business

A US company (“GEFI Inc.”) and UK company (“GEFI”) in the GE group formed a Delaware LP (“LP”) with GEFI Inc. as the 1% general partner and GEFI as the 99% limited partner. LP acquired five intercompany loans over six years, before it was wound up.

The stock of GEFI Inc. and GEFI were stapled, which caused GEFI to be deemed to be resident in the US under the Code, with a view to increasing the US foreign tax credit capacity in the US. GEFI claimed credit for the US income taxes payable by it against its UK income tax liabilities.

At issue was whether a Barbados bank subsidiary (Glenhuron ) of the taxpayer, which used equity funds received from its Canadian parent to invest in short-term debt obligations, conducted its business principally with persons with whom it dealt at arm’s length, as required in s. 95(1) - investment business - (a). In finding that what the Crown argued to be the “receipt side” of Glenhuron’s business, i.e., “the capital investments by the Loblaw group [,] were not part of Glenhuron’s conduct of business” Woods JA stated (at paras. 82, 84-85):

The taxpayer, an aerospace engineer and a U.S. resident, was hired as an independent contractor for TDM Technical Services, a temporary employment agency, to assist Bombardier Inc. in the designing of fuel lines. In order to do the work, he worked on a part-time basis and was present in Canada for 188 days between August 10, 2011 and August 10, 2012.

The filing position of the taxpayer (Wesbild), that it did not have a permanent establishment in B.C., was based on an application of the Marconi test of what was a business, so that under Reg. 400(2) it did not have a fixed place of “business” in B.C. CRA reassessed (but not until after the normal reassessment period) on the basis that, in the context of Reg. 400 et seq., “business” included having property or taxable capital gains as the only sources of income.

The Calgary Real Estate Board Co-operative Limited was found not to be a "business" for purposes of the Municipal Taxation Act (Alberta), which defined a "business" as "any activity or undertaking of a commercial, merchandising or industrial nature and includes a trade, profession, occupation, employment or calling and the providing of goods and services".

The taxpayer was employed by the New Brunswick Department of Agriculture and Rural Development to assist in establishing and administering several dairy farms in Malawi, in consideration for which the Department received fees that were intended to cover its cost, cover overhead and make a small profit. In finding that the Department satisfied the requirement that it be carrying on a business, Noel J.A. stated (at para. 12) that in applying the definition of business in s. 248(1):

Lord Fisher invited his hunting friends and relations to shoot pheasants on his estate each year, and required a "contribution" from those who accepted his invitations. It was held that he was not engaged in a "business" within the meaning of the Finance Act 1972. "[T]he true meaning of the word 'business' in the context of this Act excludes any activity which is no more than an activity for pleasure and social enjoyment."

After referring to dicta in the Salisbury House case, [1930] A.C. 432 to the effect that the letting of land does not constitute a "trade", Lord Diplock noted that the word "business" in the Malayan Income Tax Act 1967 was broader (p. 684):

Taxpayer's counsel unsuccessfully submitted that because the definition of "business" specifically excluded an office or employment, the Minister's assumption that the taxpayer had received employee stock options in connection with an adventure in the nature of trade could not stand. "[A"] taxpayer may acquire shares under employee stock options and at the same time become engaged in an adventure in the nature of trade with respect to the shares so acquired." (p. 6146)

"The term 'business' by definition includes an adventure in the nature of trade but it is not synonymous with carrying on a business. This latter concept requires more than the isolated type of transaction referred to as 'an adventure in the nature of trade'."