Income Tax Act — I-3.3 18.2
ries results in an amount that (A) is not included in the description of B in the definition interest and financing revenues , or the description of A in the definition interest and financing expenses , in computing the income or loss of the taxpayer, or of a person not dealing at arm’s length with the taxpayer, for a taxation year, and (B) is deductible in computing the income of loss for a taxation year of the taxpayer or a person or partnership not dealing at arm’s length with the taxpayer, or (ii) it can reasonably be considered that, in the absence of the transaction or series, the particular amount or an amount for which the particular amount was substituted (A) would have been included in computing the income or loss for a taxation year (other than as a dividend) of the taxpayer, or a person or partnership not dealing at arm’s length with the taxpayer, and (B) would not have been included under the description of A in the definition interest and financing revenues , or the description of B in the definition interest and financing expenses , in computing the income or loss of the taxpayer or a person not dealing at arm’s length with the taxpayer. Anti-avoidance — excluded entity (14) For the purposes of subparagraph (c)(iv) of the definition excluded entity , a person or partnership is deemed to be tax-indifferent and not to deal at arm’s length with the taxpayer or any eligible group entity in respect of the taxpayer throughout a taxation year of the taxpayer if (a) any portion of the interest and financing expenses of the taxpayer for the year is paid or payable by the taxpayer or any eligible group entity in respect of the taxpayer to the person or partnership as part of a transaction or series of transactions; and (b) it can reasonably be considered that one of the main purposes of the transaction or series is to avoid that portion of the interest and financing expenses being paid or payable to a person or partnership that is tax-indifferent and does not deal at arm’s length with the taxpayer or any eligible group entity in respect of the taxpayer. Deemed eligible group entities (15) If two taxpayers are eligible group entities in respect of a third taxpayer, they are deemed to be eligible group entities in respect of each other. Eligible group entities — related (16) For the purposes of paragraph (a) of the definition eligible group entity in subsection (1) (a) despite subsection 104(1), a reference to a person that is a trust does not include a reference to the trustee or other persons that own or control the trust property; and (b) a corporation or a trust is deemed not to be related to a taxpayer where the corporation or trust would, but for this paragraph, be related to the taxpayer solely because the taxpayer is controlled by His Majesty in right of Canada, His Majesty in right of a province or an entity referred to in any of paragraphs 149(1)(c) to (d.6). Eligible group entities — affiliated (17) For the purposes of paragraph (b) of the definition eligible group entity in subsection (1), a corporation or a trust is deemed not to be affiliated with a taxpayer where that corporation or trust would, but for this subsection, be affiliated with the taxpayer solely because (a) the taxpayer is controlled by His Majesty in right of Canada, His Majesty in right of a province or an entity referred to in any of paragraphs 149(1)(c) to (d.6); or (b) if the corporation or trust is a registered charity or a non-profit organization with whom the taxpayer deals at arm’s length, the corporation or trust is a majority-interest beneficiary (within the meaning of subsection 251.1(3)) of the taxpayer. Filing requirement (18) Each taxpayer shall file with its return of income for the taxation year a prescribed form containing prescribed information for the purpose of determining the deductibility of its interest and financing expenses and determining its exempt interest and financing expenses. Relevant inter-affiliate interest (19)