2007 FCA 174
CORAM: LÉTOURNEAU J.A.
and CATHERINE GRANT
MAJESTY THE QUEEN
Heard at Vancouver,
British Columbia, on April 30, 2007.
Judgment delivered from the Bench at Vancouver, British Columbia, on April 30, 2007.
FOR JUDGMENT OF THE COURT BY: SHARLOW
2007 FCA 174
REASONS FOR JUDGMENT OF THE
from the Bench at Vancouver, British Columbia, on April 30, 2007)
is an appeal of a judgment of the Tax Court of Canada (2006 TCC 373) dismissing
the appellants’ income tax appeals for the 1997 and 1998 taxation years.
issue is the deductibility of interest accrued on a $1 billion loan made by the
Canadian Imperial Bank of Commerce (CIBC) to Mr. and Mrs. Grant on December 24,
1998, while they were still residents of Canada. The
proceeds of the loan were used immediately to make an income earning investment
with a subsidiary of the CIBC. The loan and the investment matured on January 4, 1999,
after Mr. and Mrs. Grant had ceased to be residents of Canada, which
occurred on December 30, 1998.
and Mrs. Grant claim to be entitled to a deduction in 1998 of $1.7 million,
which is the amount of interest paid on the loan on December 31, 1998 that had
accrued as of December 30, 1998.
of the income on the investments was taxable in Canada because Mr.
and Mrs. Grant received it after they had ceased to be residents of Canada. It is
admitted that these transactions were entered into to create a deduction for
interest expenses that would shelter taxable capital gains of approximately
$1.5 million that Mr. and Mrs. Grant realized in 1998.
is undisputed that the determination of the taxable income of Mr. and Mrs.
Grant for 1998 must be based on section 114 of the Income Tax Act,
R.S.C. 1985, c. 1 (5th supp.), which deals with persons who are
resident in Canada for only part of a taxation year. The analysis of the Tax
Court Judge of section 114 is thorough and detailed. We need not repeat it. It
is enough to say that, despite the written and oral submissions of counsel for
Mr. and Mrs. Grant, we agree with the conclusion reached by the Tax Court
Judge, and with her reasons.
for Mr. and Mrs. Grant argues that the Tax Court Judge erred in law in failing
to refer to the statutory definition of “taxable income” in subsection 248(1).
We do not agree. The question before the Tax Court judge was the meaning of the
phrase “other deductions permitted for the purpose of computing taxable income”
in paragraph 114(c). It is arguable that the quoted phrase, read in isolation,
is capable of referring to any deduction of any kind. However, in the context
of section 114, and considering the structure of the provisions of the Income
Tax Act that deal with deductions permitted in computing income (Division
B) and deductions in computing taxable income (Division C), the quoted phrase is
also capable of bearing a narrower meaning. That is the meaning the Tax Court
Judge correctly adopted.
we agree with her that a textual, contextual and purposive interpretation of
the relevant provisions compels the conclusion that the deductions referred to
in paragraph 114(c) are those permitted by Division C only.
appeal will be dismissed with costs.
FEDERAL COURT OF APPEAL
SOLICITORS OF RECORD
STYLE OF CAUSE: DAVID GRANT et al. v. HMQ
HEARING: Vancouver, British Columbia
JUDGMENT BY: LÉTOURNEAU
FROM THE BENCH BY: SHARLOW
DATED: April 30, 2007
Joel Nitikman FOR
Robert Carvalho FOR
Fraser Milner Casgrain LLP
John H. Sims,
Attorney General of Canada
FOR THE RESPONDENT