CARTWRIGHT,
J.:—The
relevant
facts
out
of
which
this
appeal
arises
are
set
out
in
the
reasons
of
my
brother
Judson.
I
agree
with
his
view
that
the
question
to
be
determined
is
what
business
the
appellant
did
in
fact
engage
in,
and
that
cases
of
this
sort
must
all
depend
on
their
particular
facts.
~The
respondent
seeks
to
uphold
the
assessment
on
the
ground
that
the
profit
resulting
from
the
sale
of
the
lands
in
question
was
income
of
the
appellant
for
the
year
1955
from
its
business.
There
is
no
doubt
that
the
appellant
was
carrying
on
a
business
which
it
wound
up
when
it
became
apparent
that
its
scheme
to
develop
a
shopping
centre
would
not
be
carried
out.
The
question
to
be
determined
is
whether
the
gain
which
resulted
to
the
appellant
from
the
sale
of
the
lands
was
a
capital
gain
or
was
income
within
the
meaning
of
the
applicable
provisions
of
the
Income
Tax
Act.
It
is
clear
from
many
decisions
that
the
Income
Tax
Act
does
not
impose
tax
upon
a
profit
which
is
in
truth
a
capital
gain.
On
this
point
it
is
sufficient
to
refer
to
the
unanimous
judgment
of
this
Court
delivered
by
Locke,
J.,
in
Sutton
Lumber
and
Trading
Company
Ltd.
v.
M.N.R.,
[1953]
2
S.C.R
77;
[1953]
C.T.C.
237,
in
which
are
set
out
the
principles
by
which
the
Court
should
be
guided
in
dealing
with
the
question,
essentially
one
of
fact,
whether
a
particular
profit
is
in
truth
a
capital
gain.
In
the
case
at
bar
the
question
whether
the
profit
realized
by
the
appellant
is
subject
to
tax
is
dependent
upon
whether
in
fact
the
true
nature
of
the
business
in
which
it
engaged
was,
(i)
the
purchase
of
lands
with
a
view
to
reselling
them
at
a
profit
or,
(ii)
the
development
of
a
shopping
centre
to
be
held
and
operated
as
an
investment
or,
(iii)
both
of
these.
As
I
read
the
reasons
of
the
learned
trial
judge,
he
has
accepted
as
truthful
the
evidence
of
the
appellant’s
witnesses
and
has
found
that
the
‘‘motivating
intention”
of
the
appellant
and
its
promoters
and
directors
was
to
purchase
the
lands
as
the
first
step
in
the
erection
and
development
of
a
shopping
centre
to
be
held
and
operated
as
a
revenue-producing
investment.
He
has
however
held
the
profit
realized
subject
to
tax
on
the
ground
that
reasonable
and
experienced
business
men,
such
as
the
promoters
were,
must
have
envisaged
the
possibility
of
being
unable
to
carry
out
the
scheme
of
developing
the
shopping
centre
and
have
hoped
in
that
event
to
dispose
of
the
lands
at
a
profit.
Accepting
this
as
a
reasonable
inference,
it
does
not
appear
to
me
to
justify
the
finding
that
the
appellant
was
in
fact
engaged
in
the
business
of
buying
and
selling
lands.
I
do
not
think
the
evidence
supports
the
view
that
the
appellant
or
its
promoters
would
have
purchased,
or
did
purchase,
the
lands
in
question
as
a
speculation
looking
to
re-sale.
Applying
the
principles
set
out
in
the
Sutton
Lumber
case
it
appears
to
me
that
the
sales
of
the
lands
made
by
the
appellant
were
a
realization
of
its
capital
assets
when
the
purpose
for
which
they
had
been
acquired
was
defeated
by
the
decision
of
the
department
store
mentioned
in
the
evidence
to
build
on
a.
nearby
site.
To
put
the
matter
colloquially,
the
lands
were
acquired
and
disposed
of
not
as
the
stock-in-trade
or
inventory
of
a
dealer
in
land
but
as
capital
assets
of
a
developer
of
a
shopping
centre
which,
owing
to
circumstances
beyond
the
control
of
the
appellant,
it
became
impossible
to
develop.
The
result
is
not
affected
by
the
circumstance
that
these
capital
assets
were
held
for
a
much
shorter
time
than
those
which
were
under
consideration
in
the
Sutton
Lumber
case.
I
would
allow
the
appeal
with
costs
throughout
and
direct
that
the
judgment
of
the
Exchequer
Court
and
the
assessments
should
be
set
aside.
JUDSON,
J.:—Regal
Heights
Limited
appeals
from
the
judgment
of
the
Exchequer
Court
which
dismissed
its
appeal
from
the
judgment
of
the
Income
Tax
Appeal
Board.
The
issue
is
whether
the
appellant
was
properly
assessed
on
a
profit
of
$135,704.73
arising
from
its
dealings
with
certain
real
property
in
the
City
of
Calgary.
The
appellant
reported
an
income
for
the
year
1955
of
$970.94.
The
department
re-assessed
at
$135,704.73.
Both
the
Income
Tax
Appeal
Board
and
the
Exchequer
Court
have
held
that
the
re-assessment
was
correct.
Hence
this
appeal.
The
question
is
whether
the
appellant’s
profit
from
the
sale
of
this
real
estate
in
the
1955
taxation
year
was
a
profit
derived
from
a
venture
or
concern
in
the
nature
of
trade
and
was
therefore
income
from
a
business
within
the
meaning
of
Sections
3,
4
and
139(1)
(e)
of
the
Income
Tax
Act,
R.S.C.
1952,
e.
148.
In
September
1952
one
Benjamin
Raber
became
interested
in
the
purchase
of
40
acres
of
land
in
the
City
of
Calgary
which
was
then
being
operated
as
the
Regal
Golf
Course.
Mr.
Raber
took
in
three
other
associates
and
the
four,
as
partners,
purchased
the
property
for
$70,000.
They
intended
to
attempt
to
establish
a
large
shopping
centre
on
the
property.
In
May
1953
the
partners
purchased
for
$14,700
a
property
on
the
other
side
of
the
road
which
would
be
useful
in
giving
more
ready
access
to
a
shopping
centre.
They
also
purchased
in
March
1954
an
undivided
one-third
interest
in
a
property
some
distance
away
which
they
proposed
to
use
for
the
purpose
of
advertising
the
existence
of
the
shopping
centre.
The
total
outlay
of
the
partners
for
the
acquisition
of
these
properties
was,
therefore,
$88,700.
In
February
1954
they
incorporated
Regal
Heights
Limited
and
transferred
all
the
property
in
question
to
the
company
in
return
for
shares.
The
partners
were
the
sole
shareholders
of
the
company.
It
became
apparent
in
September
1954
that
a
shopping
centre
of
the
kind
intended
could
not
be
established
on
the
property.
The
reason
was
that
a
large
department
store,
which
the
promoters
hoped
to
interest
in
their
centre,
announced
publicly
that
it
intended
to
locate
in
the
neighbourhood
but
on
another
site
20
blocks
away.
The
company,
in
December
1954,
disposed
of
30
acres
fer
$88,500.
In
May
1955
the
shareholders
passed
a
resolution
to
wind
up
the
company.
The
company
next
sold
the
property
on
the
other
side
of
the
road,
which
had
been
purchased
for
the
purpose
of
access,
for
$20,
000,
and
finally,
in
May
1955,
it
sold
6.3
acres
of
the
remaining
property
for
$148,200.
There
is
no
doubt
that
the
primary
aim
of
the
partners
in
the
acquisition
of
these
properties,
and
the
learned
trial
judge
so
found,
was
the
establishment
of
a
shopping
centre
but
he
also
found
that
their
intention
was
to
sell
at
a
profit
if
they
were
unable
to
carry
out
their
primary
aim.
It
is
the
second
finding
which
the
appellant
attacks
as
a
basis
for
the
taxation
of
the
profit
as
income.
The
Minister,
on
the
other
hand,
submits
that
this
finding
is
just
as
strong
and
valid
as
the
first
finding
and
that
the
promoters
had
this
secondary
intention
from
the
beginning.
The
appellant
adduced
much
evidence
concerning
the
efforts
of
the
promoters
to
establish
what
was
described
as
a
‘regional
shopping
centre’’.
This
means
the
largest
of
this
type
of
enterprise
and
requires
an
area
of
from
30
to
60
acres.
These
promoters
undoubtedly
had
the
necessary
land
but
a
scheme
of
this
kind
involves
an
expenditure
of
anything
from
$2,000,000
to
$5,000,000
and
its
financing
and
establishment
depend
upon
the
negotiation
of
leases
with
satisfactory
tenants,
and
above
all,
upon
the
negotiation
of
a
lease
with
a
major
department
store
as
the
centre
of
attraction.
It
is
necessary
to
set
out
the
efforts
made
by
the
promoters
to
develop
this
property
in
this
way.
The
acquisition
of
the
two
additional
properties,
the
one
for
the
purpose
of
easy
access
and
the
other
for
the
purpose
of
advertising
the
centre,
fits
into
the
scheme.
In
February
1953
they
secured
a
favourable
opinion
from
the
Calgary
Planning
Board
that
the
property
would
be
re-zoned
from
residential
to
commercial
purposes
although
the
Board
withheld
formal
approval
until
there
should
be
some
indication
that
construction
would
begin.
In
addition,
they
had
sketches
made
to
show
what
the
centre
would
look
like.
These
sketches
were
no
more
than
promotional
literature.
They
made
studies
of
other
shopping
centres;
with
professional
help
they
compiled
lists
of
prospective
tenants;
they
entered
into
discussions
with
four
department
stores
although
the
evidence
shows
that
there
was
only
one
which
might
possibly
be
interested;
they
had
discussions
with
one
of
the
banks
concerning
the
financing
of
the
project
;
they
had
a
special
survey
made
at
a
fee
of
$3,000
for
the
purpose
of
influencing
one
particular
department
store;
and
they
incorporated
this
company.
These
efforts
were
all
of
a
promotional
character.
The
establishment
of
a
regional
shopping
centre
was
always
dependent
upon
the
negotiation
of
a
lease
with
a
major
department
store.
There
is
no
evidence
that
any
such
store
did
anything
more
than
listen
to
the
promoters’
ideas.
There
is,
understandably,
no
evidence
of
any
intention
on
the
part
of
these
promoters
to
build
regardless
of
the
outcome
of
these
negotiations.
There
is
no
evidence
that
these
promoters
had
any
assurance
when
they
entered
upon
this
venture
that
they
could
interest
any
such
department
store.
Their
venture
was
entirely
speculative.
If
it
failed,
the
property
was
a
valuable
property,
as
is
proved
from
the
proceeds
of
the
sales
that
they
made.
There
is
ample
evi-
dence
to
support
the
finding
of
the
learned
trial
judge
that
this
was
an
undertaking
or
venture
in
the
nature
of
trade,
a
speculation
in
vacant
land.
These
promoters
were
hopeful
of
putting
the
land
to
one
use
but
that
hope
was
not
realized.
They
then
sold
at
a
substantial
profit
and
that
profit,
in
my
opinion,
is
income
and
subject
to
taxation.
Throughout
the
existence
of
the
appellant
company,
its
interest
and
intentions
were
identical
with
those
of
the
promoters
of
this
scheme.
One
of
the
objects
stated
in
the
memorandum
of
association
of
the
company
was
“To
construct
and
operate
apartment
houses,
blocks,
shop-.
ping
centres
and
to
otherwise
carry
on
any
business
which
may
be
conveniently
carried
on
in
a
shopping
centre.”’
Nothing
turns
upon
such
a
statement
in
such
a
document.
The
question
to
be
determined
is
not
what
business
or
trade
the
company
might
have
carried
on
but
rather
what
business,
if
any,
it
did
in
fact
engage
in.
(Sutton
Lumber
and
Trading
Co.
Ltd.
v.
M.N.R.,
[1953]
S.C.R.
77
at
page
93;
[1953]
C.T.C.
237
at
page
203.)
What
the
promoters
and
the
company
did
and
intended
to
do
is
clear
to
me
on
the
evidence,
as
it
was
to
the
learned
trial
judge.
They
failed
to
promote
a
shopping
centre.
and
they
then
disposed
of
their
speculative
property
at
a
profit..
This
was
a
venture
in
the
nature
of
trade
and
the
profit
from.
it
is
taxable
within
the
meaning
of
Sections
3,
4
and
139(1)
(e).
of
the
Income
Tax
Act.
These
cases
must
all
depend
on
their
particular
facts
and
there
is
no
analogy
between
the
sale
of
long-held.
bona
fide
capital
assets,
as
in
the
Sutton
Lumber
case,
and
the
realization
of
a
profit
from
this
speculative
venture
in
the
nature:
of
trade.
I
would
dismiss
the
appeal
with
costs.
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