Notification No. 368

A tax treaty given effect under section 24A of the Income-tax Act, 1961

What this is

Notification No. 368 was published on 15 December 2006. Its subject is A tax treaty given effect under section 24A of the Income-tax Act, 1961.

This one is about a tax treaty. India’s treaties enter Indian law by notification under section 90; where the instrument below is that notification, its date decides from when the treaty may be applied, and where it is a circular, it is the Board telling its officers how it reads the treaty — which is not the same thing.

What it does

Acting under section 90 of the Income-tax Act, 1961, the Central Government amends the notification G.S.R. 756(E) dated 9 September 1987 by which the India-Norway Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital was given effect. In the annexed Convention, in paragraph 2 of Article 13 relating to royalties and fees for technical services, the words and figures "not exceed 20 percent" are substituted by "not exceed 10 percent". The amendment takes effect from 1 April 2006 in India and from 1 January 2006 in Norway.

Why it was issued

Paragraph 2 of Article 13 of the Convention provides that if, after its entry into force, India limits its taxation on royalties or fees for technical services under a Convention or Agreement with a third State to a lower rate, that rate shall also apply under this Convention; the Conventions with Armenia (in force 9 September 2004), Sudan (15 April 2004) and Hungary (4 March 2005) did so.

Who it reaches

Norwegian residents receiving royalties or fees for technical services from India
Indian payers withholding tax on such payments to Norway
Indian residents receiving such income from Norway
assessing officers applying the treaty rate

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.24A	no counterpart recorded
s.44A	s.50
s.90	s.159

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

NOTIFICATION NO. 368/2006, DATED 15-12-2006

Whereas the Convention between the Government of the Republic of India and the Kingdom of Norway for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital came into force in the year 1986, being the year in which it was signed, after the notification by both the Contracting States to each other of the completion of the procedures required under their laws for bringing into force the said Convention;
AND WHEREAS the Central Government in exercise of the powers conferred by section 44A of the Wealth-tax Act, 1957 (27 of 1957), section 90 of the Income-tax Act, 1961 (43 of 1961), and section 24A of the Companies (Profits) Surtax Act, 1964 (7 of 1964), had directed that all the provisions of the said Convention annexed to the notification of the Government of India, Ministry of Finance (Department of Revenue) (Foreign Tax Division) number G.S.R.756 (E) dated the 9th September, 1987 shall be given effect to in the Union of India;
AND WHEREAS the aforesaid Convention, under paragraph 2 of Article 13 relating to Royalties and fees for technical services, provides that if after the entry into force of this Convention, under any Convention or Agreement between India and a third State, India should limit its taxation on royalties or fees for technical services to a rate lower than that provided for in the present agreement on the said items of income, then, the same rate as provided for in that Convention or Agreement on the said items of income shall also apply under this Convention;
AND WHEREAS the Conventions between India and Armenia, which came into force on the 9th September, 2004, India and Sudan which came into force on the 15th April, 2004 and Hungary which came into force on the 4th March, 2005, have limited the taxation at source on royalties and fees for technical services to a rate lower than that provided in the Convention between India and Norway on the said items of income;
NOW, THEREFORE, in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following amendments to the notification of the Government of India, Ministry of Finance (Department of Revenue) (Foreign Tax Division) number G.S.R.756(E) dated the 9th September, 1987, with effect from the 1st April, 2006, in India and with effect from 1st January, 2006, in Norway, namely:-
In the said notification, in the Annexure, relating to the Convention between the Republic of India and the Kingdom of Norway for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, in Article 13, in paragraph 2 for the words and figures "not exceed 20 percent" the words and figures "not exceed 10 percent " shall be substituted.

[F. No. 505/3A/81-FTD]

From when

1 April 2006 in India and 1 January 2006 in Norway, retrospectively.

What to watch

The source rate ceiling on royalties and fees for technical services falls from 20 per cent to 10 per cent.
The amendment operates from 1 April 2006 in India and 1 January 2006 in Norway, so the two States apply it from different dates.
The change comes through the most-favoured-nation clause in paragraph 2 of Article 13, triggered by the Armenia, Sudan and Hungary Conventions.
The notification is dated 15 December 2006 but operates from 1 April 2006 in India, so it is retrospective in effect.

Where you meet it

In withholding on a royalty or technical fee payment to a Norwegian resident, and in a treaty relief claim in the return of income or in assessment.

An example

Ours, not the Board’s: a worked case built from the rule the instrument sets, to show how it falls out.

A royalty of Rs. 1 crore paid by an Indian company to a Norwegian resident on 1 July 2006 bears Indian tax at not more than 10 per cent, that is Rs. 10 lakh, in place of the 20 per cent ceiling of Rs. 20 lakh that the Convention had carried.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. 54E- — A tax treaty given effect under section 24A of the Income-tax Act, 1961 19 January 2001
Notification No. 650(E) — A tax treaty given effect under section 24A of the Income-tax Act, 1961 10 July 2000
Notification No. G.S.R. 38(E) — 38 e convention between the government of the republic of INDIA and the government of the kingdom of sweden for the avoi 27 March 1989
Notification No. 78 — Section 90 of the Income-tax Act, 1961 - Double taxation agreement - Agreement for Avoidance of Double Taxation and Prev 12 October 2009
Notification No. 5 — Section 90 of the Income-tax Act, 1961 - Double taxation agreement - Agreement for Avoidance of Double Taxation and Prev 7 January 2009
Notification No. 4 — Section 90 of the Income-tax Act, 1961 - Double taxation agreement - Agreement for Avoidance of Double Taxation and Prev 7 January 2009

← Notification No. 369 · Notification No. 367 →

What a notification is. A notification is made under a power the Act itself gives, and within that power it is law — unlike a circular, which only binds the department. Its reach is the reach of the enabling provision and no wider, and the date it carries decides from when it works.

Source: the Income Tax Department’s own published text — its page for this instrument.