Income Tax Act — I-3.3 135
Deduction in computing income 135 (1) Notwithstanding anything in this Part, other than subsections (1.1) to (2.1) and 135.1(3), there may be deducted, in computing the income of a taxpayer for a taxation year, the total of the payments made, pursuant to allocations in proportion to patronage, by the taxpayer (a) within the year or within 12 months thereafter to the taxpayer’s customers of the year; and (b) within the year or within 12 months thereafter to the taxpayer’s customers of a previous year, the deduction of which from income of a previous taxation year was not permitted. Limitation where non-arm’s length customer (1.1) Subsection (1) applies to a payment made by a taxpayer to a customer with whom the taxpayer does not deal at arm’s length only if (a) the taxpayer is a cooperative corporation described in subsection 136(2) or a credit union; or (b) the payment is prescribed. Limitation where non-member customer (2) If a taxpayer has not made allocations in proportion to patronage in respect of all of the taxpayer’s customers of the year, at the same rate, with appropriate differences for different types, classes, grades or qualities of goods, products or services, the amount that may be deducted by the taxpayer under subsection (1) is an amount equal to the lesser of (a) the total of the payments mentioned in that subsection, and (b) the total of (i) the part of the income of the taxpayer for the year attributable to business done with members, and (ii) the allocations in proportion to patronage made to non-member customers of the year. Deduction carried over (2.1) Where, in a taxation year ending after 1985, all or a portion of a payment made by a taxpayer pursuant to an allocation in proportion to patronage to the taxpayer’s customers who are members is not deductible in computing the taxpayer’s income for the year because of the application of subsection 135(2) (in this subsection referred to as the “undeducted amount”), there may be deducted in computing the taxpayer’s income for a subsequent taxation year, an amount equal to the lesser of (a) the undeducted amount, except to the extent that that amount was deducted in computing the taxpayer’s income for any preceding taxation year, and (b) the amount, if any, by which (i) the taxpayer’s income for the subsequent taxation year (computed without reference to this subsection) attributable to business done with the taxpayer’s customers of that year who are members exceeds (ii) the amount deducted in computing the taxpayer’s income for the subsequent taxation year by virtue of subsection 135(1) in respect of payments made by the taxpayer pursuant to allocations in proportion to patronage to the taxpayer’s customers of that year who are members. Amount to be deducted or withheld from payment to customer (3) Subject to subsection 135.1(6), a taxpayer who makes at any particular time in a calendar year a payment pursuant to an allocation in proportion to patronage to a person who is resident in Canada and is not exempt from tax under section 149 shall, notwithstanding any agreement or any law to the contrary, deduct or withhold from the payment an amount equal to 15% of the lesser of the amount of the payment and the amount, if any, by which (a) the total of the amount of the payment and the amounts of all other payments pursuant to allocations in proportion to patronage made by the taxpayer to that person in the calendar year and before the particular time exceeds (b) $100, and forthwith remit that amount to the Receiver General on behalf of that person on account of that person’s tax under this Part. Definitions (4) For the purposes of this section and section 135.1, allocation in proportion to patronage for a taxation year means an amount credited by a taxpayer to a customer of that year on terms that the customer is entitled to or will receive payment thereof, computed at a rate in relation to the quantity, quality or value of the goods or products acquired, marketed