The Queen v. Esskay Farms Ltd., 76 DTC 6010, [1976] CTC 24 (FCTD)

Cattanach, J:—The issue in these appeals from a decision of the Tax Review Board is whether the defendant is entitled to claim a reserve pursuant to paragraph 85B(1)(d) of the Income Tax Act for its 1969 and 1970 taxation years which was claimed by the defendant and disallowed by the Minister of National Revenue in the circumstances peculiar to these appeals which I shall describe.

The defendant is a joint stock company incorporated pursuant to the laws of the Province of Alberta and was engaged in the business of buying and selling real estate.

In the course of that business the defendant acquired a parcel of land in 1961 consisting in excess of some 400 acres, the greater portion of which was sold to a purchaser at a profit which profit was indisputably taxable and the purchase price was payable in instalments with respect to which a reserve was claimed by the defendant under section 85B and was allowed by the Minister. It is my recollection that the purchase price would be paid in full on July 1,1975.

However, from that larger parcel there was some 117 acres which were not purchased and accordingly remained in the possession of the defendant. It was the disposition of this 117 acre parcel by the defendant which gives rise to the present appeals.

Of this 117 acres some 30 acres only may have been suitable for a housing development, the balance consisting of steep and unstable river bank and an area subject to annual spring flooding.

The City of Calgary, with the consent of the defendant, had constructed or was in the course of constructing a public utility at the river’s edge. Further, the City had approached the defendant requesting an easement over or under the defendant’s property for the construction of a storm sewer, the grant of which was consented to by the defendant. Apparently the easement did not detract from the suitability of the 30 acres on the top of the river bank for housing development. The public utility was a siphoning device construction on the flood land. It may be significant to note that the City is vested with expropriating authority but at no time during the course of the transaction did the City resort to or threaten to resort to an exercise of that power.

In 1966 the defendant offered to sell the 117 acres to the City for $150,000 but the City did not accept that offer at that time. Subsequently, in 1969, the City offered the defendant $247,000 cash for the 117 acres. Apparently the City had decided to convert the 117 acres, not occupied by the public utility, into a public park and, if my recollection of the evidence is correct, to take steps to stabilize the river bank.

The defendant was quite willing to sell the 117 acres to the City for the purchase price but made the counter-offer that an amount of $100,000 should be paid on July 1, 1976, and that the balance of $147,000 should be paid on July 1, 1977. This counter-offer was made by the defendant with income tax advantages in mind. The amounts receivable for the greater bulk of the property previously sold by the defendant would be paid in its 1975 taxation year. The obvious purpose of the defendant was that the amount of $100,000 would be received in its income in its 1976 taxation year and $147,000 in its 1977 taxation year, in which years it was anticipated that the defendant’s income would be less an dthe tax thereon correspondingly less. By way of illustration, had the entire purchase price of $247,000 been received by the defendant in 1969 or 1970 the tax payable would have been in excess of $100,000, whereas if payments were deferred to 1976 and 1977 there would have been a tax saving of between $50,000 to $75,000. These figures were approximations only and would depend on the defendant’s other income in the years in question but I mention them only to indicate the substantial tax saving which would be effected.

The officers of the City indicated to the defendant that they were prepared to recommend the acceptance of the defendant’s proposal, that is that the purchase price of $247,000 for the 117 acres should be payable in the amounts of $100,000 in 1976 and $147,000 in 1977.

Subsequently, on August 12, 1969, the City advised the defendant that it was precluded by statute from purchasing land over a period of years and could only purchase the property on the basis of a full cash payment of the purchase price on closing. This did not meet with the defendant’s approval and accordingly the officers of the defendant cast about for other means of disposal of the property. Of course they could have accepted the City’s offer, taken the full purchase price and paid tax thereon. This the defendant did not wish to do nor was it obligated to do so. The defendant could have refused to sell the property to the City as was its right to do, but the defendant was in the business of selling real estate and naturally wanted to sell this particular parcel.

The obvious course would have been to find another purchaser but because of the physical peculiarities of the land and the City’s interest therein the only potential purchaser was the City of Calgary. The prospect of there being another purchaser was most remote. Added to this the City had the power to expropriate, a fact which must have been known to the defendant and one which is generally known even though the City gave no indication whatsoever that it would resort to that power.

The chartered accountant engaged by the defendant to do its accountancy work, and who was also an officer of the defendant, by chance met the solicitor for the defendant on the street and discussed the matter with him. From that discussion there emerged the germ of an idea.

To implement the idea so implanted the chartered accountant approached the assistant manager of the Crown Trust Company (hereinafter called the Trust Co) with an offer to sell the land to the Trust Co for the identical price offered by the City but payable by the Trust Co to the defendant in two instalments, one of $100,000 in 1976 and the balance of $147,000 in 1977, with interest at 7 /2% per annum on the outstanding balance. The accountant emphasized that the Trust Co could sell to anyone. However the accountant made it known to the Trust Co that the sale to the City was almost a “fait accompli”. The City was not a party to nor did it originate this idea.

I have great difficulty in accepting that the land could have been sold to a purchaser other than the City at the price offered by the City bearing in mind that only 30 acres were suitable for development purposes, that the City had an easement for storm sewers over the property and had constructed a public utility on the site, even though the Trust Co may have been at liberty to do so. Viewed realistically the Trust Co intended to sell the land to the City which it knew was willing to purchase the property and the whole purpose of the exercise from the defendant’s point of view was to allow the defendant to take advantage of the reserve provisions of the Income Tax Act.

The Trust Co accepted the offer of the defendant. It had nothing to lose and stood to gain. The Trust Co would receive the full purchase price of $247,000 from the City. It would have the use of that money for seven years and $147,000 for eight years for which it paid the defendant 71/2 % but it could invest the money in its hands at a greater rate of interest. It did in fact do so and profited thereby to the extent of 2% per annum, or about $5,000 a year. The defendant stood to minimize the tax payable by it to an extent of between $50,000 to $75,000. The only party which stood to lose was the tax collector.

On September 29, 1969 the defendant and the Trust Co entered into an agreement for sale of the property on those terms.

However, a letter from the defendant’s solicitor outlined a supplementary clause to the agreement whereby it was agreed between the parties that the Trust Co could elect within 60 days of the date of the agreement for sale, or within such extended time as the defendant may grant, to void the agreement. This clause was an obvious safeguard insisted upon by the Trust Co in the event that the sale of the land by the Trust Co to the City of Calgary did not take place.

Because it is notorious that there are invariably delays in completing transactions with governmental authorities at all levels, it was agreed that the interest on the agreement for sale between the Trust Co and the defendant should run from the date upon which the Trust Co received payment on the cash sale of the property. This varied a provision in the agreement for sale that interest should run from October 1, 1979. After the execution of the agreement for sale on September 29, 1969, the defendant’s solicitor by letter dated September 30, 1969 advised the City that it might now deal with the Trust Co for the purchase of the 117 acres from that company for the cash price of $247,000. This was done and by letter dated April 28, 1970 the city solicitor advised the defendant’s solicitor, now acting on behalf of the Trust Co as well, that the City had accepted the Trust Co’s offer to sell the land to the City and requested the solicitor to prepare the requisite transfer of title on receipt of which an advance of $100,000 of the purchase price would be paid.

This the solicitor did forthwith. However, the transfer was made directly from the defendant to the City without an intervening transfer to the Trust Co.

The City’s offer to purchase the property from the Trust Co was dated October 16, 1969 which was accepted immediately. The City Council approved the purchase on November 28, 1969. The Trust Co felt, because of the delay, that it was entitled to interest at 5% from November 28, 1969 to April 30, 1970 which it computed at $5,176.85. Liability for that interest was denied by the City and the Trust Co forewent that claim. However, if interest had been recovered from the City, the Trust Co indicated that it would share that interest with the defendant.

The balance of the purchase price of $147,000 was paid by the City to the Trust Co on June 12, 1970.

The solicitor for the defendant and the Trust Co drafted the transfer of the land directly from the defendant to the City. He testified that this was an acceptable method of conveyancing and an accepted practice in the Province of Alberta and that it is done to avoid an unnecessary expense of registering two transfers when one will suffice. I accept his testimony in this respect. However, the Trust Co and the defendant divided his account of $792.50 equally between them, each paying $396.25. In advising the Trust Co and the defendant the solicitor explained by letter dated June 22, 1970 “that the account for the . . . two sales be equally divided . . .”. He added that he “did not propose to charge the two sales as two separate transactions as they are really two phases of one transaction, charged on the Law Society Tariff for a single transaction’’.

The Minister in assessing the defendant for the taxation years 1969 and 1970 as he did, did so on the assumptions set forth in paragraph 18 of the Statement of Claim which bears repetition:

18. In reassessing the defendant’s 1969 and 1970 taxation years the Minister assumed inter alia, that:

(a) Between May and June of 1969 extensive negotiations took place between the defendant and the City of Calgary relating to the sale by the defendant of 117 acres of land on the outskirts of the City.

(b) On June 18th, 1969, the City of Calgary offered the defendant $247,000 for the above property and on July 28, 1969, the defendant counter-offered to sell the property to the City for the same price, payable in the seventh and eighth years, with interest as set out in the offer.

(c) On July 29, 1969, the City of Calgary offered to purchase the defendant's land, on the basis of the counter-offer made by the defendant, and this offer was accepted by the defendant.

(d) Subsequently, the City of Calgary determined that it was unable as a result of certain statutory provisions to complete the purchase of the defendant property, agreed to on July 29, on the basis set out in that agreement. The City of Calgary wrote to the defendant’s solicitor, on August 12, 1969, advising him of the above, and stated that the legal department and City Commissioners were reviewing the matter to see if some alternate method of purchase could be worked out.

(e) The defendant subsequently entered into an agreement dated September 23, 1969, with Crown pursuant to which Crown ostensibly agreed to purchase the defendant’s lands, on the same terms as the defendant had originally agreed to sell the land to the City. This agreement was entered into for the sole and exclusive purpose of allowing the defendant to sell its lands to the City, and provide a means by which the defendant could claim to be entitled to a reserve under the provisions of paragraph 85B(1)(d) of the Income Tax Act in reporting its profits on the sale.

(f) On September 30, 1969, the defendant solicitor, Mr F J Fleming, wrote to the City of Calgary land department advising them that they may now deal with Crown for purchase of the defendant’s lands for a cash figure of $247,000.

(g) On October 16, 1969, the City of Calgary wrote to Crown offering to purchase the subject property for $247,000 cash, which offer was accepted by Crown, ostensibly on its own behalf.

(h) Subsequently, the land was transferred directly from the defendant to the City of Calgary, on receipt by Mr Fleming, the— defendant’s solicitor, of the total amount of $247,000 which was received by Mr Fleming in'two instalments. Mr Fleming throughout acted as the solicitor with respect to the transaction.

(i) The terms of the agreement dated September 23, 1969, between the defendant and the Crown called for payment of. interest by Crown to the defendant at the rate of 7 /2% per annum on the principal amount of $247,000. As a result however, of delays occasioned by the City of Calgary, the total consideration of $247,000 payable by the City for the property was not received by Crown in full until May of 1970.

(j) The interest in fact paid by Crown to the defendant was calculated from the time the proceeds of the sale by the defendant to the City of Calgary was received by Crown, and not in accordance with the terms of the agreement between the defendant and Crown.

(k) That throughout the entire proceedings outlined above, Crown was acting as agent, trustee or nominee of the defendant.

(l) Crown did not at any time record on its books any liability to the defendant, with respect to the alleged purchase, nor did it ever record the land as an asset on its books of accounts.

Counsel for the Minister contended that throughout these transactions the Trust Co acted as the agent, trustee or nominee of the defendant and in no other capacity and accordingly the receipt of the purchase price from the city to the Trust Co was in reality and in substance receipt of that purchase price by the defendant from which it would follow that the defendant received those proceeds in its 1969 and 1970 taxation yars and therefore is not entitled to defer the receipt of those proceeds to its 1976 and 1977 taxation years as it sought to do in accordance with paragraph 85B(1)(b) of the Income Tax Act.

Alternatively, it was contended on behalf of the Minister that the entire series of transactions constituted an attempt by the defendant to artificially reduce its income in its 1969 and 1970 taxation years and that the Trust Co by entering into the agreement with the defendant thereby conferred a “benefit” on the defendant and accordingly an amount equal to the benefit shall be deemed to be included in the defendant’s income in those taxation years in accordance with subsection 137(2) of the Income Tax Act.

In the further alternative it was contended on behalf of the Minister that the agreement between the Trust Co and the defendant constituted an attempt by the defendant to unduly or artificially reduce its income through the use of paragraph 85B(1)(b) contrary to subsection 137(1).

It has been admitted by the defendant that it is liable to income tax on the profit realized upon the sale of the 117 acres but the dispute is when that profit was realized. The issue for determination is whether the profit was realized in 1969 and 1970 as contended by the Minister or whether it will be realized in 1976 and 1977 when the two instalments of the purchase price are received from the Trust Co as the defendant contends to be the case with a likelihood amounting to almost a certainty that there will be a substantial reduction in the amount of the tax then payable rather than a greater amount of tax payable if the profit was realized in 1969 and 1970.

The assistant manager of the Trust Co testified that the company would not have entered into the transaction if the Trust Co had not been certain and assured that the land would be purchased by the City forthwith. In entering into the transactions he did not act solely on his own initiative but sought and received approval to do so from his superiors. The Trust Co could not lose and it cautiously provided against any loss or inconvenience by insisting upon the supplementary agreement that if the City, although not so specifically expressed, did not buy the land the agreement between the Trust Co and the defendant became null and void at the Trust Co’s election.

In response to a question from myself, the assistant manager of the Trust Co denied that the Trust Co entered into the transaction with the motive of accommodating the defendant which was a valued customer. While the Trust Co foresaw no profit on the sale of the land by it to the City, it did foresee that it would receive the cash purchase price of $247,000 forthwith for which it would pay interest to the defendant at the rate of 7 /2% per annum but that it could invest the moneys so received at a greater rate of interest thereby realizing a substantial profit for itself over the period of seven and eight years at the end of which periods it would be obligated to pay the defendant the purchase price. It was a good deal for the Trust Co and that, in my view, was the motivation for the Trust Co to enter into the transaction with the defendant.

Counsel for the Minister contended that the Trust Co at all material times was acting as agent, trustee or nominee of the defendant and in no other capacity.

In using the words “agent”, “trustee” and “nominee”, counsel for the Minister must be taken to have used these words in their technical sense and not as they are commonly misused by laymen. To ascertain if the relation of agency exists between the Trust Co and the defendant the true nature of the agreement must be regarded. Since the agreement contemplates that the Trust Co will act on its own behalf the relationship of agency does not arise. Similarly so, I do not think that the relationship of trustee and cestui qui trust exists between the Trust Co and the defendant. There was no express trust created between those parties nor do I think that a constructive trust results. To establish a trust, either express or implied, it must be shown that the Trust Co held the land and the proceeds from the sale thereof as trustee and also that the defendant had agreed that the Trust Co should so hold the land or the proceeds from its sale. This, in my opinion, the Minister has failed to do. I so conclude because the Trust Co received the proceeds for the sale and used these proceeds for its own benefit which is not consistent with acting as a trustee for the defendant.

The identical considerations are equally applicable to the contention that the Trust Co was the mere nominee of the defendant.

A sham has been described by Diplock, LJ (as he then was) in Snook v London and West Riding Investments, Limited, [1967] 1 All ER 518, at page 528 as follows:

As regards the contention of the plaintiff that the transactions between himself, Auto-Finance, Ltd and the defendants were a “sham”, it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the “sham” which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. One thing I think, however, is clear in legal principle, morality and the authorities (see Yorkshire Railway Wagon Co v Maclure; Stoneleigh Finance, Ltd v Phillips) that for acts or documents to be a “sham”, with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating.

In contending that the acts done and the documents executed by the Trust Co and the defendant created legal rights and obligations different from those implicit from the executed documents, which is the effect of that contention, is tantamount to contending that a “sham” existed even though counsel for the Minister did not expressly so state. In my view the negotations between the defendant and the Trust Co and the documents executed by those parties do not nor were they intended to convey the impression that the legal rights were different from those that the parties intended.

The defendant, while quite willing to sell the 117 acres to the City for $247,000, did not wish to receive the cash purchase price forthwith. Therefore the defendant was not obliged to sell to the City. It could sell to any other purchaser it could find at a greater or lesser purchase orice upon the terms of payment that the defendant desired. Those were the defendant’s privileges. I do not overlook the fact that there was such little likelihood of finding another purchaser as to be virtually non-existent, but it was the defendant’s privilege to try.

The Trust Co was willing to purchase the land from the defendant knowing full well that an immediate sale could be negotiated with the City at the identical price for which the land would be purchased by it. The Trust Co was quite willing to defer the payment of the purchase price for which it committed itself to the dates the defendant wished. In so doing the Trust Co had the use of the money for a protracted period which it could and did turn to profit on its own account.

The defendant sold the land to the Trust Co for $247,000, payment of which was deferred as the defendant wished. The Trust Co immediately sold the land to the City for the identical price payable by the City to the Trust Co forthwith. This is what was done and this is precisely what the documents indicate was done. There was no secret made of what was done, there was no dissembling nor was there any lack of bona fide intention. In my view the documents were genuine and they created the legal liabilities they were intended to create and the obligations created by the documents were carried out.

Predictably I was referred to the classic case of The Commissioners of Inland Revenue v His Grace The Duke of Westminster, [1936] AC 1, and to that equally classical statement of Lord Tomlin at page 19 that:

Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax. This so-called doctrine of “the substance” seems to me to be nothing more than an attempt to make a man pay notwithstanding that he has so ordered his affairs that the amount of tax sought from him is not legally claimable.

The Commissioners of Inland Revenue v Duke of Westminster, in addition to being authority for the proposition that there is no impediment to a taxpayer so ordering his affairs as to escape or reduce tax, is also authority for the proposition that the substance of a transaction must be determined from the legal rights which flow therefrom ascertained upon ordinary legal principles (see, Balstone Farms Ltd v MNR, [1966] CTC 738 at 751, 66 DTC 5482 at 5490.)

In my opinion the defendant has so ordered its affairs as to reduce the tax payable upon the sale of its property in the course of its business. The fact that the transfer of the land was effected directly from the defendant to the City without the intervention of a transfer from the Trust Co to the City was done by the solicitor who acted both for the defendant and the Trust Co to save legal expenses to the parties, because he did propose to charge for the two sales as two separate transactions describing the two sales as “really two phases of one transaction”, and he testified that was the accepted practice of conveyancing in Alberta. I do question the lack of precision in the language he used in describing the two sales as two phases of one transaction. He explained that language in his testimony and the use of that language does not alter the fact that there were actually two sales of the property. The transfer from the defendant to the City makes it clear that the Trust Co paid the defendant $247,000 and that, at the request of the Trust Co, the land was being transferred to the City of Calgary even though the purchase price was noi received by the defendant at that time which the solicitor explained as another idiosyncrasy of conveyancing.

It was also established that the interest paid by the Trust Co to the defendant was not from the date specified in the agreement between them but from the date the moneys were received by the Trust Co from the City. It had been contemplated that there could be a delay in the payment of the money to the Trust Co for which reason a date was set in the agreement from which interest to the defendant would begin to run estimated to coincide with the date of the receipt of the money by the Trust Co. The delay in payment exceeded the estimated date and there is no impediment to the parties not to strictly comply with the agreement in this respect although the benefiting party is entitled to do so and the party detrimentally affected is bound by the agreement. Further, consideration was given to attempting to exact interest from the City for the period of delay which interest the Trust Co was willing to share with the defendant, if received, although under no obligation to do so, but whatever right the Trust Co may have had to such interest was abandoned.

The Trust Co did not record its liability to the defendant when it arose in its books of account in clear and unequivocal terms. However, the assistant. manager did testify that an entry of sorts was made adequate for his purposes though perhaps unintelligible to a stranger without the complex explanation which I was given. In fact the liability to the defendant was predicated upon the duplicate of the agreement for sale in the possession of the Trust Co. An account was opened under the name of Esskay Farms Limited — Crown Trust Company Purchase Agreement on September 23, 1969, and assigned a number. On May 8, 1970 when the purchase price had been received from the City a further account was opened indicating that a guaranteed investment certificate had been purchased to offset and surpass the obligation of the Trust Co to pay interest to the defendant. Since this bookkeeping arrangement was considered adequate for the Trust Co’s purpose, I do not think I am obliged to delve further into the vagaries and sufficiency of their bookkeeping methods, if the Trust Co is satisfied as to their adequacy, beyond ascertaining that the Trust Co was obligated and acknowledged itself obligated to the defendant for the purchase price of the land and for interest. The agreement for sale and supplementary agreement do that. I have not overlooked the point made by counsel for the Minister that a specific entry of liability to the defendant by the Trust Co does not appear to have been made until the purchase price was received by the Trust Co from the City as giving credence to his submission that the agreement does not mean what it says and accordingly the failure to make a specific entry at the time the obligation arose was not erroneous. I do not think that bookkeeping entries or the lack of an entry can be accepted as contradicting the clear provisions of a written agreement.

Counsel for the Minister further contended that the Trust Co was prohibited by section 126 of the Alberta Trust Companies Act, RSA 1970, c 372, from purchasing real estate other than real estate that is improved and income-producing. Assuming that to be so, although I do not decide that question is not being incumbent upon me to do so because of the view I take of the submission, it may well be that the provision is not directed to corporate capacity in which event the company would be subject to sanction or other consequences such as the cancellation of the charter or certificate of registration by granting authority. On the other hand, if the statutory provision is directed to corporate capacity, then the purchase of the land would be ultra vires of the Trust Co and the contract is null and void so that neither party to the contract can enforce it. I assume this proposition to be so as being the one most favourable to the Minister. As I appreciate the significance of this submission it is that since the contract is ultra vires the Trust Co, the Trust Co must have been acting as agent, trustee or nominee for the defendant otherwise it could not have done what it did. The status to set aside the contract lies in the defendant or the Trust Co (or their liquidators). The defendant has not moved to recover the land from the Trust Co. The Trust Co has not moved to void the contract with the defendant. The Trust Co has not moved to recover the land from the City nor has the City moved to avoid the contract with the Trust Co. Had any one of these actions been instigated it is axiomatic that the party seeking to repudiate the contract cannot retain the benefits (subject to certain limitations).

At common law real estate sold by a company under an ultra vires contract may be recovered back because no rights thereto could pass to the grantee from the grantor. But under the Torrens system of land registration which is in effect in Alberta the Land Titles Act provides that a bona fide purchaser gets a good title and the vendor’s common law right of recovery of the land is defeated by virtue of the statutory estoppel.

Accordingly, the City of Calgary has good title to the land and the transfer from the defendant to the City, at the behest of the Trust Co, cannot be defeated and the transfer is effective and unimpeachable. The title to the land depends not upon the ultra vires contract but upon the executed transfer (see Creelman v Hudson’s Bay Insurance Co, [1920] AC 1954).

It is for the foregoing reasons that I have concluded that the Trust Co was not an agent, trustee or nominee of the defendant but was acting as a purchaser of the land on its own behalf and accordingly the defendant and the Trust Co did precisely what they purported to do and the documentation to effect those purposes was genuine, unimpeachable and acted upon by those parties as was intended by them. There was no sham within the meaning ascribed to that word in Snook v London and West Riding Investments, Limited (supra).

This conclusion does not resolve the matter for the Minister also relies on subsections 137(1) and (2) of the Income Tax Act. Subsection 137(1) reads:

In computing income for the purposes of this Act, no deduction may be made in respect of a disbursement or expense made or incurred in respect of a transaction or operation that, if allowed, would unduly or artificially reduce the income.

In my view the section is not applicable to the present appeals. The section provides that “no deduction may be made . . . of a disbursement or expense made or incurred .. .”. The word “disbursement” in common parlance means “money paid out, an expenditure” and the word “expense” also in common parlance means “money out of pocket”. I see no valid reason for ascribing any other meaning to those words as used in the context of subsection 137(1).

That being so, in the circumstances of these appeals, the defendant in the transactions in question made neither a disbursement nor did it incur an expense. On the contrary, it stood to receive the sale price of the land which generated income which is admittedly subject to income tax. What the defendant stood to get was a plus quantity not a negative quantity and claims no disbursement or expense as a deduction.

Subsection 137(2) of the Income Tax Act reads as follows:

Where the result of one or more sales, exchanges, declarations of trust, or other transactions of any kind whatsoever is that a person confers a benefit on a taxpayer, that person shall be deemed to have made a payment to the taxpayer equal to the amount of the benefit conferred notwithstanding the form or legal effect of the transactions or that one or more other persons were also parties thereto; and, whether or not there was an intention to avoid or evade taxes under this Act, the payment shall, depending upon the circumstances, be

(a) included in computing the taxpayer’s income for the purpose of Part I,

(b) deemed to be a payment to a non-resident person to which Part III applies, or

(c) deemed to be a disposition by way of gift to which Part IV applies.

In my view the sale of the land by the defendant to the Trust Co and its subsequent sale by the Trust Co to the City of Calgary does not amount to the bestowal of a benefit on the defendant by the Trust Co within the meaning of subsection 137(2). What the Trust Co obligated itself to the defendant to do was to pay the purchase price agreed upon between them but in two instalments in the years 1976 and 1977, respectively. If the benefit received by the defendant is the purchase price of the land, the defendant acknowledges its obligation to pay income tax on the profit realized by it on the sale of the land but when the deferred payments are received by it. This will no doubt result in a lesser tax being payable than would be the case if the profit on the purchase price were brought into the defendant’s income in its 1976 and 1977 taxation years but, as Lord Tomlin has stated in The Commissioners of Inland Revenue v The Duke of Westminster (supra), “Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be.”

What the defendant has done has been to order its affairs as to attract a lesser tax at a subsequent time as it is entitled to do. If the sale by the defendant to the City on the defendant’s terms had been consummated there would be no question of its right to claim deferment and for the reasons I have expressed the interpolation of the Trust Co does not alter that position in the circumstances of these appeals. The defendant has effected a tax advantage to itself as is its right and accordingly it is incongruous that that advantage should be construed as a “benefit” to the defendant within the meaning of subsection 137(2). Since the defendant received no “benefit” under subsection 137(2), it follows that the Trust Co did not confer any such benefit on the defendant.

The appeals are therefore dismissed with costs.