It’s High Time – Provisions Should Be Read Narrowly: Lehigh

Short summary

On April 23, 2014, the Federal Court of Appeal (the "FCA") released its decision in The Queen v Lehigh Cement Limited ("Lehigh"). The Lehigh case involved a double-dip structure which the Canada Revenue Agency (the "CRA") attacked using an anti-avoidance rule in paragraph 95(6)(b) of the Income Tax Act (Canada) (the "Act"). Although the Tax Court of Canada ("TCC") ruled in favour of the taxpayer in 2013, its broad interpretation of that anti-avoidance rule surprised many practitioners and may have had wider implication to the interpretation of other specific anti-avoidance rules in the Act. On the appeal, the FCA revisited the issue and found that a narrow reading of the provision at issue was more appropriate. A textual focus in interpreting anti-avoidance provisions will give certainty to tax planners as they design their plans around these specific rules. However, a narrow interpretation of specific anti-avoidance provisions could increase the CRA's