THe CHIEF JUSTICE (concurred in by Fauteux, J.) :—I am unable to agree that this case is governed by the decision of this Court in Johnston v. M.N.R., [1948] S.C.R. 486; [1948] C.T.C. 195. Here there was an appeal to the Income Tax Appeal Board, and, before the Board counsel for the appellant outlined facts to which counsel for the respondent agreed. As stated in the reasons for judgment in the Exchequer Court, when the appeal to it came on for hearing, ‘‘the facts not being disputed, no verbal evidence was heard’’. It appears to me that upon the statement of facts in the Notice of Appeal to the Exchequer Court and the reply to that notice both parties considered that all the evidence that had any bearing upon the matter appeared in what was agreed upon. The parties having gone to trial under those circumstances it must be assumed that there are no other facts upon which the appellant relies, but it is entitled to a decision as to whether upon those admitted facts the purchase by it from one of its shareholders was a transaction “between persons not dealing at arm’s length’’ within subsection (2) of Section 20 of the Income Tax Act, as enacted in 1949.
In that connection it is necessary to refer to subsection (5) of Section 127 of the Act by which
u (5) For the purposes of this Act,
(a) a corporation and a person or one of several persons by whom it is directly or indirectly controlled
shall, without extending the meaning of the expression ‘to deal with each other at arm’s length’ be deemed not to deal with each other at arm’s length.’’
This and the other provisions of this subsection are not exhaustive of the meaning to be attached to the expression “persons not dealing at arm’s length’’ in subsection (2) of Section 20, but it is sufficient for the disposition of this appeal to refer to subsection (5) (a) as set forth above.
Gérard Miron and any three of his brothers owned more than one-half of all the common (voting) shares of the appellant (at least 650 shares) and consequently the appellant was controlled by Gérard Miron and any three of his brothers. Gérard Miron and his five brothers owned 997 common (voting) shares out of the 1,000 common (voting) shares of the capital stock of the appellant. Gérard Miron was, therefore, one of several persons by whom the appellant was directly or indirectly controlled.
The appeal should be dismissed with costs.
KELLOCK, J. (concurred in by Taschereau and Abbott, JJ.) :— The appellant, having acquired from one of its shareholders in June, 1949, for a consideration of $600,000, a farm which the said shareholder had in the latter part of 1948 himself purchased at a price of $90,000, claimed capital cost allowance on the basis of the price paid by it. Of a total issue of 1,000 common shares, the said shareholder held 200, another brother 200, a third brother 150, and three other brothers 149 each, the three remaining shares being held by other individuals.
The Minister, in the view that the transaction by which the property had been acquired by the appellant had taken place ‘‘between persons not dealing at arm’s length’’ within the meaning of Section 20, subsection (2) of the statute, rejected the claim and made the allowance on the basis of the cost to the shareholder, in conformity with paragraph (a) of the said subsection.
Both in his reply to the notice of appeal to the Tax Appeal Board and in his reply to the notice of appeal to the Exchequer Court, the Minister stated that he relied upon the provisions of Section 127, subsection (5), particularly upon that part of paragraph (a) of the said subsection which provides that for the purposes of the statute, a corporation and one of several persons by whom it is “directly or indirectly controlled’’ shall, without extending the meaning of the expression ‘ 1 to deal with each other at arm’s length”, be deemed not to deal with each other at arm’s length.
Notwithstanding that an assessment is, by virtue of Section 42(6) deemed to be valid and binding, subject to appeal, the appellant saw fit to adduce no evidence with respect to the shares or the subject matter of control apart from the share-holdings as above set out. It is now argued on behalf of the appellant that it was for the respondent to support his decision by such evidence relative to control of the shares so held as he saw fit. In my view this is a misconception. The Minister, having concluded in the making of the assessment that the relevant transaction was not one between persons dealing at arm’s length, it was for the appellant to show error on the part of the Minister in this respect: Johnston v. M.N.R., [1948] S.C.R. 486; [1948] C.T.C. 195. This it did not attempt to do.
I would dismiss the appeal with costs.
Appeal dismissed.
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