Canada v. Imperial Oil Ltd., 2004 DTC 6044, 2004 FCA 36 -- summary under Subsection 245(4)

The Court affirmed the finding of the Tax Court that the claiming of an investment allowance by the taxpayer on short-term loans made by it close to the end of its calendar fiscal period to a bank subsidiary, with the loans being guaranteed by the parent bank, did not result in a misuse or abuse for purposes of s. 245(4). The taxpayer was not indirectly lending money to a bank, as the business of the borrower was different than that of its parent and the money was available for use by it and not the bank; and "the fact that the bank guaranteed the loan did not make it a borrower of the money lent" (p. 6054). Although the taxpayer "took advantage of a loophole in the statutory scheme, namely the failure to deal with the consequences of different corporate year ends" ... "it must have been perfectly foreseeable to Parliament that large corporations would make short term loans to other large corporations which span the end of the lender's financial year, but not the borrower's, so that both corporations would escape that LCT on the amount of the loans" (p. 6055). Further, the Court could not agree with the Minister's submission "that there is a clear policy that a corporation's capital at the end of the fiscal year should be representative of its capital throughout the year", as Parliament had not chosen to require companies to report the value of their capital at several points during the year (p. 6055).