BJ SERVICES COMPANY CANADA
THE SUCCESSOR TO NOWSCO WELL SERVICE LTD.,
HER MAJESTY THE QUEEN,
REASONS FOR JUDGMENT
 This appeal concerns the deductibility of expenses incurred by Nowsco Well Service Ltd. ("Nowsco") in response to a hostile takeover bid by BJ Services Company Canada ("BJ") an occurrence that became prevalent in the Canadian corporate landscape during the 1990s. On April 1, 1996, BJ approached Nowsco with an unsolicited merger proposal for the purchase of all of the common shares of Nowsco at a price of $27.00 per share. In the weeks following this proposal, the directors of Nowsco sought financial and legal advice and as a result incurred substantial fees from RBC Dominion Securities Inc. ("RBC"), Simmons & Company International of Houston, Texas ("Simmons"), Blake Cassels & Graydon law firm ("Blake"), KPMG Peat Marwick Thorne Accountants (KPMG) and finally MacLeod Dixon Law Firm ("MacLeod"). The Appellant incurred additional expenses in soliciting a "white knight" that would be interested in presenting an alternative competitive proposal to acquire the shares of Nowsco. As a result, two sets of expenses, referred to as "hello" and "break" fees, were incurred and became payable to this so called "white knight" - Great Lakes Chemical Corporation ("GLCC").
BACKGROUND AND FACTS
 On June 13, 1996, BJ was successful, despite a bid by GLCC, in acquiring the shares of Nowsco. For the taxation year ending June 13, 1996, Nowsco deducted all of the foregoing expenses in computing its income for tax purposes. The Minister of National Revenue (the "Minister") eventually reassessed and denied the deductions, from which the Appellant, being the successor to Nowsco, has appealed.
 During the opening remarks, counsel advised that a number of minor issues had been resolved, to be reassessed by the Minister in accordance with the outcome of this appeal. It was agreed that the legal fees paid to Blake and the accounting fees paid to KPMG would be deductible together with some other corporate and miscellaneous expenses. For the purposes of this appeal, I am left to decide the deductibility of the following expenses:
(1) RBC $13,070,777.00
(2) Simmons $5,171,164.00
(3) GLCC - (a) hello fees of $6,900.000.00
(b) break fees of $23,601.591.00
 BJ Services Company Canada v. R.,  G.S.T.C. 124 (T.C.C.), the companion case to the present one, decided by Justice Miller, dealt with the application of the goods and services tax and the eligibility for input tax credits for the legal and financial advisory fees of Blake, RBC and Simmons. Justice Miller found that the fees were incurred in the course of the "commercial activities" of Nowsco pursuant to subsection 169(1) of the Excise Tax Act. This case is concerned not only with the deductibility of the RBC and Simmons fees under the Income Tax Act but also the deductibility of the GLCC "hello" and "break" fees.
 Nowsco was a publicly traded corporation carrying on the business of providing well stimulation and pipeline services in the oil and gas industry. It has been in business since the early 1960s. Through the years, this company grew from a handful of employees to a staff of over 2,000 individuals working worldwide. According to the evidence of Stanley Shouldice, the corporate CEO, Nowsco became a publicly traded company in 1971. He had been one of the principal influences with Nowsco over the years, overseeing company revenues rise to the hundreds of millions in the 1990s. By 1995, Nowsco had become the largest Canadian company in this industry in respect to revenue, staff and research and development. Mr. Shouldice's pride in these accomplishments was obvious throughout his testimony and certainly justifiable.
 Following is an abbreviated summary of the sequence of events as it unfolded commencing on April 1, 1996:
(1) On April 1, 1996, Nowsco received an unsolicited offer from BJ to purchase the shares of Nowsco for $27.00 per share.
(2) On April 2, 1996, the Board of Directors of Nowsco met and formed a Special Committee comprised of three independent Board Members to advise on this proposal. This Committee advised Nowsco, among other things, to retain legal and financial advisors.
(3) On April 2, 1996, Nowsco retained the financial services of RBC to evaluate the BJ proposal plus any subsequent proposals.
(4) On April 4, 1996 Nowsco also retained Simmons, an investment bank specializing in the oil industry, as supplementary American financial advisors to assist RBC.
(5) On April 9, 1996, BJ formally presented the proposal to the Board of Nowsco, with the proviso that Nowsco commit to negotiating exclusively with BJ until April 19, 1996. Nowsco rejected this request.
(6) On April 12, 1996, BJ offered their proposal directly to the shareholders of Nowsco.
(7) On April 16, 1996, the Nowsco Special Committee engaged Blake, Cassels law firm to advise it on a number of legal issues arising from the takeover proposal.
(8) On April 19, 1996, RBC advised the Board of Nowsco that the initial BJ proposal was inadequate and should be rejected. A Directors' Circular was prepared and circulated to shareholders recommending that the BJ offer be rejected.
(9) During this period, Nowsco and its advisors contacted other parties hoping another more attractive offer would be made.
(10) Although never contacted by Nowsco, GLCC expressed interest in making a proposal and between April 19, 1996 and May 1, 1996 negotiations ensued. GLCC eventually offered $30.90 per share. The Special Committee and Nowsco's advisors recommended that the GLCC offer was reasonable and that it be accepted.
(11) On May 4, 1996, Nowsco and GLCC entered into an agreement accepting the GLCC offer. As part of the terms of this agreement and as recommended by the advisors, Nowsco agreed to pay GLCC a non-contingent fee of $6,900,000.00 (the "Hello" fee) plus a contingent fee (the "Break" fee), which would be paid if a more attractive unsolicited bid was made and accepted by Nowsco which would nullify the GLCC offer.
(12) On May 6, 1996, the Board of Directors issued a second Directors' Circular to Nowsco shareholders recommending the GLCC offer.
(13) On June 3, 1996, BJ responded by amending its initial proposal and increased the consideration to $35.00 per share.
(14) On June 6, 1996, RBC advised Nowsco that this second BJ offer was reasonable. On this same date, the Board of Nowsco issued another Directors' Circular to its shareholders recommending acceptance of BJ's second offer.
(15) On June 13, 1996, BJ acquired all of the issued and outstanding common shares of Nowsco, according to the compulsory acquisition provisions of the Business Corporation Act of Alberta.
 Counsel for both the Respondent and the Appellant agreed that Justice Miller's review of the facts in the companion GST case accurately set forth the events leading to the BJ takeover. An agreed statement of facts and documents was entered. It may be beneficial to reproduce the more detailed portions of the agreed facts:
1. During the relevant period, Nowsco Well Service Ltd. ("Nowsco") was a publicly traded corporation carrying on the business of providing well stimulation and pipeline services in the oil and gas industry, with a head office located at 1300, 801 - 6th Avenue S.W., Calgary, Alberta. The annual reports of Nowsco for the calendar years 1990 through 1995 are attached hereto as Tabs 1 through 6, and a list of Nowsco's largest customers by strategic business unit is attached hereto as Tab 7.
2. At all material times Nowsco was a taxable Canadian corporation for the purposes of the Income Tax Act (Canada) (the "Act"), with a December 31 taxation year end.
3. During 1992, Nowsco adopted a mission statement, a copy of which is attached hereto as Tab 8, stating among other things, that it will ensure superior growth in shareholder value by providing quality services and engineering to the international energy market.
4. BJ Services Canada, Inc. ("BJ Canada") was an indirect wholly owned subsidiary of BJ Services Company ("BJ") throughout the relevant period and up until the amalgamation of BJ Canada with Nowsco, as described below.
The Takeover of Nowsco
5. On April 1, 1996, representatives of BJ approached Nowsco to negotiate a friendly merger and proposed the purchase of all the common shares in Nowsco for $27 per share (the "Initial Proposal"). The representatives of BJ made it clear that if the Board of Directors (the "Board") failed to accept the Initial Proposal within ten days, BJ, through BJ Canada, would make an unsolicited offer directly to the shareholders of Nowsco without the Board's approval. A copy of the letter of April 4, 1996 from BJ to Nowsco is attached hereto as Tab 9.
6. On April 2, 1996, the Board met to discuss the Initial Proposal and formed a special committee, comprised of three independent Board members, to advise on all matters relating to this proposal (the "Special Committee"). At this meeting, Bennett Jones Verchere (as they were then known) advised the Board that (i) the Board had a general duty to act honestly, in good faith and in the best interests of the corporation in determining whether or not to support the Initial Proposal, (ii) that the directors had a fiduciary obligation to obtain the highest price for Nowsco's shares and (iii) that the requirement to obtain the highest price for Nowsco's shares had generally been interpreted to require the Board to engage in an auction of Nowsco's shares and to retain financial advisors to advise them of the value of Nowsco's shares. The minutes of such meeting are attached hereto as Tab 10.
7. Expert financial and legal advisors were engaged to provide assistance to Nowsco.
8. On April 2, 1996, Nowsco engaged the services of RBC Dominion Securities Inc. ("RBC") as financial advisors with respect to the Initial Proposal and any subsequent proposals that might arise. This engagement was formalized in a letter agreement dated April 6, 1996 and accepted by Nowsco on April 19, 1996 (the "RBC Agreement"), which is attached hereto as Tab 39.
9. Under the RBC Agreement, RBC was exclusively engaged as the Canadian financial advisor to Nowsco, effective as of April 4, 1996, with respect to the Initial Proposal and:
"with respect to any possible responses thereto, including, without limitation, the review of alternatives to maximize shareholder value including the solicitation of additional take-over bid offers, a recapitalization, asset sales, or the sale of all or part of [Nowsco] by way of merger, share exchange, amalgamation, arrangement, reorganization or otherwise."
10. The RBC Agreement further provided that the financial advisory services included, without limitation, advice and assistance in evaluating the Initial Proposal or subsequent offers and opinions as to the fairness of the Initial Proposal or subsequent offers from a financial perspective.
11. On April 4, 1996, Nowsco engaged the services of Simmons & Company International of Houston, Texas ("Simmons"), an investment bank specializing in the oil service and equipment industry, as special financial advisors to assist Nowsco and RBC in determining a course of action with respect to the Initial Proposal and any subsequent proposals that might arise. This engagement was formalized in a letter agreement dated April 15, 1996 and accepted by Nowsco on April 25, 1996 (the "Simmons Agreement"), a copy of which is attached hereto as Tab 41.
12. According to the Simmons Agreement, Simmons was also engaged to:
(a) assist with an understanding and presentation of the status and potential impact of Nowsco's technology to potential acquirers of Nowsco;
(b) assist with efforts to approach other companies as alternatives to a takeover by BJ;
(c) share industry data and information to assist Nowsco and RBC in determining a fair value for the common shares in Nowsco; and
(d) respond to any other requests from the Board and senior management of Nowsco in their efforts to maximize shareholder value.
A copy of a memorandum prepared by Simmons and relating to Nowsco's technology and product development efforts is attached hereto as Tab 42.
13. On April 9, 1996, the Initial Proposal was formally presented to the Board by representatives of BJ with the request that the Board commit to negotiating exclusively with BJ until April 19, 1996, the period given to the Board to consider and negotiate the final terms of the Initial Proposal. BJ proposed that failing agreement on a transaction by April 19, 1996, Nowsco could negotiate with other interested parties and BJ, through BJ Canada, could make a takeover bid directly to the shareholders of Nowsco. The Board refused this request on the basis that committing to exclusive negotiations could prejudice Nowsco's alternatives in responding to the Initial Proposal. The minutes of such meeting together with copies of the proposal from BJ and a presentation made by RBC are attached hereto as Tabs 13(a), 13(b) and 40, respectively.
14. On April 12, 1996, BJ Canada formally offered the Initial Proposal to shareholders of Nowsco, as shown by the Offer to Purchase from BJ Services Canada Inc. attached hereto as Tab 43.
15. On April 16, 1996, the Special Committee engaged Blake Cassels & Graydon ("Blakes") to provide the Special Committee with legal advice regarding the independence of the Special Committee and a number of other legal issues that arose from April 2, 1996 to June 13, 1996, including advice with respect to representations made to the Securities Commissions of Alberta and Ontario. The minutes of the April 16, 1996 meeting of the Special Committee and a copy of the memorandum prepared by Blakes are attaches hereto as Tabs 13 and 38, respectively.
16. On April 19, 1996, RBC advised the Board that, in RBC's opinion, the consideration under the Initial Proposal was inadequate. RBC provided a formal opinion to this effect to the Board on April 22, 1996. The Board also received the report of the Special Committee on April 22, 1996, recommending that the Board advise shareholders to reject the Initial Proposal. The minutes of the April 19 and April 22, 1996 meetings of the Board and the minutes of the April 22, 1996 meeting of the Special Committee are attached hereto as Tabs 16, 17 and 18, respectively.
17. Based on the recommendations of the Special Committee and RBC, the Board unanimously recommended to the shareholders of Nowsco that they reject the Initial Proposal in a Directors' Circular dated April 22, 1996 (the "First Directors' Circular"), a copy of which is attached hereto as Tab 44.
18. From April 2, 1996, Nowsco and its advisors were in contact with other parties interested in acquiring the assets of Nowsco, the common shares in Nowsco, or a combination thereof.
19. Nowsco received an unsolicited expression of interest from Great Lakes Chemical Corporation ("GLCC") and between April 29, 1996 and May 2, 1996, Nowsco and its advisors met with GLCC to negotiate the terms of an offer to acquire the common shares of Nowsco and a pre-acquisition agreement relating thereto.
20. On May 4, 1996, Nowsco and GLCC entered into a pre-acquisition agreement (the "GLCC Agreement"), whereby GLCC agreed to make a takeover bid to acquire the common shares in Nowsco at a price equal to $30.90 per share on the terms described in the GLCC Agreement (the "GLCC Offer"), a copy of which agreement is attached hereto as Tab 45. The Board agreed, inter alia, to cooperate with and support the GLCC Offer, including recommending it to Nowsco's shareholders, to waive the application of the shareholder rights protection plan, to accelerate the vesting of options to acquire shares in Nowsco and to not solicit any further proposals. GLCC further agreed that it would honour Nowsco's existing employment and severance agreements.
21. In addition, GLCC was entitled under the GLCC Agreement to receive a non-contingent fee equal to $6,900,000 (the "Hello Fee") plus a contingent fee if an unsolicited proposal was made and accepted such that the GLCC Offer was not accepted or upon the occurrence of certain other specified events. The GLCC Agreement specified that the contingent fee payable to GLCC was equal to 3% of a superior proposal, or, if no superior proposal was made, the contingent fee was $20,900,000.00. If a superior proposal was made, the GLCC Agreement further provided that GLCC would have the opportunity to amend the GLCC Offer to meet that proposal prior to Nowsco entering into an agreement in respect of such superior proposal.
22. GLCC insisted that Nowsco agree to the payment of the Hello Fee and the contingent fee as a condition of their agreeing to make an offer to acquire all of the issued and outstanding shares of Nowsco.
23. Nowsco entered into the GLCC Agreement on the recommendation of the Special Committee and Nowsco's advisors, who concluded that the GLCC Offer was the best alternative to Nowsco and its shareholders and that the terms and conditions of the GLCC Agreement were reasonable. In particular, the financial and legal advisors advised the Board that the quantum of the Break Fee was reasonable in the circumstances and provided the Board with a chart outlining the quantum of Selected Canadian Break & Topping Fees between 1987 and 1996, a copy of which is attached hereto as Tab 67.
24. On May 6, 1996, RBC provided Nowsco with an opinion that the GLCC Offer was fair from a financial point of view, a copy of which is attached hereto as Tab 46.
25. On May 6, 1996, GLCC made the GLCC Offer to the shareholders of Nowsco, as shown by the Offer to Purchase from GLCC attached hereto as Tab 47.
26. On May 6, 1996, the Board issued a Directors' Circular to shareholders of Nowsco, recommending the GLCC Offer (the "Second Directors' Circular'), a copy of which is attached hereto as Tab 48. The following factors were cited in the Second Directors' Circular as being considered by the Board in deciding that the GLCC Offer was the best alternative available to Nowsco and its shareholders:
(a) Nowsco's businesses, financial condition, results of operations and future prospects;
(b) the fact that the consideration offered under the GLCC Offer represented a $3.90 per share (14.4%) increase over the consideration offered under the Initial Proposal and a premium of 51% over the closing price reported on The Toronto Stock Exchange on April 2, 1996 (the day before the Initial Proposal was made public);
(c) RBC's opinion as to the fairness of the GLCC Offer from a financial point of view;
(d) the advice of RBC and Simmons relating to various financial and other matters concerning Nowsco, the GLCC Offer and the alternatives available to Nowsco;
(e) the view of the Board that, while more favourable proposals from other interested parties was a possibility, the GLCC Offer was the best alternative before the Board at that time; and
(f) the fact that the GLCC Agreement and the GLCC Offer did not preclude the possibility of a subsequent superior proposal.
27. On May 17, 1996, BJ extended the offer period for the Initial Proposal to May 27, 1996 as shown in the Notice of Extension of the Offer to Purchase from BJ Services Canada Inc. attached hereto as Tab 49.
28. On June 3, 1996, BJ Canada amended the Initial Proposal by increasing the consideration offered to $35 per share and extending the offer period to June 13, 1996 (the "Second BJ Offer"), as shown in the Notice of Variation and Extension of Offer to Purchase from BJ Services Canada Inc. attached hereto as Tab 50.
29. On June 6, 1996, RBC provided Nowsco with an opinion that the Second BJ Offer was fair from a financial point of view, a copy of which is attached hereto as Tab 51.
30. On June 6, 1996, the Board issued a Directors' Circular to the shareholders of Nowsco, recommending the Second BJ Offer (the "Third Directors' Circular"), a copy of which is attached hereto as Tab 52.
31. In the course of responding to the foregoing developments, the Board and the Special Committee met on several other occasions to discuss, among other matters, retaining RBC and Simmons, the Initial Proposal, the GLCC Agreement, the GLCC Offer and issues relating to and arising from those matters. Copies of the minutes of Board and Special Committee meetings, as the case may be, of April 3, April 4, April 16, April 18, April 23, April 25, April 29, May 1, May 3, May 6, May 13, May 15, May 21, May 23, May 28, May 29, June 3, June 5 and June 6 are attached hereto as Tabs 11, 12, 14, 15 and 19 through 37.
32. During the currency of the takeover bid, BJ Canada made an application to the Securities Commissions of Ontario and Alberta for a cease trade order in respect of the GLCC Offer and a waiver of Nowsco's shareholder rights protection plan, a copy of the primary submission of BJ Canada is attached hereto as Tab 53. Nowsco also responded to the application and submissions of BJ Canada and a copy of the primary response of Nowsco is attached hereto as Tab 54.
33. On June 13, 1996, BJ Canada acquired greater than 90% of the common shares in Nowsco, which allowed BJ Canada to acquire all of the issued and outstanding common shares in Nowsco by virtue of the compulsory acquisition provisions in the Business Corporations Act, S.A. 1981, c. B-15 (the "Takeover"). As the Takeover resulted in BJ Canada acquiring control of Nowsco, there was a deemed year-end pursuant to subsection 249(4) of the Act.
34. On July 31, 1996, Nowsco amalgamated with BJ Canada and subsequently amalgamated with 3032419 Nova Scotia Company on October 1, 1999 to form Nowsco-Fracmaster Company. Nowsco-Fracmaster Company subsequently changed its name to BJ Services Company Canada effective May 23, 2000 and BJ Services Company Canada continues to be the successor of Nowsco.
Fees paid to RBC, Simmons and GLCC
35. The fees outlined in the RBC Agreement for the financial advisory services provided by RBC depended on whether a transaction resulted from the Initial Proposal or any subsequent proposals within one year of the RBC Agreement. If no transaction occurred, RBC would have been entitled to a fee equal to $2,000,000. If a transaction occurred, there were two possible fee structures depending on the nature of the transaction. If more than 50% of the outstanding common shares in Nowsco were acquired by BJ, or any other third party, if Nowsco were combined, merged or amalgamated with any other entity, if Nowsco disposed of all or substantially all of its assets or any other acquisition of Nowsco was effected (a "Change of Control Transaction"), RBC would be entitled to a non-contingent fee equal to $2,000,000 plus an incentive fee, calculated on an incremental scale, based on the aggregate value of the Change of Control Transaction in excess of the Initial Proposal. Where there was an acquisition or sale of assets or securities other than a Change of Control Transaction, RBC would be entitled to a fee equal to 0.625% of the value of the consideration paid to Nowsco on this transaction.
36. Under the RBC Agreement, Nowsco was required to pay an initial engagement fee of $500,000 immediately and a further $150,000 upon the provision of an opinion on the fairness of the Initial Proposal. These fees were deposits to be applied against the fees described above. The $500,000 engagement fee was paid on April 22, 1996 and the $150,000 fee payable on the provision of a fairness opinion was paid on April 24, 1996, as shown by the Statements of Account from RBC attached hereto as Tabs 55 and 56, and cancelled cheques from Nowsco attached hereto as Tabs 57 and 58.
37. As the Takeover was a Change of Control Transaction, RBC was entitled to the non-contingent fee of $2,000,000 plus the incentive fee. The aggregate fees paid to RBC under the RBC Agreement, including the engagement fee and expense reimbursement of $56,705, was $13,070,777 (the "RBC Fees"), the balance of which was paid on June 7, 1996 as shown by the Statement of Account from RBC and cancelled cheque from Nowsco attached hereto as Tabs 59 and 60.
38. In consideration for their financial advisory services, the Simmons Agreement provided that Simmons was entitled to a non-contingent fee equal to USD$250,000 plus an incentive fee, calculated on an incremental scale, based on the value of a closed transaction in excess of the Initial Proposal, subject to a minimum of USD$250,000.
39. Under the Simmons Agreement, Nowsco was required to pay the non-contingent fee equal to USD$250,000 immediately and the incentive fee on the closing date of the transaction. The non-contingent fee, along with an expense reimbursement of USD$9,424.95, was paid by wire transfer on June 12, 1996, as shown by Tabs 63 and 64 attached hereto.
40. On the closing of the Takeover, Simmons was entitled to the incentive fee. The aggregate fees paid to Simmons under the Simmons Agreement, including the non-contingent fee and the expense reimbursement of $9,424.95, was USD$3,759,425, or CDN$5,171,164, (the "Simmons Fees"), as shown by the Statement of Account from Simmons attached hereto as Tab 61. The incentive fee was paid by wire transfer on June 10, 1996, as shown by Tabs 62 and 64 attached hereto.
41. Nowsco paid GLCC the Hello Fee via wire transfer on May 7, 1996 as is shown by Tab 65 attached hereto. On June 7, 1996 Nowsco paid GLCC the 3% contingent fee described in paragraph 21 above in the amount of $23,601,591 (the "Break Fee"), as shown by Tab 66 attached hereto, in accordance with the terms of the GLCC Agreement as GLCC had decided not to use its right of first refusal to match the Second BJ Offer.
42. The quantum of the RBC Fees, the Simmons Fees, the Hello Fee and the Break Fee and (collectively referred to herein as the "Expenses") were reasonable in the circumstances.
43. For financial reporting purposes, in accordance with well-accepted principles of business practice, the Expenses were properly deducted by Nowsco as general and administrative expenses in the computation of its profit for the period.
44. For its taxation year ending June 13, 1996, Nowsco deducted the Expenses in computing its income for tax purposes.
 Counsel also agreed on the issues to be decided and set them out within the statement of agreed facts and documents as follows:
(a) whether the Expenses are deductible in computing Nowsco's income for its taxation year ending June 13, 1996;
(b) if any of the Expenses are not deductible in computing Nowsco's income because of the restrictions in paragraphs 18(1)(a) or 18(1)(b) of the Act, whether such Expenses are deductible in computing income pursuant to either of paragraphs 20(1)(e) and 20(1)(bb) of the Act; and
(c) if any of the Expenses constitute capital outlays for the purposes of paragraph 18(1)(b) of the Act and do not satisfy the requirements for deductibility under either of paragraphs 20(1)(e) and 20(1)(bb), whether the amount of such Expenses constitute "eligible capital expenditures" pursuant to subsection 14(5) of the Act.
 The Expenses, incurred by Nowsco pursuant to a hostile takeover bid, were expenditures necessitated to meet legal requirements and the expectations of the public capital markets, where Nowsco financed its business operations. Therefore these Expenses were incurred for the purpose of gaining or producing income for Nowsco in light of the requirements imposed on it. They are properly deducted from the income of the business in computing Nowsco profit, pursuant to section 9 of the Act. As these expenses were incurred solely in respect to the takeover bid, were wholly within the taxation year in question, reduced the resources of Nowsco to pay income tax in that year, had no relationship to any prior or subsequent period and resulted in no enduring benefit, they should not be characterized as capital expenses but should be currently deductible.
 Appellant raised the following alternative arguments:
(1) the expenses are deductible as financing expenses under paragraph 20(1)(e), notwithstanding paragraphs 18(1)(a) and 18(1)(b);
(2) the RBC and Simmons fees are deductible under paragraph 20(1)(bb) as they involved advice respecting the sale of shares of Nowsco;
(3) if the expenses were incurred for the purpose of gaining of producing income but are capital outlays, and do not fall under the preceding two alternative arguments, they are eligible capital expenditures pursuant to subsection 14(5) of the Act.
 The expenses are not deductible from the business income, as they were incurred in response to a takeover bid, aimed at maximizing shareholder value and were not incurred for the purpose of gaining or producing income. The disallowed expenses relate to fees paid for advice and assistance to pursue alternative purchasers and to create and operate a bidding auction for the sale of the shares. As a result the expenses were not for the purpose of increasing Nowsco's income from its business but for the purpose of increasing the price that Nowsco shareholders would realize on a sale of their shares. In addition, the expenses were not required by any specific legislative provision.
 In the alternative, if the expenses are found to have been incurred by Nowsco in relation to its business operations and not primarily for the benefit of the shareholders, the expenses should be capital outlays in accordance with paragraph 18(1)(b). Therefore no deduction can be made in computing the income of Nowsco for the year ending June 13, 1996.
 Counsel advised that much of the evidence and exhibits would be very similar to those presented in the GST companion case. However, there was additional evidence presented at this hearing concerning the hello and break fees paid to GLCC, that were not at issue in the companion case.
 Two witnesses were called -Stanley Patrick Shouldice, former CEO and Chairman of Nowsco, and Ian Bruce, who was presented and accepted as an expert investment banker with expertise in mergers and acquisition transactions. Mr. Shouldice outlined the growth of Nowsco business operations throughout the years. The importance of shareholder expectations and shareholder confidence in Nowsco was paramount throughout the years, according to Shouldice. This was reflected in the following mission statement which Nowsco adopted in 1992:
Nowsco will ensure superior growth in shareholder value by providing quality services and engineering to the international energy market. Nowsco will accomplish this by providing the best value to the client through quality management and industry leading solutions delivered with integrity and safety by the best people in the service industry.
His evidence was that maximizing shareholder value was always the underlying factor in the business decisions of Nowsco over the years. He spent a considerable portion of his working time on gaining an understanding of shareholder expectations, by organizing and attending international shareholder road shows, conducting annual visits to the major shareholders, fielding daily calls and obtaining necessary advice and instructions, where warranted, in handling shareholder matters. His evidence was that the manner in which the takeover bid was handled was consistent with the usual business practice and philosophy that fuelled the corporate activities. He believed that shareholder value and confidence was of utmost importance, as this dictated the success of Nowsco in raising money in the public markets, where shareholders constantly monitored the performance of Nowsco against comparable companies. Mr. Shouldice explained why a Special Committee was immediately set up to deal with the takeover bid and why advisors were required to provide advice on the legal and financial ramifications, particularly in respect to the company's foremost obligation of maximizing shareholder value, as reflected in the mission statement. He also explained that the "hello" fee was paid to reimburse GLCC for out-of-pocket costs it incurred in making an alternative bid to BJ's proposal. The "break" fee was triggered and payable to GLCC only in the event of an accepted higher bid, subsequent to their offer. It protected GLCC in initially presenting a higher official bid. Data from the advisors to Nowsco showed that the break fee was both reasonable and competitive when compared to similar situations and as Mr. Shouldice explained "... it was, in essence, the price of doing business with Great Lakes".
 Ian Bruce explained how the Dey Committee in Ontario was struck to address the responsibilities of directors in the face of increasing merger and acquisition activity in the 1980's and the perceived failure of directors to act as diligently as they could be. This committee looked at elements of corporate governance and pointed out that board members have a higher personal liability and standard to ensure shareholder protection in the area of takeovers. Mr. Bruce also referred to National Policy Number 38 which would have applied to Nowsco at the time of the takeover bid. This policy statement set out a framework by which corporations, that were subjected to unsolicited takeover offers, should conduct their activities. He pointed out that there is express acknowledgement within this policy that the primary objective of takeover legislation is to protect the bona fide interests of shareholders of the target company so that fully informed decisions can be made. Part of this strategy involved advance defense preparation due to the short time frame available in responding to a bid. Nowsco had instituted a shareholder protection plan prior to the BJ bid in 1996. Due to the intense nature and short time frame of a takeover bid and the developing law respecting Director liability, it is typical, explained Bruce, to form special committees and engage outside advisors to responsibly and adequately review alternatives. In fact he could not think of a single case where outside financial advisors had not been hired and in some cases two or three were hired. He characterized Nowsco's response to the BJ bid as "... a very expertly managed and executed response and it is totally consistent with the highest expectations of public market expectations". He characterized the break fee to GLCC as slightly higher than the average but well within the reasonable range and absolutely commonplace in corporate takeovers. He explained that break fees operate as an inducement to potential alternate bidders to come forward, as GLCC did, knowing that they have some insurance that the deal may get done and that a further bid by BJ would not come in at $30.91 per share, for example, as opposed to the $30.90 GLCC offer.
 Although there are some aspects of the decision of Justice Miller, in the GST companion case, that are similar to the present case, the hurdles imposed by the Income Tax Act are not only different but more numerous. Unlike Justice Miller, however, I have the benefit of several Supreme Court decisions in this area, as well as the recent cases of Boulangerie St-Augustin Inc. v. R., 95 DTC 2149 (T.C.C.), later approved by the Federal Court of Appeal, and International Colin Energy Corporation v. R., 2002 DTC 2185 (T.C.C.). The two latter cases dealt with the deduction of professional advisory fees incurred in takeover bids. Both decisions traced the case law that has developed since the Supreme Court case of British Columbia Electric Railway Co. Ltd. v. Minister of National Revenue, 58 DTC 1022, Associate Chief Justice Bowman succinctly stated the appropriate approach and tests at paragraph 43 in International Colin Energy Corporation:
43. The approach outlined by Abbott J. is one that has traditionally been followed. One first asks the question "Was the payment made for the purpose of gaining or producing income from a business or property?" If the answer is no the question whether it is on capital account is irrelevant. If the answer is yes the application of paragraph 18(1)(b) must be considered. If the deduction of the payment is not prohibited under paragraph 18(1)(a), but is nonetheless caught by paragraph 18(1)(b), it must then be determined whether any of the specific provisions of the Income Tax Act that permit capital expenditures in a business context (such as the paragraphs in subsection 20(1) apply. Indeed subsection 20(1) operates even if the payment is caught by both paragraphs 18(1)(a) and (b).
 The first of these tests (whether the expenses are made for the purpose of gaining or producing income?) arises from the wording of paragraph 18(1)(a) of the Act. It states:
18(1) General limitations -- In computing the income of a taxpayer from a business or property no deduction shall be made in respect of
(a) general limitation -- an outlay or expense except to the extent that it was made or incurred by the taxpayer for the purpose of gaining or producing income from the business or property;
 The predecessor provision to 18(1)(a) was more restrictive as it required that expenses be totally, exclusively and necessarily laid out or expended for the purpose of gaining or producing income.
 "Income" from a business or property must be determined in conjunction with subsection 9(1) which reads:
9(1) Income - Subject to this Part, a taxpayer's income for a taxation year from a business or property is the taxpayer's profit from that business or property for the year.
 Generally, business expenses will be deductible and this deductibility flows from the concept of profit, which is referred to in subsection 9(1) but is not defined in the Act. The difficulty is that in determining profit, what is considered an expense for business purposes may not necessarily be permitted as a deductible expense under the Act for income tax purposes. Justice Archambault canvassed this question in Boulangerie St-Augustin, and after reviewing relevant case law, concluded that although a Court may consider generally accepted accounting principles, it is the accepted principles of commercial trading, or accepted principles of business, that will be the primary aid in determining net profit. The Supreme Court in Canderel v. R.,  1 S.C.R. 147 emphasized the key role that these interpretive aids play in determining an accurate picture of a taxpayer's profit in any given year. I agree with the view taken in these cases that the business approach best depicts the reality of the financial picture of a taxpayer and is the best method to determine the answer to the first test (are the expenses for the purpose of gaining or producing income?).
 It is pursuant to subsection 9(1), and not paragraph 18(1)(a), that a taxpayer may deduct expenses incurred to gain or produce income. It is paragraph 18(1)(a) (together with paragraph 18(1)(b)) that provides the limitations or restrictions in this respect.
 Justice Abbott in British Columbia Electric Railway Co. Ltd. at page 1027 stated that:
Since the main purpose of every business undertaking is presumably to make a profit, any expenditure made "for the purpose of gaining or producing income" comes within the terms of Section 12(1)(a) whether it be classified as an income expense or as a capital outlay.
 The criteria for deductibility was broadened when the words "wholly, exclusively and necessarily" were removed from the predecessor to 18(1)(a).
 Justice Archambault in Boulangerie St-Augustin Inc. reviewed Justice Abbott's explanation for the change of interpretation from earlier cases in respect to paragraph 12(1)(a), now 18(1)(a) at paragraph 44:
44. To explain this change of interpretation, Abbott J. indicated that paragraph 12(1)(a) of the Income Tax Act (Act of 1948), S.C. 1948, c. 52 now paragraph 18(1)(a) of the Act, no longer contained the words "wholly, exclusively and necessarily" of paragraph 6(a) of the Act of 1927. Iacobucci J. also underscored the effect of this change in Symes, supra, at page S.C.R. 731 (C.T.C. 56, DTC 6012):
On more than one occasion since the amendment, it has been recognized that the current language of the Act suggests a broader rationale for the deductibility than did the former.
 This broader "rationale for deductibility" suggests that the concept of expenses will include not only direct expenses, relating to a company's product or services, but will also include ancillary expenses, such as maintaining shareholder relations, which are necessary for the company to conduct its operations.
 This view is expressed in the Supreme Court decision of British Columbia Power Corp. v. M.N.R., 67 DTC 5258:
48. In my opinion, the reasonable furnishing of information from time to time to shareholders by a company respecting its affairs is properly a part of the carrying on of the company's business of earning income and a corporate taxpayer should be entitled to deduct the reasonable expense involved as an expense of doing business.
 This same view was followed by Justice Wilson in the Supreme Court decision of Mattabi Mines Ltd. v. Ontario (Minister of Revenue),  2 S.C.R. 175:
...The only thing that matters is that the expenditures were a legitimate expense made in the ordinary course of business with the intention that the company could generate a taxable income some time in the future. ...
 The question of whether ancillary expenses constitute an integral part of a business was considered by Justice Miller in the GST companion case. Justice Miller concluded at paragraph 66:
...any activity engaged in by the company which is related to the shareholders, provided that it is commercial and not personal in nature, is a commercial activity for the purposes of the Excise Tax Act.
 Although the test under the Excise Tax Act is different, I am inclined to the same view in my analysis under the Income Tax Act. Although paragraph 18(1)(a) does not use the phrase "in the course of" but relies on the phrase "for the purpose of", the Supreme Court, in Symes v. R,  1 C.T.C. 40, is clear that if the expenses are business in nature, instead of personal, the test for deductibility may be met by showing the expense satisfied a need of the company. Expenses incurred by a business, which are ancillary to its primary functions and activities, are not immediately excluded from being deductible. As a result this renders the paragraph 18(1)(a) restriction porous and allows the Nowsco expenses to pass through the excluding provisions, as long as they are business in nature and not personal. There need not be a direct link between expenses and revenue. Expenses may be deductible, provided they are not personal and meet some business need of the taxpayer.
 The expenses here were certainly ancillary expenses. However the hello and break fees, as well as the other expenses, must be viewed in the larger context of the commercial operations of Nowsco. They not only satisfied a need of the company but were necessitated in dealing with the practicalities of a takeover bid environment. As Justice Miller stated, in BJ Services Company Canada, at paragraph 41:
...While the purpose is most directly connected to the corporate marketplace, rather than the goods and services marketplace, the two necessarily overlap in a public company context. The public company is in that corporate marketplace to access funds. It is critical that that marketplace have confidence in the company's ability to maintain and grow its value. This is done in a number of ways. As Mr. Shouldice indicated in answer to the question as to what drives up shareholder value:
 Justice Archambault, in Boulangerie St-Augustin Inc., echoes these views at paragraphs 48 and 49 when he states:
 A corporation must communicate regularly with its shareholders. The latter are usually a major source of capital for the business's operation. They insist on being informed in order to monitor their investment in that corporation. Good relations with its shareholders are important for a corporation, particularly if its wishes in future to issue new shares in order to finance its activities. As the Supreme court of Canada recognized in British Columbia Power, the expenses to communicate with its shareholders were legitimate expenses made in the ordinary course of a corporation's business.
 In the instant case, Boulangerie was required to incur expenses to communicate with its shareholders in order to comply with the provisions of section 134 of the SA. It provided information concerning its business, the holders of its shares, its directors and its officers so that its shareholders could make an informed decision. It made its recommendation to the shareholders taking into account the interests of its business, of its employees and of its customers. The recommended bid was not the most advantageous for its shareholders. The costs to draft legal documents such as a resolution by the corporation authorizing the transfer of shares from one shareholder to another, are expenses inherent in the management of every business corporation. These communication and share transfer costs are part of general administrative expenses which every corporation must incur in order to earn its business income. The exception of 18(1)(a) does not apply to those expenses.
 Justice Archambault rejected the same arguments of the Crown, as were presented in this case, and that is, that the expenses were connected to protection of shareholder value and were not incurred in the operation of its business operations or alternatively that the expenses were capital in nature.
 Just as in the Boulangerie St-Augustin Inc. case, the Nowsco Board of Directors reacted to the BJ takeover bid in a professional and responsible manner. Following the advice of its independent Special Committee, skilled financial and legal advisors in the area of mergers and acquisitions, were hired and eventually a broad auction was pursued. When Nowsco elected to become and remain a public company, in order to finance its operations and expansions through the public markets, it knowingly decided to operate in a marketplace, which, by the 1990s, was fraught with hostile takeover bids. In such a marketplace, shareholders expect informed communication from its Board, which goes hand in hand with a shareholder's insistence on maximization of its shareholder value. This is a critical need particularly at the time of a hostile takeover bid, from both the shareholder view point and from the corporate view point, especially if the Board of Directors is to maintain its credibility and shareholder confidence. The evidence of both Shouldice and Bruce, together with many of the exhibits, bolster my opinion on the public capital market expectations, as well as the legal obligations and ramifications for Boards of Directors in such a climate.
 Associate Chief Justice Bowman, in International Colin Energy Corporation, held that advisory fees, incurred by a taxpayer in seeking a transaction to alleviate failing finances, were currently deductible. In the present case, Nowsco sought financial and legal advice because of an unsolicited takeover bid and in the process sought out a broad auction. In both cases, the expenses arose as a result of the necessary response to developments arising in the operation of the business to produce income. Although there is a distinction between direct and indirect, or ancillary expenses, as they relate to business operations, one may be no less important than the other in maintaining the overall viability of the corporate operations. During the time of a takeover bid, certain legal and public financial market expectations have developed and I see no reason to exclude from deductibility those costs which a taxpayer must incur to comply with those obligations. It is simply, and rightly so, just one of the costs of doing business in such a marketplace. Such costs are commercial in nature and as part of the business activities of Nowsco, are therefore incurred for the purpose of gaining or producing income.
 The Minister has alleged that the fees were incurred in the course of maximizing the share price on a potential disposition and cannot meet the test of having been incurred for the purpose of gaining or producing income. This view has been resoundingly denied by this Court in International Colin Energy Corporation, where Associate Chief Justice Bowman has stated at the following paragraphs:
 ... [The merger] was intended to improve the ability of the appellant to earn income by combining its resources with that of another entity. If the shareholders' investment was improved by holding shares in a larger and commercially stronger entity, this was the result of an improvement in the income earning ability of the appellant within the larger combined entity. Obviously improved earnings enhance share prices and the value of the shareholders' investment. To say however that an expense that is calculated to improve a company's ability to earn income constitutes a form of disguised dividend or shareholder benefit because it may improve the value of the shares and is therefore non-deductible under paragraph 18(1)(a) strikes me as getting the cart before the horse.
 Patently here the services performed by ARC were intended to improve the appellant's income and the fees paid were laid out to earn income from the appellant's business. Accordingly the basic factual and legal assumption on which the Crown's case rests has been demolished.
 ... For one thing neither the factual premise that ICEC was acting on behalf of its shareholders, nor the alternative premise that it was acting on behalf of Morgan, has any foundation in the evidence. The board of directors was acting in the interests of the appellant. If this happened to be of some benefit to the shareholders or to Morgan it does not make the appellant their agent.
 The Crown's view on the expense deductibility in the present case is fundamentally inconsistent with the economic and business realities of the world of mergers and acquisitions. It is a basic common sense approach to view maximizing share price as inextricably interwoven with the business of any company, whether that be public or otherwise. Shouldice was clear in his evidence that maximizing shareholder value was behind all of the business decisions which Nowsco made. Further evidence of the importance to Nowsco of maximizing shareholder value can be found in its mission statement (Tab 8 of Volume l of the Statement of Agreed Facts and Book of Agreed Documents), which was drafted in 1992, long before the BJ bid.
 Shareholder confidence is the foundation for both maintenance and future expansion of corporate operations. Present and potential shareholders represent the source of funding for public companies. Shouldice estimated that he spent, on average, approximately one-half hour in each of his work days devoted to maintaining shareholder confidence in the company's handling of shareholder's investments. The evidence of Shouldice was that he was expected to maximize shareholder value in everything he did. When improving share price is integral to every business decision, how can one classify this as anything other than a part of the business of running Nowsco. The public market expectations dictated several courses of action that a company could take in the event of a takeover bid. Mr. Bruce outlined these options in his evidence. Bruce confirmed that Nowsco responded in textbook fashion and that the expenses, including the "hello" and "break" fees, were not only reasonable but standard. Nowsco was obligated to react to the takeover bid with due diligence and in the best interests of Nowsco. As explained by Bruce, Nowsco simply did not have the option of saying "no" to the proposal. To ignore the BJ offer and take no action could invite potential legal action from dissatisfied shareholders against either the directors or the company, or both, resulting from a breach of obligations to act in the best interests of shareholders and to maximize share price. The Board had an obligation to seek a better alternative, in the form of a white knight, if one existed, even though no specific legislative requirement existed. National Policy 38 in fact recognizes that the corporate objective in a takeover bid is to protect the bona fide interests of the shareholders of target companies. This is quite apart from the ordinary common law responsibilities of directors in takeover bids.
 In summary, these expenses, although related to maximizing shareholder value, were so integral to conducting its business that they cannot be divorced from the corporate activities of gaining and producing income. Although Justice Miller in the GST companion case, concluded that there was a necessary overlap, between what he characterized as a "corporate marketplace", which mandated maximization of shareholder value, and the "goods and services marketplace" in which the daily oil servicing activities of Nowsco existed, I am not as keen to compartmentalize the business operations of Nowsco for the purposes of my analysis under the income tax provisions. I prefer to accept the characterization by Shouldice in referring to the two areas of maximizing shareholder value and the daily oil activities of Nowsco as part of "one great big wheel". These two areas are so intertwined that, as Shouldice testified, maximizing shareholder value formed part of the fundamental business philosophy, which was behind every business decision Nowsco made. I cannot sum it up better, than Shouldice did, when he testified:
... everything we did, every budget, every time we hired somebody, every time we fired somebody, every time we opened a new station, every time we moved to a new country, the first question asked was, What's it gonna do to the bottom line? The bottom line being the earnings per share.
Shareholders provided Nowsco the funding and if this was lost or withdrawn, customers would be lost, staff laid off and eventually, taken to the extreme, Nowsco operations would shut down. It is simple logic that maximizing shareholder value must be inextricably tied to the bare bones of gaining or producing income on a daily basis in any corporate environment. How can it be anything but? Given the circumstances, the expenses were part of the general overall costs, a corporation must incur to earn income, even though these expenses have no direct link to revenue generating activities but are related to shareholder interests. It is good and wise corporate behaviour to attend to shareholder interests and expenses incurred in doing so are simply part of the cost of doing business in the corporate marketplace.
 Because the Appellant has succeeded under paragraph 18(1)(a), I must turn now to paragraph 18(1)(b) and the Crown's second argument that these expenses should be treated as capital outlays. If I conclude that these expenses are capital in nature, there will generally be no deduction unless they constitute "eligible capital expenditures" under subsection 14(5) of the Act. If however I conclude that they are not capital in nature, then they will be fully deductible from income, as I have concluded that the expenses have been shown to be incurred for the "purpose of gaining or producing income".
 The specific limitation in respect to capital expenditures is set out in paragraph 18(1)(b) of the Act. Much of the same case law used to determine the first issue in this appeal is also applicable to the income versus capital expenditure issue. Justice Archambault in Boulangerie St-Augustin Inc. referred to comments in Algoma Central Railway v. M.N.R., 67 DTC 5091 where Justice Jackett stated:
The "usual test" applied to determine whether such a payment is one made on account of capital is," was it made 'with a view of bringing into existence an advantage for the enduring benefit of the appellant's business'"?
Following this reasoning, what then did Nowsco have in "view" when it incurred these expenses? Nowsco's purpose in engaging the financial and legal advisors was to maximize shareholder value in accordance with the legal obligations of its Board of Directors in the face of a takeover bid. Once it became apparent that Nowsco was going to be sold, this involved a further bona fide effort on the part of the Board to hold a broad auction and locate a white knight for the shares and then to make reasonable and informed recommendations to its shareholders via a directors' circular. Certainly this process is inextricably linked to the shares of Nowsco but the company is nevertheless one step removed from their sale. The ultimate decision to tender the shares to an acquiring company was entirely left to the discretion of the shareholders.
 In his analysis, Justice Archambault in Boulangerie St-Augustin Inc. stated at paragraphs 56 and 57:
 The evidence adduced at the hearing did not show that Boulangerie had incurred its professional fees in order to obtain any other enduring benefit. For example, the professional fees were not incurred by Boulangerie in order to obtain funds. There was no subscription of shares of its capital stock. All that was done was to replace all the shareholders by a single shareholder. Nor was there any evidence that professional fees have been incurred by Boulangerie as part of an attempt to obtain a new shareholder with considerable financial resources to facilitate expansion plans or a new shareholder with a specific technology which might secure synergistic benefits. If it had been the case, it would have been necessary to make a detailed analysis of the circumstances to determine if these are capital expenditures.
 ... On the contrary, the evidence showed that Boulangerie incurred these professional fees in order to comply with section 134 of the SA, which requires a corporation to inform its shareholders so that they can make an informed decision, even though the board did not make a recommendation to its shareholders. The fact that in some circulars the board made a recommendation taking Boulangerie's long-term interests into account does not change the nature of the expenses incurred in order to prepare the circulars. In any case, if those professional fees provided Boulangerie with an enduring benefit, this was only a secondary consequence of those expenses.
 Associate Chief Justice Bowman in International Colin Energy Corporation was more to the point and stated it succinctly at paragraph 48 as follows:
 I shall mention briefly the argument that the payment is on capital account even though I do not think it is properly before the court. It is not necessary to discuss the myriad of authorities. They are well known and have been fully reviewed in Johns-Manville Canada Inc. v. R.,  2 S.C.R. 46 (S.C.C.). Here no capital asset was acquired, nothing of an enduring benefit came into existence nor was any capital asset preserved.
Here the Minister agreed that Nowsco obtained no enduring benefit when it incurred the expenditures, that they do not relate to any prior or subsequent taxation year of the company, and that they were deducted against current income in accordance with well established business principles.
 Many of the principles, which I have reviewed from the cases employed in my analysis of the first issue, are equally applicable in this determination. The approach established in the case of Canderel is equally applicable in determining whether expenses are on account of capital, as it applies in determining whether expenses are deductible. The primary objective is to create an accurate portrayal of Nowsco's income in accordance with well accepted and established principles of business practice. In light of the Crown's admissions in respect to these expenses, and because no evidence was presented to show that capitalizing these expenses could result in a more accurate portrayal of Nowsco's income either in the present year under appeal or any other year, I do not accept that current deductibility is prohibited by paragraph 18(1)(b).
 I consider the decision by Associate Chief Justice Bowman in International Colin Energy Corporation to be pivotal in the conclusions I have drawn here. The Crown tried to distinguish this case partly on the facts and partly on comments contained in that decision, which the Crown contended were obiter. It is true that the taxpayer in International Colin Energy Corporation was struggling financially and hired advisors to pursue alternatives to its financial woes. Nowsco was financially healthy. The Crown argued that Nowsco incurred fees which enhanced shareholder value but Justice Bowman in International Colin found that there had been no effort by the advisors to enhance shareholder value and the share price was not enhanced by any action taken by the advisors. In dealing with paragraph 18(1)(b), Justice Bowman provided some brief comments, which the Crown argued I should give little weight to. Many of the admissions by the Minister fully engage the comments of Justice Bowman, although they may be obiter in the context of International Colin. In the present case, the Minister's officer testified at discovery proceedings as follows (Discovery Read-Ins, pp. 37-39):
Q. And would you agree with me that it creates an accurate picture of a particular period if you record the revenues and expenses that properly relate to that period?
Q. And you'd agree with me that Nowsco incurred the expenses in the period in question.
A. They incurred the amounts. Whether they are expenses or not I guess is debatable.
Q. You would agree with me that they are not amounts or expenditures that have any relationship to a prior period?
Q. And you'd agree with me that they're not expenditures that have any relationship to a future period?
Q. And you'd agree with me that making these expenditures reduced the resources that Nowsco had available to pay income taxes, for example.
A. Yes, they reduced the cash of the company.
Q. Would you agree with me that the expenses were incurred solely in the context of the takeover bid?
Q. And would you agree with me that the purpose of incurring them was exhausted once the takeover was completed?
A. The purpose of spending the money was to increase the share price. Once the share price had increased and the shares had been sold to BJ, then there was no enduring benefit of the $50 million.
I agree with Appellant's submissions that this case is an arguably stronger one, against characterization of the expenses as capital outlays, than in the International Colin case. In the case before Justice Bowman, the expenses were incurred voluntarily by the taxpayer and were motivated because of its financial problems and to preserve its business. Yet Justice Bowman rejected the argument on capital treatment. Here if it had not been for BJ's unsolicited takeover bid, Nowsco would never have sought to make changes to its capital structure. It was a leader in its industry, being the largest company of that type in Canada. Revenues had grown from $198 million in 1990 to $480 million in 1995. The expenses incurred in 1996 were solely in response to the BJ bid, which landed on the lap of the Board of Directors completely out of the blue. The entire process began and ended within an approximate 60-day window period, in the same financial period. I can see no justification for capitalizing these expenses and certainly no logic in applying them to some subsequent period where there is no causal link to the corporate activities. In fact, on reflection I am inclined to question the validity of characterizing the initial sale of corporate shares as a capital outlay. Once the initial sale occurs by the company in the public market, the shares inherit a quasi-independent existence within the "corporate marketplace" (as Justice Miller named it in the companion case) and cannot be perceived as providing the issuing company with any enduring or lasting benefit. In fact they may be viewed as an enduring burden and not a benefit to the issuing company because once funds are received for shares sold, then the responsibilities fall on the company for compliance with securities regulations, maintaining shareholder relations and confidence, and producing financial reports.
 Appellant counsel referred me to a number of other cases, including the case of Johns-Manville Canada Inc. v. The Queen,  2 S.C.R. 46, where ten specific factors were reviewed to assist in determining whether an expense is income or capital in nature. I think it is sufficient, for the purposes of my conclusions here, to state that on a review of the general principles contained in John-Mansville Canada Inc. and applying a common sense approach to the facts in this case, my characterization of the expenses as income in nature are supported. No capital asset was acquired, no capital asset was preserved, and no enduring benefit was obtained in incurring these expenditures. The expenses did not relate to any prior or subsequent period. I conclude that Nowsco has correctly deducted these expenses against current income in accordance with well-established business principles and that they are not outlays on account of capital.
 In conclusion, I want to deal with the Appellant's alternative arguments, although I have effectively disposed of the appeal in the foregoing analysis. The Appellant argues that notwithstanding paragraphs 18(1)(a) an 18(1)(b) the financing expenses could be deductible under paragraph 20(1)(e). This provision provides for a 20% annual deduction of the expenses, until deducted in full, where the expenses are incurred in the course of an issuance or sale of shares. Appellant relied on the case of M.N.R. v. Yonge-Eglington Building Ltd.,  C.T.C. 209 (F.C.A.), where at paragraph 13, the phrase "in the course of" for the purposes of paragraph 11(1)(cb), the predecessor to paragraph 20(1)(e) was interpreted broadly as follows:
... it seems to me that the words "in the course of" ... are not a reference to the time when the expenses are incurred but are used in the sense of "in connection with" or "incidental to" or "arising from" and refer to the process of carrying out or the things that must be undertaken to carry out the issuing or selling or borrowing for or in connection with which the expenses are incurred.
 Although I have accepted the Appellant's principal argument, I do believe that these expenditures could also be characterized as culminating in an occurrence within the broad scope of paragraph 20(1)(e), as interpreted in M.N.R. v. Yonge-Eglington Building Ltd. If I give this paragraph its plain and ordinary meaning then the entire process, of incurring these expenses, regardless of who eventually acquired the Nowsco shares, may in my opinion be viewed as having been incurred in the course of the eventual sale of the shares to BJ. In considering a similar argument in International Colin Energy Corporation, Associate Chief Justice Bowman, although finding its unnecessary to decide this issue, made the following comments:
The question is however whether "in the course of the sale...of the shares of the capital stock of the taxpayer..." is to be restricted to a sale by the corporation of its own shares.
There are respectable arguments on either side. It is arguable that "sale" by its juxtaposition with "issuance" means a sale by the company of its own shares and not a sale by shareholders of their shares. It is equally arguable that "issuance" by itself is quite broad enough to cover a sale by a company of its own shares and that there was no need to add the word sale if all that was meant was a sale by the company. Therefore "sale" must imply something else and the only thing it can refer to is a sale by the shareholders in the course of a corporate transaction of the type involved here where the interests of the corporation are affected. I find the argument attractive not only because it makes sense commercially but because the more restrictive interpretation requires reading into the statute words that are not there.
 The Appellant also relied alternatively on paragraph 20(1)(bb), which provides for the deduction of investment counsel expenses in computing income from a business or property. Appellant argues that the evidence supports that the advice given to Nowsco by RBC and Simmons was investment advice respecting the sale of shares. Respondent argues that paragraph 20(1)(bb) requires a connection between the taxpayer's source of income and the expense claimed and allows a deduction of certain expenses paid for advice on purchasing or selling shares or for services for administration or management of shares. The Respondent argues that Nowsco cannot rely on this provision as it did not seek to sell or manage its shares, because the shares belonged to others. Although there is validity to the Respondent's argument, it may in fact be too narrow an interpretation of this provision. In light of my conclusions however, I need not decide this issue here.
 And finally the Appellant proposes in the alternative again that if the expenses were incurred for the purposes of gaining income but are capital outlays pursuant to paragraph 18(1)(b) and do not fall under any of the preceding alternative arguments, then they are eligible capital expenditures pursuant to subsection 14(5). When I re-examine the nature of the expenses incurred by Nowsco, it is evident that my initial characterization of the expenses as non-capital in nature is far more appropriate from a common sense approach, than to attempt to slot them under a subsection 14(5) analysis.
 For the above reasons, the appeal is allowed with costs and the assessment for the period ending June 13, 1996 is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the fees to RBC, Simmons and GLCC are deductible in computing the Appellant's income.
Signed at Ottawa, Canada this 3rd day of December 2003.