The Government of the Republic of India and the Government of the Kingdom of Saudi Arabia, desiring to conclude a Convention for the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and with a view to promoting economic cooperation between the two countries, have agreed as follows:

Article 1

PERSONS COVERED

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

Article 2

TAXES COVERED

1.            This Convention shall apply to taxes on income imposed on behalf of a Contracting State or of its political subdivisions or local authorities, irrespective of the manner in which they are levied.

2.            There shall be regarded as taxes on income all taxes imposed on total income, or on elements of income, including taxes on gains from the alienation of movable or immovable property, and taxes on the total amounts of wages or salaries paid by enterprises.

3.              The existing taxes to which the Convention shall apply are in particular:

      a)               in the case of India:

                     - The income tax, including any surcharge thereon;

                     (hereinafter referred to as "Indian tax");

     b)    in the case of the Kingdom of Saudi Arabia:

                     - The Zakat

                     - The income tax including the natural gas investment tax;

              (hereinafter referred to as “ Saudi tax”).

4.  The provisions of this Convention shall also apply to any identical or substantially similar taxes which are imposed by either contracting state after the date of signature of this Convention in addition to, or in place of, the existing taxes. The competent authorities in both Contracting States shall notify each other of any significant changes that have been made in their respective taxation laws.

Article 3

GENERAL DEFINITIONS

1.  For the purposes of this Convention, unless the context otherwise requires:

           a)                  the term “India”  means the territory of India and includes the territorial sea and airspace above it, as well as any other maritime zone in which India has sovereign rights, other jurisdiction, according to the Indian law and in accordance with international law, including the U.N. Agreement on the Law of the Sea;

b)                              the term “Kingdom of Saudi Arabia”  means the territory of the kingdom of Saudi Arabia which also includes the area outside the territorial waters, where the Kingdom of Saudi Arabia exercises its sovereign and jurisdictional rights in their waters, seabed, subsoil and natural resources by virtue of its law and the international law;

c)                               the term “a Contracting State” and “the other Contracting State” mean the Republic of India or the Kingdom of Saudi Arabia as the context requires;

d)                              the term “person” includes an individual, a company , any other body of persons.

e)                  the term "company" means any body corporate or any entity that is treated as a body corporate for tax purposes;

           f)                             the terms "enterprise of a Contracting State" and "enterprise of the other Contracting State" mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

           g)                  the term "international traffic" means any transport by a ship or aircraft operated by an enterprise of a contracting state, except when the ship or aircraft is operated solely between places in the other Contracting State;

           h)                  the term "competent authority" means:

             (i)       In the case of India: The Finance Minister, Government of India or his authorized representative;

(ii)       In the case of the Kingdom of Saudi Arabia, the Ministry of Finance represented by the Minister of Finance or his authorized representative;

           i)                   the term "national" means:

(i)     any individual possessing the nationality of a Contracting State;

(ii)   any legal person, partnership or association deriving its status as such  from the laws in force in a Contracting State;

2.        As regards the application of the Convention at any time by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the taxes to which this Convention applies, any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State.

Article 4

RESIDENT

1.      For the purposes of this Convention, the term "resident of a Contracting State" means

(a)  Any person who, under the laws of that State, is liable to taxes in that state by reason of his domicile, residence, place of management or any other criterion of a similar nature. This term, however, does not include any person who is liable to tax in that State in respect only of income from sources in that State.

(b)  The government of any of the two contracting states or any of its political subdivision or local authorities.

2.                          Where by reason of the provisions of paragraph 1 of this Article an individual is a resident of both Contracting States, then his status shall be determined as follows:

a)  he shall be deemed to be a resident only 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 the Contracting States, he shall be deemed to be a resident only of the Contracting State with which his personal and economic relations are closer (centre of vital interests);

b)   if the Contracting State in which he has his centre of vital interests cannot be determined, or if he does not have a permanent home available to him in either Contracting State, he shall be deemed to be a resident only of the Contracting State in which he has a habitual abode;

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

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

3.        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 only of the State in which its place of effective management is situated.

Article 5

PERMANENT ESTABLISHMENT

1.       For the purposes of this Convention, the term "Permanent Establishment" means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

2.     The term "permanent establishment" includes especially:

           a) a place of management;

   b) a branch;

   c) an office;

   d) a factory;

   e) a workshop;

            f) a mine, a gas well, a quarry or any other place of extraction of natural resources.

3.        The term “permanent establishment” also includes:

(a)      A building site, a construction, assembly or installation project, or supervisory activities, in connection therewith, but only where such site, project or activities continue for a period of more than 182 days;

(b)      The furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only where activities of that nature continue (for the same or a connected project) within the country for a period or periods aggregating more than 182 days within any 12-month period.

4.            Notwithstanding the preceding provisions of this Article the term "permanent establishment" shall be deemed not to include:

(a)  the use of facilities solely for the purpose of storage or display 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 or display;

(c)  the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterpri