Date:
20130618
Docket:
A-47-12
Citation: 2013 FCA 160
CORAM: NOËL
J.A.
TRUDEL J.A.
MAINVILLE
J.A.
BETWEEN:
FLSMIDTH
LTD.
Appellant
and
HER
MAJESTY THE QUEEN
Respondent
REASONS
FOR JUDGMENT
NOËL J.A.
[1]
This
is an appeal from a decision of Paris J. of the Tax Court of Canada (the Tax
Court judge) dismissing the appeal by FLSmidth Ltd. (the appellant) from an
assessment issued with respect to its 2002 taxation year.
[2]
The
dispute turns on the application of subsection 20(12) of the Income Tax Act,
R.S.C. 1985, c. 1 (5th Supp.) (the Act) and whether pursuant to this
provision GL&V/Dorr-Oliver Canada Inc. (Dorr-Oliver), a predecessor
corporation of the appellant, was entitled to deduct its share of U.S. income
tax paid by a limited partnership of which it was a member.
[3]
Subsection
20(12) provides:
|
20. (12) In computing a
taxpayer’s income for a taxation year from a business or property, there may
be deducted such amount as the taxpayer claims not exceeding the non-business
income tax paid by the taxpayer for the year to the government of a country
other than Canada (within the meaning assigned by subsection 126(7) read
without reference to paragraphs (c) and (e) of the
definition “non-business-income tax” in that subsection) in
respect of that income, other than any such tax, or part thereof, that can
reasonably be regarded as having been paid by a corporation in respect of
income from a share of the capital stock of a foreign affiliate of the
corporation.
|
20. (12) Est déductible dans
le calcul du revenu d’un contribuable pour une année d’imposition tiré d’une
entreprise ou d’un bien le montant que le contribuable demande, ne dépassant
pas l’impôt sur le revenu ne provenant pas d’une entreprise (au sens de la
définition de « impôt sur le revenu ne provenant pas d’une entreprise »
au paragraphe 126(7), compte non tenu des alinéas c) et e)
de celle-ci) qu’il a payé pour l’année à un pays étranger au titre de ce revenu,
à l’exception de tout ou partie d’un tel impôt qu’il est raisonnable de
considérer comme payé par une société à l’égard du revenu tiré d’une action
du capital-actions d’une société étrangère affiliée de la société.
|
It is common ground that the amount
sought to be deducted does not exceed the non-business income tax paid to the U.S. government. The controversy surrounds the requirement that the U.S. tax sought to be deducted be “in respect of that income” (first condition) but not be
reasonably regarded as having been paid “in respect of income from a share of
the capital stock of a foreign affiliate” (second condition).
[4]
The
Tax Court judge found that the income being computed by Dorr-Oliver was income
from property and that the U.S. tax sought to be deducted was a tax paid “in
respect of that income” (reasons, paras. 45 and 46). Accordingly, the first
condition had been met. However, he went on to hold that the income tax sought
to be deducted could also be regarded as having been paid “in respect of income
from a share of the capital stock of a foreign affiliate”, with the result that
the second condition which is framed in the negative had not been met (reasons,
para. 58).
[5]
In
support of its appeal, the appellant takes the position that the Tax Court judge
correctly held that it met the first condition but erred in finding that it did
not meet the second. For the reasons which follow, I am of the view that the
appeal cannot succeed.
THE FACTS
[6]
The
matter proceeded before the Tax Court judge on the basis of a detailed
statement of facts to which the parties agreed prior to trial. The following
summary suffices for present purposes.
[7]
Dorr-Oliver
is a wholly owned subsidiary of Groupe Laperrière Verrault (GL&V). The
issue arises in the context of the use by GL&V of a cross-border structure
– referred to in the tax community as a “tower structure” – in order to fund
the acquisition of U.S. businesses in a tax efficient manner (reasons, para.
7).
[8]
This
tax efficiency is achieved by the use of “hybrid entities” – i.e. entities
which are treated differently under U.S. and Canadian tax laws. The limited
partnership of which GL&V was a member (the GL&V limited partnership)
was such an entity in that it was treated as a U.S. resident corporation for
U.S. tax purposes, but as a flow through pursuant to the relevant provisions of
the Act (sections 97 et seq. of the Act) (reasons, para. 10).
[9]
Also
included in the structure are a Nova Scotia unlimited liability company
(NSULC), the shares of which were held by the GL&V limited partnership; and
a U.S. limited liability company (LLC), the shares of which were held by NSULC.
Both NSULC and LLC are disregarded entities under U.S. tax law – i.e.
their existence is ignored for U.S. tax purposes – but are treated as existing
entities under the Act (ibidem).
[10]
The
financing operation took place as follows (reasons, para. 11):
- the [GL&V] limited
partnership subscribed for shares of NSULC using, in part, borrowed funds;
- NSULC used the funds from the
subscriptions made by the [GL&V] limited partnership to subscribe for
shares of LLC;
- LLC used the proceeds from the
subscriptions to make interest - bearing loans (the “LLC loans”) to GL&V
Holdings (“Holdings”), a U.S. subsidiary of GL&V, and
- Holdings used the proceeds of
the LLC loans to provide capital and loans to indirectly wholly-owned
subsidiaries of GL&V to purchase U.S. companies.
[11]
Because
NSULC and LLC were disregarded entities for U.S. tax purposes and because the
GL&V limited partnership is treated as a U.S. corporation, the result under
U.S. tax law was as follows (reasons, para. 15):
- the [GL&V] limited
partnership made the LLC loans to Holdings directly,
- the interest earned on those
loans was earned directly by the [GL&V] limited partnership, and the LLC dividends
and the NSULC dividends were disregarded, and
- the interest paid by the
[GL&V] limited partnership on the money used to acquire the NSULC shares
and ultimately fund the LLC loans was incurred to earn the interest income on
the LLC loans.
the GL&V limited partnership
deducted the interest on the money it borrowed to purchase the NSULC shares and
paid tax on the interest paid to it by Holdings.
[12]
For
Canadian tax purposes, the results were as follows (reasons, para. 16):
- LLC was treated as a foreign
affiliate of NSULC, and the interest income earned by LLC from Holdings was
recharacterized as active business income and was included in LLC’s exempt
surplus (by paragraph 95(2)(a) of the Act and section 5907 of the Income
Tax Regulations, C.R.C. c. 945 (the Regulations)).
- The LLC dividends paid to NSULC
were paid out of LLC’s exempt surplus. Since the dividends were paid out of
exempt surplus, NSULC was able to deduct the amount of those dividends in
computing its taxable income pursuant to paragraph 113(1)(a) of the Act
and did not pay tax on them.
- The [GL&V] limited
partnership included the NSULC dividends in its income and deducted the
interest paid on the money it borrowed to subscribe for the NSULC shares. It
also deducted the U.S. tax it paid during the year, which is the deduction that
is disputed in this case.
- Dorr-Oliver included its share
of the [GL&V] limited partnership’s income in computing its income. The
amount included in income by Dorr-Oliver was net of its proportionate share of
disputed deduction taken by the [GL&V] limited partnership under subsection
20(12).
- In computing its taxable
income, Dorr-Oliver deducted its share of the NSULC dividends received by the
[GL&V] limited partnership under subsection 112(1). Therefore, Dorr-Oliver
did not pay any tax on its proportionate share of the NSULC dividends.
- LLC was a foreign affiliate of
Dorr-Oliver [by reason of subsection 93.1(1) of the Act which deems Dorr-Oliver
to own a proportionate share of the NSULC shares owned by the [GL&V]
limited partnership].
[13]
The
Canadian tax exempt treatment of the dividend in the hands of Dorr-Oliver is
the result of the tax regime applicable to foreign affiliates. Specifically,
paragraph 95(2)(a) of the Act applied to recharacterize the interest
income earned by LLC into active business income which was then included in
LLC’s earnings and exempt surplus pursuant to section 5907 of the Regulations;
the LLC dividends were then paid to NSULC out of its exempt surplus which NSULC
then deducted pursuant to paragraph 113(1)(a) of the Act; thereafter Dorr-Oliver
deducted its proportionate share of the dividend received by the GL&V
limited partnership pursuant to subsection 112(1) of the Act (Agreed Statement
of Fact, paras. 25 to 27 and 37).
[14]
This
treatment effectively recognizes that the income generated in the U.S. by the foreign affiliate (i.e. LLC) would have been taxed by that country according to
its own law at rates which reasonably compare to those applicable in Canada.
[15]
In
its tax return for the 2002 taxation year, Dorr-Oliver claimed pursuant to
subsection 20(12) its proportionate share of the U.S. tax paid by the GL&V
limited partnership. The deduction was denied and the appeal to the Tax Court
ensued.
DECISION OF THE TAX COURT JUDGE
[16]
The
Tax Court judge identified the issue before him by reference to two questions,
the first being aimed at the first condition and the second being aimed at the
second condition (reasons,
para. 5):
- Was the U.S. tax paid by the GL&V limited partnership in respect of a property source of income
under the Act? and if so;
- Can Dorr-Oliver’s share of the
U.S. tax paid by the GL&V limited partnership be reasonably regarded as
having been paid in respect of income from a share of the capital stock of a
foreign affiliate, i.e. LLC?
[17]
Addressing
the first question, the Tax Court judge found that subsection 20(12) requires
that the foreign tax be paid in respect of income from a particular business or
property and that the tax is only deductible in respect of that source
(reasons, paras. 30 to 35). In this case, the requirement that the tax be paid
“in respect of that income” must be read as a requirement that the U.S. tax be paid “in respect of” the dividend income from NSULC since this was the GL&V
limited partnership’s only source of income (reasons, para. 36).
[18]
In
so holding, the Tax Court judge rejected the respondent’s contention that the
words “tax paid … in respect of that income” be read as “tax paid … on that
income”, as being too narrow (reasons, para. 38). As asserted by the appellant,
it is sufficient that the payment of the tax “be connected with or related to
that income” (reasons, paras. 39 to 45). In this case, the dividend income
received by the GL&V limited partnership from NSULC was so connected or
related because the indirect source of the dividend income was the interest
income received by LLC from Holdings and the payment of the tax reduced the
amount that could be paid by NSULC to the GL&V limited partnership as
dividends (reasons, para. 47).
[19]
The
Tax Court judge found a further and distinct connection in that “if the
appellant had not owned the NSULC shares, it would not have had to pay U.S. tax” (reasons, para. 46).
[20]
He
therefore found that the first condition had been met.
[21]
Turning
to the second condition the Tax Court judge, relying on the same logic, went on
to find that the U.S. tax paid was also “related to or connected with” the
dividend income received by NSULC from LLC, a Dorr-Oliver foreign affiliate,
since both were part of the flow of funds that originated with Holdings and
ended up with the GL&V limited partnership, with the result that the second
condition had not been met (reasons, para. 58).
[22]
He
then addressed the appellant’s contention that the words “can reasonably be
regarded” which appear before the phrase “in respect of” in the second
condition could alter this result. After reviewing the relevant case law
dealing with the meaning that is to be given to these words, he went on to hold
that they could not (reasons, paras. 60 to 65).
[23]
The
Tax Court judge therefore confirmed that the claimed deduction had been
properly denied because the second condition had not been met.
[24]
According
to the Tax Court judge, this result accords with the purpose of subsection
20(12), which is to provide relief from foreign taxes paid in respect of income
that is included in a taxpayer’s income in Canada. In the present case,
subsection 113(1) of the Act provided relief from double taxation on dividends
received from a foreign affiliate. It is reasonable to conclude that no further
deduction under subsection 20(12) was intended (reasons, paras. 66 to 69).
[25]
Finally,
the Tax Court judge held that this result is not inconsistent with paragraphs
XXIV (2) and (3) of the Canada-United States Income Tax Convention Act,
1984, S.C. 1984 c. 20, as it does not subject the income earned by the
GL&V limited partnership to double taxation (reasons, paras. 77 to 82).
POSITION OF THE PARTIES ON APPEAL
[26]
Only
the second condition is put in issue by the appellant in this appeal
(memorandum of the appellant, paras. 11 and 12). The appellant does not take
issue with the broad construction of the phrase “in respect of” which the Tax
Court judge adopted nor does it propose that this phrase, which appears twice
in the same provision, should be construed differently depending on the
condition being applied. Rather, it submits that the words “can reasonably be
regarded” which qualify the second condition but not the first should have led
the Tax Court judge to a different conclusion.
[27]
According
to the appellant the Tax Court judge misconstrued these words when he held that
the second condition had not been met. When using these words, the legislator
does not contemplate that actual transactions be ignored (memorandum of the
appellant, paras. 22 to 29). Relying on the decision of the Supreme Court in Shell
Canada Ltd. v. Canada, [1999] 3 S.C.R. 622, the appellant submits that it
was not open to the Tax Court judge to “recharacterize” the transaction in the
manner that he did (memorandum of the appellant, paras. 51 to 55).
[28]
The
appellant argues in the alternative that the Tax Court judge failed to consider
the word “corporation” in subsection 20(12) which also forms part of the second
condition. The second condition is met when the foreign tax cannot “reasonably
be regarded as having been paid by a corporation in respect of income
from a share of the capital stock of a foreign affiliate of the corporation”
(emphasis by the appellant). Since the GL&V limited partnership is the
entity that paid the U.S. tax and since it is not a corporation, it was not
open to the Tax Court judge to hold that the second condition had not been met
(memorandum of the appellant, paras. 30 to 35).
[29]
The
appellant adds that the tracing approach used by the Tax Court judge to hold
that the U.S. tax is related to or connected with the dividend income from LLC
gives rise to arbitrariness and anomalous results (memorandum of the appellant,
paras. 63 to 72).
[30]
The
Tax Court judge further erred when he held that the deduction with respect to
dividends on a share of a foreign affiliate provided for in subsection 113(1)
was intended to deal fully with relief from foreign taxes and that no further
deduction was contemplated by subsection 20(12) (memorandum of the appellant,
paras. 36 to 50).
[31]
The
respondent for its part took the position before the Tax Court judge that the
phrase “in respect of” as it is used in subsection 20(12) should be given a
narrow meaning. It now accepts that the phrase can be given a broad meaning and
supports the conclusion reached by the Tax Court judge on this point
(memorandum of the respondent, paras. 40 to 49).
[32]
In
the alternative, it maintains that the U.S. tax for which the appellant claims
a deduction was not paid “in respect of” the source of income from which the
deduction is claimed. It adds that whether the phrase “in respect of” is given
the narrow meaning which it advocates in the alternative or the broad meaning
proposed by the appellant, the result is the same. Specifically, if a narrow
meaning is given, the appellant fails on the first condition and if a broad
meaning is given, the appellant fails on the second condition. Either way the
appeal is doomed to fail (memorandum of the respondent, paras. 57 to 65).
ANALYSIS AND DECISION
[33]
The
appellant does not take issue with the construction given by the Tax Court
judge to the phrase “in respect of” as it twice appears in subsection 20(12).
The focus of the appeal is on the words “can reasonably be regarded” which
qualify the second condition. According to the appellant, the Tax Court judge failed
to give effect to these words in holding that the second condition had not been
met (memorandum of the appellant, paras. 11 and 22 to 28). According to the
appellant (memorandum of the appellant, para. 29):
Had the [Tax Court judge]
carefully reviewed the meaning and function of the expression “can reasonably
be regarded” …, he would not have expanded their scope to such an extent
that now allow the consideration of other taxpayer’s income irrespective of
legal substance. There is simply no reason to believe that the expression “can
reasonably be regarded” acquires a distinct meaning in subsection 20(12) or
that, absent specific wording, Parliament authorized a tracing approach. …
[My
emphasis]
[34]
The
difficulty with this argument is that the Tax Court judge’s conclusion on the
second condition is not based on an expanded view of the words “can reasonably
be regarded” (reasons, para. 65):
… I conclude that … the U.S. tax … were paid in respect of income from the shares of LLC and that the tax
could therefore reasonably be regarded as having been so paid.
[My
emphasis]
[35]
It
can be seen that this conclusion rests entirely on the broad meaning which the
Tax Court judge gave to the phrase “in respect of”. This should be obvious
given the fact that he construed the phrase the exact same way in dealing with
the first condition even though it does not embody the words “can reasonably be
regarded”. As with the first condition, the Tax Court judge was satisfied that
the tax sought to be deducted was “related to or connected with” the dividend
income received by NSULC from LLC since both were part of the flow of funds
that originated with Holdings and ended up with the GL&V limited
partnership (reasons, paras. 46 and 58). Hence the U.S. tax was connected or
related to both the NSULC shares and the LLC shares.
[36]
As
the respondent has pointed out in her memorandum, the phrase “in respect of”
can be interpreted in a broad or restrictive manner, but either way the appellant
would fail to meet one of the two conditions set out in subsection 20(12) given
that the first condition is framed in the affirmative and the second in the
negative, i.e. as an exclusion.
[37]
Seemingly
mindful of this predicament, counsel for the appellant took a different tack
during the hearing of the appeal. He focused on the assertion by the Tax Court
judge that the U.S. tax affected the flow of funds from LLC to NSULC (reasons,
para. 58) and argued, by reference to the following chart, that he erred when
he found that the U.S. tax reduced the amount that could be paid by LLC to
NSULC (ibidem):
[38]
I
agree that the finding that the U.S. tax reduced the amount that could be paid
by LLC to NSULC was made in error since this dividend was paid before the U.S. tax was paid (Agreed Statement of Fact, para. 24(b)). However, the Tax court judge
made the same observation in his assessment of the first condition when he said
that the U.S. tax “reduced the amount available to NSULC that could be paid out
to the limited partnership as dividends” (reasons, para. 46). This statement would
also seem to be an error since the dividend from NSULC to the GL&V limited
partnership was also paid before the payment of the U.S. tax (Agreed Statement
of Fact, para. 24(c)).
[39]
The
result of these errors, if material, would be that the appellant meets the
second condition, but not the first.
[40]
It
is apparent that in raising this error, the appellant asks this Court to accept
as correct the argument which it advanced before the Tax Court judge on the
first condition as this is the only basis on which the treatment of the LLC and
the NSULC dividend can be distinguished and the two conditions can be met.
[41]
The
argument made with respect to the first condition before the Tax Court judge is
that while the “economic profit” from the NSULC dividend was reduced by the
U.S. tax, the “economic profit” from the LLC dividend was not (appendix A to
the appellant’s memorandum, paras. 1 to 7). The essence of this argument is
that (idem, para. 2):
... The concept of income,
ultimately a legal determination refers to an economic reality based on a net
accretion (or gain) from a source. If taxes reduce the economic profit
from that source, it is reasonable to conclude that those taxes are paid “in respect
of” income from that source.
[My
emphasis]
[42]
The
notion that a dividend can be viewed as a “profit” from a share is foreign to the
Act. A dividend is included in income, not on the basis of a computation of
profit from property in accordance with the relevant accounting principles and
statutory rules (subsection 9(1)), but by reason of the specific inclusion provided
by subdivisions b and i – Income or Loss from a Business or Property and
Shareholders of Non Resident Corporations – specifically paragraphs
12(1)(j), (k) and subsection 90(1). In this case, it is the whole
of the dividend that was included in income in accordance with these provisions
before being deducted pursuant to subsection 112(1), and the use made of that
income after it has been so included does not have the effect of reducing it.
[43]
In
any event, insofar as the appellant’s argument is based on the premise that the
NSULC dividend was used to pay the U.S. tax, the record falls short of
establishing that this is in fact what took place. While the Agreed Statement
of Facts states that the NSULC dividend was “used … to make the interest
payments of U.S. $1,189,766 …” (paragraph 24(d)); it is silent as to the origin
of the funds used to pay the U.S tax (para. 31). The GL&V limited partnership
had funds available through credit facilities (paragraph 21(a)) and
based on the return of income filed for the year in issue, there was income
from at least one other source (Income Tax Return, appeal book, pp. 69 to 76,
part 1, line 1).
[44]
Finally,
as counsel for the appellant himself recognized in the context of the present
appeal (memorandum of the appellant, para. 74):
…, the U.S. Taxes would have been
paid by the Partnership even without any payment of dividends by LLC. The mere
payment of interest by U.S. Holdings to LLC triggers U.S. Taxes in the
Partnership irrespective of the payment of dividends by LLC to NSULC
thereafter. This indicates how disconnected the U.S. Taxes are from those
dividends. … How can one reasonably consider that the U.S. Taxes were paid in
respect of income from a share of LLC when such tax would have been paid by the
Partnership even if LLC had not declared any dividends? There is no
relationship between the U.S. Taxes and the income from shares of LLC unless
one arbitrarily selects the LLC Dividends in the chain of payments made in the
corporate group.
[Emphasis
by the appellant]
Even though this statement was made with
respect to the LLC dividend, it applies with equal force to the NSULC dividend.
[45]
All
this to say that whether the Tax Court judge correctly construed the words “in
respect of” or whether a narrower meaning was warranted, the appeal cannot
succeed.
[46]
In
the alternative, the appellant made the argument that the Tax Court judge erred
in finding that the second condition had not been met because the U.S. tax was paid by the GL&V limited partnership and not by a corporation as the
second condition contemplates. The appellant points out that, although the
argument was made before the Tax Court judge, he did not address it.
[47]
This
argument only arises if the Tax Court judge correctly held that the first
condition was met. Assuming for present purposes that it was, I do not believe
that this argument can succeed.
[48]
This
issue was considered by Webb J. (as he then was) in 4145356 Canada Limited
v. The Queen, 2011 TCC 220 (4145356 Canada), in the context of
subsection 126(2) of the Act. As here, the payment of U.S. taxes had in fact been made by a Canadian partnership which was considered as a separate person
under the U.S. law. Webb J., relying on the relevant provisions of the Act
relating to partnership, held that the U.S. taxes could nevertheless be said to
have been paid by the partners (4145356 Canada, paras. 35 and 70).
[49]
I
believe that this is the correct approach. Despite the fact that the amount
paid is tax levied under U.S. law, the issue must be addressed by reference to
the Act. Giving effect to the relevant provisions of the Act, the issue is
whether the U.S. tax can be said to have been paid by the partner, in this case
Dorr-Oliver. A partnership pays no tax under the Act. Although income is
computed at the partnership level as though it was a person, the resulting
income is allocated to the partners and the tax is paid by the partners on
their proportionate share of the income. It follows in my view that the U.S. tax can be said to have been paid by a corporation and can therefore “reasonably be
regarded” as having been paid by a corporation as contemplated by subsection
20(12).
[50]
After
concluding that the second condition had not been met and that the deduction claimed
under subsection 20(12) could therefore not be allowed (reasons, para. 65), the
Tax Court judge went on to express the view that Parliament intended to exclude
the application of subsection 20(12) in all cases where the foreign affiliate
regime is in play and the subsection 113(1) deduction is available (reasons,
para. 68).
[51]
As
the appellant submits, it is not clear that the foreign affiliate regime always
provides for a comprehensive solution to foreign tax paid on dividends from a
foreign affiliate. Subsection 20(12) is a provision of general application
which on its face applies to all taxpayers and there are no words in the
foreign affiliate provisions which expressly exclude the application of 20(12).
It follows that if there is such exclusion, it is only by implication.
[52]
As
was said by the Supreme Court in A.Y.S.A. Amateur Youth Soccer Assn. v.
Canada (Revenue Agency), 2007 SCC 42, [2007] 3 S.C.R. 217 in disposing of
an appeal from a judgment rendered on the basis that provisions of the Act had
been similarly excluded (paras. 15 and 16):
15 …, arguments based on
implied meaning must be viewed with caution. As Professor Sullivan notes:
While reliance on implied
exclusion for this purpose [determining if a provision is exhaustive] can be
helpful, it can also be misleading. What the courts are looking for is
evidence that a particular provision is meant to be an exhaustive statement of
the law concerning a matter. To show that the provision expressly or
specifically addresses the matter is not enough. [Footnote deleted; p. 266.]
16 It is well known that the
modern approach to interpretation applies to taxation statutes no less than it
does to other statutes, that is, “the words of an Act are to be read in their
entire context and in their grammatical and ordinary sense harmoniously with
the scheme of the Act, the object of the Act, and the intention of Parliament”
(Placer Dome Canada Ltd. v. Ontario (Minister of Finance), [2006] 1 S.C.R.
715, 2006 SCC 20, at para. 21; E. A. Driedger, Construction of Statutes
(2nd ed. 1983), at p. 87). However, because of the degree of precision and
detailed characteristics of many tax provisions, an emphasis has often been
placed on textual interpretation where taxation statutes are concerned: Canada
Trustco Mortgage Co. v. Canada, [2005] 2 S.C.R. 601, 2005 SCC 54, at para.
11; Placer Dome, at para. 23. As McLachlin J. (as she then was) stated
for the Court in Shell Canada Ltd. v. Canada, [1999] 3 S.C.R. 622, at
para. 43:
The [Act] is a complex statute
through which Parliament seeks to balance a myriad of principles. This Court
has consistently held that courts must therefore be cautious before finding
within the clear provisions of the Act an unexpressed legislative intention: Canderel
Ltd. v. Canada, [1998] 1 S.C.R. 147, at para. 41, per Iacobucci J.; Royal
Bank of Canada v. Sparrow Electric Corp., [1997] 1 S.C.R. 411, at para.
112, per Iacobucci J.; Antosko, supra, at p. 328, per Iacobucci J. Finding
unexpressed legislative intentions under the guise of purposive interpretation
runs the risk of upsetting the balance Parliament has attempted to strike in
the Act.
[53]
While
the Tax Court judge could take comfort from the relief provided by the foreign
affiliate regime on the facts of this case, I would not go so far as to say
that subsection 113(1) excludes the subsection 20(12) deduction in all cases in
which it applies.
[54]
I
would dismiss the appeal with costs.
“Marc Noël”
“I
agree.
Johanne Trudel J.A.”
“I
agree.
Robert M.
Mainville J.A.”
Email this Content