Thurlow,
CJ:—We
do
not
need
to
hear
from
you
Mr
Lefebvre
and
Ms
Olsen.
The
critical
issue
in
the
appeal,
as
we
see
it,
is
whether
the
service
rendered
or
function
performed
by
contractors
in
the
appellant’s
1974
and
1975
taxation
years,
in
cutting,
making
and
trimming
shirts,
was
“a
service
or
function
that
would
normally
be
performed
by
an
employee
of
the”
appellant
within
the
meaning
of
subparagraph
(b)(iii)
of
the
definition
of
“cost
of
labour”
in
section
5202
of
the
Income
Tax
Regulations.
In
Canadian
Clyde
Tube
Forgings
Limited
v
The
Queen,
[1982]
CTC
21,
this
Court
affirmed
the
view
of
Mahoney,
J.
in
the
Trial
Division
that
the
adverb
“normally”
relates
to
the
modus
operandi
of
the
manufacturer
and
processor
Claiming
inclusion
of
the
particular
outlay
in
its
cost
of
labour,
and
went
on
to
say:
Clause
(b)(iii)
of
the
definition
of
cost
of
labour
does
not
refer
to
a
service
or
function
that
would
normally
be
performed
by
an
employee
of
a
(i.e.
any)
corporation.
It
uses
the
definite
article
“the”
before
the
word
“corporation”
thus
pointing
clearly
to
the
corporation
claiming
the
deduction
from
the
tax
otherwise
payable
as
the
relevant
entity,
namely,
in
this
case,
the
Appellant.
Since
normally
it
engages
Weram
Limited
to
do
its
machining,
rather
than
using
its
own
employees,
it
does
not
meet
the
requirements
of
the
clause.
Applying
this
reasoning
to
the
facts
of
the
present
case,
it
appears
to
us
that
the
modus
operand!
of
the
appellant
in
the
years
in
question,
and
indeed
in
the
years
before
and
since,
has
been
to
contract
out
all
the
cutting,
making
and
trimming
of
shirts
and
to
confine
the
cutting,
making
and
trimming
carried
out
by
its
own
employees
to
the
production
of
pants.
Notwithstanding
similarities
in
the
two
functions,
the
method
of
carrying
on
its
business
adopted
by
the
appellant
has
been
at
all
relevant
times
to
maintain
a
clear
separation
of
the
shirt
manufacture
from
the
pant
manufacture
and,
so
far
from
the
cutting,
making
and
trimming
of
shirts
being
a
function
that
would
normally
be
performed
by
the
appellant’s
employees,
the
opposite
is
what,
in
fact,
occurs,
that
is
to
say,
that
the
function
of
cutting,
making
and
trimming
shirts
would
not
normally
be
performed
by
the
appellant’s
employees
but
would
normally
be
performed
by
contractors.
Counsel
submitted
that
to
apply
the
regulation
in
this
way
would
be,
in
effect,
to
add
restrictive
wording
to
it,
but
we
do
not
think
that
is
so.
On
the
contrary,
to
interpret
the
wording
as
counsel
suggested
would,
in
our
view,
require
the
insertion
of
words
such
as
“of
a
kind”
after
the
word
function
in
subparagraph
(b)(iii).
The
appeal
accordingly
fails,
and
is
dismissed
with
costs.
Email this Content