Indalex Ltd. v. Minister of National Revenue, (1987) 83 N.R. 185 (FCA)

• Judge: Heald, Mahoney and Hugessen, JJ.
• Court: Federal Court of Appeal (Canada)
• Case Date: December 21, 1987
• Jurisdiction: Canada (Federal)
• Citations: (1987), 83 N.R. 185 (FCA)

Indalex Ltd. v. MNR (1987), 83 N.R. 185 (FCA)

MLB headnote and full text

Indalex Ltd. v. Minister of National Revenue

(A-43-86)

Indexed As: Indalex Ltd. v. Minister of National Revenue

Federal Court of Appeal

Heald, Mahoney and Hugessen, JJ.

December 21, 1987.

Summary:

Indalex Limited, a Canadian company, purchased its aluminum needs from an associated Bermuda company, Pillar International. Both were subsidiaries of a British parent, which had agreed with Alcan for the supply of aluminum to its subsidiaries by Alcan. Purchases were made from Alcan by Pillar International for Indalex. When Indalex paid Pillar International, Pillar International paid the same price to Alcan, which immediately paid a discount to Pillar International. Pillar International paid Indalex part of the discount and kept the balance. The Minister of National Revenue treated the discount as income to Indalex for income tax purposes and claimed that Indalex should have paid withholding tax on the balance retained by Pillar International in Bermuda.

The Federal Court of Canada, Trial Division, in a judgment reported [1986] 1 C.T.C. 219; 1 F.T.R. 1; 86 D.T.C. 6039, upheld the Minister's position. Indalex appealed.

The Federal Court of Appeal dismissed the appeal and affirmed that the arrangement between Indalex and Pillar International was a non-arm's length, artificial transaction, which unduly reduced Indalex' income.

Income Tax - Topic 8711

Nonresident withholding tax - Deemed payments to nonresidents - Indalex, an aluminum extruder, purchased aluminum from Alcan through a Bermuda company related to Indalex, Pillar International - Indalex paid Pillar for the aluminum and Pillar in turn paid the same price to Alcan - Alcan then paid a discount back to Pillar, which paid a portion of the discount to Indalex - The Minister of National Revenue claimed that the discount constituted income to Indalex and Indalex should have paid withholding tax on the portion retained by Pillar - The Federal Court of Appeal affirmed the Minister's position.

Income Tax - Topic 9543

Tax evasion - Artificial transactions - What constitute - Transfer pricing - Indalex an aluminum extruder, purchased aluminum from Alcan through a Bermuda company related to Indalex, Pillar International - Indalex paid Pillar for the aluminum and Pillar in turn paid the same price to Alcan - Alcan then paid a discount back to Pillar, which paid a portion of the discount to Indalex - The Minister of National Revenue claimed that the discount constituted income to Indalex and Indalex should have paid withholding tax on the portion retained by Pillar - The Federal Court of Appeal upheld the Minister's position and held that the arrangement between Indalex and Pillar was a non-arm's length, artificial transaction which unduly reduced Indalex' income contrary to s. 245(1) of the Income Tax Act.

Practice - Topic 5417

Judgments and orders - General - Signing of judgments and orders - The Federal Court of Appeal held that under Federal Court Rule 337 a judgment must be signed by the judge and not by a registry officer - See paragraph 1.

Statutes Noticed:

Federal Court Rules, rule 337 [para. 1].

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 56(2) [para. 4]; sect. 67, sect. 69(1)(a), sect. 69(2) [para. 17]; sect. 245(1) [para. 16].

Counsel:

W.L.N. Sommerville, Q.C., and L.V. Tkachenko, for the appellant;

C.T.A. MacNab, Q.C., C.G. Pearson, S.M. Farber and D. Winters, for the respondent Minister.

Solicitors of Record:

Borden & Elliot, Toronto, Ontario, for the appellant;

F. Iacobucci, Q.C., Deputy Attorney General of Canada, Ottawa, Ontario, for the respondent.

This case was heard on November 23-26, 1987, at Toronto, Ontario, before Heald, Mahoney and Hugessen, JJ., of the Federal Court of Appeal.

On December 21, 1987, Mahoney, J., delivered the following judgment for the Federal Court of Appeal: