Newfoundland Light & Power Co. Ltd. v. The Queen, 90 DTC 6166, [1990] 1 CTC 229 (FCA)

Desjardins, J.A.: — The appellant, a Newfoundland company based in St. John's, is engaged in the business of generating, transmitting and distributing electrical energy to the public of Newfoundland. In the conduct of its business, it is required to erect, repair and maintain its electrical installations. To do the necessary works, it often retains the services of general contractors. Under the terms and conditions of the contracts in force in 1977, the appellant was entitled to withhold a percentage (10 per cent) from amounts which were otherwise payable pending approval or certification of the works by the appellant's engineers. The sums retained are known as "holdbacks".

In 1977, holdbacks in the amount of $208,019 (the "capital holdbacks") were withheld by the appellant on contracts for work done and in service that year. These capital holdbacks were finally paid to the general contractors in 1978, except for an amount of $5,276.86 which was paid to the general contractors in 1979 and an amount of $959.10 which was never paid as the related work performed under the contract was not satisfactory. [1]

In reporting its income for the 1977 taxation year, the appellant claimed capital cost allowance with respect to those holdbacks (the “capital holdbacks") in an amount of $12,169. The appellant deducted an amount of $1,029.05 as operating expenses with respect to the holdbacks it withheld (the "service holdbacks"). [2]

By notice of reassessment dated May 11, 1979, National Revenue for Taxation disallowed both the claim for capital cost allowance and the deduction for operating expenses. [3] The appellant objected to the notice of reassessment. [4] By notice of confirmation dated August 15, 1980, the Minister confirmed the reassessment. [5] An appeal was brought before the Trial Division which dismissed the claim with costs on June 30,1986. [6] Hence the present appeal.

In his reasons for judgment, the Trial judge noted the evidence given by the appellant's vice-president and treasurer, Mr. Kevin Warr, who said that the holdbacks represented a percentage of work actually done, billed, accepted and used by the appellant, the value of which, as of December 31, 1977, had been included in the appellant's rate base for the purpose of earning its allowed rate of returns under the provisions of the Public Utilities Act of its province of residence. The trial judge accepted the evidence of Mr. C. William Hayward, F.C.A., a chartered accountant called by the appellant as an expert witness. In his formal opinion, the witness described thus the way holdbacks were treated according to generally accepted accounting principles:

Holdbacks qualify as liabilities under generally accepted accounting principles on the basis that the total billings do not exceed value received by the company. The holdback on an asset purchase is reflected as a liability and the cost of the asset at that point in time includes the amount of holdback. The holdback on a service purchase is reflected as a liability and the expense for the period includes that amount.

(Joint Case at 10)

The trial judge commented on the quality of that testimony as he said:

Hayward's evidence and expertise were impressive and, as already indicated, convincing. As a result of his observations and opinions I am left with no doubt that Generally Accepted Accounting Principles permit or allow the amounts, the characterization of which are in issue, to be treated as actual rather than contingent liabilities.

He added the following reservation:

However the fact that holdbacks can, or even should, be so characterized under Generally Accepted Accounting Principles does not determine whether the holdbacks are deductible of the purposes of calculating taxable income under the provisions of the Income Tax Act.

If these principles run contrary to the provisions of the Income Tax Act the provisions of the Act must prevail. In my view it also follows that the phrase "the provisions of the Income Tax Act” means the provisions of the Act as interpreted by court decisions which are binding on me.

(Joint Case at 11)

The trial judge held that under the authorities of /.L. Guay Ltée v. M.N.R. [7] and M.N.R. v. John Colford Cont. Co. Ltd. [8] "uncertified holdbacks are to be treated as contingent liabilities rather than actual liabilities for the purpose of determining whether the [appellant] is entitled to deduct them from its taxable income in this matter". [9] He found that under the various clauses of the contracts, notably clause 22, the holdbacks, although due, were not payable at the time the accounts were submitted but instead were deferred until the contract ”. . . has been substantially completed to the satisfaction of the Engineer and until the Contractor has settled all costs and claims by third parties with respect to the operations of the Contractor and any Subcontractor, their employees and/or agents". Payment of the holdbacks was thus subject to these conditions which, until met, prevented the contractors from compelling the appellant to pay. In the view of the trial judge, these conditions precedent to payment of the holdbacks constituted contingent liabilities within the meaning of paragraph 18(1)(e) of the Income Tax Act, S.C 1970-71-72,

c. 63 (the "Act"). [10] They could not therefore be deducted by the taxpayer.

The appellant submits that the trial judge, after the findings he made, erred in law in failing to apply the dicta formulated by Mr. Justice Pigeon in the decision of Time Motors Ltd. v. M.N.R.^ [11] and the uncontradicted expert evidence of the expert evidence witness Mr. C. William Hayward, F.C.A. He also failed to properly determine that the appellant's capital and service holdbacks were actual liabilities and were not either "contingent accounts" within the meaning of paragraph 18(1)(e) of the Act or contingent liabilities.

The appellant claims that the term “capital cost", as used in paragraph 20(1)(a) of the Act, which is not defined, has been held to mean “simply cost" or "what the (taxpayer) gave up to get them," [12] or ", . . the price paid for property acquired in an arm's length transaction . . .", [13] or ”. . . the total cost to a taxpayer of acquiring a depreciable asset . . ." [14] Based on all these definitions, the appellant’s capital and service holdbacks were clearly part of the total cost of the works acquired in 1977. They represented a percentage of work actually done, billed, accepted and used by the appellant even though the payment of these holdbacks was deferred into subsequent years, save an amount of $959.10. The appellant, being a public utility, its regulatory body required that, for the purpose of its business, it records its capital holdbacks and its service holdbacks in the fiscal period during which the work is done and the asset is available for use. These holdbacks represent current or real liabilities, not contingent. The capital holdbacks should have been computed in the calculation of the capital cost of assets acquired as is allowed under paragraph 20(1)(a) of the Act and Part XI of the Regulations. The service holdbacks should have been made deductible under paragraph 18(1)(a) of the Act. Generally accepted accounting principles which have received recognition in the Time Motors case and in a host of other cases [15] to determine a taxpayer's appropriate income tax treatment should determine the income tax treatment of the appellant's capital and service holdbacks payable in 1977. The J.L. Guay and Col ford decisions, relied on by the trial judge, do not deal with what amounts should or should not be included in computing capital cost for capital cost allowance purposes. Rather, they focus on the deductibility from income of “holdbacks payable” (J.L. Guay) or the inclusion in income of “holdbacks receivable” (Colford). They should not, says the appellant, have been relied on in the case at bar.

Essentially, what is claimed is that generally accepted accounting principles ought to be applied in order to determine the tax treatment of the amounts in dispute.

The holdbacks were retained pursuant to section 4 of the sample Agreement [16] and sections 16 and 22 of the Conditions of Contract. [17] These sections read as follows:

AGREEMENT

Section 4

The Owners will retain ten per cent (10%) of all payments due to the Contractor other than payments for Force Account Work in accordance with Clause 23 of the Conditions of Contract.

(Joint Case at 86)

CONDITIONS OF CONTRACT

Section 16

Work to be to the Satisfaction of the Engineer

The Contractor shall complete the Works in accordance with the Contract and to the satisfaction (and acceptance) of the Engineer and shall comply with the Engineer's instructions on any matter relating thereto whether referred to in the Contract or not.

Section 22

Payments and Retention Money

The Owner will make monthly payments to the Contractor against progress statements, approved by the Engineer, of the value of work done each month. In instances where the Contractor does not maintain a field office, the summary of units for each period will be compiled in duplicate in the field. Both copies will be signed by the Engineer and the Contractor’s foreman, a copy of which will be forwarded to the office of the Contractor and the second copy to the office of the Owner. In each instance the progress statement will be paid on the basis of the quantities shown in the above mentioned summary. Such statements are to be submitted monthly by the Contractor and in the case of Force Account costs shall be substantiated by copies of payrolls, invoices, and other documents supporting all costs contained in the Force Account statements.

Ten (10%) per cent of all payments due to the Contractor other than payments for Force Account work will be retained by the Owner until the Contract has been substantially completed to the satisfaction of the Engineer and until the Contractor has settled all costs and claims by third parties with respect to the operations of the Contractor and any Sub-contractor, their employees and/or agents.

(Joint Case at 6-7)

The appropriate legislative scheme of the Income Tax Act on December 1977 was the following.

Section 9 of the Act provided:

9. (1) Subject to this Part, a taxpayer's income for a taxation year from a business or property is his profit therefrom for the year.

(2) Subject to section 31, a taxpayer's loss for a taxation year from a business or property is the amount of his loss, if any, for the taxation year from that source computed by applying the provisions of this Act respecting computation of income from that source mutatis mutandis.

(3) In this Act, “income from a property" does not include any capital gain from the disposition of that property and “loss from a property" does not include any capital loss from the disposition of that property.

Paragraph 13(21)(b) of the Act provided:

13. (21) In this section and any regulations made under paragraph 20(1)(a).

(b) “depreciable property" of a taxpayer as of any time in a taxation year means property acquired by the taxpayer in respect of which he has been allowed, or, if he owned the property at the end of the year, would be entitled to, a deduction under regulations made under paragraph 20(1)(a) in computing income for that year or a previous taxation year.

Paragraphs 18(1)(a), (b) and (e) of the Act provided:

18. (1) In computing the income of a taxpayer from a business or property no deduction shall be made in respect of

(a) 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;

(b) an outlay, loss or replacement of capital, a payment on account of capital or an allowance in respect of depreciation, obsolescence or depletion except as expressly permitted by this Part;

(e) an amount transferred or credited to a reserve, contingent account or sinking fund except as expressly permitted by this Part;

Paragraph 20(1)(a) of the Act provided:

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:

(a) such part of the capital cost to the taxpayer of property, or such amount in respect of the capital cost to the taxpayer of property, if any, as is allowed by regulation;

Paragraph 1100(1)(a) of the Income Tax Regulations read:

1100. (1) Under paragraph (a) of subsection (1) of section 11[20] of the Act, there is hereby allowed to the taxpayer, in computing his income from a business or property, as the case may be, deductions for each taxation year equal to

(a) such amounts as he may claim in respect of property of each of the

following classes in Schedule B not exceeding in respect of property

(ii) of class 2.6%

(iii) of class 3.5%

(viii) of class 8.20%

of the amount remaining, if any, after deducting the amounts, determined under sections 1107 and 1110 in respect of the class, from the undepreciated capital cost to him as of the end of the taxation year (before making any deduction under this subsection for the taxation year) of property of the class.

In the Time Motors case, the issue related to the treatment for income tax purposes of credit notes issued by a used car dealer in partial payment of used cars acquired for resale. The cash payment and the amount of the credit note were stated in the bill of sale. The credit notes were conditional by the fact that

(1) they were not transferable, (2) they were valid only within a stated delay, usually between one and two years, and (3) they were good only for the purchase of a car of not less than a stated value. In the appellant's account, credit notes outstanding were treated as current liabilities. If they were not redeemed, the amount at expiration was removed from the accounts payable and treated as profit. In 1965, the Minister took the view that the outstanding credit notes were not existing liabilities and should be disallowed for tax purposes as being contingent. The Tax Appeal Court allowed the taxpayer's appeal. The Exchequer Court reversed the judgment. Pigeon, J. for the Supreme Court of Canada allowed the appeal. He rejected the first contention of the Minister that the credit notes created no liability. He held that they reflected an obligation on the part of the car dealer which was subsisting until satisfied or expired. The fact that the merchandise to be obtained was not specific did not mean that the customer had no enforceable obligation for the balance due. He could select any of the cars offered for sale coming within the general description of his credit note and require delivery by tendering the note and the proper cash and the dealer could not have evaded his obligation. A second contention made by the Minister was that because the car dealer's obligation was conditional, it should not, until the condition was realized, be treated as a current liability but as an amount properly to be entered in a contingent account. As a result, the deduction would be prohibited by paragraph 12(1)(e) of the Income Tax Act then applicable [18] (now paragraph 18(1)(e)). Pigeon, J. again rejected that contention (at 192-93):

The wording of that provision clearly refers to accounting practice. The only expression applicable to the present case is not “contingent liability” but "contingent account". This means that the provision is to be construed by reference to proper accounting practice in a business of the kind with which one is concerned. In the present case, the only evidence of accounting practice is that of appellant's auditor, a chartered accountant. His testimony shows that in appellant's accounts credit notes are treated according to standard practice as current liabilities until they are redeemed or expired. They are not classed as contingent liabilities. When asked why he considered the obligation under a credit note as current liability and the obligation under a warranty as contingent, he said:

. . . the credit note, while it is a liability, is also an existing obligation today. A warranty may be a liability in the future. It may be determinable in the future but isn't an existing obligation until the future. At least, this is my interpretation of the difference.

With respect, Gibson J. was in error in holding that whether or not appellant's financial statements were drawn up according to generally accepted accounting principles they could be disregarded. On the contrary, the wording of the relevant provision of the Income Tax Act implies that this is the essential question.

[Emphasis added.]

My reading of this decision is that, while accepting the accounting practice followed, Pigeon, J., more importantly, accepted the whole reasoning behind the accounting practice. By the same token, he rejected the notion that the credit notes represented a conditional or a contingent liability. The credit note reflected an obligation which was in existence till the note expired: it represented a value owed for a value received. The customer's option to present or not to present the note for redemption before its expiration never changed the nature of the liability. If claimed in time, the value owed was given. If not claimed in time, the value given turned out to be a profit.

In the case at bar, under clause 22 of the contract, "The Owner will make monthly payments to the Contractor against progress statements approved by the Engineer of the value of work done each month". At the end of the last period, the work is completed, but only 90 per cent of the amount due on the contract is disbursed since an amount representing 10 per cent “of all payments due to the Contractor" is “retained by the Owner until the contract has been substantially completed to the satisfaction of the Engineer and until the Contractor has settled all costs and claims by third parties with respect to the operations of the Contractor and by Subcontractor, their employees and/or agents" (emphasis added). Counsel for the appellant has explained that under the Mechanics’ Lien Act of the Province of Newfoundland (section 13), [19] the appellant was required to delay final payment of the holdbacks under each contract for thirty days after the "Engineer" was satisfied the work under contract was substantially completed. In practice, according to the testimony of Mr. Warr, appellant's vice-president and treasurer, the company requires an affidavit from the contractor stating that he carried out all his work and has paid all the necessary bills. That sometime causes the delay in the company releasing the payment. The company itself, with regard to the quality of the work, could have been satisfied probably months earlier than when the payment is made. [20]

The nature and effect of an engineer's certificate is well known to the case law, at least with regard to the concept of income/expense. Those decisions are undistinguishable to the consideration as to what is to be included for purposes of establishing the cost of an asset.

The issue in Col ford [21] was whether certain holdbacks were to be treated as amounts receivable within the meaning of the word “receivable” of paragraph 75B(1)(b) of the Act as amended, S.C. 1952-53, c. 40, [22] now paragraph 12(1)(b). After reviewing various dictionary definitions of the word “receivable”, Mr. Justice Kearney of the Exchequer Court felt that it was not enough that the so- called recipient have a precarious right to receive the amount in question. He had to have a clearly legal, though not necessarily immediate right to receive it. He concluded from these definitions that the word connoted entitlement. He scrutinized each of the contracts in issue to determine whether the holdbacks possessed the quality required to bring them within the meaning of a receivable in view of a clause in the contracts dealing with the procurement of an architect's or an engineer's certificate. He analysed the Ontario and Quebec jurisprudence dealing with the effect of such certificates in relation to the contracts in issue. In Ontario, it had been held that a contractor had no legal right to the amount of the holdback until the issuance of the certificate and no suit could be properly commenced by him before certification unless it was clear that the certificate had been improperly withheld by the architect. [23] In Quebec, the cases showed that the acceptance by the architect constituted a condition precedent to payment. [24] Mr. Justice Kearney concluded at page 193 (D.T.C. 1138):

Although the contract does not specifically state that such acceptance shall constitute a condition precedent to payment, I think, by reason of the foregoing jurisprudence, it should be given the same interpretation as if such words appeared in the text. It is in evidence that the owner accepted the work only when final payment was made in 1957, amounting to some $5,000 which falls under the heading of holdbacks.

[Emphasis added.]

The holdbacks were held not to be "receivable" within the meaning of the Act since there was no certitude that the taxpayer would be in receipt of these moneys. The Supreme Court of Canada confirmed the decision without giving reasons.

In /.L. Guay Ltée, [25] the issue was whether the holdbacks met the conditions set forth in paragraphs 12(1)(a) and (e) of the Act, as then read, i.e. whether they became an outlay incurred by the taxpayer for the purpose of gaining income from a business. The taxpayer, a general contractor, withheld an amount of $277,428.48 representing the balances owing to the subcontractors by him as a result of the amounts withheld each month during the year 1965.

The holdback clauses read at page 689 (D.T.C. 5425):

3. Terms of payment: % of the monthly estimates submitted and accepted, the balance namely %, 35 days after final approval of the work by the architect.

5. If the work is not considered satisfactory by the architect, we reserve the right to cancel your contract and have it carried on by another contractor at your expense. Work already done will be paid for at the current market price, without your being entitled to any damages for cancellation of the contract.

20. In the event of cancellation or termination of the contractor's main contract or suspension of the work forming the subject of the said contract, including the work specified in the present contract, for whatever cause, even for cause attributable to the contractor, it is agreed that by simple notice your contract shall be cancelled or terminated, or your work suspended, as the case may be, and that you shall only be entitled to payment in proportion to the amount of your contract, of the labour and of the materials incorporated in the work and delivered to the site of the main contract, according to the reckoning of the architect, less the total amount of prior payments.

Noël, A.C.J. in the Trial Division stated at page 690 (D.T.C. 5426):

As stated by appellant, the contract does provide that, if the work is not found satisfactory by the architect, the sub-contractor will nevertheless have the right to be paid in full at the current market price for the work already done; this does not mean, however, that the contractor will always have to pay the amount so withheld in full. In fact, it must not be forgotten that the purpose of the provision which permits withholding of a certain percentage of the contract price is to ensure the payment of any damages the owner or the general contractor may incur from the sub-contractor's failure to perform the work or its faulty performance of it. If such damages correspond to, or exceed, the amounts so withheld, the owner or the general contractor may keep the entire amount; if, on the other hand, the damages are less, the sub-contractor will be entitled to receive the difference.

It seems to me, therefore, that it is far from certain that the amounts so withheld will be paid in full to the sub-contractor. In fact, the payment of these amounts to the sub-contractor is perhaps to be regarded, if damages are incurred, as contingent. It is true that, once fixed, such damages may be offset by the amounts withheld, and that the general contractor will not benefit therefrom, but the damages have not yet been liquidated for 1965, and compensation cannot be paid until they are. Until then, and even after, until the architect has issued his certificate and 35 days have elapsed, the general contractor is under no obligation to pay this amount, and it is not claimable by the sub-contractor. In fact, compensation takes place by the sole operation of law only between debts which are equally liquidated and exigible, and have each for object a sum of money or a certain quantity of indeterminate things of the same kind and quality (cf. Articles 1187 and 1188, Civil Code).

[Emphasis added.]

Both the Federal Court of Appeal and the Supreme Court of Canada agreed with the reasoning of Noël, A.C.J.

The clause in the case at bar is slightly different since it does not provide for the cancellation of the contract. The appellant, in his notice of objection, has stated that when the work is completed, even if the certificate is not issued, a liability has been established. Payments will have to be made to the Workman's Compensation Board or other government agencies, to others to cover damages for which the contractor was liable or to remedy the deficiencies of the contractor. If a balance remains in the holdback account, it belongs to the contractor as of right. Therefore, claims the appellant, the "Company has a clear legal obligation to disburse the holdbacks. The only contingent question is — to whom?" [26]

I agree that when the work is completed, a liability exists. Until the certificate is issued, the taxpayer however does not know for sure the full cost of the work. On December 31, 1977, the appellant could not ascertain the exact cost of the assets acquired by him since the certificate as to quality had not been issued. The costs to the taxpayer were known for an added amount of $201,783.04 only in 1978; and for another added amount of $5,276.86 only in 1979. More eloquently, an amount of $959.10 was never disbursed. The taxpayer would be acting under a wrong assumption had he been able to claim those amounts, particularly the $959.10, as a cost to him in 1977.

I therefore cannot accept the reasoning behind the generally accepted accounting principles presented by the appellant's expert witness.

I am of the view that the capital holdbacks could not be computed for purposes of capital cost allowance in the taxation year 1977 under paragraph 20(1)(a) of the Act and Part XI of the Regulations. The service holdbacks could not be deducted under paragraph 18(1)(a) of the Act. Paragraph 18(1)(e) should not be referred to since it has no application in this case.

I would dismiss the appeal with costs.

Pratte, J.A.: —I have read the reasons for judgment prepared by Madame Justice Desjardins and agree entirely with her conclusion.

As she indicates, in the 1977 taxation year, the appellant withheld a total of $209,048 on the progress payments that became due to the contractors that worked for it. Of that total, $208,019 related to work of a capital nature and $1,029 to maintenance work.

In computing its income for 1977, the appellant claimed capital cost allowances totalling $12,169.01 with respect to the holdbacks relating to work of a capital nature and deducted as operating expenses the holdbacks of $1,029.05 relating to maintenance work. Those were the deductions that were disallowed by the Minister and the Trial Division.

While this case raises two different questions, namely, the deductibility of amounts as capital cost allowances and of other amounts as current expenses, those two questions raise in substance the same issue. The question to be answered with respect to the holdbacks that the appellant deducted as expenses in computing its income for 1977 is whether those amounts were expenses "made or incurred” in that year within the meaning of paragraph 18(1)(a) of the Income Tax Act. The question that relates to the part of the holdbacks that was deducted by the appellant as capital cost allowance must be expressed in different terms. Indeed, under subsection 20(1) of the Act and subsection 1100(1) of the Income Tax Regulations, the taxpayer may deduct, in computing his income from a business, a fraction of the capital cost to him at the end of the taxation year of property of a class defined in the Regulations. The question to be answered with respect to the holdbacks relating to work of a capital nature is whether, in 1977, those amounts represented cost to the appellant. That question is, in substance, the same as the one relating to the operating expenses. Indeed, in order for an expense to be incurred during a year, the obligation to pay must be created during that year; similarly, there is no cost of property to a taxpayer as long as the obligation to pay that cost has not come into existence.

There is therefore only one issue to be resolved on this appeal, namely, whether the trial judge was right to hold that the deductions in question were rightly disallowed because the appellant's liability to pay the holdbacks to its contractors was merely contingent since it was dependent for its existence upon an uncertain future event, namely, the acceptance of the work by the engineer.

In my view, the trial judge, in view of the decisions in J.L. Guay Ltée v. M.N.R/ [1] and in M.N.R. v. John Col ford Contracting Company Limited, [2] could not reach another conclusion.

At the hearing, the appellant's main submission was that Mr. Justice Martin, instead of viewing the problem in a purely legalistic way, as had been done in Guay and Colford, should have adopted a more realistic approach and, following the decision of the Supreme Court of Canada in Time Motors Limited v. M.N.R., [3] decided the case in the light of the Generally Accepted Accounting Principles which apparently teach that an expense or cost may have been incurred even though the legal obligation to pay that expense or cost does not yet exist. This argument must, in my view, be rejected. The Time Motors decision is not relevant. The Court held, in that case, that the obligation of the taxpayer under certain credit notes was “subsisting until satisfied or expired.” It reached that conclusion without the help of accounting principles. It made reference to those principles for the sole purpose of determining the meaning to be given to the expression "contingent account" in paragraph 18(1)(e) of the Act, a provision which has no application here.

Hugessen, J.A.: — I have had the benefit of reading the reasons for judgment prepared by my colleague Madam Justice Desjardins. I am in entire agreement with her proposed disposition and wish only to add a few words.

In the first place, it is clear that the trial judge was in error to rely, as he did, on the provisions of paragraph 18(1)(e) [1] of the Income Tax Act. As was stated by the Supreme Court in the Time Motors case, [2]

The wording of that provision clearly refers to accounting practice.

The expert evidence which the trial judge accepted is conclusive that the amounts here in issue would not, on generally accepted accounting principles, be regarded as “transferred or credited to a . . . contingent account".

That said, however, the appellant faces the insuperable obstacle of the decisions in Colford [3] and Guay. [4] Each of those decisions was approved, albeit without extensive reasons, by the Supreme Court. [5] In my view, they stand for the proposition that, as a matter of law, uncertified construction holdbacks are to be regarded as contingent both from the point of view of the payor and from that of the payee. That being so, the appellant cannot treat such uncertified holdbacks as “an outlay or expense" under paragraph 18(1)(a) (the "service" holdbacks) or as "part of the capital cost . . . of property" under paragraph 20(1)(a) (the “capital” holdbacks).

Appeal dismissed.