The Supreme Court of Canada (SCC) yesterday released its decisions in Canada Trustco Mortgage Co. v. Canada ("Canada Trustco") and Mathew v. Canada ("Mathew"), the first two cases it has heard regarding the general anti-avoidance rule (GAAR) under the Income Tax Act. The facts in Mathew are for all practical purposes the same as those considered in OSFC Holdings Ltd. v. Canada ("OSFC"), a Federal Court of Appeal case previously considered to be the highest authority on the GAAR. The SCC unanimously dismissed both appeals; meaning Canada Trustco won and Mathew lost.
Canada Trustco won because (i) the Tax Court judge properly determined that the meaning of cost for purposes of capital cost allowance (CCA) was generally legal cost and not economic cost, and (ii) the Crown was unable to establish that the facts differed materially from a normal domestic sale-leaseback transaction. Mathew lost because (i) the Tax Court judge properly determined that the purpose of the specific provisions
