At issue was the appropriate discount rate paid under a
receivables sales agreement between McKesson Canada and its parent
company, MIH, under section 247 of the Income Tax Act
(Canada). A secondary issue was the assessment of withholding tax
on a deemed dividend that arose as a result of the lower discount
rate. For our earlier blog post on the Tax Court decision see
In the Federal Court of Appeal, the Appellant's Memorandum
of Fact and Law was filed on June 11, 2014. For our earlier post
summarizing the appellant's memorandum see
In its Memorandum, the Respondent states that the trial
judge's "carefully reasoned decision" and findings
were "amply supported" by the evidence at trial and no
palpable and overriding error can be found in the trial judge's
The Respondent summarizes its points at issue at paragraph 56 of
The trial judge applied the correct test. His decision was
based on what arm's-length persons would agree to pay for the
rights and benefits obtained and not on findings of tax avoidance,
lack of need for funds, or group control.
Ample evidence supports the trial judge's determination of
the arm's-length discount rate. Since no palpable and
overriding error was committed, his decision should not be
The trial judge did not commit an error of law in concluding
that the five-year limitation period in Article 9(3) of the
Canada-Luxembourg Tax Treaty does not apply to the Part
XIII tax reassessment at issue.
No hearing date has yet been set for the hearing in the Federal
Court of Appeal.
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