Taylor,
T.C.J.:
—
This
is
an
appeal
heard
in
Toronto,
Ontario
on
August
30,
1989
against
an
income
tax
assessment
for
the
year
1986
in
which
the
Minister
of
National
Revenue
disallowed
a
deduction
of
$70,000
to
the
Mocus
Foundation,
claimed
as
a
charitable
donation.
According
to
the
notice
of
appeal
the
following
circumstances
obtained:
By
notice
of
assessment
dated
September
4,
1987
the
Minister
assessed
the
appellant
in
respect
of
the
1986
taxation
year
and
denied
the
deductibility
of
the
Donation
by
the
Appellant
in
computing
his
income
for
the
1986
taxation
year
on
the
basis
that
no
official
receipt
for
the
Donation
had
been
submitted
by
the
Appellant
to
the
Minister.
By
a
Notice
of
Confirmation
dated
September
13,
1988,
the
Minister
confirmed
the
said
Notice
of
Assessment
on
the
basis
that:
the
amount
of
$70,000
claimed
as
a
deduction
from
income
in
respect
of
charitable
donations
was
not
in
respect
of
gifts
made
to
a
charitable
organization
registered
in
Canada
in
the
year
within
the
meaning
of
paragraphs
110(1)(a)
and
110(8)
of
the
Act.
In
reply
thereto
the
respondent
stated:
The
respondent
relies,
inter
alia,
upon
paragraphs
110(1)(a)
and
110(8)(c)
and
subsection
110(2.2)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.148
as
amended
(“the
Act").
The
Respondent
respectfully
submits
that
the
donation,
if
any,
to
Mocus
Foundation
was
not
a
gift
made
to
a
registered
charity
at
the
time
the
gift
was
made.
In
the
alternative,
the
Respondent
puts
the
Appellant
to
the
strict
proof
of
the
timing
and
the
value
of
the
gift
to
Mocus
Foundation.
Mr.
Wolfgang
J.
Pazzula,
lawyer,
gave
testimony
regarding
the
status
of
the
“registered
charity”.
I
am
satisfied
there
remained
no
outstanding
question
with
regard
to
that
point.
Mr.
J.
Graf,
chartered
accountant,
was
offered
to
the
Court
as
an
expert
witness
with
regard
to
valuation.
His
qualifications
for
this
role
were
rejected
by
the
Court.
It
remains
an
open
question
in
my
mind
in
the
light
of
the
analysis
of
this
situation
which
follows,
whether
there
was
any
requirement
in
the
first
place
for
counsel
for
the
appellant
to
consider
calling
any
such
evidence.
Counsel
for
the
respondent
did
not
call
evidence,
and
that
brought
to
the
fore
the
real
question
for
the
Court.
The
point
of
dispute
between
the
parties
finally
rested
on
whether
the
respondent
was
entitled
to
require
“strict
proof
of
the
timing
and
the
value
of
the
gift—”,
supra,
in
light
of
the
fact
that
all
other
matters
respecting
the
nature
of
the
gift
had
been
resolved.
On
this
point,
the
fundamental
position
of
counsel
for
the
appellant
was
stated
in
argument:
Turning
first
to
the
Kit-Win
Holdings
Limited,
at
page
5039,
the
second
column
—I
guess
it’s
the
second
to
last
paragraph
starting
on
the
right-hand
column:
A
taxpayer
is
entitled
to
know
the
findings
and
assumptions
upon
which
the
Minister,
or
his
assessors
based
the
assessment
when
it
was
made.
When
assumptions
are
pleaded
(or
otherwise
determined
as
in
Tobias
v.
Queen
.
.
.
then
the
onus
is
on
the
taxpayer
as
Rand,
J.
has
said
"to
demolish”
the
exact
assumptions
made
by
the
Minister
at
the
time
of
assessment
and
no
more.
If
the
Minister
has
failed
to
allege
as
a
fact
an
essential
ingredient
to
the
validity
of
the
assessment
under
the
applicable
statutory
provision
there
is
no
onus
on
the
taxpayer
to
disprove
that
fact
for
the
assumptions
which
were
made
do
not
of
themselves
support
the
assessment.
Finally,
in
Hiwako
at
page
6283,
the
last
two
lines
on
page
6283
in
the
right-hand
column:
The
question
remains,
however,
as
to
whether,
on
the
pleadings,
there
was
an
onus
on
the
appellant,
that
was
undischarged,
to
establish
that
he
was
not
motivated
in
making
the
purchase
by
an
intention
to
use
the
property
in
an
adventure
or
operation
in
the
nature
of
trade.
Such
an
onus
would
have
to
arise
from
the
fact
that
the
assessments
were
based
on
an
assumption
of
facts
that
would
support
such
a
conclusion.
Part
A
of
the
Statement
of
Defence,
which
is
headed
"Statement
of
Facts",
alleges
that,
in
making
the
assessments,
the
Minister
of
National
Revenue
assumed
inter
alia
that
the
appellant
purchased
the
property
in
question
“with
the
intention
of
re-selling
the
same
at
a
profit".
l
doubt
whether
such
an
assumption
would
be
sufficient
to
support
the
assessments.
My
basic
submission,
your
Honour,
is
that
the
assessment
was
made
on
the
basis
that
there
was
no
charity
in
existence
in
'86
and
no
gift
to
that
charity.
Ms.
Boris
indicated
that
the
Minister's
second
position
in
this
appeal
was
simply
that
the
shares
had
no
value.
I
come
back
to
the
assessment,
your
Honour:
no
where
in
the
assumptions
is
it
stated
that
the
Minister
made
any
assumption
as
to
value;
there
simply
was
no
assumption
as
to
the
fact
of
value.
And
the
Respondent's
initial
ground
is
that,
in
paragraph
6:
The
Respondent
submits
that
the
donation
was
not
a
gift
made
to
a
registered
charity
at
the
time
when
the
gift
was
made.
Again,
paragraph
7,
—"in
the
alternative,
the
Respondent
puts
the
Appellant
to
strict
proof”.
That,
your
Honour,
is
the
essential
situation
which
arose
in
Brewster
.
The
Minister
argued
in
the
alternative
and
the
Trial
Division
of
the
Federal
Court
found
that
the
Minister
did
so
and
was
required
to
lead
evidence.
Ms.
Boris
this
morning
has
chosen
not
to
lead
any
evidence
as
to
value
but
the
Minister’s
Reply
does
not
contain
any
assumption
as
to
the
fact
of
value.
In
response
thereto
counsel
for
the
respondent
noted:
.
.
.
the
taxpayer,
the
Appellant,
since
February
the
8th,
1959
has
been
quite
aware
that
the
Minister
was
prepared
to
reconsider
the
position
on
the
charity
and
that
the
issue
indeed
was
value,
and
that
was
mentioned
in
our
Reply.
Now,
the
Minister
may
well
have
made
this
assumption
on
the
basis
that
there
was
no
charity
in
existence
at
the
time
the
alleged
gift
was
made.
He
didn't
bother
looking
at
value
at
that
stage.
Obviously,
if
he
thought
there
was
no
charity,
there
was
no
looking
at
value.
At
the
time
the
pleadings
were
filed
in
February,
prior
to
the
pleadings
being
filed,
it
was
clear
to
the
Appellant
that
the
issue
was
the
value
of
any
alleged
donation.
The
Appellant
has
adduced
no
affirmative
evidence
whatsoever
before
your
Honour
as
to
value
and,
in
that
regard,
he
has
not
proved
that
the
assessment,
as
made,
would
simply
deny
a
charitable
donation.
The
assessment
merely
disallowed
the
deduction
and
he
has
not
shown
the
Court
that
the
disallowance
of
a
charitable
deduction
was
wrong.
And
that,
in
my
respectful
submission,
is
the
only
issue
this
Court
has
to
decide:
Was
the
assessment
wrong?
Counsel
for
the
respondent
also
supplied
the
Court
with
a
copy
of
the
following
case
law,
with
particular
emphasis
on
the
quotation
given:
Vineland
Quarries
and
Crushed
Stone
Limited
v.
M.N.R.,
[1970]
C.T.C.
12;
70
D.T.C.
6043
at
page
6048:
In
M.N.R.
v.
Beatrice
Minden,
[1962]
C.T.C.
79;
62
D.T.C.
1044,
Thorson
P.,
the
former
President
of
this
Court,
said
at
page
1050:
.
.
.
In
considering
an
appeal
from
an
income
tax
assessment
the
Court
is
concerned
with
the
validity
of
the
assessment,
not
the
correctness
of
the
reasons
assigned
by
the
Minister
for
making
it.
An
assessment
may
be
valid
although
the
reason
assigned
by
the
Minister
for
making
it
may
be
erroneous.
This
has
been
abundantly
established.
In
effect
the
Minister
says
that
for
a
reason
he
thinks
to
be
correct
he
assessed
the
appellant
to
income
tax
at
"X"
dollars.
The
appellant
says
that
the
reason
assigned
by
the
Minister
was
incorrect.
The
Minister
then
says
if
the
Court
should
hold
the
basis
for
his
assessment
of
"X"
dollars
is
erroneous,
then
for
what
the
Court
might
find
to
be
the
correct
reason,
he
would
assess
the
appeal
at
"X"
minus
"Y"
dollars.
This
I
think
the
Minister
is
entitled
to
do
and
accordingly
I
would
allow
the
motion
and
permit
the
Minister
to
amend
his
Reply
to
the
Notice
of
Appeal
as
requested.
The
costs
of
the
motion
shall
be
costs
in
the
cause.
Analysis
I
am
quite
satisfied
from
the
context
of
the
evidence
and
argument
that
the
disputed
assessment
was
indeed
struck
(September
4,
1987)
and
confirmed
(September
13,
1988)
by
the
respondent
on
the
basis
of
the
respondent's
understanding
that
Mocus
Foundation
was
not
a
registered
charity
during
the
year
in
issue,
and
accordingly
could
not
provide
an
acceptable
official
receipt
to
Revenue
Canada.
It
also
appears
clear
that
by
the
time
of
filing
the
reply
to
notice
of
appeal
(July
18,1989)
the
respondent
had
reason
to
question
that
particular
basis
(no
charitable
foundation)
as
being
sufficient
to
support
the
assessment
used
for
a
trial,
and
thereupon
included
as
an
alternative
reason
for
disallowing
the
amount
the
"timing
and
the
value
of
the
gift”,
and
referenced
subsection
110(2.2)
of
the
Act
dealing
with
the
“fair
market
value”.
As
I
grasp
the
position
of
counsel
for
the
Minister,
on
this
issue,
she
is
saying
that
since
the
point
was
at
least
raised
in
the
reply
to
notice
of
appeal,
supra,
the
Minister
is
entitled
to
leave
the
onus
for
proof
with
the
appellant,
on
a
basis
for
the
assessment
quite
different
than
that
upon
which
the
assessment
was
struck.
I
am
aware
that
certain
jurisprudence
would
appear
to
leave
considerable
latitude
for
the
Minister
in
requiring
just
such
"proof"
from
a
taxpayer,
but
I
fail
to
see
how
the
Minden,
supra,
case
provides
support
for
counsel's
contention
in
this
case,
that
"the
onus
in
fact
of
disproving
the
assessment,
as
opposed
to
the
respondent's
reasons
therefor
(rests
with
the
appellant)”.
In
Minden,
supra,
the
basic
issue
was
whether
the
taxpayer
was
engaged
in
a
profit
making
scheme,
thereby
placing
the
taxpayer
under
certain
taxing
provisions
of
the
Act.
The
respondent's
error
was
in
stating
that
the
taxpayer
was
"deemed
to
be
in
the
business
of
lending
money
on
the
security
of
mortgages
and
agreements
for
sale”,
whereas
the
facts
clearly
showed
"the
agreements
for
sale
and
the
interest
in
the
mortgages
were
purchased
outright"
page
89
(D.T.C.
1050).
The
issue,
however,
remained
the
same
as
noted
on
page
81
(D.T.C.
1045):
The
issue
in
the
appeal
is
thus
a
familiar
one,
namely,
whether
the
profits
realized
by
the
respondent
from
the
transactions
into
which
she
had
entered
were
capital
accretions
from
investment
as
claimed
by
her,
and,
therefore,
not
subject
to
income
tax
or
profits
from
a
business
or
an
adventure
in
the
nature
of
trade,
as
found
by
the
Minister,
and,
therefore,
taxable
income
.
.
.
The
facts
or
assumptions
underlying
an
assessment,
at
the
time
an
assessment
is
made,
are
those
vital
to
the
process
before
the
Court.
To
substitute
for
these,
some
other
facts
or
assumptions
(even
if
termed
"reasons")
at
a
later
point
in
time,
simply
because
these
new
reasons
appear
to
be
more
soundly
based,
is
not
a
procedure
which
I
find
acceptable.
There
is
no
indication
in
the
information
before
the
Court
in
this
matter
that
the
question
of
"value"
was
ever
considered
by
Revenue
Canada
in
assessing
the
appellant,
let
alone
as
sufficient
to
invalidate
totally
the
deduction
claimed
by
the
appellant.
The
respondent
at
trial
has
no
right
to
put
it
forward,
as
if
it
had
been
so
considered.
I
do
not
believe
these
thoughts
are
in
contradiction
to
Minden,
supra,
or
the
text
of
Vineland
Quarries,
supra,
when
these
are
read
properly.
The
quotation
given
earlier
for
the
jurisprudence
submitted
by
counsel
for
the
appellant
sustains
this
view.
I
would
add
the
judgment
of
this
Court
in
del
Valle
v.
M.N.R.,
[1986]
1
C.T.C.
2288;
86
D.T.C.
1235
and
quote
from
page
2290
(D.T.C.
1237):
While
it
was
possible
for
the
respondent
to
have
alleged
further
and
other
facts
the
respondent
did
not
choose
to
do
so
in
this
case
but
simply
relied
on
the
facts
assumed
at
the
time
of
the
reassessments.
I
emphasize
that
if
the
respondent
has
alleged
such
further
or
other
facts
the
onus
would
have
been
on
him
to
establish
them.
(See
M.N.R.
v.
Pillsbury
Holdings
Limited
[1965]
1
Ex.
C.R.
678;
[1964]
C.T.C.
294;
64
D.T.C.
5184.)
In
light
of
the
fact
that
the
Court
has
not
been
provided
with
any
evidence
regarding
value,
and
based
on
the
above
observations,
the
appeal
is
allowed
and
the
entire
matter
is
referred
back
to
the
respondent
for
reconsideration
and
reassessment.
The
appellant
is
entitled
to
party-and-party
costs.
Appeal
allowed.