| Citation: |
General Electric Capital Canada Inc. v. canada, 2010 FCA 344, [2011] 1 F.C.R. D-10 |
A-1-10 |
Income Tax
Income Calculation
Deductions
Appeal from Tax Court of Canada decision (2009 TCC 563) vacating assessments for 1996–2000 taxation years issued by Minister of National Revenue (Minister) against respondent pursuant to Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, Parts I, XIII—Respondent, wholly-owned by General Electric Capital US (GECUS), financing operations with debt issuances—GECUS providing explicit guarantee for debt issuances, charging one percent fee—Respondent deducting guarantee fee in computing income under Part I—Minister disallowing deduction on basis benefit equal to fee paid to GECUS, giving rise to deemed dividend—Part I assessments based on Act, ss. 69(2), 247(2)(a),(c)—Respondent alleging guarantee fee commensurate with arm’s length price, exigible Part XIII tax properly computed, remitted—Judge determining arm’s length price of guarantee transaction, turning to yield approach to measure value of benefit provided by explicit guarantee—Finding that one percent guarantee fee equal to, below arm’s length price, respondent receiving net economic benefit—Judge thus treating guarantee fees as deemed dividends, not deemed interest—Whether implicit support factor to be considered when applying ss. 69(2), 247(2)(a),(c) given that arising by reason of non arm’s length relationship—Task underlying ss. 69(2), 247(2)(a),(c) to ascertain price paid in same circumstances if parties dealing at arm’s length—Statutory objective to prevent tax avoidance resulting from price distortions in context of non arm’s length relationships—Implicit support, relied upon by Crown for proposition that explicit guarantee of no value to respondent, can be considered when applying ss. 69(2), 247(2)(a),(c), identifying arm’s length price—Ignoring implicit support herein requiring Court to turn blind eye on relevant fact, deprive transfer pricing provisions of intended effect—Appeal dismissed.
General Electric Capital Canada Inc. v. Canada (A-1-10, 2010 FCA 344, Noël J.A., judgment dated December 15, 2010, 31 pp.)