Corporation A, which has a sanitary landfill site and must annually fund an qualifying environmental trust to provide a fund for the post-closure management of site, is subject to tax on the interest income generated by the trust under s. 107.3(1)(a), but may claim a tax credit equal to the Part XII.4 tax payable by the trust under section 127.41. Is this tax credit taxable under s. 12(1)(x)? CRA responded:
[S]subparagraph 12(1)(x)(iii) does not apply because it … was not given as an inducement to the taxpayer or the trust to undertake certain activities.
… Hudson Bay Mining and Smelting … [found] that paragraph 12(1)(x) was not applicable to the amount received by the taxpayer because the taxpayer was not the one who made or incurred the expenditure … . [S]ubparagraph 12(1)(x)(iv) does not apply because it was the trust that incurred or made the Part XII.4 tax expenditure in respect of which the credit was received, not Corporation A. …
… This interpretation of paragraph 12(1)(x) … appears to be consistent with … [the] Explanatory Notes