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permanent establishment, including executive and
general administrative expenses so incurred, whether in
the State in which the permanent establishment is
situated or elsewhere. Nothing in this paragraph shall
require a Contracting State to allow the deduction of
any expenditure which, by reason of its nature, is not
generally allowed as a deduction under the taxation
laws of that State.
* * * * * * *
5. For the purposes of the preceding paragraphs, the
business profits to be attributed to a permanent
establishment shall be determined by the same method
year by year unless there is good and sufficient reason
to the contrary.
* * * * * * *
7. For the purposes of the Convention, the business
profits attributable to a permanent establishment shall
include only those profits derived from the assets or
activities of the permanent establishment.
[Canadian Convention, art. VII, 1986-2 C.B. at 260; emphasis
added.]
Article XXV, paragraph (6) of the Canadian Convention states
in pertinent part:
6. Notwithstanding the provisions of Article XXIV
(Elimination of Double Taxation), the taxation on a
permanent establishment which a resident of a
Contracting State has in the other Contracting State
shall not be less favorably levied in the other State
than the taxation levied on residents of the other
State carrying on the same activities. * * * [Canadian
Convention, art. XXV, par. (6), 1986-2 C.B. at 268.]
In the instant case, the parties agree that petitioner is
entitled to the benefits of the Canadian Convention and that
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