The non-resident taxpayer, a film distributor, which had acquired from another film distributor the distributorship rights for certain films, agreed in consideration for a lump-sum payment to supply copies of those films to the CBC and to grant it for the same period of time the exclusive right to show them on its French-language television network. Such a contract was a lease of a motion picture film rather than an outright sale for purposes of a withholding tax exemption appearing in the former Canada-France treaty because the rights acquired by CBC were not as extensive as those acquired by the taxpayer: CBC acquired only the right to show the films on its own network and not to assign or lease them; and the taxpayer had the right to a return of the films at the end of the term. The application of s. 106(2) of the pre-1972 Act was conceded.
Addy J. stated (at p. 5371):
"The term 'royalties' normally refers to a share in the profits or a share or percentage of a profit based on user or on the number of units, copies or articles sold rented or used. When referring to a right, the amount of the royalty is related in some way to the degree of use of that right."