Law360 Canada (May 24, 2023, 7:02 AM EDT) -- Appeal by Emergis Inc. (Emergis) from the Tax Court’s dismissal of its appeal from the denial of a deduction of withholding taxes paid to the US Government. The issue on appeal was whether Emergis was entitled to a deduction under s. 20(12) of the Income Tax Act (ITA) for the taxes paid to the US Government on the interest paid by the general partnership (USGP) to Emergis. Emergis acquired a US corporation (UP&UP). USGP was formed with Emergis, holding a 99.9 percent interest. USGP incorporated a Nova Scotia unlimited liability company (NSULC). USGP and NSULC incorporated a limited liability company under the laws of Delaware (LLC). The funding for the acquisition of UP&UP flowed from Emergis. Emergis included in income the interest paid by USGP on the Emergis Loan and claimed a deduction under s. 20(12) of the ITA for the withholding taxes paid to the US Government on this interest. The Tax Court Judge concluded there was some connection between the interest income paid by USGP and the dividends paid by LLC to USGP, which were reclaimed and reported by Emergis through its partnership interest in USGP. The Tax Court Judge stated a taxpayer could not claim relief under more than one provision for any foreign taxes paid in relation to a particular item of income and noted that Emergis received the benefit of a deduction under s. 112(1) of the ITA in the amount of the NSULC dividends allocated by USGP to Emergis....