India and Bhutan today signed a Double Taxation Avoidance Agreement (DTAA) for the prevention of fiscal evasion with respect to taxes on income. The Agreement was signed between the Finance Minister, P. Chidambaram and Bhutanese Finance Minister, Mr. Lyonpo Wangdi Norbu in New Delhi. The DTAA provides that business profits will be taxable in the source state if the activities of an enterprise constitute a permanent establishment in the source state. The Agreement further incorporates provisions for effective exchange of information and assistance in collection of taxes between tax authorities of the two countries including exchange of banking information.Speaking on the occasion, Mr. Chidambaram said the agreement will provide tax stability to the residents of both the countries and facilitate mutual economic cooperation. He said it will also stimulate the flow of investment, technology and services between India and Bhutan. Our correspondent reports that this is the first ever DTAA for Bhutan with any country.