Ingredion – Tax Court of Canada finds that a proposed Crown pleading that an arm’s length interest rate would be nil was “untenable”

The Minister considered that the cross-border “hybrid instrument” structure at issue should be recharacterized as an equity investment in the taxpayer by its U.S. parent, and reassessed and pleaded accordingly based on ss. 247(2)(b) and (d).

The Minister now sought leave to amend such pleadings to state that, to the extent the parties dealing at arm's length would have entered into the transactions (which was denied), at all times the arm's length rate of interest for the money that the taxpayer borrowed from its U.S. parent as part of the series was 0%, so that the interest actually charged should be denied pursuant to ss. 247(2)(a) and (c).

In refusing such amendment, Sorensen J stated:

[I]n an environment in which annual inflation is greater than zero and Treasury Bills offer even negligible yields, the idea of handing $300M to an arm’s length party in a business-to-business transaction with nil interest is untenable. …. [B]aldly pleading an untenable fact does not meet the threshold for amending a pleading.

Neal Armstrong. Summary of Ingredion Canada Corporation v. The King, 2026 TCC 3 under s. 247(2)(c).