Pratte, J.:—The only issue on these appeals is whether the payment of a sum of $65,000 to a partnership named Grovedale Realty Co. (Grovedale) gave rise to a Capital gain in a like amount.
A company named Administration Guipar Inc. (Guipar) had apparently agreed to purchase an immovable property owned by Grovedale. It had also been agreed that if the purchaser failed to sign the deed of sale on or before April 18, 1977, the agreement would be cancelled and a sum of $65,000, which had been deposited with a trust company by the purchaser, would be forfeited to the vendor “as partial liquidated damages". The purchaser failed to sign the deed of sale. As a consequence, the sum of $65,000 was paid to Grovedale. It is the receipt of that sum which, according to the judgment under attack, gave rise to a capital gain.
The respondent contends
(a) that following Guipar's failure to sign the deed of sale, Grovedale acquired a right to receive the sum of $65,000;
(b) that when Grovedale received payment of that sum, it made a disposition of property within the meaning of clause 54(c)(ii)(B) of the Income Tax Act;
(c) that, as a consequence, pursuant to subsection 40(1), the receipt of the sum of $65,000 gave rise to a capital gain equal to the amount by which the proceeds of that disposition ($65,000) exceeded the adjusted cost base of the right disposed of by Grovedale;
(d) that, finally, the cost of the property or right disposed of by Grovedale was “Nil” and, as a consequence, the full amount of $65,000 received by Grovedale constituted a capital gain.
In order to decide this case, it is not necessary to determine whether all those contentions are well founded since, even it is assumed, for purposes of discussion, that Grovedale disposed of property within the meaning of clause 54(c)(ii)(B) when it received the payment of $65,000, the record does not allow us to say that the adjusted cost base of the property disposed of by Grovedale was less than $65,000.
The amount of $65,000 was ostensibly paid in partial satisfaction of Grovedale's right to claim damages from Guipar. Counsel for the respondent agreed that the cost of that right to Grovedale was the value of the loss suffered by Grovedale as a result of the cancellation of the sale. He said, however, that Grovedale, according to the record, had suffered no such loss and, consequently, had incurred no costs to acquire the property disposed of.
That contention is ill-founded. It is common ground that the Minister had, in this case, the burden of establishing the correctness of the assessments since he was trying to support them on grounds that were different from those on which they were based. The record, as we read it, contains no evidence showing that the sum of $65,000 was something other than damage paid to compensate Grovedale of a loss really suffered by it. It follows that the cost of the property disposed of by Grovedale has not been shown to be less than the $65,000 it received.
For these reasons, the appeals will be allowed, the judgments of the Trial Division will be set aside, the reassessments will be vacated and referred back to the Minister for reassessment on the basis that the share of each appellant in the sum of $65,000 received by Grovedale from Guipar does not constitute a capital gain. The appellants shall be entitled to their costs in this Court as well as in the Trial Division.
Appeals allowed.