Estey,
J.
(Dickson,
C.J.C.,
Betz
and
La
Forest,
JJ.
concurring):—I
have
had
the
benefit
of
reading
the
judgment
of
my
colleague
Wilson,
J.
and,
while
I
respectfully
reach
the
same
outcome
as
does
she,
I
follow
quite
a
different
route
to
that
result.
I
find
section
68
to
be
applicable,
however
I
would
confirm
that
the
allocation
of
the
proceeds
of
sale
as
between
land
and
building
was
reasonable,
as
determined
below
for
the
reasons
advanced
by
both
Chief
Justice
Thurlow
and
Mr.
Justice
Heald
in
the
Court
of
Appeal.
Section
68
was
introduced
with
the
new
Income
Tax
Act
of
1972
(S.C.
1970-71-72,
c.
63)
and,
while
it
appears
in
the
reasons
of
Wilson,
J.,
I
set
it
out
here
for
convenience:
Where
an
amount
can
reasonably
be
regarded
as
being
in
part
the
consideration
for
the
disposition
of
any
property
of
a
taxpayer
and
as
being
in
part
consideration
for
something
else,
the
part
of
the
amount
that
can
reasonably
be
regarded
as
being
the
consideration
for
such
disposition
shall
be
deemed
to
be
proceeds
of
disposition
of
that
property
irrespective
of
the
form
or
legal
effect
of
the
contract
or
agreement;
and
the
person
to
whom
the
property
was
disposed
of
shall
be
deemed
to
have
acquired
the
property
at
the
same
part
of
that
amount.
In
the
pre-1972
Income
Tax
Act
(“the
old
Act”),
R.S.C.
1952,
c.
148,
as
amended,
a
somewhat
comparable
provision
was
found
in
paragraph
20(6)(g)
which
I
repeat
here
for
convenience:
Where
an
amount
can
reasonably
be
regarded
as
being
in
part
the
consideration
for
disposition
of
depreciable
property
of
a
taxpayer
of
a
prescribed
class
and
as
being
in
part
consideration
for
something
else,
the
part
of
the
amount
that
can
reasonably
be
regarded
as
being
the
consideration
for
such
disposition
shall
be
deemed
to
be
the
proceeds
of
disposition
of
depreciable
property
of
that
class
irrespective
of
the
form
or
legal
effect
of
the
contract
or
agreement;
and
the
person
to
whom
the
depreciable
property
was
disposed
of
shall
be
deemed
to
have
acquired
the
property
at
a
capital
cost
to
him
equal
to
the
same
part
of
that
amount.
This
section
came
before
the
Court
in
The
Queen
v.
Malloney’s
Studio
Ltd.,
[1979]
2
S.C.R.
326;
[1979]
C.T.C.
206,
where
the
Court
determined
that
the
section
applied
to
a
disposition
of
depreciable
property
together
with
“something
else.”
In
the
context
of
that
proceeding,
this
meant
that
the
Minister
of
National
Revenue
was
not
empowered
by
the
section
to
reallocate
a
consideration
received
by
the
vendor
from
a
purchaser
on
a
sale
of
land
“clear
of
all
buildings.”
Section
68
makes
reference
to
a
disposition
of
“any
property,”
which
of
course
would
include
depreciable
and
non-depreciable
property,
real
property
and
personal
property,
and
indeed
incorporeal
property
rights
and
presumably
anything
which,
under
section
248
of
the
Act,
may
properly
be
classified
as
“property.”
In
contrast,
the
old
Act
provision
referred
to
the
“disposition
of
depreciable
property.”
In
section
68
the
draftsman
went
on
to
refer
to
the
property
under
disposition
as
‘‘that
property.”
With
reference
to
the
purchaser,
the
provision
describes
the
property
disposed
of
as
“the
property.”
While
“any
property”
can
reasonably
be
understood
as
particular
(any
piece
of
property
as
opposed
to
any
other
piece
of
property)
or
general
(any
property
as
opposed
to
any
thing
which
is
not
property),
this
potential
ambiguity
is
resolved
with
reference
to
the
other
words
of
the
section,
which
must
all
be
given
meaning
(see
Maxwell
on
the
Interpretation
of
Statutes
(12th
ed.,
1969),
pages
36-9).
With
due
respect
to
those
who
may
reach
a
conclusion
to
the
contrary,
the
use
in
the
section
of
the
expressions
“that
property**
and
“the
property,”
in
association
with
the
opening
reference
to
“any
property,”
leads
me
to
the
conclusion
that
“the
disposition
of
any
property**
means
the
sale
of
a
particular
item
or
items
of
property.
I
find
support
for
this
construction
of
section
68
in
the
French
language
text
where
the
phrase
“de
tout
bien”
is
employed
in
place
of
“any
property**
in
the
English
version.
Again,
in
the
French
version,
“that
property**
and
“the
property”
appear
as
“ce
bien”
and
“le
bien,”
and
not
in
the
plural
form.
The
singular
form
is
chosen
because
it
is
not
“biens,**
or
property
in
general,
that
is
contrasted
with
“something
else,”
but
rather
particular
property.
The
quantity
or
element
in
contrast
to
“any
property,**
construed
as
above
discussed,
is
the
consideration
paid
for
“something
else.**
In
this
appeal,
the
issue,
simply
stated,
narrows
down
to
a
determination
as
to
whether
“something
else**
includes
other
property
or
refers
only
to
something
other
than
property.
Even
a
cursory
examination
of
the
result
of
the
adoption
of
the
latter
alternative,
namely
that
the
“something
else”
must
be
something
which
is
not
in
law
“property,”
reveals
that
the
section
would
be
substantially
gutted
of
all
meaning.
Subsection
248(1)
of
the
Income
Tax
Act
defines
property
as
follows:
“[PJroperty”
means
property
of
any
kind
whatever
whether
real
or
personal
or
corporeal
or
incorporeal
and,
without
restriction
the
generality
of
the
foregoing,
includes
(a)
a
right
of
any
kind
whatever,
a
share
or
a
chose
in
action,
This
extremely
broad
definition
of
property
leaves
very
little
in
the
“nonproperty**
classification.
it
would
appear
to
include
a
contract
right
and
might
in
some
circumstances
include
a
right
to
assert
a
convenant
by
a
vendor
to
deliver
“know-how.”
It
may
be
thought
that
“services”
would
be
“something
else/"
Consideration
paid
for
“services""
will
in
most,
if
not
all,
cases
fall
within
the
basic
income
tax
provisions
in
Division
B,
including
section
12.
Thus,
if
“something
else""
is
interpreted
to
refer
only
to
nonproperty
items,
the
result
would
be
the
confinement
of
section
68
to
at
most
a
miniscule
part
of
commercial
transactions.
Indeed,
it
would
be
somewhat
unusual
to
find
in
the
part
of
the
Act
entitled
“Rules
Relating
to
Computation
of
Income""
such
a
narrowly
tuned
taxing
provision.
This
is
particularly
evident
when
one
considers
the
multitudinous
transactions
to
which
the
above-quoted
provision
in
the
old
Act
was
applicable.
It
would
seem
unlikely
that
Parliament,
in
the
1972
amendment,
intended
to
abandon
the
aims
achieved
by
paragraph
20(6)(g)
and
enact
a
new
section
having
very
similar
wording
but
no
similar
application.
In
Stubart
Investments
Limited
v.
The
Queen,
[1984]
1
S.C.R.
536,
at
573-
79;
[1984]
C.T.C.
294
at
313-17
the
Court
recognized
that
in
the
construction
of
taxation
statutes
the
law
is
not
confined
to
a
literal
and
virtually
meaningless
interpretation
of
the
Act
where
the
words
will
support
on
a
broader
construction
a
conclusion
which
is
workable
and
in
harmony
with
the
evident
purposes
of
the
Act
in
question.
Strict
construction
in
the
historic
sense
no
longer
finds
a
place
in
the
canons
of
interpretation
applicable
to
taxation
statutes
in
an
era
such
as
the
present,
where
taxation
serves
many
purposes
in
addition
to
the
old
and
traditional
object
of
raising
the
cost
of
government
from
a
somewhat
unenthusiastic
public.
It
would
therefore
seem
to
me
that
the
expression
“something
else""
must
be
given
the
widest
meaning
reasonably
assignable,
which
would
include
different
items
and
classes
of
property
as
well
as
the
rarer
class
of
nonproperty.
This
interpretation
would
justify
the
inclusion
of
section
68
in
the
“Rules
Relating
to
Computation
of
Income,""
as
the
section
would
have
a
wide
and
useful
application
in
the
determination
of
taxability
across
the
commercial
spectrum.
It
has
been
said
that
this
result
has
been
achieved
(subsequent
to
the
assessment
here
in
issue)
by
an
amendment
to
section
13.
The
amendment,
effected
by
S.C.
1980-81-82-83,
c.
140,
subsection
6(2),
is
found
in
subsection
13(21.1).
This
is
a
long
and
quite
complex
provision
which
applies
only
to
the
combined
sale
of
buildings
and
subjacent
or
contiguous
land.
It
would
have
no
application,
therefore,
to
a
single
contract
under
which
disposition
is
made
of
different
classes
of
personal
property
attracting
different
rates
of
Capital
cost
allowance
or
different
taxation
treatment
under
the
Act.
Furthermore,
the
section
would
not
appear
to
relate
(but
the
Court
is
not
here
called
upon
to
so
determine)
to
those
situations
where
the
taxpayer
has
disposed
of
buildings
described
in
subsection
(21.1)
for
more
than
their
undepreciated
capital
cost,
but
in
the
view
of
the
taxing
authority
for
less
(under
the
contract
allocation
of
price)
than
the
reasonable
value
of
the
depreciable
property
in
question.
That
is
to
say,
the
section
would
not
appear
to
be
available
to
the
tax
authority
where
the
taxpayer
has
ordered
his^^
affairs
so
as
to
admit
some
liability
for
recaptured
depreciation,
but
less
than
the
tax
collector
considers
to
be
a
“reasonable""
amount.
Therefore,
I
find
the
introduction
of
this
amendment
into
the
statute
after
the
event
to
be
of
little
or
no
assistance
in
determining
the
proper
reach
of
section
68.
I
conclude
that
section
68
is
applicable
to
the
transaction
here
before
the
Court.
It
is
therefore
necessary
to
determine
the
second
issue,
namely
whether
the
Court
of
Appeal
was
correct
in
its
conclusion
that
the
alloca-
tion
of
purchase
price
made
by
the
parties
is
“reasonable”
within
the
meaning
of
the
section.
For
the
reasons
given
by
the
learned
Chief
Justice
and
Mr.
Justice
Heald
in
the
Court
of
Appeal,
in
the
circumstances
of
this
proceeding,
the
allocation
established
by
the
contract
between
the
parties
is
reasonable.
I
therefore
would
dismiss
the
appeal
in
the
manner
proposed
by
Madam
Justice
Wilson.
Wilson,
J.
(Chouinard
and
Lamer,
JJ.
concurring):—This
case
involves
the
interpretation
of
section
68
of
the
Income
Tax
Act,
S.C.
1970-71-72,
c.
63,
as
amended,
and
entails
a
consideration
of
the
Minister
of
National
Revenue's
power
to
deem
an
allocation
of
the
proceeds
of
sale
between
depreciable
and
non-depreciable
property
when
both
are
sold
together
as
a
package.
The
section
reads:
68.
Where
an
amount
can
reasonably
be
regarded
as
being
in
part
the
consideration
for
the
disposition
of
any
property
of
a
taxpayer
and
as
being
in
part
consideration
for
something
else,
the
part
of
the
amount
that
can
reasonably
be
regarded
as
being
the
consideration
for
such
disposition
shall
be
deemed
to
be
proceeds
of
disposition
of
that
property
irrespective
of
the
form
or
legal
effect
of
the
contract
or
agreement;
and
the
person
to
whom
the
property
was
disposed
of
shall
be
deemed
to
have
acquired
the
property
at
the
same
part
of
that
amount.
1.
The
Facts
The
respondents
were
the
sole
partners
in
an
investment
group
known
as
the
Bel
Air
Syndicate
and
jointly
owned
a
27.32-
acre
plot
of
land
on
the
outskirts
of
Edmonton.
On
this
land
they
built
the
Bel
Air
Apartments
consisting
of
25
three-story
walk-up
apartment
buildings
and
developed
the
land
for
residential
use
by
installing
services,
roads,
sidewalks,
etc.
On
March
7,
1973
a
syndicate
consisting
of
N.
M.
Skalbania
Ltd.
and
others
(“Skalbania”)
made
an
unsolicited
offer
to
purchase
the
Bel
Air
property
for
the
sum
of
$5,600,000
in
accordance
with
a
valuation
breakdown
of
$2,600,000
for
the
land,
$2,400,000
for
the
buildings
and
$600,000
for
“trucks,
equipment,
roads,
etc.”
The
respondents
rejected
this
offer
but
pursued
further
negotiations
with
Skalbania.
These
negotiations
were
successful
and
on
March
14,
1973
the
parties
entered
into
an
Agreement
of
Purchase
and
Sale
stipulating
a
total
sale
price
of
$5,850,000.
The
Agreement
expressly
provided
that
of
this
total
price
$5,100,000
was
allocated
to
land
and
$750,000
was
allocated
to
“equipment,
buildings,
roads,
roads,
sidewalks,
etc.”
Based
on
this
allocation
the
respondents
reported
a
small
taxable
capital
gain
resulting
from
the
sale
but
did
not
include
any
recapture
of
capital
cost
allowances
in
computing
their
1973
income.
The
Minister
reassessed
the
respondents
pursuant
to
section
68
of
the
Income
Tax
Act
with
the
result
that
substantial
amounts
of
recaptured
capital
cost
allowances
were
added
to
their
incomes.
The
respondents
appeal
the
Minister’s
reassessment
to
the
Federal
Court.
2.
The
Courts
Below
In
the
Federal
Court
—
Trial
Division
([1980]
C.T.C.
488;
80
D.T.C.
6378)
Mr.
Justice
Mahoney
found
that,
in
assessing
the
apportionment
of
the
purchase
price
between
land
and
depreciated
equipment
and
buildings,
the
Minister
can
under
section
68
deem
a
reasonable
apportionment
without
regard
to
the
figures
stipulated
in
the
Agreement
of
Purchase
and
Sale.
Indeed,
the
entire
trial
proceeded
on
the
assumption
that
section
68
was
applicable
to
this
transaction
and
that
the
only
dispute
was
with
respect
to
the
proper
approach
to
the
computation
of
the
Minister's
deemed
alloca-
tion.
The
Crown's
expert
land
appraiser
testified
that
the
value
of
the
land
alone
at
the
time
of
sale
was
$2,320,000
rather
than
$5,100,000
as
stipulated
in
the
Agreement.
This
figure
was
accepted
by
the
learned
trial
judge
as
being
objectively
correct.
He
then
went
on
to
consider
whether
section
68
called
for
such
an
objective
valuation
or
whether
it
was
more
appropriate
to
consider
the
values
in
question
from
the
point
of
view
of
one
or
the
other
of
the
parties
to
the
transaction.
Mr.
Justice
Mahoney
accepted
that
the
value
of
the
Bel
Air
land
to
Skal-
bania
in
March
1973
was
$5,100,000
as
indicated
in
the
Agreement
and
that
this
was
in
fact
what
Skalbania
had
agreed
to
pay
for
it.
Emphasis
was
placed
on
the
fact
that
Skalbania
was
a
knowledgeable
real
estate
operator
dealing
at
arm's
length
with
the
respondent
vendors
and
that
from
Skalbania’s
point
of
view
this
was
not
an
unreasonable
purchase
price
for
the
land
in
question.
Mahoney,
J.
did
not,
however,
consider
this
finding
to
be
determinative
of
the
valuation
issue
since
what
was
sold
was
not
the
land
alone
but
other
things
along
with
it.
He
proceeded
to
reason
that
what
must
be
determined
under
section
68
is
not
the
value
of
the
land
to
the
purchaser
but:
“the
amount
that
can
reasonably
be
regarded
as
being
the
consideration
for
.
.
.
disposition”
of
the
land
in
the
circumstances
[in
which]
that
land
and
other
things
were
sold.
([1980]
C.T.C.
488
at
490;
80
D.T.C.
6378
at
6380]).
This
was
perceived
as
a
determination
to
be
approached
from
the
point
of
view
of
the
vendor
rather
than
the
purchaser
as
it
is
consideration
for
disposition,
not
consideration
for
acquisition,
that
the
section
specifies.
Having
held
that
the
determination
is
to
be
made
from
the
vendors'
rather
than
the
purchaser's
point
of
view,
Mahoney,
J.
then
found
that
the
respondents
had
led
no
evidence
whatsoever
upon
which
he
could
make
such
a
determination.
Rather
than
deem
an
allocation
between
the
value
of
the
land
and
the
value
of
the
depreciable
property
based
on
the
testimony
of
the
Crown's
expert
witness
alone,
he
referred
the
matter
back
to
the
Minister
for
reassessment
in
accordance
with
the
principle
he
had
set
out.
Ultimately,
these
reassessments
resulted
in
a
substantial
recapture
of
depreciation
brought
into
the
respondents'
1973
income.
The
respondents
appealed
to
the
Federal
Court
of
Appeal
([1983]
2
F.C.
599;
[1983]
C.T.C.
112;
83
D.T.C.
5138).
When
the
appeal
came
on
for
hearing,
the
Court
of
its
own
motion
raised
a
question
as
to
the
applicability
of
section
68
of
the
Income
Tax
Act
to
the
transaction
in
issue.
As
noted
above,
it
was
evident
that
the
action
in
the
Trial
Division
had
proceeded
on
the
basis
that
section
68
did
apply.
Its
applicability
or
otherwise
was
not
argued.
Nor
was
the
matter
advanced
as
a
ground
of
appeal
before
the
Federal
Court
of
Appeal.
Accordingly,
the
Court
heard
the
entire
case
as
prepared
by
both
parties
and
then
adjourned
for
several
days
to
enable
both
counsel
to
prepare
argument
on
whether
or
not
the
section
applied.
Heald,
J.
(with
whom
Verchère,
D.J.
concurred)
held
that
Mahoney,
J.
had
erred
in
applying
the
deemed
apportionment
in
section
68
to
the
transaction
in
issue.
He
commenced
his
analysis
with
an
examination
of
the
legislative
history
of
the
section,
indicating
that
the
enactment
of
section
68
as
part
of
the
1972
Income
Tax
Act
was
accompanied
by
the
repeal
of
the
somewhat
similarly
worded
paragraph
20(6)(g)
of
the
pre-1972
act.
He
noted
that
paragraph
20(6)(g)
was
part
of
a
series
of
provisions
dealing
with
the
recapture
and
inclusion
in
ncome
of
excess
capital
cost
allowance
on
the
disposition
of
an
asset
in
respect
of
which
capital
cost
allowances
had
been
claimed.
The
section
dealt
with
nothing
other
than
the
disposition
of
depreciable
property.
By
contrast,
Heald,
J.
reasoned,
section
68
applies
to
the
disposition
of
any
property.
Whereas
paragraph
20(6)(g)
applied
in
circumstances
where
an
amount
received
by
a
taxpayer
could
reasonably
be
regarded
as
being
in
part
consideration
for
the
disposition
of
depreciable
property
and
in
part
consideration
for
the
disposition
of
something
other
than
depreciable
property,
section
68
applied
only
“in
circumstances
where
an
amount
received
by
a
taxpayer
can
reasonably
be
regarded
as
being
in
part
the
consideration
for
the
disposition
of
any
property
and
as
being
in
part
consideration
for
something
else
other
than
any
property”
(emphasis
in
the
original).
Having
regard
to
the
extremely
broad
definition
of
"property”
found
in
subsection
248(1)
of
the
Act,
Heald,
J.
concluded
that
the
transaction
in
question
disposed
of
property
alone
and
included
nothing
that
could
be
characterized
as
something
"other
than
any
property.”
Accordingly,
he
held
that
subsection
68
had
no
application
to
this
transaction
and
that
the
allocation
set
out
by
the
parties
to
the
Agreement
of
Purchase
and
Sale
must
form
the
basis
of
the
Minister's
assessment.
Thurlow,
C.J.
concurred
in
this
result.
In
separate
reasons
he
expressed
the
view
that,
if
section
68
were
applicable,
the
trial
judge
erred
in
approaching
a
determination
under
the
section
from
the
point
of
view
of
the
vendor
alone.
He
held
that
it
was
therefore
open
to
the
Court
of
Appeal
to
reach
its
own
determination
of
the
amount
that
can
reasonably
be
regarded
as
the
proceeds
of
disposition
of
the
depreciable
property
included
in
the
sale.
He
went
on
to
hold
that,
where
an
allocation
is
made
by
the
parties,
the
inquiry
under
section
68
is
not
as
to
reasonable
value
but
as
to
proceeds
of
disposition.
It
was
open
to
the
taxpayer
to
dispose
of
his
property
as
he
saw
fit
and
to
realize
the
greatest
advantage
in
the
disposition.
Chief
Justice
Thurlow
also
stressed
the
fact
that
the
trial
judge
had
specifically
found
that
$5,100,000
was
not
an
unreasonable
price
for
the
respondents,
for
their
own
reasons,
to
insist
on
receiving
for
the
land
and
for
Skalbania
to
agree
to
pay.
The
contractual
valuation
of
$750,000
for
the
depreciable
property
sold
was
therefore
the
appropriate
basis
on
which
the
tax
assessment
should
proceed.
Although
he
based
his
decision
on
the
above
ground,
Thurlow,
C.J.
also
commented
on
a
case
advanced
by
the
Crown
in
support
of
its
argument
that
section
68
applied
to
this
transaction.
The
Chief
Justice
noted
that
in
Attorney
General
of
Canada
v.
Matador
Inc,
[1980]
2
F.C.
703;
[1980]
C.T.C.
51
(C.A.)
the
applicability
of
section
68
of
the
Act
did
not
appear
to
have
been
seriously
argued.
in
the
view
of
Thurlow,
C.J.
the
case
was
concerned
with
section
13
of
the
Act
and
the
comments
made
on
section
68
by
Pratte,
J.
in
a
footnote
to
the
judgment
were
not
necessary
to
the
decision.
Pratte,
J.
had
expressed
the
view
that
where
land
and
buildings
are
disposed
of
section
68
applies
to
authorize
an
apportionment
of
the
consideration
between
the
land
and
the
buildings.
Thurlow,
C.J.
disagreed
that
section
68
applied
in
that
case
or
in
this
one
either,
but
preferred
to
deal
with
this
case
as
if
the
section
applied
because
it
had
been
argued
on
that
assumption.
3.
The
Applicability
of
section
68
Although
the
Crown's
case
is
premised
on
the
forceful
assertion
that
the
decision
of
the
majority
in
the
Federal
Court
of
Appeal
is
contrary
to
"consistent
judicial
decisions
in
the
past,”
the
question
of
the
applicability
of
section
68
to
circumstances
of
this
type
does
not
appear
to
have
given
rise
to
any
extensive
body
of
case
law.
Indeed,
the
sole
authority
to
which
counsel
for
the
Crown
referred
on
this
point
is
Pratte,
J.'s
footnote
in
Matador
(supra),
where
he
said
at
709
(C.T.C.
56):
Counsel
for
the
respondent
suggested
that
section
68
was
not
applicable
to
this
case.
I
do
not
agree.
In
my
view,
that
section
is
applicable
when
"an
amount
can
reasonably
be
regarded
as
being
in
part
the
consideration
for
the
disposition
of
any
property
of
a
taxpayer
and
as
being
in
part
consideration”
either
for
the
disposition
of
property
of
another
type
or
for
something
other
than
the
disposition
of
property.
[My
emphasis.]
Clearly
Pratte,
J.'s
interpretation
involves
the
insertion
of
words
into
section
68
which
are
not
there.
As
Heald,
J.
pointed
out
in
the
present
case,
the
express
wording
of
the
section
refers
only
to
transactions
involving
the
sale
of
property
together
with
something
other
than
property.
An
example
might
be
the
sale
of
some
technological
equipment
together
with
the
know-how
that
must
necessarily
accompany
the
equipment
since
industrial
know-how
is
outside
the
scope
of
the
broad
definition
of
“property”
found
in
subsection
248(1)
of
the
Income
Tax
Act:
see
Rapistan
Canada
Ltd.
v.
M.N.R.,
[1974]
C.T.C.
495;
74
D.T.C.
6427
(F.C.A.);
aff'd
[1976]
C.T.C.
296;
76
D.T.C.
6177
(S.C.C.).
Or
it
might
be
a
sale
of
property
combined
with
services
of
any
kind.
Mr.
Justice
Pratte,
on
the
other
hand,
went
one
step
further
in
Matador
(supra)
by
adding
the
words
“either
.
.
.
property
of
another
type”
to
the
otherwise
straightforward
language
of
section
68.
Thus,
as
the
Crown
would
have
it,
this
section
applies
not
only
to
transactions
involving
the
disposition
of
both
property
and
non-property
but
is
also
applicable
to
transactions
where
only
property
is
sold
so
long
as
the
subject
matter
of
the
sale
encompasses
property
of
more
than
one
type.
The
Crown
supports
this
interpretation
by
pointing
to
the
policy
underlying
the
now
repealed
paragarph
20(6)(g)
of
the
Act
which
is
described
as
the
predecessor
of
the
present
section
68.
That
subsection
was
found
in
the
part
of
the
Act
dealing
with
depreciable
property
and
capital
cost
allowances
and
applied
specifically
to
transactions
in
which
a
sum
was
received
by
the
taxpayer
“in
part
the
consideration
for
disposition
of
depreciable
property
.
.
.
and
.
.
.
in
part
consideration
for
something
else.”
The
cases
cited
by
the
Crown
in
support
of
the
interpretation
of
section
68
adopted
by
Pratte,
J.
in
Matador
(supra)
all
deal
with
paragraph
20(6)(g)
and
not
with
section
68
and
are
being
invoked
in
an
attempt
to
equate
the
“something
else”
other
than
depreciable
property
in
the
former
section
with
the
“something
else”
other
than
“any
property”
in
the
latter
section:
see
Canadian
Propane
Gas
&
Oil
Ltd.
v.
M.N.R.,
[1972]
C.T.C.
566;
73
D.T.C.
5019
(F.C.T.D.).
As
is
explained
by
Estey,
J.
in
R.
v.
Malloney's
Studio
Ltd.,
[1979]
2
S.C.R.
326,
paragraph
20(6)(g)
allowed
for
precisely
the
type
of
allocation
for
which
the
Crown
is
arguing
in
the
present
case.
Mr.
Justice
Estey
said
at
332:
In
the
opening
portions
of
rule
(g),
provision
is
made
for
the
allocation
of
so
much
of
the
consideration
as
can
reasonably
be
regarded
as
being
in
part
the
consideration
for
the
disposition
of
depreciable
property
and
for
the
allocation
otherwise
of
that
part
of
the
consideration
which
can
be
reasonably
regarded
as
having
been
paid
for
“something
else.”
The
rule
therefore
applies
to
the
situation
where
the
taxpayer
has
disposed
of
two
types
of
property,
first
depreciable
property
and
secondly,
something
else.
It
seems
to
me
fairly
clear,
however,
that
when
the
legislature
contrasts
“something
else”
with
“depreciable
property”
the
“something
else”
will
include
non-depreciable
property
as
well
as
things
which
are
not
property
at
all.
But,
by
the
same
token,
when
the
legislature
contrasts
“something
else”
with
“any
property”
then
the
“something
else”
must
be
something
other
than
property.
As
noted
by
Heald,
J.
in
the
Court
of
Appeal,
section
68
came
into
existence
in
1972
at
which
time
paragraph
20(6)(g)
was
repealed.
However,
the
differences
in
the
wording
of
the
two
sections
and
their
different
locations
within
the
Act
serve
to
indicate
that
the
provisions
embody
two
distinct
policy
objectives.
Whereas
paragraph
20(6)(g)
was
one
of
the
series
of
provisions
dealing
with
the
recapture
of
capital
cost
allowances
upon
the
disposition
of
depreciable
property,
the
parallels
and
successors
to
which
are
now
found
in
section
13
of
the
Act,
section
68
is
found
in
that
portion
of
the
Act
dealing
with
the
computation
of
income
generally.
Its
purpose
is
to
allow
the
Minister
to
deem
an
allocation
between
the
proceeds
of
disposition
of
property
and
sums
received
by
the
taxpayer
in
return
for
something
other
than
property.
Section
68,
being
a
general
rule
relating
to
the
computation
of
income,
would
not
appear
to
be
the
successor
of
paragraph
20(6)(g)
in
the
sense
of
embodying
the
same
policy
objective.
The
function
of
section
68
is
to
allow
income
receipts
to
be
allocated
to
various
sources
(i.e.
property
or
non-property)
rather
than
to
allow
for,
or
have
anything
to
do
with,
the
recapture
of
capital
cost
allowances
upon
the
disposition
of
depreciable
property.
The
fact
that
section
68
was
enacted
as
part
of
a
general
reform
package
in
the
same
year
as
paragraph
20(6)(g)
was
repealed
would
therefore
appear
to
be
irrelevant
to
the
question
of
the
section's
applicability
to
the
type
of
transaction
before
us.
Given
the
clear
language
of
section
68
and
the
way
in
which
the
distinct
policy
objectives
of
the
two
sections
have
been
reflected
in
their
different
locations
in
the
overall
structure
of
the
Act,
the
Crown's
attempt
to
portray
section
68
as
an
ambiguously
worded
successor
to
the
clearly
worded
paragraph
20(6)(g)
would
seem
to
lack
merit.
Neither
provision
was
or
is
ambiguous
in
its
application
and
each
has
its
own
distinct
sphere
of
operation.
As
stated
by
Heald,
J.
in
the
court
below,
section
68
“can
be
expected
to
apply
according
to
its
terms
and
without
straining
the
meaning
of
any
of
them.”
Accordingly,
it
is
operative
only
where
the
taxpayer
has
engaged
in
a
transaction
in
which
proceeds
have
been
received
“in
part
the
consideration
for
the
disposition
of
any
property
and
.
.
.
in
part
consideration
for
something
else
other
than
any
property”
(Heald,
J.,
reasons
for
judgment,
F.C.
606
[C.T.C.
114-15]).
As
the
subject
matter
of
the
transaction
before
us
encompassed
land,
buildings,
equipment,
roads,
sidewalks
and
other
property,
there
was
nothing
sold
that
could
be
characterized
as
non-property
so
as
to
trigger
the
application
of
section
68.
4.
Recapture
of
Capital
Cost
Allowances
It
was
strongly
argued
by
the
Crown
that
if
the
interpretation
of
section
68
articulated
by
Heald,
J.
in
the
court
below
is
affirmed
in
this
Court
and
the
section
found
to
be
inapplicable
to
this
transaction,
then
the
legislative
policy
of
including
“recaptured"
capital
cost
allowances
in
the
taxpayer's
income
will
be
completely
defeated.
The
Crown
submits
that
the
position
adopted
by
Pratte,
J.
in
Matador
(supra)
reflects
a
longstanding
approach
to
transactions
such
as
the
one
in
issue
here
and
that
Parliament
has
relied
on
this
approach
being
maintained
since
no
legislation
has
been
introduced
to
achieve
the
effect
of
the
former
paragraph
20(6)(g).
Accordingly,
if
section
68
is
construed
as
not
applying
to
transactions
like
the
present
one
then,
it
is
submitted,
there
will
be
a
void
in
the
otherwise
complete
legislative
scheme
dealing
with
the
depreciation
of
capital
property
and
recapture
of
capital
cost
allowances.
The
provisions
of
the
Income
Tax
Act
dealing
with
depreciation
and
recapture
are
found
primarily
in
section
20
and
section
13.
Property
that
is
specified
in
the
Income
Tax
Regulations
as
belonging
to
a
class
of
depreciable
property
is
made
subject
under
paragraph
20(1)(a)
to
a
capital
cost
allowance
with
the
rate
of
annual
depreciation
varying
for
each
class
of
property
as
specified
in
the
Regulations.
The
underlying
rationale
for
capital
cost
allowance
is
to
allow
major
expenditures
on
long-term
capital
assets
to
be
written
off
the
taxpayer's
income
over
the
duration
of
the
period
in
which
the
asset
is
to
be
used
rather
than
in
one
large
sum
in
the
year
of
purchase.
The
disposition
of
such
depreciated
capital
property
can
give
rise
to
a
taxable
capital
gain
where,
as
with
any
other
capital
property,
the
proceeds
of
disposition
exceed
the
adjusted
cost
base
of
the
property.
Paragraph
54(a)
stipulates
that
for
depreciable
property
the
initial
capital
cost
of
the
property
to
the
taxpayer
remains
fixed
as
the
adjusted
cost
base
of
the
property.
Upon
receiving
proceeds
of
disposition
of
depreciated
property
the
taxpayer
must
“recapture”
any
amount
written
off
the
property
as
capital
cost
allowance
over
the
years
before
calculating
any
capital
gain
on
the
property.
Subsection
13(1)
of
the
Act
requires
that
any
recapture
amount
be
included
in
the
computation
of
the
taxpayer’s
ordinary
income
since
it
was
deducted
from
income
in
the
first
place
under
paragraph
20(1)(a).
So
long
as
the
proceeds
of
disposition
are
greater
than
the
undepreciated
capital
cost
of
the
property
(i.e.
the
point
to
which
the
property
has
been
depreciated
through
the
deduction
of
annual
capital
cost
allowance)
there
will
be
some
recaptured
capital
cost
to
be
included
in
the
taxpayer's
income
in
the
year
of
disposition.
If
the
proceeds
of
disposition
are
greater
than
the
adjusted
cost
base
(i.e.
the
initial
capital
cost)
of
the
property
then,
of
course,
the
recaptured
amount
brought
into
ordinary
income
will
be
the
total
of
all
capital
cost
allowances
deducted
over
the
years
and
the
amount
by
which
the
proceeds
exceed
the
adjusted
cost
base
will
be
characterized
under
paragraph
38(a)
as
a
taxable
capital
gain.
With
this
scheme
in
mind
some
mechanism
was
clearly
required
in
order
to
differentiate
between
the
proceeds
of
sale
of
property
in
respect
of
which
capital
cost
allowance
had
been
deducted
and
the
proceeds
of
sale
of
non-depreciable
property
when
the
two
were
sold
together
as
a
package.
That
mechanism
prior
to
1972
was
the
“deeming”
power
conferred
on
the
Minister
in
paragraph
20(6)(g).
In
the
omnibus
reform
in
1972
the
legislature
replaced
the
Minister's
discretionary
“deeming”
power
with
the
specific
and
very
detailed
formulae
set
out
in
section
13.
It
apparently
recognized,
however,
in
the
early
eighties
that
no
formula
had
been
provided
for
allocating
proceeds
of
disposition
in
the
type
of
transaction
before
the
court
on
this
appeal.
Section
13
was
accordingly
amended
by
the
addition
after
subsection
(21)
of
subsection
(21.1)
which
specifically
deals
with
the
allocation
of
proceeds
of
disposition
between
a
building
and
its
subjacent
or
immediately
contiguous
land.
The
sale
of
the
Bel
Air
property,
however,
preceded
the
amendment
and
is
therefore
not
caught
by
it.
I
do
not
believe,
however,
that
that
provides
a
rationale
for
this
Court
to
construe
section
68
so
as
to
fill
the
gap
existing
prior
to
the
amendment.
It
seems
to
me
that
if
the
statute
has
failed
to
provide
a
means
whereby
a
figure
can
be
allocated
to
the
depreciable
property
in
a
transaction
such
as
the
one
before
us,
then
the
figure
agreed
upon
by
the
parties
in
an
arm's
length
transaction,
given,
of
course,
that
it
is
not
a
sham
or
subterfuge
(see
M.N.R.
v.Leon
et
al,
[1977]
1
F.C.
249
at
258;
[1976]
C.T.C.
532
at
546,
must
govern.
5.
Conclusions
1.
Section
68
of
the
Income
Tax
Act
on
its
plain
meaning
applies
only
to
transactions
in
which
there
has
been
a
disposition
of
property
and
something
else
other
than
property.
That
is
not
the
case
here.
2.
The
legislative
history
of
section
68
and
its
place
within
the
scheme
of
the
Act
reinforce
this
plain
meaning.
Despite
some
similarity
in
language
between
the
former
paragraph
20(6)(g)
and
section
68,
the
latter
is
not
the
successor
of
the
former.
3.
The
statutory
provisions
governing
recapture
of
capital
cost
allowance
clearly
require
an
allocation
of
proceeds
as
between
depreciable
and
nondepreciable
property.
Prior
to
1972
this
was
achieved
through
the
mechanism
of
the
Minister’s
discretionary
power
in
paragraph
20(6)(g).
It
is
now
achieved
through
the
specific
provisions
of
section
13.
Subsection
13(21.1)
would
have
caught
the
sale
of
the
Bel
Air
property
had
it
taken
place
after
the
enactment
of
that
provision.
4.
The
majority
of
the
Federal
Court
of
Appeal
was
correct
in
holding
that
section
68
of
the
Income
Tax
Act
is
not
policywise
the
successor
to
the
repealed
paragraph
20(6)(g)
and
that
section
68
does
not
empower
the
Minister
to
reassess
the
contractual
allocation
of
the
proceeds
of
disposition
of
the
Bel
Air
property
between
the
depreciable
and
non-depreciable
property
included
in
the
sale.
The
allocation
agreed
upon
by
the
parties
must
therefore
stand.
I
would
dismiss
the
appeal
and
award
the
respondents
their
costs
on
a
solicitor-client
basis
as
ordered
by
this
Court
on
June
6,
1983.
Appeal
dismissed.