Keith, J:—In my judgment this appeal must fail and since the entire argument has been taken down by the Court Reporter, it is unnecessary for me to deliver elaborate reasons.
The appellant, a wholly owned Ontario subsidiary of a United States corporation, is engaged in the business of importing films or videotapes from its parent company which it in turn makes available to television broadcasters in Canada under very profitable licensing contracts.
The appellant complains that the respondent has improperly applied subparagraph 22(1)(l) of The Corporations Tax Act, SO 1972 c 143 as amended by SO 1973 c 42, the relevant portions of which, as so amended read as follows in the taxation years in question:
(1) In computing the income of a corporation from a business or property no deduction shall be made in respect of,
(I) five-twelfths of the aggregate of amounts each of which is an amount in respect of
(iii) a right in or to use of motion picture films or films or videotapes for use in connection with television that have been or are to be used or reproduced by the corporation in Canada,
that were paid or credited, or deemed to be paid or credited, in the fiscal year to a non-resident person with whom the corporation was not dealing at arm’s length,
On behalf of the appellant it is submitted that this section can only apply where the taxable corporation itself uses the film or videotape by broadcasting and that this interpretation is necessary because the words “used or reproduced” are followed immediately by the words “by the corporation”. Counsel for the appellant in support of this interpretation, noted that the words “by the corporation” never appeared in the relevant section of the Income Tax Act (Canada) and were eliminated from the Ontario section by a 1977 amendment.
I think these matters are of no significance. The only “use” that this taxpayer can make of the films and videotapes that were sent to it by its parent company for distribution in Canada was to license them to others. The word “use” whether used as a verb or a noun, has many uses and is used in varying ways depending upon the context.
The context in this case is television broadcasting. Broadcasting in this country is subject to strict statutory authority and regulation. The appellant is neither licensed nor equipped to use the films and videotapes it imports by broadcasting them. Yet it is very legitimately in the field of earning income by using the same films and videotapes as an article of commerce for licensing to others who can broadcast them.
If it is necessary for any purpose to expand on these reasons, I will be glad to do so on application by either party.
Are you asking for costs, Mr Stoodley?
MR STOODLEY: Yes, My Lord.
HIS LORDSHIP: Anything to say about that, Mr Foster?
MR FOSTER: Yes My Lord, I would ask that there be no costs on the basis that I feel the application brought on behalf of ITC was based on a lack of clarity in the section and with the regulations, that they had a right to bring them to the Court.
HIS LORDSHIP: I am inclined to agree with Mr Foster, Mr Stoodley, particularly because of the 1977 amendment.
MR STOODLEY: Thank you, My Lord.
HIS LORDSHIP: I shall so endorse the record.