.Gainsfromthealienationofanypropertyotherthanthatreferredtoinparagraphs1,2,3,4and5shallbetaxableonlyinthe
ContractingStateofwhichthealienatorisaresident.
ARTICLE14
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INDEPENDENTPERSONALSERVICES
1.IncomederivedbyanindividualwhoisaresidentofaContractingStatefromtheperformanceofprofessionalservicesor
otherindependentactivitiesofasimilarcharactershallbetaxableonlyinthatStateexceptinthefollowingcircumstanceswhen
suchincomemayalsobetaxedintheotherContractingState:
(a)
if he has a fixed base regularly available to him in the other Contracting State for the purpose of
performinghisactivitiesinthatcase,onlysomuchoftheincomeasisattributabletothatfixedbasemay
betaxedinthatotherStateor
(b)
if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the
aggregate183daysinany twelve monthperiod commencing orending in the fiscal year concerned in
thatcase,onlysomuchoftheincomeasisderivedfromhisactivitiesperformedinthatotherStatemay
betaxedinthatotherState.
2.Theterm"professionalservices"includesespeciallyindependentscientific,literary,artistic,educationalorteachingactivities
aswellastheindependentactivitiesofphysicians,lawyers,engineers,architects,surgeons,dentistsandaccountants.
ARTICLE15
DEPENDENTPERSONALSERVICES
1. Subject to the provisions of Articles 16, 18,19, 20 and 21, 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
exercisedintheotherContractingState.Iftheemploymentissoexercised,suchremunerationasisderivedtherefrommaybe
taxedinthatotherState.
2.Notwithstandingtheprovisionsofparagraph1,remunerationderivedbyaresidentofaContractingState in respect of an
employmentexercisedintheotherContractingStateshallbetaxableonlyinthefirstmentionedStateif:
(a)
the recipient is present in that other Contracting State for a period or periods not exceeding in the
aggregate183daysinanytwelvemonthperiodcommencingorendinginthefiscalyearconcerned,and
(b)
theremunerationispaidby,oronbehalfof,anemployerwhoisnotaresidentofthatotherContracting
State,and
(c)
theremunerationisnotbornebyapermanentestablishmentorafixedbasewhichtheemployerhasinthat
otherContractingState.
3.NotwithstandingtheprecedingprovisionsofthisArticle,remunerationderivedinrespectofanemploymentexercisedaboard
ashiporaircraftoperatedininternationaltraffic,byanenterpriseofaContractingStatemaybetaxedinthatState.
ARTICLE16
DIRECTORS'FEES
Directors'feesandothersimilarpaymentsderivedbyaresidentofaContractingStateinhiscapacityasamemberoftheboard
ofdirectorsofacompanywhichisaresidentoftheotherContractingStatemaybetaxedinthatotherState.
ARTICLE17
ARTISTESANDSPORTSPERSONS
1.NotwithstandingtheprovisionsofArticles14and15,incomederivedbyaresidentofaContractingStateasanartiste,such
asatheatre,motionpicture,radioortelevisionartiste,oramusician,orasasportsperson,fromhispersonalactivitiesassuch
exercisedintheotherContractingState,maybetaxedinthatotherState.
2.Whereincomeinrespectofpersonalactivitiesexercisedbyanartisteorasportspersoninhiscapacityassuchaccruesnotto
theartisteorsportspersonhimselfbuttoanotherperson,thatincomemay,notwithstandingtheprovisionsofArticles7,14and
15,betaxedintheContractingStateinwhichtheactivitiesoftheartistesorsportspersonareexercised.
3.Theprovisionsofparagraphs1and2,shallnotapplytoincomefromactivitiesperformedinaContractingStatebyartistesor
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sportspersonsiftheactivitiesaresubstantiallysupportedbypublicfundsofoneorbothoftheContractingStatesorofpolitical
subdivisionsorlocalauthoritiesthereof.Insuchacase,theincomeshallbetaxableonlyintheContractingStateofwhichthe
artistorsportspersonisaresident.
ARTICLE18
PENSIONSANDANNUITIES
1.Subjecttotheprovisionsofparagraph2ofArticle19,pensionsand othersimilarremunerationandanyannuitiespaidtoa
residentofaContractingStateinconsiderationofpastemploymentandanyannuity paid to such a resident shall be taxable
onlyinthatState.
2.Theterm"annuity"meansastatedsumpayableperiodicallyatstatedtimesduringlifeorduringaspecifiedorascertainable
period of time under an obligation to make the payments in return for adequate and full consideration in money or money's
worth.
ARTICLE19
GOVERNMENTSERVICE
1.(a)Salaries,wagesandothersimilarremuneration,otherthanapension,paidbyContractingStateorapoliticalsubdivision
or a local authority thereof to an individual in respect of services rendered tothat State or subdivision or authority shall be
taxableonlyinthatState.
(b)However, such salaries, wages and other similar remuneration shall be taxable only in the other Contracting State if the
servicesarerenderedinthatStateandtheindividualisaresidentofthatStatewho:
(i)
isanationalofthatStateor
(ii)
didnotbecomearesidentofthatStatesolelyforthepurposeofrenderingtheservices.
2.(a)Anypensionpaidby,oroutoffundscreatedby,aContractingStateorapoliticalsubdivisionoralocalauthoritythereof
toanindividualinrespectofservicesrenderedtothatStateorsubdivisionorauthorityshallbetaxableonlyinthatState.
(b)However,suchpensionshallbetaxableonlyintheotherContractingStateiftheindividualisaresidentof,andanational
of,thatState.
3.TheprovisionsofArticles15,16,17and18shallapplytosalaries, wagesandothersimilarremunerationandtopensionsin
respectofservicesrenderedinconnectionwithabusinesscarriedonbyaContractingStateorapoliticalsubdivisionoralocal
authoritythereof.
4. For the purpose of this Article, the term "Government" shall include any State Government or local authority of either
ContractingState.
ARTICLE20
PROFESSORS,TEACHERSANDRESEARCHSCHOLARS
1.Aprofessor,teacherorresearchscholarwhoisorwasaresidentof aContractingStateimmediatelybeforevisitingtheother
ContractingStateforthepurposeofteachingorengaginginresearch,orboth,atauniversity,collegeorothersimilarapproved
institutioninthatotherContractingStateshallbeexemptfromtaxinthatotherContractingStateonanyremunerationforsuch
teachingorresearchforaperiodnotexceedingtwoyearsfromthedateofhisfirstarrivalinthatotherContractingState.
2.ForthepurposesofthisArticle,anindividualshallbedeemedtobearesidentofaContractingStateifheisresidentinthat
ContractingStateinthefiscalyearinwhichhevisitstheotherContractingStateorintheimmediatelyprecedingfiscalyear.
3.Forthepurposesofparagraph1"approvedinstitution"meansaninstitutionwhichhasbeenapprovedinthisregardbythe
GovernmentoftheconcernedContractingState.
ARTICLE21
STUDENTS
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1.AstudentwhoisorwasaresidentofoneoftheContractingStates immediatelybeforevisitingtheotherContractingState
and who is present in that other Contracting State solely for the purpose of his education or training shall, besides grants,
scholarships and any payments received from sources outside that State for the purpose of his maintenance, education or
training, be exempt from tax in that other Contracting State on remuneration which he derives from an employment which
he/sheexercisesintheotherContractingStateiftheemploymentisdirectlyrelatedtohisstudies.
2.Theexemptionavailableunderparagraph1aboveinrespectofremunerationfromemploymentshallnotexceedanamount
equaltoUS$3000/perannum.
3. The benefits of this Article shall extend only for such period of time as may be reasonable or customarily required to
completetheeducationortrainingundertaken,butinnoeventshallanyindividualhavethebenefitsofthisArticleformore
thansixconsecutiveyearsfromthedateofhisfirstarrival,forthepurposeofhiseducationortraininginthatotherContracting
State.
ARTICLE22
OTHERINCOME
1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this
AgreementshallbetaxableonlyinthatState.
2.Theprovisionsofparagraph1shallnotapplytoincome,otherthanincomefromimmovablepropertyasdefinedinparagraph
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
connectedwithsuchpermanentestablishmentorfixedbase.InsuchcasetheprovisionsofArticle7 orArticle14,asthecase
maybe,shallapply.
3.Notwithstandingtheprovisionsofparagraphs1and2,itemsofincomeofaresidentofaContractingStatenotdealtwithin
theforegoingarticlesofthisConventionandarisingintheotherContractingStatemayalsobetaxedinthatotherState.
ARTICLE23
METHODSFORELIMINATIONOFDOUBLETAXATION
1. The laws in force in either of the Contracting States shall continue to govern the taxation of income in the respective
ContractingStatesexceptwhenanyprovisiontothecontraryismadeinthisAgreement.Whenincomeissubjecttotaxinboth
ContractingStates,relieffromdoubletaxationshallbegiveninaccordancewiththefollowingparagraphsofthisArticle.
2.InIndia:
(a)
Where a resident of India derives income which, in accordance with the provisions of thisAgreement,
maybetaxedinSriLanka,Indiashallallowasadeductionfromthetaxontheincomeofthatresident,an
amountequaltothetaxpaidinSriLanka.
Such deduction shall not, however, exceed that portion of the tax as computed before the deduction is
given,whichisattributable,asthecasemaybe,totheincomewhichmaybetaxedinSriLanka.
(b)
Where in accordance with any provision of the Agreement income derived by a resident of India is
exempt from tax in India, India may nevertheless, in calculating the amount of tax on the remaining
incomeofsuchresident,takeintoaccounttheexemptedincome.
3.InSriLanka:
(a)
Where a resident of Sri Lanka derives income which, in accordance with the provisions of this
Agreement,maybetaxedinIndia,SriLankashallallowasadeductionfromthetaxontheincomeofthat
resident,anamountequaltothetaxpaidinIndia.
Such deduction shall not, however, exceed that portion of the tax as computed before the deduction is
given,whichisattributable,asthecasemaybe,totheincomewhichmaybetaxedinIndia.
(b)
WhereinaccordancewithanyprovisionoftheAgreement,incomederivedbya residentofSriLankais
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exempt from tax in Sri Lanka, Sri Lanka may nevertheless, in calculating the amount of tax on the
remainingincomeofsuchresident,takeintoaccounttheexemptedincome.
ARTICLE24
NONDISCRIMINATION
1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement
connectedtherewith,whichisotherormoreburdensomethanthetaxationandconnectedrequirementstowhichnationalsof
thatotherStateinthesamecircumstances,inparticularwithrespecttoresidence,areormaybesubjected.Thisprovisionshall,
notwithstandingtheprovisionsofArticle1,alsoapplytopersonswhoarenotresidentsofoneorbothoftheContractingStates.
2.ThetaxationonapermanentestablishmentwhichanenterpriseofaContractingStatehasintheotherContractingStateshall
notbelessfavourablyleviedinthatotherStatethanthetaxationleviedonenterprisesofthatotherStatecarryingonthesame
activities.Thisprovisionshallnotbeconstrued asobliging a Contracting State to grant to residents of the other Contracting
Stateanypersonalallowances,reliefsandreductionsfortaxationpurposesonaccountofcivilstatusorfamilyresponsibilities
whichitgrantstoitsownresidents.ThisprovisionshallnotbeconstruedaspreventingaContractingStatefromchargingthe
profitsofapermanentestablishmentwhichacompanyoftheotherContractingStatehasinthefirstmentionedStateatarateof
taxwhichishigherthanthatimposedontheprofitsofasimilarcompanyofthefirstmentionedContractingState,norasbeing
inconflictwiththeprovisionsofparagraph3ofArticle7.
3. Except where the provisions of paragraph 1 ofArticle 9, paragraph 7 ofArticle 11, or paragraph 6 of Article 12, apply,
interest,royaltiesandotherdisbursementspaidbyanenterpriseofaContractingStatetoaresidentoftheotherContracting
Stateshall,forthepurposeofdeterminingthetaxableprofitsofsuchenterprise,bedeductibleunderthesameconditionsasif
theyhadbeenpaidtoaresidentofthefirstmentionedState.
4.EnterprisesofaContractingState,thecapitalofwhichiswhollyorpartlyownedorcontrolled,directlyorindirectly,byone
or more residents of the other Contracting State shall not be subjected in the firstmentioned State to any taxation or any
requirementconnectedtherewithwhichisotherormore burdensome than the taxation and connected requirements to which
othersimilarenterprisesofthefirstmentionedStateareormaybesubjected.
5.TheprovisionsofthisArticleshallapplytotaxescoveredbythisAgreement.
ARTICLE25
MUTUALAGREEMENTPROCEDURE
1.WhereapersonconsidersthattheactionsofoneorbothoftheContractingStatesresultorwillresultforhimintaxationnot
in accordance with the provisions of thisAgreement, he may, irrespective of the remedies provided by the domestic law of
thoseStates,presenthiscasetotheCompetentAuthorityoftheContractingStateofwhichheisaresidentor,ifhiscasecomes
underparagraph1ofArticle24,tothatoftheContractingStateofwhichheisanational.Thecasemustbepresentedwithin
threeyearsfromthefirstnotificationoftheactionresultingintaxationnotinaccordancewiththeprovisionsoftheAgreement.
2.Thecompetentauthorityshallendeavour,iftheobjectionappearstoittobejustifiedandifitisnotitselfabletoarriveata
satisfactorysolution,toresolvethecasebymutualagreementwiththecompetentauthorityoftheotherContractingState,with
a view to the avoidance of taxation which is not in accordance with the Agreement. Any agreement reached shall be
implementednotwithstandinganytimelimitsinthedomesticlawoftheContractingStates.
3.ThecompetentauthoritiesoftheContractingStatesshallresolvebymutualagreementanydifficultiesordoubtsarisingasto
the interpretation or application of theAgreement. They may also consult together for the elimination of double taxation in
casesnotprovidedforintheAgreement.
4.ThecompetentauthoritiesoftheContractingStatesmaycommunicatewitheachotherdirectlyforthepurposeofreachingan
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
authoritiesoftheContractingStates.
ARTICLE26
EXCHANGEOFINFORMATION
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1.ThecompetentauthoritiesoftheContractingStatesshallexchangesuchinformation(includingdocumentsorcertifiedcopies
of the documents) as is foreseeably relevant for carrying out the provisions of this Agreement or to the administration or
enforcementofthedomesticlawsconcerningtaxesofeverykindanddescriptionimposedonbehalfoftheContractingStates,
oroftheirpoliticalsubdivisionsorlocalauthorities,insofarasthetaxationthereunderisnotcontrarytotheAgreement. The
exchangeofinformationisnotrestrictedbyArticles1and2.
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
courtsandadministrativebodies)concernedwiththeassessmentorcollectionof,theenforcementorprosecutioninrespectof,
thedeterminationofappealsinrelationtothetaxesreferredtoinparagraph1,ortheoversightoftheabove.Suchpersonsor
authoritiesshallusetheinformationonlyforsuchpurposes.Theymaydisclosetheinformationinpubliccourtproceedingsor
in judicial decisions. Notwithstanding the foregoing, information received by a Contracting State may be used for other
purposeswhensuchinformationmaybeusedforsuchotherpurposesunderthelawsofbothStatesandthecompetentauthority
ofthesupplyingStateauthorisessuchuse.
3.Innocaseshalltheprovisionsofparagraphs1and2beconstruedsoastoimposeonaContractingStatetheobligation:
(a)
tocarryoutadministrativemeasuresatvariancewiththelawsandadministrativepracticeofthatorofthe
otherContractingState
(b)
tosupplyinformation(includingdocumentsorcertifiedcopiesofthedocuments)which is not obtainable

underthelawsorinthenormalcourseoftheadministrationofthatoroftheotherContractingState
(c)
to supply information which would disclose any trade, business, industrial, commercial or professional
secretortradeprocess,orinformation,thedisclosureofwhichwouldbecontrarytopublicpolicy(ordre
public).
4.IfinformationisrequestedbyaContractingStateinaccordancewiththisArticle,theother ContractingStateshalluseits
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
paragraph3butinnocaseshallsuchlimitationsbeconstruedtopermitaContractingStatetodeclinetosupplyinformation
solelybecauseithasnodomesticinterestinsuchinformation.
5.Innocaseshalltheprovisionsofparagraph3beconstruedtopermita Contracting State todeclinetosupplyinformation
solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a
fiduciarycapacityorbecauseitrelatestoownershipinterestsinaperson.
ARTICLE27
ASSISTANCEINTHECOLLECTIONOFTAXES
1.TheContractingStatesshalllendassistancetoeachotherinthecollectionofrevenueclaims.TheCompetentAuthoritiesof
theContractingStatesmay,bymutualagreement,settlethemodeofapplicationofthisArticle.
2. The term "revenue claim" as used in thisArticle means an amount owed in respect of taxes covered by the Agreement
togetherwithinterest,penaltiesandcostsofcollectionorconservancyrelatedtosuchamount.
3.WhenarevenueclaimofaContractingStateisenforceableunderthelawsofthatContractingStateandisowedbyaperson
who,atthattime,cannot,underthelawsofthatContractingState,preventitscollection,thatrevenueclaimshall,attherequest
oftheCompetentAuthorityofthatContractingState,beacceptedforpurposesofcollectionbytheCompetentAuthorityofthe
other Contracting State, and that revenue claim shall be collected by that other Contracting State in accordance with the
provisionsofitslawsapplicabletotheenforcementandcollectionofitsowntaxesasiftherevenueclaimwerearevenueclaim
ofthatotherContractingState.
4.WhenarevenueclaimofaContractingStateisaclaiminrespectofwhichthatContractingStatemay,underitslaw,take
measures of conservancy with a view to ensure its collection, that revenue claim shall, at the request of the Competent
AuthorityofthatContractingState,beacceptedforpurposesoftakingmeasuresofconservancybytheCompetentAuthorityof
theotherContractingState.ThatotherContractingStateshalltakemeasuresofconservancyinrespectofthatrevenueclaimin
accordancewiththeprovisionsofitslawsasiftherevenueclaimwerearevenueclaimofthatotherContractingStateevenif,
atthetimewhensuchmeasuresareapplied,therevenueclaimisnotenforceableinthefirstmentionedContractingStateoris
owedbyapersonwhohasarighttopreventitscollection.
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5. The provisions of thisArticle shall be invoked on request of a Contracting State only after all permissible measures of
recoveryunderthedomesticlawsofthatContractingStatehavebeenexhausted.
6. 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 Contracting State, be subject to the time limits or accorded any priority applicable to a
revenueclaimunderthelawsofthatContractingStatebyreasonofitsnatureassuch.Inaddition,arevenueclaimacceptedby
aContractingStateforthepurposesofparagraph3or4shallnot,inthatContractingState,haveanypriorityapplicabletothat
revenueclaimunderthelawsoftheotherContractingState.
7. Proceedings with respect to the existence, validity or the amount, of a revenueclaimofa Contracting State shall only be
brought before the courts or administrative bodies of that Contracting State. Nothing in this Article shall be construed as
creatingorprovidinganyrighttosuchproceedingsbeforeanycourtoradministrativebodyoftheotherContractingState.
8. Where, at any time after a request has been made by a Contracting State under paragraph 3 or 4 and before the other
ContractingStatehascollectedandremittedtherelevantrevenueclaimtothefirstmentionedContractingState,therelevant
revenueclaimceasestobe:
(a)
inthecaseofarequestunderparagraph3,arevenueclaimofthefirstmentionedContractingStatethatis
enforceableunderthelawsofthatContractingStateandisowedbyapersonwho,atthattime,cannot,
underthelawsofthatContractingState,preventitscollection,or
(b)
in the case of a request under paragraph 4, a revenue claim of the firstmentioned Contracting State in
respectofwhichthatContractingStatemay,underitslaws,takemeasuresofconservancywithaviewto
ensure its collection. The Competent Authority of the firstmentioned Contracting State shall promptly
notifytheCompetentAuthorityoftheotherContractingStateofthatfactand,attheoptionof theother
ContractingState,thefirstmentionedContractingStateshalleithersuspendorwithdrawitsrequest.
9.InnocaseshalltheprovisionsofthisArticlebeconstruedsoastoimposeonaContractingStatetheobligation:
(a)
tocarryoutadministrativemeasuresatvariancewiththelawsandadministrativepracticeofthatorofthe
otherContractingState
(b)
tocarryoutmeasureswhichwouldbecontrarytopublicpolicy(ordrepublic)
(c)
toprovideassistanceiftheotherContractingStatehasnotpursuedallreasonablemeasuresofcollection
orconservancy,asthecasemaybe,availableunderitslawsoradministrativepractices
(d)
toprovideassistanceinthosecaseswheretheadministrativeburdenforthatContractingStateisclearly
disproportionatetothebenefittobederivedbytheotherContractingState.
ARTICLE28
LIMITATIONOFBENEFITS
1.ExceptasotherwiseprovidedinthisArticle,aperson(otherthanan individual),whichisaresidentofaContractingState
and which derives income from the other Contracting State shall be entitled to all the benefits of thisAgreement otherwise
accordedtoresidentsofaContractingStateonlyifsuchapersonhasthequalificationsasdefinedinparagraph2andmeetsthe
otherconditionsofthisAgreementfortheobtainingofanyofsuchbenefits.
2.Apersonofacontractingstateisaqualifiedpersonforafiscalyearonlyifsuchapersoniseither:
(a)
Governmentalentityor
(b)
a company incorporated in either of the

ContractingStates,if
(i)
theprincipalclassofitssharesislistedonarecognizedstockexchangeasdefinedinparagraph5ofthisArticleand
isregularlytradedononeor'morerecognizedstockexchanges,or
(ii)
atleast50%oftheaggregatevoteorvalueofthesharesinthecompanyisowneddirectlyorindirectly by one or
more individuals residents of either of the Contracting States or/and by other persons incorporated in either of the
ContractingStates,atleast50%oftheaggregatevoteorvalueofthesharesorbeneficialinterestofwhichisowned
directlyorindirectlybyoneormoreindividualresidentsofeitheroftheContractingStates,or
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(c)
apartnershiporassociationofpersons,atleast50%ormoreofwhosebeneficial
interestsisownedbyoneormoreindividualresidentsofeitheroftheContracting
Statesor/andbyotherpersonsincorporatedineitheroftheContractingStates,at
least 50% of the aggregate vote or value of the shares or beneficial interest of
whichisowneddirectlyorindirectlybyoneormoreindividualresidentsofeither
oftheContractingStates,or
(d)
Acharitable institutionoranyothertaxexemptentitywhosemainactivitiesare
carriedonineitheroftheContractingStates.
Provided that the persons mentioned above will not be entitled to the benefits of the Agreement if more than 50% of the
person'sgrossincomeforthetaxableyearispaidorpayabledirectlyorindirectlytopersonswhoarenotresidentsofeitherof
the Contracting States in the form of payments that are deductible for the purpose of computation of tax covered by this
Agreement in the person's state of residence (but not including arm's length payment in the ordinary course of business for
services or tangible property and payments in respect of financial obligations to a bank incurred in connection with a
transactionenteredintowiththePermanentEstablishmentofthebanksituatedineitheroftheContractingStates).
3.TheprovisionsofParagraph1and2shallnotapplyandaresidentofaContractingStatewillbeentitledtobenefitsofthe
AgreementwithrespecttoanitemofincomederivedfromtheotherState,ifthepersonactivelycarriesonbusinessintheState
ofresidence(otherthanthebusinessofmakingormanaginginvestmentsfortheresident'sownaccountunlesstheseactivities
arebanking,insuranceorsecurityactivities)andtheincomederivedfromtheotherContractingStatesisderivedinconnection
withorisincidentaltothatbusinessandthatresidentsatisfiestheotherconditionsofthisAgreementfortheobtainingofsuch
benefits.
4.AresidentofaContractingStateshallneverthelessbegrantedthe benefitsoftheAgreementifthe CompetentAuthorityof
theotherContractingStatedeterminesthattheestablishmentoracquisitionormaintenanceofsuchpersonandtheconductof
itsoperationsdidnothaveasoneofitsprincipalpurposestheobtainingofbenefitsundertheAgreement.
5.ForthepurposesofthisArticletheterm'recognizedstockexchange'means
(a)
inIndia,astockexchangewhichisforthetimerecognizedbytheCentralGovernmentunderSection4of
the'SecuritiesContracts(Regulation)Act,1956.
(b)
inSriLankaanystockexchangelicensedbytheSecurityandExchangeCommissionofSriLanka.
(c)
any other stock exchange which the CompetentAuthorities agree to recognize for the purposes of this
Article.
6.NotwithstandinganythingcontainedintheprecedingparagraphsofthisArticle,anyperson(includingindividuals)shallnot
beentitledtothebenefitsofthisAgreement,ifitsaffairswerearrangedinsuchamannerasifitwasthemainpurposeoroneof
themainpurposestoavoidtaxestowhichthisAgreementapplies.
ARTICLE29
MEMBERSOFDIPLOMATICMISSIONSANDCONSULARPOSTS
Nothing in thisAgreement shall affect the fiscal privileges of members of diplomatic missions or consular posts under the
generalrulesofinternationallaworundertheprovisionsofspecialagreements.
ARTICLE30
ENTRYINTOFORCE
1.TheContractingStatesshallnotifyeachotherinwriting,throughdiplomaticchannels,ofthecompletionoftheprocedures
requiredbytherespectivelawsfortheentryintoforceofthisAgreement.
2.ThisAgreementshallenterintoforceonthedateofthelaterofthenotificationsreferredtoinparagraph1ofthisArticle.
3.TheprovisionsofthisAgreementshallhaveeffect:
(a)
InIndia,inrespectofincomederivedinanyfiscalyearbeginningonorafterthefirstdayofAprilnext
followingthecalendaryearinwhichtheAgreemententersintoforceand
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(b)
InSriLanka,inrespectofincomederivedinanytaxableyearbeginningonorafterthefirstdayofApril
nextfollowingthecalendaryearinwhichtheAgreemententersintoforce.
4.TheConventionbetweentheGovernmentoftheRepublicofIndiaandtheGovernmentoftheDemocraticSocialistRepublic
ofSriLankafortheavoidanceofdoubletaxationandthepreventionoffiscalevasionwithrespecttotaxesonIncomeandon
Capitalsignedon27thJanuary1982shallterminate and cease to have effect when the provision of thisAgreement become
effectiveinaccordancewiththeprovisionsofparagraph3ofthisArticle.
ARTICLE31
TERMINATION
This Agreement shall remain in force indefinitely until terminated by a Contracting State. Either Contracting State may
terminatetheAgreement,throughdiplomaticchannels,bygivingnoticeofterminationatleastsixmonthsbeforetheendofany
calendaryearbeginningaftertheexpirationoffiveyearsfromthedateofentryintoforceoftheAgreement.Insuchevent,the
Agreementshallceasetohaveeffect:
(a)InIndia,inrespectofincomederivedinanyfiscalyearonorafterthefirstdayofAprilnextfollowingthecalendaryearin
whichthenoticeisgivenand
(b)InSriLanka,inrespectofincomederivedinanytaxableyearonorafterthefirstdayofAprilnext followingthecalendar
yearinwhichthenoticeisgiven.
INWITNESSWHEREOFtheundersigned,dulyauthorizedthereto,havesignedthisAgreement.
DONEinduplicateatNewDelhi,this22nddayofJanuary,2013,eachintheHindiSinhalaandEnglish languages, all texts
beingequallyauthentic.Incaseofdivergenceofinterpretation,theEnglishtextshallprevail.
PROTOCOL
TheGovernmentoftheRepublicofIndiaandtheGovernmentoftheDemocraticSocialistRepublicofSriLankaonsigningat
NewDelhion22ndJanuary,2013,theAgreementfortheAvoidanceofDouble TaxationandthePreventionofFiscalEvasion
with respect to Taxes on income have agreed upon the following provisions which shall form an integral part of the said
Agreement.
(i)
Inrespectofparagraphs1and2ofArticle7,itisunderstoodthatwherean enterprise of a Contracting

StatesellsgoodsormerchandiseorcarriesonbusinessintheotherContractingStatethroughapermanent
establishmentsituatedtherein,theprofitsofthatpermanentestablishmentshallnotbedeterminedonthe
total amount received by the enterprise, but shall be determined only on the basis of that part of the
receipts which is attributable to the actual activity of the permanent establishment for such sales or
business.Likewiseinthecaseofcontractsforsurvey,supply,services,constructionsorinstallations,when
the enterprise has a permanent establishment, the profits of such permanent establishment shall not be
determinedonthetotalamountofthecontract,butshallbedeterminedonlyonthebasisofthatpartofthe
contract,whichiseffectivelycarriedoutbythepermanentestablishmentintheStatewherethepermanent
establishmentissituated.
(ii)
ItisunderstoodthatinrelationtothisAgreementifatanytimetheprovisionsofthe domesticlawofa
Contracting State are more beneficial to a resident of the, other Contracting State, then such more
beneficialprovisionsofthedomesticlawshallprevailovertheprovisionsofthisAgreement.
(iii)
Itisunderstoodthat,inrespectofArticle10on'Dividends'therateofwithholdingagreedtoat7.5%will
besubjecttoreviewafterthreeyearsfromthedatetheAgreemententersintoforce.Incasethisrateisnot
reviewedafter3years,theagreedrateof7.5%willcontinue.
INWITNESSWHEREOFtheundersigned,dulyauthorizedthereto,havesignedthisProtocol.
DONEinduplicateatNewDelhi,this22nddayofJanuary,2013,eachintheHindiSinhalaandEnglish languages, all texts
beingequallyauthentic.Incaseofdivergenceofinterpretation,theEnglishtextshallprevail.
Copyright. Taxmann Publications Pvt. Ltd.
16/16

DTC Agreement Between India and Sri Lanka

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1/6/2017

in India: The Finance Minister, Government of India, or his authorized

in the case of India: the financial year

3.(a)Abuildingsite or construction, installationor assembly projectoradrilling rig orsupervisory activitiesinconnection

tosupplyinformation(includingdocumentsorcertifiedcopiesofthedocuments)which is not obtainable

a company incorporated in either of the

Inrespectofparagraphs1and2ofArticle7,itisunderstoodthatwherean enterprise of a Contracting

Copyright. Taxmann Publications Pvt. Ltd.

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