CONSTRUCTION OF STATUTES |
Beame v. Canada
A-59-03
2004 FCA 51, Malone J.A.
4/2/04
12 pp.
Income tax conventions--Taxpayer resident of Ireland --Sold shares in Canadian private corporation--Obtained clearance certificate under Act, s. 116 upon payment of 15% of taxable capital gains--Assessed on basis Canadian tax on 15% of entire, as opposed to taxable, capital gains--Tax Court held broad interpretation without reference to Act appropriate since Canada-Ireland Income Tax Agreement Act (Treaty), Art. VI provides for 15% tax rate on "income" without any modification or suggestion income limited to taxable income --Appeal from Tax Court's decision ([2003] 2 C.T.C. 2140) determining meaning of word "income" used in Treaty, Art. VI(1) without reference to Income Tax Act (Act)--"Income" in Treaty, Art. VI(1) means taxable capital gain and not capital gain--Vienna Convention on the Law of Treaties (Vienna Convention), Art. 31(1) providing correct approach to interpreting treaty: treaty shall be interpreted in good faith in accordance with ordinary meaning of terms in context and in light of object, purpose--Treaty, Art. II(3) provides undefined terms in Treaty have meaning given to them under domestic legislation unless context otherwise requires--Income Tax Conventions Interpretation Act (ITCIA), s. 3, mandates meaning given to term found in treaty meaning given to term from time to time under Act, unless context otherwise requires--By ignoring ITCIA, s. 3 and Treaty, Art. II(3), Tax Court Judge erred in law--Taken together, these two provisions lead to conclusion word "income" in Treaty must reflect meaning derived under relevant provisions of Act as at 1997--"Taxable capital gain" from disposition of particular property determined by reference to Act, s. 38(a) as it read in 1997--For person not resident of Canada, computation of income determined by combined operation of Act, ss. 2(3) and 115(1)(b)(iii)--Only taxable portion of capital gain from disposition of property comprises part of non-resident's "taxable income earned in Canada"--Fundamental purpose of Act, s. 9(3), to ensure capital gain/loss not treated for income tax purposes in same way as income/loss from business or property--Considerable stretch to say it also intended to ensure exempt portion of capital gain to be treated as income for some purposes--Appeal allowed--Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, ss. 2(3), 9(3), 38(a) (as am. by S.C. 2001, c. 17, s. 22), 115(1)(b)(iii) (as am. by S.C. 1998, c. 19, s. 132; 2001, c. 17, s. 90)--Canada-Ireland Income Tax Agreement Act, Arts. II (3), VI(1)--Vienna Convention on the Law of Treaties, [1980] Can. T.S. No. 37, Art. 31(1)--Income Tax Conventions Interpretation Act, R.S.C., 1985, c. I-4, s. 3.