India – USA Transport Tax Agreement (1989)

TRANSPORT TAX TREATY (1989)

This Treaty was signed on April 12, 1989 and entered into force on April 12, 1989.

AGREEMENT BETWEEN INDIA AND THE UNITED STATES OF AMERICA  FOR THE RECIPROCAL TAX EXEMPTION OF INCOME FROM INTERNATIONAL SHIPPING AND AVIATION

EXCHANGE OF NOTES I

Embassy of the United States of America,
New Delhi
April 12, 1989
His Excellency
Dr. N.K. Sengupta
Secretary (Revenue) Ministry of Finance
Government of India
Excellency,
I have the honour to propose that the Government of the United States of America and the Government of India conclude an agreement to exempt from income tax, on a reciprocal basis, income derived by residents of the other country from the international operation of ships and aircraft. The terms of the Agreement are as follows:
The Government of the United States of America, in accordance with sections 872(b) and 883(a) of the Internal Revenue Code, agrees to exempt from tax gross income derived from the international operation of ships or aircraft by individuals who are residents of India (other than U.S. citizens) and corporations organized in India. This exemption is granted on the basis of equivalent exemptions granted by India to citizens of the United States (who are not residents of India) and to corporations organized in the United States (which are not subject to tax by India on the basis of residence).
In the case of a corporation, the exemption shall apply only if the corporation meets either of the following conditions:
(1) more than 50% of the value of the corporation’s stock is owned, directly or indirectly, by individuals who are residents of India or of another country which grants a reciprocal exemption to U.S. citizens and corporations; or
(2) the corporation’s stock is primarily and regularly traded on an established securities market in India or is wholly owned by a corporation whose stock is so traded and which is also organized in India.
For purposes of subparagraph (1), the Government of India will be treated as an individual resident of India. For purposes of the exemption from U.S. tax, subparagraph (1) will be considered to be satisfied if the corporation is a “controlled foreign corporation” under the Internal Revenue Code.
Gross income includes all income derived from the international operation of ships or aircraft, including income from the rental of ships or aircraft on a full (time or voyage) basis. It also includes income from the rental on a bareboat basis of ships and aircraft used in international transport, income from the rental of containers and related equipment used in international transport, and gain on the disposition of ships or aircraft, provided in each case that the income is incidental to the international operation of ships or aircraft. Gross income from the international operation of ships or aircraft also includes income derived from participation in a pool, a joint business, or an international operating agency and interest on funds connected with the international operation of ships or aircraft.
The Government of the United States of America considers that this Note, together with your reply Note confirming that the Government of India agrees to these terms, constitutes an agreement amending the agreement of November 26, 1976 and the exchange of letters of December 27 and 29, 1976. This agreement shall enter into force on the date of your reply Note and shall have effect with respect to taxable years beginning on or after January 1, 1987.
Either government may terminate this agreement by giving written notice of termination through diplomatic channels.
I avail myself of this opportunity to renew to Your Excellency the assurances of my highest consideration.
John R. Hubbard
Ambassador
Embassy of the United States of America,
New Delhi
II
Government of India
Ministry of Finance
Department of Revenue
New Delhi
April 12, 1989
His Excellency
Dr. John R. Hubbard
Ambassador United States Embassy
New Delhi
Excellency,
I have the honour to acknowledge receipt of your Note of today’s date proposing the terms of a reciprocal exemption from income tax of income derived from the international operation of ships and aircraft.
The Government of India agrees to exempt from income tax gross income derived from the international operation of ships or aircraft by U.S. citizens (who are not residents of India) and corporations organized in the United States (other than corporations which are subject to tax by India on the basis of residence).
In the case of a corporation, the exemption shall apply only if the corporation meets either of the following conditions:
(1) more than 50% of the value of the corporation’s stock is owned, directly or indirectly, by individuals who are citizens of the United States or residents of another country which grants a reciprocal exemption to Indian residents and corporations; or
(2) the corporation’s stock is primarily and regularly traded on an established securities market in the United States, or is wholly owned by a corporation whose stock is so traded and which is also organized in the United States.
Gross income includes all income derived from the international operation of ships or aircraft, including income from the rental of ships or aircraft on a full (time or voyage) basis. It also includes income from the rental on a bareboat basis of ships and aircraft used in international transport, income from the rental of containers and related equipment used in international transport, and gain on the disposition of ships or aircraft, provided in each case that the income is incidental to the international operation of ships or aircraft. Gross income from the international operation of ships or aircraft also includes income derived from participation in a pool, a joint business, or an international operating agency and interest on funds connected with the international operation of ships or aircraft.
I am pleased to confirm that Your Excellency’s Note and this reply Note constitute an agreement between the two governments amending the agreement of November 26, 1976 and the exchange of letters of December 27 and 29, 1976. This agreement shall enter into force on today’s date and shall have effect with respect to previous years beginning on or after January 1, 1987.
Either government may terminate this agreement by giving written notice of termination through diplomatic channels.
I avail myself of this opportunity to renew to Your Excellency the assurances of my highest consideration.
N.K. Sengupta
Secretary (Revenue)
Government of India
Ministry of Finance
New Delhi