With a view to its imminent disposition of the shares of a subsidiary, the taxpayer continued to the British Virgin Islands, with the result that it ceased to be a Canadian-controlled private corporation (CCPC) and became a private corporation that was not a CCPC (its central management and control remained in Canada). CRA assessed on the basis inter alia that the resulting non-application of s. 123.3 (imposing refundable tax) was an abuse of that provision.
In finding no abuse of s. 123.3, D’Arcy stated (at para. 227):
Parliament has chosen, for policy reasons, to have different sets of rules for different corporations. …
Before so concluding, he stated (at paras. 137-138):
[The] history of the definition of RDTOH shows that Parliament intended for the refundable tax regime for Part I tax, which now includes section 123.3, to only apply to CCPCs. …
In my view, the text, context and purpose of section 123.3 does not support a finding that its object, spirt and purpose was to prevent Canadian resident individuals from deferring tax on investment income held in any private corporations. [emphasis in original]