Malaysia

Notification
No. 1705/F. No. 11(43)/46-FTD dt. 1-4-1977.

G.S.R.
167(E).—-Whereas the Government of India and the Government of Malaysia have
concluded an Agreement, as set out in the Annexure hereto, for the avoidance of
double taxation and the prevention of fiscal evasion with respect to taxes on
income;

And
where as all the requirements have been completed in Malaysia and India as are
necessary to give the said Agreement the force of law in Malaysia and India
respectively, as required by paragraph 1 of Article 27 of the said Agreement;

And
whereas the diplomatic notes of this effect have been exchanged between the
said two Governments, as required by paragraph 2 of Article 27 of the said
Agreement;

Now,
therefore, in exercise of the powers conferred by section 90 of the Income-tax
Act, 1961 (43 of 1961) and section 24A of the Companies (Profits) Surtax Act,
1964 (7 of 1964), the Central Government hereby directs that all the provisions
of the said Agreement shall be given effect to in the Union of India.

ANNEXURE

AGREEMENT
BETWEEN THE GOVERNMENT OF INDIA AND THE GOVERNMENT OF MALAYSIA FOR THE
AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT
TO TAXES ON INCOME

The
Government of India and the Government of Malaysia,

Desiring
to conclude an Agreement for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with respect to Taxes on Income.

Have
agreed as follows:

CHAPTER
I

SCOPE
OF THE AGREEMENT

ARTICLE
I

Personal
Scope

This
Agreement shall apply to persons who are residents of one of both of the
Contracting States.

ARTICLE
II

Taxes
covered

1.     The taxes which are
the subject of this Agreement are:

a.     in Malaysia:

                     
i.       
the
income-tax;

                    
ii.       
the
supplementary income-tax, that is, tin profits tax, development tax and timber
profits tax; and

                   
iii.       
the
petroleum income-tax;

(hereinafter
referred to as “Malaysian tax”);

a.     

b.    in India:

                     
i.       
the
income-tax and any surcharge on income-tax imposed under the Income-tax Act,
1961 (43 of 1961);

                    
ii.       
the
surtax imposed under Companies (Profits) surtax Act, 1964 (7 of 1964),

(hereinafter
referred to as “Indian tax”).

1.      

2.     The Agreement shall
also apply to any other taxes of a substantially similar character to those
referred to in the preceding paragraph imposed in either Contracting State
after the date of signature of this Agreement.

3.     At the end of each
year, the competent authorities of the Contracting States shall notify to each
other any significant changes which have been made in their respective taxation
laws.

CHAPTER
II

DEFINITIONS

ARTICLE
III

General
Definitions

1.     In this Agreement,
unless the context otherwise requires:—-

a.     the term

“Malaysia” means the Federation of Malaysia and includes any area
adjacent to the territorial waters of Malaysia which, in accordance with
international law, has been or may hereafter be designated under the laws of
Malaysia concerning the Continental Shelf as an area within which the rights of
Malaysia with respect to the sea bed and sub-soil and their natural resources
may be exercised;

b.    the term
“India” means the territory of India and includes any area adjacent
to the territorial waters of India which, in accordance with international law,
has been or may hereafter be designated under the laws of India as an area
within which the rights of India with respect to the sea bed and sub-soil and
their natural resources may be exercised;

c.     the terms “one
of the Contracting States” and “the other Contracting State”

means Malaysia or India, as the context requires;

d.    the term
“tax” means Malaysian tax or Indian tax, as the context requires;

e.     the term
“company” means any body corporate or any entity which is treated as
a body corporate for tax purposes under the taxation laws of the respective
Contracting States;

f.     the term
“person” shall have the meaning assigned to it in the taxation laws
in force in the respective Contracting States;

g.    the terms
“Malaysian enterprise” and “Indian enterprise” mean
respectively an enterprise carried on by a resident of Malaysia and an
enterprise carried on by a resident of India;

h.     the terms
“enterprise of one of the Contracting States” and “enterprise of
the other Contracting State” mean a Malaysian enterprise or an Indian
enterprise, as the context requires;

i.      the term
“competent authority” means, in the case of Malaysia, the Minister of
Finance or his authorised representative; and in the case of India, the Central
Government in the Ministry of Finance (Department of Revenue and Insurance).

1.      

2.     In the application of
this Agreement by one of the Contracting States any term not otherwise defined
shall, unless the context otherwise requires, have the meaning which it has
under the laws of that Contracting State relating to the tax which are the
subject of this Agreement.

ARTICLE
IV

Fiscal
Domicile

1.     In this Agreement,
unless the context otherwise requires:—-

a.     the term “resident
of Malaysia” means

                     
i.       
an
individual who is ordinarily resident in Malaysia; or

                    
ii.       

a
person other than individual who is resident in Malaysia; for the basis year
for a year of assessment for the purpose of Malaysian tax;

a.     

b.    the term
“resident of India” means a person who is treated as a resident of
India in the previous year for the relevant assessment year for the purpose of
Income-tax;

c.     the terms

“resident of one of the Contracting States” and “resident of the
other Contracting State” mean a resident of Malaysia or a resident of
India, as the context requires.

1.      

2.     Where by reason of
the provisions of paragraph 1 of this Article an individual is a resident of
both Contracting States, then his residential status shall be determined in
accordance with the following rules:

a.     he shall be deemed to
be a resident of the Contracting State in which he has a permanent home
available to him. If he has a permanent home available to him in both
Contracting States, he shall be deemed to be a resident of the Contracting
State with which his personal and economic relations are closer;

b.    if the Contracting
State, with which his personal and economic relations are closer cannot be
determined, or if he has not a permanent home available to him in either
Contracting State, he shall be deemed to be a resident of the Contracting State
in which he has an habitual abode;

c.     if he has an habitual
abode in both Contracting States or in neither of them, he shall be deemed to
be a resident of the Contracting State of which he is a citizen;

d.    if he is a citizen of
both Contracting States or of neither of them, the competent authorities of the
Contracting States shall determine the question by mutual agreement.

1.      

2.     Where by reason of
the provisions of paragraph 1 of this Article a person other than an individual
is a resident of both Contracting States, then it shall be deemed to be a
resident of the Contracting State in which its place of effective management is
situated.

ARTICLE
V

Permanent
Establishment

1.     For the purposes of
this Agreement, the term “permanent establishment” means a fixed
place of business in which the business of the enterprise is wholly or partly
carried on.

2.     The term
“permanent establishment” shall include especially:

a.     a place of
management;

b.    a branch;

c.     an office;

d.    a factory;

e.     a workshop;

f.     a warehouse;

g.    a mine, oil well,
quarry or other place of extraction of natural resources;

h.     a building site or
construction, installation or assembly project which exists for more than six
months;

i.      a farm or plantation;

j.      a place of extraction
of timber or forest produce.

3.     The term
“permanent establishment” shall not be deemed to include:

a.     the use of facilities
solely for the purpose of storage, display or delivery of goods or merchandise
belonging to the enterprise;

b.    the maintenance of a
stock of goods or merchandise belonging to the enterprise solely for the
purpose of storage, display or delivery;

c.     the maintenance of a
stock of goods or merchandise belonging to the enterprise solely for the
purpose of processing by another enterprise;

d.    the maintenance of a
fixed place of business solely for the purpose of purchasing goods or
merchandise or collecting information, for the enterprise;

e.     the maintenance of a
fixed place of business solely for the purpose of advertising, for the supply
of information, for scientific research or for similar activities which has a
preparatory or auxiliary character, for the enterprise.

1.      

2.      

3.      

4.     An enterprise of one
of the Contracting States shall be deemed to have a permanent establishment in
the other Contracting State if:

a.     it carries on
supervisory activities in that other Contracting State for more than six months
in connection with a construction, installation or assembly project which is
being undertaken in that other Contracting State;

b.    it carries on a
business which consists of providing the services of public entertainers (such
as stage, motion picture, radio or television artistes and musicians) or
athletes in that other Contracting State unless the enterprise is directly or
indirectly supported, wholly or substantially, from the public funds of the
Government of the first-mentioned Contracting State in connection with the
provision of such services.

1.      

2.     Subject to the
provisions of paragraph 6 of this Article, a person acting in one of the
Contracting States on behalf of an enterprise of the other Contracting State
shall be deemed to be a permanent establishment in the first-mentioned
Contracting State if:

a.     he has, and
habitually exercises in that first-mentioned Contracting State, an authority to
conclude contracts on behalf of the enterprise unless his activities are
limited to the purchase of goods or merchandise for the enterprise; or

b.    he maintains in the
first-mentioned Contracting State a stock of goods or merchandise belonging to
the enterprise from which he regularly fills orders on behalf of the
enterprise.

1.      

2.      

3.     An enterprise of one
of the Contracting States shall not be deemed to have a permanent establishment
in the other Contracting State merely because it carries on business in that
other Contracting State through a broker, general commission agent or any other
agent of an independent status, where such persons are acting in the ordinary
course of their business.

4.     The fact that a
company which is a resident of one of the Contracting States controls or is
controlled by a company which is a resident of the other Contracting State or
which carries on business in that other Contracting State whether through a
permanent establishment or otherwise shall not of itself constitute either
company a permanent establishment of the other.

CHAPTER
III

TAXATION
ON INCOME

ARTICLE
VI

Income
from Immovable Property

1.     Income from immovable
property may be taxed in the Contracting State in which such property is
situated.

2.     The term
“immovable property” shall be defined in accordance with 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, oil wells, quarries and other places of
extraction of natural resources or of timber or forest produce. Ships, boats
and aircraft shall not be regarded as immovable property.

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

4.     The provisions of
paragraph 1 and 3 of this Article shall also apply to the income from immovable
property of an enterprise.

ARTICLE
VII

Business
Profits

1.     The income or profits
of an enterprise of one of the Contracting States shall be taxable only in that
Contracting State, unless the enterprise carries on business in the other
Contracting State through a permanent establishment situated therein. If the
enterprise carries on business as aforesaid, tax may be imposed in that other
Contracting State on the income or profit of the enterprise but only on so much
of that income or profit as is attributable to that permanent establishment.

2.     Where an enterprise
of one of the Contracting States carries on business in the other Contracting
State through a permanent establishment situated therein, there shall be in
each Contracting State be attributed to that permanent establishment the income
or profits which it might be expected to make if it were a distinct and

separate enterprise engaged in the same or similar activities under the same or
similar conditions and dealing wholly independently with the enterprise of
which it is a permanent establishment.

3.     In the determination
of the income or profits of a permanent establishment, there shall be allowed
as deductions expenses which are incurred for the purposes of the permanent
establishment including executive and general administrative expenses so
incurred, whether in the State in which the permanent establishment is situated
or elsewhere.

4.     In so far as it has
been customary in a Contracting State to determine the income or profits to be
attributed to a permanent establishment on the basis of an apportionment of the
total income or profits of the enterprise to its various parts, nothing in
paragraph 2 or paragraph 3 of this Article shall preclude such Contracting
State from determining the income or profits to be taxed by such an
apportionment as may be cutomary; the method of apportionment adopted shall,
however, be such that the result shall be in accordance with the principles
laid down in this Article.

5.     No income or profits
shall be attributed to a permanent establishment by reason of the mere purchase
by that permanent establishment of goods or merchandise for the purpose of
expert to the enterprise of which it is the permanent establishment.

6.     Where income or
profits include items of income which are dealt with separately in other
Articles of this Agreement, then the provisions of those Articles shall not be
affected by the provisions of this Article.

ARTICLE
VIII

Shipping

1.     Income of an
enterprise of one of the Contracting States derived from the other Contracting
State from the operation of ships in international traffic may be taxed in that
other Contracting State, but the tax chargeable in that Contracting State on
such income shall be reduced by an amount equal to fifty per cent of such tax.

2.     For the purposes of
paragraph 1 of this Article income derived from the other Contracting State
shall mean income from the carriage of passengers, mail, livestock or goods
shipped in that other Contracting State:

Provided
that there shall be excluded the income accruing from the carriage of
passengers, mail, livestock or goods which are brought to that other
Contracting State solely for transhipment or for transfer from an aircraft to a
ship or from a ship to another ship.

1.      

2.      

3.     Where income from the
operation of ship in international traffic is derived by an enterprise of one
of the Contracting States from a State other than the Contracting States, such
income shall be taxable only in the Contracting State of which the interprise
is a resident.

4.     The provisions of
paragraphs 1, 2 and 3 of this Article shall likewise apply to income arising
from participation in shipping pools of any kind by such enterprise engaged in
shipping operations.

ARTICLE
IX

Air
Transport

1.     Income of an
enterprise of one of the Contracting States derived from the other Contracting
State from the operation of aircraft in international traffic shall not be
taxed in the other Contracting State.

2.     For the purposes of
paragraph 1 of this Article, income derived from the other Contracting State
shall mean income from the carriage of passengers, mail, livestock or goods
from the other Contracting State.

3.     Where income from the
operation of aircraft in international traffic is derived by an enterprise of
one of the Contracting States from a State other than the Contracting States,
such income shall be taxable only in the Contracting State of which the
enterprise is a resident.

4.     The provisions of
paragraphs 1, 2 and 3 of this Article shall likewise apply, to income arising
from participation in aircraft pools of any kind by such enterprise engaged in
air transport operations.

ARTICLE
X

Associated
Enterprises

Where—-

a.     an enterprise of one
of the Contracting States participates directly or indirectly in the
management, control or capital of an enterprise of the other Contracting State;
or

b.    the same persons
participate directly or indirectly in the management, control or capital of an
enterprise of one of the Contracting States and of an enterprise of other
Contracting State;

and
in either case, conditions are made or imposed between the two enterprises in
their commercial or financial relations, which differ from those which would be
made between independent enterprises, then any income or profits which would
but for those conditions have accrued to one of the enterprises, but by reason
of those conditions have not so accrued, may be included in the income or
profits of that enterprise and taxed accordingly.

ARTICLE
XI

Dividends

1.     Dividends paid by a
company which is a resident of a Contracting State to a resident of the other
Contracting State may be taxed in the first-mentioned Contracting State.

2.     Where a dividend was
paid by a company which was resident in both Malaysia and Singapore and the meeting
at which the dividend was declared was held in Malaysia, or where a dividend
was paid by a company which was resident in Singapore and at the time of
payment of that dividend the company declared itself to be a resident of
Malaysia for the purposes of Article VII of the Agreement between the
Government of Malaysia and the Government of the Republic of Singapore for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect
to Taxes on Income signed in Singapore on 26th December, 1968, the dividend
shall be deemed to have been paid by a company resident in Malaysia.

3.     Where a dividend was
paid by a company which was resident in both Malaysia and Singapore and the
meeting at which the dividend was declared was held in Singapore, or where a
dividend was paid by a company which was resident in Malaysia and at the time
of payment of that dividend, the company declared itself to be a resident of
Singapore for the purposes of Article VII of the Agreement between the
Government of Malaysia and the Government of the Republic of Singapore for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect
to Taxes on Income signed in Singapore on 26th December, 1968, the dividend
shall be deemed to have been paid by a company not resident in Malaysia.

4.     Nothing in this
Article shall affect the provisions of the law in Malaysia under which the tax
in respect of a dividend paid by a company resident in Malaysia from which
Malaysian tax has been, or has been deemed to be, deducted may be adjusted by
reference to the rates of tax appropriate to the year of assessment immediately
following that in which the dividend was paid.

5.     Where a company which
is a resident of one of Contracting States derives income or profits from
sources within the other Contracting State, there shall not be imposed in that
other Contracting State any form of taxation on dividends paid by the company
to persons not resident in that other Contracting State any form of taxation on
dividends paid by the company to persons not resident in that other Contracting
State or any tax in the nature of an undistributed profits tax on the
undistributed profits of the company, whether or not those dividends represent,
in whole or in part, income or profits so derived.

ARTICLE
XII

Interest

1.     Interest derived by a
resident of one of the Contracting States from the other Contracting State may
be taxed in that other Contracting State.

2.     Interest shall be
deemed to be derived from a Contracting State if the payer is the Government, a
State Government, a political sub-division, a local authority or a resident of
that Contracting State. Where, however, the payer has in the other Contracting
State a permanent establishment with which the loan or other indebtedness in
respect of which the interest is paid, is effectively connected and such
interest is borne by such permanent establishment, then such interest shall be
deemed to be derived from the Contracting State in which the permanent
establishment is situated. In such a case, the provisions of Article 7 shall
apply.

3.     Where, owing to a
special relationship between the payer and the recipient, or between both of
them and some other persons, 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 by the payer and the recipient in the absence of such relationship,
the provisions of this Article shall apply only to the last mentioned amount.
In that case, the excess part of the payments shall be taxed according to the
laws of each Contracting State, due regard being had to the other provisions of
this Agreement.

4.     The term
“interest” as used in this Article means income from Government
securities, bonds or debentures, whether or not secured by mortgage and whether
or not carrying a right to participate in profits, and debt-claims of every
kind as well as all other income assimilated to income from money lent by the
taxation law of the State in which the income arises.

ARTICLE
XIII

Royalties

1.     Royalties derived by
a resident of one of the Contracting State from the other Contracting State may
be taxed in that other Contracting State.

2.     Notwithstanding the
provisions of paragraph 1 of this Article, royalties of the kind mentioned in
clauses (a) and (b) of paragraph 5 of this Article and derived from Malaysia by
a resident of India shall be exempt from tax in Malaysia, if the agreement
under which such royalties are payable is approved by the Government of
Malaysia after this Agreement is signed.

3.     Royalties shall be
deemed to be derived from a Contracting State if the payer is the Government, a
State Government, a political sub-division, a local authority or a resident of
that Contracting State. Where, however, the payer has in the other Contracting
State a permanent establishment with which the right or property giving rise to
the royalties is effectively connected, then, such royalties shall be deemed to
be derived from the Contracting State in which the permanent establishment is
situated. In such a case, the provisions of Article 7 shall apply.

4.     Where, owing to a
special relationship between the payer and the recipient, or between both of
them and some other person, the amount of the royalties having regard to the
use, right or information for which they are paid, exceeds the amount which
would have been agreed upon by the payer and the recipient in the absence of
such relationship, the provisions of this Article shall apply only to the last
mentioned amount. In that case, the excess part of the payments shall be taxed
according to the laws of each Contracting State, due regard being had to the
other provisions of this Agreement.

5.     The term

“royalties” as used in this Article means payment of any kind
received as a consideration for the use of, or the right to use—

a.     any patent, trademark
design or model, plan, secret formula or process;

b.    industrial,
commercial, or scientific equipment, or information concerning industrial,
commercial or scientific experience

c.     any copyright of
literary, artistic or scientific work, cinematograph films, or tapes for
television or broadcasting. but does not include royalties or other amounts
paid in respect of operation of mines or quarries or of the extraction or
removal of natural resources.

ARTICLE
XIV

Dependent
Personal Services

1.     Subject to the provisions
of Articles 15, 17 and 18, salaries, wages and other similar remuneration
derived by a resident of one of the Contracting States in respect of an
employment shall be taxable only in that Contracting State unless the
employment is exercised in the other Contracting State. If the employment is so
exercised, such remuneration as is derived therefrom may be taxed in that other
Contracting State.

2.     Notwithstanding the
provisions of paragraph 1 of this Article, an individual who is a resident of
Malaysia shall be exempt from tax in India on remuneration in respect of an
employment exercised in any previous year in India, if—–

a.     he is present in
India for a period or periods not exceeding in the aggregate 183 days during
that previous year; and

b.    any period for which
he is present within India does not form part of a continuous period of more
than 183 days throughout which he is present within India; and

c.     the remuneration is
paid by, or on behalf of, an employer who is not a resident of India; and

d.    the amount of
remuneration is not deductible in computing the income or profits of an
enterprise chargeable to Indian tax.

1.      

2.      

3.     Notwithstanding the
provisions of paragraph 1 of this Article, an individual who is a resident of
India shall be exempt from tax in Malaysia on remuneration in respect of an
employment exercised in any basis year for a year of assessment in Malaysia,
if—-

a.     he is present in
Malaysia for a period or periods not exceeding in the aggregate 183 days during
that basis year; and

b.    any period for which
he is present within Malaysia does not form part of a continuous period of more
than 183 days throughout which he is present within Malaysia; and

c.     the remuneration is
paid by or on behalf of an employer who is not a resident of Malaysia; and

d.    the amount of remuneration
is not deductible in computing the income or profits of an enterprise
chargeable to Malaysian tax.

1.      

2.      

3.      

4.     Notwithstanding the
preceding provisions of this Article, remuneration in respect of an employment
exercised aboard a ship or aircraft engaged in international traffic and
operated by an enterprise of one of the Contracting States may be taxed in that
Contracting State.

5.     In relation to
remuneration of a director of a company derived from the company, the
provisions of this Article shall apply as if the remuneration were remuneration
of an employee in respect of an employment.

ARTICLE
XV

Directors
Fees

Notwithstanding
the provisions of Article 14, directors’ fees and similar payments derived by a
resident of one of the Contracting State in his capacity as a member of the
board of directors of a company which is a resident of the other Contracting
State may be taxed in that other Contracting State.

ARTICLE
XVI

Artistes
and Athletes

1.    

Notwithstanding
the provisions of Article 14, income derived by public entertainers (such as
stage, motion picture, radio or television artistes and musicians) or athletes,
from their personal activities as such may be taxed in the Contracting State in
which these activities are exercised:

Provided
that such income shall not be taxed in the said Contracting State if the visit
of the public entertainers or athletes to that State is directly or indirectly
supported, wholly or substantially, from the public funds of the Government of
the other Contracting State.

1.      

2.     For the purposes of
this Article, the term “Government” includes a State Government, a
political sub-division, or a local or statutory authority of either Contracting
State.

ARTICLE
XVII

Non-Government
Pensions and Annuities

Any
pension (other than a pension of the kind referred to in Article 18) or any
annuity in respect of past services derived by an individual who is a resident
of one of the Contracting States from the other Contracting State shall be
taxable only in the first-mentioned Contracting State.

ARTICLE
XVIII

Government
Remuneration and Pension

1.     Remuneration (not
being a pension) paid by the Government of Malaysia to any individual who is a
citizen of Malaysia in respect of services rendered in the discharge of
governmental functions in India shall be exempt from Indian tax.

2.     Remuneration (not
being a pension) paid by the Government of India to any individual who is a
citizen of India in respect of services rendered in the discharge of
governmental functions in Malaysian shall be exempt from Malaysian tax.

3.     Any pension paid by
the Government of one of the Contracting State to any individual may be taxed
in that Contracting State.

4.     The provisions of
paragraphs 1 and 2 of this Article shall not apply to payments in respect of
services rendered in connection with any business carried on by the Government
of either of the Contracting States for the purposes of profit.

5.     For the purposes of
this Article, the term “Government” shall include any State
Government or local or statutory authority of either Contracting State and in
particular the Bank Negara Malaysia and the Reserve Bank of India.

ARTICLE
XIX

Students
and Apprentices

1.     An individual who is
a resident of one of the Contracting States and who visits the other
Contracting State solely as a student at a recognised university, college,
school or other similar recognised education institution in that other
Contracting State or as a business or technical apprentice therein, for a
period not exceeding five years from the date of his first arrival in that
other Contracting State in connection with that visit, shall be exempt from tax
in that other Contracting State on—-

a.     all remittances from
abroad for the purposes of his maintenance, education or training; and

b.    any remuneration (not
exceeding 3,000 Malaysian dollars or 7,500 Indian Rupees during any basic year
or previous year, as the case may be, for any year of assessment) for personal
services rendered in that other Contracting State with a view to supplementing
the resources available to him for such purposes.

1.      

2.     An individual who is
a resident of one of the Contracting States and who visits the other
Contracting State for the purposes of study, research or training solely as a
recipient of a grant, allowance or award from the Government of either of the
Contracting States or from a scientific, educational, religious or charitable
organisation or under a technical assistance programme entered into by the
Government of either of the Contracting States for a period not exceeding five
years from the date of his first arrival in that other Contracting State in
connection with that visit shall be exempt from tax in that other Contracting
State on—-

a.     the amount of such
grant, allowance or award;

b.    all remittances from
abroad for the purposes of his maintenance, education or training; and

c.     any remuneration (not
exceeding 3,000 Malyasian Dollars or 7,500 Indian Rupees for any basic year or
previous year, as the case may be, for any year of assessment) in respect of
services in that other Contracting State if the services are performed in connection
with his study, research, training or are incidental thereto.

1.      

2.      

3.     An individual who is
a resident of one of the Contractng States and who visits the other Contracting
State solely as an employee of or under contract with, the Government of an
enterprise of the first-mentioned Contracting State solely for the purpose of
acquiring technical, professional or business experience for a period not
exceeding twelve months from the date of his first arrival in that other
Contracting State in connection with that visit shall be exempt in that other
Contracting State on:—

a.     all remittances from
abroad for the purposes of maintenance, education or training; and

b.    any remuneration, so
far as it is not in excess of 5,000 Malaysian Dollars or 12,500 Indian Rupees,
as the case may be, for personal services rendered in that other Contracting
State, provided such services are in connection with his studies or training or
are incidental thereto.

1.      

2.      

3.      

4.     For the purposes of
this Article and Article 20:—-

                     
i.       

the
term “Government” shall have the same meaning as in paragraph 5 of
Article 18;

                    
ii.       
an
individual shall be deemed to be a resident of a Contracting State if he is
resident in that Contracting State in the basic year or the previous year, as
the case may be, in which he visits the other Contracting State or in the
immediately preceding basic year or the previous year.

ARTICLE
XX

Professors,
Teachers and Researchers

1.     An individual who is
a resident of one of the Contracting States and who, at the invitation of the
Government of the other Contracting State or of a university or other
recognised educational institution situated in that other Contracting State,
visits that other Contracting State for the primary purpose of teaching or
engaging in research or both, at a university or other recognised educational
institution shall be exempt from tax in that other Contracting State on his
income from personal services for teaching or research or both at the
university or the recognised educational institution, for a period not
exceeding two years from the date of his arrival in that other Contracting
State.

2.     This Article shall
not apply to income from research if such research is undertaken primarily for
the private benefit of a specific person or persons.

ARTICLE
XXI

Income
of Government Institutions

1.     The Government of one
of the Contracting States shall be exempt from tax in the other Contracting
State in respect of any income derived by such Government from that other
Contracting State.

2.     For the purpose of
paragraph 1 of this Article, the term “Government”:—-

a.     in the case of
Malaysia means the Government of Malaysia and shall include:—-

                     
i.       
the
Governments of the States;

                    
ii.       
the
Bank of Negara Malaysia;

                   
iii.       
any
such institution or body as may be agreed from time to time between the two
Contracting States;

a.     

b.    in the case of India
means the Government of India and shall include:—-

                     
i.       
the
Government of the States and the Union territories of India;

                    

ii.       
the
Reserve Bank of India;

                   
iii.       
any
such institution or body as may be agreed from time to time between the two
Contracting States.

CHAPTER
IV

ELIMINATION
OF DOUBLE TAXATION

ARTICLE
XXII

1.     The laws in force in
either of the Contracting States will continue to govern the taxation of income
in the respective Contracting States except where provisions to the contrary
are made in this Agreement.

2.      

a.     The amount of
Malaysian tax payable, under the laws of Malaysia, and in accordance with the
provisions of this Agreement, whether directly or by deduction, by a resident
of India, in respect of income from sources within Malaysia which has been
subjected to tax both in India and Malaysia, shall be allowed as a credit
against the Indian tax payable in respect of such income but in an amount not
exceeding that proportion of Indian tax which such income bears to the entire
income chargeable to Indian tax.

b.    For the purposes of
the credit referred to in sub-paragraph (a) above, there shall be deemed to
have been paid by the resident of India:—-

                     
i.       
the
amount of tax which would have been paid in respect of royalties but for the
exemption provided in paragraph 2 of Article 13; and (ii) the amount of tax
which would have been paid if the Malaysian tax had not been reduced or
relieved in accordance with the special incentive measures designed to promote
economic development in Malaysia—-

aa.  which are set forth
in section 21, 22 and, 26 of the Investment Incentives Act, 1968 of Malaysia;
or

ab.   

bb.   

ab.   

bb.  which may be
introduced in future in Income-Tax Act 1967, Supplementary Income-Tax Act,
1967, Petroleum (Income-Tax) Act, 1967 or Investment Incentives Act, 1968 in
modification of or in addition to the existing measures;

Provided
an agreement is made between the two Contracting States in respect of the scope
of the benefit accorded by the said measures.

1.      

2.      

3.    

a.     The amount of Indian
tax payable, under the laws of India and in accordance with the provisions of
this Aareement, whether directly or by deduction, by a resident of Malaysia, in
respect of income from sources within India which has been subjected to tax
both in India and Malaysia, shall be allowed as a credit against Malaysian tax
payable in respect of such income, but in an amount not exceeding that
proportion of Malaysian tax which such income bears to the entire income
chargeable to Malaysian tax.

b.    For the purposes of
the credit referred to in sub-paragraph (a) above, there shall be deemed to
have been paid by the resident of Malaysia the amount which would have been
paid if the Indian tax had not been reduced or relieved in accordance with the
special incentive measures designed to promote economic development in
India—-

                     
i.       
in
relation to royalties, as set forth in the relevant annual Finance Act of
India; and

                    
ii.       
in
relation to other income as set forth in the following sections of the
Income-tax Act, 1961 of India or which may be introduced in future in the
Indian tax laws in modification of or in addition to the existing measures,
provided that an agreement is made between the two Government in respect of the
scope of the benefit accorded by the said measures:—

ae.  (aa) Section 10 (15)
(iv) (b) and (c)—-relating to exemption from tax of (a) an approved foreign
financial institution in respect of interest on moneys lent by it to an
industrial undertaking in India under a loan agreement; and (b) a non-resident
in respect of interest on moneys lent or credit facilities allowed by him to an
industrial undertaking in India for the purchase outside India of raw materials
or capital plant and machinery;

ab.   

bb.  Section 33—relating
to development rebate in respect of ships, machinery or plant;

be.   

ce.  Section
80J—relating to deduction in respect of profits and gains from eligible
industrial undertaking or ships or hotels;

ad.   

bd.   

cd.   

dd.  Section
80K—-relating to deduction in respect of dividends attributable to profits
and gains from eligible industrial undertakings or ships or hotels; and

de.   

ee.  Section
80M—relating to deduction in respect of certain dividends received by a
company from a domestic company. This Sub-clause shall apply in relation to a
company which is a resident of Malaysia only if such company beneficially holds
shares (either singly or together with any company controlling it or any
company controlled by it) carrying not less than ten per cent of the voting
power in the domestic company and the domestic company is an industrial
company,

               
i.       

 

               
ii.       
 

               
iii.       
any
other incentive measure as may be agreed from time to time between the two
Contracting States.

CHAPTER
V

SPECIAL
PROVISIONS

ARTICLE
XXIII

Non-Discrimination

1.     Citizens or nationals
of one of the Contracting States shall not be subjected in the other
Contracting State to any taxation or any requirement connected therewith which
is other or more burdensome than the taxation and connected requirements to
which citizens or nationals of that other Contracting State in the same
circumstances and under the same conditions are or may be subjected. This
provision shall not be construed as obliging one of the Contracting States to
grant to citizens of the other Contracting State not resident in the first-mentioned
Contracting State those personal allowances, relief and reductions for tax
purposes which are by law available only to citizens of that first-mentioned
Contracting State and to such other persons as may be specified in such law who
are not resident in that first-mentioned Contracting State.

2.     The taxation on a
permanent establishment which an enterprise of one of the Contracting States
has in the other Contracting State shall not be less favourably levied in that
other Contracting State than the taxation levied on enterprises of that other
Contracting State carrying on the same activities in the same circumstances and
under the same conditions.

3.     Enterprises of one of
the Contracting States, the capital of which is wholly or partly owned or
controlled, directly or indirectly by one or more residents of the other
Contracting State, shall not be subjected in the first mentioned Contracting
State to any taxation or any requirement connected therewith which in other or
more burdensome than the taxation and connected requirements to which other
similar enterprises of that first-mentioned Contracting State are or may be
subjected in the same circumstances and under the same conditions.

4.     In this Article, the
term “citizens or nationals” in relation to a Contracting State
means:—

a.     all individuals
possessing the citizenship or nationality of that Contracting State;

b.    all legal persons,
partnerships, associations and other entities deriving their status as such
from the law in force in that Contracting State.

ARTICLE
XXIV

Mutual
Agreement Procedure

1.     Where a resident of
one of the Contracting States, considers that the actions of one or both of the
Contracting States result, or will result in taxation not in accordance with
this Agreement, he may notwithstanding the remedies provided by the taxation
laws in force in the Contracting States present his case to the competent
authority of the Contracting State of which he is a resident.

2.     The competent
authority of the first-mentioned Contracting State shall endeavour, if the
objection appears to it to be justified and if it is not itself able to arrive
at an appropriate solution, to resolve that case by the mutual agreement with
the competent authority of the other Contracting State with a view to the
avoidance of taxation which is not in accordance with this Agreement.

3.     The competent
authorities of the Contracting States shall endeavour to resolve by mutual
agreement any difficulties or doubts arising as to the interpretation or
application of this Agreement.

4.     The competent
authorities of the Contracting States may communicate with each other directly
for the purposes of giving effect to the provisions of this Agreement.

ARTICLE
XXV

Exchange
of Information

1.     The competent
authorities of the Contracting States shall exchange such information or
document as is necessary for carrying out the provisions of this Agreement or
for the prevention or detection of evasion or avoidance of the taxes which are
the subject of this Agreement. Any information or document so exchanged shall be
treated as secret but may be disclosed to persons (including a court or
administrative body) concerned with the assessment collection, enforcement, or
prosecution in respect of taxes which are the subject matter of this Agreement
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 request with
reference to particular cases. The competent authorities of the Contracting
States shall agree from time to time on the list of the information or
documents which shall be furnished on a routine basis.

3.     In no case shall the
provisions of paragraph 1 be construed so as to impose on a Contracting State
the obligation:

a.     to carry out
administrative measures at variance with the laws of administrative practice of
that or of the other Contracting State;

b.    to supply 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 State;

c.     to supply information
or documents which would disclose any trade, business, industrial, commercial
or professional secret or trade process or information the disclosure of which
would be contrary to public policy.

ARTICLE
XXVI

Diplomatic
and Consumer Officials

Nothing
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.

CHAPTER
VI

FINAL
PROVISIONS

ARTICLE
XXVII

Entry
into Force

1.     This Agreement shall
come into force on the date when the last of all such things shall have been
done in Malaysia and India as are necessary to give the Agreement the force of
law in Malaysia and India respectively.

2.     The Contracting
States shall notify each other of the completion of the requirements mentioned
in paragraph 1 of this Article. The exchange of diplomatic notes certifying
that this requirement has been completed shall take place at Kuala Lumpur.

3.     Upon the exchange of
such diplomatic notes this Agreement shall have effect.

a.     in Malaysia—-

as
respect Malaysian tax for the year of assessment beginning on 1st January,
1973, and subsequent years of assessment;

a.     

b.    in India,—–

as
respects Indian tax for the assessment year commencing on the 1st day of April,
1973, and subsequent years of assessment.

ARTICLE
XXVIII

Termination

1.     This Agreement shall
continue in effect indefinitely, but either of the Contracting States may, on
or before 30th June in any calendar year after the year 1975 give to the other
Contracting State written notice of termination and in such event this
Agreement shall cease to be effective—-

a.     in India—-

as
respects Indian tax for the year of assessment commencing on the 1st day of
April of the calendar year next following the calendar year in which such
notice is given and subsequent years of assessment;

a.     

b.    in Malaysia—–

as
respects Malaysia tax for the year of assessment next following the calendar
year in which such notice is given and subsequent years of assessment.

IN
WITNESS whereof the undersigned, duly authorised thereto, have signed this
Agreement.

Done
in duplicate at New Delhi, this twenty-fifth day of October one thousand nine
hundred and seventy-six in the Hindi, Malay and English languages, all the
texts being equally authentic, except that in the case of divergence of
interpretation the English text shall prevail.

(Sd/-)
PRANAB KUMAR MUKHERJEE.

For
the Government of the Republic of India

(Sd/-)
TAN SRI HAJI ABDUL KHALID BIN AWANG OSMAN.

For
the Government of Malaysia.

PROTOCOL

At
the time of signing the Agreement between the Government of India and the
Government of Malaysia for the Avoidance of Double Taxation and the Prevention
of Fiscal Evasion with respect to Taxes on Income, the undersigned have agreed
that as regards income derived from a Contracting State by a resident of the
other Contracting State from the operation of ships in international traffic
the competent authority of the first-mentioned Contracting State shall accept a
certificate issued by the competent authority of the other Contracting State
for the purpose of Article 8 of the Agreement.

1.      

2.     The certificate shall
show the following:—-

a.     the gross income from
wherever derived;

b.    income or loss in
respect of shipping operations computed for the purpose of taxation in the
other Contracting State; and

c.     the total
depreciation allowances (excluding any allowance brought forward from a
previous period) given by the competent authority of that other Contracting
State.

1.      

2.      

3.     Further, it is also
agreed that this Protocol shall constitute an integral part of the Agreement.

IN
WITNESS WHEREOF the undersigned, duly authorised thereto, have signed this
Protocol.

DONE
in duplicate at New Delhi on the 25th day of October, 1976 in the Hindi, Malay
and English languages, all the texts being equally authentic, except that in
the case of divergence of interpretation the English text shall prevail.

(Sd/-)
PRANAB KUMAR MUKHERJEE,

For
the Govt. of India.

Sd/-)
TAN SRI HAJI ABDUL

KHALID
BIN AWANG OSMAN,

For
the Govt. of Malaysia

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