Non-discrimination under tax treaty does not require identical capital gains computation for residents and non-residents.

Denial of indexation benefit to a non-resident under the capital gains computation rules was held not to amount to discriminatory treatment under article 24 of the India-Canada DTAA. Article 24 prohibits more burdensome taxation based on nationality in like circumstances, but it does not require a foreign national and a resident to be taxed identically. The differential computation mechanism under section 48 was treated as a valid domestic rule, and section 90(2) was held not to displace that mechanism absent a treaty entitlement to the contrary.

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Issues: Whether denial of indexation benefit to a non-resident assessee under the second proviso to section 48 of the Income-tax Act, 1961 amounts to discriminatory tax treatment under article 24 of the India-Canada Double Taxation Avoidance Agreement.

Analysis: Article 24 prohibits taxation or connected requirements that are more burdensome for nationals of the other Contracting State in the same circumstances. The non-discrimination rule is directed against discrimination based on nationality and does not require a foreign national and a resident assessee to be placed in identical tax positions. The computation scheme under section 48 differentiates the method of capital gains computation for non-residents, and the mere denial of indexation does not, by itself, amount to prohibited discrimination. Section 90(2) permits application of the treaty only to the extent it is more beneficial, but it does not override a valid domestic computation mechanism where the treaty does not confer a contrary entitlement.

Conclusion: The denial of indexation benefit to the applicant does not constitute discriminatory treatment under article 24 of the India-Canada DTAA and the issue is answered against the assessee.

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