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Canada, 2020 FCA 201-- summary under Paragraph 251(1)(c) Summary Under Tax Topics- Income Tax Act- Section 251- Subsection 251(1)- Paragraph 251(1)(c) a transaction with a financially subordinate company was a non-arm’s length transaction The taxpayer (“Keybrand”), its wholly-owning parent (“ BWS ”), and another Strassburger-family company were guarantors of loans made to a start-up company (“Vidabode”) by GE Capital. ... After then noting the “directing mind” test applied in the Robson Leather case (whose facts revealed “a striking similarity,” as in both cases there was “substantial debt” owing by a company with poor prospects to the relevant family – para. 54), Webb JA stated (at para. 58): Given the degree of financial dependence of Vidabode on BWS and Keybrand and the lack of any negotiation with respect to the terms and conditions (including the price) related to the share subscription, it is more likely than not that Keybrand controlled both sides of the transaction related to the issue of shares by Vidabode to Keybrand. He also stated (at paras. 68-69): [T]he lack of ordinary commercial terms that would be agreed upon by parties acting in their own interests may support a finding that the transaction is not an arm’s length transaction and, therefore, that the parties were not dealing with each other at arm’s length. … [I]n an extraordinary situation such as here, where a person pays in excess of $14 million for shares that do not have any value, the magnitude of the discrepancy raises doubts that the parties were dealing with each other at arm’s length. ...

That is a legal relationship involving reciprocal performance. … The real value of CSP's claim was an account of Praesto's profits. CSP was seeking to put Praesto out of business as its competitor. … The FTT was satisfied and found that the litigation was effectively being brought against Mr Ranson and Praesto, even though Praesto had not been joined to the proceedings. ... In a dissenting reasons, Sir Terence Etherton MR stated (at paras 86 and 88): The personal belief of Mr Ranson and the understanding of Sintons that CSP was "attacking" Praesto, as well as Mr Ranson, and seeking to put Praesto out of business do not establish the requisite objective direct and immediate link to Praesto's economic activity as a whole. … … The objective link between those services and the success of Praesto's business was not direct but indirect and was not immediate but consequential. ...

In finding that Art. 23(1) had such effect, the Court stated (at para. 15): The effect of Article 23 … is that the payments in question are deemed to have an Australian source for the purposes of s 6-5(3)(a). ... They do not oblige the contracting states to tax: Federal Commissioner of Taxation v Lamesa Holdings BV (1997) 77 FCR 597 (“ Lamesa ”) at 600-601; GE Capital at [36]. ...

. … (para 147) Respecting the “financial services requirement in para. ... (e) applied to CCG as CITB’s affiliate, Owen J stated (at paras. 153, 156): …CCG was engaged directly or indirectly in the business of providing financial services in the form of the provision of credit to arm’s length third parties. … [P]aragraph (e) of the definition of “foreign bank” in the Bank Act does not require CCG to be licensed as a bank under the laws of the foreign country, nor does it require CCG to carry on a banking business as such. … In finding that the business of CCG as a foreign bank also was “regulated,” as required by s. 95(2)(2)(l)(iii), Owen J stated (at paras. 162, 165): … [T]he employees of CCG filed monthly and quarterly reports with the Central Bank and regularly met with officials of the Central Bank. As well, CCG was subjected to two audits by the Central Bank and paid an annual fee to the Central Bank to maintain its licence under Part III of the FIA. … … [T]he regulatory requirements in the FIA were both enforced and satisfied. ...

Target Group Ltd v Revenue and Customs, [2023] UKSC 35-- summary under Paragraph (a) Summary Under Tax Topics- Excise Tax Act- Section 123- Subsection 123(1)- Financial Service- Paragraph (a) exemption for “transactions … concerning … payments” did not include causing funds transfers through issuing instructions to the payment system The appellant (“Target”) administered loans made by a provider of mortgages and loans (“Shawbrook”), including by operating individual loan accounts and instigating and processing payments due from borrowers. Article 135(1)(d) of the Council Directive 2006/112/EC (the “Principal VAT Directive”) exempted “transactions, … concerning …payments, transfers, debts, … but excluding debt collection”. ...

Visser J found that Arora was not carrying on a PSB in its 2009 taxation year, stating (at para. 26) that “Arora had no employees in 2009, and in particular … Ms. ... Singh … carried on the same work in 2010 [as in 2009] as an employee of Arora while continuing to work out of Econo’s office and using Econo’s office equipment and supplies. ... All of Arora’s income in 2009 and 2010 came from Econo. … Arora did not provide any invoices to Econo for any of the services Arora provided to Econo in 2010. … … [I]t is clear that Arora and Ms. ...

In finding that Black had made a loan to Inc., Rossiter CJ stated (at paras. 114, 128-129): A reasonable observer would conclude that Black and Inc. intended for there to be a loan agreement, and the key players thought there was a binding loan agreement. … Black and Inc. had [orally] agreed that the essential terms or repayment would match the Quest Loan so as to ensure Black was not out-of-pocket after stepping up to help Inc. … Black and Inc. reached an agreement on the essential terms of the loan and left the details to be worked out at a later date. The fact that a formal document outlining those essential terms was to be prepared later on and signed … does not alter the validity of the earlier contract. ... Since Black had an obligation to pay interest expenses on the Quest Loan, Black had to earn interest income on the loan to Inc. in order for him to be made whole. … … While I find that this was an ancillary purpose compared to his primary purpose of helping Inc., that was a bona fide objective of his investment, which is capable of providing the requisite purpose for interest deductibility under paragraph 20(1)(c). ...

In affirming the findings below by Ouimet J, including that the reassessment of Laplante made after the normal reassessment period was valid, Boivin JA stated (at para. 4): He was … correct to identify a substantive element and an intentional element, being the two elements which must be present in order to conclude that there is a simulation under Article 1451 …. Furthermore … the judge … did not err in finding a simulation in this case, i.e., that the appellant was the true beneficiary of the amounts distributed by DL Trust to the seeming beneficiaries. ...

Paletta, 2022 FCA 86-- summary under Business Summary Under Tax Topics- Income Tax Act- Section 248- Subsection 248(1)- Business common law concept of business informs the s. 248(1) definition Before going on to find that the taxpayer’s activity of FX straddle trading, which had the appearance of commerciality but was not engaged in for profit, was not a business, and after noting (at para. 34) “the long accepted common law definition of business which simply requires that the activity be undertaken in the pursuit of profit,” Noël C.J. stated (at para. 38): … Stewart … made it clear that the test being devised was consistent with the traditional common law definition of “business”. ... As in such circumstances, the private law-- the common law on the facts of Stewart-- fills the gap, the Supreme Court explained that the Stewart test gave effect to the common law definition of “business” (Stewart, para. 51) …. ...

After finding (at para. 30) that “there is no doubt that the activity in which the Applicant wishes to engage – public advocacy of policy change – is within the guarantee of freedom of expression,” and noting (at para. 31) the Attorney General’s argument that “the Applicant has a right to free speech, not to subsidized speech” through the ability to issue charitable receipts, Morgan J further stated (at paras 39, 42 and 43): [V]irtually everything that the Applicant does is “political”, although those political activities are conceptually ancillary to –i.e. a mechanism to achieve – its charitable activities and purpose. … Simply put, there is no way to pursue the Applicant’s charitable purpose – using methodology that is recognized as necessary by Parliament itself – while restricting its politically expressive activity to 10% of its resources as required by CRA under s. 149.1(6.2). … Moreover, the evidence is that the Applicant cannot function – or will have difficulty in functioning – in the absence of registered charitable status. ...