Ryan,
J:—This
is
an
appeal
from
a
judgment
of
the
Trial
Division
dated
February
24,
1981
allowing
an
appeal
by
the
respondent,
Timagami
Financial
Services
Limited
(“Timagami”)
from
income
tax
reassessments
made
by
the
Minister
of
National
Revenue
respecting
Timagami’s
1975,
1976
and
1977
taxation
years.
The
appeal
turns
on
the
interpretation
of
the
words
..
an
amount
has
become
payable
to
a
taxpayer
in
a
taxation
year..(“the
disputed
words”)
appearing
in
subsection
14(1)
of
the
Income
Tax
Act
as
that
subsection
was
written
in
the
relevant
taxation
years*.
Subsection
14(1)
reads:
14.
(1)
Where,
as
a
result
of
a
transaction
occurring
after
1971,
an
amount
has
become
payable
to
a
taxpayer
in
a
taxation
year
in
respect
of
a
business
carried
on
or
formerly
carried
on
by
him
and
the
consideration
given
by
the
taxpayer
therefor
was
such
that,
if
any
payment
had
been
made
by
the
taxpayer
after
1971
for
that
consideration,
the
payment
would
have
been
an
eligible
capital
expenditure
of
the
taxpayer
in
respect
of
the
business,
there
shall
be
included
in
computing
the
taxpayer’s
income
for
the
year
from
the
business
the
amount,
if
any,
by
which
1/2
of
the
amount
so
payable
(which
1/2
is
hereafter
in
this
section
referred
to
as
an
‘‘eligible
capital
amount”
in
respect
of
the
business)
exceeds
the
taxpayer’s
cumulative
eligible
capital
in
respect
of
the
business
immediately
before
the
amount
so
payable
became
payable
to
the
taxpayer.
By
an
agreement
dated
April
30,
1975,
Timagami
sold
its
business,
or
a
goodly
part
of
it,
to
Hurontario
Management
Services
Limited
(“Hurontario”)
for
$150,000.
It
is
not
disputed
that
$141,474
of
this
amount
was
on
account
of
goodwill.
Under
the
agreement
Hurontario
agred
to
pay
Timagami
$20,000
upon
execution
of
the
agreement.
The
balance
of
the
purchase
price
was
to
be
payable
in
instalments:
$20,000
was
to
become
due
and
payable
on
November
1,
1975,
and
$20,000
was
to
become
due
and
payable
on
the
first
days
of
May
and
November
in
each
of
the
years
1976
and
1977
and
on
the
first
day
of
May
1978;
the
balance
of
$10,000
was
to
become
due
and
payable
on
November
1,
1978.
Interest
was
payable
on
the
instalments
as
they
became
due.
Hurontario
was
given
the
privilege
of
making
advance
payments*.
It
appears
from
the
evidence
that
this
privilege
was
exercised
from
time
to
time,
and
that
the
price
was
fully
paid
by
the
end
of
1977.
The
Minister,
in
reassessing,
took
the
position
that
the
total
purchase
price,
$150,000
(this
would,
of
course,
include
the
$141,474
in
respect
of
goodwill),
had
become
payable
to
Timagami
in
1975
and
assessed
under
subsection
14(1)
on
that
basis.
It
is
not
in
dispute
that,
if
the
Minister
were
correct,
the
amount
to
be
included
in
computing
Timagami’s
income
for
1975
would
be
$38,905;
this
would
be
a
consequence
of
applying
section
21
of
the
Income
Tax
Application
Rules,
1971.
Timagami
appealed
the
reassessments
on
the
ground
that
only
that
part
of
the
purchase
price
which,
under
the
terms
of
the
agreement,
fell
due
during
1975
had
become
payable
in
the
taxation
year
1975;
the
instalments
which
were
to
become
payable
in
1976
and
1977
were
not,
it
was
said,
payable
until
they
became
due.
The
learned
trial
judge
allowed
the
appeal
on
the
ground
that
.
.
the
word
‘payable’
in
subsection
14(1)
is
synonymous
with
due,
a
present
obligation
to
pay”.
The
trial
judge
referred
the
matter
.
back
for
reassessments
for
the
taxation
years
1975,
1976
and
1977
in
a
manner
not
inconsistent
with
the
reasons
of
this
Court’.
(The
trial
judge
noted
that
counsel
for
Timagami
had
agreed
that,
if
the
meaning
of
“payable”
in
subsection
14(1)
was
determined
to
be
what
he
submitted
it
was,
he
had
no
objection
to
assessment
for
the
years
1976
and
1977
on
that
basis.)
The
appellant
appealed
this
judgment.
The
issue
before
us
is
the
same
as
the
issue
before
the
trial
judge.
The
basic
submission
of
the
appellant
to
us
was
that:
..
the
word
‘payable’
means
an
obligation
which
is
not
precarious
or
contingent
and
which
the
debtor
must
legally
though
not
necessarily
immediately,
pay”.
The
full
amount
of
the
purchase
price
had
thus
become
payable
in
1975.
The
respondent
submitted
that
the
disputed
words
in
subsection
14(1),
when
read
gramatically
and
in
their
ordinary
sense,
mean
that
a
sum
of
money
does
not
become
payable
until
it
becomes
due,
that
is
until
the
debtor
is
under
a
legally
enforceable
duty
to
pay
it.
And
there
was
no
good
reason,
it
was
submitted,
not
to
read
the
disputed
words
in
their
ordinary
and
grammatical
sense.
It
seems
to
me
that
a
taxpayer,
engaged
in
a
business,
who
enteres
into
a
contract
to
sell
his
goodwill
would
not
regard
an
amount
which
the
purchaser
promised
to
pay
in
part
consideration
of
the
purchase
a
year
after
the
making
of
the
contract
as
an
amount
which
had
become
payable
to
him
in
the
year
in
which
the
contract
was
made;
he
would,
I
think,
regard
the
amount
as
an
amount
to
become
payable
the
following
year
when
the
due
date
arrived.
The
ordinary
taxpayer
would,
in
my
view,
regard
the
two
sums
of
$20,000
each
which
Hurontario
promised
to
pay
during
1975
as
amounts
which
became
payable
during
1975,
but
would
not
regard
the
instalments
which,
by
the
express
terms
of
the
contract,
were
not
“due
and
payable”
until
1976
and
1977
as
having
become
payable
to
him
in
1975.
Counsel
for
the
appellant
submitted,
however,
that
the
meaning
of
the
disputed
words
cannot
be
determined
by
reading
them
within
the
context
of
subsection
14(1)
alone.
That
subsection
is
but
part
of
a
legislative
scheme,
introduced
by
the
new
Income
Tax
Act,
under
which
deductions
(not
previously
permitted)
are
allowed
to
a
taxpayer,
in
computing
his
income
from
businss
or
property,
based
on
costs
incurred
by
him
in
acquiring
goodwill
and
certain
other
“nothings”.
(Only
“goodwill”
is
pertinent
in
the
present
case.)
For
purposes
of
the
present
appeal
the
relevant
statutory
context
includes
at
the
very
least
paragraph
20(1
)(b)
of
the
Income
Tax
Act
and
subsection
14(5),
as
well
as
subsection
14(1).
I
agree
that
these
additional
provisions
are
relevant
statutory
context*.
Paragraph
20(1
)(b)
permits
a
taxpayer
to
deduct
up
to
ten
per
cent
of
his
“cumulative
eligible
capital”
at
the
end
of
the
year
in
computing
his
income
for
the
taxation
year**.
“Cumulative
eligible
capital”
is
defined
in
paragraph
14(5)(a)
of
the
Actt.
To
understand
this
definition,
it
is
necessary
to
read
it
along
with
the
definition
of
“eligible
capital
expenditure”
in
paragraph
14(5)(b)*.
As
I
understood
counsel’s
argument,
his
basic
submission
was
that
a
consequence
of
reading
subsection
14(1)
and
paragraphs
14(5)(a)
and
(b)
together
is
that
the
disputed
words
.
an
amount
has
become
payable
to
a
taxpayer
in
a
taxation
year..
in
subsection
14(1)
must
be
read
as
meaning
that
the
amount
referred
to
is
an
amount
to
be
determined
on
an
accrual
basis.
It
was
then
submitted
that,
on
an
accrual
basis,
the
amount
payable
to
Timagami
in
1975
would
include,
not
only
the
amounts
expressly
made
payable
in
1975,
but
also
the
amounts
described
by
the
agreement
as
not
being
due
and
payable
until
1976
and
1977.
Paragraph
14(5)(b)
defines
“eligible
capital
expenditure”
of
a
taxpayer
as
meaning,
for
relevant
purposes,
an
expense
made
or
incurred
by
the
taxpayer
to
acquire
goodwill.
The
effect
is
to
include,
it
was
argued,
the
portions
of
the
purchase
price
of
goodwill
payable
in
the
future,
even
in
subsequent
taxation
years.
A
consequence,
it
was
argued,
is
that
the
cumulative
eligible
capital
of
the
taxpayer,
as
that
term
is
defined
in
paragraph
14(5)(a),
would
include,
not
only
immediately
payable
amounts,
but
also
amounts
payable
in
later
taxation
years.
It
was
submitted
that
consistency
requires
that
the
disputed
words
in
subsection
14(1)
must
be
read
in
the
same
way,
so
that
amounts
payable
in
a
taxation
year
would
include
amounts
not
due
until
later
years.
As
a
further
illustration
of
inconsistency
that
would
arise
if
respondent’s
submission
on
the
meaning
of
the
disputed
words
were
accepted,
counsel
referred
to
what,
he
argued,
would
be
its
effect
under
clause
14(5)(a)(ii)(B).
Paragraph
14(5)(a),
as
indicated
above,
sets
out
the
definition
of
“cumulative
eligible
capital”
of
a
taxpayer
at
any
particular
time.
For
relevant
purposes,
it
means
one
half
of
the
eligible
capital
expenditure
made
or
incurred
by
a
taxpayer
before
that
time
less
the
amounts
which
he
had
deducted
under
paragraph
20(1
)(b)
in
computing
his
income
and
less
the
eligible
capital
amount
that
became
payable
to
the
taxpayer
before
that
time.
It
was
argued
that,
if
the
respondent’s
submission
were
accepted,
the
result
would
be
that,
in
building
up
a
cumulative
eligible
capital
account
of
a
taxpayer,
one
would
use
the
accrual
method
where
goodwill
was
acquired
by
a
purchaser,
but
would
not
use
this
method
in
respect
of
the
effect
of
the
sale
on
the
seller’s
account.
This,
I
take
it,
would
be
so
(according
to
the
submission)
for
this
reason:
the
purchaser,
in
building
up
his
cumulative
eligible
capital
account,
would
at
once
add
in
the
full
price
of
the
goodwill
he
had
bought,
including
amounts
not
actually
falling
due
until
future
years;
the
seller
of
the
goodwill,
on
the
other
hand,
would
be
required
to
reduce
his
account
only
by
the
amount
actually
payable
in
the
taxation
year.
This,
it
was
said,
would
be
anomalous.
Assuming
that
the
submission
of
counsel
in
respect
of
the
effect
of
the
words
“expense
made
or
incurred”
is
well
founded,
the
consequence
might
well
be
as
indicated
by
counsel.
The
short
answer
may,
however,
simply
be
that
suggested
by
the
respondent
in
his
memorandum
of
fact
and
law:
in
Canadian
income
tax
law
there
are
instances
.
where
the
Act
is
not
symmetrical:
that
is
to
say,
where
deductions
and
additions
to
a
taxpayer’s
income
are
not
treated
in
the
same
fashion.”
It
seems
to
me
to
be
pertinent
that
the
effect
of
subsection
14(1)
is
to
add
to
a
taxpayer’s
income
amounts
that
clearly
would
not
be
includable
on
ordinary
principles.
It
may
well
be
that
there
is
a
statutory
intent,
expressed
in
the
disputed
words,
to
spread
the
added
tax
burden
over
the
period
in
which
the
deemed
income
actually
becomes
payable
to
the
taxpayer*.
I
must
say
that,
to
me,
the
meaning
of
the
disputed
words
in
subsection
14(1)
is
reasonably
clear
whether
those
words
are
read
within
subsection
14(1)
alone
or
within
the
wider
context
urged
by
the
appellant.
In
either
context
I
do
not
find
it
reasonably
open
to
conclude
that
amounts
which
(as
in
this
case),
by
the
express
terms
of
an
agreement,
are
not
to
be
paid
to
a
taxpayer
until
1976,
1977
and
1978
can
be
said
to
be
payable
to
him
in
1975.
It
would
take
more
than
the
inconsistencies
(if
they
be
inconsistencies)
indicated
by
counsel
to
persuade
me
that
the
disputed
words
in
subsection
14(1)
carry
the
rather
strained
meaning
argued
for.
Counsel
for
the
appellant
placed
considerable
reliance
on
the
judgment
of
Mr
Justice
Kearney
in
MNR
v
John
Col
ford
Contracting
Company
Limited,
[1960]
Ex.
C.R.
433,
[1960]
CTC
178;
60
DTC
1131;
affirmed
without
reasons
[1962]
SCR
viii,
[1962]
CTC
546;
62
DTC
1338.
I
would
not
want
to
conclude
without
expaining
why
I
do
not
find
counsel’s
submissions,
based
on
this
judgment,
persuasive.
The
Colford
case
had
to
do
with
the
taxability,
as
receivables,
of
amounts
withheld
under
construction
contracts,
amounts
which
were
to
be
payable
only
after
the
issuance
of
an
engineer’s
or
architect’s
certificate.
It
was
held
that
such
amounts
were
not
taxable
as
income
prior
to
issue
of
the
certificate.
In
relation
to
one
of
the
contracts
involved,
however,
the
“Ontario
contract”,
it
was
found
that
a
certificate
had
been
issued
in
the
relevant
taxation
year.
It
was
accordingly
held
that
the
amount
was
a
“receivable”
in
that
year,
though,
under
the
contract,
the
amount
was
payable
during
a
period
after
the
issuance
of
the
certificate
which
did
not
expire
until
the
following
year.
In
his
reasons,
Mr
Justice
Kearney
said
(at
441):
.
.
.
In
the
absence
of
a
statutory
definition
to
the
contrary,
I
think
it
is
not
enough
that
the
so-called
recipient
have
a
precarious
right
to
receive
the
amount
in
question,
but
he
must
have
a
clearly
legal,
though
not
necessarily
immediate,
right
to
receive
it.
These
words
were
relied
on
by
appellant’s
counsel.
His
submission
was,
as
I
understood
it,
that
an
amount
which
is
receivable
by
a
taxpayer
at
a
particular
time
must
be
payable
to
him
at
that
time.
I
doubt
that,
for
purposes
of
the
Income
Tax
Act,
this
would
always
follow.
But,
at
any
rate,
the
transactions
in
Colford,
including
the
“Ontario
contract”,
were
clearly
transactions
which
fell
within
the
provisions
of
the
then
paragraph
85B(1)(b)*.
The
sums
in
question
arose
from
the
supply
of
goods
or
services
in
the
regular
course
of
the
business
of
a
construction
firm.
This
was
clearly
recognized
by
Mr
Justice
Kearney.
He
said
at
444
in
relation
to
the
“Ontario
contract”:
.
..
It
will
thus
be
seen
that
the
condition
precedent
ceased
to
exist
before
the
termination
of
the
taxpayer’s
fiscal
year
1953
and
the
holdbacks
payable
under
it
acquired
the
quality
of
a
receivable
as
of
the
date
of
the
certificate.
It
is
to
be
recalled
that
final
payment
was
to
fall
due
thirty
days
after
the
issuance
of
the
certificate
which
would
bring
it
into
the
taxpayer’s
subsequent
fiscal
year,
and
it
was
in
fact
paid
on
April
11,
1953.
I
do
not
think
that
the
latter
can
rely
on
the
delay
allowed
for
payment
as
justification
for
bringing
the
amount
of
the
holdback
into
the
fiscal
year
in
which
it
fell
due.
In
my
opinion,
a
term
or
instalment
account
must
be
included
in
the
taxation
year
in
which
it
could
be
said
that
it
had
the
quality
of
a
receivable
since
s
85B(1)(b)
provides
that
it
shall
be
thus
included
“notwithstanding
that
the
amount
is
not
receivable
until
a
subsequent
year.”
It
is,
in
my
view,
significant
that
Mr
Justice
Kearney
referred
expressly
to
these
words
in
paragraph
85B(1)(b):
..
since
paragraph
85B(1)(b)
pro-
vides
that
it
shall
be
thus
included
‘notwithstanding
that
the
amount
is
not
receivable
until
a
subsequent
year’.”
I
find
it
interesting
that,
in
both
the
former
paragraph
85B(1)(b)
and
the
new
paragraph
12(1
)(b),
it
was
thought
necessary,
or
at
least
desirable,
to
make
it
clear
that
the
word
“receivable”
was
to
incude
sums
which
would
not,
in
ordinary
language,
be
considered
to
be
receivable
within
the
particular
taxation
year.
In
subsection
14(1),
the
words
“payable
to”
are
used
without
any
indication
in
the
subsection
that
they
are
to
be
read
in
an
extended
way
or
in
a
technical
sense:
the
subsection
leaves
the
disputed
words
to
be
read
in
their
ordinary,
everyday
way.
I
would
add
that,
if
in
subsection
14(1)
analogy
to
“receivable”
(as
that
word
is
defined
in
paragraph
12(1
)(b))
were
intended,
it
would
have
been
very
easy
to
use
the
words
“receivable
by
the
taxpayer”
rather
than
“payable
to
the
taxpayer”.
Actually,
subsection
14(1)
does
not
relate
to
the
kind
of
transactions
covered
by
the
old
paragraph
85B(1)(b)
or
the
present
paragraph
12(1)(b).
Those
paragraphs
deal
with
what
on
general
principles
would
be
income
receipts.
Subsection
14(1)
brings
into
income
(for
purposes
of
imposing
tax)
sums
which,
apart
from
the
subsection,
would
clearly
not
be
income
receipts
at
all.
Subsection
14(1)
must
be
read
with
this
in
mind.
In
the
present
case,
there
was
a
transaction
in
1975,
the
agreement
between
Timagami
and
Hurontario.
By
virtue
of
this
transaction,
amounts*
became
payable
to
Timagami
in
1975,
1976,
1977,
and
also
in
1978.
(The
1978
taxation
year
is
not
involved
in
this
case.)
I
agree
with
the
trial
judge
that
these
amounts,
subject
to
their
being
translated
into
“eligible
capital
amounts”,
became
income
of
Timagami
in
the
taxtion
years
in
which
they
became
payable
to
it,
or,
I
would
add,
in
the
years
in
which
they
were
actually
paid
if
paid
in
advance.
In
the
light
of
this
conclusion,
it
is
not
necessary
to
consider
the
submissions
that
were
made
in
respect
of
the
establishment
of
a
reserve
under
paragraph
20(1
)(n).
I
would
dismiss
the
appeal
with
costs.