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(i) the provisions of section 257(1) shall apply as if the payment of past interest was being made on the date of the occurrence, and

(II) the provisions of paragraphs (b) and (c) of section 257(1) shall apply to such deduction as they apply to a deduction from relevant interest.

(6) Subject to subsection (8), section 261 shall apply in relation to any relevant interest paid in respect of a relevant deposit held in a special term account, as if the following paragraph were substituted for paragraph (c) of that section:

(7) An account shall cease to be a special term account if any of the conditions specified in section 264A(1) cease to be satisfied, and where that occurs—

“(c) the amount of any payment of relevant interest paid in respect of any relevant deposit held in a special term account shall not, except for the purposes of a claim to repayment under section 267(3) in respect of the appropriate tax deducted from such relevant interest, be reckoned in computing total income for the purposes of the Income Tax Acts;”.