Digests

Banner Pharmacaps NRO Ltd. v. Canada

A-124-03

2003 FCA 367, Sharlow J.A.

2/10/03

4 pp.

Appellant Banner Pharmacaps NRO Ltd. (Banner) appealing Tax Court decision dismissing its appeal of assessment under Income Tax Act (Act) for 1996 taxation year --Banner's appeal cannot succeed unless one of two alternative propositions established: (1) Banner not required to include in 1996 income dividend in amount of $5,647,775 declared by its wholly owned Canadian subsidiary, Banner Gelatin Products (Canada) Ltd. (Banner Canada) on February 15, 1996; (2) principal business of Banner in 1996 making of loans--Resolution declaring dividend on February 15, 1996 valid--Tax Court Judge reached correct conclusion, but for wrong reasons--First, clear result of combined operation of Act, s. 12(1)(j) and s. 82(1)(a)(ii)(A) that such dividends taxable only when received, not when merely receivable-- Therefore, Banner required to include dividend in 1996 income only if received dividend in 1996--Second, legal effect of delivery of promissory note depends upon all relevant facts, important fact being intention of maker of note as determined by evidence--Important evidence resolution declaring dividend--Resolution must be presumed to express intention of Banner Canada because no evidence to contrary-- As promissory note in fact delivered as resolution required, impossible to conclude dividend not paid when supposed to be paid, on February 15, 1996--It follows Banner required to include amount of dividend in income for 1996 year--As to whether principal business of Banner making of loans, no evidence ever advanced money to another party on condition money be repaid, and thus no evidence made any loans at all, much less that Banner carried on money-lending business-- Appeal dismissed--Income Tax Act, R.S.C., 1985, (5th Supp.), c. 1, ss. 12(1)(j), 82(1)(a)(ii)(A).