PROTOCOL
At the signing today of the Convention between the United States
of America and the Republic of India for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with respect to
Taxes on Income, the undersigned have agreed upon the following
provisions, which shall form an integral part of the Convention:
I. Ađ Article 5
It is understood that where an enterprise of a Contracting
State has a permanent establishment in the other Contracting
State in accordance with the provisions of paragraphs 2 (j), 2 (k)
or 2(1) of Article 5 (Permanent Establishment), and the time
period referred to in that paragraph extends over two taxable
years, a permanent establishment shall not be deemed to exist in
a year, if any, in which the use, site, project or activity, as
the case may be, continues for a period or periods aggregating
less than 30 days in that taxable year. A permanent
establishment will exist in the other taxable year, and the
enterprise will be subject to tax in that other Contracting state
in accordance with the provisions of Article 7 (Business
Profits), but only on income arising during that other taxableyear.
II. Ad Article 7
Where the law of the Contracting state in which a permanent
establishment is situated imposes, in accordance with the
provisions of paragraph 3 of Article 7 (Business Profits), a
restriction on the amount of executive and general administrative
expenses which may be allowed as a deduction in determining the
profits of such permanent establishment, it is understood that in
making such a determination of profits the deduction in respect
of such executive and general administrative expenses in no case
shall be less than that allowable under the Indian Income-tax Act
as on the date of signature of this Convention.
III. Ad Articles 7, 10, 11, 12, 15, and 23
It is understood that for the implementation of paragraphs 1
and 2 of Article 7 (Business Profits), paragraph 4 of Article 10
(Dividends), paragraph 5 of Article 11 (Interest), paragraph 6 of
Article 12 (Royalties and Fees for Included Services), paragraph
1 of Article 15 (Independent Personal Services), and paragraph 2
of Article 23 (Other Income), any income attributable to a
permanent establishment or fixed base during its existence is
taxable in the Contracting state in which such permanent
establishment or fixed base is situated even if the payments are
deferred until such permanent establishment or fixed base has
ceased to exist.
IV. Ad Article 12
It is understood that fees for included services, as defined
in paragraph 4 of Article 12 (Royalties and Fees for Included
Services) will, in accordance with United States law, be subject
to income tax in the United States based on net income and, when
earned by a company, will also be subject to the taxes described
in paragraph 1 of Article 14 (Permanent Establishment Tax). The
total of these taxes which may be imposed on such fees, however,
may not exceed the amount computed by multiplying the gross fee
by the appropriate tax rate specified in subparagraph a) or b),
whichever is applicable, of paragraph 2 of Article 12.
V. Ad Article 14
It is understood that references in paragraph 1 of Article 14
(Permanent Establishment Tax) to profits that are subject to tax
in the United States under Article 6 (Income from Immovable
Property (Real Property)), under Article 12 (Royalties and Fees
for Included Services), as fees for included services as defined
in that Article, or under Article 13 (Gains) of this Convention,
are intended to refer only to cases in which the profits in
question are subject to United States tax based on net income
(i.e., by virtue of being effectively connected, or being treated
as effectively connected, with the conduct of a trade or business
in the United States). Any income which is subject to tax under
those Articles based on gross income is not subject to tax under
Article 14.
IN WITNESS WHEREOF, the undersigned, being duly authorized by
their respective Governments, have signed this Protocol.
DONE at New Delhi in duplicate, this 12th day of September,
1989, in the English and Hindi languages, both texts being
equally authentic. In case of divergence between the two texts,
the English text shall be the operative one.
FOR THE GOV
GOVERN
ERNMEN
MENT THE
T OF THE FOR THE GOVERNMENT OF THE
UNIT
UNITED
ED ST
STAT
ATES AMER
ES OF AMERICA:
ICA: REPUBLIC OF INDIA:
John R. Hubbard N.K. Sengupta
Ambassador Secretary to the
Government of India