Canada (Attorney General) v. Ford Credit Canada Ltd., 2007 FCA 225

• Jurisdiction: Federal Jurisdiction (Canada)
• Court: Court of Appeal (Canada)
• Judge: Décary, Evans and Ryer, JJ.A.
• Citation: 2007 FCA 225,(2007), 367 N.R. 37 (FCA)
• Date: 15 May 2007

Can. (A.G.) v. Ford Credit Can. Ltd. (2007), 367 N.R. 37 (FCA)

MLB headnote and full text

Temp. Cite: [2007] N.R. TBEd. JN.039

Attorney General of Canada (appellant) v. Ford Credit Canada Ltd. (respondent)

(A-410-06; 2007 FCA 225)

Indexed As: Canada (Attorney General) v. Ford Credit Canada Ltd.

Federal Court of Appeal

Décary, Evans and Ryer, JJ.A.

June 11, 2007.

Summary:

In 2001, Ford Credit issued 1,170,000 Class C Special Shares  to Ford Credit Lending for $1,170,000,000. Because they were retractable, the shares were classified as a liability in Ford Credit's balance sheets for 2001, 2002 and 2003, and the $1,170,000,000 was not included as capital stock for the large corporations tax in its tax returns. Ford Credit was reassessed on the basis that the $1,170,000,000 should have been included as capital stock. The Minister of National Revenue confirmed the reassessments. Ford Credit appealed.

The Tax Court of Canada allowed the appeal. The Minister was ordered to reassess Ford Credit on the basis that the $1,170,000,000 was not included in its capital stock for any of those years. The Attorney General of Canada appealed.

The Federal Court of Appeal dismissed the appeal. The $1,170,000,000 was not to be included in Ford Credit's capital for the purposes of Part I.3 of the Act for the 2001, 2002 and 2003 tax years.

Income Tax - Topic 6905

Computation of tax - Rules for corporations - Large corporations - Capital - General - In 2001, Ford Credit issued 1,170,000 Class C Special Shares to Ford Credit Lending for $1,170,000,000 - Because they were retractable, the shares were classified as a liability in Ford Credit's balance sheets for 2001, 2002 and 2003, and the $1,170,000,000 was not included as capital stock for the large corporations tax in its tax returns - Ford Credit was reassessed on the basis that the $1,170,000,000 should have been included as capital stock - The Tax Court of Canada allowed Ford Credit's appeal - The Federal Court of Appeal dismissed Canada's appeal - Under s. 181(3) of the Income Tax Act, a large corporation's tax liability was determined by using amounts calculated according to generally accepted accounting principles (GAAP) in the corporation's balance sheet - In imposing this temporary new tax, Parliament had adopted a method of computing capital that was well known to large corporations - Where deviations from GAAP were desirable, these were specifically provided for - The shares were properly characterized as liabilities under GAAP - Nothing in the Act specified an alternate characterization.

Cases Noticed:

Oerlikon Aérospatiale Inc. v. Ministre du Revenu national, [1998] 4 C.T.C. 2821 (T.C.C.), dist. [para. 16].

Minister of National Revenue v. Manufacturers Life Insurance Co., [2001] 1 C.T.C. 2481 (T.C.C.), consd. [para. 16].

PCL Construction Management Inc. v. Minister of National Revenue, [2001] 1 C.T.C. 2132 (T.C.C.), refd to. [para. 16].

Royal Trust Company v. Minister of National Revenue, [2001] 3 C.T.C. 2268 (T.C.C.), refd to. [para. 16].

Inco. Ltd. v. Canada, 2007 TCC 1, refd to. [para. 28].

Statutes Noticed:

Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, sect. 181(3) [para. 14].

Counsel:

Catherine Letellier De St-Just and Harry Erlichman, for the appellant;

David E. Spiro and Edward P. Miller, for the respondent.

Solicitors of Record:

John H. Sims, Q.C., Deputy Attorney General of Canada, Ottawa, Ontario, for the appellant;

Blake, Cassels & Graydon LLP, Toronto, Ontario, for the respondent.

This appeal was heard at Ottawa, Ontario, on May 15, 2007, by Décary, Evans and Ryer, JJ.A., of the Federal Court of Appeal. On June 11, 2007, Ryer, J.A., delivered the following reasons for judgment for the court.