Marzen Artistic Aluminum Ltd. v. Canada (January 29, 2016 – 2016 FCA 34, Nadon, Scott (author), Rennie JJ. A.).
Précis: This was an appeal from a Tax Court decision blogged earlier on this site. The case involved transfer pricing, more specifically the disallowance of more than $7,000,000 in fees paid in 2000 and 2001 as well as the imposition of a penalty in excess of $500,000 for the 2001 taxation year. The Tax Court allowed the appeal, but only to the extent of permitting the deduction of fees in the amount of US$32,500 paid to Starline Windows Inc. (“SWI”) in each of 2000 and 2001. Costs were awarded to the respondent.
The appeal raised three issues:
 This appeal raises the following issues:
i. Whether the Judge erred in determining that terms and conditions imposed in respect of the MSSA between the appellant and SII differed from what would have been agreed to by parties’ dealing at arm’s length?
ii. Whether the Judge erred in finding that an arm’s length party would not have paid SII any fees in excess of the amounts allowed by the Minister plus US$32,500 had they been dealing at arm’s length?
iii. Whether the Judge erred in declining to award costs to the appellant?
The Federal Court of Appeal decided against the appellant on all three points. The appeal was dismissed with costs.
Decision: On the first issue the Court concluded against the appellant:
 I find that it was open to the Judge, based on the evidence before her, to identify the transaction under review as the MSSA between SII and the appellant. As any transfer pricing analysis is fact driven, the appellant needed to point to an error the Judge made in the assessment of the facts leading to that determination. The appellant argued that its expert report did not dispute that the transaction under review was the MSSA but indicated that the value of the services provided to SII by SWI through the seconded US employees should also have been taken into consideration.
 The Judge’s finding was based on the Guidelines (see OECD Guidelines 1995 chapter 1 paragraph 1.6). I find no error on her part in that regard. More so, as I review the evidence that was before her, it is undeniable that the appellant never challenged the Minister’s assumption that the quantum of fees paid by SII to SWI were not in issue in the appeal before her. Having reviewed the record and the Notice of Appeal filed before the Tax Court, I cannot find any evidence that was adduced by the appellant in the Tax Court to challenge the Minister’s assumption that the price for the seconded US employees, set on a cost plus 10% basis, was not an arm’s length price.
Similarly on the second issue:
 With respect to the second issue, the determination of the Arm’s length price, the Judge relied again primarily on the Guidelines which identified the CUP method as the most direct and reliable way to apply the arm’s length principle (see section 2.7 of the appended Guidelines). I find no error in that respect as the Guidelines applied. The Judge concluded that Mr. Csumrik dealt with SII at arm’s length and that the $32,500 fee payable to Mr. Csumrik and his corporation Longview is the amount a reasonable business person would have paid thereby confirming in essence the transfer pricing adjustment made by the Minister subject only to this minor adjustment of $32,500. That conclusion was based on the oral evidence before her. The appellant has failed to point to an overriding and palpable error in the Judge’s appreciation of the evidence to overturn this finding.
Finally, the appellant was also unsuccessful on the question of costs in the Tax Court:
 On the third issue regarding the granting of costs to the respondent, it is a well-established principle that orders granting costs are discretionary and command deference. Rule 147 of the Tax Court of Canada Rules (General Procedures) SOR/90-688a, specifies the factors that a judge must consider in awarding costs. An appellate Court should only intervene if the Judge considered irrelevant factors, failed to consider relevant factors, or reached an unreasonable conclusion (see Guibord v. Canada, 2011 FCA 346). In the present case, I see no valid reason to intervene.
As a result the appeal was dismissed with costs.