The taxpayer was a Delaware corporation which produced and distributed films, TV programs and music. The Canadian distribution was handled by its Canadian branch. Addy J found that all of the film-rental revenues of the Canadian branch of the taxpayer were exempted from withholding tax under ITA s. 212(5) by Reg. 802 or (if Reg. 802 did not apply to the exclusion of Reg. 805) under Reg. 805(1). Addy J stated (at p. 5521) that "the rental of films in Canada as in the United States forms an essential and integral part of the business of the plaintiff and that the revenues from film rentals must necessarily be considered as reasonably attributable to the business which was carried on in Canada." In particular, although "none of the production costs are incurred here and therefore none of the benefits directly attributable to the quality of production originate here…this does not mean...that the revenues themselves are not to be considered as reasonably attributable to an active business of the plaintiff carried on in Canada nor does it mean that some proportion of the revenues is to be excluded" (p. 5519).
See summary under Reg. 802.