Citation: 2007TCC395
Date: 20070711
Dockets: 2003-3999(IT)G
2004-1916(IT)G
2003-4340(IT)G
BETWEEN:
TEMBEC INC.
CASCADES INC.
PROVIGO INC.,
Appellants,
and
HER MAJESTY THE QUEEN
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Lamarre Proulx J.
[1] In each of these
appeals, agreements as to the facts were filed before the hearing. The facts
are not completely identical, but the question of law is the same in each case.
It involves the interpretation of subparagraph 20(1)(f)(ii) of the Income
Tax Act (the Act). The taxation years at issue are 1997 for
Tembec Inc. and Cascades Inc. and 1998 for Provigo Inc.
[2] Paragraph 20(1)(f)
of the Act read as follows during the relevant period:
20(1) Deductions permitted in computing income
from business or property. Notwithstanding
paragraphs 18(1)(a), 18(1)(b) and 18(1)(h), in computing a
taxpayer's income for a taxation year from a business or property, there may be
deducted such of the following amounts as are wholly applicable to that source
or such part of the following amounts as may reasonably be regarded as
applicable thereto:
. . .
(f) Discount
on certain obligations-an amount paid in the year
in satisfaction of the principal amount of any bond, debenture, bill, note,
mortgage or similar obligation issued by the taxpayer after June 18, 1971 on
which interest was stipulated to be payable, to the extent that the amount so
paid does not exceed,
(i) in any case
where the obligation was issued for an amount not less than 97% of its
principal amount, and the yield from the obligation, expressed in terms of an
annual rate on the amount for which the obligation was issued (which annual
rate shall, if the terms of the obligation or any agreement relating thereto
conferred on its holder a right to demand payment of the principal amount of
the obligation or the amount outstanding as or on account of its principal
amount, as the case may be, before the maturity of the obligation, be
calculated on the basis of the yield that produces the highest annual rate
obtainable either on the maturity of the obligation or conditional on the
exercise of any such right) does not exceed 4/3 of the interest stipulated to
be payable on the obligation, expressed in terms of an annual rate on
(A) the principal amount of the
obligation, if no amount is payable on account of the principal amount before
the maturity of the obligation, or
(B) the amount outstanding from time to
time as or on account of the principal amount of the obligation, in any other
case,
the amount by which the lesser of the
principal amount of the obligation and all amounts paid in the year or in any
preceding year in satisfaction of its principal amount exceeds the amount for
which the obligation was issued, and
(ii) in any other
case, 3/4 of the lesser of the amount so paid and the amount by which the
lesser of the principal amount of the obligation and all amounts paid in the
year or in any preceding taxation year in satisfaction of its principal amount
exceeds the amount for which the obligation was issued;
[3] Subparagraph 20(1)(f)(ii)
was amended in 2001 by replacing the reference to the fraction "3/4"
with a reference to the fraction "1/2", in order to reflect the amendment
made to the capital gains inclusion rate, which was changed from 3/4 to 1/2.
[4] The definition of
"principal amount" in subsection 248(1) of the Act reads as follows:
"principal amount", in relation
to any obligation, means the amount that, under the terms of the obligation or
any agreement relating thereto, is the maximum amount or maximum total amount,
as the case may be, payable on account of the obligation by the issuer thereof,
otherwise than as or on account of interest or as or on account of any premium
payable by the issuer conditional on the exercise by the issuer of a right to
redeem the obligation before the maturity thereof;
[5] In these cases,
there are two issues. The first is whether the principal amount can fluctuate
between the year the obligation is issued and the year it is redeemed. The
second issue involves determining the maximum amount paid in satisfaction of
the principal amount in the case of redemption in shares. Is it the share price
agreed upon by the parties in the trust indenture, or is it the fair market
value (FMV) of the shares at the time they are issued in satisfaction of the
obligations?
[6] Since the
agreements as to the facts are relatively long, I shall reproduce the version
submitted by the Appellant Tembec Inc.:
[TRANSLATION]
1. The Appellant is a corporation that was
incorporated in 1972 under Part I of the Companies Act (QCA) and
continued under Part IA of the QCA in 1983. The Appellant's fiscal year ends on
September 30 of each year.
2. The Appellant operates primarily in the
field of pulp and paper.
3. The Appellant's authorized capital stock
includes, inter alia, an unlimited number of Class A shares.
4. The taxation year in dispute for the
Appellant ended on September 30, 1997.
THE DEBENTURES
(a) Issuance
5. Throughout 1993 and in accordance with the
terms of a trust indenture dated July 28, 1993, the Appellant issued
$70,000 in convertible unsecured subordinated debentures (the Debentures)
maturing on August 1, 2003. The Debentures were issued in $1,000 denominations.
Short-form prospectus of July 15, 1993 – Tab 1
Trust Indenture of July 28, 1993 – Tab 2
6. The Debentures were issued with no original discount.
7. A portion of the net proceeds from the
issuance was used to refinance the Appellant's operations and a portion was
added to its working capital.
(b) Interest
8. The Debentures bore interest at the rate
of 7.5% per year, payable semi‑annually on February 1 and August 1.
The interest on the Debentures was deductible under paragraph 20(1)(c)
of the Act.
(c) Conversion privilege
9. The Debentures were convertible at the
holders' option into the Appellant’s Class A shares at any time prior to the
close of business on the last business day preceding August 1, 2003, or, if
they were called for early redemption, the last business day prior to the
redemption date.
10. The conversion price was $10 per Class A
share, or 100 shares per $1,000 of principal amount of Debentures.
(d) Early redemption
11. The Appellant could call the Debentures for
early redemption at any time on or after August 1, 1996, at a price equal to
the Debenture capital ($1,000) plus any accrued interest. However, in order for
the transaction to take place, the weighted average price of the Appellant's
Class A shares on the Montreal and Toronto Stock Exchanges for the 20
consecutive trading days ending five trading days preceding the date on which
the notice of redemption was given shall not be less than the following:
i. if called during the 12 months ending August
1
|
1997
|
$14.00
|
|
1998
|
$13.00
|
|
1999
|
$12.00
|
|
2000
|
$11.50
|
|
2001
|
$11.00
|
|
2002
|
$10.50
|
|
2003
|
$10.00
|
12. Unless in default, the Appellant also had
the option, with at least 30 days' and at most 60 days' notice, of redeeming
the principal amount of the Debenture by issuing a certain number of Class A
shares. The number of Class A shares to issue was calculated by dividing
$1,000 by 95% of the weighted average price at which the Appellant's
Class A shares were traded on the Montreal and Toronto Stock Exchanges
during the 20 consecutive trading days ending five trading days preceding the
call date. This calculation resulted in the holder receiving shares with an
approximate value of $1,050 per $1,000 of principal amount of Debentures.
(e) Buyback of Debentures for cancellation
13. The Appellant could purchase the Debentures
on the market or by private contract or offer for a price not higher than 105%
of their principal amount for purchases until August 1, 1997, and, for
purchases after that date, for a price not higher than the principal amount
($1,000 per Debenture), plus accrued and unpaid interest and acquisition fees.
(f) Payment upon maturity
14. Upon maturity, the Appellant had to pay
$1,000 per Debenture plus accrued and unpaid interest. However, unless in
default, the Appellant had the option, with at least 30 days' and at most 60
days' notice, of redeeming the principal amount of the Debenture by issuing a
certain number of Class A shares. The number of shares was calculated in the
same way as in paragraph 12 above.
CONVERSION
15. Between August 6 and 29, 1997, following a
Notice from the Appellant that it would call the Debentures as soon as the
weighted average price exceeded $13.00, the holders converted 64,485 Debentures
having a face value of $64,485,000 into 6,448,500 of the Appellant's Class A
shares.
16. At the time the Debentures were converted,
the stock market value of the Appellant's Class A shares was fluctuating
between $13 and $14 a share.
Stock prices – Tabs 3 and 4
ACCOUNTING AND TAX
TREATMENT
17. For accounting
purposes, the Appellant raised the value of its capital stock by $64,485,000,
the face value of the converted Debentures.
18. In June 2000, the Appellant submitted an
adjustment request for its income tax return for its 1997 taxation year. The
request focused on, inter alia, the claim for a $16,553,987 deduction
under paragraph 20(1)(f). The amount of $16,553,987 represents 75%
of the difference between the stock market value of the 6,448,500 of the Appellant's
Class A shares ($86,556,983) and the amount initially received when the
converted Debentures were issued ($64,485,000).
19. In its Notice of Determination of a Loss
dated October 15, 2001, the CRA disallowed the $16,553,987 deduction
claimed by the Appellant.
20. The Appellant duly and in a timely manner
filed a notice of objection to the Notice of Determination and the CRA
confirmed its determination in a notice dated August 6, 2003.
[7] Cascades Inc. used
unsecured convertible debentures as the financial instrument for the purpose of
borrowing from its subscribers, while Provigo Inc. used unsecured
convertible promissory notes.
[8] As the provisions
concerning the right to convert securities into shares are important, I shall
also reproduce paragraphs 8 and 9 of the agreement as to the facts from
Cascades Inc. and paragraph 12 of the agreement as to the facts from
Provigo Inc.:
[TRANSLATION]
Cascades Inc.
(c) Conversion
privilege
8. Subject to
adjustments in certain cases, holders of common shares had the option of
converting them into Debentures at any time prior to
the close of business on August 19, 1998, at a conversion price ("initial conversion price")
of $6.50 per common share of the Appellant's company, i.e. a rate of
153,846 common shares per $1,000 of principal amount of Debentures.
9. Holders then
had the option of converting the Debentures into common shares at a conversion
price ("subsequent conversion price"), subject to adjustments in
certain cases, of $7.25 per common share, i.e. a rate of 137,931 common
shares per $1,000 of principal amount of Debentures.
Provigo
(d) Conversion
privilege
12. The promissory
notes were convertible into the Appellant's common shares without par value on
the following basis:
(i) if the conversion
took place after June 29, 1994, and before June 29, 1999, one
common share for every $4.93 (face value) of the promissory note.
(ii) notwithstanding
the above, if the conversion took place on June 29, 1999, or if a
call notice was issued with respect to the promissory note or if the holder of
the note was in a position, according to the note’s terms, to declare due and
payable the principle amount of the promissory note, one common share for every
$4.475 (face value) of the promissory note.
[9] Here is how the
conversion right is described in Tembec Inc.'s trust indenture:
[TRANSLATION]
Conversion
Privilege
Each Debenture is convertible at the
option of the holder at all times prior to the close of business on the on the last business day preceding whichever is the earlier of the
date of maturity or the specified early redemption date, into Class A shares,
at a conversion price of $10.00 per Class A share, i.e. 100 Class A shares per $1,000 in
Debentures. . . .
. . .
The issued and outstanding Class A shares
are traded on the Montreal and Toronto Stock Exchanges. There is currently no
market through which the Debentures may be sold. On July 14, 1993, the
closing price of the Class A shares was $8.125 on the Montreal Stock
Exchange and $8.00 on the Toronto Stock Exchange. The Montreal and Toronto
Stock Exchanges have conditionally agreed to list the Debentures and
Class A shares issued upon the conversion of the Debentures. Listing is
conditional upon the Company fulfilling all the requirements of those stock
exchanges no later than October 15, 1993.
[10] The obligations
issued give the holder a right of conversion into shares of the borrowing
company, in accordance with the provisions of the trust indentures under which
they were issued. The holder was entitled to redeem the amount paid for the
debenture or promissory note, i.e. the obligation's face value, or to convert
the obligation into company shares.
[11] In the case of
Tembec Inc., obligations in the amount of $70,000,000 were issued in 1993,
in the case of Provigo Inc., $20,000,000 in 1994, and Cascades Inc.,
$82,500,000 in 1993.
[12] In 1997, the holders
of obligations from Tembec Inc. (the company used as an example in the
submissions) converted 64,485 debentures having a face value of
$64,485,000 into 6,448,500 of the Appellant's Class A shares. At that
time, the shares’ stock market price was fluctuating between $13 and $14, as
opposed to the $10 set out in the agreement. The claim, pursuant to
subparagraph 20(1)(f)(ii) of the Act, is for 75% of the difference
between the stock market value of the 6,448,500 Class A shares, which was
$86,556,983, and the amount initially received when the Debentures were
purchased. See paragraphs 15, 16 and 18 of the agreement as to the facts.
[13] Before moving on to
the parties' arguments, it may be helpful to reproduce paragraphs 32 and 33 of
the Supreme Court of Canada's decision in Imperial Oil Ltd. v. Canada; Inco
Ltd. v. Canada, [2006] 2 S.C.R. 447, hereinafter Imperial Oil.
In that decision, the scope of paragraph 20(1)(f) of the Act was
analyzed in depth and the formula set out.
32 . . . The instant cases turn on
the proper interpretation of the deduction encompassed by s. 20(1)(f).
Specifically, the question is whether the deduction provided for in par. (f)
is exclusively one for original issue discounts or whether it is instead a
broader deduction that applies more generally to the capital cost of borrowing.
33 The formula described in s.
20(1)(f) is as follows:
X = [lesser of A or B] –
[C]
where
X is the amount of the deduction;
A is the principal amount
of the obligation;
B is all amounts paid in
the year or in any preceding year in satisfaction of the principal amount; and
C is the amount for which the obligation was issued.
[14] In this case, the
dispute concerns the amounts in variables A and B of the formula. There is no
dispute as to variable C. The Appellants must satisfy the Court that both the
amount corresponding to variable A of the formula (the principle amount) and
the amount corresponding to variable B (all amounts paid) exceed the amount for
which the obligation was issued. Nor is there any dispute as to the
applicability of subparagraph 20(1)(f)(ii).
Appellants' arguments
[15] It is common ground
in the agreements as to the facts that the obligations—debentures and
promissory notes—were issued with no original issue discount: see paragraph 6
of the agreement reproduced above.
[16] However, according
to counsel for the Appellants, the Supreme Court decision does not make a final
determination as to whether only the original issue discount may be taken into
consideration. Despite the fact that in the last sentence of paragraph 32
of the decision, the Supreme Court says that the issue is whether the deduction
provided for in paragraph (f) is exclusively one for original issue
discounts or whether it is instead a broader deduction that applies more
generally to the capital cost of borrowing, counsel argues that the decision
makes a final determination only with respect to foreign exchange losses. The
issue of other potential borrowing costs, such as redemption costs, was not
decided.
[17] In support of this
argument, counsel refers to paragraphs 64 and 67 of the decision:
64 . . . This does not dispose of the
matter, however, because if the "principal amount" can fluctuate with
the cost of repayment in Canadian dollars, then the "discount amount"
can be ascertained in relation to the value of the principal in Canadian
dollars at the time of repayment, rather than in relation to the face
value of the obligation (i.e., the term "discount" may not be limited
to "original issue discounts" but may encompass discounts that arise
out of fluctuations of commodity or currency prices over time). To resolve this
issue, it is necessary to determine whether Parliament intended foreign
exchange losses to be covered by s. 20(1)(f) in the same way as
discounts.
. . .
67 In my view, s. 20(1)(f) was
never intended to apply to foreign exchange losses. As we have seen above, a
number of factors, which generally relate to the wording of the provision, are
determinative in this respect. This interpretation best reflects the structure
of the ITA and the intent of Parliament. The purpose of the provision is
to address a specific class of financing costs arising out of the issuance of
debt instruments at a discount. The interpretation advanced by the respondents
in these appeals, on the other hand, turns s. 20(1)(f) into a broad
provision allowing for the deductibility of a wide range of costs attendant
upon financing in foreign currency, in the absence of any mention of such costs
in the text of the ITA, and despite the fact that such costs are usually
regarded as being on capital account.
[18] Counsel makes two
proposals in light of his view that the Supreme Court settled only the issue of
foreign exchange losses: (1) in some circumstances, the principal amount can
fluctuate, and (2) the fair market value (FMV) of the shares must be taken into
account in calculating the total amounts paid in satisfaction of the principal
amount.
[19] According to
counsel, the term "principal amount" is not an amount fixed upon
issuance, but can fluctuate according to the market value of the product
payable upon maturity. For example, if a $100,000 debenture were issued and
redeemable at 1,000 ounces of gold that, at the time of the loan, were worth
$100,000, the principal amount of that debenture would be, according to
counsel, the FMV of the gold at the time of redemption.
[20] Counsel points out
that these cases are distinguishable from Imperial Oil. In that case,
uncertainty as to the maximum repayment was not dealt with in the lending
agreement. In this case, on the other hand, under the terms of the agreement a
potential discount is possible, since the market value of the shares at the
time of their conversion is unknown, but the conversion right is included
regardless.
[21] Hence, in the case of Tembec Inc., the conversion price set out in the
agreement was $10 per Class A share, or 100 shares per $1,000 of principal
amount of the Debentures: see paragraph 15 of the agreement as to the
facts. According to counsel, it is not the expected price that is important but
rather the proportion of shares obtained. It is this proportion that remains
stable. Therefore, according to the very terms of the agreement, the total
amount payable in satisfaction of the principal amount may vary.
[22] In Imperial Oil,
borrowing and redemption were performed in US dollars. At the time of
redemption, there had been a fluctuation in the value of the US dollar,
expressed in Canadian dollars. According to counsel for the Appellant, the
conversion into Canadian dollars was not addressed in the agreement, which was
not the case for the right to convert into shares. Therefore, counsel argues,
the principal amount is subject to fluctuation; it is not necessarily the
initial amount, but rather the cost of redemption to the extent that that cost
is covered by the lending agreement.
[23] The second proposal
by counsel for the Appellants is that the amounts paid in satisfaction of the
obligation pursuant to subparagraph 20(1)(f)(ii) of the Act and the
definition of "principal amount" in subsection 248(1) of the Act
must be calculated by taking the FMV of the shares at the time of conversion or
redemption and not the price agreed upon in the trust indenture.
[24] Counsel maintains
that the price mentioned in the trust indentures is nothing more than an item
or tool for calculating the proportion of shares to be issued in satisfaction of
the obligations. The intention of the parties must be considered. He maintains
that the agreement between the parties is to fix a total number of shares to be
obtained. It is therefore at the time of payment that the maximum amount
payable in satisfaction of the principal amount can be determined; the cost
incurred by the Appellants for this purpose is the FMV of the shares and not
the agreed upon price. In support of this, he refers to the decision of this
Court in Alcatel Canada Inc. v. Canada, 2005 TCC 149 at
paragraph 31:
31 Black's Law Dictionary, Eighth
Edition, defines "expenditure" as follows:
1. The act of process of paying out;
disbursement. 2. A sum paid out.
I take that to be the ordinary meaning of
the word. Expenditure is not confined to outlays of cash. Nothing in the
definition excludes the disbursement of assets by mechanisms adopted for that
purpose which do not involve payouts of cash. The Respondent's argument fails
to recognize that a very real expenditure is accomplished when shares having an
established market value are sold for less than that value in the context of a
scheme for the compensation of the employees who buy them. The benefit realized
by the employees is real. It is not conjured up by magic. It flows from the
Appellant to the employees by the mechanism of the stock option. The
expenditure consists of the consideration which the Appellant foregoes when it
issues its shares for less than market value. The encouragement of scientific
research which is the object of the legislation would be greatly diminished by
the adoption of the narrow construction for which the Respondent contends.
[25] According to this
decision, a company makes a real expenditure when it issues shares for less
than their FMV. The expenditure consists of the consideration that the
Appellant foregoes when it issues its shares for less than their market value.
[26] I should also note
that counsel, in response to a question from the Court, expressed the opinion
that the cost of acquiring the shares upon conversion by the holders of the
obligations is the issue price of the obligation.
Respondent's arguments
[27] Counsel for the
Respondent maintains that the Supreme Court in Imperial Oil made a final
determination not only on foreign exchange losses, but also on the issue of
whether the deduction referred to in paragraph 20(1)(f) is
exclusively one for original issue discounts or whether it should be deemed to
cover a broader array of financing costs. If, at the end of the decision, the
Supreme Court focused primarily on foreign exchange losses, it is because they
represented, in that case, the additional cost of borrowing at the time of
redemption. There is no reason the same reasoning cannot be applied to other
additional borrowing costs at the time of redemption.
[28] According to her,
the paragraph 20(1)(f) deduction is designed to cover one-time
expenses incurred when the debt is repaid but not to cover the depreciation or
appreciation of the principal amount over time, apart from that related to the
original issue discount.
[29] The Supreme Court
held at paragraph 67 of the decision that paragraph 20(1)(f) was
never intended to apply to foreign exchange losses. The provision was meant to
apply to a specific category of financing costs flowing from the issuance of
discounted debt securities.
[30] In this case, when
the obligations were issued, the principal amount of the obligations was equal
to the amount in which they were issued. It is common ground that there was no
original issue discount. According to counsel, the principal amount could
therefore not fluctuate as a function of redemption costs.
[31] With respect to the
second argument raised by the Appellants, to the effect that the amounts paid
in satisfaction of the obligations must be calculated based on the FMV of the
shares, counsel maintains that the case law is clear that what is paid is the
share price agreed upon by the parties in the trust indentures.
[32] When there is an
agreement between the parties establishing the cost to the company of issuing
the shares, whether in exchange for property or in payment of a debt, it is the
terms of the obligation that apply. It is the agreed upon price and not the FMV
of the shares at the time of issue that constitutes the cost or the consideration
for the issuing company.
[33] She refers to the
decision in Teleglobe Canada Inc. v. R., 2002 DTC 7517, and
paragraph 32 in particular:
32 It follows from this that the cost to the appellant of
issuing shares as part consideration for the assets of Old Teleglobe is the
amount agreed between the parties, as evidenced by the stated capital of the
common shares in the appellant. . . .
[34] Under the
agreements, the Appellants undertook, in the case of conversion, to issue
shares at a certain price. At the time of issuance, they renounced the
possibility of receiving more for the shares.
[35] Counsel also refers
to the decision in King Rentals Ltd. v. Canada, [1995] T.C.J. No. 790
(QL), and paragraph 14 in particular:
14 I conclude from this jurisprudence that, provided there is
no abuse, the amount agreed upon between the subscriber and the corporation and
added to the paid-up capital of the shares is conclusive of the amount paid by
the corporate debtor to retire the debt.
[36] To summarize,
counsel argues that the principal amount of the obligations, variable
"A", could not fluctuate after the obligations had been issued and
that, in any case, the maximum amount payable in satisfaction of the
obligations issued, variable "B", was equal to the amount for which
the obligations were issued.
Conclusion
[37] I am of the opinion
that the Court must accept the arguments of counsel for the Respondent.
[38] It is at the time
the obligations are issued that it must be determined whether or not they are
issued at a discount. The deduction can only be realized when the debt is
repaid, but it is the contractual terms related to the issuance that are
determinant.
[39] This is what was
found by the Supreme Court of Canada. The principal amount cannot fluctuate. The
following passage is from the summary of the Supreme Court’s decision: " .
. . The text, scheme and context of s. 20(1)(f) indicate that the
deduction is limited to original issue discounts—shallow discounts in
par. (f)(i) and deep discounts in para. (f)(ii). . . .
"
[40] However, to
calculate the principal amount, the amount of the redemption agreed upon at the
time the obligations are issued is essential. We must therefore look at the
subscription agreement. In the agreement, there is no reference made to
redemptions greater than the amount loaned. What is contemplated is a
redemption equal to the amount loaned, whether the amount loaned is redeemed in
cash or by conversion of shares.
[41] Counsel for the
Appellants submits that the parties intended that the redemption be at the FMV
of the shares. No subscriber testified on this point. Moreover, counsel himself
believes that the cost of acquiring the shares would be equivalent to the
amount of the claim. It is also common ground that for accounting reasons, the
Appellants raised the value of their capital stock by the face value of the
converted debentures or promissory notes. See page 17 of the agreement as
to the facts.
[42] In the trust
indentures, two items were referred to that related to the satisfaction of the
debt through the conversion of shares, namely the agreed upon price and the
proportion of shares. Counsel for the Appellants argues that the price is
nothing more than a tool for calculating the proportion of shares. I disagree:
if the price can fluctuate, there is no reason that the proportion of shares
cannot fluctuate accordingly.
[43] The proportion of
shares did not fluctuate. The agreed upon price did not fluctuate either. The
redemption agreed to upon the conversion of shares was equal to the amount for
which the obligation was issued and is the amount that was paid in satisfaction
of the obligations issued. This is the interpretation of the case law cited by
counsel for the Respondent. It was also the intention of the parties.
[44] Nevertheless, as a
result of this Court’s decision in Alcatel, the Appellants must be
considered to have made as a real expenditure the FMV of the shares that they
issued when the subscribers exercised their conversion rights. The difference
between the price agreed upon in satisfaction of the obligations and the FMV of
the shares issued can be considered an expenditure made by the Appellants, but
there is no need for me to decide that issue, nor the tax treatment of that
expenditure, as those issues are secondary to the legal debate in this case.
Only the deduction under paragraph 20(1)(f) of the Act is in
dispute, and I am of the opinion that the Respondent’s position is the correct
one.
[45] Accordingly, the
appeals are dismissed, with costs.
Signed at Ottawa, Canada, this 11th day of July 2007.
"Louise Lamarre Proulx"
on this 4th day of September 2007.
Monica F.
Chamberlain, Revisor
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