The taxpayers sold individual customers access to the satellite network of an American firm ("NPS"). The Minister argued that the payments from the taxpayers to NPS were "rent" or "royalties" under s. 212(1)(d).
V.A. Miller J. cited R. v. Saint John Shipbuilding & Dry Dock Co. ([1980] C.T.C. 352 (F.C.A.)) for the proposition that a "rent" connotes a grant of property that lasts for a fixed or determinable term, reverting thereafter to the grantor. In the case of satellite television access, there was no property acquired from NPS, and nothing reverted to it, so the taxpayer's payments were not rent.
Furthermore, the payments were not royalties or similar payments (para. 22):
They were for NPS to activate the descrambler units held by the Appellants' customers for the subscription period. The payments were not contingent on the extent or duration of use, profits or sales by the Appellants or its customers..