At the time of signing the Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on income, concluded this day between the Republic of India and the Republic of Turkey, the undersigned have agreed that the following provisions shall form an integral part of the Agreement.
(1) With respect to sub-paragraph (c) of paragraph (1) of Article 3:
The term "tax" shall not include any amount which is payable in respect of any default or omission in relation to the taxes to which this Agreement applies or which represents a penalty.
(2) With respect to proviso to sub-paragraph (j) of paragraph (2) of Article 5:
It is understood that an enterprise covered therein will be subject to taxation accordingly and not in accordance with provisions of Article 12 (Royalties and Fees for Technical Services) and Article 14 (Independent Personal Services).
(3) With respect to paragraph (1) of Article 7:
It is understood that, where an enterprise of a Contracting State has a permanent establishment in the other Contracting State, and the enterprise:
- (a) effects sales in that other State of goods or merchandise of the same or similar kind as those sold through that permanent establishment, or
- (b) carries on other business activities in that other State of the same or similar kind as those effected through that permanent establishment,
profits derived from such sales and business activities may be taxed in that other Contracting State as part of the profits of the permanent establishment.
(4) With respect to paragraph (3) of Article 7:
With regard to a permanent establishment in India, it is understood that, the executive and general administrative expenses incurred outside India which will be allowed as a deduction in determining the profits of the permanent establishment shall be the least of the following amounts:
- (a) an amount equal to 5 per cent of the adjusted total income; or
- (b) an amount equal to the average head office expenditure; or
- (c) the amount of so much of the expenditure in the nature of head office expenditure incurred which is attributable to the business of the permanent establishment in India.
In a case where the adjusted total income is a less, the amount under clause (a) above shall be computed at the rate of 5 per cent of the average adjusted total income.
The expressions "adjusted total income", "average adjusted total income", "average head office expenditure" and "head office expenditure" will have the same meaning as defined in the Indian Income tax Act, 1961.
(5) With respect to paragraph (1) of article 23:
It is understood that the expression "in the same circumstances", refers to taxpayers (individuals, legal persons, partnerships and associations) placed from the point of view of the application of the ordinary taxation laws and regulations, in substantially similar circumstances both in law and in fact.
Amongst other things this means that a national of one of the States, resident of a third State and doing business in the other State will be subjected to the same taxation or requirements connected therewith in that other State to which a national of that other State, resident in a third State and doing business in that other State, is or may be subjected.
(6) It is understood that the provisions of this Agreement shall not apply to income derived by a resident of a Contracting State from agricultural activities in the other Contracting State.
IN WITNESS WHEREOF, the undersigned being duly authorized thereto have signed the present agreement.
DONE in duplicate at New Delhi this 31st day of January 1995 in the Turkish, Hindi and English languages, all three texts being equally authentic. In case of divergence between the texts, the English text shall be the operati ve one.
FOR THE GOVERNMENT OF THE REPUBLIC OF TURKEY:
BEKIR SAMI DACE
MINISTER OF STATE
FOR THE GOVERNMENT OF THE REPUBLIC OF INDIA:
DR. MANMOHAN SINGH
MINISTER OF FINANCE