Estey,
J:—The
disposition
of
this
appeal
calls
for
the
interpretation
of
those
sections
of
the
Income
Tax
Act
of
Canada,
RSC
1952,
c
148
as
amended,
which
relate
to
the
allocation
of
proceeds
on
the
disposition
of
depreciable
property
and
other
property,
which
in
turn
will
determine
the
capital
cost
of
certain
of
the
property
of
the
respondent
for
the
purpose
of
calculating
a
deduction,
commonly
referred
to
as
capital
cost
allowance,
in
computing
the
tax
liability
of
the
respondent
in
the
years
1966
and
1967.
The
factual
background
to
this
issue
can
be
briefly
stated.
The
tax-
payer/respondent
owned
and
operated
a
restaurant
on
land
situated
in
downtown
Toronto.
This
real
property
adjoined
a
hospital
which
had
expropriating
powers.
The
hospital
notified
the
taxpayer
that
it
required
the
property
of
the
respondent
for
expansion
purposes,
and
in
the
ensuing
negotiations
the
parties
agreed
upon
the
terms
of
the
sale
which
were
reduced
to
a
contract
duly
signed
and
executed
wherein
the
respondent
agreed
to
deliver
on
closing
“vacant
possession
of
the
real
property
.
.
.
to
the
purchaser,
clear
of
all
buildings”.
This
contract
was
set
out
on
the
standard
Toronto
Real
Estate
Board
Agreement
of
Purchase
and
Sale,
and
apart
from
typewritten
inserts
with
reference
to
the
description
of
the
parties
and
the
property
being
bought
and
sold,
as
well
as
the
price,
time
for
searching
title
and
date
of
closing,
the
only
typewritten
insert
is
the
expression
“clear
of
all
buildings”.
The
transaction
was,
after
some
postponements,
ultimately
closed
by
the
delivery
of
a
deed
from
the
vendor/respondent
to
the
hospital
dated
October
29,
1963
and
registered
in
the
Registry
Office
of
Toronto
on
November
17,1964.
The
evidence
is
that
on
closing
the
property
so
conveyed
was
“clear
of
all
buildings’’,
these
having
been
removed
from
the
property
by
a
contractor
engaged
by
the
respondent
and
which
contractor
was
paid
the
fee
of
$750
plus
all
salvage,
for
so
doing.
Prior
to
closing,
the
respondent
had
been
able
to
purchase
replacement
premises
nearby
and
to
move
its
business
to
those
premises.
The
appellant
assessed
the
respondent
on
the
basis
that
the
respondent
has
disposed
of
depreciable
property
and
accordingly
must
set
off
against
its
undepreciated
capital
cost
of
class
3
assets
$80,000
of
the
$280,000
received
from
the
sale.
The
Tax
Appeal
Board
allowed
the
respondent’s
appeal
from
the
assessment,
Board
member
W
O
Davis,
QC
stating:
I
am
satisfied
that
no
portion
of
the
selling
price
of
the
property
...
can
be
reasonably
regarded
as
proceeds
of
disposition
of
the
building.
An
appeal
by
way
of
trial
de
novo
was
taken
by
the
Minister
of
National
Revenue
and
was
allowed
by
Dubé,
J
of
the
Federal
Court
of
Canada
who
was
of
the
view
that
part
of
the
$280,000
was
proceeds
of
disposition
of
depreciable
property
as
“compensation
for
property
destroyed’’
under
subparagraph
20(5)(c)(ii)
of
the
Act.
The
Federal
Court
of
Appeal
allowed
the
taxpayer’s
appeal
from
this
judgment
and
held
that
there
were
no
proceeds
of
disposition
of
depreciable
property
within
the
meaning
of
that
phrase
in
the
Act.
The
appellant
makes
three
principal
arguments.
Firstly,
the
appellant
says
that
the
building
heretofore
existing
on
the
land
owned
by
the
respondent
and
which
was
in
existence
at
the
time
the
contract
for
sale
was
signed
by
both
parties,
became
in
equity
the
property
of
the
purchaser
(the
Hospital),
and
therefore,
the
taxpayer
did
in
fact
and
in
substance,
whatever
the
form
of
the
agreement,
sell
the
land
and
the
buildings,
thereby
entitling
the
Minister
to
allocate
as
he
did
$80,000
of
the
proceeds
of
sale
as
the
consideration
paid
for
the
building.
The
parties
agree
that
in
law,
a
purchaser,
upon
signing
a
contract
to
purchase,
does
indeed
become
the
equitable
owner
of
all
property
bargained
for
and
sold
under
the
contract
of
sale.
The
short
answer
to
this
proposition
is
that
as
the
building
is
not
made
the
subject
of
the
contract,
no
equitable
interest
arose
in
the
Hospital.
No
part
of
the
purchase
price
can
therefore
be
said
to
be
referrable
to
any
such
interest
in
the
building.
There
can
be
no
doubt
that
the
contract
did
indeed
deal
only
with
land
“clear
of
buildings’’,
and
even
if
a
court
is
entitled
to
go
behind
the
contract
and
examine
the
negotiations
leading
up
to
its
signature,
it
is
clear
that
the
purchaser
required
only
the
land,
and
the
vendor,
being
aware
of
this
set
out
to
sell
only
land
to
the
hospital.
The
fact
that
a
vendor
may
have
established
the
worth
of
the
land
to
it
on
the
basis
of
its
usefulness
to
it
in
its
business
of
operating
a
restaurant
does
not,
in
my
view,
qualify
the
nature
of
the
resulting
contract
in
any
substantive
way.
Furthermore,
the
circumstance
that
the
hospital
had
expropriating
powers
and
could,
if
it
so
desired,
have
taken
the
land
with
the
building
on
it,
has
no
bearing
on
the
classification
of
the
transaction
in
law,
or
the
application
of
the
relevant
provisions
of
the
Act
to
that
transaction.
For
whatever
reason,
the
record
reveals
that
neither
the
hospital
nor
the
respondent
wished
to
have
recourse
to
their
respective
rights
on
expropriation
and
hence
agreement
was
reached
and
reduced
to
the
above-described
contract.
The
appellant’s
second
submission
is
that
the
sale
of
the
property
by
the
taxpayer
produced
“proceeds
of
disposition’’
as
that
term
is
defined
in
paragraph
20(5)(c)
of
the
Act
which
provides
as
follows:
(5)
In
this
section
and
regulations
made
under
paragraph
(a)
of
subsection
(1)
of
section
11,
(c)
“proceeds
of
disposition”
of
property
include
(i)
the
sale
price
of
property
that
has
been
sold,
(ii)
compensation
for
property
damaged,
destroyed,
taken
or
injuriously
affected,
either
lawfully
or
unlawfully,
or
under
statutory
authority
or
otherwise,
(iii)
an
amount
payable
under
a
policy
of
insurance
in
respect
of
loss
or
destruction
of
property,
These
proceeds,
in
the
appellant’s
view,
fall
within
subparagraph
(c)(ii)
because
the
sale
entailed
a
destruction
of
the
building
and
hence
a
portion
of
the
sale
proceeds
is
compensation
to
the
respondent
for
this
destruction.
This
argument
was
advanced
in
the
Federal
Court
of
Appeal,
and
Mr
Justice
Urie,
in
speaking
for
the
Court,
disposed
of
such
submission
as
follows:
In
so
far
as
section
20(5)(c)(ii)
is
concerned,
in
our
view,
it
has
no
application.
As
we
read
it,
the
“compensation”
for
property
“damaged”,
“destroyed”,
“taken”
or
“injuriously
affected”
there
referred
to
is
an
amount
received
or
receivable
from
a
third
person
who
has
damaged,
destroyed,
taken
or
injuriously
affected
property
of
the
taxpayer*.
When
the
appellant
sold
land
“clear
of
all
buildings”,
the
sale
price,
in
our
view,
was
payment
for
the
land
and
no
part
of
it
can
be
regarded
as
“compensation”
for
buildings
that
the
appellant
had
to
remove
between
the
making
of
the
agreement
for
sale
and
its
completion
in
order
to
carry
out
the
agreement
in
accordance
with
its
terms.
With
respect,
I
adopt
this
reasoning
as
completely
disposing
of
such
submission.
The
appellant
then
submits
that
a
right
of
allocation
of
the
sale
proceeds
as
between
land
and
building
is
to
be
found
in
paragraph
20(6)(g)
of
the
Income
Tax
Act
which
provides
as
follows:
(6)
For
the
purpose
of
this
section
and
regulations
made
under
paragraph
(a)
of
subsection
(1)
of
section
11,
the
following
rules
apply:
(g)
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;
There
are
two
fatal
obstacles
to
the
application
of
this
subsection
of
section
20
to
the
facts
of
this
case.
Firstly,
it
is
argued
by
the
appellant
that
demolition
is
equal
to
disposition
and
counsel
for
the
respondent
accepts
this
submission.
However,
that
is
not
the
end
of
the
problem.
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.
When
this
factual
situation
occurs,
the
rule
then
permits
the
allocation
of
that
part
of
the
consideration
received
in
the
total
transaction
to
depreciable
assets
as
“can
reasonably
be
regarded
as
being
in
part
the
consideration
for
disposition
of
depreciable
property
of
a
taxpayer’’.
The
rule
does
not
permit
the
Minister
to
characterize
a
transaction
as
one
which
could
reasonably
be
regarded
as
being
in
part
the
sale
of
depreciable
property
and
in
part
the
sale
of
something
else.
The
rule
operates
only
as
a
second
stage,
the
first
stage
being
the
agreement
or
valid
determination
that
the
sale
involves
both
a
sale
of
depreciable
property
and
a
sale
of
something
else.
Here
the
contract
demonstrably
relates
only
to
the
sale
of
vacant
land.
There
is
no
contractual
reference
to
depreciable
property
and
no
bill
of
sale
or
other
transfer,
deed,
or
assignment
was
delivered
on
closing
relating
to
any
depreciable
asset.
Only
the
deed
conveying
the
land
on
which
no
buildings
were
then
located,
was
delivered
upon
receipt
of
the
consideration
of
$280,000.
The
second
obstacle
to
the
applicability
of
rule
(g)
when
bare
demolition
occurs
with
nothing
more
arises
from
the
portion
of
the
rule
appearing
after
the
semicolon,
which
provides:
;
and
the
person
to
whom
the
depreciable
property
was
disposed
of
shall
be
deemed
to
have
acquired
the
property
.
.
.
Grammatically,
the
depreciable
property
there
referred
to
is
the
same
depreciable
property
as
referred
to
in
the
opening
of
rule
(g),
and
the
past
tense
“was
disposed
of”
likewise
refers
back
to
the
“disposition”
mentioned
in
the
second
line
of
the
opening
part
of
rule
(g).
Thus
it
seems
abundantly
clear
that
for
the
purposes
of
the
invocation
of
rule
(g),
the
disposition
in
question
must
be
bilateral
and
include
both
a
disposer
and
“the
person
to
whom
the
depreciable
property
was
disposed
of”,
whether
or
not
such
person
may
thereupon
become
entitled
to
any
capital
cost
allowance
under
the
Act.
Here
the
demolition
involved
no
recipient,
at
least
as
regards
the
hospital.
It
may
conceivably
be
argued
that
the
taxpayer
disposed
of
the
building
by
selling
it
to
the
demolition
contractor
and
the
proceeds
of
sale
would
at
the
most
be
the
saving
effected
by
the
taxpayer
in
avoiding
the
cost
of
tearing
the
building
down
himself.
This
is
rather
fanciful,
and
in
any
case,
would
not
advance
the
position
of
the
appellant.
In
both
form
and
substance,
the
disposition
here,
in
the
bilateral
sense,
relates
only
to
vacant
land.
It
is
well
before
proceeding
further
with
the
submissions
made
before
this
Court,
to
point
out
that
we
are
not
here
concerned
with
disposition
only,
but
with
the
“proceeds
of
disposition”,
for
it
is
that
quantity
which
is
applied
against
the
undepreciated
capital
cost
by
way
of
deduction
which
sequentially
determines
the
amount
of
capital
cost
allowance
to
which
the
respondent
will
thereafter
be
entitled;
and
hence
will
influence
its
tax
Obligation.
Under
paragraph
20(5)(b)
it
is
provided:
(5)
In
this
section
and
regulations
made
under
paragraph
(a)
of
subsection
(1)
of
section
11,
(b)
“disposition
of
property”
includes
any
transaction
or
event
entitling
a
taxpayer
to
proceeds
of
disposition
of
property;
(Underlining
added)
Demolition
of
a
building
does
not
in
ordinary
parlance
or
arrangements
produce
an
entitlement
in
the
owner
to
proceeds
of
disposition
where
the
demolition
is
carried
out
by
that
owner.
It
may
be
argued
in
these
circumstances
that
when
the
respondent
so
ordered
his
affairs
as
to
be
able
to
sign
a
contract
obligating
it
to
remove
the
building
and
thereafter
did
remove
the
building,
demolition
was
indeed
an
“event
entitling
a
taxpayer
to
proceeds
of
disposition
..of
the
building.
The
taxpayer
has
covenanted
only
to
deliver
on
closing
‘‘vacant
possession
of
real
property
...
clear
of
all
buildings”.
It
was
open
to
the
respondent
to
transport
the
building
as
a
unit
to
other
property
without
any
claim
for
adjustment
or
breach
of
contract
by
the
purchaser.
Similarly,
it
was
open
to
the
respondent,
as
indeed
it
may
well
have
done,
to
remove
some
or
all
of
the
fixtures
installed
in
the
building
for
the
conduct
of
the
business
of
the
taxpayer.
Again
such
removal
would
entail
no
adjustment
on
closing
or
damages
for
breach
of
contract.
This
is
factually
the
revers
of
the
Aberdeen
case,
infra,
where
in
order
to
sell
one
asset,
the
taxpayer
was
required
by
contract
to
liquidate
another.
In
my
view
of
these
facts
there
has
been
no
“disposition
of
property”
within
the
meaning
of
that
expression
as
it
is
employed
in
subsection
20(5).
We
are
here,
of
course,
dealing
with
a
taxation
statute
and
a
clear
and
unambiguous
wording
would
be
required
in
the
Act
to
support
the
appellant’s
submission
with
reference
to
subsection
20(5).
The
appellant
made
reference
in
the
course
of
argument
to
the
unreported
decision
of
this
Court
in
Sa
Majesté
La
Reine
c
Compagnie
Immobilière
BCN
Limitée,
[1979]
CTC
71;
79
DTC
5068,
pronounced
on
February
6,
1979
wherein
reference
is
made
to
some
aspects
of
the
capital
cost
provisions
in
the
Income
Tax
Act.
In
that
case,
however,
the
taxpayer
conveyed
the
building
in
question
to
a
third
party
by
an
emphyteutic
lease
for
the
purpose
of
enabling
the
third
party
to
whom
the
building
was
so
conveyed
to
demolish
it
and
to
build
a
new
building
on
the
lands
in
question.
Mr
Justice
Pratte,
in
giving
judgment
for
the
Court,
said:
The
Transportation
Building
which
was
in
the
full
ownership
of
Respondent
was
conveyed
by
it
to
the
Société
in
January
1965
under
the
second
lease
and
it
was
immediately
demolished.
The
nature
of
the
transaction
in
that
case
was
thus
quite
different
from
that
in
the
appeal
now
before
this
Court.
The
appellant
found
support
for
its
principal
submission
with
reference
to
the
true
substance
of
the
transaction
of
sale
here
before
the
Court
in
the
decision
of
the
House
of
Lords
in
Aberdeen
Construction
Group
Ltd
v
Inland
Revenue
Commissioners,
[1978]
2
WLR
648.
There
the
taxpayer
sold
its
shares
in
a
subsidiary
corporation
for
a
sale
price
of
£250,000
which
was
some
£136,000
in
excess
of
its
cost
of
acquiring
those
shares
ten
years
earlier.
In
the
meantime,
the
subsidiary
had
incurred
substantial
losses
made
good
in
part
by
loans
from
the
taxpayer
totalling
£500,000
at
the
time
of
the
sale
of
its
shares
in
the
subsidiary.
Under
the
terms
of
the
contract
of
sale
relating
to
these
shares,
the
taxpayer
as
a
condition
of
the
sale
agreed
to
“waive
the
loan”
of
£500,000.
The
taxpayer
challenged
the
assessment
for
the
“profit”
of
£136,000
on
the
grounds
that
in
order
to
realize
the
pro-
ceeds
of
sale,
the
taxpayer
incurred
a
loss
of
the
capital
advanced
to
the
subsidiary
of
£500,000.
Lord
Wilberforce
describes
the
factual
basis
for
the
transaction
at
651
as
follows:
At
March
10,
1971,
on
the
basis
of
Rock
Fall’s
draft
balance
sheet
at
December
31,
1970,
the
Rock
Fall
shares
had
little
or
no
value:
certainly
they
could
not
be
worth
par;
still
more
certainly
they
could
not
be
worth
£2
each,
a
value
they
would
have
to
possess
if
a
price
of
£250,000
was
to
be
justified.
On
the
other
hand,
if
the
debt
of
£500,000
were
to
be
removed
the
position
would
be
very
different:
there
would
be
tangible
assets
and
tax
losses
which
might
well
be
of
considerable
value
to
a
purchaser.
The
agreement
of
March
10,
1971,
is
drafted
so
as
to
deal
with
this
situation;
it
does
so
by
paragraph
1,
“Aberdeen
waive
the
loan.”
I
can
only
read
this
as
a
contractual
provision
to
be
performed
by
the
sellers
of
the
shares:
in
other
words,
leaving
aside
the
subsidiary
matters
dealt
with
in
the
other
clauses,
the
contract
is
that
(1)
the
appellants
shall
transfer
the
shares
and
waive
the
loan,
(2)
Westminster
will
pay
£250,000.
The
effect
of
this
is
that
Westminster
was
paying
£250,000
not
only
for
the
shares,
but
for
the
composite
obligation
undertaken
by
the
appellants.
If
this
is
right,
in
order
to
ascertain
what
Westminster
was
paying
and
the
appellants
receiving
for
their
shares,
an
apportionment
would
have
to
be
made
of
the
sum
of
£250,000
between
these
two
obligations.
Unlike
the
case
now
before
the
Court,
the
value
of
the
asset
being
sold
by
the
taxpayer
was
enhanced
by
the
performance
of
the
condition
that
the
loan
be
waived,
and
it
mattered
not
whether
the
formal
waiver
occurred
before
or
after
the
closing.
The
taxpayer
here
did
not
increase
the
value
of
the
real
estate
by
clearing
the
land
of
buildings
except
to
the
extent
that
it
would
have
saved
the
purchaser
the
$750
fee
for
demolition
which
I
have
mentioned.
At
most,
the
purchaser
would
have
an
action
for
breach
of
contract
against
the
vendor
for
failure
to
clear
the
land
with
damages
amounting
of
$750
(and
perhaps
damages
for
delay
thereby
occasioned).
In
the
Aberdeen
case,
supra,
the
shares
as
found
by
the
House
of
Lords
had
little
or
no
value
unless
the
vendor
waived
the
loan
and
thereby
freed
the
subsidiary,
whose
shares
were
the
subject
of
the
contract
for
sale,
of
the
burden
of
repayment.
Lord
Fraser
at
657
put
it
this
way:
The
contract
was
not
for
the
purchase
of
shares
in
a
company
whose
loan
capital
had
already
been
extinguished,
but
was
for
the
purchase
of
shares
on
condition
that
the
seller
also
undertook
to
extinguish
the
loan.
The
Law
Lords
dissenting
(Viscount
Dilhorne
and
Lord
Russell
of
Killowen)
took
the
view
that
the
sale
was
of
shares
only
and
no
apportionment
of
price
between
the
shares
and
the
waiver
could
be
made
and
therefore
the
£250,000
was
referrable
alone
to
the
transfer
of
the
shares.
Far
from
supporting
the
appellant,
the
Aberdeen
case,
supra,
in
my
view,
underlines
the
submissions
of
the
respondent
that
the
sale
of
the
land
here
was
independent
of
and
entirely
free
from
any
association
with
the
prior
existence
of
the
building.
The
appellant
argues
that
it
is
an
unfair
and
unrealistic
result
that
the
taxpayer
is,
after
this
transaction
is
complete,
entitled
to
take
the
sale
proceeds,
free
of
any
claim
for
recaptured
capital
cost
allowance.
Mutuality
of
tax
treatment
of
parties
to
the
same
transaction,
or
even
the
avoidance
of
double
taxation
have
never
been
principles
with
which
the
draftsmen
of
taxing
statutes
have
ever
regarded
themselves
as
saddled.
Indeed,
“fairness
and
realism’’
have
never
been
the
governing
criteria
for
the
interpretation
of
taxing
statutes.
Lord
Cairns
in
Partington
v
Attorney-General
(1869),
LR
4
HL
100
at
122
put
it
this
way:
I
am
not
at
all
sure
that,
in
a
case
of
this
kind—a
fiscal
case—form
is
not
amply
sufficient;
because,
as
I
understand
the
principle
of
all
fiscal
legislation,
it
is
this:
if
the
person
sought
to
be
taxed
comes
within
the
letter
of
the
law
he
must
be
taxed,
however
great
the
hardship
may
appear
to
the
judicial
mind
to
be.
On
the
other
hand,
if
the
Crown,
seeking
to
recover
the
tax,
cannot
bring
the
subject
within
the
letter
of
the
law,
the
subject
is
free,
however
apparently
within
the
spirit
of
the
law
the
case
might
otherwise
appear
to
be.
In
other
words,
if
there
be
admissible,
in
any
statute,
what
is
called
equitable
construction,
certainly
such
a
construction
is
not
admissible
in
a
taxing
statute
where
you
simply
adhere
to
the
words
of
the
statute.
For
these
reasons
I
therefore
would
dismiss
the
appeal
with
costs.
Pigeon,
J:—Malloney’s
Studio
Limited
(the
“taxpayer”)
operated
a
restaurant
in
a
building
of
which
it
was
the
owner
in
downtown
Toronto.
In
1963,
it
was
informed
that
the
land
on
which
the
building
stood
was
required
by
the
Women’s
College
Hospital,
a
corporation
which
had
expropriation
powers
in
respect
of
this
land.
The
taxpayer
thereupon
negotiated
with
one
Murray
Bosley,
a
real
estate
agent
acting
for
the
hospital.
In
view
of
the
sale
of
the
property
on
the
basis
of
the
value
of
the
whole
to
the
owner,
Bosley
offered
$250,000.
The
taxpayer
offerred
to
sell
for
$300,000.
Then,
on
September
4,
1963,
it
accepted
an
offer
of
$280,000.
The
agreement
of
purchase
and
sale
signed
on
that
date
provides:
This
transaction
of
purchase
and
sale
is
to
be
completed
on
or
before
the
1st
day
of
July
1964
on
which
date
vacant
possession
of
the
real
property
is
to
be
given
to
the
Purchaser
clear
of
all
buildings.
(What
I
have
underlined
is
typewritten
on
the
printed
form).
On
October
11,
1963,
the
taxpayer
executed
with
a
contractor
a
contract
for
the
demolition
of
the
building
for
the
price
of
$750.
This
contract
contained
the
following
stipulation:
In
addition
to
the
stated
price,
all
salvageable
materials
shall
belong
to
the
CONTRACTOR
.
.
.
It
called
for
the
work
to
be
completed
by
July
1,1964,
this
being
the
delivery
date
fixed
in
the
agreement
of
sale,
but
the
taxpayer
obtained
an
extension
to
November
1964.
The
deed
of
sale
was
then
executed
dated
29
October
1963
and
was
registered
on
November
17,
1964.
In
the
meantime,
the
taxpayer
had
acquired
another
property
in
the
vicinity
and
had
renovated
it
to
make
it
suitable
for
its
purposes.
The
question
which
arises
is
whether
any
part
of
the
selling
price
of
$280,000
is
attributable
to
the
building
for
capital
cost
allowance
purposes
under
the
provisions
of
paragraph
20(6)(g)
of
the
Income
Tax
Act
(RSC
1952
c
148
as
amended):
(g)
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;
Under
the
decision
of
this
Court
in
R
RA
Stanley
v
MNR,
([1972]
CTC
34,
affirming
[1969]
CTC
430;
[1967]
Tax
ABC
1048;
72
DTC
6004,
affirming
69
DTC
5286;
67
DTC
700)
it
is
clear
that,
if
the
taxpayer
had
sold
the
whole
property
to
the
hospital,
a
part
of
the
sale
price
corresponding
to
the
value
of
the
building
to
the
seller
would
have
to
be
regarded
as
being
the
consideration
for
its
disposition,
although
this
building
was
of
no
value
to
the
buyer
and
was
intended
to
be
demolished
immediately.
The
question
that
arises
in
the
present
case
is
whether
it
makes
a
difference
that
the
vendor
contracted
to
have
the
building
removed
before
delivery
of
the
land
so
as
to
deliver
it
bare.
Dubé,
J
hearing
the
case
by
trial
de
novo
in
the
Federal
Court,
on
appeal
from
the
Tax
Appeal
Board
([1971]
Tax
ABC
791;
71
DTC
551)
held
in
effect
that
it
made
no
difference
and
that
$80,000
should
be
regarded
as
consideration
for
the
disposition
of
depreciable
property
([1975]
CTC
542;
75
DTC
5377).
This
judgment
was
reversed
by
the
Federal
Court
of
Appeal
([1978]
CTC
385;
78
DTC
6278)
hence
the
present
appeal
by
leave
of
this
Court.
In
my
view,
Dubé,
J
reached
the
proper
conclusion.
There
is
no
doubt
that
the
taxpayer
made
a
disposition
of
its
building;
the
only
question
is
whether
it
disposed
of
it
by
its
agreement
of
sale
of
the
land
or
by
its
demolition
contract
with
a
wrecker.
I
cannot
agree
with
the
Court
of
Appeal
that
the
taxpayer
did
not
make
a
disposition
of
the
building
by
the
agreement
of
sale
because
this
agreement
called
for
delivery
of
the
bare
land
and
therefore
reserved
the
building
to
its
owner.
This
is
to
overlook
an
essential
aspect,
the
nature
of
the
property
which
was
the
subject
matter
of
the
operation.
All
the
taxpayer
owned
was
land,
it
did
not
own
the
building
otherwise
than
as
part
of
the
freehold.
This
structure
could
not
remain
a
building
apart
from
the
land.
It
could
have
remained
a
building
only
if
the
owner
had
retained
an
interest
in
the
land
which,
of
course,
was
exactly
what
was
not
intended.
By
contracting
to
deliver
the
land
without
the
building
the
taxpayer
in
effect
contracted
to
turn
this
part
of
the
realty
into
personalty.
This
destroyed
the
building
as
such,
that
is,
as
a
piece
of
real
estate.
As
a
result
of
the
agreement
of
sale
of
the
land,
the
building
severed
from
the
land
became
an
obligation
instead
of
an
asset.
The
taxpayer
having
contracted
to
deliver
the
land
without
it
could
not
even
give
it
away
for
nothing,
it
had
to
pay
for
having
it
removed.
This
was
done
only
because,
by
the
agreement
of
sale,
the
taxpayer
was
obliged
to
do
so.
The
buyer
was
entitled
to
specific
performance
and
would
have
been
entitled
to
an
order
from
the
Court
to
have
the
removal
effected
at
the
expense
of
the
vendor
if
the
latter
had
failed
to
do
it.
It
is
therefore
incorrect
to
treat
the
situation
as
if
this
was
an
owner
who
had
decided
to
demolish
a
building
because
it
appeared
more
profitable
to
own
bare
land.
The
contract
with
the
wrecker
was
entered
into
only
after
the
agreement
of
sale
had
been
made.
In
my
view
this
shows
that
the
consideration
for
that
agreement
was
really
not
the
bare
land
only
but
also
the
obligation
of
making
the
land
bare,
which
implied
the
obligation
to
destroy
the
building
as
a
building.
The
taxpayer’s
building
was
not
like
the
stamp
mill
of
the
mining
licensee
in
Liscombe
Falls
Gold
Mining
Co
v
Bishop
(1905),
35
SCR
539.
That
stamp
mill
was
a
chattel,
not
part
of
any
land.
Here
we
are
dealing
with
a
building
of
the
usual
kind
which
was
clearly
part
of
the
land
and
would
effectively
be
destroyed
as
a
piece
of
real
estate
by
being
severed.
In
Gateway
Lodge
Ltd
v
MNR,
([1967]
CTC
199;
67
DTC
5138)
Jackett,
P,
as
he
then
was,
said
when
dealing
with
buildings
on
a
leasehold
interest,
(at
5142):
...
it
seems
clear
that
the
appellant’s
leasehold
interest
in
the
land,
of
which
the
buildings
formed,
in
the
view
of
the
law,
a
part,
falls
within
prescribed
class
13
and
not
within
prescribed
class
6.
Class
6
extends
only
to
property
“not
included
in
any
other
class”
that
is
a
building
and
the
appellant’s
leasehold
interest
clearly
falls
within
class
13.
Here
the
taxpayer
was
the
owner
of
the
freehold
and
therefore
the
building
was
part
of
the
land.
By
contracting
to
deliver
the
bare
land
the
taxpayer
effectively
contracted
to
remove
the
building
therefrom
and
therefore
to
turn
into
personalty.
The
demolition
contract
was
not
a
contract
for
the
disposition
of
land
but
of
personalty.
That
contract
was
not
a
legal
consequence
of
the
agreement
of
sale,
the
fulfilment
of
an
obligation
undertaken
thereunder.
The
destruction
of
the
value
of
the
building
did
not
arise
out
of
that
later
contract,
but
out
of
the
agreement
of
sale
and
therefore
it
was
part
of
the
consideration
for
which
this
was
made.
I
do
not
find
it
necessary
to
discuss
at
great
length
the
definitions
of
“disposition
of
property”
and
of
“proceeds
of
disposition”
in
subsection
20(5)
of
the
Act.
So
far
as
relevant,
these
read:
(b)
“disposition
of
property”
includes
any
transaction
or
event
entitling
a
taxpayer
to
proceeds
of
disposition
of
property;
(c)
“proceeds
of
disposition”
of
property
include
(i)
the
sale
price
of
property
that
has
been
sold,
(ii)
compensation
for
property
damaged,
destroyed,
taken
or
injuriously
affected,
either
lawfully
or
unlawfully,
or
under
statutory
authority
or
otherwise,
In
the
recent
judgment
of
this
Court
in
Her
Majesty
The
Queen
v
Compagnie
Immobilière
BCN
Limitée,
[1979]
CTC
71;
79
DTC
5068,
Pratt,
J
said
for
the
Court:
In
the
context
of
subsection
20(5),
the
definitions
of
“disposition
of
property”
and
“proceeds
of
disposition”
cannot
be
said
to
be
exhaustive;
these
expressions
must
bear
both
their
normal
meaning
and
their
statutory
meaning;
it
would
be
wrong
to
restrict
the
former
because
of
the
latter.
In
that
case,
it
was
held
that
a
building
was
disposed
of
when
the
land
on
which
it
stood
was
conveyed
by
emphyteutic
lease
with
the
stipulation
that
it
be
demolished
and
a
new
building
erected.
I
have
so
far
considered
the
situation
only
from
the
point
of
view
of
the
legal
effects
of
the
operation,
but
I
do
not
overlook
the
words
in
paragraph
(g)
“irrespective
of
the
form
or
legal
effect
of
the
contract
or
agreement”.
Looking
at
the
matter
from
that
angle,
I
fail
to
see
how
it
can
be
said
that
the
value
of
the
building
was
not
part
of
the
consideration
of
the
agreement
of
sale,
when
it
is
established
without
contradiction
that
the
sale
price
was
arrived
at
on
the
basis
of
the
value
of
the
whole
property
to
the
owner;
land,
building,
and
improvements.
For
these
reasons,
I
would
allow
the
appeal,
set
aside
the
judgment
of
the
Federal
Court
of
Appeal
and
restore
the
judgment
at
trial
with
costs
throughout
against
respondent.