Docket: A-493-14
Citation:
2015 FCA 231
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CORAM:
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DAWSON J.A.
STRATAS J.A.
DE MONTIGNY J.A.
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BETWEEN:
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0742443 BC LTD
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Appellant
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and
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HER MAJESTY THE
QUEEN
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Respondent
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REASONS
FOR JUDGMENT OF THE COURT
(Delivered from the Bench at Toronto, Ontario, on
October 28, 2015).
DAWSON J.A.
[1]
The appellant, formerly R-Xtra Storage Centre
Ltd., carried on a business throughout the 2006, 2007, 2008 and 2009 taxation
years. The Minister of National Revenue assessed R-Xtra on the basis it was
carrying on a specified investment business. In the Minister’s view, the
principal purpose of the appellant was to derive income from property as a
mini-storage business. It followed that the appellant was not entitled to claim
the small business deduction.
[2]
In careful and thorough reasons cited as 2014
TCC 301, a judge of the Tax Court of Canada dismissed the appellant’s appeals
from the assessments. This is an appeal from the judgment of the Tax Court.
[3]
In dismissing the appellant’s appeals the Judge
found:
[4]
The small business deduction applies to income
earned from an active business carried on by a corporation. “Active business carried on by a corporation” is
defined by subsection 125(7) of the Income Tax Act, R.S.C. 1985, c. 1 (5th
Supp.) to mean “any business carried on by the
corporation other than a specified investment business...”. In turn, “[s]pecified
investment business” is defined in the same subsection as “a business […] the
principal purpose of which is to derive income (including interest, dividends,
rents and royalties) from property …” (reasons at paragraph 14).
i)
The phrase “principal
purpose of which is to derive income […] from property” is not ambiguous
as the appellant contended (reasons at paragraph 31).
ii)
To determine the
“principal purpose” of the appellant’s business, the Judge was required
to determine on an objective basis what the appellant’s customers paid for
(reasons at paragraph 26).
iii)
The appellant’s customers bought storage space
and this is what they paid for (reasons at paragraph 30).
iv)
In the Judge’s view, services provided to the
appellant’s customers such as snow removal were requisite support for property
income (reasons at paragraph 20).
v)
It followed that the character of the income
earned by the business was rental income from property (reasons at paragraphs
29 and 30).
[5]
It further followed that the appellant’s
business was a specified investment business.
[6]
On this appeal, despite the able submissions of
Mr. Sorensen, the appellant has not demonstrated any error of law in the
Judge’s analysis or any palpable and overriding error of fact. Rather, in large
part the appellant has simply re-argued the case lost before the Tax Court.
[7]
On this appeal, the appellant also argues that
it was deprived of procedural fairness because the Judge ignored deficiencies
in the Minister’s assumptions of fact set out in her reply.
[8]
As the Judge noted, before trial the appellant
moved unsuccessfully to strike the impugned assumptions. No appeal was taken
from the order dismissing the appellant’s motion. Thus, the appellant had the
opportunity to challenge the Minister’s assumptions and failed. The issue could
not be re-litigated at trial. Moreover, we agree with the Judge’s conclusion
that the reply permitted the appellant to know the case it was required to
meet.
[9]
For these reasons, the appeal will be dismissed
with costs.
“Eleanor R. Dawson”
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