Treaty royalty concession applies where a post-convention contract is a fresh agreement, not a mere continuation of an earlier one.

Royalty income under the agreement signed on 10 December 1981 qualified for the concessional 30% tax rate under article 13(2) of the India-U.K. tax treaty because the contract was signed after the Convention came into force on 23 November 1981. The court treated the 1981 agreement as a fresh contract, not a mere extension of the earlier 1971 arrangement, since its royalty structure and contractual conditions were materially different. The fact that it was made effective from 1 January 1980 did not change its legal character as an agreement signed after the treaty's commencement. The Revenue's attempt to apply the higher rate was rejected.

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Issues: Whether royalty income arising under the agreement dated 10 December 1981 was entitled to the concessional tax rate of 30% under article 13(2) of the Double Taxation Avoidance Agreement between India and U.K., and whether that agreement was merely an extension of the earlier agreement so as to deny the treaty benefit.

Analysis: Article 13(2) permits taxation not exceeding 30% where royalties or fees for technical services are paid under a contract signed after the date of entry into force of the Convention. The Convention came into force on 23 November 1981, while the relevant agreement was signed on 10 December 1981. The terms of the 1981 agreement were found to be different from the earlier arrangement, including the royalty structure and contractual conditions, so it could not be treated as a mere continuation of the 1971 agreement. The fact that the agreement was made effective from 1 January 1980 did not alter the legal character of the contract as one signed after the Convention came into force.

Conclusion: The assessee was entitled to the concessional rate of 30% under article 13(2), and the Revenue's view that the higher rate applied was rejected.

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