The North West Life Assurance Company of Canada - Page 23

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            Convention and section 842(b) are consistent, petitioner concedes                          
            that section 842(b) applies in this case and that it owes the                              
            income and branch profits tax as determined by respondent in her                           
            statutory notices of deficiency.                                                           
                  The parties present various alternative arguments based on                           
            provisions of Article VII and Article XXV.  In deciding whether                            
            petitioner is entitled to relief from section 842(b) as a result                           
            of the Canadian Convention, we must determine whether:                                     
                  1.  Section 842(b), in requiring petitioner to report a                              
                  minimum amount of ECNII, conflicts with the requirements of                          
                  paragraphs 1, 2, and 7 of Article VII on how to determine                            
                  the profits attributable to a permanent establishment;                               
                  2.  section 842(b) violates paragraph 5 of Article VII,                              
                  which requires a consistent method of profit attribution to                          
                  be applied unless a good and sufficient reason to the                                
                  contrary exists; or                                                                  
                  3.  section 842(b) violates Article XXV, paragraph (6) by                            
                  levying taxation less favorably on petitioner than the                               
                  Internal Revenue Code levies taxation on U.S. residents                              
                  carrying on the same activities.                                                     
            We discuss these issues in the context of the relevant convention                          
            Articles.  The issues before us are of first impression.                                   
            III. Principles of Convention Obligations                                                  
                  Before addressing the parties' arguments pertaining to                               
            specific convention provisions, we consider the principles for                             
            interpreting conventions.                                                                  
                  The goal of convention interpretation is to "give the                                
            specific words of a * * * [convention] a meaning consistent with                           






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