74712 Alberta Ltd. v. Minister of National Revenue, (1994) 78 F.T.R. 259 (TD)

• Judge: Muldoon, J.
• Court: Federal Court (Canada)
• Case Date: April 07, 1994
• Jurisdiction: Canada (Federal)
• Citations: (1994), 78 F.T.R. 259 (TD)

74712 Alta. v. MNR (1994), 78 F.T.R. 259 (TD)

MLB headnote and full text

74712 Alberta Ltd. (formerly Cal-Gas & Equipment Ltd.)(plaintiff) v. Her Majesty The Queen (defendant)

(T-2001-90)

Indexed As: 74712 Alberta Ltd. v. Minister of National Revenue

Federal Court of Canada

Trial Division

Muldoon, J.

June 2, 1994.

Summary:

74712 Alberta Ltd. deducted the interest paid on a loan with Wells Fargo as a business expense. The Minister of National Revenue disallowed the claim. 74712 Alberta Ltd. appealed.

The Tax Court of Canada dismissed the appeal. 74712 Alberta Ltd. appealed again.

The Federal Court of Canada, Trial Division, dismissed the appeal.

Income Tax - Topic 1129

Income from a business or property - Deductions - Requirement that expense be incurred for producing income - 74712 Alberta Ltd. was one of a group of seven companies - As part of a financial reorganization the companies were regrouped under one parent company -74712 Alberta Ltd. guaranteed the parent company's loan to CIBC - CIBC called in the guarantee - 74712 Alberta Ltd. borrowed $1.7 million from Wells Fargo Bank and deducted the interest paid on the loan - 74712 Alberta Ltd. argued the money was used to operate its business and thus produce income - The Federal Court of Canada, Trial Division, held that the evidence showed that the money was borrowed to allow the parent corporation to meet its debt obligation, not for the purpose of producing income.

Income Tax - Topic 1130

Income from a business or property - Deductions - Expenses incurred in borrowing money - [See Income Tax - Topic 1129 ].

Income Tax - Topic 3904

Interpretation - Interpretation bulletins - Effect of - The Federal Court of Canada, Trial Division, opined that constitutionally, the courts are the authentic and authoritative interpreters of the law, not the Minister of National Revenue - Although interpretation bulletins can be useful in advising taxpayers how the Income Tax Act is going to be administered, if the interpretation is wrong in law, the result may be litigation if the taxpayer relies on the bulletin to his detriment - See paragraphs 6 and 52.

Cases Noticed:

Imperial Oil Ltd. v. Minister of National Revenue, [1947] Ex. C.R. 527; 3 D.T.C. 1090, refd to. [para. 48].

Herald & Weekly Times Ltd. v. Federal Commissioner of Taxation (1932), 48 C.L.R. 113 (Aust. H.C.), refd to. [para. 48].

Optical Recording Co. v. Minister of National Revenue, [1991] 1 F.C. 309; 116 N.R. 200; 90 D.T.C. 6647 (F.C.A.), refd to. [para. 52].

Bronfman (Phyllis Barbara) Trust v. Minister of National Revenue, [1987] 1 S.C.R. 32; 71 N.R. 134; 87 D.T.C. 5059, refd to. [para. 53].

Phyliss Barbara Bronfman Trust - see Bronfman (Phyllis Barbara) Trust v. Minister of National Revenue.

Canada Safeway Ltd. v. Minister of National Revenue, [1957] S.C.R. 717; 57 D.T.C. 1239; [1957] C.T.C. 335, refd to. [para. 54].

Interprovincial Pipeline Co. v. Minister of National Revenue, [1967] C.T.C. 180 (Ex. Ct.), refd to. [para. 54].

Sherritt Gordon Mines Ltd. v. Minister of National Revenue, [1968] C.T.C. 262 (Ex. Ct.), refd to. [para. 54].

Bowater Canada Ltd. v. Minister of National Revenue, [1987] 2 C.T.C. 47; 78 N.R. 140 (F.C.A.), refd to. [para. 59].

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 18(1)(a), sect. 18(1)(b), sect. 20(1)(c)(i), sect. 20(1)(c)(ii) [para. 4].

Income Tax Act, Interpretation Bulletin IT-445, para. 52,450 at pp. 33,593 - 33,594 [para. 6].

Counsel:

Brian Felesky and Ken Skingle, for the plaintiff;

Carman McNary, for the defendant.

Solicitors of Record:

Felesky, Flynn, Calgary, Alberta, for the plaintiff;

John C. Tait, Q.C., Deputy Attorney General of Canada, Ottawa, Ontario, for the defendant.

This appeal by action de novo was heard on April 7, 1994, in Calgary, Alberta, before Muldoon, J., of the Federal Court of Canada, Trial Division, who delivered the following judgment on June 2, 1994.