In finding that the damages awards in a class action suit, including prejudgment interest were received tax free, CRA referred to the surrogatum principle, and then stated:
[T]he taxation of "prejudgment" interest should follow the tax treatment of the compensation to which it relates, unless such prejudgment interest is in fact interest by its nature. The courts generally define interest as the "return, consideration or compensation for the use or holding by one person of money that belongs to or is due to another person.” …
In this case … only interest at the legal rate and the additional compensation provided for in the Civil Code of Quebec accrued since the date of the judgments of the Superior Court of Quebec must be included in the calculation of the plaintiffs' income under paragraph 12(1)(c).