Finding that principal purpose was to save tax was not condemnation of taxpayer’s behavior

Taxpayer was uranium producer and supplier of conversion services. CESA/CEL and Cameco US were non-arm’s length non-residents. Series and transactions that allegedly were subject to transfer pricing rules included Tenex Series comprising incorporation of CESA, execution of HEU Feed Agreement with CESA as signatory and taxpayer’s guarantee, Urenco Series comprising incorporation of CESA, execution of Urenco Agreement with CESA as signatory and taxpayer’s guarantee, BPC Transactions consisting of taxpayer delivering uranium to CESA/CEL under long-term contracts (BPCs), and CC Transactions consisting of CESA/CEL delivering uranium to taxpayer under CC Contracts. Minister of National Revenue reassessed taxpayer and added to taxpayer’s income $43,468,281 in 2003, $196,887,068 in 2005, and $243,075,364 in 2006, relying on s. 247(2) of Income Tax Act. Taxpayer appealed. Appeals allowed. Minister’s transfer pricing adjustments for each taxation year shall be reversed. With respect to Tenex and Urenco Series, it was commercially rational for everyone involved to give up business opportunity to achieve other objectives. There was nothing inappropriate about taxpayer’s decision to incorporate CESA and have CESA execute Agreements, and s. 247(2)(a) and (c) of Act addressed any transfer pricing concerns. Application of extraordinary remedy in s. 247(2)(b) and (d) of Act was not warranted. Tenex and Urenco Series, and BPC and CC Transactions, were not described in s. 247(2)(b)(i) of Act. Finding that principal purpose of Tenex Series and Urenco Series was to save tax was not condemnation of taxpayer’s behaviour. There was no evidence warranting adjustment with regard to taxpayer because of Tenex Series or Urenco Series. Prices charged by taxpayer to CESA/CEL for uranium delivered were within arm’s length range of prices and no transfer pricing adjustment was warranted for Transactions.

Cameco Corporation v. The Queen (2018), 2018 CarswellNat 5346, 2018 TCC 195, John R. Owen J. (T.C.C. [General Procedure]).