A-17-80
The Queen (Appellant)
v.
Associates Corporation of North America
(Respondent)
Court of Appeal, Urie and Ryan JJ. and MacKay
D.J.-Toronto, March 12, 1980.
Income tax — Non-residents — Guarantee fees — Canada-
U.S. Tax Convention — Guarantee fees in issue taxable by
virtue of s. 214(15)(a) of the Income Tax Act except for the
fact of those fees falling within the term "industrial and
commercial profits" exempted from Canadian tax by Article I
of the Convention — Definition of "interest" cannot be unilat
erally expanded by Canada, except for purposes of domestic
law, to embrace income that is not interest at all — Income
Tax Act, S.C. 1970-71-72, c. 63, s. 214(15)(a) — The Cana-
da-United States of America Tax Convention Act, 1943, S.C.
1943-44, c. 21, Article I.
INCOME tax appeal.
COUNSEL:
John R. Power, Q.C. and G. Jorre for
appellant.
B. Verchere and S. Kerr for respondent.
SOLICITORS:
Deputy Attorney General of Canada for
appellant.
Verchere & Eddy, Toronto, for respondent.
The following are the reasons for judgment
delivered orally in English by
URIE J.: It will not be necessary to call upon
you, Mr. Verchere.
Despite the able submissions of appellant's
counsel, we have not been persuaded that the
learned Trial Judge [supra page 377] erred in
finding that the assessments for tax against the
respondent ought, in the circumstances of this
case, to be vacated. There is no question that if it
were not for the Canada-U.S. Tax Convention the
guarantee fees here in issue would, by virtue of
section 214(15)(a) of the Income Tax Act, S.C.
1970-71-72, c. 63, be subject to tax. It is also
beyond doubt that if it were not for that section
guarantee fees would fall within the term "indus-
trial and commercial profits" exempted from
Canadian tax by virtue of Article I of the
Convention.
While undoubtedly for the purpose of its domes
tic tax law Canada could enlarge the definition of
"interest" to include guarantee fees, as the learned
Trial Judge held, the definition could not be "uni-
laterally expanded by Canada to embrace income
that is not interest at all."
In saying this, we expressly refrain from any
finding that a "deeming" provision in the domestic
tax law might not, in other circumstances, be
embraced by the provisions of international
conventions.
Accordingly, the appeal will be dismissed with
costs.
* * *
RYAN J. concurred.
* * *
MACKAY D.J. concurred.
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