1605. Agreement for avoidance of doube ta!ation and
"revention of fi#ca eva#ion $it% Mauritiu# Whereas the annexed Convention between the Government of the Republic of India and the Government of Mauritius for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains and for the encouragement of mutual trade and investment has come into force on the notification by both the Contracting States to each other on completion of the procedures required by their respective laws as required by !rticle "# of the said Convention $ %ow therefore in exercise of the powers conferred by section &' of the Income(tax !ct )&*) +,- of )&*). and section ",! of the Companies +/rofits. Surtax !ct )&*, +0 of )&*,. the Central Government hereby directs that all the provisions of the said Convention shall be given effect to in the 1nion of India2 Notification & GSR %o2 &"'+3. dated *()"()&#-2 4354 67 !%%3538 C6%93%4I6% 8!438 ",(#()&#" The Government of the Republic of India and the Government of Mauritius, desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains and for the encouragement of mutual trade and investment: have agreed as follows : '(A)T*R I - S'+)* +, T(* '+N-*NTI+N ARTIC! " # /ersonal scope # This Convention shall appl$ to persons who are residents of one or both of the Contracting %tates& ARTIC! ' # 4axes covered # )2 The existing taxes to which this Convention shall appl$ are : (a) in the case of India, (i) the income#tax including an$ surcharge thereon imposed under the Income#tax Act, "*+" (,- of "*+") . (ii) the surtax imposed under the Companies (/rofits) %urtax Act, "*+, (0 of "*+,) . (hereinafter referred to as Indian tax) . (b) in the case of Mauritius, the income#tax (hereinafter referred to as Mauritius tax)& "2 This Convention shall also appl$ to an$ identical or substantiall$ similar taxes which are imposed b$ either Contracting %tate after the date of signature of the present Convention in addition to, or in place of, the existing taxes referred to in paragraph ()) of this article& -2 The competent authorities of the Contracting %tates shall notif$ to each other an$ significant changes which are made in their respective taxation laws& '(A)T*R II - D*,INITI+NS ARTIC! - # General definitions # )2 1or the purposes of this Convention, unless the context otherwise re2uires: (a) the term India means the territor$ of India and includes the territorial sea and air space above it as well as an$ other maritime 3one referred to in the Territorial 4aters, Continental %helf, !xclusive !conomic 5one and other Maritime 5ones Act, "*0+ (Act 6o& 78 of "*0+), in which India has certain rights and to the extent that these rights can be exercised therein as if such maritime 3one is a part of the territor$ of India . (b) the term Mauritius means all the territories, including all the islands, which in accordance with the laws of Mauritius, constitute the %tate of Mauritius and includes, (i) the territorial sea of Mauritius . and (ii) an$ area outside the territorial sea of Mauritius which in accordance with international law has been or ma$ hereafter be designated, under the laws of Mauritius concerning the Continential %helf, as an area within which the rights of Mauritius with respect to the sea bed and sub#soil and their natural resources ma$ be exercised . (c) the terms a Contracting %tate and the other Contracting %tate mean India or Mauritius as the context re2uires . (d) the term tax means Indian tax or Mauritius tax as the context re2uires, but shall not include an$ amount which is pa$able in respect of an$ default or omission in relation to the taxes to which this Convention applies or which represents a penalt$ imposed relating to those taxes . (e) the term person includes an individual, a compan$ and an$ other entit$, corporate or non#corporate, which is treated as a taxable unit under the taxation laws in force in the respective Contracting %tates . (f) the term compan$ means an$ bod$ corporate or an$ entit$ which is treated as a compan$ or a bod$ corporate under the taxation laws in force in the respective Contracting %tates . (g) the terms enterprise of a Contracting %tate and enterprise of the other Contracting %tate mean respectivel$ an industrial, mining, commercial, plantation or agricultural enterprise or similar underta9ing carried on b$ a resident of a Contracting %tate and an industrial, mining, commercial, plantation or agricultural enterprise or similar underta9ing carried on b$ a resident of the other Contracting %tate . (h) the term competent authorit$ means in the case of India, the Central Government in the Ministr$ of 1inance (:epartment of Revenue) or their authorised representative. and in the case of Mauritius, the Commissioner of Income#tax or his authorised representative . (i) the term national means an$ individual possessing the nationalit$ of a Contracting %tate and an$ local person, partnership or association deriving its status from the laws in force in the Contracting %tate . (:) the term international traffic means an$ transport b$ a ship or aircraft operated b$ an enterprise which has its place of effective management in a Contracting %tate, except when the ship or aircraft is operated b$ the enterprise solel$ between places in the other Contracting %tate& "2 In the application of the provisions of this Convention b$ a Contracting %tate, an$ term not defined therein shall, unless the context otherwise re2uires, have the meaning which it has under the laws in force of that Contracting %tate relating to the areas which are the sub;ect of this Convention& ARTIC! , # Residents # )2 1or the purposes of this Convention, the term resident of a Contracting %tate means an$ person who, under the laws of that %tate, is liable to taxation therein b$ reason of his domicile, residence, place of management or an$ other criterion of similar nature& The terms resident of India and resident of Mauritius shall be construed accordingl$& "2 4here b$ reason of the provisions of paragraph ()), an individual is a resident of both Contracting %tates, then his residential status for the purposes of the Convention shall be determined in accordance with the following rules : (a) he shall be deemed to be a resident of the Contracting %tate in which he has a permanent home available to him. if he has a permanent home available to him in both Contracting %tates, he shall be deemed to be a resident of the Contracting %tate with which his personal and economic relations are closer (hereinafter referred to as his centre of vital interests) . (b) if the Contracting %tate in which he has his centre of vital interests cannot be determined, or if he does not have a permanent home available to him in either Contracting %tate, he shall be deemed to be a resident of the Contracting %tate in which he has an habitual abode . (c) if he has an habitual abode in both Contracting %tates or in neither of them, he shall be deemed to be a resident of the Contracting %tate of which he is a national . (d) if he is a national of both Contracting %tates or of neither of them, the competent authorities of the Contracting %tates shall settle the 2uestion b$ mutual agreement& -2 4here b$ reason of the provisions of paragraph ()), a person other than an individual is a resident of both the Contracting %tates, then it shall be deemed to be a resident of the Contracting %tate in which its place of effective management is situated& ARTIC! < # /ermanent establishment # )2 1or the purposes of this Convention, the term permanent establishment means a fixed place of business through which the business of the enterprise is wholl$ or partl$ carried on& "2 The term permanent establishment shall include (a) a place of management . (b) a branch . (c) an office . (d) a factor$ . (e) a wor9shop . (f) a warehouse, in relation to a person providing storage facilities for others . (g) a mine, an oil or gas well, a 2uarr$ or an$ other place of extraction of natural resources . (h) a firm, plantation or other place where agricultural, forestr$, plantation or related activities are carried on . (i) a building site or construction or assembl$ pro;ect or supervisor$ activities in connection therewith, where such site, pro;ect or supervisor$ activit$ continues for a period of more than nine months& -2 6otwithstanding the preceding provisions of this article, the term permanent establishment shall be deemed not to include : (a) the use of facilities solel$ for the purpose of storage or displa$ of merchandise belonging to the enterprise . (b) the maintenance of a stoc9 of goods or merchandise belonging to the enterprise solel$ for the purpose of storage or displa$ . (c) the maintenance of a stoc9 of goods or merchandise belonging to the enterprise solel$ for the purpose of processing b$ another enterprise . (d) the maintenance of a fixed place of business solel$ for the purpose of purchasing goods or merchandise or for collecting information for the enterprise . (e) the maintenance of a fixed place of business solel$ (i) for the purpose of advertising, (ii) for the suppl$ of information, (iii) for scientific research, or (iv) for similar activities, which have a preparator$ or auxiliar$ character for the enterprise& ,2 6otwithstanding the provisions of paragraphs ()) and (") of this article, a person acting in a Contracting %tate for or on behalf of an enterprise of the other Contracting %tate =other than an agent of an independent status to whom the provisions of paragraph (;) appl$> shall be deemed to be a permanent establishment of that enterprise in the first#mentioned %tate if : (i) he has and habituall$ exercises in that first#mentioned %tate, an authorit$ to conclude contracts in the name of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise . or (ii) he habituall$ maintains in that first#mentioned %tate a stoc9 of goods or merchandise belonging to the enterprise from which he regularl$ fulfils orders on behalf of the enterprise& ;2 An enterprise of a Contracting %tate shall not be deemed to have a permanent establishment in the other Contracting %tate merel$ because it carries on business in that other %tate through a bro9er, general commission agent or an$ other agent of an independent status, where such persons are acting in the ordinar$ course of their business& ?owever, when the activities of such an agent are devoted exclusivel$ or almost exclusivel$ on behalf of that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph& *2 The fact that a compan$, which is a resident of a Contracting %tate controls or is controlled b$ a compan$ which is a resident of the other Contracting %tate, or which carries on business in that other Contracting %tate (whether through a permanent establishment or otherwise) shall not, of itself, constitute either compan$ a permanent establishment of the other& '(A)T*R III - TA.ATI+N +, IN'+M* ARTIC! + # Income from immovable property # )2 Income from immovable propert$ ma$ be taxed in the Contracting %tate in which such propert$ is situated& "2 The term immovable propert$ shall be defined in accordance with the law and usage of the Contracting %tate in which the propert$ is situated& The term shall in an$ case include propert$ accessor$ to immovable propert$, livestoc9 and e2uipment used in agriculture and forestr$, rights to which the provisions of general law respecting landed propert$ appl$, usufruct of immovable propert$ and rights to variable or fixed pa$ments as consideration for the wor9ing of, or the right to wor9, mineral deposits, oil#wells, 2uarries and other places of extraction of natural resources, ships, boats and aircraft shall not be regarded as immovable propert$& -2 The provisions of paragraph ()) shall appl$ to income derived from the direct use, letting, or use in an$ other form of immovable propert$& ,2 The provisions of paragraphs ()) and (-) shall also appl$ to the income from immovable propert$ of an enterprise and to income from immovable propert$ used for the performance of independent personal services& ARTIC! 0 # <usiness profits # )2 The profits of an enterprise of a Contracting %tate shall be taxable onl$ in that %tate unless the enterprise carries on business in the other Contracting %tate through a permanent establishment situated therein& If the enterprise carries on business as aforesaid, the profits of the enterprise ma$ be taxed in the other %tate but onl$ so much of them as is attributable to that permanent establishment& "2 %ub;ect to the provisions of paragraph (-) of this article, where an enterprise of a Contracting %tate carries on business in the other Contracting %tate through a permanent establishment situated therein, there shall in each Contracting %tate be attributed to that permanent establishment the profits which it might be expected to ma9e if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholl$ independentl$ with the enterprise of which it is a permanent establishment& 4here the correct amount of profits attributable to a permanent establishment cannot be readil$ determined or the determination thereof presents exceptional difficulties, the profits attributable to the permanent establishment ma$ be estimated on a reasonable basis& -2 In determining the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the business of the permanent establishment including executive and general administrative expenses so incurred, whether in the %tate in which the permanent establishment is situated or elsewhere& ,2 6o profits shall be attributed to a permanent establishment b$ reason of the mere purchase b$ that permanent establishment of goods or merchandise for the enterprise& ;2 1or the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined b$ the same method $ear b$ $ear unless there is good and sufficient reason to the contrar$& *2 4here profits include items of income which are dealt with separatel$ in other articles of this Convention, then the provisions of those articles shall not be affected b$ the provisions of this article& ARTIC! 7 # Shipping and air transport # )2 /rofits from the operation of ships or aircraft in international traffic shall be taxable onl$ in the Contracting %tate in which the place of effective management of the enterprise is situated& "2 If the place of effective management of a shipping enterprise is aboard a ship, then it shall be deemed to be situated in the Contracting %tate in which the home harbour of the ship is situated or, if there is no such home harbour, in the Contracting %tate of which the operator of the ship is resident& -2 The provisions of paragraph ()) of this article shall also appl$ to profits from the participation in a pool, a ;oint business or an international operating agenc$& ,2 1or the purposes of paragraph ()), interest on funds connected with the operation of ships or aircraft in international traffic shall be regarded as profits from the operation of such ships or aircraft, and the provisions of Article "" shall not appl$ in relation to such interest& ;2 The term operation of ships or aircraft shall mean business of transportation of persons, mail, livestoc9 or goods, carried on b$ the owners or lessees or charterers of the ships or aircraft, including the sale of tic9ets for such transportation on behalf of other enterprises, the incidental lease of ships or aircraft and an$ other activit$ directl$ connected with such transportation& ARTIC! * # !ssociated enterprises # 4here (a) an enterprise of a Contracting %tate participates, directl$ or indirectl$, in the management, control or capital of an enterprise of the other Contracting %tate, or (b) the same persons participate, directl$ or indirectl$, in the management, control or capital of an enterprise of a Contracting %tate and an enterprise of the other Contracting %tate, and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then an$ profits which would, but for those conditions, have accrued to one of the enterprises, but, b$ reason of those conditions have not so accrued, ma$ be included in the profits of that enterprise and taxed accordingl$& ARTIC! "8 # 8ividends # )2 :ividends paid b$ a compan$ which is a resident of a Contracting %tate to a resident of the other Contracting %tate ma$ be taxed in that other %tate& "2 ?owever, such dividends ma$ also be taxed in the Contracting %tate of which the compan$ pa$ing the dividends is a resident and according to the laws of that %tate, but if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed (a) five per cent of the gross amount of the dividends if the beneficial owner is a compan$ which holds directl$ at least "8 per cent of the capital of the compan$ pa$ing the dividends . (b) fifteen per cent of the gross amount of the dividends in all other cases& This paragraph shall not affect the taxation of the compan$ in respect of the profits out of which the dividends are paid& -2 6otwithstanding the provisions of paragraph ("), dividends paid b$ a compan$ which is a resident of Mauritius to a resident of India ma$ be taxed in Mauritius and according to the laws of Mauritius, as long as dividends paid b$ companies which are residents of Mauritius are allowed as deductible expenses for determining their taxable profits& ?owever, the tax charged shall not exceed the rate of the Mauritius tax on profit of the compan$ pa$ing the dividends& ,2 The term dividends as used in this Article means income from shares or other rights, not being debt#claims, participating in profits, as well as income from other corporate rights which is sub;ected to the same taxation treatment as income from shares b$ the laws of the Contracting %tate of which the compan$ ma9ing the distribution is a resident& ;2 The provisions of paragraphs ()), (") and (-) shall not appl$ if the beneficial owner of the dividends, being a resident of the Contracting %tate, carries on business in the other Contracting %tate of which the compan$ pa$ing the dividends is a resident, through a permanent establishment situated therein or performs in that other %tate independent personal services from a fixed base situated therein and the holding in respect of which the dividends are paid is effectivel$ connected with such permanent establishment or fixed base& In such a case, the provisions of article 0 or article ",, as the case ma$ be, shall appl$& *2 4here a compan$ which is a resident of a Contracting %tate derives profits or income from the other Contracting %tate, that other %tate ma$ not impose an$ tax on the dividends paid b$ the compan$, except insofar as such dividends are paid to a resident of that other %tate or insofar as the holding in respect of which the dividends are paid is effectivel$ connected with a permanent establishment or a fixed base situated in that other %tate nor sub;ect the compan$s undistributed profits to a tax on the compan$s undistributed profits, even if the dividends paid or the undistributed profits consist wholl$ or partl$ of profits or income arising in such other %tate& ARTIC! "" # Interest # )2 Interest arising in a Contracting %tate and paid to a resident of the other Contracting %tate ma$ be taxed in that other %tate& "2 ?owever, sub;ect to the provisions of paragraphs (-) and (,) of this article, such interest ma$ also be taxed in the Contracting %tate in which it arises and according to the laws of that %tate& -2 Interest arising in a Contracting %tate shall be exempt from tax in that %tate provided it is derived and beneficiall$ owned b$ : (a) the Government or a local authorit$ of the other Contracting %tate . (b) an$ agenc$ or entit$ created or organised b$ the Government of the other Contracting %tate . or (c) an$ ban9 carr$ing on a bona fide ban9ing business which is a resident of the other Contracting %tate& ,2 Interest arising in a Contracting %tate shall be exempt from tax in that Contracting %tate to the extent approved b$ the Government of that %tate if it is derived and beneficiall$ owned b$ an$ person =other than a person referred to in paragraph (-)> who is a resident of the other Contracting %tate provided that the transaction giving rise to the debt#claim has been approved in this regard b$ the Government of the first#mentioned Contracting %tate& ;2 The term interest as used in this Article means income from debt# claims of ever$ 9ind, whether or not secured b$ mortgage, and whether or not carr$ing a right to participate in the debtors profits, and, in particular, income from Government securities and income from bonds or debentures, including premiums and pri3es attaching to such securities, bonds or debentures& /enalt$ charges for late pa$ment shall not be regarded as interest for the purpose of this article& *2 The provisions of paragraphs ()), ("), (-) and (,) shall not appl$ if the recipient of the interest, being a resident of a Contracting %tate, carries on business in the other Contracting %tate in which the interest arises, through a permanent establishment situated therein, or performs in that other %tate independent personal services from a fixed base situated therein, and the debt#claim in respect of which the interest is paid is effectivel$ connected with such permanent establishment or fixed base& In such case, the provisions of article 0 or article ",, as the case ma$ be, shall appl$& 02 Interest shall be deemed to arise in a Contracting %tate when the pa$er is that Contracting %tate itself, a political sub#division, a local authorit$ or a resident of that %tate& 4here, however, the person pa$ing the interest, whether he is a resident of a Contracting %tate or not, has in a Contracting %tate a permanent establishment in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne b$ that permanent establishment, then such interest shall be deemed to arise in the Contracting %tate in which the permanent establishment is situated& #2 4here, b$ reason of a special relationship between the pa$er and the recipient or between both of them and some other person, the amount of the interest paid, having regard to the debt#claim for which it is paid, exceeds the amount which would have been agreed upon b$ the pa$er and the recipient in the absence of such relationship, the provisions of this article shall appl$ onl$ to the last#mentioned amount& In that case, the excess part of the pa$ments shall remain taxable according to the law of each Contracting %tate, due regard being had to the other provisions of this Convention& ARTIC! "' # Royalties # )2 Ro$alties arising in a Contracting %tate and paid to a resident of the other Contracting %tate ma$ be taxed in that other %tate& "2 ?owever, such ro$alties ma$ also be taxed in the Contracting %tate in which the$ arise, and according to the law of that %tate, but the tax so charged shall not exceed "< per cent of the gross amount of the ro$alties& -2 The term ro$alties as used in this Article means pa$ments of an$ 9ind received as a consideration for the use of, or the right to use, an$ cop$right of literar$, artistic or scientific wor9 (including cinematograph films, and films or tapes for radio or television broadcasting), an$ patent, trade mar9, design or model, plan, secret formula or process or for the use of, or the right to use, industrial, commercial or scientific e2uipment, or for information concerning industrial, commercial or scientific experience& ,2 The provisions of paragraphs ()) and (") shall not appl$ if the recipient of the ro$alties, being a resident of a Contracting %tate carries on business in the other Contracting %tate in which the ro$alties arise, through a permanent establishment situated therein, or performs in that other %tate independent personal services from a fixed base situated therein, and the right or propert$ in respect of which the ro$alties are paid is effectivel$ connected with such permanent establishment or fixed base& In such a case, the provisions of article 0 or article ",, as the case ma$ be, shall appl$& ;2 Ro$alties shall be deemed to arise in a Contracting %tate when the pa$er is that Contracting %tate itself, a political sub#division, a local authorit$ or a resident of that %tate, where, however, the person pa$ing the ro$alties whether he is a resident of a Contracting %tate, or not, has in a Contracting %tate a permanent establishment in connection with which the liabilit$ to pa$ the ro$alties was incurred, and such ro$alties are borne b$ such permanent establishment, then such ro$alties shall be deemed to arise in the Contracting %tate in which the permanent establishment is situated& *2 4here, b$ reason of a special relationship between the pa$er and the recipient or between both of them and some other person, the amount of ro$alties paid, having regard to the use, right or information for which the$ are paid, exceeds the amount which would have been agreed upon b$ the pa$er and the recipient in the absence of such relationship, the provisions of this article shall appl$ onl$ to the last# mentioned amount& In that case, the excess part of the pa$ments shall remain taxable according to the laws of each Contracting %tate, due regard being had to the other provisions of this Convention& ARTIC! "- # Capital gains # )2 Gains from the alienation of immovable propert$, as defined in paragraph (") of article +, ma$ be taxed in the Contracting %tate in which such propert$ is situated& "2 Gains from the alienation of movable propert$ forming part of the business propert$ of a permanent establishment which an enterprise of a Contracting %tate has in the other Contracting %tate or of movable propert$ pertaining to a fixed base available to a resident of a Contracting %tate in the other Contracting %tate for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or together with the whole enterprise) or of such a fixed base, ma$ be taxed in that other %tate& -2 6otwithstanding the provisions of paragraph (") of this article, gains from the alienation of ships and aircraft operated in international traffic and movable propert$ pertaining to the operation of such ships and aircraft, shall be taxable onl$ in the Contracting %tate in which the place of effective management of the enterprise is situated& ,2 Gains derived b$ a resident of a Contracting %tate from the alienation of an$ propert$ other than those mentioned in paragraphs ()), (") and (-) of this article shall be taxable onl$ in that %tate& ;2 1or the purposes of this article, the term alienation means the sale, exchange, transfer, or relin2uishment of the propert$ or the extinguishment of an$ rights therein or the compulsor$ ac2uisition thereof under an$ law in force in the respective Contracting %tates& ARTIC! ", # Independent personal services # )2 Income derived b$ a resident of a Contracting %tate in respect of professional services or other independent activities of a similar character shall be taxable onl$ in that %tate unless he has a fixed base regularl$ available to him in the other Contracting %tate for the purpose of performing his activities& If he has such a fixed base, the income ma$ be taxed in the other Contracting %tate but onl$ so such of it as is attributable to that fixed base& "2 The term professional services includes especiall$ independent scientific, literar$, artistic, educational or teaching activities, as well as the independent activities of ph$sicians, law$ers, engineers, architects, dentists and accountants& ARTIC! "< # 8ependent personal services # )2 %ub;ect to the provisions of articles "+, "0, "7, "*, '8 and '", salaries, wages and other similar remuneration derived b$ a resident of a Contracting %tate in respect of an emplo$ment shall be taxable onl$ in that %tate unless the emplo$ment is exercised in the other Contracting %tate& If the emplo$ment is so exercised, such remuneration as is derived therefrom ma$ be taxed in that other Contracting %tate& "2 6otwithstanding the provisions of paragraph ()) of this article, remuneration derived b$ a resident of a Contracting %tate in respect of an emplo$ment exercised in the other Contracting %tate shall be taxable onl$ in the first mentioned %tate, if (a) the recipient is present in the other %tate for a period or periods not exceeding in the aggregate "7- da$s in the relevant previous $ear or $ear of income, and (b) the remuneration is paid b$, or on behalf of, an emplo$er who is not a resident of the other %tate, and (c) the remuneration is not borne b$ a permanent establishment or a fixed base which the emplo$er has in the other %tate& -2 6otwithstanding the preceding provisions of this article, remuneration in respect of an emplo$ment exercised aboard a ship or aircraft in international traffic, ma$ be taxed onl$ in the Contracting %tate in which the place of effective management of the enterprise is situated& ARTIC! "+ # 8irectors fees # :irectors fees and other similar pa$ments derived b$ a resident of a Contracting %tate in his capacit$ as a member of the board of directors of a compan$ which is a resident of the other Contracting %tate ma$ be taxed in that other Contracting %tate& ARTIC! "0 # !rtistes and athletes # )2 6otwithstanding the provisions of articles ", and "<, income derived b$ public entertainers such as theatre, motion picture, radio or television artistes and musicians, and b$ athletes, from their personal activities as such ma$ be taxed in the Contracting %tate in which these activities are exercised& "2 4here income is derived from personal activities exercised b$ an entertainer or an athlete in his capacit$ as such, and accrues not to the entertainer or athlete himself but to another person, that income ma$, notwithstanding the provisions of articles 0, ", and "<, be taxed in the %tate in which the activities of the entertainer or athlete are exercised& -2 6otwithstanding the provisions of paragraph ()) of this article, income derived b$ an entertainer or an athlete who is a resident of a Contracting %tate from his personal activities as such exercised in the other Contracting %tate, shall be taxable onl$ in the first#mentioned Contracting %tate, if those activities in the other Contracting %tate, are supported wholl$ or substantiall$ from the public funds of the first# mentioned Contracting %tate, including an$ of its political sub#divisions or local authorities& ,2 6otwithstanding the provisions of paragraph (") of this article and articles 0, ", and "<, where income is derived from personal activities exercised b$ an entertainer or an athlete in his capacit$ as such in a Contracting %tate and accrues not to the entertainer or athlete himself but to another person, that income shall be taxable onl$ in the Contracting %tate, if that other person is supported wholl$ or substantiall$ from the public funds of that other Contracting %tate, including an$ of its political sub#divisions or local authorities& ARTIC! "7 # Governmental functions # )2 Remuneration, other than pension, paid b$ the Government of a Contracting %tate, to an individual who is a national of that %tate in respect of services rendered to that %tate shall be taxable onl$ in that %tate& "2 An$ pension paid b$ the Government of a Contracting %tate to an individual who is a national of that %tate, shall be taxable onl$ in that Contracting %tate& -2 The provisions of paragraphs ()) and (") of this article shall not appl$ to remuneration and pensions in respect of services rendered in connection with an$ business carried on b$ the Government of either of the Contracting %tates for the purpose of profit& ,2 The provisions of paragraph ()) of this article shall li9ewise appl$ in respect of remuneration paid under a development assistance programme of a Contracting %tate, out of funds supplied b$ that %tate, to a specialist or volunteer seconded to the other Contracting %tate with the consent of that other %tate& ;2 1or the purposes of this article, the term Government shall include an$ %tate Government or local or statutor$ authorit$ of either Contracting %tate and, in particular, the Reserve @an9 of India and the @an9 of Mauritius& ARTIC! "* # %on(Government pensions and annuities # )2 An$ pension, other than a pension referred to in article "7, or an$ annuit$ derived b$ a resident of a Contracting %tate from sources within the other Contracting %tate shall be taxed onl$ in the first#mentioned Contracting %tate& "2 The term pension means a periodic pa$ment made in consideration of past services or b$ wa$ of compensation for in;uries received in the course of performance of services& -2 The term annuit$ means a stated sum pa$able periodicall$ at stated times during life or during a specified or ascertainable period of time, under an obligation to ma9e the pa$ments in return for ade2uate and full consideration in mone$ or mone$s worth& ARTIC! '8 # Students and apprentices # )2 A student or business apprentice who is or was a resident of one of the Contracting %tates immediatel$ before visiting the other Contracting %tate and who is present in that other Contracting %tate solel$ for the purpose of his education or training, shall be exempt from tax in that other Contracting %tate on (a) pa$ments made to him from sources outside that other Contracting %tate for the purposes of his maintenance, education or training, and (b) remuneration from emplo$ment in that other Contracting %tate, in an amount not exceeding Rs& "<,888 in Indian currenc$ or its e2uivalent in Mauritius rupees at the parit$ rate of exchange during an$ previous $ear or $ear of income, as the case ma$ be, provided that such emplo$ment is directl$ related to his studies or is underta9en for the purpose of his maintenance& "2 The benefits of this article shall extend onl$ for such period of time as ma$ be reasonable or customaril$ re2uired to complete the education or training underta9en, but in no event shall an$ individual have the benefits of this article for more than five consecutive $ears from the date of his first arrival in that other Contracting %tate& ARTIC! '" # /rofessors teachers and research scholars # )2 A professor, teacher and research scholar who is or was a resident of one of the Contracting %tates immediatel$ before visiting the other Contracting %tate at the invitation of that other Contracting %tate or of a universit$, college, school or other approved institution in that other Contracting %tate for the purpose of teaching or engaging in research, or both, at the universit$, college, school or other approved institution, shall be exempt from tax in that other Contracting %tate on an$ remuneration for such teaching or research for a period not exceeding two $ears from the date of his arrival in that other Contracting %tate& "2 This article shall not appl$ to income from research if the research is underta9en primaril$ for the private benefit of a specific person or persons& -2 1or the purposes of this article and article '8 an individual shall be deemed to be resident of a Contracting %tate if he is a resident in that Contracting %tate in the previous $ear or the $ear of income, as the case ma$ be, in which he visits the other Contracting %tate or in the immediatel$ preceding previous $ear or the $ear of income& ,2 1or the purpose of paragraph ()), approved institution means an institution which has been approved in this regard b$ the competent authorit$ of the concerned Contracting %tate& ARTIC! '' # 6ther income # )2 %ub;ect to the provisions of paragraph (") of this article, items of income of a resident of a Contracting %tate, wherever arising, which are not expressl$ dealt with in the foregoing articles of this Convention, shall be taxable onl$ in that Contracting %tate& "2 The provisions of paragraph ()) shall not appl$ to income, other than income from immovable propert$ as defined in paragraph (") of article +, if the recipient of such income, being a resident of a Contracting %tate, carries on business in the other Contracting %tate through a permanent establishment situated therein, or performs in that other %tate independent personal services from a fixed base situated therein and the right or propert$ in respect of which the income is paid is effectivel$ connected with such permanent establishment or fixed base& In such case, the provisions of article 0 or article ",, as the case ma$ be, shall appl$& '(A)T*R I- - M*T(+DS ,+R */IMINATI+N +, D+U0/* TA.ATI+N ARTIC! '- # 3limination of double taxation # )2 The laws in force in either of the Contracting %tates shall continue to govern the taxation of income in the respective Contracting %tates except where provisions to the contrar$ are made in this Convention& "2 (a) The amount of Mauritius tax pa$able, under the laws of Mauritius and in accordance with the provisions of this Convention, whether directl$ or b$ deduction, b$ a resident of India, in respect of profits or income arising in Mauritius, which has been sub;ected to tax both in India and in Mauritius, shall be allowed as a credit against the Indian tax pa$able in respect of such profits or income provided that such credit shall not exceed the Indian tax (as computed before allowing an$ such credit) which is appropriate to the profits or income arising in Mauritius& 1urther, where such resident is a compan$ b$ which surtax is pa$able in India, the credit aforesaid shall be allowed in the first instance against income#tax pa$able b$ the compan$ in India and as to the balance, if an$, against surtax pa$able b$ it in India& (b) In the case of a dividend paid b$ a compan$ which is a resident of Mauritius to a compan$ which is a resident of India and which owns at least "8 per cent of the shares of the compan$ pa$ing the dividend, the credit shall ta9e into account =in addition to an$ Mauritius tax for which credit ma$ be allowed under the provisions of sub#paragraph (a) of this paragraph> the Mauritius tax pa$able b$ the compan$ in respect of the profits out of which such dividend is paid& -2 1or the purposes of the credit referred to in paragraph (") the term Mauritius tax pa$able shall be deemed to include an$ amount which would have been pa$able as Mauritius tax for an$ $ear but for an exemption or reduction of tax granted for that $ear or an$ part thereof under : (i) sections --, -,, -,A and -,@ of the Mauritius Income#tax Act, "*0, (," of "*0,) . (ii) an$ other provision which ma$ subse2uentl$ be made granting an exemption or reduction of tax which the competent authorities of the Contracting %tates agree to be for the purposes of economic development& ,2 (a) The amount of Indian tax pa$able under the laws of India and in accordance with the provisions of this Convention, whether directl$ or b$ deduction, b$ a resident of Mauritius, in respect of profits or income arising in India, which has been sub;ected to tax both in India and Mauritius shall be allowed as a credit against Mauritius tax pa$able in respect of such profits or income provided that such credit shall not exceed the Mauritius tax (as computed before allowing an$ such credit) is appropriate to the profits or income arising in India& (b) In the case of a dividend paid b$ a compan$ which is a resident of India to a compan$ which is a resident of Mauritius and which owns at least "8 per cent of the shares of the compan$ pa$ing the dividend, the credit shall ta9e into account =in addition to an$ Indian tax for which credit ma$ be allowed under the provisions of sub#paragraph (a) of this paragraph> the Indian tax pa$able b$ the compan$ in respect of the profits out of which such dividend is paid& ;2 1or the purposes of the credit referred to in paragraph (,), the term Indian tax pa$able shall be deemed to include an$ amount b$ which tax has been reduced b$ the special incentive measures under (i) section "8(,), "8(,!), "8(*)(viia), "8();)(iv), "8("#), "8A, -'A, --A, -<@, <,!, 78??, 78??A, 78#I or 78 of the Income#tax Act, "*+" (,- of "*+"). (ii) an$ other provision which ma$ subse2uentl$ be enacted granting a reduction of tax which the competent authorities of the Contracting %tates agree to be for the purposes of economic development& *2 4here under this Convention a resident of a Contracting %tate is exempt from tax in that Contracting %tate in respect of income derived from the other Contracting %tate, then the first#mentioned Contracting %tate ma$, in calculating tax on the remaining income of that person, appl$ the rate of tax which would have been applicable if the income exempted from tax in accordance with this Convention had not been so exempted& '(A)T*R - - S)*'IA/ )R+-ISI+NS ARTIC! ', # %on(discrimination # )2 The nationals of a Contracting %tate shall not be sub;ected in the other Contracting %tate to an$ taxation or an$ re2uirement connected therewith which is other or more burdensome than the taxation and connected re2uirements to which nationals of that other %tate in the same circumstances are or ma$ be sub;ected& "2 The taxation on a permanent establishment which an enterprise of a Contracting %tate has in the other Contracting %tate shall not be less favourabl$ levied in that other %tate than the taxation levied on enterprises of that other %tate carr$ing on the same activities in the same circumstances& -2 6othing contained in this Article shall be construed as obliging a Contracting %tate to grant persons not resident in that %tate an$ personal allowances, reliefs, reductions and deductions for taxation purposes which are b$ law available onl$ to persons who are so resident& ,2 !nterprises of a Contracting %tate, the capital of which is wholl$ or partl$ owned or controlled, directl$ or indirectl$, b$ one or more residents of the other Contracting %tate, shall not be sub;ected in the first#mentioned Contracting %tate to an$ taxation or an$ re2uirement connected therewith which is other or more burdensome than the taxation and connected re2uirements to which other similar enterprises of that first#mentioned %tate are or ma$ be sub;ected in the same circumstances& ;2 In this article, the term taxation means taxes which are the sub;ect of this Convention& ARTIC! '< # Mutual agreement procedure # )2 4here a resident of a Contracting %tate considers that the actions of one or both of the Contracting %tates result or will result for him in taxation not in accordance with this Convention, he ma$, notwithstanding the remedies provided b$ the national laws of those %tates, present his case to the competent authorit$ of the Contracting %tate of which he is a resident& This case must be presented within three $ears of the date of receipt of notice of the action which gives rise to taxation not in accordance with the Convention& "2 The competent authorit$ shall endeavour, if the ob;ection appears to it to be ;ustified and if it is not itself able to arrive at an appropriate solution, to resolve the case b$ mutual agreement with the competent authorit$ of the other Contracting %tate, with a view to the avoidance of taxation not in accordance with the Convention& An$ agreement reached shall be implemented notwithstanding an$ time limits in the laws of the Contracting %tates& -2 The competent authorities of the Contracting %tates shall endeavour to resolve b$ mutual agreement an$ difficulties or doubts arising as to the interpretation or application of the Convention& The$ ma$ also consult together for the elimination of double taxation in cases not provided for in the Convention& ,2 The competent authorities of the Contracting %tates ma$ communicate with each other directl$ for the purpose of reaching an agreement in the sense of the preceding paragraphs& 4hen it seems advisable in order to reach agreement to have an oral exchange of opinions, such exchange ma$ ta9e place through a Commission consisting of representatives of the competent authorities of the Contracting %tates& ARTIC! '+ # 3xchange of information or document # )2 The competent authorities of the Contracting %tates shall exchange such information or document as is necessar$ for carr$ing out the provisions of this Convention or for prevention of evasion of taxes which are the sub;ect of this Convention& An$ information or document so exchanged shall be treated as secret but ma$ be disclosed to persons (including courts or other authorities) concerned with the assessment, collection, enforcement, investigation or prosecution in respect of the taxes which are the sub;ect of this Convention, or to persons with respect to whom the information or document relates& "2 The exchange of information or documents shall be either on a routine basis or on re2uest with reference to particular cases or both& The competent authorities of the Contracting %tates shall agree from time to time on the list of the information or documents which shall be furnished on a routine basis& -2 The provisions of paragraph ()) shall not be construed so as to impose on a Contracting %tate the obligation (a) to carr$ out administrative measures at variance with the laws or administrative practice of that or of the other Contracting %tate . (b) to suppl$ information or documents which are not obtainable under the laws or in the normal course of the administration of that or of the other Contracting %tate . (c) to suppl$ information or documents which would disclose an$ trade, business, industrial, commercial or professional secret or trade process or information the disclosure of which would be contrar$ to public polic$& ARTIC! '0 # 8iplomatic and consular activities # 6othing in this Convention shall affect the fiscal privileges of diplomatic or consular officials under the general rules of international law or under the provisions of special agreements& '(A)T*R -I - ,INA/ )R+-ISI+NS ARTIC! '7 # 3ntry into force # !ach of the Contracting %tate shall notif$ to the other completion of the procedures re2uired b$ its law for the bringing into force of this Convention& The Convention shall enter into force on the date of the later of these notifications and shall thereupon have effect (a) in India, in respect of income and capital gains assessable for an$ assessment $ear commencing on or after "st April, "*7- . (b) in Mauritius, in respect of income and capital gains assessable for an$ assessment $ear commencing on or after "st Aul$, "*7-& ARTIC! '* # 4ermination # This Convention shall remain in force indefinitel$ but either of the Contracting %tates ma$, on or before the thirtieth da$ of Aune in an$ calendar $ear beginning after the expiration of a period of five $ears from the date of its entr$ into force, give the other Contracting %tate through diplomatic channels, written notice of termination and, in such event, this Convention shall cease to have effect (a) in India, in respect of income and capital gains assessable for the assessment $ear commencing on "st da$ of April in the second calendar $ear next following the calendar $ear in which the notice is given, and subse2uent $ears . (b) in Mauritius, in respect of income and capital gains assessable for the assessment $ear commencing on "st da$ of Aul$ in the second calendar $ear next following the calendar $ear in which the notice is given, and subse2uent $ears& In witness whereof the undersigned, being dul$ authorised thereto, have signed the present Convention& :one on this ',th da$ of August, "*7' at /ort ouis on two original copies each in ?indi and !nglish languages, both the texts being e2uall$ authentic& In case of divergence between the two texts, the !nglish text shall be the operative one& BB BB BB 1605A. Ta!ation of income from dividend and ca"ita gain# under t%e Indo-Mauritiu# Doube Ta! Avoidance 'onvention 1. The Ministr$ of 1inance toda$ "-#,#'888 issued a clarification regarding taxation of income from dividends and capital gains under the Indo#Mauritius :ouble Tax Avoidance Convention (:TAC)& In a circular addressed to all the Chief Commissioners of Income#tax, the Ministr$ said provisions of the Indo#Mauritius :TAC of "*7- appl$ to residents of both India and Mauritius& Article , of the :TAC defines a resident of one %tate to mean an$ person who, under the laws of that %tate is liable to taxation therein b$ reason of his domicile, residence, place of management or an$ other criterion of a similar nature& 1oreign Institutional Investors and other investment funds, etc&, which are operating from Mauritius are invariabl$ incorporated in that countr$& These entities are liable to tax under the Mauritius tax law and are therefore to be considered as residents of Mauritius in accordance with the :TAC& 1. The circular said prior to "#+#"**0, dividends distributed b$ domestic companies were taxable in the hands of the shareholder and tax was deductible at source under the Income#tax Act, "*+"& Cnder the :TAC, tax was deductible at source on the gross dividend paid out at the rate of <D or "<D depending upon the extent of shareholding of the Mauritius resident& Cnder the Income#tax Act, "*+", tax was deductible at source at the rates specified under section ""<A, etc& :oubts have been raised regarding the taxation of dividends in the hands of investors from Mauritius& It is hereb$ clarified that wherever a Certificate of Residence is issued b$ the Mauritian Authorities, such certificate will constitute sufficient evidence for accepting the status of residence as well as beneficial ownership for appl$ing the :TAC accordingl$& 2. It further said, the test of residence mentioned above would also appl$ in respect of income from capital gains on sale of shares& Accordingl$, 1IIs, etc&, which are resident in Mauritius would not be taxable in India on income from capital gains arising in India on sale of shares as per paragraph , of article "-& The aforesaid clarification shall appl$ to all proceedings which are pending at various levels& )I0 )re## Reea#e & 8ated )-(,("'''2 16050. 'arification regarding agreement for avoidance of doube ta!ation $it% Mauritiu# 1. A Convention for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes of income and capital gains was entered into between the Government of India and the Government of Mauritius and was notified on +#"'#"*7-& In respect of India, the Convention applies from the assessment $ear "*7-#7, and onwards& 1. Article "- of the convention deals with taxation of capital gains and it has five paragraphs& The first paragraph gives the right of taxation of capital gains on the alienation of immovable propert$ to the countr$ in which the propert$ is situated& The second and third paragraphs deal with right of taxation of capital gains on the alienation of movable propert$ lin9ed with business or professional enterprises and ships and aircrafts& 2. /aragraph , deals with taxation of capital gains arising from the alienation of an$ propert$ other than those mentioned in the preceding paragraphs and gives the right of taxation of capital gains onl$ to that %tate of which the person deriving the capital gains is a resident& In terms of paragraph ,, capital gains derived b$ a resident of Mauritius b$ alienation of shares of companies shall be taxable onl$ in Mauritius according to Mauritius tax law& Therefore, an$ resident of Mauritius deriving income from alienation of shares of Indian companies will be liable to capital gains tax onl$ in Mauritius as per Mauritius tax law and will not have an$ capital gains tax liabilit$ in India& 3. /aragraph < defines alienation to mean the sale, exchange, transfer or relin2uishment of the propert$ or the extinguishment of an$ rights in it or its compulsor$ ac2uisition under an$ law in force in India or in Mauritius& 'ircuar & %o2 *#" dated -'(-()&&,2 1605'. 'arification regarding ta!ation of income from dividend# and ca"ita gain# under t%e Indo-Mauritiu# Doube Ta! Avoidance 'onvention 4DTA'5 1. The provisions of the Indo#Mauritius :TAC of "*7- appl$ to residents of both India and Mauritius& Article , of the :TAC defines a resident of one %tate to mean an$ person who, under the laws of that %tate is liable to taxation therein b$ reason of his domicile, residence, place of management or an$ other criterion of a similar nature& 1oreign Institutional Investors and other investment funds, etc&, which are operating from Mauritius are invariabl$ incorporated in that countr$& These entities are liable to tax under the Mauritius Tax law and are, therefore, to be considered as residents of Mauritius in accordance with the :TAC& 1. /rior to "#+#"**0, dividends distributed b$ domestic companies were taxable in the hands of the shareholder and tax was deductible at source under the Income#tax Act, "*+"& Cnder the :TAC, tax was deductible at source on the gross dividend paid out at the rate of <D or "<D depending upon the extent of shareholding of the Mauritius resident& Cnder the Income#tax Act, "*+", tax was deductible at source at the rates specified under section ""<A, etc& :oubts have been raised regarding the taxation of dividends in the hands of investors from Mauritius& It is hereb$ clarified that wherever a Certificate of Residence is issued b$ the Mauritian Authorities, such Certificate will constitute sufficient evidence for accepting the status of residence as well as beneficial ownership for appl$ing the :TAC accordingl$& 2. The test of residence mentioned above would also appl$ in respect of income from capital gains on sale of shares& Accordingl$, 1IIs, etc&, which are resident in Mauritius would not be taxable in India on income from capital gains arising in India on sale of shares as per paragraph , of article "-& 'ircuar & %o2 0#& dated )-(,("'''2 CLARIFICATION ONE
Reference is invited to the Circular 6o& 07*, dated "-#,#'888 issued b$ the @oard where it was clarified that wherever the certificate of residence is issued b$ the Mauritian authorities, such certificate will constitute sufficient evidence for accepting the status of residence, as well as beneficial ownership for appl$ing :TAC accordingl$& The said circular specified the mode of proof of residence of an entit$ in Mauritius& Certain doubts have been raised regarding the effect of the aforesaid circular, particularl$ whether the said circular would also appl$ to entities which are resident of both India and Mauritius& In order to remove all doubts on the sub;ect, it is hereb$ clarified that where an assessee is a resident of both the Contracting %tates, in accordance with para " of article , of Indo#Mauritius :TAC, then, his residence is to be determined in accordance with para - of the said article, which reads as under : -& 4here, b$ reason of the provisions of paragraph ", a person other than an individual is resident of both the Contracting %tates, then it shall be deemed to be a resident of the Contracting %tate in which the place of effective management is situated&
In view of the above, where an Assessing Efficer finds and is satisfied that a compan$ or an entit$ is resident of both India and Mauritius, he would be free to proceed to determine the residential status under para - of article , of :TAC& 4here it is found as a fact that the compan$ has its place of effective management in India, then notwithstanding its being incorporated in Mauritius, it would be taxed under the :TAC in India& Circular : 6o& "F'88-, dated "8#'#'88-&