MACLEAN,
J.:—This
proceeding
is
one
to
recover
from
the
defendant
the
sum
of
$849.31,
for
the
consumption
or
sales
tax
imposed
under
the
provision
of
the
Special
War
Revenue
Act,
and
for
certain
statutory
penalties.
The
particulars
of
the
claim
for
the
taxes
due
and
payable,
and
penalties,
are
set
forth
in
paragraph
4
of
the
Information.
Assuming
that
there
is
liability
on
the
part
of
the
defendant
for
the
taxes
and
penalties
claimed
it
is
agreed
that
the
particulars
of
the
same
as
set
forth
in
the
Information
are
correct.
The
defendant
is
a
manufacturer
of
mattresses
which
it
sells
to
the
public,
but
such
sales
are
not
involved
in
this
issue.
The
defendant
also
renovates
and
repairs
for
customers
mattresses
that
have
been
in
use
and
for
which
it
makes
certain
charges
for
material
supplied
and
labour
performed.
These
mattresses
are
referred
to
as
‘‘rebuilt’’
mattresses,
and
it
is
in
respect
of
such
mattresses
that
it
is
here
sought
to
recover
the
sales
tax
in
question,
the
Crown
claiming
that
such
transactions
constitutes
taxable
sales
within
the
terms
of
the
Special
War
Revenue
Act,
and
this
claim
the
defendant
resists.
The
defendant
also
purchases
from
owners
old
or
used
mattresses
which
it
rebuilds
and
sells
to
the
public
and
it
pays
the
sales
tax
upon
the
selling
price
of
the
same,
and
no
question
arises
here
as
to
the
sales
tax
on
such
transactions.
The
labour
and
services
performed,
and
the
material
supplied,
by
the
defendant,
in
connection
with
the
mattresses
delivered
by
customers
to
it,
and
with
which
we
are
here
concerned,
are
the
following.
First,
any
mattress
so
delivered
is
sterilized
or
disinfected
by
some
chemical
process.
Then
the
covering
or
ticking
of
the
mattress
is
removed
and
a
new
cover
or
ticking
is
made
up,
the
material
for
which
is
supplied
by
the
defendant.
The
original
mattress
filling
or
felt
is
then
put
through
a
picking
machine
to
loosen
up
or
refluff
the
same,
that
is
to
say,
any
portion
of
the
felt
that
has
become
wadded
or
matted
is
restored
to
its
original
fluffy
condition,
or
nearly
so,
and
the
felt
as
thus
treated
is
then
blown
into
the
new
mattress
cover
or
ticking..
The
final
operation
is
to
bind
or
sew
the
cover
and
its
contents
together,
I
assume
by
vertical
binding
or
sewing
at
predetermined
points
through
the
mattress
cover.
The
mattress
is
then
ready
for
delivery
back
to
the
owner
or
customer.
It
was
stated
by
Mr.
Crux,
for
the
Crown,
that
in
the
case
where
the
mattress
covering
was
merely
patched
or
repaired,
and
the
sterilizing
and
refluffing
operations
were
performed,
the
sales
tax
was
not
claimed.
For
the
material
supplied
and
the
labour
performed
a
charge
of
$5.75
is
made
to
the
customer.
This
amount
is
made
up
as
follows,
$2.25
would
be
the
charge
for
the
new
mattress
cover
or
ticking
supplied
or
sold
the
customer,
18
cents
would
be
the
sales
tax
on
the
new
cover
or
ticking
supplied
the
customer
and
which
in
all
cases
here
the
defendant
paid
to
the
Crown
and
was
credited
therefor,
50
cents
would
be
the
charge
to
the
customer
for
the
sterilization,
and
the
remainder,
$2.82,
would
be
the
charge
for
the
labour
performed
in
the
rebuilding
of
the
mattress.
The
Crown
is
here
claiming
the
sales
tax
upon
the
total
charge
to
the
customer
less
the
tax
which
has
been
already
paid
for
the
new
mattress
cover
or
ticking
supplied
or
sold
to
the
customer;
I
assume
the
customer
might,
if
he
desired,
furnish
his
own
mattress
cover
or
ticking
to
the
defendant.
The
question
for
decision
then
seems
to
be:
Does
the
material
supplied
and
the
labour
performed
by
the
defendant
in
the
rebuilding
of
the
customer’s
mattress
constitute
a
sale
of
goods
by
a
manufacturer,
within
the
meaning
of
s.
86
of
the
Act?
In
the
case
of
The
King
v.
Boultbee
Limited,
([19381
Ex.
C.R.
187),
I
decided
that
the
defendant
there
was
not
liable
for
the
sales
tax
where
it
retreated
automobile
tires
for
customers
and
to
whom
it
returned
the
identical
tires
given
it
for
treatment.
It
would
seem
to
me
that
what
I
said
in
my
reasons
for
Judgment
in
connection
with
that
class
of
transactions,
and
which
appear
on
pages
190
and
191
of
the
Report
of
that
case,
are
applicable
here
and
I
need
not
repeat
what
I
there
said.
I
do
not
think
that
the
transactions
here
in
question
fall
within
the
meaning
and
intendment
of
sec.
86
of
the
Special
War
Revenue
Act.
It
is
true
that
the
mattresses
in
question
did
undergo
quite
extensive
repairs
but
I.
do
not
think
it
can
be
said
that
the
defendant
manufactured
and
sold
the
same.
My
conclusion
is
that
the
Information
must
be
dismissed
and
with
costs
to
the
defendant.
Information
dismissed
with
costs.
CONVENTION
FOR
THE
AVOIDANCE
OF
DOUBLE
TAXATION
BETWEEN
CANADA
AND
THE
UNITED
STATES
OF
AMERICA
EDITORIAL
NOTE:
The
following
convention
together
with
its
protocol
between
Canada
and
the
United
States
of
America
was
signed
at
Washington
on
March
4,
1942
by
Mr.
Leighton
McCarthy,
K.C.,
Envoy
Extraordinary
and
Minister
Plenipotentiary
of
Canada
and
Mr.
Sumner
Welles,
Acting
Secretary
of
State
of
the
United
States
of
America.
No
ratification,
however,
has
taken
place
and
the
instruments
of
ratification
as
referred
to
in
Article
No.
22
have
not
yet
been
exchanged.
Nevertheless
the
importance
of
this
document
as
presently
made
known
to
the
public
of
Canada
and
the
United
States
cannot
be
underestimated.
It
is
more
than
a
mere
concrete
expression
of
the
common
desires
of
its
signatory
States
to
reduce
an
ever
growing
mass
of
fiscal
legislation
on
both
sides
of
the
border
to
terms
whose
common
denominator
shall
be
equality
of
treatment
of
their
citizens
and
the
prevention
of
double
taxation
caused
by
the
conflict
of
their
respective
tax
laws.
It
is
in
itself
a
positive
creative
document
which
will,
when
duly
ratified,
undoubtedly
make
new
law
as
well
as
clarify
and
simplify
the
old.
Any
intelligent
study
of
its
articles
with
a
view
to
ascertaining
their
meaning
in
law
and
their
effect
in
practice
upon
the
lives
and
fortunes
of
the
taxpayers
affected,
must
be
governed
by
a
thorough
study
of
the
definitions
in
the
protocol
and
a
comparison
of
the
provisions
of
the
convention
with
the
income
tax
laws
of
both
countries.
It
is
as
yet
too
early,
in
view
of
the
absence
of
any
indicative
regulations
and
more
particularly
because
of
the
pending
ratification,
to
presume
to
offer
any
practical
analysis
of
this
document.
It
is
the
intention,
however,
that
as
soon
as
its
content
and
practical
application
assume
what
might
be
called
a
static
form,
that
a
more
lengthy
analysis
of
its
effect
upon
the
income
tax
law
of
Canada
will
be
provided.
The
Government
of
Canada
and
the
Government
of
The
United
States
of
America,
being
desirous
of
further
promoting
the
flow
of
commerce
between
the
two
countries,
of
avoiding
double
taxation
and
of
preventing
fiscal
evasion
in
the
case
of
income
taxes,
have
decided
to
conclude
a
Convention
and
for
that
purpose
have
appointed
as
their
Plenipotentiaries:
Mr.
Leighton
McCarthy,
K.C.,
Envoy
Extraordinary
and
Minister
Plenipotentiary
of
Canada
at
Washington;
and
Mr.
Sumner
Welles,
Acting
Secretary
of
State
of
the
United
States
of
America;
who,
having
communicated
to
one
another
their
full
powers
found
in
good
and
due
form,
have
agreed
upon
the
following
Articles:
ARTICLE
I
An
enterprise
of
one
of
the
contracting
States
is
not
subject
to
taxation
by
the
other
contracting
State
in
respect
of
its
industrial
and
commercial
profits
except
in
respect
of
such
profits
allocable
in
accordance
with
the
Articles
of
this
Convention
to
its
permanent
establishment
in
the
latter
State.
No
account
shall
be
taken
in
determining
the
tax
in
one
of
the
contracting
States,
of
the
mere
purchase
of
merchandise
effected
therein
by
an
enterprise
of
the
other
State.
ARTICLE
II
For
the
purposes
of
this
Convention,
the
term
‘‘industrial
and
commercial
profits’’
shall
not
include
income
in
the
form
of
rentals
and
royalties,
interest,
dividends,
management
charges,
or
gains
derived
from
the
sale
or
exchange
of
capital
assets.
Subject
to
the
provisions
of
this
Convention
such
items
of
income
shall
be
taxed
separately
or
together
with
industrial
and
commercial
profits
in
accordance
with
the
laws
of
the
contracting
States.
ARTICLE
III
1.
If
an
enterprise
of
one
of
the
contracting
States
has
a
permanent
establishment
in
the
other
State,
there
shall
be
attributed
to
such
permanent
establishment
the
net
industrial
and
commercial
profit
which
it
might
be
expected
to
derive
if
it
were
an
independent
enterprise
engaged
in
the
same
or
similar
activities
under
the
same
or
similar
conditions.
Such
net
profit
will,
in
principle,
be
determined
on
the
basis
of
the
separate
accounts
pertaining
to
such
establishment.
2.
The
competent
authority
of
the
taxing
State
may,
when
necessary,
in
execution
of
paragraph
one
of
this
article
rectify
the
accounts
produced,
notably
to
correct
errors
and
omissions
or
to
reestablish
the
prices
or
remunerations
entered
in
the
books
at
the
value
which
would
prevail
between
independent
persons
dealing
at
arm’s
length.
3.
If
(a)
an
establishment
does
not
produce
an
accounting
showing
its
own
operations,
or
(b)
the
accounting
produced
does
not
correspond
to
the
normal
usages
of
the
trade
in
the
country
where
the
establishment
is
situated,
or
(c)
the
rectifications
provided
for
in
paragraph
two
of
this
article
cannot
be
effected
the
competent
authority
of
the
taxing
State
may
determine
the
net
industrial
and
commercial
profit
by
applying
such
methods
or
formulae
to
the
operations
of
the
establishment
as
may
be
fair
and
reasonable.
4.
To
facilitate
the
determination
of
industrial
and
commercial
profits
allocable
to
the
permanent
establishment,
the
competent
authorities
of
the
contracting
States
may
consult
together
with
a
view
to
the
adoption
of
uniform
rules
of
allocation
of
such
profits.
ARTICLE
IV
1.
(a)
When
a
United
States
enterprise,
by
reason
of
its
participation
in
the
management
or
capital
of
a
Canadian
enter-
prise,
makes
or
imposes
on
the
latter,
in
their
commercial
or
financial
relations,
conditions
different
from
those
which
would
be
made
with
an
independent
enterprise,
any
profits
which
should
normally
have
appeared
in
the
balance
sheet
of
the
Canadian
enterprise
but
which
have
been,
in
this
manner,
diverted
to
the
United
States
enterprise,
may
be
incorporated
in
the
taxable
profits
of
the
Canadian
enterprise,
subject
to
applicable
measures
of
appeal.
(b)
In
order
to
effect
the
inclusion
of
such
profits
in
the
taxable
profits
of
the
Canadian
enterprise,
the
competent
authority
of
Canada
may,
when
necessary,
rectify
the
accounts:
of
the
Canadian
enterprise,
notably
to
correct
errors
and
omissions
or
to
reestablish
the
prices
or
remuneration
entered
in
the
books
at
the
values
which
would
prevail
between
independent
persons
dealing
at
arm’s
length.
To
facilitate
such
rectification
the
competent
authorities
of
the
contracting
States
may
consult
together
with
a
view
to
such
determination
of
profits
of
the
Canadian
enterprise
as
may
appear
fair
and
reasonable.
2.
The
same
principle
applies,
mutatis
mutandis,
in
the
event
that
profits
are
diverted
from
a
United
States
enterprise
to
a
Canadian
enterprise.
ARTICLE
V
Income
which
an
enterprise
of
one
of
the
contracting
States
derives
from
the
operation
of
ships
or
aircraft
registered
in
that
State
shall
be
exempt
from
taxation
in
the
other
contracting
State.
The
present
Convention
will
not
be
deemed
to
affect
the
exchange
of
notes
between
the
United
States
of
America
and
Canada,
dated
August
2
and
September
17,
1928,
providing
for
relief
from
double
income
taxation
on
shipping
profits.
ARTICLE
VI
Wages,
salaries
and
similar
compensation
paid
by
the
Government,
or
any
agency
or
instrumentality
thereof,
of
one
of
the
contracting
States
or
by
the
political
sub-divisions
or
territories
or
possessions
thereof
to
citizens
of
such
State
residing
in
the
other
State
shall
be
exempt
from
taxation
in
the
latter
State.
Pensions
and
life
annuities
derived
from
within
one
of
the
contracting
States
and
paid
to
individuals
residing
in
the
other
contracting
State
shall
be
exempt
from
taxation
in
the
former
State.
Article
VII
1.
A
resident
of
Canada
shall
be
exempt
from
United
States
income
tax
upon
compensation
for
labor
or
personal
services
performed
within
the
United
States
of
America
if
he
conforms
to
either
of
the
following
conditions:
(a)
He
is
temporarily
present
within
the
United
States
of
America
for
a
period
or
periods
not
exceeding
a
total
of
one
hundred
and
eighty-three
days
during
the
taxable
year
and
such
compensation
(A)
is
received
for
labor
or
personal
services
performed
as
an
employee
of,
or
under
contract
with,
a
resident
or
corporation
or
other
entity
of
Canada
and
(B)
does
not
exceed
$5,000
in
the
aggregate
during
such
taxable
year;
or
(b)
he
is
temporarily
present
in
the
United
States
of
America
for
a
period
or
periods
not
exceeding
a
total
of
ninety
days
during
the
taxable
year
and
the
compensation
received
for
such
services
does
not
exceed
$1,500
in
the
aggregate
during
such
taxable
year.
2.
The
provisions
of
paragraph
1
(a)
of
this
Article
shall
have
no
application
to
the
professional
earnings
of
such
individuals
as
actors,
artists,
musicians
and
professional
athletes.
3.
The
provisions
of
paragraphs
1
and
2
of
this
Article
shall
apply,
mutatis
mutandis,
to
a
resident
of
the
United
States
of
America
deriving
compensation
for
personal
services
performed
within
Canada.
ARTICLE
VIII
Gains
derived
in
one
of
the
contracting
States
from
the
sale
or
exchange
of
capital
assets
by
a
resident
or
a
corporation
or
other
entity
of
the
other
contracting
State
shall
be
exempt
from
taxation
in
the
former
State,
provided
such
resident
or
corporation
or
other
entity
has
no
permanent
establishment
in
the
former
State.
ARTICLE
IX
Students
or
business
apprentices
from
one
of
the
contracting
State
residing
in
the
other
contracting
State
for
purposes
of
study
or
for
acquiring
business
experience
shall
not
be
taxable
by
the
latter
State
in
respect
of
remittances
received
by
them
from
within
the
former
State
for
the
purposes
of
their
maintenance
or
studies.
ARTICLE
X
Income
derived
from
sources
within
one
of
the
contracting
States
by
a
religious,
scientific,
literary,
educational
or
charitable
organization
of
the
other
contracting
State
shall
be
exempt
from
taxation
in
the
State
from
which
the
income
is
derived
if,
within
the
meaning
of
the
laws
of
both
contracting
States,
such
organization
would
have
been
exempt
from
income
tax.
ARTICLE
XI
1.
The
rate
of
income
tax
imposed
by
one
of
the
contracting
States,
in
respect
of
income
derived
from
sources
therein,
upon
individuals
residing
in,
or
corporations
organized
under
the
laws
of,
the
other
contracting
State,
and
not
engaged
in
trade
or
business
in
the
former
State
and
having
no
office
or
place
of
business
therein,
shall
not
exceed
fifteen
per
centum
for
each
taxable
year.
2.
Notwithstanding
the
provisions
of
paragraph
1
of
this
Article,
income
tax
in
excess
of
five
per
centum
shall
not
be
imposed
by
one
of
the
contracting
States
in
respect
of
divi-
dens
paid
by
a
subsidiary
corporation
organized
under
the
laws
of
such
State,
or
of
a
political
subdivision
thereof,
to
a
parent
corporation
organized
under
the
Jaws
of
the
other
contracting
State,
or
of
a
political
subdivision
thereof:
Provided,
however,
that
this
paragraph
shall
not
apply
if
the
competent
authority
in
the
former
State
is
satisfied
that
the
corporate
relationship
between
the
two
corporations
has
been
arranged
or
is
maintained
primarily
with
the
intention
of
taking
advantage
of
this
paragraph.
3.
Notwithstanding
the
provisions
of
Article
XXII
of
this
Convention,
paragraph
1
or
paragraph
2,
or
both,
of
this
Article,
may
he
terminated
without
notice
on
or
after
the
termination
of
the
three-year
period
beginning
with
the
effective
date
of
this
Convention
by
either
of
the
contracting
States
imposing
a
rate
of
income
tax
in
excess
of
the
rate
of
15
percent
prescribed
in
paragraph
1
or
in
excess
of
the
rate
of
5
percent
prescribed
in
paragraph
2.
4.
The
provisions
of
tnis
Article
shall
not
be
construed
so
as
to
contravene
the
Tax
Convention
between
Canada
and
the
United
States
of
America,
effective
January
1,
1936,
to
April
29,
1941.
ARTICLE
XII
Dividends
and
interest
paid
on
or
after
the
effective
date
of
this
Convention
by
a
corporation
organized
under
the
laws
of
Canada
to
individual
residents
of
Canada,
other
than
citizens
of
the
United
States
of
America,
or
to
corporations
organized
under
the
laws
of
Canada
shall
be
exempt
from
all
income
taxes
imposed
by
the
United
States
of
America.
ARTICLE
XIII
Corporations
organized
under
the
laws
of
Canada,
more
than
50
percent
of
the
outstanding
voting
stock
of
which
is
owned
directly
or
indirectly
throughout
the
last
half
of
the
taxable
year
by
individual
residents
of
Canada,
other
than
citizens
of
the
United
States
of
America,
shall
be
exempt
from
any
taxes
imposed
by
the
United
States
of
America
with
respect
to
accumulated
or
indistributed
earnings,
profits,
Income
or
surplus
of
such
corporations.
With
respect
to
corporations
organized
under
the
laws
of
Canada
not
exempt
from
such
taxes
under
the
provisions
of
this
Article
the
competent
authorities
of
the
two
contracting
States
will
consult
together.
ARTICLE
XIV
1.
(a)
The
United
States
income
tax
liability
for
any
taxable
year
beginning
prior
to
January
1,
1936
of
any
individual
resident
of
Canada,
other
than
a
citizen
of
the
United
States
of
America,
or
of
any
corporation
organized
under
the
laws
of
Canada,
remaining
unpaid
as
of
the
date
of
signature
of
this
Convention
may
be
adjusted
on
a
basis
satisfactory
to
the
Commissioner:
Provided,
That
the
amount
to
be
paid
in
settlement
of
such
liability
shall
not
exceed
the
amount
of
the
liability
which
would
have
been
determined
if—
(A)
the
Revenue
Act
of
1936
as
modified
by
the
Tax
Convention
between
Canada
and
the
United
States
of
America,
effective
January
1,
1936,
to
April
29,
1941
(except
in
the
case
of
a
corporation
organized
under
the
laws
of
Canada
more
than
50
percent
of
the
outstanding
voting
stock
of
which
was
owned
directly
or
indirectly
throughout
the
last
half
of
the
taxable
year
by
citizens
or
residents
of
the
United
States
of
America)
and
(B)
Articles
XIJ
and
XIII
of
this
Convention,
had
been
in
effect
for
such
year.
If
the
taxpayer
was
not,
within
the
meaning
of
the
Revenue
Act
of
1936,
engaged
in
trade
or
business
within
the
United
States
of
America
and
had
no
office
or
place
of
business
therein
during
the
taxable
year,
the
amount
of
interest
and
penalties
shall
not
exceed
50
percent
of
the
amount
of
the
tax
with
respect
to
which
such
interest
and
penalties
have
been
computed.
(b)
The
United
States
income
tax
liability
remaining
unpaid
as
of
the
date
of
signature
of
this
Convention
for
any
taxable
year
beginning
after
December
31,
1935,
and
prior
to
January
1,
1941
in
the
case
of
any
individual
resident
of
Canada,
other
than
a
citizen
of
the
United
States
of
America
or
in
the
case
of
any
corporation
organized
under
the
laws
of
Canada
shall
be
deter-
mined
as
if
the
provisions
of
Articles
XII
and
XIII
of
this
Convention
had
been
in
effect
for
such
year.
2.
The
provisions
of
paragraph
1
of
this
Article
shall
not
apply—
(a)
Unless
the
taxpayer
files
with
the
Commissioner
within
two
years
from
the
date
of
signature
of
this
Convention
a
request
that
such
tax
liability
be
so
adjusted
together
with
such
information
as
the
Commissioner
may
require;
(b)
In
any
ease
in
which
the
Commissioner
is
satisfied
that
any
deficiency
in
tax
is
due
to
fraud
with
intent
to
evade
the
tax.
ARTICLE
XV
In
accordance
with
the
provisions
of
Section
8
of
the
Income
War
Tax
Act
as
in
effect
on
the
day
of
the
entry
into
force
of
this
Convention,
Canada
agrees
to
allow
as
a
deduction
from
the
Dominion
income
and
excess
profits
taxes
on
any
income
which
was
derived
from
sources
within
the
United
States
of
America
and
was
there
taxed,
the
appropriate
amount
of
such
taxes
paid
to
the
United
States
of
America.
In
accordance
with
the
provisions
of
Section
131
of
the
United
States
Internal
Revenue
Code
as
in
effect
on
the
day
of
the
entry
into
force
of
this
Convention,
the
United
States
of
America
agrees
to
allow
as
a
deduction
from
the
income
and
excess
profits
taxes
imposed
by
the
United
States
of
America
the
appropriate
amount
of
such
taxes
paid
to
Canada.
ARTICLE
XVI
Where
a
taxpayer
shows
proof
that
the
action
of
the
revenue
authorities
of
the
contracting
States
has
resulted
in
double
taxation
in
his
case
in
respect
of
any
of
the
taxes
to
which
the
present
Convention
relates,
he
shall
be
entitled
to
lodge
a
claim
with
the
State
of
which
he
is
a
citizen
or
resident
or,
if
the
taxpayer
is
a
corporation
or
other
entity,
with
the
State
in
which
it
was
created
or
organized,
if
the
claim
should
be
deemed
worthy
of
consideration,
the
competent
authority
of
such
State
may
consult
with
the
competent
authority
of
the
other
State
to
determine
whether
the
double
taxation
in
question
may
be
avoided
in
accordance
with
the
terms
of
this
Convention.
ARTICLE
XVII
Notwithstanding
any
other
provision
of
this
Convention,
the
United
States
of
America
in
determining
the
income
and
excess
profits
taxes,
including
all
surtaxes,
of
its
citizens
or
residents
or
corporations,
may
include
in
the
basis
upon
which
such
taxes
are
imposed
all
items
of
income
taxable
under
the
revenue
laws
of
the
United
States
of
America
as
though
this
Convention
had
not
come
into
effect.
ARTICLE
XVIIT
The
competent
authorities
of
the
two
contracting
States
may
prescribe
regulations
to
carry
into
effect
the
present
Convention
within
the
respective
States
and
rules
with
respect
to
the
exchange
of
information.
The
competent
authorities
of
the
two
contracting
States
may
communicate
with
each
other
directly
for
the
purpose
of
giving
effect
to
the
provisions
of
the
present
Convention.
ARTICLE
XIX
With
a
view
to
the
prevention
of
fiscal
evasion,
each
of
the
contracting
States
undertakes
to
furnish
to
the
other
contracting
State,
as
provided
in
the
succeeding
Articles
of
this
Convention,
the
information
which
its
competent
authorities
have
at
their
disposal
or
are
in
a
position
to
obtain
under
its
revenue
laws
insofar
as
such
information
may
be
of
use
to
the
authorities
of
the
other
contracting
State
in
the
assessment
of
the
taxes
to
which
this
Convention
relates.
The
information
to
be
furnished
under
the
first
paragraph
of
this
Article,
whether
in
the
ordinary
course
or
on
request,
may
be
exchanged
directly
between
the
competent
authorities
of
the
two
contracting
States.
ARTICLE
XX
1.
The
competent
authorities
of
the
United
States
of
America
shall
forward
to
the
competent
authorities
of
Canada
as
soon
as
practicable
after
the
close
of
each
calendar
year
the
following
information
relating
to
such
calendar
year:
The
names
and
addresses
of
all
persons
whose
addresses
are
within
Canada
and
who
derive
from
sources
within
the
United
States
of
America
dividends,
interest,
rents,
royalties,
salaries,
wages,
pensions,
annuities,
or
other
fixed
or
determinable
annual
or
periodical
profits
and
income,
showing
the
amount
of
such
profits
and
income
in
the
case
of
each
addressee.
2.
The
competent
authorities
of
Canada
shall
forward
to
the
competent
authorities
of
the
United
States
of
America
as
soon
as
practicable
after
the
close
of
each
calendar
year
the
following
information
relating
to
such
calendar
year:
(a)
The
names
and
addresses
of
all
persons
whose
addresses
are
within
the
United
States
of
America
and
who
derive
from
sources
within
Canada
dividends,
interest,
rents,
royalties,
salaries,
wages,
pensions,
or
other
fixed
or
determinable
annual
or
periodical
profits
and
income,
showing
the
amount
of
such
profits
and
income
in
the
ease
of
each
addressee.
(b)
The
names
and
addresses
of
all
persons
whose
addresses
are
outside
of
Canada
and
who
derive
through
a
nominee,
or
agent,
or
custodian
in
Canada
income
from
sources
within
the
United
States
of
America,
and
who
are
not
entitled
to
the
reduced
rate
at
15
percent
with
respect
to
such
income
provided
in
Article
XI
of
this
Convention,
showing
the
amount
of
such
income
in
the
case
of
each
addressee.
(c)
The
names
and
addresses,
where
available,
of
persons
whose
addresses
are
outside
of
Canada
and
who
derive
dividends
during
the
calendar
year
from
corporations
organized
under
the
laws
of
Canada,
more
than
50
percent
of
the
gross
income
of
which
is
derived
from
sources
within
the
United
States
of
America,
showing
the
amount
of
such
dividends
in
each
ease.
(d)
The
names
and
addresses
of
all
persons
whose
addresses
are
within
the
United
States
of
America
and
who
beneficially
or
of
record
own
stocks
or
bonds,
debentures
or
other
securities,
or
evidences
of
funded
indebtedness,
of
any
company
taxed
in
Canada
as
a
Non-Resident-Owned
Investment
Corporation.
The
term
"‘Non-resident-Owned
Investment
Corporation”
shall
have
the
same
meaning
as
when
used
in
the
Income
War
Tax
Act
of
Canada.
ARTICLE
XXI
1.
If
the
Minister
in
the
determination
of
the
income
tax
liability
of
any
person
under
any
of
the
revenue
laws
of
Canada
deems
it
necessary
to
secure
the
cooperation
of
the
Commissioner,
the
Commissioner
may,
upon
request,
furnish
the
Minister
such
information
bearing
upon
the
matter
as
the
Commissioner
is
entitled
to
obtain
under
the
revenue
laws
of
the
United
States
of
America.
2.
If
the
Commissioner
in
the
determination
of
the
income
tax
liability
of
any
person
under
any
of
the
revenue
laws
of
the
United
States
of
America
deems
it
necessary
to
secure
the
cooperation
of
the
Minister,
the
Minister
may,
upon
request,
furnish
the
Commissioner
such
information
bearing
upon
the
matter
as
the
Minister
is
entitled
to
obtain
under
the
revenue
laws
of
Canada.
ARTICLE
XXII
This
Convention
and
the
accompanying
protocol
which
shall
be
considered
to
be
an
integral
part
of
the
Convention
shall
be
ratified
and
the
instruments
of
ratification
shall
be
exchanged
at
Washington
as
soon
as
possible.
This
Convention
and
protocol
shall
become
effective
on
the
first
day
of
January
1941.
They
shall
continue
effective
for
a
period
of
three
years
from
that
date
and
indefinitely
after
that
period,
but
may
be
terminated
by
either
of
the
contracting
States
at
the
end
of
the
three-year
period
or
at
any
time
thereafter
provided
that
(except
as
otherwise
specified
in
the
case
of
Article
XI)
at
least
six
months
prior
notice
of
termination
has
been
given,
the
termination
to
become
effective
on
the
first
day
of
January
following
the
expiration
of
the
six-month
period.
Done
in
duplicate,
at
Washington,
this
Fourth
day
of
March,
1942.
LEIGHTON
McCarthy,
SUMNER
WELLES.
PROTOCOL
At
the
moment
of
signing
the
Convention
for
the
avoidance
of
double
taxation,
and
the
establishment
of
rules
of
reciprocal
administrative
assistance
in
the
case
of
income
taxes,
this
day
concluded
between
Canada
and
the
United
States
of
America,
the
undersigned
plenipotentiaries
have
agreed
upon
the
following
provisions
and
definitions:
1.
The
taxes
referred
to
in
this
Convention
are:
(a)
for
the
United
States
of
America:
the
Federal
income
taxes
(including
surtaxes)
and
excess-profits
taxes.
(b)
for
Canada:
the
Dominion
income
taxes
(including
surtaxes)
and
excess-profits
taxes.
2.
In
the
event
of
appreciable
changes
in
the
fiscal
laws
of
either
of
the
contracting
States,
the
Governments
of
the
two
contracting
States
will
consult
together.
3.
As
used
in
this
Convention:
(a)
the
terms
‘‘persons,
"‘individual’’
and
"‘corporation,’’
shall
have
the
same
meanings,
respectively,
as
they
have
under
the
revenue
laws
of
the
taxing
State
or
the
State
furnishing
the
information,
as
the
case
may
be:
(b)
the
term
‘‘enterprise’’
includes
every
form
of
undertaking,
whether
carried
on
by
an
individual,
partnership,
corporation
or
any
other
entity
;
(c)
the
term
"‘enterprise
of
one
of
the
contracting
States’’
means,
as
the
case
may
be,
"United
States
enterprise””
or
"‘Canadian
enterprise’’’
;
(d)
the
term
"‘United
States
enterprise’’
means
an
enterprise
carried
on
in
the
United
States
of
America
by
an
individual
resident
in
the
United
States
of
America,
or
by
a
corporation,
partnership
or
other
entity
created
or
organized
in
or
under
the
laws
of
the
United
States
of
America,
or
of
any
of
the
States
or
Territories
of
the
United
States
of
America.
(e)
the
term
"‘Canadian
enterprise’’
is
defined
in
the
same
manner
mutatis
mutandis
as
the
term
‘‘United
States
enterprise’’
’
;
(f)
the
term
"
"
Permanent
establishment
’
’
includes
branches,
mines
and
oil
wells,
farms,
timber
lands,
plantations,
factories,
workshops,
warehouses,
offices,
agencies
and
other
fixed
places
of
business
of
an
enterprise,
but
does
not
include
a
subsidiary
corporation.
When
an
enterprise
of
one
of
the
contracting
States
carries
on
business
in
the
other
contracting
State
through
an
employee
or
agent
established
there,
who
has
general
authority
to
contract
for
his
employer
or
principal
or
has
a
stock
of
merchandise
from
which
he
regularly
fills
orders
which
he
receives,
such
enterprise
shall
be
deemed
to
have
a
permanent
establishment
in
the
latter
State.
The
fact
that
an
enterprise
of
one
of
the
contracting
States
has
business
dealings
in
the
other
contracting
State
through
a
commission
agent,
broker
or
other
independent
agent
or
maintains
therein
an
office
used
solely
for
the
purchase
of
merchandise
Shall
not
be
held
to
mean
that
such
enterprise
has
a
permanent
establishment
in
the
latter
State.
4.
The
term
"‘Minister'',
as
used
in
this
Convention,
means
the
Minister
of
National
Revenue
of
Canada
or
his
duly
authorized
representative.
The
term
"‘Commissioner,''
as
used
in
this
Convention,
means
the
Commissioner
of
Internal
Revenue
of
the
United
States
of
America,
or
his
duly
authorized
representative.
The
term
‘‘competent
authority,’’
as
used
in
this
Convention,
means
the
Commissioner
and
the
Minister
and
their
duly
authorized
representatives.
o.
The
term
(
"United
States
of
America’’,
when
used
in
a
geographical
sense,
includes
only
the
States,
the
Territories
of
Alaska
and
Hawaii,
and
the
District
of
Columbia.
The
term
"‘Canada''
when
used
in
a
geographical
sense
means
the
Provinces,
the
Territories
and
Sable
Island.
6.
The
term
"‘subsidiary
corporation”
referred
to
in
Article
XI
of
this
Convention
means
a
corporation
all
of
whose
shares
(less
directors’
qualifying
shares)
having
full
voting
rights
are
beneficially
owned
by
another
corporation,
provided
that
ordinarily
not
more
than
one-quarter
of
the
gross
income
of
such
subsidiary
corporation
is
derived
from
interest
and
dividends
other
than
interest
and
dividends
received
from
its
subsidiary
corporations.
7.
(a)
The
term
‘‘rentals
and
royalties’’
referred
to
in
Article
II
of
this
convention
shall
include
rentals
or
royalties
arising
from
leasing
real
or
immoveable,
or
personal
or
moveable
property
or
from
any
interest
in
such
property,
including
rentals
or
royalties
for
the
use
of,
or
for
the
privilege
of
using,
patents,
copyrights,
secret
processes
and
formulae,
goodwill,
trade
marks,
trade
brands,
franchises
and
other
like
property
;
(b)
the
term
‘‘interest’’
as
used
in
this
Convention
shall
include
income
arising
from
interest-bearing
securities,
public
obligations,
mortgages,
hypothecs,
corporate
bonds,
loans,
deposits
and
current
accounts.
(ce)
The
term
‘‘Dividends’’
as
used
in
this
Convention
shall
include
all
distributions
of
the
earnings
or
profits
of
corporations.
8.
The
term
‘‘pensions’’
referred
to
in
Article
VI
of
this
Convention
means
periodic
payments
made
in
consideration
for
services
rendered
or
by
way
of
compensation
for
injuries
received.
9.
The
term
‘‘life
annuities’’
referred
to
in
Article
VI
of
this
Convention
means
a
stated
sum
payable
periodically
at
stated
times,
during
life,
or
during
a
specified
number
of
years,
under
an
obligation
to
make
the
payments
in
consideration
of
a
gross
sum
or
sums
paid
by
the
recipient
or
under
a
contributory
retirement
plan.
10.
The
terms
‘‘engaged
in
trade
or
business’’
and
‘‘office
or
place
of
business’’
as
used
in
Article
XI
of
this
Convention
shall
not
be
deemed
to
include
an
office
used
solely
for
the
purchase
of
merchandise.
11.
The
provisions
of
the
present
Convention
shall
not
be
construed
to
restrict
in
any
manner
any
exemption,
deduction,
credit
or
other
allowance
accorded
by
the
laws
of
one
of
the
contracting
States
in
the
determination
of
the
tax
imposed
by
such
State.
12.
The
citizens
of
one
of
the
contracting
States
residing
within
the
other
contracting
State
shall
not
be
subjected
to
the
payment
of
more
burdensome
taxes
than
the
citizens
of
such
other
State.
Done
in
duplicate,
at
Washington,
this
fourth
day
of
March,
1942.
LEIGHTON
McCarthy,
SUMNER
WELLES.
Email this Content