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V. Measurement of Profits on a Separate-Entity Basis
Petitioner argues that the language of Article VII requires
income to be attributed to a permanent establishment based on its
own particular operations. Respondent argues that Article VII
does not require a specific method or guarantee mathematical
certainty and that, consequently, either country may use its
domestic law in determining the profits attributable to a
permanent establishment.
It is axiomatic that the "Interpretation of the * * * Treaty
* * * must, of course, begin with the language of the Treaty
itself." Sumitomo Shoji Am., Inc. v. Avagliano, 457 U.S. at 180.
As we stated above, the clear import of treaty language controls.
Id. But Article VII, paragraph (2) speaks in ambiguous terms,
and when language is susceptible to differing interpretations,
extrinsic materials bearing on the parties' intent should be
considered. Day v. Trans World Airlines, Inc., 528 F.2d 31, 34
(2d Cir. 1975); Hidalgo County Water Control & Improvement
District v. Hedrick, 226 F.2d 1, 8 (5th Cir. 1955).
The Senate's preratification materials confirm that the
Canadian Convention was based in part on the Model Treaty. See
S. Exec. Rept. 98-22 at 3. Our examination shows that the
business profits article of the Model Treaty9 includes provisions
9Art. 7 of Model Double Taxation Convention on Income and on
Capital, Report of the O.E.C.D. Comm. on Fiscal Affairs (1977)
(continued...)
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