Date: 20001006
Docket: A-368-99
CORAM: DESJARDINS, J.A.
ROTHSTEIN, J.A.
NOËL, J.A.
BETWEEN:
LOMAN WAREHOUSING LTD.
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
(Delivered orally from the Bench at
Vancouver, British Columbia, October 4, 2000)
NOËL, J.A.
[1] This appeal raises a narrow point: must a taxpayer be in the business of the lending of money in order to deduct a bad debt pursuant to clause 20(1)(p)(ii)(A) of the Income Tax Act?1 The appellant took the position before the Tax Court Judge that its sole business was that of warehousing and that it was not in the business of lending money either as an incidental business, a separate business or otherwise.2 Associate Chief Judge Bowman answered the question in the affirmative. We come to the same conclusion as he did.
[2] Clause 20(1)(p)(ii)(A) provides in its relevant part:
| 20(1) Notwithstanding paragraphs 18(1)(a), (b) and (h), in computing a taxpayer's income for a taxation year from a business or property, there may be deducted such of the following amounts as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as applicable thereto:
...
...
| (ii) all amounts each of which is that part of the amortized cost to the taxpayer at the end of the year of a loan or lending asset (other than a mark-to-market property, as defined in subsection 142.2(1)) that is established in the year by the taxpayer to have become uncollectible and that, |
| (A) where the taxpayer is an insurer or a taxpayer whose ordinary business includes the lending of money, was made or acquired in the ordinary course of the taxpayer's business of insurance or the lending of money, or |
|
20(1) Malgré les alinéas 18(1)a), b) et h), sont déductibles dans le calcul du revenu tiré par un contribuable d'une entreprise ou d'un bien pour une année d'imposition celles des sommes suivantes qui se rapportent entièrement à cette source de revenus ou la partie des sommes suivantes qu'il est raisonnable de considérer comme s'y rapportant :
[...]
| p) le total des montants suivants_: |
[...]
| (ii) les montants représentant chacun la partie du coût amorti, pour le contribuable à la fin de l'année, d'un prêt ou d'un titre de crédit (sauf un bien évalué à la valeur du marché, au sens du paragraphe 142.2(1)) que le contribuable a établie, au cours de l'année, comme étant devenue irrécouvrable, lequel prêt ou titre, selon le cas : |
| (A) si le contribuable est un assureur ou si son activité d'entreprise habituelle consiste en tout ou en partie à prêter de l'argent, a été consenti ou acquis dans le cours normal des activités de son entreprise d'assurance ou de prêt d'argent, |
|
(my emphasis)
[3] Mr. Nitikman argued forcefully that what the provision contemplates is a taxpayer whose ordinary business includes "the lending of money" and not "the business of the lending of money". Thus he says that the provision contemplates a taxpayer who lends money otherwise than as a business.
[4] We do not believe that this interpretation can stand when regard is had to the closing words of the provision which require that the loan be made in the course of "the taxpayer's business of. . . the lending of money". Mr. Nitikman points out that these words did not appear in the predecessor to clause 20(1)(p)(ii)(A) which formerly read:
(1) Notwithstanding paragraphs 18(1)(a), (b) and (h), in computing a taxpayer's income for a taxation year from a business or property, there may be deducted such of the following amounts as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as applicable thereto:
...
the total of
| (ii) all amounts each of which is that part of the amortized cost to the taxpayer at the end of the year of a loan or lending asset made or acquired in the ordinary course of business by a taxpayer who was an insurer or whose ordinary business included the lending of money established by the taxpayer to have become uncollectable in the year. |
(1) Malgré les alinéas 18(1)a), b) et h), sont déductibles dans le calcul du revenu tiré par un contribuable d'une entreprise ou d'un bien pour une année d'imposition celles des sommes suivantes qui se rapportent entièrement à cette source de revenus ou la partie des sommes suivantes qu'il est raisonnable de considérer comme s'y rapportant :
[...]
| p) Créances Irrécouvrables |
le total des montants suivants:
[...]
| (ii) les montants dont chacun représente la partie du coût amorti, pour le contribuable à la fin de l'année, d'un prêt ou d'un titre de crédit qu'un contribuable -- qui est un assureur ou dont l'activité d'entreprise habituelle consiste en partie à prêter de l'argent -- qu'il a établie comme étant devenue irrécouvrable au cours de l'année; |
(my emphasis)
[5] He adds that the technical notes which accompanied the introduction of new clause 20(1)(p)(ii)(A) did not indicate that any substantive change in meaning was intended. He concludes from this that the closing words of the provision cannot be read as requiring that the taxpayer be in the business of the lending of money.
[6] Mr. Nitikman's argument rests entirely on the premise that the former provision did not embody this requirement. This is not obvious to us and in any event the words of clause 20(1)(p)(ii)(A) must be given their plain and ordinary meaning and when this is done, the requirement that the taxpayer be somehow engaged "in the business of . . . the lending of money" becomes inescapable.
[7] The appeal will be dismissed with costs.
(Sgd.) "Marc Noël"
J.A.
October 6, 2000
Vancouver, British Columbia
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
| STYLE OF CAUSE: Loman Warehousing Ltd. |
v.
Her Majesty The Queen
| PLACE OF HEARING: Vancouver, British Columbia |
DATE OF HEARING: October 4, 2000
REASONS FOR JUDGMENT BY NOËL, J.A.
| CONCURRED IN BY: Desjardins, J.A., |
Rothstein, J.A.
APPEARANCES:
Mr. Joel Nitikman and
| Ms. L. Mathison For the Appellant |
| Ms. Lynn Burch For the Respondent |
SOLICITORS OF RECORD:
Fraser Milner
Barristers and Solicitors
| Vancouver, BC For the Appellant |
Morris Rosenberg
Deputy Attorney
| General of Canada For the Respondent |
Date: 20001006
Docket: A-368-99
CORAM: DESJARDINS, J.A.
ROTHSTEIN, J.A.
NOËL, J.A.
BETWEEN:
LOMAN WAREHOUSING LTD.
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
Heard at Vancouver, BC on October 4, 2000
JUDGMENT delivered orally from the Bench at Vancouver, BC on October4, 2000 and signed on October 6, 2000
REASONS FOR JUDGMENT BY: NOËL, J.A.
__________________
1 R.S.C. 1985 (5th Supp.), c. I, as amended.
2 Having regard to the facts outlined in the agreed statement of fact, this apparent concession is surprising as the business of lending money under the Act extends not only to one who lends money to all who qualify in the conventional sense (see Litchfield v. Dreyfus (1906) 1 K.B. 584 at 589), but would also include one who lends money on a regular and continuous basis over time to a limited group of borrowers for an arm's length consideration (see in particular the extended meaning of the word "business" in par. 248(1)). However, this is the basis upon which the case was argued and decided.
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