Rip,
TCJ:—These
are
appeals
by
the
appellant
in
respect
of
its
1975,
1976
and
1977
taxation
years
which
were
heard
together
under
common
evidence.
The
appellant
is
a
non-resident
insurer
carrying
on
the
business
of
general
insurance
in
Canada
and
elsewhere.
The
appellant
reported
its
gross
investment
income
for
the
years
in
appeal
pursuant
to
paragraph
138(9)(b)
of
the
Income
Tax
Act
(“Act”),*
as
it
read
at
the
time,
by
including
in
income
such
portion
of
its
gross
investment
income
which
it
considered
to
be
applicable
to
the
carrying
on
by
it
of
its
insurance
business
in
Canada.
The
portion
of
the
appellant’s
gross
investment
income
which
is
considered
applicable
to
the
carrying
on
by
it
of
its
insurance
business
in
Canada
is
determined
in
accordance
with
subsections
2401(2)
and
(3)f
of
the
regulations
to
the
Act,
as
they
read
at
the
time,
and
may
be
calculated
by
the
following
formula:
|
Gross
investment
revenue
for
|
Canadian
investment
fund
for
the
year
|
|
the
year
from
all
specified
|
X
Value
for
the
year
of
specified
|
|
Canadian
assets
|
Canadian
assets
|
The
terms
“Canadian
assets”
and
“specified
Canadian
assets”
are
defined
in
subparagraphs
2404(l)(b)
and
(b.l)
of
the
regulations
to
the
Act
as
follows:
(b)
“Canadian
asset”
of
an
insurer
means
non-segregated
property
of
the
insurer
that
is
(12)(o)(ii)
and
(iv)
for
the
period
ending
with
the
year
shall
be
determined
in
accordance
with
prescribed
rules
and
the
aggregate
of
taxable
dividends
for
the
purposes
of
each
of
paragraphs
138(6)(a),
138(6)(b)
and
208(2)(b)
shall
be
determined
in
accordance
with
rules
prescribed
for
the
purposes
of
each
of
those
paragraphs
respectively.
The
appellant
did
not
make
an
election
under
subsection
138(9)
in
respect
of
the
years
in
appeal.
tSubsections
2401(2)
and
(3)
of
the
Regulations
read
as
follows:
(2)
The
part
of
an
insurer’s
gross
investment
revenue
for
a
taxation
year
that
is
determined
to
be
applicable
to
the
carrying
on
by
it
of
a
life
insurance
business
in
Canada
is
the
aggregate
of
(a)
such
part
of
its
gross
investment
revenue
for
the
year
as
was
obtained
from
property
included
in
the
year
in
such
of
its
segregated
funds
as
were
used
by
it
in
the
year
in,
or
held
by
it
in
the
year
in
the
course
of,
carrying
on
its
life
insurance
business
in
Canada,
and
(b)
the
insurer’s
life
proportion,
for
the
year,
of
the
aggregate
of
(i)
an
amount
equal
to
the
lesser
of
(A)
such
part
of
the
insurer’s
gross
investment
revenue
for
the
year
as
was
obtained
from
those
of
its
Canadian
assets
that
are
described
in
subparagraphs
(i)
to
(iv)
of
paragraph
(b)
of
subsection
(1)
of
section
2404
(hereinafter
in
this
section
referred
to
as
its
“specified
Canadian
Assets”),
and
(B)
the
proportion
of
such
part
that
its
Canadian
investment
fund
for
the
year
is
of
the
value
for
the
year
of
its
specified
Canadian
assets,
and
(ii)
the
amount,
if
any,
equal
to
that
proportion
of
such
part
of
the
insurer’s
gross
investment
revenue
for
the
year
as
was
obtained
from
such
of
its
securities
as
were
specified
Canadian
assets
that
(A)
the
amount,
if
any,
by
which
its
Canadian
investment
fund
for
the
year
exceeds
the
value
for
the
year
of
its
specified
Canadian
assets
is
of
(B)
the
value
for
the
year
of
such
of
its
securities
as
were
specified
Canadian
assets.
(3)
The
part
of
an
insurer’s
gross
investment
revenue
for
a
taxation
year
that
is
determined
to
be
applicable
to
the
carrying
on
by
it
of
its
insurance
business
in
Canada
other
than
its
life
insurance
business
is
the
insurer’s
non-life
proportion
for
the
year
of
the
aggregate
of
(a)
the
amount
determined
under
subparagraph
(i)
of
paragraph
(b)
of
subsection
(2)
in
respect
of
the
insurer
for
the
year,
and
(b)
the
amount,
if
any,
determined
under
subparagraph
(ii)
of
paragraph
(b)
of
subsection
(2)
in
respect
of
the
insurer
for
the
year.
(i)
an
amount
owing
to
the
insurer
by
a
resident
of
Canada,
or,
if
it
is
a
debt
that
arises
in
the
course
of
carrying
on
its
insurance
business
in
Canada,
by
any
other
person,
other
than
a
balance
standing
to
the
insurer’s
credit
as
or
on
account
of
amounts
deposited
with
a
branch
or
other
office
outside
Canada
of
(A)
a
bank
to
which
the
Bank
Act
applies,
or
(B)
a
corporation
licensed
or
otherwise
authorized
under
the
laws
of
Canada
or
a
province
to
carry
on
in
Canada
the
business
of
offering
to
the
public
its
services
as
trustee.
.
.
.
(b.1)
“specified
Canadian
assets’’
of
an
insurer
means
non-segregated
property
of
the
insurer
described
in
subparagraph
(b)(i)
to
(iv).
In
1975,
1976
and
1977
the
appellant
included
in
its
specified
Canadian
assets
accrued
interest
of
$3,409,995,
$3,853,887
and
$4,161,464
respectively.
Subparagraph
2404(1)(b)(i)
refers
to
non-segregated
property
of
the
insurer
that
is
“an
amount
owing
to
the
insurer”.
The
issue
in
appeal
is
how
the
word
“owing”
in
that
subparagraph
is
to
be
interpreted.
In
the
respondent’s
view
for
an
amount
to
be
owing
to
a
person,
for
the
purposes
of
that
subparagraph,
the
person
must
have
a
legal
right
to
receive
the
amount
at
or
before
the
end
of
the
taxation
year
and
since
the
appellant
did
not
have
a
legal
right
to
receive
the
accrued
interest
at
or
before
the
end
of
the
particular
taxation
years
the
accrued
interest
was
not
owing
to
the
appellant.
In
the
appellant’s
view
as
interest
accrues
to
the
creditor
it
is
owed,
or
becomes
owing
to
the
creditor;
interest
is
owing
at
the
end
of
the
appellant’s
taxation
year
because
it
was
“earned”
by
the
end
of
the
year.
The
Income
Tax
Act
does
not
use
the
word
“owing”;
the
word
“owing”
is
found
only
in
the
regulations
to
the
Act.
The
Act,
however,
does
use
the
words
“accrued”
(vide
ss
12(3)
and
12(4))
and
“receivable”
(vide
paras
12(l)(b)
and
(c)).
Interest
on
a
loan
generally
accrues
on
a
daily
basis
and
the
interest
is
receivable
at
the
end
of
the
interest
period.
When
the
interest
is
receivable
it
is
owing;
but
is
accrued
interest
which
is
not
yet
receivable
also
owing?
Certain
dictionary
definitions
of
the
words
“owing”,
“owe”
and
“owed”
are
as
follows:
Owe
.
.
.
2.
To
be
under
obligation
to
pay
or
repay
(money
or
the
like);
to
be
indebted
in,
or
to
the
amount
of;
(The
Oxford
English
Dictionary
Volume
VII)
Owe
.
.
.
to
be
indebted
in,
to
be
bound
to
pay;
to
be
due
or
owing.
(The
New
Webster
Encyclopedic
Dictionary
of
the
English
Language)
Owe
.
.
.
II.
To
have
to
pay.
1.
To
be
under
the
obligation
to
pay
or
repay
(money,
etc.);
to
be
indebted
in,
or
to
the
amount
of;
(The
Shorter
Oxford
English
Dictionary
on
Historical
Principles)
Owing
.
.
.
the
action
of
the
verb
owe
(sense
2);
that
which
one
owes;
obligation
to
pay,
indebtedness;
debt
.
.
.
2.
said
of
the
thing:
That
is
yet
to
be
paid
or
rendered;
owed,
due.
(The
Oxford
English
Dictionary
Volume
VII)
Owing:
still
to
be
paid;
due;
owed.
(The
Houghton,
Mifflin
Canadian
Dictionary
of
the
English
Language)
Owing
.
.
.
Required
by
obligation
to
be
paid;
remaining
as
a
debt
.
.
.
due;
(The
New
Webster
Encyclopedic
Dictionary
of
the
English
Language)
Owing:
Unpaid.
A
debt,
for
example,
is
owing
while
it
is
unpaid,
and
whether
it
would
be
due
or
not.
(Black’s
Law
Dictionary
5th
edition)
Owed:
to
be
indebted
to
the
amount
of;
have
to
pay
or
repay:
“He
owes
me
five
dollars”.
(The
Houghton,
Mifflin
Canadian
Dictionary
of
the
English
Language)
Owe;
owing
To
owe
a
sum
of
money
is
to
be
under
an
obligation
to
pay
it
at
once
or
at
some
future
time,
and
such
a
debt
is
said
to
be
“owing”
as
opposed
to
“payable”.
See
Due.*
(Jowitt’s
Dictionary
of
English
Law
2d
1977)
Certain
dictionary
definitions
of
the
word
“debt”
are
as
follows:
Debt
.
.
.
1.
That
which
is
owed
or
due;
anything
(as
money,
goods,
or
service)
which
one
person
is
under
obligation
to
pay
or
render
to
another.
2.
A
liability
to
pay
or
render
something
.
.
.
(The
Shorter
Oxford
Dictionary
on
Historical
Principles)
Debt
.
.
.
The
state
of
owing
something
to
another.
(The
Living
Webster
Encyclopedic
Dictionary
of
the
English
Language)
The
French
version
of
subparagraph
2404(1
)(b)(i)
of
the
regulations
uses
the
word
“dû”
where
“owing”
is
used
in
the
English
version.
“Dû”
is
the
past
participle
of
“devoir”.
Certain
dictionary
definitions
of
the
word
“dû”
and
“devoir”
are
as
follows:
dû
.
.
.
(part.
p.
de
devoir).
Que
l’on
doit.
Chose
promise,
chose
die.
(Dictionnaire
Quillet
de
la
langue
française)
devoir
.
.
.
1.
Etre
dans
l’obligation
de
donner
à
quelqu’un
quelque
chose
qui
lui
revient
de
droit,
et
en
particulier
de
lui
payer
une
somme
d’argent.
(Grand
Larousse
de
la
langue
française)
devoir:
avoir
à
payer
une
somme
d’argent
ou
à
fournir
toute
autre
valeur.
(Dictionnaire
général
de
la
langue
française
au
Canada)
devoir
.
.
.
avoir
à
payer
(une
somme
d’argent),
à
fournir
(qqch.
en
nature)
à
qqn.
Il
me
doit
mille
francs
.
.
.
(Le
petit
Robert
1)
A
sum
of
money
may
in
certain
circumstances
be
“owing”
even
though
the
payment
thereof
cannot
be
legally
enforced
till
afterwards
(vide
Faure
Electric
Accumulator
Co
Ltd
v
Phillipart
(1888),
58
LT
525).
A
debt
is
defined
as
a
sum
of
money
which
is
certainly,
and
at
all
events,
payable
without
regard
to
the
fact
whether
it
be
payable
now
or
at
a
future
time.
And
an
accruing
debt
is
a
debt
not
yet
actually
payable,
but
a
debt
which
is
represented
by
an
existing
obligation,
(per
Lindley,
LJ,
in
Webb
v
Stenton
(1883),
11
QBD,
at
527,
cited
in
Lyall
&
Sons
Construction
Co
v
Baker,
[1933]
2
DLR
at
269).
When
a
debt
exists
an
amount
is
owing.
The
parties
agree
that
in
each
of
1975,
1976
and
1977
interest
was
accruing
in
favour
of
the
appellant
but
the
interest
was
not
payable
until
after
the
particular
year.
There
was
no
question
before
the
Court
that
the
debts
were
represented
by
anything
other
than
existing
obligations.
In
my
view
the
accruing
debts,
ie
the
interest,
in
the
years
in
appeal
were
“owing”
to
the
appellant
as
they
accrued,
notwithstanding
payment
thereof
was
not
legally
enforceable
in
the
particular
year.
Therefore
the
amount
of
the
interest
accruing
in
each
of
the
years
in
appeal
is
to
be
included
in
determining
the
value
for
the
particular
year
of
specified
Canadian
assets
for
the
appellant.
Accordingly
the
appeals
will
be
allowed.
Appeals
allowed.
Email this Content