Words and Phrases - "in proportion to"

The taxpayer and 53 other BC credit unions maintained their required deposit insurance with two corporations - ("CUDIC" and "STAB"). Due to a change in regulations, they were required to approximately double their insurance with CUDIC. In order to accomplish an indirect transfer of funds from STAB to CUDIC, STAB declared dividend A, which reflected STAB's aggregate accumulated investment income, and dividend B, which reflected STAB's aggregate accumulated assessment income, with the credit unions using those dividends to pay assessments of them by CUDIC (which were deductible by them under s. 137.1(11)(a)). The taxpayer claimed the s. 112 inter-corporate dividend deduction for both amounts. The Minister assessed on the basis that dividend B was included in the taxpayer's income under s. 137.1(10)(a) which "when read together with paragraph 137.1(4)(c) and subsection 137.1(2), provides that where a taxpayer is a member institution it is required to include in its income for a taxation year any amounts received in that year from a deposit insurance corporation as allocations in proportion to any premiums or assessments that the member institution had paid to that deposit insurance corporation in the taxation year" (para. 43, emphasis in original).

The taxpayer's cumulative contribution to STAB's aggregate amount of assessments (which it had previously deducted under s. 137.1(11)(a)) was 0.26%, while the taxpayer's share of Dividend B amounted to 0.23% of such contribution. Trudel JA found no reviewable error in the finding of Boyle JA that as "Dividend B was paid in proportion to shareholdings then it could not have been paid ‘in proportion to assessments' and thus Dividend B would clearly not fall within the ambit of paragraph 137.1(10)(a)" (para. 49).

GAAR also did not apply, as there was no avoidance transaction (see summary under s. 245(3)).