Words and Phrases - "royalties"
The Queen v. St. John Shipbuilding & Dry Dock Co. Ltd., 80 DTC 6272, [1980] CTC 352 (FCA)
Thurlow, C.J. stated (p. 6275) that "'royalties' ... connotes a payment calculated by reference to the use or to the production or revenue or profits from the use of the rights granted" and that "neither 'rentals' nor 'royalties', in the ordinary connotation ... includes a lump sum payment for the use of or for the privilege of using property indefinitely." Accordingly, lump sum payments made by a Canadian shipbuilder for technical data contained on tapes pursuant to non-exclusive licence that placed no relevant restrictions as to how many times or over what period of time the shipbuilder could use the data in its own operations, did not represent "rentals and royalties" for purposes of paragraph 6(a) of the Protocol to the 1942 Canada-U.S. Convention.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(d) - Subparagraph 212(1)(d)(i) | 36 |
MNR v. Paris Canada Films Ltd., 62 DTC 1338, [1962] CTC 538 (Ex Ct)
Dumoulin J. stated (p. 1341):
"I incline to believe that a lump-sum payment for rights irrevocably ceded, tantamount to an assignment in perpetuity ... can hardly be reconciled with the customarily accepted notion attaching to 'rent or royalties', id est: limit of time, retention of a 'jus in re' by the lessor, and periodical rentals by the lessee, either for fixed sums or an apportionment of receipts."
He also noted that the use of the word "rental" in the agreement, although not conclusive, afforded "some indication" that the payments were in the nature of rent.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(5) | 78 | |
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(5) | 63 | |
| Tax Topics - Treaties - Income Tax Conventions - Article 12 | 60 |
Vauban Productions v. The Queen, 75 DTC 5371, [1975] CTC 511 (FCTD), aff'd 79 DTC 5186, [1979] CTC 262 (FCA)
The non-resident taxpayer, a film distributor, which had acquired from another film distributor the distributorship rights for certain films, agreed in consideration for a lump-sum payment to supply copies of those films to the CBC and to grant it for the same period of time the exclusive right to show them on its French-language television network. Such a contract was a lease of a motion picture film rather than an outright sale for purposes of a withholding tax exemption appearing in the former Canada-France treaty because the rights acquired by CBC were not as extensive as those acquired by the taxpayer: CBC acquired only the right to show the films on its own network and not to assign or lease them; and the taxpayer had the right to a return of the films at the end of the term. The application of s. 106(2) of the pre-1972 Act was conceded.
Addy J. stated (at p. 5371):
"The term 'royalties' normally refers to a share in the profits or a share or percentage of a profit based on user or on the number of units, copies or articles sold rented or used. When referring to a right, the amount of the royalty is related in some way to the degree of use of that right."
Mobil Oil Canada Ltd. v. Canada, 2001 DTC 5668, 2001 FCA 333
Under the Road Allowances Crown Oil Act (Alberta), 1.88% of producing oil reservoirs of the taxpayer was deemed to be property of the Alberta Crown; and the taxpayer was accorded the right to sell its entire oil production from the reservoirs, including the Province's 1.88% share, upon paying the Province 1% of the total value of the production.
In finding that such payments were "royalties", Sharlow J.A. stated (at p. 5673) that:
"The word 'royalty' is still used in Canada to describe a payment that is required by a provincial statute to be paid to the province as a share of the production of a resource"
She also rejected a submission that s. 18(1)(m)(v) imposed any condition as to the ownership of the oil with respect to which the payments were made. Accordingly, s. 18(1)(m) prohibited the deduction of the 1% payments.
Minister of National Revenue v. Wain-Town, 52 DTC 1138, [1952] CTC 147, [1952] 2 S.C.R. 377
The taxpayer, which assigned its franchise to supply municipalities with natural gas to another company in consideration for amounts (described in the assignment as "royalties") which were stipulated percentages of the revenues derived by the assignee from sales of gas, was held to receive the royalties as income pursuant to s. 3(1)(f) of the Income War Tax Act, which provided for the inclusion of "rents, royalties, annuities or other like periodical receipts which depend upon the production or use of any real or personal property". The payments were "royalties" in the business sense of that word in Canada, and dependent upon the use of the franchise.