Hugessen,
J.:—The
appellant
paid
one
of
its
non-resident
shareholders
an
amount
deemed
to
be
a
dividend
pursuant
to
paragraph
212.1
(1)(a)
of
the
Income
Tax
Act:
212.1
(1)
Where,
after
April
10,
1978,
a
non-resident
person
disposes
of
shares
(in
this
section
referred
to
as
the
"subject
shares")
of
any
class
of
the
capital
stock
of
a
Canadian
corporation
(in
this
section
referred
to
as
the
"subject
corporation”)
to
another
Canadian
corporation
(in
this
section
referred
to
as
the
“purchaser
corporation")
with
which
the
non-resident
person
does
not
(otherwise
than
by
virtue
of
a
right
referred
to
in
paragraph
251(5)(b))
deal
at
arm's
length
and,
immediately
after
the
disposition,
the
subject
corporation
is
connected
(within
the
meaning
of
subsection
186(4),
on
the
assumption
that
the
references
therein
to
"payer
corporation"
and
to
“particular
corporation”
were
read
as
"subject
corporation"
and
"purchaser
corporation”
respectively),
with
the
purchaser
corporation,
(a)
the
amount,
if
any,
by
which
the
fair
market
value
of
any
consideration
(other
than
any
share
of
the
capital
stock
of
the
purchaser
corporation)
received
by
the
non-resident
person
from
the
purchaser
corporation
for
the
subject
shares,
exceeds
the
paid-up
capital
in
respect
of
the
subject
shares
immediately
before
the
disposition
shall,
for
the
purposes
of
this
Act,
be
deemed
to
be
a
dividend
paid
at
the
time
of
the
disposition
by
the
purchaser
corporation
to
the
non-resident
person
.
.
.
The
only
question
presented
by
the
appeal
at
bar
is
whether
the
said
"deemed"
dividend
is
taxable
under
paragraph
212(2)(a):
(2)
Every
non-resident
person
shall
pay
an
income
tax
of
25%
on
every
amount
that
a
corporation
resident
in
Canada
pays
or
credits,
or
is
deemed
by
Part
I
or
Part
XIV
to
pay
or
credit,
to
him
as,
on
account
or
in
lieu
of
payment
of,
or
in
satisfaction
of,
(a)
a
taxable
dividend
(other
than
a
capital
gains
dividend
within
the
meaning
assigned
by
subsection
130.1(4),
131(1)
or
133(7.1))
.
.
.
We
are
all
of
the
view
that
the
trial
judge
did
not
err
in
dismissing
the
appellant's
arguments.
In
its
essentials,
the
wording
of
paragraph
212(2)(a)
makes
taxable
any
dividend
paid
to
a
non-resident
by
a
corporation
resident
in
Canada.
The
mere
mention
of
the
word
“dividend”
necessarily
includes
any
payment
deemed
to
be
a
dividend,
in
particular
one
covered
by
the
deeming
provision
of
paragraph
212.1(1)(a).
Beetz,
J.
described
the
function
of
such
a
provision
in
R.
v.
Vermette,
[1978]
2
S.C.R.
838,
at
845,
as
follows:
A
deeming
provision
is
a
statutory
fiction;
as
a
rule
it
implicitly
admits
that
a
thing
is
not
what
it
is
deemed
to
be
but
decrees
that
for
some
particular
purpose
it
shall
be
taken
as
if
it
were
that
thing
although
it
is
not
or
there
is
doubt
as
to
whether
it
is.
A
deeming
provision
artificially
imports
into
a
word
or
an
expression
an
additional
meaning
which
they
would
not
otherwise
convey
beside
the
normal
meaning
which
they
retain
where
they
are
used;
it
plays
a
function
of
enlargement
analogous
to
the
word
"includes"
in
certain
definitions;
however,
"includes"
would
be
logically
inappropriate
and
would
sound
unreal
because
of
the
fictional
aspect
of
the
provision.
The
fact
that
the
definitions
of
"dividend"
in
subsection
248(1)
and
of
“taxable
dividend”
in
paragraph
89(1)(j)
do
not
mention
a
"deemed"
dividend
is
of
no
assistance
to
the
appellant
since
the
deeming
provision
has
precisely
this
effect,
of
extending
the
meaning
of
the
word
"dividend"
to
payments
which
it
would
otherwise
not
cover.
Paragraph
212(2)(a)
applies
not
only
to
actual
payment
of
a
"deemed"
dividend,
as
in
the
case
at
bar,
but
also
to
situations
such
as
those
covered
in
subsection
84(1)
and
219(5.3),
in
which
it
is
the
payment
itself
which
is
deemed
to
have
been
made
though
there
is
no
payment
of
money.
This,
in
our
view,
is
the
explanation
for
the
phrase
"or
is
deemed
by
Part
I
or
Part
XIV
to
pay
or
credit,
to
him”;
in
the
circumstances
of
the
case
at
bar,
we
can
remove
these
words
and
read
the
provision
as
if
it
spoke
only
of
the
payment
of
a
dividend.
For
the
reasons
given
it
extends
to
payments
which
are
deemed
to
be
dividends.
The
appeal
will
be
dismissed
with
costs.
Appeal
dismissed.
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