Central City Financial Services Limited (Appellant) v. Her Majesty the Queen (Respondent)

98 DTC 6645
Federal Court of Appeal
September 24, 1998

(Court File No. A-588-97.)

Deductions -- Interest -- Whether a certain debenture "settled" or "extinguished", thereby disentitling corporate taxpayer to the debenture interest deductions claimed with respect thereto -- Income Tax Act, R.S.C. 1985 (5th Supp.), c. , as amended, ss. 20(1)(c) and 80(1).

In assessing the corporate taxpayer for 1989, the Minister assumed that a certain debenture had been "settled" or "extinguished" (within the meaning of section 80 of the Act). Hence the Minister disallowed the debenture interest deductions which the taxpayer had claimed in computing its income for 1989. In dismissing the taxpayer's appeal (98 DTC 1021), the Tax Court of Canada found, on the evidence, that the debenture in issue had been "settled" or "extinguished". The taxpayer appealed to the Federal Court of Appeal.

Held: The taxpayer's appeal was dismissed. The Tax Court Judge had carefully analyzed the settlement agreement and the intention of the parties with respect thereto, as evidenced by all of the surrounding circumstances. There were no compelling reasons to justify any review of the Tax Court Judge's findings. The Minister's assessment was affirmed accordingly.

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