Alberta Gas Ethylene Co. v. Minister of National Revenue

• Jurisdiction: Federal Jurisdiction (Canada)
• Court: Federal Court (Canada)
• Judge: Reed, J.
• Citation: (1988), 24 F.T.R. 309 (TD)
• Date: 15 November 1988

Alta. Gas Ethylene Co. v. MNR (1988), 24 F.T.R. 309 (TD)

MLB headnote and full text

The Alberta Gas Ethylene Company Ltd. (plaintiff) v. Her Majesty the Queen (defendant)

(T-710-88)

Indexed As: Alberta Gas Ethylene Co. v. Minister of National Revenue

Federal Court of Canada

Trial Division

Reed, J.

December 5, 1988.

Summary:

ASCO was a wholly owned nonresident subsidiary of Alberta Gas. ASCO was formed to borrow money in the United States at a favourable interest rate and in turn loan the money to Alberta Gas. Alberta Gas made interest payments on the loans. The Minister of National Revenue ruled that withholding taxes were owed by Alberta Gas on the interest payments to ASCO. Alberta Gas appealed.

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

Income Tax - Topic 8703

Special taxes - Nonresident withholding taxes - Payments of interest - To subsidiaries - ASCO was a wholly owned nonresident subsidiary of Alberta Gas - ASCO was formed to borrow money in the United States at a favourable interest rate and in turn loan the money to Alberta Gas - Alberta Gas made interest payments on the loans - The Minister of National Revenue ruled that withholding taxes were owed by Alberta Gas on the interest payments to ASCO - The Federal Court of Canada, Trial Division, affirmed the ruling - The court held that the separate corporate identity of the subsidiary, ASCO, could not be ignored, nor could ASCO be said to be merely the agent of Alberta Gas in the loan transactions.

Cases Noticed:

Smith, Stone and Knight Ltd. v. Lord Mayor, Aldermen and Citizens of the City of Birmingham, [1939] 4 All E.R. 116 (K.B.), consd. [paras. 13, 14, 16].

City of Toronto v. Famous Players Canadian Corporation Ltd., [1936] S.C.R. 141, affing. [1935] 3 D.L.R. 327 (Ont. C.A.), consd. [paras. 13, 17].

Aluminum Company of Canada Limited v. Corporation of the City of Toronto, [1944] S.C.R. 267, consd. [paras. 13, 17].

Dominion Bridge Company Limited v. Her Majesty the Queen, [1975] C.T.C. 263 (F.C.T.D.), affd. [1977] C.T.C. 554 (F.C.A.), refd to. [para. 13].

R. v. Mer Ban Capital Corporation Limited et al., [1985] C.T.C. 1 (F.C.T.D.), consd. [paras. 13, 16].

Salomon v. Salomon & Co., Salomon & Co. v. Salomon, [1897] A.C. 22 (H.L.), refd to. [para. 14].

Denison Mines Limited v. Minister of National Revenue, [1971] F.C. 295, affd. [1972] F.C. 1324 (F.C.A.), refd to. [para. 20].

Gurd's Products Company v. Minister of National Revenue (1985), 60 N.R. 184; 85 D.T.C. 5314 (F.C.A.), refd to. [para. 21].

Stubart Investments Limited v. Minister of National Revenue, [1984] S.C.R. 536; 53 N.R. 241, refd to. [para. 22].

Massey Ferguson Limited v. Minister of National Revenue, [1977] 1 F.C. 760; 14 N.R. 316, refd to. [para. 22].

Statutes Noticed:

Canada - U.S. Income Tax Convention (1980), art. IV [para. 10].

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 212(1), sect. 215(6) [para. 2]; sect. 212(1)(b)(vii) [paras. 10, 11]; sect. 250(5) [para. 10].

Authors and Works Noticed:

Dalsin, D.T., Canada - U.S. Dual Resident Corporation: Tax Planning Restricted (1986), 34 Can. Tax. J. 621 [para. 10].

Welling, Corporate Law in Canada (1984), pp. 139, 140 [para. 19].

Counsel:

W.J.A. Mitchell, Q.C., for the plaintiff;

Ingeborg E. Lloyd, for the defendant.

Solicitors of Record:

Thorsteinson, Mitchell, Little, O'Keefe & Davidson, Vancouver, British Columbia, for the plaintiff;

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

This appeal was heard in Ottawa, Ontario, on November 15, 1988, before Reed, J., of the Federal Court of Canada, Trial Division, who delivered the following decision on December 5, 1988: