MNR v. Pevato, 65 DTC 5183, [1965] CTC 300 (Ex Ct), briefly aff'd 67 DTC 5058 (SCC)

GIBSON, J.:—I am of the opinion that this case can be decided on the question of fact raised in the action. The question of fact, in brief, is whether the respondent, Egidio Pevato, was engaged in the same business at all material times within the meaning of Section 1101(1) of the Regulations made under the Income Tax Act when he sold his interest in the Parklane Hotel at Sudbury, Ontario, and acquired the Canadiana Motel, also at Sudbury.

In my opinion the business of the respondent was that of an inkeeper or hotel- or motelkeeper at all material times, which is in essence the business of providing accommodation to guests. In my opinion it is irrelevant whether the facilities as opposed to the room accommodation in the Parklane Hotel and those in the Canadiana Motel are different; that the Parklane Hotel was a partnership, whereas the interest of the respondent in the Canadiana Motel is that of a single proprietor ; that the physical plant of the Canadiana Motel was not completed until after the disposition by the respondent of the physical plant of the Parklane Hotel, and that there was a smaller number or different category of employees at the Parklane Hotel than there is or was at any material time at the Canadiana Motel.

In view of this finding, I do not propose to deal with the question of law submitted as to whether or not Section 1101(1) of the Regulations made under the Income Tax Act is intra vires the Governor in Council.

In the result, therefore, the appeal is dismissed, with costs. CHARLES EDMUND BROWN, Appellant,

and

MINISTER OF NATIONAL REVENUE, Respondent.

Exchequer Court of Canada (Cattanach, J.), July 5, 1965, on appeal from a decision of the Tax Appeal Board, reported 87 Tax A.B.C. 86.

Income tax—Federal—Income Tax Act, R.S.C. 1952, c. 148—Section 11(1)(1), (la)—Alimony and maintenance payments—Whether paid for maintenance of “recipient”—Whether payable on “periodic basis”.

In issue were, (1) the deductibility under Section 11(1) (la) of the sum of $1,170 paid by the appellant as arrears of alimony to his wife’s father in respect of rent owing by the appellant’s wife to her father, and (2) the deductibility under Section 11(1) (1) of a later sum of $10,000 paid by the appellant to his wife when their divorce became absolute. The Tax Appeal Board had upheld the Minister’s disallowance of both items, the first because it was not made for the maintenance of the “recipient” (the appellant’s father-in- law), and the second because it was not an allowance payable on a “periodic basis”.

HELD:

That the conclusions reached by the Tax Appeal Board and the reasoning by which they were reached were sound and that the appeal be dismissed accordingly.

H. G. Chappell, Q.C., for the Appellant.

D. G. H. Bowman and M. Barkin, for the Respondent.

CATTANACH, J.:—This is an appeal from a judgment of the Tax Appeal Board dated November 20, 1964 (87 Tax A.B.C. 86) whereby an appeal from an assessment to income tax for the appellant’s 1962 taxation year was dismissed.

As a result of an action brought before the Supreme Court of Ontario by his wife, the appellant by order of the Senior Master in Chambers, dated February 27, 1962, was ordered to pay to his wife the sum of $65 per week as interim alimony commencing at the date of the issue of the Writ of Summons (i.e., October 26, 1961) and it was further ordered that the arrears of alimony owing from date were to be paid to the appellant’s wife’s father, Wilfred Baker, in respect of rent owing by the appellant’s wife to her father. These arrears, being a total of $1,170, were paid forthwith by the appellant by a cheque for that amount payable to his wife’s father in accordance with the order of the Master.

Later in the same year by a Judgment nisi of the Supreme Court of Ontario dated June 29, 1962, dissolving the marriage, the appellant was ordered to make weekly payments to his former wife of $150 for her support and maintenance beginning June 29, 1962 and also, upon the judgment being made absolute, the sum of $10,000. The judgment was made absolute on October 11, 1962 and the appellant immediately paid his former wife the sum of $10,000 in accordance with that order.

In completing his income tax return for the year 1962 the appellant claimed as a deduction from income an amount of $16,175 being the total of the payments made by him during the 1962 taxation year pursuant to the order of the Senior Master and the judgment of the Supreme Court of Ontario.

Of the amount so claimed by the appellant, the Minister refused to allow as a deduction the sum of $1,170 paid by him to his wife’s father and the sum of $10,000 paid by him to his former wife on the grounds that:

‘the amount of $10,000 paid to Whilhelmina E. Brown pursuant to the Judgment Nisi of the Supreme Court of Ontario dated 29th June, 1962 claimed as a deduction from income was not an allowance payable on a periodic basis for the maintenance of the recipient thereof within the meaning of paragraph (1) of subsection (1) of section 11 of the Act; that the amount of $1,170 paid to the father of Whilhelmina E. Brown pursuant to the Order of the Senior Master at Toronto dated 27th February, 1962 claimed as a deduction from income was not an allowance payable on a periodic basis for the maintenance of the said Whilhelmina E. Brown and further that at the time the payment was made the taxpayer was under no obligation to make the payment to the said Whilhelmina E. Brown within the meaning of paragraph (la) of subsection

(1) of section 11 of the Act.”

In dismissing the appeal, the learned member of the Tax Appeal Board held that the arrears of $1,170 were not paid for the maintenance of the recipient and therefore did not qualify as a deduction under Section 11(1) (la) of the Income Tax Act and further that the sum of $10,000 was not payable on a periodic basis for the maintenance of the recipient and therefore did not qualify under Section 11(1) (1) of the Act as a deductible payment.

It was from that decision that an appeal was taken to this Court.

The facts adduced in evidence before me were in substance the same as those which were before the Tax Appeal Board. Further it is apparent that the same arguments as were advanced by counsel to the Tax Appeal Board were presented to me and that no further issue or question of law was raised before me.

Since I am in agreement with the conclusions reached by the learned member of the Tax Appeal Board and the reasoning by which he reached those conclusions, the appeal is dismissed with costs.