Words and Phrases - "borrowed capital"
Stock Exchange Building Corp. Ltd. v. Minister of National Revenue, [1955] S.C.R. 235, 55 DTC 1014, [1955] CTC 5
The taxpayer realized $90 for each $100 bond issued by it in 1929 and invested the net proceeds in an office building. The taxpayer was only entitled to deduct interest on the $90 actually borrowed (because it was found that the reference in s. 5(1)(b) of the Income War Tax Act to "borrowed capital" referred to the amount of money borrowed and not to the extent of the obligation incurred in order to borrow it) and was not entitled to deduct "compound" interest (i.e., default interest on simple interest that was in arrears.) The simple interest in default "was merely a debt which became payable by reason of the inability of the borrower to pay the interest as it fell due. It was not, in any sense, capital used in the business to earn the income."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Financing Expenditures | compound interest payable on capital account | 42 |