Munich Reinsurance Co. ( Canada Branch ) v. Canada
T-3083-91
Richard J.
22/2/96
11 pp.
Appeal from decision of Tax Court of Canada dismissing appeals of two reassessments by Minister of National Revenue-Appellant German corporation carrying on reinsurance business throughout world-Impugned reassessments relating to 1985, 1986 taxation years-One of amounts to be included in calculation of investment revenue derived from property used in course of business "Canadian reserve liabilities" (CRL)-Reserves to be considered in calculating CRL provided for in Foreign Insurance Companies Act (FICA)-For 1985, appellant's unearned premiums (excluding those related to marine insurance) amounted to $33,104,000-In submitting report to relevant authority, appellant must include reserve equal to unearned premiums of $33,104,000, less actual acquisition expenses of $6,829,000-Appellant required to keep reserve in amount of $26,229,000 to be used for calculating CRL, as required by Income Tax Regulations, s. 2405(3)-In reassessment for 1985, Minister omitting deduction of $6,829,000 for actual acquisition expenses-In 1986 reassessment, gross unearned premiums of $39,548,000 used by Minister-Appropriate deduction for deferred policy acquisition expenses of $8,530,000 again omitted-Minister erred in not taking into account deduction with respect to acquisition expenses, as required by FICA, s. 62(1)(b), when calculating unearned premium reserve to be added to CRL of appellant-Second issue whether to exclude interest on income tax credit balances for purposes of computing plaintiff's income under Income Tax Act, Part I, whether such interest falls within Act, Part XIII, but excluded by Act, s. 212(1)(b)-Income from interest taxable under Part I, therefore excluded from calculation under Act, Part XIII-Appeal allowed in part-Foreign Insurance Companies Act, R.S.C., 1985, c. I-13, s. 62(1)(b)-Income Tax Act, S.C. 1970-71-72, c. 63, Parts I, XIII-Income Tax Regulations, C.R.C., c. 945, s. 2405(3).