A J Frost:—This is an appeal from an income tax assessment dated June 22, 1970 in respect of the appellant’s 1968 taxation year, wherein a payment of $1,890 advanced under the Prairie Grain Advance Payments Act was added to the appellant’s income for the said year. Upon Notice of Objection duly signed and filed, the Minister of National Revenue reconsidered the assessment and confirmed it on June 17, 1971 on the ground that the amount had been properly included in the appellant’s income for 1968 under the appropriate provisions of the Income Tax Act.
The appellant contended, that he received the amount in question about December 10, 1968 as a non-interest-bearing loan from the government and that this loan was paid off the following year when he sold and delivered his grain to the Canadian Wheat Board. He accordingly reported the proceeds of the sale of this grain in his 1969 tax year as income for that year.
The appellant in his argument said that many Western farmers considered such advances under the said Act as interest-free loans and that “Good Farming”, a farming magazine had used this terminology in a number of its articles which had indicated to him and probably to many others that advance payments could properly be held in suspense until the year of actual delivery of grain. The appellant pointed out that the cash advance method (ie cash vs accrual basis of accounting) could put 1 /2 years’ income into one calendar year and that, in his particular case, he was unwittingly trapped as he only had the use of the money advanced for a very short time and could just as easily have waited a few weeks and saved himself additional taxes of $708. As 1968 was a peak year, he would have been financially better off to defer receipt of the cash payment until 1969, but he \ was. unaware of the consequences of that payment at the time.
The appellant impressed the Board as a responsible businessman who knew exactly what he was talking about. He argued that farmers in Western Canada rely for guidance on the Farmer’s and Fisherman’s.
Guide in making out their tax returns and not on the text of the Income Tax Act itself which, he said, is not readily available to them and that from 1957 to 1970 there was no indication that cash advances from the Wheat Board were to be treated differently from loans from other sources. His main objection, expressed in his testimony, was that he had been caught because the Department of National Revenue had kept its interpretation of the Act secret for 13 years. Apart from this general statement of dissatisfaction, the appellant claimed that because the Canadian Wheat Board. charges interest on default loans and because repayments could be made in cash, advances are in fact business loans to farmers to assist them in the temporary financing of their crops.
Counsel for the Minister, in his argument, contended that the appellant was carrying on the business of farming during 1968 on a cash basis and that the amount of $1,890 was received by him in the course of his business and therefore. must be reflected as a receipt in respect of income for his 1968 taxation year.
By virtue of section 3 of the Prairie Grain Advance Payments Act, a farmer is entitled to apply for an advance payment which is defined under subsection 2(1) as “a payment for grain made to a producer under the authority of this Act”.
Subsection 3(1) of that Act reads as follows:
3. (1) Subject to this Act, the Board may upon application therefor make a payment to a producer in respect of a crop year, as an advance on the initial payment for threshed grain in storage otherwise than in an elevator, prior to delivery thereof to the Board.
(2) Notwithstanding the Canada Grain Act, the manager or operator of an elevator or other person authorized by the Board to make advance payments on its behalf may make advance payments by means of cash purchase tickets.
(The italics are mine.)
Subsection 5(1) of the Act provides that:
5. (1) Before an advance payment is made to a producer he shall execute an undertaking in prescribed form in favour of the Board to the effect that
(a) as soon as general acreage quotas enable him to do so, he will, in addition to any deliveries described in subsection 11(2), deliver and sell grain to the Board until the aggregate of the deductions from the initia! payments for the grain under subsection 4(2) in respect of those deliveries and sales of grain to the Board is equal to the advance payment made to him;
(b) upon default he will pay to the Board the amount in default with interest at the appropriate prescribed rate per annum on the amount in default from the date of the making of the advance payment; and
(c) if, pursuant to subsection (2), he discharges his obligation to the Board otherwise than in the circumstances set out in subsection (3) or (4), he will pay to the Board interest on any payment made to the Board at the appropriate prescribed rate per annum from the date of the making of the advance payment.
(2) A recipient may at any time discharge his obligation to deliver grain to the Board by payment to the Board.
(The italics are mine.)
Subsection 7(1) of that Act also provides as follows:
7. (1) Subject to this section, the amount of an advance payment to a producer in respect of the grain of any kind deliverable under the permit book specified in the application shall be the quantity of threshed grain of that kind (irrespective of its grade) that the applicant has in storage otherwise than in an elevator and undertakes to deliver to the Board, less any undelivered grain of that kind in respect of which a previous advance payment was made, multiplied by the advance payment rate per bushel prescribed for that kind of grain.
(The italics are mine.)
And subsection 8(1) provides:
8. (1) At the time an advance payment is made to a producer he shall deliver to the person who approves of his application on behalf of the Board the permit book described in his application and an endorsement shall be made therein in prescribed form indicating that amounts in respect of all grain delivered under that permit book shall be deducted and paid to the Board, in accordance with the authorization given by the producer under subsection 4(2), until the producer has discharged his undertaking.
The above provisions of the Prairie Grain Advance Payments Act make available to prairie farmers a facility for receiving cash for their threshed grain despite the Wheat Board’s inability to accept physical delivery of the grain. The producer stores the grain for the Wheat Board and receives an advance payment in the ordinary and normal course of business. The farmer’s obligation under his contract is to deliver grain to the Wheat Board. There is no obligation to repay in actual cash except in case of default. Parliament has established a system whereby a producer can get immediate payment for his grain against future delivery. Under these circumstances, there is no doubt that the payment of $1,890 to the appellant must be construed as an advance payment for grain which was threshed and was ready for delivery but which could not be physically received by the Wheat Board due to the shortage of storage space.
Having thus defined the nature of the said receipt of $1,890 by the appellant in the 1968 taxation year, it appears to fall squarely within the provisions of subparagraph 85B(1)(a)(i) of the Income Tax Act which reads as follows:
85B. (1) In computing the income of a taxpayer for a taxation year, (a) every amount received in the year in the course of a business
(i) that is on account of services not rendered or goods not delivered before the end of the year or that, for any other reason, may be regarded as not having been earned in the year or a previous year, . . .
shall be included;
and leaves the Board no other choice but to conclude that for income tax purposes the advance payment of $1,890, received by the appellant in his 1968 taxation year, was income for the 1968 taxation year and not a loan.
Appeal dismissed.