Forex

Schedular system for computation of taxable income, which has come for critical comment in Rajah Chelliah Committee is followed under the domestic law of Anglo-Saxon countries, so that its shadow has fallen on U.N., OECD and U.S. Models and in almost all agreements. Under schedular system, income is computed with reference to the heads of income under which it falls. Double Tax Avoidance Agreement also follows the same pattern for relief from taxation depending upon the Article under which the class of income falls. Reliefs under Double Tax Avoidance Agreement are classified under Articles generally following OECD pattern as under: (i) Business income attributable to permanent establishment - Article 7 (Permanent establishment is defined in Article 2 read with Article 5 defining permanent establishment). Income diverted through an associated enterprise is covered by Article 9. (ii) Income from house property — Article 6. (iii) Income from shipping and air transport — Article 8 (iv) Dividends — Article 10 (v) Interest — Article 11 (vi) Royalties and technical fees — Article 12 (vii) Capital gains — Article 13 (viii) Independent personal service — Article 14 (income from profession) is omitted in OECD Model from 2000 on the ground, it is already included under Article 7. (ix) Dependant personal service (income from employment) — Article 15. (x) Other miscellaneous incomes (director’s fees, artistes, sportsmen, pension, government servants, stipend for students and other income) — Articles 16 to 21.