Canada Trustco Mortgage Co., v. The Queen, 2005 DTC 5523, [2005] 2 S.C.R. 601, 2005 SCC 54

McLachlin C.J. and Major J. stated (at para. 20):

If a deduction against taxable income is claimed, the existence of a tax benefit is clear, since a deduction results in a reduction of tax. In some other instances, it may be that the existence of a tax benefit can only be established by comparison with an alternative arrangement. For example, characterization of an amount as an annuity rather than as a wage, or as a capital gain rather than as business income, will result in differential tax treatment. In such cases, the existence of a tax benefit might only be established upon a comparison between alternative arrangements. In all cases, it must be determined whether the taxpayer reduced, avoided or deferred tax payable under the Act.

The taxpayer purchased trailers from the U.S. user of the trailers ("TLI"), with the taxpayer appointing TLI as its agent to hold title on its behalf. The taxpayer leased the trailers to an English company ("MAIL") which in turn subleased the trailers to TLI. TLI then immediately made a lump sum prepayment of all the rents payable by it under the sublease, and MAIL used a portion of this sum to make a deposit with the bank that had helped fund the purchase by the taxpayer of the trailers in an amount equal to the bank loan and paid the balance of the prepayment to a Jersey affiliate of the bank on the condition that the affiliate use those funds to purchase a Government of Canada bond to be pledged to secure MAIL's obligations under the lease.

The claiming by the taxpayer of capital cost allowance on the acquired trailer was consistent with the object and spirit of the capital cost allowance provisions of the Act which did not, except in specified circumstances, reduce cost to reflect a mitigation of economic risk. Accordingly, the transactions did not defeat or frustrate the object, spirit or purpose of the capital cost allowance provisions read textually, contextually and purposively.

In the course of a general discussion of the expression "series of transactions" apearing in ss. 245(2) and (3), the Court noted (at para. 26) that OSFC had held that s. 248(10) extends the meaning of a series "where the parties to the transaction 'knew of the ... series such that it could be said that they took it into account when deciding to complete the transction'," and then stated (also at para. 26):

We would elaborate that 'in contemplation' is read not in the sense of actual knowledge but in the broader sense of 'because of' or 'in relation to' the series. The phrase can be applied to events either before or after the basic avoidance transaction found under s. 245(3)."

In indicating that judges should not apply taxation policies that are not grounded in the specific provisions of the Act, McLaughlin C.J. and Major J. stated (at p. 5530) that such an approach "would run counter to the overall policy of Parliament that tax law be certain, predictable and fair, so that taxpayers can intelligently order their affairs. Although Parliament's general purpose in enacting the GAAR was to preserve legitimate tax minimization schemes while prohibiting abusive tax avoidance, Parliament must also be taken to seek consistency, predictability and fairness in tax law. These three latter purposes would be frustrated if the Minister and/or the courts overrode the provisions of the Income Tax Act without any basis in a textual, contextual and purposive interpretation of those provisions."

In the course of a general introduction, McLachlin CJ stated (at para. 10):

The interpretation of a statutory provision must be made according to a textual, contextual and purposive analysis to find a meaning that is harmonious with the Act as a whole. When the words of a provision are precise and unequivocal, the ordinary meaning of the words play a dominant role in the interpretive process. On the other hand, where the words can support more than one reasonable meaning, the ordinary meaning of the words plays a lesser role.