rent

Municipal taxes which, under the terms of the real property lease between the non-resident taxpayer and a resident tenant, the tenant agreed to pay were found to be payments similar to rent made for the use in Canada of property and, therefore, were subject to withholding tax under s. 106(1)(d) of the pre-1972 Act, which applied to a "rent, royalty or a similar payment, including, but not so as to restrict the generality of the foregoing, any such payment ... for the use in Canada of property".

The appellant, which had been leasing computer equipment, notified the lessor that it would no longer be making the agreed monthly payments nor using the equipment. Following negotiations, the lessor agreed to release the appellant from any further obligation to make monthly lease payments upon payment of a fixed amount of compensation. At issue was whether such payments were subject to Ontario retail sales tax, which turned on whether such payments were for the consumption or use of the equipment.

Since at common law "rent" connates only a payment arising out of a landlord-tenant relationship, home office expenses of the taxpayer (i.e., a pro rata portion of mortgage interest, municipal taxes, insurance premiums and utilities) were not deductible. [C.R.: 248(1) - "former business property"]

The taxpayer and her husband had operated a service station in partnership and then transferred pursuant to s. 85(2) the assets of the business other than the land (which was leased under a head lease to BP Oil Ltd., which subleased the land back to the taxpayer) to a corporation owned by them. It was found that on the same incorporation transactions she had assigned to the corporation her right to receive gallonage and other rental payments from BP under the head lease as well as assigning the head lease and sublease (considered as an integrated whole).

It was held that an 11 suite apartment building had been purchased by a tailor for the purpose of retaining it and renting it, and was accordingly a rental property given the ordinary meaning of the word "rent". In addition, the rental income earned was property income rather than business income. The building accordingly was not a former business property.

In finding that payments made by the taxpayer to its U.S. parent for the use by it of equipment in its Canadian business represented "rent, royalty or a similar payment" under s. 106(1)(d) of the pre-1972 Act, Thurlow J. stated (at p. 1105):

Dumoulin J. stated (p. 1341):

"I incline to believe that a lump-sum payment for rights irrevocably ceded, tantamount to an assignment in perpetuity ... can hardly be reconciled with the customarily accepted notion attaching to 'rent or royalties', id est: limit of time, retention of a 'jus in re' by the lessor, and periodical rentals by the lessee, either for fixed sums or an apportionment of receipts."

Lump-sum damages received by the non-resident taxpayer from Canadian residents for the repudiation, prior to the slated operational commencement date, of a bare-boat charter of a drilling rig owned by its parent, were found to be payments received in lieu of the payment of rent, so that it was not entitled to a refund of Part XIII tax withheld. After noting (at para.