The taxpayer, which carried on a retail chain grocery business, used the proceeds of a debenture issue to purchase the shares of a sister company which had been supplying groceries and other products to it at favourable prices and which, following the acquisition of its shares, paid dividends to the taxpayer in excess of the taxpayer's interest expense. It was found that the borrowed capital was being used to purchase shares giving rise to exempt income (dividends) rather than being used in the taxpayer's business. Rand J. stated (p. 1244):
"What is aimed at by the section is an employment of the borrowed funds immediately within the company's business and not one that effects its purpose in such an indirect and remote manner."