HALL,
J.
(all
concur)
:—The
appellant
was
incorporated
under
the
name
‘‘Geo.
W.
Crothers
Limited’’
on
June
14,
1934,
by
letters
patent
pursuant
to
the
provisions
of
the
Companies
Act,
R.S.C.
1927,
ce.
27.
By
supplementary
letters
patent
dated
November
10,
1966,
the
appellant’s
name
was
changed
to
‘‘
Lea-
Don
Canada
Limited’’.
Nassau
Leasings
Limited
(hereinafter
referred
to
as
‘‘Nassau’’)
was
incorporated
on
January
25,
1960
by
letters
patent
pursuant
to
the
provisions
of
The
Corporations
Act,
1953,
Statutes
of
Ontario,
c.
19.
At
all
times
material
to
this
appeal
the
issued
shares
of
both
the
appellant
and
Nassau
were
beneficially
owned
by
Lea-Don
Corporation
Limited
(hereinafter
referred
to
as
the
‘‘parent
company’’)
a
corporation
incorporated
under
the
laws
of
the
Bahama
Islands.
Nassau
has
been
wound
up.
By
an
Order
of
the
Supreme
Court
of
Ontario,
the
right
to
appeal
from
any
assessment
against
Nassau
after
November
16,
1964
under
the
Income
Tax
Act
was
vested
in
the
appellant.
The
parent
company
did
not
carry
on
business
in
Canada
nor
was
it
a
resident
of
Canada.
It
was
a
resident
of
the
Bahamas.
Nassau
and
the
appellant
company
were
corporations
which
did
not
deal
with
each
other
at
arm’s
length.
Nassau
was
a
resident
of
Canada
and
carried
on
the
business
of
leasing
to
the
appellant
an
aircraft
at
a
monthly
rental
of
$14,000
which
Nassau
had
acquired
in
1960
at
a
capital
cost
of
$786,232.17.
During
1961
and
1962
Nassau
modified
the
interior
and
installed
new
radio
and
electronic
equipment
at
an
additional
cost
of
approximately
$218,500,
making
the
total
capital
cost
to
Nassau
$1,004,732.17.
This
rental
arrangement
continued
from
1960
until
May
1963.
On
June
12,
1963
Nassau
sold
the
aircraft
to
the
parent
company
for
$615,000.
At
the
time
of
the
sale,
the
undepreciated
capital
cost
of
the
aircraft
to
Nassau
was
$676,088.32.
The
parent
company
acquired
the
aircraft
subject
to
the
lease
to
the
appellant.
The
appellant,
in
paying
the
rent
due
to
the
parent
company,
deducted
and
remitted
to
the
respondent
the
withholding
tax
imposed
under
Part
III
of
the
Income
Tax
Act.
On
November
1,
1963
the
parent
company
sold
the
aircraft
to
Denison
Mines
Limited
for
$892,000.
Nassau,
in
computing
its
income
for
the
fiscal
year
ending
June
28,
1963,
deducted
the
sum
of
$60,588.32,
claiming
that
since
it
had
sold
the
aircraft
for
a
price
less
than
the
undepreciated
capital
cost
and
had
on
hand
no
depreciable
property
in
Class
16
it
was
entitled
to
deduct
under
Section
1100(2)
of
the
Income
Tax
Regulations
the
amount
‘‘that
would
otherwise
be
the
undepreciated
capital
cost
to
him
of
property
of
that
class
at
the
expiration
of
the
taxation
year’’.
The
respondent,
in
assessing
Nassau,
did
so
on
the
basis
that
Nassau
had
sold
the
aircraft
to
a
person
with
whom
it
was
not
dealing
at
arm’s
length
and
that
by
virtue
of
Section
17(2)
of
the
Income
Tax
Act
the
proceeds
of
disposition
were
the
fair
market
value
of
the
aircraft
which
the
Minister
put
at
$915,500.
The
issue
between
the
appellant
and
the
respondent
is
as
to
whether
the
proceeds
of
disposition
is
$615,500
or
$915,500
and
is
dependent
upon
whether
or
not
Section
17(2)
of
the
Income
Tax
Act
is
applicable
to
the
transaction
between
Nassau
and
the
parent
company.
Section
17(7)
of
the
Income
Tax
Act
provides
that
if
depreciable
property
had
been
disposed
of
under
such
circumstances
that
subsection
(4)
of
section
20
is
applicable”,
then
subsection
(2)
of
Section
17
is
not
applicable.
Accordingly,
the
question
which
was
submitted
to
the
Exchequer
Court
was:
15.
With
reference
to
the
sale
of
the
aircraft
by
Nassau
to
the
Parent,
and
with
reference
to
the
provisions
of
subsection
(7)
of
section
17
of
the
Income
Tax
Act,
was
depreciable
property
of
a
taxpayer
as
defined
for
the
purpose
of
section
20
“disposed
of
under
such
circumstances
that
subsection
(4)
of
section
20
is
applicable
to
determine,
for
the
purpose
of
paragraph
(a)
of
subsection
(1)
of
section
11,
the
capital
cost
of
the
property’’
to
the
Parent?
Cattanach,
J.
answered
the
question
in
the
negative
and
because
of
an
agreement
between
the
parties
as
to
the
fair
market
value
of
the
aircraft
at
the
time
of
its
sale
by
Nassau
to
the
parent
company
the
matter
of
the
fair
market
value
was
adjourned
to
be
dealt
with
by
the
Court
at
the
later
date.
The
learned
trial
judge
based
his
conclusion
on
a
finding
that
the
parent
company
being
a
non-resident,
a
computation
of
its
Canadian
income
is
neither
necessary
nor
relevant
and
further
that
in
its
hands
the
aircraft
was
not
‘‘depreciable
property”
because,
under
the
Regulations,
a
capital
cost
allowance
can
be
claimed
by
non-residents
only
if
carrying
on
business
in
Canada
or
if
receiving
income
from
property
within
Section
110
of
the
Act.
I
agree
with
Cattanach,
J.
on
this
finding
and
with
his
negative
answer
to
the
question
which
the
Court
was
asked
to
answer.
The
appellant
rested
its
case
on
the
proposition
that
the
parent
company
was
a
taxpayer
within
the
meaning
of
the
Income
Tax
Act,
basing
its
argument:
(1)
on
the
contention
that
by
virtue
of
the
definition
in
Section
139(1)
(av),
‘*
‘taxpayer’
includes
any
person
whether
or
not
liable
to
pay
tax’’
and
the
deduction
on
account
of
depreciable
property
being
from
income,
not
from
taxable
income,
is
“applicable”
to
those
whose
income
is
not
taxable;
and
(2)
on
the
narrower
basis
that
the
tax
withheld
on
the
rent
of
the
aircraft
due
to
the
parent
company
and
remitted
to
the
respondent
under
Part
III
of
the
Income
Tax
Act
qualified
the
appellant
as
a
taxpayer.
The
argument
that
the
provisions
of
the
Income
Tax
Act
authorizing
a
deduction
on
account
of
the
capital
cost
of
depreciable
property
are
applicable
to
non-residents
who
are
not
subject
to
assessment
for
income
tax
under
Part
I
of
the
Act
because
such
deduction
is
from
income
is
wholly
untenable.
It
is
clear
that
Section
20(4)
is
concerned
with
taxpayers
entitled
to
a
deduction,
not
with
persons
who
are
not
subject
to
assessment
under
Part
I.
A
non-resident
not
carrying
on
business
in
Canada
is
not
a
person
entitled
to
such
a
deduction
and
therefore
Section
20(4)
cannot
properly
be
said
to
be
“applicable”
to
him.
The
subsidiary
argument
that
the
parent
company
must
be
considered
a
taxpayer
within
the
Income
Tax
Act
because
Nassau
deducted
and
remitted
to
the
respondent
the
withheld
tax
above
mentioned
is
also
untenable.
The
withholding
tax
provided
for
by
Section
106
of
the
Income
Tax
Act
is
a
tax
on
gross
receipts
in
Canada
by
a
resident
for
a
non-resident
and
does
not
constitute
the
non-resident,
in
this
case
the
parent
company,
a
taxpayer
within
the
meaning
of
Section
20(4).
No
deduction
is
permitted
from
the
tax
withheld
by
virtue
of
Section
106.
See
Section
108(1)
which
reads:
108.
(1)
The
tax
payable
under
section
106
is
payable
on
the
amounts
described
therein
without
any
deduction
from
those
amounts
whatsoever.
I
would,
accordingly,
dismiss
the
appeal
with
costs.