I have a technical question on clause 195 of the bill, which deals with restrictive covenants. I would like to put things in context by mentioning a decision of the Federal Court of Appeal. When there is a restrictive covenant between two businesses, the Court of Appeal held that the inflow of capital was not taxable.
Following that decision, John Manley, the finance minister at the time, issued a comfort letter stating that the legislative amendments in question would mean that the amount to be received under a restrictive covenant would be normal income for tax purposes, subject to the exception described further on. That comfort letter was included in the technical amendments that were published in 2004, and, if I am not mistaken, in 2006 and 2007.
However, Bill C-48 says quite the opposite. Basically, it says that income derived from restrictive covenants is no longer taxable.
Mr. Harnish, I am asking you to join us at the table because your signature was on the comfort letter as well as Mr. Manley's. In a nutshell, why was all goodwill in restrictive covenants excluded, when the intention seemed to be not to exclude it?