Where the assessee, a US company, claimed that non-grant to it of deduction u/s 80HHE on the ground that it was a non-Indian company violated the non-discrimination provision in Article 26 of the India-USA DTAA, HELD, rejecting the claim that:

(i) In order to attract the non-discrimination clause in Article 26, mere differential treatment is not enough. The assessee has to show that not only has it been subjected to differential treatment vis-à-vis others but also that the ground for this differentiation in treatment is unreasonable, arbitrary or irrelevant and that the basis of differentiation lacks any coherent relationship with the object sought to be achieved by that provision.

(ii) Though s. 80HHE is available only to Indian companies and not to foreign companies, the differentiation is on the basis of residential status of the assessee and not on the place of incorporation. Further, though other fiscal incentives for exports like ss. 10A and 10B as well as deductions u/ss 80-I and 80-HH are available to non-residents as well, the denial of deduction u/s 80HHE cannot be said to be unreasonable. The differentiation on the basis of residential status cannot be said to be arbitrary or irrelevant and it has a reasonable relationship with the object sought to be achieved by the incentive deduction. Accordingly, though there is a differentiation, there is no discrimination.

(iii) The OECD Model Convention Commentary has a limited role to play in view of the Technical Explanation on the India-USA DTAA. The Technical Explanation is of significant persuasive value and is the best guide for interpreting this DTAA. If there is a conflict between the OECD Commentary and Technical Explanation, the latter will prevail.

(iv) The fact that different tax treaties have different words and phrases does not necessarily mean that a different interpretation is warranted in view of the fact that treaties are, unlike a statute, the result of bilateral negotiations and the wordings thereon depend on the comfort levels of the treaty partners.