Subsection 197(1) - Definitions
Where a SIFT holds all the shares of a foreign affiliate, and the SIFT's only transactions with the foreign affiliate are loans to the foreign affiliate, and the foreign affiliate has no business in Canada, the foreign affiliate's interest payments to the SIFT are unlikely to be considered non-portfolio earnings under s. 197(1). (In the fact scenario provided, the SIFT held the foreign affiliate's shares indirectly.)
Subsection 197(2) - Tax on partnership income
Colin Campbell, "Libility for the Tax on SIFT Partnerships: A Rejoinder", 2011 Canadian Tax Journal, Vol 59, p. 709
Suggests that the phrase "liable to" can create a liability to tax; and that, in any event, the creation of liability to tax, viewed as merely an inchoate obligation to pay tax, then is crystallized through the assessment process. Context and purpose point to the same conclusion.
Brian Bloom, Brandon Wiener, "Has Parliament Failed To Charge the 'Tax on SIFT Partnerships?", 2011 Canadian Tax Journal, Vol 59, p. 1
The "liable to" wording of s. 197(2) fails to create an immediate obligation to pay the SIFT tax because it does not specify that such tax is to be paid, so that the tax lacks a charging section.