Hewlett Packard (Canada) Ltd. v. The Queen, 2003 DTC 1324 (TCC), rev'd 2004 DTC 6498, 2004 FCA 240

In accepting evidence that the vendor and purchaser had intended property in automobiles to pass before the end of the taxpayer's year end notwithstanding that it was in the interest of both parties to so testify, Hershfield J. stated (at p. 1337):

"Still, an intention so manifestly clear (self-evident) supported by credible testimony cannot be cast aside by reason of being uncorroborated by disinterested evidence purely. Similarly, conduct and circumstances that might indicate a different apparent intention than that asserted will not prevail over the asserted intention where it is manifestly clear that the asserted intention is the real intention."

Each year the taxpayer took delivery of a new fleet of automobiles from the vendor (Ford) for use by the taxpayer's employees and transferred possession of the previous year's fleet to Ford or an auctioneer acting for Ford. Although the intention of the parties was to transfer property in the automobiles to Ford on November 1 of each year (i.e., after the taxpayer's October 31 year end) in order that high undepreciated capital cost balances would be maintained by the taxpayer as at October 31, there had been a disposition of the old fleet in October because by October 31, the taxpayer had an unconditional entitlement to enforce payment of the purchase price for the old fleet vehicles: "Inspections were complete; vehicles were in a deliverable state; the price was fixed; and, possession had been transferred. Even the diligently followed arrangement to meet on October 31st each year to ensure registration and passage of legal title on November 1st, had the effect of absolutely and unconditionally crystallizing Ford's obligations to pay HP for the old fleet before the end of the day" (p. 1341)

Although the provision in the definition of undepreciated capital cost providing for a reduction referred to a "disposition before that time of property" rather than using the defined phrase "proceeds of disposition", no other conclusion could be drawn but that "Parliament, in defining 'disposition of property' intended an express directive not to leave the timing of dispositions for CCA purposes solely to the expressed intentions (or even manifestly clear, self-evident incredibly attested to intentions) of the parties to an agreement of sale." (p. 1342)

In October every year the taxpayer acquired a new fleet of automobiles for use by its employees and transferred possession of the previous year's fleet to the vendor (Ford) or to an auctioneer acting for Ford. The Crown alleged that in October (before the taxpayer's October 31 year end) the old fleet had ceased to be used for an income-producing purpose, with a result that there was a deemed disposition thereof. In rejecting the submission, Hershfield J. stated (at p. 1338):

"Taking property out of use should not be a sufficient reason by itself to find that it is no longer part of the income earning process until a positive act putting the property to a different use has commenced .... [S]teps taken to help ensure a more profitable resale of a capital asset does not constitute a change in use."