Antosko v. Minister of National Revenue, (1994) 168 N.R. 16 (SCC)

• Judge: Iacobucci and Major, JJ.
• Court: Supreme Court (Canada)
• Case Date: May 26, 1994
• Jurisdiction: Canada (Federal)
• Citations: (1994), 168 N.R. 16 (SCC)

Antosko v. MNR (1994), 168 N.R. 16 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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H. Boris Antosko (appellant) v. Her Majesty the Queen (respondent)

Stanley F. Trzop (appellant) v. Her Majesty the Queen (respondent)

Stanley F. Trzop (appellant) v. Her Majesty the Queen (respondent)

(23282, 23283, 23284)

Indexed As: Antosko v. Minister of National Revenue

Supreme Court of Canada

La Forest, L'Heureux-Dubé, Gonthier,

Iacobucci and Major, JJ.

May 26, 1994.

Summary:

The Minister of National Revenue appealed a decision of the Tax Court of Canada that three taxpayers were entitled to deduct interest payments received in 1977 and 1980 under s. 20(14) of the Income Tax Act.

The Federal Court of Canada, Trial Division, in a judgment reported 31 F.T.R. 224, allowed the appeals and held that the taxpayers were not entitled to deductions under s. 20(14). Both taxpayers (Antosko and Trzop) appealed.

The Federal Court of Appeal, in a judgment reported 145 N.R. 352, dismissed Antosko's appeal. The court, in a judgment not reported in this series of reports, dismissed both of Trzop's appeals. Both taxpayers appealed.

The Supreme Court of Canada allowed the appeals and held that the taxpayers were not disentitled to deduct interest solely because the transferor of the debt obligation was not required to claim the same amount as income. The court remitted the matter to the Minister for reassessment.

Income Tax - Topic 1141

Income from business or property - Deductions - Interest payments - Section 20(14)(a) of the Income Tax Act provided that on certain transfers of debt obligations the interest received "shall be included in computing the transferor's income for the taxation year in which the transfer was made" - Section 20(14)(b) permitted the transferee to deduct the same amount - The Supreme Court of Canada agreed that s. 20(14) provided for the apportionment of accrued interest as between the transferor and transferee where the debt obligation was transferred between interest dates, to avoid double taxation - The court stated that "the ability of a taxpayer to claim a deduction pursuant to s. 20(14)(b) is not dependent on the inclusion by the transferor pursuant to s. 20(14)(a) of the same amount in his or her calculation of income." - Accordingly, a taxpayer transferee was entitled to a deduction notwithstanding the transferor, a nontaxable government body, did not have to file a return and claim the interest as income - See paragraphs 34 to 43.

Income Tax - Topic 1141

Income from business or property - Deductions - Interest payments - Section 20(14)(a) of the Income Tax Act provided that on certain transfers of debt obligations the interest received "shall be included in computing the transferor's income for the taxation year in which the transfer was made" - Section 20(14)(b) permitted the transferee to deduct the same amount - A taxpayer met the two requirements of s. 20(14)(b) - There was an assignment or transfer of a debt obligation and the transferee was entitled, as a result of the transfer, to interest accruing before the date of the transfer but not payable until after that date - The Federal Court of Appeal held that notwithstanding compliance with the two required elements of s. 20(14)(b), the taxpayer was not entitled to a deduction, because the transfer was not in accord with the intention of the section when viewed in light of economic and commercial reality - The Supreme Court of Canada stated that "in the absence of evidence that the transaction was a sham or an abuse of the provisions of the Act, it is not the role of the court to determine whether the transaction in question is one which renders the taxpayer deserving of a deduction." - See paragraphs 15 to 33.

Income Tax - Topic 3901

Interpretation - General - [See second Income Tax - Topic 1141 ].

Cases Noticed:

Hill v. Minister of National Revenue (1981), 81 D.T.C. 167 (T.R.B.), dist. [para. 8].

Courtright v. Minister of National Revenue (1980), 80 D.T.C. 1609 (T.R.B.), dist. [para. 8].

Stubart Investments Ltd. v. Minister of National Revenue, [1984] 1 S.C.R. 536; 53 N.R. 241; 10 D.L.R.(4th) 1; 84 D.T.C. 6305; [1984] C.T.C. 294, refd to. [para. 11].

McClurg v. Minister of National Revenue, [1990] 3 S.C.R. 1020; 119 N.R. 101; 91 D.T.C. 5001, refd to. [para. 13].

Mattabi Mines Ltd. v. Ontario (Minister of Revenue), [1988] 2 S.C.R. 175; 87 N.R. 300; 29 O.A.C. 268, refd to. [para. 24].

Symes v. Minister of National Revenue, [1993] 4 S.C.R. 695; 161 N.R. 243, refd to. [para. 24].

Husain v. Minister of National Revenue (1991), 91 D.T.C. 278 (Tax C.C.), disagreed with [para. 39].

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 12(1)(c) [para. 6]; sect. 20(14) [para. 1]; sect. 40(3) [para. 50]; sect. 68, sect. 69(5), sect. 70(2), sect. 70(3), sect. 70(5) [para. 37]; sect. 110.1 [para. 38]; sect. 149(1) [para. 41].

Income Tax Act, Interpretation Bulletin IT-410R, para. 3 [para. 32].

Interpretation Bulletins - see Income Tax Act.

Authors and Works Noticed:

Dreidger, E.A., Construction of Statutes (2nd Ed. 1983), p. 578 [para. 23].

Nadeau, Claude, The Interpretation of Taxing Statutes Since Stubart (1990), 42 Can. Tax Found. 49:1, p. 49:21 [para. 38].

Templeton, M.D., Subsection 20(14) and the Allocation of Interest - Buyers Beware (1990), 38 Can. Tax. J. 85, pp. 87, 88 [para. 37].

Ulmer, John M., Taxation of Interest Income (1990), 42 Can. Tax Found. 8:1, p. 8:20 [para. 41].

Counsel:

Eugene J. Mockler, Q.C., for the appellants;

Donald G. Gibson and Josée Tremblay, for the respondent.

Solicitors of Record:

Mockler, Allen & Dixon, Fredericton, N.B., for the appellants;

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

These appeals were heard on February 2, 1994, before La Forest, L'Heureux-Dubé, Gonthier, Iacobucci and Major, JJ. of the Supreme Court of Canada.

On May 26, 1994, Iacobucci, J., delivered the following judgment, in both official languages, for the Court.