Décary,
J:—The
issue
in
this
matter
is
to
determine,
for
the
purpose
of
section
125.1
of
the
Income
Tax
Act,
if
the
interest
received
by
plaintiff
is
Canadian
manufacturing
and
processing
profits
as
defined
in
paragraph
125.1
(3)(a)
of
the
Act.
The
facts
of
the
matter
are
simple:
the
plaintiff,
prior
to
1973,
apart
from
its
business
of
manufacturing
electronic
equipment
for
sale,
operated
a
radio
and
television
broadcasting
station
in
Montreal.
The
broadcasting
part
of
the
business
of
plaintiff
had
to
be
disposed
of,
following
a
ruling
by
the
CRTC
in
September
1968,
providing
that
there
be
no
renewal
of
licences
after
September
1,
1969,
which
was
later
changed
to
September
1,
1970,
because
the
plaintiff,
being
controlled
by
a
company
in
the
United
Kingdom,
was
not
an
eligible
corporation
for
the
granting
of
a
licence
renewal.
Finally,
the
plaintiff,
in
1972,
was
able
to
sell
its
broadcasting
operation
for
an
amount
of
18
million
dollars,
which
amount
was
received
in
cash.
Having
been
unable
to
acquire
a
suitable
concern,
whose
activities
were
similar
or
complementary
to
its
own,
plaintiff,
throughout
the
period
1973
to
1976,
invested
the
funds
acquired
from
the
sale
in
short
term
loans,
extending
from
one
day
to
one
year,
or
by
way
of
purchase
of
commercial
papers
or
certificates
of
deposit
of
banks.
It
is
the
interest
from
the
proceeds
of
this
sale
that
has
to
be
determined,
whether
or
not
it
is
Canadian
manufacturing
and
processing
profits,
as
defined
in
paragraph
125.1
(3)(a)
of
the
Act.
The
provisions
of
paragraph
125.1
(3)(a)
read
as
follows:
(a)
(a)
“Canadian
manufacturing
and
processing
profits”
—
“Canadian
manufacturing
and
processing
profits”
of
a
corporation
for
a
taxation
year
means
such
portion
of
the
aggregate
of
all
amounts
each
of
which
is
the
income
of
the
corporation
for
the
year
from
an
active
business
carried
on
in
Canada
as
is
determined
under
rules
prescribed
for
that
purpose
by
regulation
made
on
the
recommendation
of
the
Minsiter
of
Finance
to
be
applicable
to
the
manufacturing
or
processing
in
Canada
of
goods
for
sale
or
lease;
and
It
seems
evident
that
the
matter
of
The
Queen
v
Marsh
&
McLennan
Ltd,
[1981]
CTC
410;
81
DTC
5307;
and
Ensite
Limited
v
The
Queen,
[1981]
CTC
445;
81
DTC
5326,
two
recent
decisions
rendered
by
the
Associate
Chief
Justice,
are
useful
in
determining
the
present
issue.
In
these
two
matters,
funds
have
been
invested
and
in
each
instance
were
found
to
be
investment
income.
In
the
Marsh
&
McLennan
case
it
was
the
matter
of
deciding
the
nature
of
the
interest
received
from
the
investment
in
short
term
obligations
of
insurance
premiums
during
the
period
between
their
collection
and
their
remittance
to
the
insurance
companies.
The
Court
found
such
interest
to
be
an
Investment
income.
In
the
Ensite
case,
the
taxpayer
deposited
its
cash
surplus
in
banks
and
received
interest
thereon
that
was
included
in
computing
its
investment
income.
Again,
that
interest
was
found
to
be
the
result
of
an
investment
transaction.
If
moneys
received
by
plaintiff
in
a
form
similar
or
identical
to
the
ones
received
by
the
plaintiffs
in
the
two
matters
referred
to
above,
I
fail
to
see
how,
in
the
present
instance,
the
interest
being
the
form
in
which
the
funds
were
received,
is
not
also
of
an
investment
income
nature.
If
the
said
funds
are
of
an
investment
income
nature,
it
follows
that
they
cannot
be
Canadian
manufacturing
and
processing
profits
under
the
definition
of
paragraph
125.1
(3)(a)
of
the
Act
as
interest
is
not
of
a
manufacturing
and
processing
profit
nature.
It
is
my
opinion
that
I
do
not
have
to
discuss
whether
the
lending
of
monies
by
the
company
amounted
to
an
active
business
because,
even
then,
if
it
were
an
active
business,
that
business
could
not
be
one
of
manufacturing
and
processing
and
the
income
or
profits
could
not
pertain
of
that
nature
of
manufacturing
and
processing
profits.
The
Court
comes
to
the
conclusion
that
the
interest
received
by
plaintiff
is
not
Canadian
manufacturing
and
processing
profits,
but
investment
income,
as
in
the
cases
of
The
Queen
v
Marsh
&
McLennan
Ltd
and
Ensite
Limited
v
The
Queen,
supra,
and
the
appeals
against
the
notices
of
reassessment
for
the
years
1973,
1974,
1975
and
1976
are
dismissed
with
costs.
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