Date: 20060314
Docket: A-202-05
Citation: 2006 FCA
112
CORAM: DESJARDINS J.A.
LÉTOURNEAU J.A.
NOËL J.A.
BETWEEN:
LES PRODUITS POUR TOITURES FRANSYL INC.
Appellant
and
HER
MAJESTY THE QUEEN
Respondent
Hearing held at Montréal, Quebec, on March 14, 2006.
Judgment
delivered at Montréal, Quebec, on March 14, 2006.
REASONS FOR JUDGMENT OF THE COURT BY: DESJARDINS
J.A.
Date:
20060314
Docket: A-202-05
Citation: 2006 FCA 112
CORAM: DESJARDINS
J.A.
LÉTOURNEAU
J.A.
NOËL
J.A.
BETWEEN:
LES PRODUITS
POUR TOITURES FRANSYL INC.
Appellant
and
HER MAJESTY
THE QUEEN
Respondent
REASONS FOR JUDGMENT OF THE
COURT
(Delivered from the bench at Montréal, Quebec, March 14, 2006)
DESJARDINS J.A.:
[1]
This is an
appeal from a decision of the Tax Court of Canada (Les Produits pour
Toitures Fransyl Ltée v. Her Majesty the Queen, [2005] D.T.C. 564, Angers J.) that confirmed a
reassessment denying in part a deduction of $1,865,726 claimed by the appellant
as rental expenses for the 1995 taxation year, on the grounds that this expense
did not meet the requirements of section 67 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) and was not reasonable in the
circumstances.
[2]
That
section reads:
|
RULES RELATING
TO COMPUTATION OF INCOME
|
RÈGLES
RELATIVES AU CALCUL DU REVENU
|
|
67. In computing income, no deduction shall
be made in respect of an outlay or expense in respect of which any amount is
otherwise deductible under this Act, except to the extent that the outlay
or expense was reasonable in the circumstances.
|
67. Dans le calcul du revenu, aucune
déduction ne peut être faite relativement à une dépense à l’égard de laquelle
une somme est déductible par ailleurs en vertu de la présente loi, sauf
dans la mesure où cette dépense était raisonnable dans les circonstances.
|
[Emphasis
added.]
[3]
The amount
of $1,865,726 was almost three times greater than the rent paid by the
appellant to two related corporations in 1994 and in 1996.
[4]
It was
also significantly greater than the fair rental market value established by the
expert evidence.
[5]
The
appellant tried to justify the expense by proving that it was an attempt to
ensure the financial survival of the corporation to which it was related.
[6]
In this
regard, it was the trial judge’s view that the appellant only submitted vague
evidence concerning its financial obligations and the obligations of the
related corporations.
[7]
The trial
judge found that the appellant did not succeed in proving that the increase was
reasonable in the circumstances.
[8]
After
reviewing the evidence as presented, we are of the opinion that the trial judge
was justified in reaching the conclusion that he did.
[9]
The appeal
will be dismissed with costs.
“Alice
Desjardins”
FEDERAL COURT OF APPEAL
SOLICITORS OF RECORD
DOCKET: A-202-05
APPEAL
FROM A JUDGMENT BY ANGERS J. OF THE TAX COURT OF CANADA
DATED MARCH 31, 2005, DOCKET 2000-4673(IT)G.
STYLE OF CAUSE: LES PRODUITS POUR TOITURES
FRANSYL INC.
v. HER MAJESTY THE QUEEN
PLACE OF HEARING: Montréal,
Quebec
DATE OF HEARING: March 14, 2006
REASONS FOR JUDGMENT OF THE
COURT BY: DESJARDINS J.A.
LÉTOURNEAU J.A.
NOËL
J.A.
DELIVERED FROM THE BENCH BY: DESJARDINS J.A.
APPEARANCES:
|
Serge Fournier
|
FOR
THE APPELLANT
|
|
Anne Poirier
|
FOR
THE RESPONDENT
|
SOLICITORS
OF RECORD:
|
BCF, LLP
Montréal, Quebec
|
FOR THE APPELLANT
|
|
John H. Sims, Q.C.
Deputy
Attorney General of Canada
Montréal,
Quebec
|
FOR THE RESPONDENT
|
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