Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:- DOES TERM PROPORTION IN 126(1)(B) limit the amount of the credit to the part I taxes payable?
Position TAKEN: yes
Reasons FOR POSITION TAKEN: - French version of the Act uses the term fraction which in the Petit Larousse is defined to mean that part of the whole. Fraction limited to 1.
September 1, 1994
Client Assistance Directorate Rulings Directorate
Richard Proulx M.P. Sarazin
Acting Chief (613) 957-8953
T1 Returns and Guides Division
Attention: Luc Brunelle
933143
Federal Foreign Tax Credit Calculation
This is in reply to your memorandum of November 1, 1993 wherein you requested our opinion as to whether the term "proportion" found in the phrase "that proportion of the tax for the year otherwise payable under this Part" which appears in the preamble of paragraphs 126(1)(b) and 126(2.1)(a) of the Act would limit the amount of the foreign tax deduction to the amount of the "tax for the year otherwise payable under this Part" (hereinafter referred to as the "Federal Taxes") within the meaning assigned by paragraph 126(7)(d) of the Act.
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you have asked us to confirm that the use of the term "proportion" in paragraphs 126(1)(b) and 126(2.1)(a) of the Act restricts the foreign tax deduction to the amount of the Federal Taxes. That is, the term "proportion" would restrict the multiplier to a maximum of 1.
The term proportion is not defined for purposes of the Act and, as such, it must be given its ordinary meaning. Websters defines proportion to be the relation of one part to another relative to magnitude, quantity or degree. Oxford's definition includes the one found in Websters but it also defines the term to mean "a portion or part in its relation to the whole; a comparative part, a share; occas., a portion, division or part". It is apparent that by looking at the word's ordinary meaning we would not be able to conclude with any certainty that the term proportion, in and by itself, would restrict the size of the fraction to a multiplier of one. This conclusion is confirmed in Quemont Mining Corporation Limited, Rio Algom Mines Limited, and MacLeod-Cockshutt Gold Mines Limited v. Minister of National Revenue 66 DTC 5376 (E.C.C.), in dealing with the term proportion as it appeared in Regulation 701(1)(a) at the time, the court noted at 5386 that:
"... This could happen when in the fraction A/B the numerator A. is larger than the denominator B...".
However, pursuant to the Official Languages Act, both the English and French versions of a statute are equally authoritative. Consequently, both versions of the Act are to be used in the resolution of any ambiguity in one of the versions. In such cases, construction of one version is made by taking into account the other version, the resulting interpretation being applicable to both. Consequently, to interpret the meaning of the word proportion as used in paragraphs 126(1)(b) and 126(2.1)(a), we must also consider the French version of the Act which uses the term "la fraction de l'impôt pour l'année ... ". Since the term "fraction" is defined in le Petit Larousse to be "partie d'un tout" (part of the whole), the French version of the Act seems quite clear that the proper interpretation for the term "proportion" in paragraphs 126(1)(b) and 126(2.1)(a) is that found in Oxford's which is "a portion or part in relation to the whole; a comparative part, a share; occas., a portion, division or part". Based on this definition, the proportion referred to in those paragraphs cannot be greater than one and the foreign tax credit cannot exceed the amount of the Federal Taxes.
In addition, we would point out that where there is a conflict between the two versions of the Act, the courts will generally look to the intent of the legislation in determining how the particular provision of the Act should be interpreted. We would refer you to The Queen v. Compagnie Immobilière BCN Limitée, 79 DTC 5068 and Fred Juster v. The Queen, 74 DTC 6540 where the courts have had to consider differences between the terminology utilized in the French and English versions of the Act. Since, we are of the view that the provisions of paragraph 126(1)(b) were enacted to restrict the foreign tax credit to the amount of the Federal Taxes, this approach would also support the interpretation that the proportion cannot exceed 1.
We trust that the foregoing comments will be of assistance to you.
Chief
Corporate Reorganizations III Section
Reorganizations and Foreign Division
Rulings Directorate
Policy and Legislation Branch
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