Oceanspan Carriers Ltd. v. The Queen, 85 DTC 5621, [1986] 1 CTC 114 (FCTD), aff'd in part 87 DTC 5102, [1987] 1 CTC 210 (FCA)

Rouleau, |.:—The plaintiff was initially incorporated and carried on business in Bermuda as of February 1972; it subsequently incorporated and carried on business in Canada as of June 15,1976. From the taxation years 1976 through 1979, it sought to deduct from revenue, in Canada, a loss carried forward from the Bermuda corporation and in addition claimed a full year of non-capital loss for the year 1976. These matters were contested by the Minister of National Revenue and the plaintiff is seeking to set aside the reassessment by the Minister of National Revenue for the taxation years 1976 through to 1979.

Issues

(1) Whether non-capital losses, incurred from a business not carried on in Canada, by a corporate person not resident at the time the loss was incurred, may be applied, pursuant to paragraph 111(1)(a) of the Income Tax Act, against income earned by that person after it established residency in Canada within the meaning of the Income Tax Act.

(2) Whether a corporate person, when it was neither resident in Canada nor carrying on business in Canada during some part of the calendar year, may include in the determination of its tax liability for that taxation year, those losses incurred in that portion of the calendar year prior to its becoming resident in Canada. In other words, does the Minister have the capacity to prorate the non-capital losses incurred during the 1976 fiscal year when the corporation commenced its activity in this country only as of June 15, 1976?

The following is the agreed statement of facts:

AGREED STATEMENT OF FACTS

The parties hereto by their respective solicitors admit the following facts, provided that the admission is made for the purpose of this action only and may not be used against either party on any other occasion, and provided further that the parties may adduce further and other evidence relevant to the issues and not inconsistent with this agreement.

1. The Plaintiff is a limited company which was incorporated under the laws of Bermuda on February 15, 1972. The Plaintiff carried on a shipping business from 1972 until 1980.

2. The shares of the Plaintiff were originally owned equally by MacMillan Bloe- del Limited and Furness Withy & Co. Ltd. In late 1973 MacMillan Bloedel acquired the 50% share interest owned by Furness Withy & Co. Ltd. and then resold the same to another arm's length party, a consortium headed by S.P. Tao, a Hong Kong businessman, on February 27, 1974. MacMillan Bloedel Limited repurchased this 50% interest in September 1976.

3. Prior to June 15, 1976 the Plaintiff was a non-resident corporation for the purposes of the Income Tax Act (the Act).

4. On June 15, 1976 central management and control of the Plaintiff shifted from Bermuda to Canada and the Plaintiff became a corporation resident in Canada for the purposes of the Act.

5. The Plaintiff adopted a year ending on December 31 as its fiscal period, and filed its first T2 corporation income tax return in Canada for its 1976 taxation year. Its 1976 to 1979 T2 returns were all filed on June 30, 1980.

6. The Plaintiff’s 1972 to 1975 financial statements were prepared by its auditors, Price Waterhouse & Co., in Bermuda. Copies of these financial statements, which are expressed in U.S. Dollars, are included herein as Schedule “A”.

7. The Plaintiff’s 1976 T2 return, a copy of which is included herein as Schedule “B", contained financial statements for 1972 to 1976, Schedule T2S(24) for 1976 (First-Time Filing Information), and the following Schedules for 1972 to 1976, expressed in Canadian Dollars:

TZS(1) — Reconciliation of income per financial statements with income for

income tax purposes.

TZS(4) — Non-Capital losses carried forward.

TZS(8) — Capital costs allowance.

8. The Plaintiff’s incomes and losses for 1972 to 1976 are as follows:

	Income (Loss) per	Income Loss for Tax
Year	Financial Statements	Purpose (Schedule TZS(1))
1972	($15,355)	($14,583)
1973	12,982	14,258
1974	(421)	345,943
1975	(2,136,970)	(749,736)
	($2,139,764)	($404,118)*
1976	($1,697,246)	($1,225,295)

*The Plaintiff has considered the sum of $404,118 as the balance of its 1975 loss carried forward.

The Minister of National Revenue (The “Minister") has not determined the accuracy of the above incomes and losses appearing in the Plaintiff’s 1972 to 1976 financial statements.

9. In filing its 1977 to 1979 income tax returns the Plaintiff carried forward the balance of its 1975 loss amounting to $404,118 and its 1976 loss amounting to $1,225,295 and applied them as follows:

	Net Income for	Prior Years	Taxable
Year	Tax Purposes	Losses Applied	Income
1977	$ 962,329	$ 962,329	Nil
1978	184,776	184,776	Nil
1979	482,308	482,308	Nil
TOTAL:	$1,629,413	$1,629,413

10. By Notices of reassessment dated July 28, 1982 the Minister reassessed the Plaintiff’s 1976 to 1979 taxation years and thereby disallowed the carryforward of non-capital losses incurred prior to 1976 and reduced the amount of the Plaintiff's non-capital loss for 1976. The non-capital loss claimed by the Plaintiff was prorated by the Minister so that an amount of $555,735.00 was disallowed, being attributable to the period before June 15, 1976; an amount of $669,560.00 was allowed, being attributable to the period after June 14, 1976. The Minister used the fraction 166/366 which he determined by reference to the number of days in the year prior to June 15 as compared to the number of days in the year.

11. The reassessments also adjusted the Plaintiff’s capital cost allowance claims resulting in taxable income in the years 1976-1979 was as follows:

The adjustments to the capital cost allowance claims were made at the Plaintiff's request in accordance with a letter dated March 9, 1982, a copy of which is attached as Schedule “C" hereto. The Plaintiff only requested the adjustments to its capital cost allowance claims because of the Minister’s proposed assessing action which would have otherwise given rise to taxable incomes in the years 1977-1979.

Year	CCA Change	Taxable Income
1976	$630,940 increase	Nil
1977	$962,329 increase	Nil
1978	($238,990) decrease	Nil
1979	($394,426) decrease	Nil

12. As a result of the foregoing adjustments to capital cost allowance the Plaintiffs undepreciated capital cost for its class 7 assets as of June 1, 1980 was decreased by the amount of $959,853.

13. In 1980 the Plaintiff disposed of its only class 7 asset for proceeds of disposition in excess of the revised undepreciated capital cost for that class. The Minister reassessed the Plaintiff’s 1980 taxation year, by notice dated July 28, 1982, thereby increasing recaptured capital cost allowance by $959,853.

14. The Plaintiff filed a Notice of Objection to the 1980 reassessment and indicated that it wished to appeal directly to the Federal Court Trial Division pursuant to subsection 165(3) of the Act. The Minister gave his consent to a direct appeal by notice dated December 21, 1982 and the Plaintiff’s Notice of Objection was filed as a Statement of Claim in this Court on that day.

The principal argument submitted by the plaintiff may be outlined as follows.

With respect to those losses incurred prior to residency: Oceanspan Carriers Ltd. ("Oceanspan”) argues that paragraph 111(1)(a) of the Income Tax Act (I.T.A.) does not expressly indicate that the non-capital loss carry-over provision, is applicable only to a person who was a resident or carrying on business in Canada. Plaintiff supports this proposition by suggesting that, since the Act was silent in previous years, a legislative amendment, made applicable in 1983 and for subsequent taxation years, which now expressly prohibits a non-resident from including losses from businesses not carried on in Canada, must previously be interpreted to include business carried on outside Canada by a non-resident.

With respect to those losses incurred during the 1976 calendar year: Plaintiff contends that as section 114 of the I.T.A. is applicable only to individuals, in the case of a corporation, the Minister is not permitted to prorate losses against that part of the year when the plaintiff was resident in Canada. Plaintiff further relies on the contention that pursuant to subsections 248(1) and 249(1) of the I.T.A., its taxation year for the 1976 calendar year is such as to enable it to include those losses incurred between January 1, 1976 and June 14, 1976.

The Minister contends that in order to have a taxation year, a person must be subject to assessment under Part I of the I.T.A. Therefore, the ability to claim a deduction in the calculation of that assessment does not begin until there is jurisdiction over the person (through residency) or jurisdiction over the income of the person. Since the plaintiff had not established residency in Canada until June 15, 1976, and the Minister had no jurisdiction to tax, then its fiscal year does not commence until that date. Therefore, Oceanspan is not entitled to apply the non-capital loss carry-forward provision, permitted under paragraph 111(1)(a) of the I.T.A., with respect to losses incurred prior to 1976. Further, in the calendar year 1976, Oceanspan should only be allowed to claim that portion of its losses incurred after June 14, 1976.

Plaintiff was resident in Canada in 1980 and it is not disputed that until June 15, 1976 it was neither resident in Canada nor carrying on business in Canada.

Subsection 2(1) of Division A of the I.T.A. imposes a tax on the taxable income of persons resident in Canada at any time in a taxation year. The taxable income of such persons is defined in subsection 2(2) of the I.T.A. to mean the taxpayer's income for a taxation year determined by applying the rules contained in Division B of the Act minus the deductions listed in Division C of the Act. Paragraph 111(1)(a), the “Non-Capital Losses” carry-over provision that plaintiff is seeking to apply, is located in Division C (deductions allowed).

Subsection 2(3) of the I.T.A. provides that a person, not resident in Canada at any time in a taxation year, but who carried on an activity during that period is liable to tax upon his taxable income earned in Canada in the year pursuant to Division D of the I.T.A. Section 115, in Division D, establishes rules for the computation of this amount. Under this provision, the taxpayer's taxable income is determined by reducing from income those deductions provided in Division C that are applicable.

Thus Parliament has clearly stated that in any given taxation year, the determination as to whether or not a resident or non-resident taxpayer may apply a non-capital loss in order to determine his taxable income in that taxation year — or in a previous or subsequent taxation years — can be ascertained if, and only if, the taxpayer in that taxation year places himself within the ambit of either subsection 2(1) or 2(3) of the I.T.A.

I. Applicability of Paragraph 111 (1 )(a) of the Income Tax Act

111. (1) For the purpose of computing the taxable income of a taxpayer for a taxation year, there may be deducted from the income for the year such of the following amounts as are applicable:

(a) non-capital losses for the 5 taxation years preceding and the taxation year immediately following the taxation year, but no amount is deductible in respect of non-capital losses from the income of any year except to the extent of the taxpayer’s income for the year minus all deductions permitted by provisions of this Division other than this paragraph, paragraph (b) or section 109; [My emphasis.]

Plaintiff argues that The Queen v. 8 & J Music Ltd., [1983] C.T.C. 50; 83 D.T.C. 5074 (F.C.A.) is authority for the proposition that it is not open to the Court to extend the application of what a section provides by reliance on some supposed or unexpressed intention. The Federal Court of Appeal in The Queen v. Geoffrey Stirling, [1985] 1 C.T.C. 275; 85 D.T.C. 5199 enunciated that, in interpreting a provision of the I.T.A., the Court is not to consider what the intention of Parliament would have been, had it given consideration to the matter.

That may be so. However, to adopt the words of E.A. Dreidger (Construction of Statutes, 2nd ed., (1983), at 101), it is one thing to put in or take out words to express more clearly what Parliament did say; but it is an entirely different matter to interpret a provision of a statute to make it say what it is presumed Parliament could or would have said if a particular situation had been before it.

A recent decision of this Court Lor-Wes Contracting Ltd. v. The Queen, [1985] 2 C.T.C. 79; 85 D.T.C. 5310 suggested the following approach should be taken in the interpretation of a statute at 83 (D.T.C. 5313):

The only principle of interpretation now recognized is a words-in-total-context approach with a view to determining the object and the spirit of the taxing provisions.

Taxation year within the meaning of paragraph 111(1)(a)

It is an integral principle of statutory construction that words are not to be construed in vacuo. It is essential in determining the meaning of words that they be interpreted not only in relation to the section in which the words occur, but in relation to the entire statute.

The Supreme Court of Canada in Stubart Investments Limited v. The Queen, [1984] C.T.C. 294; 84 D.T.C. 6305 cited with approval the approach enunciated by E.A. Dreidger in construing a statute. Mr. Justice Estey wrote at 316 (D.T.C. 6323):

While not directing his observations exclusively to taxing statutes, the learned author of Construction of Statutes, 2nd ed, (1983), at 87, E.A. Dreidger, put the modern rule succinctly:

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament. [Emphasis added.]

Post-Stubart jurisprudence (Thyssen Canada Ltd. v. The Queen, [1984] C.T.C. 600; 84 D.T.C. 6539 (F.C.T.D.); Bristol-Myers Canada Inc. v. D./M.N.R. for Customs and Excise, [1985] 1 C.T.C. 23; 85 D.T.C. 5024 (F.C.A.)) indicates that the scheme and object of the entire statute are to be considered in construing the provision of the Income Tax Act.

Thus in determining the phrase “taxation years” within the meaning of paragraph 111(1)(a) of the I.T.A., it must be determined in relation to the Act as a whole. The Act necessarily imports the concept of jurisdiction by the Minister over the taxpayer either by residency or through income earned in Canada. It cannot be sustained that the Minister may impose his authority over non-resident corporations or over income not earned in Canada. The mere fact of becoming a resident does not give the Minister — or Parliament — jurisdiction over the previous life or conduct of a corporate taxpayer.

Plaintiff suggests that the Canadian I.T.A. may be able to extend its jurisdiction over non-residents not earning taxable income from a business in Canada. As authority he cites Henry Wertman v. M.N.R., [1964] C.T.C. 252; 64 D.T.C. 5158.

My reading of Wertman does not agree with the theory advanced by the plaintiff. Wertman was faced with two questions: firstly and incidentally, whether income derived from an apartment building was “a business"; secondly, the primary question was to determine if a transfer of property to a spouse in Canada or elsewhere (in this case Poland) violated the attribution rules. The Court found that a proper transfer had occurred in Poland prior to emigration to Canada. It had nothing to do with determining or computing tax on assets transferred outside of Canada, nor did it extend the jurisdiction of the I.T.A. beyond our borders.

It is one thing to apply jurisdiction to a transfer of property which incurs tax liability on a resident with respect to an income producing property situate in Canada, and to make a determination on a transfer outside of Canada. There can be no tax liability on a non-resident on income gained (or losses incurred) from a non-resident business; thus the various deductions provided in Division B and C of the I.T.A. are inapplicable or unenforceable.

Plaintiff's proposition is further rebutted — in Lea-Don Canada Ltd. v. M.N.R., [1970] C.T.C. 346; 70 D.T.C. 6271 (S.C.C.), a resident plaintiff corporation sold an airplane in a non-arm’s length transaction to a non-resident parent company (not carrying on business in Canada) at less than fair market value and for an amount less than the undepreciated capital cost of the aircraft. One of the issues discussed was whether the parent company was a taxpayer within the meaning of the I.T.A. Mr. Justice Hall, after having found that the parent company was not carrying on business in Canada, remarked at 349 (D.T.C. 6273-74):

The argument that the provisions of the Income Tax Act authorizing a deduction on account of the capital cost of depreciable property are applicable to non-residents who are not subject to assessment for income tax under Part I of the Act because such deduction is from income is wholly untenable. It is clear that Section 20(4) is concerned with taxpayers entitled to a deduction, not with persons who are not subject to assessment under Part I. A non-resident not carrying on business in Canada is not a person entitled to such a deduction and therefore Section 20(4) cannot properly be said to be "applicable" to him. [Emphasis added.]

Therefore, if a person does not place himself within the meaning of subsections 2(1) or 2(3) of Division A of the I.T.A., he is not to be considered subject to tax assessment for that taxation year and, as a result, since the Minister cannot tax, it follows that one is not able to claim a deduction in respect of a non-capital loss as provided in paragraph 111 (1)(a) of the I.T.A.

Legislative Amendment to the Definition of Non-Capital Loss

In 1983 Parliament brought in legislative changes to the definition of Non-Capital Loss within the meaning of paragraph 111(1)(a) of the I.T.A. Paragraph 111(8)(c) was amended by S.C. 1983-84, c. 1, s. 54(5), and made applicable for 1983 and subsequent taxation years.

In the amended definition, which is of relevance to the present case, there is the expressed exception to the inclusion of losses incurred by a non-resident taxpayer from a business not carried on by him in Canada during a taxation year, in the calculation of his non-capital loss for the taxation year.

Plaintiff contends that the amendment to the definition of non-capital loss clearly indicates that Parliament (in 1976) did not intend to exclude a non-resident's losses from a business carried on by him outside Canada in the calculation of a non-capital loss in any given taxation year.

In Bathurst Paper Ltd. v. Minister of Municipal Affairs (1971), 22 D.L.R. (3d) 115 (S.C.C.) at 119 Laskin, J. remarked that, although a change in language on re-enactment of a provision must be presumed to have some significance, it does not necessarily follow that a change in substance was intended.

If plaintiff’s assertion is correct, then I would have to conclude that prior to the 1983 amendment a non-resident corporation could avail itself of the opportunity to apply non-capital losses incurred during that period against subsequent taxation years during which it was resident in Canada.

I am satisfied that the jurisprudence, as well as the statutory scheme of the I.T.A. prior to the amendment of paragraph 111(8)(c) in 1983, cannot and should not sustain plaintiff's position. This could lead to an abuse of our taxation system should I accept this submission. Prior to the amendment, a non-resident corporation, not carrying on business in Canada, having substantial losses, could acquire a profit-making Canadian corporation and deduct prior incurred non-capital losses in this country to the detriment of the Canadian taxpayer. This is not contemplated by the I.T.A.; similarly it is inconceivable that the Minister of National Revenue impose his jurisdiction on the non-resident corporation not carrying on business in Canada.

II. Ascertainment of Non-Capital Loss for the 1976 Taxation Year

As indicated in subsection 2(1) of the I.T.A. and elsewhere throughout the Act, the income tax liability of a person is determined separately for each taxation year. According to subsection 249(1) of the I.T.A., a “taxation year” is defined, in the case of a corporation, as its fiscal period. Subsection 248(1) of the I.T.A. defines “fiscal period” as follows:

[In this Act] “fiscal period” means the period for which the accounts of the business of the taxpayer have been ordinarily made up and accepted for purposes of assessments under this Act and, in the absence of an established practice, the fiscal period is that adopted by the taxpayer (but no fiscal period may exceed

(a) in the case of a corporation, 53 weeks, and

(b) in the case of any other taxpayer, 12 months,

and no change in a usual and accepted fiscal period may be made for the purpose of this Act without the concurrence of the Minister);

The purpose of subsection 248(1) of the I.T.A. is to allow a corporate taxpayer flexibility in the selection of a year end for its business other than that of the calendar year, Motivair Ltd. v. M.N.R., 40 Tax A.B.C. 129; 66 D.T.C.

77. However, the fiscal period adopted by the corporate taxpayer must not exceed 53 weeks.

The plaintiff corporation has chosen as its taxation year that period between January 1 and December 31. It must then be determined, having established corporate residency in Canada as of June 15, 1976, whether it should be permitted to include losses that it had incurred from January 1 to December 31 or only those losses arising after June 14, 1976, the period after which it carried on business in Canada.

Applicability of Section 114 of the I.T.A.

Section 114 of Division C of the I.T.A. provides for the computation and determination of the taxable income of an individual who is resident in Canada during only part of a taxation year.

In such situations the individual’s taxable income will be ascertained by determining his world income (loss), from all sources, for the period during which the taxpayer was resident in Canada; the period of residency being considered the taxpayer's taxation year for the purpose of computing his income.

Section 114 of the I.T.A. is specific in that it refers to “an individual”. Subsection 248(1) of the I.T.A., the definition section, defines the term “individual” to mean any person other than a corporation. “Person” under the same subsection is defined as including “any body corporate and politic”. Thus the Income Tax Act stipulates that although individuals and corporations may both be referred to as “persons”, the use of “individual” absolutely excludes corporations.

Subsection 249(1) of the I.T.A. stipulates that an individual's taxation year is a calendar year. Further, pursuant to section 114, the assessment of the tax liability of an individual does not include losses incurred or income gained by the taxpayer during that part of the taxation year when it was neither resident in Canada nor carrying on business in Canada.

Applicability of Section 115 of the I.T.A.

Non-resident persons are, pursuant to subsection 2(3) of the I.T.A., required to pay tax on their taxable income earned in Canada. Section 115 of the I.T.A. establishes rules for the computation of this amount. Subpara- graph 115(1 )(a)(ii) stipulates that the income of a non-resident person is not to include incomes from businesses carried on outside Canada. That is, only Canadian source income from a business is to be included in the computation of the non-resident's income tax for Canadian tax purposes.

Similarly paragraph 115(1)(c) states that a non-resident person's losses must be from a business carried on by him in Canada. Thus losses incurred in the year by a non-resident from business carried on outside Canada are not deductible from income.

Therefore if the taxation year of a non-resident corporation or an individual spans that period of time between January 1 and December 31, it may include only those losses incurred and those incomes gained from the point during the taxation year that he becomes subject to income tax assessment.

Against this statutory context plaintiff contends that, since there are no specific statutory provisions applicable with respect to losses or income for part of a taxation year incurred during non-residency, subsection 2(1) of the I.T.A. must be construed to mean that a corporate person is subject to differential tax treatment.

In other words, plaintiff argues that a corporate person, resident in Canada during part of a taxation year, is required to bring into the calculation of its taxable income for a taxation year, income gained or losses incurred from a business carried on outside Canada during that part of the taxation year when it is not a resident of Canada.

Parliamentary Jurisdiction with Respect to Tax Assessment in Taxation Year

An examination of the various Parts, Divisions and Subdivisions of the I.T.A. indicates that the entire scheme and structure of that Act embodies basic prerequisites in order to tax. Parliamentary jurisdiction over the taxpayer, either through residency or non-residency, requires involvement in transactions in Canada. In several different Divisions of Part I of the I.T.A. Parliament has clearly stated that, irrespective of whether the taxpayer is a corporation or an individual, it will not overstep its jurisdiction so as to sweep into its tax assessment all income gained or losses incurred without consideration being given to the residency of the taxpayer or the situs of the transaction.

Thus section 114 of Division C of Part I of the I.T.A. specifically proscribes the Minister of National Revenue from including in a taxation year in the assessment of the tax liability of an individual income gained and losses incurred prior to the establishment of Canadian residency in that year.

Similarly section 115 of Division D of Part I of the I.T.A. prohibits a nonresident taxpayer, either corporate or individual, from including income gained and losses incurred in respect of a business not carried on in Canada.

Of related significance to the present case is the tax treatment afforded a person's income from property sold in the course of business. Specifically, paragraph 20(1)(n) of Division B of Part I of the I.T.A. allows a taxpayer a deduction of a reasonable reserve when all or part of the selling price is not due until some time after the end of the taxation year in which the property was sold. However, subsection 20(8) of the I.T.A. provides that no reserve may be claimed in a taxation year under paragraph 20(1)(n) where a taxpayer, at the end of that year, or at any time in the immediately following year was not resident in Canada and did not carry on a business in Canada or was exempt from tax under Part I of the I.T.A.

The effect of subsection 20(8) of the I.T.A. is to prevent a corporate taxpayer from claiming a reserve from income in anticipation of future profit, when all or part of the selling price may be received when it is no longer a resident nor carrying on business in Canada. The Act will not reach out.

It is to be recalled that plaintiff argues that a corporate person, and only a corporate person, is required pursuant to subsection 2(1) of the I.T.A., to include all income gained at any time during the year and therefore may deduct all losses.

Clearly, in the absence of a statutory provision providing unambiguous support of plaintiff's proposition, one must conclude that plaintiff’s interpretation of subsection 2(1) of the I.T.A. violates the entire scheme of that Act. The basis of the Act requires a link between Parliament’s jurisdiction to impose a tax and the tax liability of the taxpayer.

Plaintiff's contention of a differential treatment in the taxation process violates the fundamentals of the law. Given the fact that common sense and harmony must be first principles of statutory analysis when dealing with ambiguous statutory provisions (Lor-Wes Contracting Ltd., supra; Stubart Investments Limited, supra), it is evident that plaintiff's contention cannot be upheld.

Proration of Non-Capital Losses

As outlined in the agreed statement of facts, plaintiff claimed in the 1976 taxation year a non-capital loss of $1,225,295. The non-capital loss was prorated by the Minister of National Revenue such that the portion attributable to the period, before plaintiff was resident in Canada and carrying on business in Canada, was disallowed.

The Minister took the position that as plaintiff’s books of account were not drawn up on a month-to-month basis, the proportionate distribution of plaintiff's losses were, in effect, a practical solution to the imposed constraint of statutory jurisdiction.

Plaintiff argued that as there was no explicit provision in the I.T.A. authorizing the Minister to prorate his non-capital losses for the 1976 taxation year, and therefore the Minister was required to include in the assessment of plaintiff's taxable income for that year, the entire non-capital loss claimed by the plaintiff.

To these arguments it needs only to be mentioned that the absence of explicit provisions enabling the Minister to prorate plaintiff's losses is not a bar to the solution chosen by the Minister, especially in view of the fact that the proration of plaintiff's losses was employed as a consequence of the fiscal period selected and the system of accounting that was chosen by the plaintiff. The methodology employed by the Minister was merely an extension of the statutory restraint of jurisdiction imposed by the legislation in the assessment of the tax liability of a taxpayer.

For the reasons contained herein, I hereby dismiss the plaintiff’s claim and confirm the reassessment of the Minister of National Revenue for the taxation years 1976 to 1979 inclusively.

Costs to the defendant.

Appeal dismissed.