Hudson Bay Mining and Smelting Co. v. Canada
A-330-96
Strayer J.A.
6/5/99
4 pp.
Appeal from Tax Court judgment confirming reassessment disallowing deductions on basis moneys neither interest nor paid pursuant to legal obligation to pay interest on borrowed money-Appellant issuing two series of debentures, each of which requiring it to pay to holders interest semi-annually-Both series governed by trust indentures requiring establishment of sinking fund from which appellant obliged to redeem debentures-Appellant repurchasing certain of its debentures through brokers-Discounted price negotiated with vendors in respect of capital amount, assuming amount of interest accrued on debentures as of date of repurchase would also be paid by appellant to holders of debentures at time of repurchase-Appellant deducting from income amounts so attributed to interest as interest amount paid pursuant to legal obligation on borrowed money and for purpose of earning income pursuant to Income Tax Act, s. 20(1)(c)(i)-Appeal allowed-Appellant not buying "expectation of interest" as it would obviously not contemplate paying itself interest once it had repurchased debentures-Cases relied on by Tax Court, Wigmore v. Summerson & Sons, [1926] 1 K.B. 131 and R. v. Immobiliaire Canada Ltd., [1978] 1 F.C. 633 (T.D.); affd by F.C.A. distinguishable as each involving purchase of debt instrument by someone other than debtor under that instrument-Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, s. 20(1)(c)(i).