Great Atlantic and Pacific Tea Co. Ltd. v. The Queen, 79 DTC 5401, [1979] CTC 509, [1980] 1 SCR 670

Estey, J (for the Court):—The appellant seeks a refund of taxes paid by it as a non-resident-owned investment corporation as the term is defined in the Income Tax Act according to the transitional provisions of the Income Tax Amendment Act enacted with effect December 23, 1971 and being c 63, Statutes of Canada 19-20-21 Eliz Il, which is herein referred to as the amending Act. The issue here arising is complicated and calls for an interpretation of certain provisions of the amending Act. In order to resolve these issues, it is necessary to outline the facts which I should say are not the subject of any dispute.

The appellant is a corporation under the Canada Corporations Act and constituted as a corporation by letters patent of amalgamation dated January 5, 1971, but the parties agreed that nothing herein turns on its amalgamation origin. At all material times the appellant’s status under the taxing statute was that of a non-resident-owned investment corporation, herein referred to as an NRO.

The fiscal year in question of the appellant corporation commenced on February 28, 1971 and ended on February 26, 1972. The appellant-taxpayer, in its 1972 taxation year, which ended February 26, 1972, had taxable income in the amount of $3,160,057.29 on which tax was exigible at the rate of 15% producing a tax of $474,008.59. In its taxation return the appellant claimed, in the following terms, that no tax was payable:

LESS: ALLOWABLE REFUND IN RESPECT OF TAXABLE DIVIDENDS

PAID DURING THE YEAR BY THE COMPANY (see letter of April 27, 1972 from your Technical Interpretations Division to our auditors, attached) 15% of Taxable Dividends paid (15% of

$4,700,000)	$705,000
FEDERAL TAX PAYABLE	NIL

Contingent upon the question of the amount of tax, if any, payable in respect of the taxation year 1972 is the question as to whether interest is payable on the unpaid tax, or conversely, whether the appellant can recover interest on the tax ($474,008.59) and interest thereon ($14,193.61) it has already paid.

Whether tax be exigible for these earnings in the appellant’s 1972 taxation year turns upon the interpretation of section 133 of the Income Tax Act as amended by Chapter 63, SC 1970-71-72 and certain other provisions of that statute. It is agreed that the appellant is classified under the Income Tax Act at the material time as a non-resident-owned investment corporation. During the fiscal period noted above the appellant declared and paid the following dividends:

At the time these dividends were paid, the appellant withheld 15% and remitted these taxes in the amount of $705,000 to the respondent.

By the amending Act, extensive amendments were affected to the Income Tax Act of 1948, and while c 63 is technically framed as ‘‘an Act to amend the Income Tax Act and to make certain provisions and alterations in the statute law related to or consequential upon the amendments to that Act,” c 63 is colloquially referred to as “the new Tax Act” (contrary to section 8 of c 63 which says in part: ‘amended Act’ means the Income Tax Act as amended by section 1.”) This legislation was assented to on December 23, 1971, took effect January 1, 1972, and hence was not the income tax law in effect at the time of the declaration of dividends by the appellant in June and December of 1971. Section 9 of the Income Tax Application Rules, 1971, being Part XIII of the amended Act, provides: “Subject to the provisions of the amended Act and subject to this Part, section 1 of this Act applies to the 1972 and subsequent taxation years.” Section 10 of those rules provides, however, that Part XIII of the amended Act, which includes provisions relating to NRO corporations, is applicable “to amounts paid or credited after 1971”; and but for the suspending effect of section 10, the provisions relating to withholding taxes in the Income Tax Act prior to these amendments would have applied and further serious questions would have arisen. In any event, the respondent in its statement of defence, para 5, has stated:

5. In the reasons hereinafter set forth, the Deputy Attorney General of Canada, in order to simplify the argumentation, will make reference only to the dividend of $1,950,000 paid on February 24, 1972, but similar reasons apply mutatis mutandis in respect of the dividend of $750,000 paid on June 1, 1971, and the dividend of $2,000,000 paid on December 29, 1971.

The appellant’s eligibility for an allowable refund is therefore approached on the basis of the dividend of February 24,1972 and the result with respect of that dividend will be applied to the other two dividends for the purpose of disposing of this appeal. Clearly withholding tax at the rate of 15% was applicable to the February 1972 dividend and was collected and remitted by the appellant. Nothing appears on the record or in the submissions placed before this court by the parties as to why withholding tax was paid by the NRO on dividends paid in June and December 1971 when paragraph 106(1a) of the then existing Income Tax Act exempted such dividends from withholding tax (unless paid out of non-NRO surplus). However, the appellant in its statement of claim makes no claim for the refund of this withholding tax, but rather concerns itself entirely with the NRO tax paid in August 1972 with respect to the 1972 taxation year. The statement of defence of the respondent places the issue for determination squarely on the basis of the February 1972 dividends and nothing filed in response by the appellant indicates any unwillingness to have the issue so determined, and I have done so.

Under the former Tax Act (that is the Act in effect prior to January 1, 1972), a non-resident-owned investment corporation paid income tax on its taxable income at the rate of 15%, but dividends paid by it to its shareholders were exempted from withholding tax otherwise applicable to dividends paid to non-residents (see subparagraph 106(1a)(a) of the former Act), which tax was generally at the rate 15%; the only exception being dividends paid out of pre-NRO status surplus. The result was that a nonresident shareholder received his return on his investment after it had been subjected to the same taxation as would have been the case had nonresident shareholder held the interest in the underlying operating companies directly.

The new Tax Act introduced taxation of capital gains, and for this and other reasons, the mechanics by which non-resident-owned investment corporations’ income was taxed were altered. The plan adopted in the new Tax Act in general terms provided for the continuation of the taxation of the income of an NRO at 15% (in 1976 the rate was to increase to 25%), and for the application of withholding tax on taxable dividends paid by the NRO at the rate of 15%. However, the plan provided for the refund of the tax paid by the NRO on its taxable income upon the distribution of that income by way of taxable dividends to its shareholders. The overall result might be said to be comparable to that achieved under the former Tax Act except that the balancing payment by way of refund of tax remains inside the NRO and is subject to reprocessing if later distributed by way of dividend to the nonresident shareholder. If the plan includes, as is urged by the respondent, a delay of one year in the making of the tax refund, this then is a further distinction or disparity between the old and the new Act.

The new legislation provides the mechanics for refund in section 133 (set out in full in Schedule 1) and the issue therefore to be resolved is whether section 133 provides for a refund of the tax paid by the appellant-NRO in respect of the 1972 taxation year income by reason of the dividends declared and paid in the 1972 taxation year; or whether the refund of taxes paid by the NRO on its 1972 income is conditional upon the payment of further dividends after the close of the 1972 taxation year in such amount as the formula prescribed by section 133.

The difficulty arises, of course, because the 1972 taxation year of the appellant straddles the introduction of the amended Act on January 1, 1972 (and the parties for brevity referred to the 1972 taxation year as the “straddle year’’). The effects of the new Act reach back into 1971, in the case of the appellant, to February 28, 1971 being the commencement of the fiscal year which ended on February 26, 1972. Both the appellant and the respondent find in transitional provisions in section 133 support for what each contends is the equitable taxation of taxpayers who find themselves in the special circumstances here prevailing. The appellant argues that a taxpayer with a straddle fiscal period is allowed a refund during the straddle year because in that taxation period the taxpayer did not know what the applicable law was at least until 10 months of the taxation year had been completed; and so subsection 133(9) allows exceptional treatment during that period to avoid inequity. The respondent on the other hand points out that until the end of the taxation year 1972 the appellant could not calculate its taxable income for such taxation year and therefore could not calculate its cumulative taxable income (CTI) or its NRO taxation, or the allowable refundable tax (ART), and consequently could not calculate its allowable refund (AR); and furthermore, given the interpretation urged by the appellant, the taxpayer with a straddle year ending in 1972 would receive preferential treatment over a taxpayer having a 1972 taxation year coincidental with the calendar year. According to the respondent’s line of reasoning, the result of the appellant’s submission would be that the dividends paid during the 1972 taxation year would be reapplicable for refund of NRO taxation in the 1973 taxation year or subsequently, because subsection 133(9) makes no provision for deduction of these dividends from the CTI.

Before turning to the detailed provisons of the Act, it should be pointed out that the parties to this appeal are in agreement as to the facts as summarized above; and furthermore, the parties are agreed that:

(a) nothing turns on the fact that the appellant was formed as a result of the amalgamation on January 5, 1971 of two companies;

(b) we are not here concerned with any question as to whether there is involved a surplus account which has its origins in a company that was not at all times classified as an NRO under the then applicable Tax Act;

(c) the appellant’s cumulative taxable income determined under section 133 includes the income for the 1972 taxation year, being $3,160,057.29;

(d) the appellant’s allowable refundable tax as determined under section 133 includes the taxes paid on the appellant’s 1972 taxation year income, being $474,008.59;

(e) the application for the applicable refund was properly made in accordance with all applicable provisions of statute and regulation;

(f) nothing turns on the form of the claim as made in the Federal Court by the appellant as being either proceedings following a notice of objection under the Income Tax Act or an action in the Trial Division in the Federal Court of claiming a refund of moneys paid together with interest thereon; and that

(g) there are no capital gains included in any of the transactions here in question.

It is on this basis that we come now to the application of section 133 of the amended Income Tax Act to the business of the appellant during its 1972 taxation year.

By subsection (6) of section 133 the Minister is authorized, and indeed required, to make refund to the taxpayer of “its allowable refund for the year” and as has been noted, the parties are in agreement that the appellant has properly made application therefor. But a corporation’s allowable refund is defined by paragraph (8)(a) as being the taxable dividend paid by the NRO multiplied by a fraction, the numerator of which is the NRO’s allowable refundable tax on hand (ART) immediately before the dividend was paid and the denominator of which is the greater of the amount of all such dividends and the NRO’s cumulative taxable income (CTI) immediately before the dividend in question was paid. This equation may be represented in this form:

The application of this formula thus requires the determination of the ART and the CTI of the appellant at the time in question, which time is, for our purposes, immediately prior to the payment of the dividend on February 24, 1972.

The quantities ART and CTI are respectively defined in paragraphs (9)(a) and (9)(b) of section 133. Because the former incorporates by reference part of the latter it is convenient to discuss first the quantity CTI. Paragraph 133(9)(b) provides as follows:

(b) “cumulative taxable income’’ of a corporation at any particular time means the amount, if any, by which the aggregate of

(i) its taxable incomes for taxation years commencing after 1971 and ending before the particular time, and

(ii) where the corporations 1972 taxation year commenced before 1972, the amount, if any, by which its taxable income for that year exceeds the aggregate of

(A) all amounts received by the corporation as described in paragraph 196(4)(b), and

(B) the lesser of the amount determined under paragraph 196(4)(e) in respect of the corporation and the amount, if any, by which the aggregate of amounts determined under paragraphs 196(4)(d) to (f) in respect of the corporation exceeds the aggregate of amounts determined under paragraphs 196(4)(a) to (c) in respect of the corporation.

exceeds the aggregate of amounts each of which is

(iii) an amount in respect of the 1972 taxation year or any taxation year referred to in subparagraph (i), equal to the amount, if any, by which the aggregate of the corporation’s taxable capital gains for the year from dispositions after 1971 of property described in paragraph (1)(c) exceeds the aggregate of

(A) its allowable capital losses for the year from dispositions after 1971 of property described in that paragraph and

(B) the amount deductible from its income for the year by virtue of paragraph (2)(c)

(such gains and losses being computed in accordance with the assumption set forth in paragraph (1)(d)).

(iv) /3 of any amount paid or credited by the corporation, after the commencement of its 1972 taxation year and before the particular time, as, on account or in lieu of payment of, or in satisfaction of interest, or

(v) the amount of any taxable dividend paid by the corporation on a share of its capital stock before the particular time and after the commencement of its first taxation year commencing after 1971.

The primary position taken by the respondent is that these quantities cannot be determined, and therefore the formula prescribed in paragraph (8)(a) for the computation of allowable refund cannot be determined, until the close of the fiscal period in question, here in 1972 fiscal year, ending on February 26, 1972, two days after the declaration of the dividend in ques- tion. The Federal Court of Appeal adopted this submission and Urie, J, speaking for himself in allowing the appeal of the now respondent, stated:

(1) As stated earlier, one of the principles applicable to ‘‘allowable refunds” is that they can only be claimed for a taxation year which ended before the dividends generating the right to a refund were paid. In the straddle year this would mean, in the case of the respondent, that the dividends paid in the 1972 taxation year could not apply because the taxable income for that year could not have been calculated until after February 26, 1972, a date after the dividends had been paid. Paragraph 133(8)(a) clearly supports the view that the calculation envisaged by that section could be made only in respect of the cumulative taxable income of a corporation immediately before the dividend was paid.

Le Dain, J, concurring in the result with Urie, J, put it this way:

It was not necessary to repeat that the 1972 taxation year in such case must have ended before payment of the dividends in question; subparagraph (ii) of paragraphs 133(9)(a) and (b) clearly refer to a taxation year that would necessarily have ended before the taxation years contemplated by subparagraphs (i) thereof. The terms of subsection 133(9) as a whole reinforce what is laid down as a general principle by subsection 133(8) in the definition of allowable refund: that the allowable refundable tax on hand must have been established before the dividends which give rise to the refund were paid. It could only be so established at the end of a taxation year. In the result, dividends paid in the course of a 1972 taxation year cannot give rise to allowable refund whether that year commenced before or after the end of 1971.

The appellant takes the position that the closing of the fiscal year is not required by the proper construction of paragraph (b) because the transitional period, being the 1972 taxation year, is provided for in an encapsulated code by subparagraph (ii) in which it is not stipulated that the taxation year in question must have been completed prior to the declaration of a dividend upon which the taxpayer relies in making his claim for refund of NRO taxes paid. To resolve these contrary submissions, it is necessary to examine paragraph (9)(b) in detail. The mechanics of the subsection require the addition of quantities (i) and (ii), from which aggregate is subtracted the total of quantities (iii), (iv) and (v). We are not here concerned with quantity (i) which deals with taxation years commencing after 1971, because if is agreed by the parties that in the accounts of the appellant there are, at the times here in issue, no taxation years which commenced after 1971.

This brings us to subparagraph (ii) where one finds the only reference in paragraph (b) to the circumstances where the 1972 taxation year commenced prior to the calendar year 1972, or in the words adopted by the parties, is a “straddle year.” It is said by the appellant that because subparagraph (ii) alone omits the reference “and ending before the particular time,” the 1972 taxation year (unlike all other taxation years) need not be completed before the payment of the dividend in question. It is true that subparagraphs (iv) and (v) clearly employ the term “before the particular time” as does subparagraph (i). The expression is not found in subparagraph (iii) but the calculation of the amount discussed in that subsection does not require the use of the expression.

Le Dain, J concludes that it was unnecessary to include the expression “before the particular time” in subparagraph (ii) because “It was not necessary to repeat that the 1972 taxation year in such case must have ended before payment of the dividends in question; subparagraphs (ii) of paragraphs 133(9)(a) and (b) clearly refer to a taxation year that would necessarily have ended before the taxation year contemplated by subparagraphs (i) thereof.” In those cases where, as in this case, the contest arises before the application of subparagraph (i) is relevant, it is not, in my view, helpful to interpret subparagraph (ii) in the light of subparagraph (i) because the chronological order has, for some reason, been reversed in both paragraphs (9)(a) and (b). In such cases, no consideration of subparagraph (i) is required in determining the taxation position of the taxpayer under subparagraph (ii). Similarly, Urie, J concludes that it was not necessary to repeat this phrase in subparagraph (ii) because subparagraph

(ii) was not inserted in the Act to enable the calculation of allowable refund for a straddle year by itself, but rather as part of a formula established by subsection (8) of section 133 to calculate generally the allowable refund of the corporation. His Lordship’s reasoning then continues: “That is, it was not necessary to specify that the taxable income be established before the particular time for the calculation under subparagraph (ii) because the figure reached under it is merely part of the aggregate figure established by adding to it the calculation under subparagraph (i) which does specify the termination date. . . While these observations are by no means irrelevant, they do not, in my view, conclude the question and we must look elsewhere to determine the significance or the consequence of the omission of the phrase from subparagraph (ii).

Taken by itself, subparagraph (ii) would appear to be a specific provision directed to one problem and one problem only, namely the calculation of an amount with reference to the 1972 taxation year of an NRO when such year straddles the introduction of c 63, which amount is to be taken into account in determining the CTI of that NRO for the purposes of subsection (8). It is trite law that in the field of taxation the taxpayer is not liable for payment of taxes unless the transaction in question is clearly caught within the tax net as established in the applicable statute and regulation. Where, for example, Parliament has omitted some operative term essential to the establishment of tax liability in the taxpayer, the courts have long applied the principal that the tax collector may not, in such circumstances, recover the taxes claimed. No doubt this principle is rooted in the simple line of reasoning that Parliament, in determining the procedure for recovering the cost of government from the community, must have intended to recover from a particular taxpayer his share of that cost only where the taxing statute clearly defines that share. But that principle is not here of any application if on an examination of the whole of paragraph (b) one can discern a system for the determination of tax liability of a taxpayer in the position of the present appellant.

I proceed therefore to examine the balance of subparagraph (ii) and the other subclauses in further detail. Subparagraph (ii) provides the second quantity to be aggregated with subparagraph (i) in step 1 of the process by which CTI is determined. The amount to be determined under subparagraph

(ii) may in paraphrase be calculated as follows:

The excess of taxable income of the NRO in the straddle year over the total of:

(1) All dividends received by the NRO during that part of the calendar year 1971 included in the taxation year 1972, that is between February 26, 1971 and December 31, 1971

plus

(2) The lesser of

(a) all dividends paid by the NRO from and after February 26, 1971 to and including December 31, 1971;

and,

(b) the excess of

(i) tax-paid undistributed income of the NRO under the former Act in circumstances not here relevant;

and,

(ii) all dividends paid by the NRO during that part of the 1972 taxation year which falls into the calendar year 1971;

and,

(iii) any amounts on which the NRO has made certain elections under the new Act, not here applicable;

over the total of

(iv) undistributed income of the NRO arising under the former Act not here applicable;

and,

(v) all dividends received by the NRO during the part of the 1972 taxation year falling within the calendar year 1971;

and,

(vi) an amount which, for our purposes, is deemed to be 0.

This takes us to the next step wherein the amount produced under subparagraph (ii) with reference to the straddle year and the amount produced under subparagraph (i) with reference to subsequent taxation years (here inapplicable), are added together and the resulting total is then reduced by an amount equal to the total of the amounts prescribed in subparagraphs (iii),

(iv) and (v). Subparagraphs (iii) and (iv) are concerned with capital gains and interest respectively, and are not herein relevant. Subparagraph (v) I come to in a moment. The amount resulting (if any) is the CTI for the NRO “at any particular time.”

The same process is applied to paragraph 133(9)(a) in which subparagraph (ii) incorporates by reference the computation procedure established in subparagraph 133(9)(b)(ii) already examined here, modified only to the extent that paragraph (a) is dealing with the refund of tax already collected, whereas subparagraph (b) is dealing with the income in respect of which tax is exigible. The result is the isolation of the ART (if any) of the NRO “at any particular time.” This means, in our circumstances, that the procedure will be applied at the time of each dividend which is said to trigger a claim for ‘‘allowable refund” (AR) under paragraph (8)(a). Since both paragraphs (9)(a) and (b) require the computation of CTI and ART “at any particular time,” it follows that the accounting periods involved in these twin computations must be closed. Subparagraphs (i), (iv) and (v) make this abundantly clear by repeating the expression “particular time.” The omission of the repetition of the phrase in subparagraph (ii), applicable as it is to the straddle year only, does not of itself require an interpretation of the whole of paragraphs (9)(a) and (b) which would make subparagraph (ii) exceptional to the result achieved under the other subparagraphs. Nor does it require an interpretation which makes subparagraph (ii) exceptional to the introductory language of both paragraphs (9)(a) and (9)(b) which prescribes the rules for these computations “at any particular time.” The introduction to each of paragraphs (a) and (b), together with the practical requirement that the ascertainment of the various quantities going into the computations in these subparagraphs must be possible at the moment in question, lead me to conclude that the argument of the appellant with respect to subparagraph (ii) must fail. We therefore are required to go on to other considerations.

I return to subparagraph (v) which is common to both paragraphs (9)(a) and (b) with the variation noted above. This subparagraph provides for the reduction of the CTI by the amount of all dividends paid by the NRO after the straddle year. There is no provision for the deduction for dividends paid during the straddle year. The result is, therefore, that the CTI would continue to include the amount of a straddle year dividend at the time like computations are made in subsequent years. The ART similarly would continue to include that proportion of such dividends that would have been in the ART prior to their payment. Consequently, the formula for computing AR, involving as it does the procedures for computing CTI and ART, would in the future produce a second refund (on the payment of further taxable dividends by the NRO) unaffected by the AR paid out in the straddle year in respect of straddle year dividends, if the submission of the appellant on the meaning of subsection 133(9) is correct.

As Justice Urie has pointed out in his reasons, such an interpretation would produce diametrically opposed results as between two NROs, one with a straddle year fiscal period and the other with a calendar year fiscal period for the taxation year 1972. The former would be allowed an immediate AR whereas the latter would be required to pay dividends subsequent to the 1972 taxation year in order to release the AR with reference to 1972 NRO taxes paid.

There are other lines of analysis leading to the same result. Clause (ii)(B) of paragraph 133(9)(b) provides that in calculating the CTI for an NRO in order to apply for an AR, one must deduct from the taxable income of the NRO those dividends paid in that part of the straddle year included in the calendar year 1971. Thus, since these dividends form no part of the appellant’s CTI, they form no part of the computation leading to an AR in respect of the 1972 NRO taxes paid by the appellant. As for the balance of dividends which were paid by the NRO in the straddle year, namely those dividends paid in that part of the straddle year included in the calendar year 1972, these dividends may not be deducted from the CTI because subparagraph (v) limits such deductions to post-straddle year dividends, and hence an amount equal thereto remains in the CTI of the NRO, and thus is available in the future for AR when eligible dividends are paid. As mentioned earlier, this provision in subparagraph (v) is required in this rather complex pattern in order to preclude two ARs in respect of the one taxable dividend paid out. Read otherwise, subparagraph (v) would only prevent a triple AR with reference to the straddle year dividend. These comments apply equally to subparagraph (v) of pagagraph (9)(a) where the deduction permitted in computing the ART is an amount equal to the NRO tax paid by the NRO on that part of its income equal to the dividends paid out in the taxation year after the straddle year, which formed part of its taxable income in the straddle year.

The appellant recognizes the serious gap in its argument created by the wording of subparagraph (v). In its factum the following appears:

Clause (v) in subsection (9)(b), if read literally, does not include taxable dividends paid during the straddle year; likewise, clause (v) of subsection (9)(a), if read literally, does not include any amount in respect of taxable dividends paid during the straddle year. It follows, therefore, from a literal reading of clause (v) in these subsections that taxable dividends paid in the straddle year would not reduce CTI and that a refund of tax based on those dividends would not reduce ART so that an inference can be drawn from such a literal reading which is inconsistent with the basic, paramount intention of Parliament clearly established by clauses (i) and (ii) of these subsections that taxable dividends paid in the straddle year can give rise to a refund of tax.

It is submitted that this clause (v) in these subsections is clearly of a subordinate nature. Its purpose is simply to state a mere truism of a purely bookkeeping nature, viz that if a taxpayer receives a refund of tax its ART will be reduced by the amount of that refund and if it pays a taxable dividend its CTI will be reduced by the amount of that dividend or, put in homely fashion, that if you pour something out of a bucket, you have that much less in the bucket.

This argument is more an expression of a hope than an interpretative submission. Where a clause is an integral part of a statutory pattern, as subparagraph (v) is in paragraphs (9)(a) and (b), a court may not interpret the section as though the subclause did not exist simply because it leads to the hardship of deferral, which is all, in reality, that the taxpayer here suffers. For reasons to which I have already referred, subparagraph (v) has indeed a functional purpose, a purpose which coincides with the literal interpretation mentioned by the appellant in the foregoing excerpt.

It may be said in further support of the appellant’s position that construed in this fashion, section 133 provides for a compulsory lending program by the taxpayer. In effect, the taxpayer loans to the tax collector the NRO taxes paid for a minimum of one year but, in any event, for a period not less than the period commencing with the payment of the NRO tax and ending with the payment of the taxable dividend after the close of the fiscal year in respect of which that NRO tax was paid. Even then, this lending program is conditional for its termination on the NRO earning income after the close of the fiscal year in respect of which it paid the 15% tax now sought to be refunded. This second qualification may not occur if the NRO did not declare any dividends in the first year (here the straddle year) and hence carried forward a cash position to support the payment of dividends after the close of the straddle year. In spite of the fact that the section does not reveal the time lag as clearly as one would wish, section 133 can only be interpreted as prescribing a program which has this result.

Furthermore, it cannot be said that section 133 creates a situation completely parallel to that of the 1971 Tax Act in respect of the avoidance of double taxation of income passing through an NRO. This is so because the refund, if and when recovered, is paid back into the NRO and hence must be reprocessed through the dividend channel and subjected to the hazards of the formula imposed by section 133 and the hazards of commerce which produce the cash flow to support the future dividends. Be that as it may, it may well be that the draftsman, given the task of including the taxation of capital gains for the first time in the NRO taxation program, as well as other complications such as non-NRO accumulated surplus, may have found it necessary to adopt a plan with these delay characteristics in order to avoid other inequities. In any case, the task of this Court is but to construe the Statute and to apply it to the facts which are here agreed upon.

For these reasons, I conclude that a proper interpretation of section 133 requires the rejection of the appeal. By reason of this disposition, it is not necessary to deal with the other issues relating to interest. I would therefore dismiss the appeal with costs.