Mahoney,
J:—The
issue
is
the
deductibility
from
its
taxable
income
of
certain
life
insurance
premiums
paid
by
the
plaintiff
in
its
1974
and
1975
taxation
years.
The
amounts
in
issue
are
$1,595
and
$5,899.50
respectively.
The
policies
insured
the
lives
of
Gordon
Roberts,
William
Henderson
and
David
Roberts.
The
deductions
were
disallowed
on
the
ground
that
the
premiums
were
not
paid
for
the
purpose
of
gaining
or
producing
income
from
the
plaintiff’s
business.
The
plaintiff
carries
on
business,
based
in
Lethbridge,
Alberta,
as
a
retail
distributor
of
fertilizer.
Gordon
Roberts
is
its
president,
a
director
and
full
time
employee.
David
Roberts
is
a
director
and
full
time
employee.
William
Henderson
is
secretary-treasurer
and
a
director
and,
through
the
vehicle
of
another
company,
which
employs
him,
he
provides
management
services
to
the
plaintiff.
Henderson
also
provides
management
services
to
a
number
of
other
businesses;
he
is
not,
directly
or
indirectly,
by
any
means
engaged
full
time
in
the
plaintiff’s
affairs.
At
all
material
times,
97%
of
the
plaintiff’s
outstanding
shares
were
owned
by
BYF
Holdings
Limited,
(hereafter
“BYF”).
A
majority
of
the
issued
and
outstanding
common
shares
of
BYF
were,
at
all
material
times,
owned
by
Henderson
and
the
two
Roberts.
On
October
1,
1973,
they
entered
into
a
standard
shareholder’s
buy-sell
agreement
whereby
each
gave
the
others
a
right
of
first
refusal
should
he
wish
to
sell
his
shares
and
the
survivors
bound
themselves
to
buy
the
shares
of
a
deceased
shareholder.
The
share
certificates
were
deposited
with
their
solicitor.
The
agreement
made
no
reference
to
life
insurance.
The
policies
in
issue
were
applied
for
and,
effective
November
1,
1973,
policies
on
the
lives
of
Gordon
Roberts
and
Henderson
issued.
The
applicant
and
beneficiary
was
the
solicitor.
David
Roberts
had
some
medical
problems
and,
in
the
result,
policies
on
his
life
did
not
issue
until
mid-1975.
His
estate
was
named
beneficiary
of
one
policy
and
Henderson
and
Gordon
Roberts
were
joint
beneficiaries
of
the
other.
Henderson,
the
only
one
of
the
three
to
testify,
said
that
it
had
been
intended
the
policies
on
David
Roberts’
life
also
be
payable
to
the
solicitor.
There
is
no
doubt
that
the
purpose
of
the
policies
was
to
fund
the
BYF
shareholders’
buy-sell
agreement.
There
is
a
group
policy
maintained
by
the
plaintiff
in
which
the
two
Roberts
and
Henderson
participate
along
with
other
employees.
They
are
the
only
persons
on
whose
lives
the
plaintiff
has
purchased
insurance
other
than
the
group
policy.
The
plaintiff’s
position
is
that
the
provision
of
life
insurance
is
an
accepted
element
of
an
executive
compensation
package
and
the
benefit
conferred
on
the
individuals,
for
which
they
have
personally
been
assessed
to
tax,
is
a
benefit
conferred
in
their
capacities
as
employes
and,
therefore,
from
the
plaintiff’s
point
of
view,
an
outlay
to
earn
income.
The
plaintiff
simply
has
not
discharged
the
onus
on
it
to
prove,
on
a
balance
of
prob-
abilities,
that,
in
paying
the
premiums
on
these
life
insurance
policies,
the
plaintiff
was
remunerating
the
Roberts
and
Henderson
in
their
capacity
as
employees,
assuming
for
the
purpose
that
Henderson
is
an
employee.
An
amended
statement
of
defense
was
filed
at
the
hearing.
Its
effect
was
to
admit
the
deductibility
of
certain
premiums
paid
on
the
group
policy
for
coverage
of
the
Roberts
and
Henderson
in
excess
of
$25,000.
To
that
extent
the
reassessment
must
be
referred
back
to
the
Minister.
Otherwise,
the
action
will
be
dismissed
with
costs.
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