Compaq Computer Corporation and Subsidiaries - Page 10




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          Article 23 of the U.S.-U.K. Convention, 31 U.S.T. at 5685,                  
          provides:                                                                   
                                     Article 23                                       
                           Elimination of Double Taxation                             
                    (1) In accordance with the provisions and subject                 
               to the limitations of the law of the United States (as                 
               it may be amended from time to time without changing                   
               the general principle hereof), * * * in the case of a                  
               United States corporation owning at least 10 per cent                  
               of the voting stock of a corporation which is a                        
               resident of the United Kingdom from which it receives                  
               dividends in any taxable year, the United States shall                 
               allow credit for the appropriate amount of tax paid to                 
               the United Kingdom by that corporation with respect to                 
               the profits out of which such dividends are paid.  Such                
               appropriate amount shall be based upon the amount of                   
               tax paid to the United Kingdom, but the credit shall                   
               not exceed the limitations (for the purpose of limiting                
               the credit to the United States tax on income from                     
               sources outside of the United States) provided by                      
               United States law for the taxable year.  For the                       
               purposes of applying the United States credit in                       
               relation to tax paid to the United Kingdom:                            
                        *     *     *     *     *     *     *                         
                         (c) that amount of tax credit referred                       
                    to in paragraph (2)(a)(i) of Article 10                           
                    (Dividends) which is not paid to the United                       
                    States corporation but to which an individual                     
                    resident in the United Kingdom would have                         
                    been entitled had he received the dividend                        
                    shall be treated as an income tax imposed on                      
                    the United Kingdom corporation paying the                         
                    dividend.                                                         
                                                                                     
          Petitioners argue that the last sentence of Article 23(1)(c)                
          specifically designates the unrefunded portion of the ACT as an             
          income tax imposed on the corporation paying the dividend.                  
          Respondent, on the other hand, argues that such language was                







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