INCOME TAX |
Associated Companies |
9044-2807 Québec Inc. v. Canada
A-80-03
2004 FCA 23, Noël J.A.
20/1/04
12 pp.
Two appeals (the other being A-81-03) brought against same decision--Issue whether 9044-2807 Québec Inc. (appellant or ML1) and appellant in related case Transport M.L. Couture Inc. (ML2) were associated with Transport Couture et Fils Inc. (TCF) and 1864-5333 Québec Inc. within meaning of Income Tax Act (Act), s. 256(1) when read with s. 256(5.1)--Judge of Tax Court of Canada (T.C.C.) concluded they were associated and therefore had to share $200,000 "business limit" mentioned in Act, s. 125(2)--Act, s. 256(1) provision of general application, effect of which to associate one corporation with another in as much as one controls other, and s. 256(1.2)(b)(ii) states that for this purpose existence of one of these two forms of control does not exclude other--Fact s. 256(1.2) makes no reference to s. 256(5.1) does not in any way impair effect sought--As to argument application of concept of de facto control is contrary to spirit of s. 256(5.1), on ground claiming of full deduction by one of corporations in question does not economically benefit shareholders of other, members of same family were shareholders of ML1, ML2 and TCF--Nothing in s. 256(5.1) requires there be such a benefit--TCF exercised control over ML1 and ML2 within meaning of s. 256(5.1)--Several factors taken into account in determining degree of control; however, whatever factors used, they must show person or group of persons had clear right and ability to change board of directors of corporation in question or influence in very direct way shareholders who would otherwise have ability to elect board of directors--Evidence must show decision-making power of corporation in question in fact lies elsewhere than with those who have de jure control--Evidence amply supports T.C.C.'s decision--If TCF had decided not to renew its management contract and no longer retain services of ML1 and ML2, neither Marie-Louis Couture, in case of ML1, nor his wife in case of ML2, would have been in position to pursue activities of those corporations--On question of operational control, evidence showed it was Couture brothers and Claude Rodrigue, manager of TCF, who took all important decisions--Marie-Louis Couture's involvement was nil and that of his wife limited to one information session a month--Appellant stated it and ML2 could have stayed in business even if they had cut all ties to TCF, citing fact market was expanding--Did not show how opposite conclusion drawn by T.C.C. unreasonable--Evidence was that Marie-Louis Couture and wife relied on TCF and relegated to it all decision-making powers they held as shareholders of ML1 and ML2--In short, T.C.C.'s conclusions valid-- Appeal dismissed--Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, ss. 125(2), 256(1), (1.2), (5.1).