Strayer
J.T.C.C.:
—
The
appeal
raises
two
questions.
1.
Were
the
amounts
provided
by
the
Government
of
Alberta
to
the
respondent
“assistance”
as
a
grant,
subsidy,
forgiveable
loan,
deduction
from
tax,
investment
allowance
or
as
any
other
form
of
assistance....
within
the
language
of
both
subparagraph
12(l)(x)(iv)
of
the
Income
Tax
Act,
defining
income,
and
of
subsections
127(11.1)
and
127(9)
defining
investment
tax
credits?
2.
If
the
answer
to
the
first
question
is
in
the
affirmative,
should
such
amounts
nevertheless
be
excluded
from
income
pursuant
to
subparagraph
12(l)(x)(viii)
as
a
...payment
made
in
respect
of
the
acquisition
by
the
payor...of
an
interest
in
the
taxpayer,
his
business
or
his
property...?
With
respect
to
the
first
question,
we
are
of
the
view
that
the
sums
provided
to
the
respondent
amounted
to
government
assistance.
This
Court
in
Consumers
Gas
Co.
v.
R.
(sub
nom.
Consumers’
Gas
Co.
v.
The
Queen)^
contrasted
“government
assistance”
to
payments
made
by
public
authorities
...in
exactly
the
same
way
and
for
exactly
the
same
reasons
as
payments
made
by
private
business,
that
is,
for
the
purpose
of
advancing
the
interests
of
the
payor.
In
this
context
it
is
clear
that
the
Court
was
speaking
of
payments
made
for
advancing
the
business
interests
of
the
payor.
In
the
present
case
the
learned
trial
judge
quoted
and
applied
this
passage
as
authority
that
the
statutory
language
concerning
“government
assistance”
has
no
application
to
“ordinary
business
arrangements”.
He
found
the
scheme
in
question
here
to
involve
such
business
arrangements.
We
are
respectfully
of
the
view
that
in
doing
so
he
misconstrued
the
Coal
Research
Agreement
under
which
the
payments
were
made
by
the
Government
of
Alberta
to
the
respondent
and
erred
in
the
application
to
it
of
the
relevant
provisions
of
the
Income
Tax
Act.
These
are
matters
on
which
this
Court
may
properly
intervene.
The
agreement
does
not
in
our
opinion
establish
an
ordinary
business
arrangement
between
the
parties.
For
its
part
the
Government
of
Alberta
undertook
to
provide
technology
and
to
pay
money
to
the
respondent.
While
in
the
short
term
the
government
obtained
an
equity
interest,
if
the
project
were
to
prove
commercially
successful
the
Government
would
be
obliged
to
sell
its
interest
to
the
respondent,
the
price
being
simply
the
return
of
its
money
contribution
plus
its
interest
costs
in
having
made
that
contribution.
If
the
project
did
not
prove
to
have
commercial
value,
as
in
fact
it
did
not
during
the
period
in
question,
the
Government
was
entitled
to
nothing
except
an
equity
interest
in
a
technology
demonstrated
not
to
have
present
commercial
value.
We
find
it
impossible
to
characterize
this
as
an
ordinary
business
arrangement.
Whatever
public
policy
merits
the
agreement
may
have
had
from
the
standpoint
of
Alberta,
it
does
not
amount
to
an
arrangement
that
a
business
would
enter
into
to
advance
its
business
interests.
A
business
which
invested
money
in
ventures
on
the
basis
that
it
could
not
receive
any
net
profit
if
the
venture
succeeded,
and
would
gain
an
equity
interest
only
if
the
venture
proved
uncommercial,
would
not
long
survive.
In
the
language
of
the
Income
Tax
Act,
subparagraph
12(l)(x)(iv),
and
the
definition
of
“government
assistance”
in
subsection
127(9),
the
government
payments
under
the
Coal
Research
Agreement
became,
in
the
circumstances
of
non-commercialization
of
the
technology,
a
grant,
subsidy,
a
forgivable
loan,
or
similar
form
of
assistance.
Nor
are
we
persuaded
that
the
various
forms
of
surveillance
of,
or
participation
in,
the
management
of
the
project
by
the
Government’s
representatives
as
contemplated
by
the
agreement,
indicate
any
commercial
role
of
the
Government.
In
our
view
that
surveillance
and
participation
was
at
least
equally
consistent
with
the
role
of
a
prudent
grant-giver
assuring
itself
that
its
contribution
was
being
spent
as
intended.
The
second
question
to
be
considered
is
whether
for
the
purposes
of
subparagraph
12(l)(x)(viii)
these
payments
should
be
regarded
as
having
been
made
in
acquisition
of
an
interest
in
property.
It
will
be
noted
that
this
subparagraph
includes
as
income
any
payment
which
“may
not
reasonably
be
considered
to
be
made
in
respect
of
the
acquisition”
of
the
taxpayer’s
property.
We
are
unable
reasonably
to
consider
the
provisions
of
the
Coal
Research
Agreement
to
be
designed
for
the
purpose
of
the
Government
of
Alberta
acquiring
an
interest
in
the
respondent’s
property.
As
noted
above,
had
the
project
been
successful
the
Government
of
Alberta
would
have
acquired
no
lasting
property
rights
in
a
going
concern:
in
that
circumstance
it
would
instead
have
been
obliged
to
sell
its
interest
for
merely
a
return
of
its
money
contributions
plus
interest.
In
the
event
of
there
being
no
commercial
success,
which
was
the
case
during
the
period
in
question,
the
Government
was
left
with
a
half-share
in
a
technology
without
demonstrated
commercial
value.
In
these
circumstances
its
contribution
if
anything
became
of
the
nature
of
a
grant,
subsidy,
or
forgivable
loan
and
cannot
reasonably
be
considered
a
payment
for
the
purpose
of
acquisition
of
property.
The
appeal
will
therefore
be
allowed
with
costs,
the
judgment
of
the
Trial
Division
will
be
set
aside,
and
the
action
will
be
dismissed
with
costs.
Appeal
allowed.
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