INCOME TAX

CIRCULAR NO. 02/2016

F. No. 500/82/2015-FTD.1

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

(Foreign Tax &Tax Research Division-I)

New Delhi, Dated the 25^th February, 2016

Subject:  Benefits of the India-United Kingdom (UK) Double Taxation Avoidance Agreement to UK partnership firms.

An Amending Protocol to the India-UK Double Taxation Avoidance  Agreement(DTAA) was notified vide Notification No.10/2014 dated 10^th  February, 2014 with effect from 27^th  December, 2013. As a result of the aforesaid Protocol, inter alia, the earlier definition of the term "person" in Article 3 (1) (f) of the DTAA was amended to delete the exclusion of UK partnership firms, and in addition, it has been provided in Article 4 of the DTAA that in case of a partnership, estate or trust, the term "resident of a Contracting State" applies only to the extent that the income derived by such partnership, estate or trust is subject to tax in that State as the income of a resident, either in its hands or in the hands of its partners or beneficiaries.

2. Apprehensions that the term "person" in the DTAA does not specifically include "partnerships" have been brought to the notice of the Central Board of Direct Taxes (the Board), and further clarity has been sought on whether the provisions of the treaty are applicable to a partnership. In exercise of the powers conferred under section 119 of the Income-tax Act, 1961, the Board hereby clarifies that the provisions of the India-UK DTAA would be applicable to a partnership that is a resident of either India or UK, to the extent that the income derived by such partnership, estate or trust is subject to tax in that State as the income of a resident, either in its own hands or in the hands of its partners or beneficiaries.

3. This may be brought to the notice of all concerned.

(Dinesh Antil)

Under Secretary (FT & TR-I)(2)