Income Tax
Corporations
Appeal from Tax Court of Canada (T.C.C.) decision allowing taxpayer’s appeal from loss determination, including almost $31 million in 2001 income—Respondent amalgamated corporation—Adjustment reflecting amount previously deducted by predecessor which remained unpaid at end of second taxation year following year in which accrued—Appeal allowed—T.C.C. misconstrued Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, s. 87(7)(d)—Based on both plain, contextual reading of s. 87(7)(d), amalgamated corporation standing in shoes of predecessor in so far as previously incurred debts concerned as of time incurred—S. 78(1) intended to apply where deducted amount remaining unpaid after two “taxation years” (not 12-month periods) elapsed, regardless of duration—Year of inclusion and two prior years not necessarily those of same taxpayer, although normally such will be the case—No gap in s. 78—Respondent must be treated as if it had itself incurred liability to pay outstanding interest and thus must bring that amount into income in 2001 taxation year.
Dow Chemical Canada Inc. v. Canada (A-545-07, 2008 FCA 231, Noël J.A., judgment dated July 4, 2008, 16 pp.)