A proposed adjustment of the Minister to the safe income of a corporation from which the taxpayer received a deemed dividend, which entailed the exclusion of income inclusions to the corporations resulting from having claimed investment tax credits was found to result in an inappropriate double taxation of the same income first in the hands of the corporation and, second, in the hands of the taxpayer as a capital gain. Dussault, J.T.C.C. stated (at para. 84):
Although the position advanced by counsel for the respondent is based on a certain logic, the fact remains that the negative adjustments made by Revenue Canada with respect to the investment tax credits have the effect of leading directly to the double taxation of those same amounts. In the case before us, accepting this position would be tantamount to allowing the increase of Kruger's income for tax purposes brought about by the investment tax credits to be taxed once as regular income in its hands, and then, under the interpretation of subsection 55(2) put forward by the respondent, allowing a corresponding amount to be taxed again in the hands of the appellant, Kruco, as a capital gain, which clearly also contravenes the spirit of the provisions in issue