INCOME TAX |
Non-Residents |
General Electric Capital Equipment Finance Inc. v. Canada
A-541-00
2001 FCA 392, Sexton J.A.
13/12/01
11 pp.
Appeal from Trial Division decision (2000 D.T.C. 6513) dismissing appeal from reassessment by Revenue Canada for 1986 taxation year with respect to appellant's claim for exemption from non-resident withholding tax pursuant to ITA, s. 212(1)(b)(vii)--Appellant incorporated in Canada in 1959 under name International Harvester Credit Corporation of Canada Ltd. (IHCC)--Wholly-owned subsidiary of Canadian company in turn wholly-owned subsidiary of American company IHCo--In 1986, all issued, outstanding shares of appellant sold to Canadian subsidiary of General Electric Company--IHCC issued promissory notes to subsidiaries of U.S. company called International Harvester Export Co.--IHCC paid interest on notes without payment of withholding tax--In 1985, notes sold to Netherlands corporation indirect wholly-owned subsidiary of IHCo--In dismissing taxpayer's appeal, Trial Judge held original promissory notes so materially altered by 1985 agreements as to result in completely new obligations under ITA, s. 212(1)(b)(vii)--Appeal dismissed--Only issue herein whether or not new obligation created by reason of agreements in 1985 which decreased amount of principal owing on notes, increased amount of interest payable under notes, changed date of maturity, and changed identity of payee--Guidance can be obtained from decision in Wiebe v. Canada (1987), 87 D.T.C. 5068 (F.C.A.): fundamental changes to stock option agreement which substantially affected basic elements of agreement inconsistent with continuing existence of that agreement (fundamental terms therein: identity of debtor, principal amount of note, amount of interest under note, maturity date of note)--Here, all but one of fundamental terms changed--Trial Judge did not commit overriding or palpable error when, on evidence before him, found as fact changes sufficiently fundamental as to bring into existence new obligation--Income Tax Act, S.C. 1970-71-72, c. 63, s. 212(1)(b)(vii) (as am. by S.C. 1977-78, c. 1, s. 92(3); 1980-81-82-83, c. 48, s. 98(1); c. 140, s. 118(3); 1986, c. 6, s. 116(3)).