Date: 20100929
Dockets: A-338-09
A-339-09
A-340-09
Citation: 2010 FCA 251
CORAM: NADON J.A.
SEXTON J.A.
SHARLOW J.A.
A-338-09
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
COLLINS & AIKMAN CANADA INC.
Respondent
A-339-09
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
COLLINS & AIKMAN HOLDINGS CANADA INC.
Respondent
A-340-09
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
COLLINS & AIKMAN PRODUCTS CO.
Respondent
Heard at Toronto,
Ontario, on September 29,
2010.
Judgment delivered from the Bench at Toronto, Ontario, on September 29, 2010.
REASONS FOR JUDGMENT OF THE COURT BY: SHARLOW
J.A.
Date: 20100929
Dockets: A-338-09
A-339-09
A-340-09
Citation: 2010 FCA 251
CORAM: NADON
J.A.
SEXTON
J.A.
SHARLOW
J.A.
A-338-09
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
COLLINS & AIKMAN CANADA INC.
Respondent
A-339-09
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
COLLINS & AIKMAN HOLDINGS CANADA INC.
Respondent
A-340-09
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
COLLINS & AIKMAN PRODUCTS CO.
Respondent
REASONS FOR JUDGMENT OF THE
COURT
(Delivered
from the Bench at Toronto, Ontario, on September 29, 2010)
SHARLOW J.A.
[1]
The Crown
is appealing three judgments of Mr. Justice Boyle of the Tax Court of Canada
allowing appeals from assessments under the general anti-avoidance rule
(“GAAR”) in section 245 of the Income Tax Act, R.S.C. 1985, c. 1 (5th
Supp.) for the 1994 and 1995 taxation years. The issue in these appeals is
whether Mr. Justice Boyle erred in concluding that the transactions in issue
did not result in a misuse or abuse of the Income Tax Act. Having
considered the Crown’s written and oral submissions, we are not persuaded that Mr.
Justice Boyle made any error warranting the intervention of this Court. On the
contrary, we agree with his decision, substantially for the reasons he gave
(2009 TCC 299).
[2]
We have
not been persuaded that we should reach a different conclusion based on the
Crown’s argument, raised for the first time in this appeal, relying on the
specific anti-avoidance rule in section 212.1 of the Income Tax Act as
part of the relevant statutory scheme for determining the issue of abuse or
misuse. We note that Mr. Justice Boyle, at paragraph 105 of his reasons,
speculated on whether it could be said that the impugned series of transactions
avoided section 212.1 and whether that avoidance was abusive. He concluded that
it would not be reasonable to conclude on the facts of this case that the
avoidance of section 212.1 was abusive because Collins & Aikman Holdings
Ltd. (the corporation referred to as “CAHL”) had ceased to be resident in
Canada in 1961, long before the series of transactions that grounded the GAAR
assessments under appeal, and long before the Income Tax Act contained
section 212.1. We agree.
[3]
Nor are we
persuaded that, for the purposes of applying GAAR, the scheme of the Income
Tax Act should be interpreted effectively to bar a foreign corporation – in
this case Collins & Aikman Products Co. (the United States corporation
referred to as “Products”) – from dealing as it liked with shares of a
corporation – CAHL – that was outside the reach of the Income Tax Act
because, for reasons that have nothing to do with GAAR or the series of
transactions upon which the Crown relied in applying GAAR, CAHL was not
resident in Canada at the relevant time.
[4]
The key
provisions of the Income Tax Act upon which the Crown now relies to
portray the relevant statutory scheme, namely sections 84.1 and section 212.1,
were carefully drafted so as not to apply to any sale by Products of its CAHL
shares to another corporation, even a related corporation that was resident in Canada. We see no reason to conclude
that the limited scope of those provisions was anything other than a deliberate
policy choice by Parliament. Therefore, Products having sold its CAHL shares
for fair market value consideration, we see nothing abusive about requiring the
legal consequences of that sale to be recognized for fiscal purposes and to
govern the Canadian income tax consequences, even though the consideration was
not paid in cash and the intended result of the transaction was to put in place
a Canadian subsidiary with stated capital and paid up capital equal to that
consideration.
[5]
For these
reasons, these appeals will be dismissed with one set of costs.
"K.
Sharlow"
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKETS: A-338-09/A-339-09/A-340-09
(APPEAL FROM THE ORDER OF THE HONOURABLE
MR. JUSTICE P. BOYLE OF THE TAX COURT, DATED JUNE 3, 2009, IN DOCKET NO.
2006-722 (IT) G)
STYLE OF CAUSE: HER MAJESTY THE QUEEN v.
COLLINS & AIKMAN CANADA INC. (A-338-09), COLLINS & AIKMAN
HOLDINGS CANADA INC. (A-339-09) AND COLLINS & AIKMAN PRODUCTS CO.
(A-340-09)
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: September 29, 2010
REASONS FOR JUDGMENT OF THE COURT BY: (NADON, SEXTON, SHARLOW JJ.A)
DELIVERED FROM THE BENCH BY: SHARLOW J.A.
APPEARANCES:
|
Deen Olsen
Justine Malone
|
FOR THE APPELLANT
|
|
Clifford L.
Rand
Margaret Nixon
|
FOR THE RESPONDENTS
|
SOLICITORS OF RECORD:
|
Myles J. Kirvan
Deputy Attorney General of Canada
|
FOR THE APPELLANT
|
|
Stikeman
Elliot LLP
Barristers and Solicitors
Ottawa, Ontario
|
FOR THE RESPONDENTS
|
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