Actra Fraternal Benefit Society v. Canada (1997)

Federal Court Reports

ACTRA Fraternal Benefit Society v. Canada (C.A.) [1997] 3 F.C. 441

A-491-95 CORAM: STRAYER J.A.

ROBERTSON J.A.

McDONALD J.A.

IN RE: The Income Tax Act , 1952 R.S.C. c. 148

BETWEEN:

ACTRA FRATERNAL BENEFIT SOCIETY,

Appellant,

- and -

HER MAJESTY THE QUEEN,

Respondent.

Heard at Toronto, Ontario, on Tuesday, March 18, 1997.

Judgment rendered at Ottawa on Wednesday, April 30, 1997.

REASONS FOR JUDGMENT BY: ROBERTSON J.A.

CONCURRED IN BY: STRAYER J.A.

McDONALD J.A.L

A-491-95 CORAM: STRAYER J.A.

ROBERTSON J.A.

McDONALD J.A.

IN RE: The Income Tax Act , 1952 R.S.C. c. 148

BETWEEN:

ACTRA FRATERNAL BENEFIT SOCIETY,

Appellant,

- and -

HER MAJESTY THE QUEEN,

Respondent.

REASONS FOR JUDGMENT

ROBERTSON J.A.

The appellant taxpayer is a fraternal benefit society incorporated under the provisions of the Canadian and British Insurance Companies Act , R.S.C. 1970, c. I-15 as amended (hereafter the " Insurance Act "). Pursuant to paragraph 149(1)(k) and subsection 149(3) of the Income Tax Act such entities are subject only to federal income tax on taxable income attributable to their life insurance business. Income derived from other sources is exempt. The principal issue raised in this appeal is whether all of the investment income derived from assets contained within a "life insurance fund" (hereafter the "life fund") is to be included when computing taxable income from a fraternal society's life insurance business. Before the Minister of National Revenue and the Tax Court, the taxpayer argued that in cases where the assets in the life fund exceed what is necessary for purposes of the life insurance business, only the investment income earned on the necessary amounts should be treated as taxable income. Both the Minister and the Tax Court Judge rejected this argument. In my respectful opinion, the appeal from the decision of the Tax Court must be allowed. As that decision is now reported it is unnecessary to offer an exhaustive analysis of the facts as did the learned Tax Court Judge: see [1995] 2 C.T.C. 2671.

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A fraternal benefit society offers its members a variety of benefits. In the present case the taxpayer maintains three funds from which it is ab...

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