John Coates v. Her Majesty the Queen (Informal Procedure), [1994] 1 CTC 2385

Léger, D.J.T.C.C.:—These appeals were heard under the informal procedure of this Court.

The issue in these appeals for the 1983 and 1984 taxation years is whether the appellant is entitled to deduct, in computing his income for the period in question, any amount as income tax credit in respect of machinery acquired in those years. The machinery in question consists of a Belarus manure spreader at a cost of $2,500 in respect of which an income tax credit of $500 is claimed. The other item is a Hi Go Bush Wacker which cost $695 and a claim of income tax credit of $139.

The evidence discloses that during the period in question the appellant was employed as a professor at Mount Allison University in Sackville, New Brunswick. He also engaged in some farmin on his own land and did what he alleges is farm contracting. In order to establish his allegation that he was a farm contractor, he produced in Exhibit R-1 the names of 99 customers for whom he did custom work during the period in question.

The appellant relies upon the case of Lor-Wes Contracting Ltd. v. The Queen, [1985] 2 C.T.C. 79, 85 D.T.C. 5310 (F.C.A.), and on subsection 127(10) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act"). The fact in the above case is that an owner of timber cutting rights retained the services of Lor-Wes Contracting Ltd. to build access roads to the logging site in the course of which Lor-Wes Contracting Ltd. would fell, skid, buck, hmb and deck timber in respect of which it would be paid specifically for the quantity of timber recovered. The logging roads were required in order to reach the site where a lumber operation would take place and to use the road to take the timber harvest to market. The question raised is "was the contractor Lor-Wes Contracting Ltd. in the business of 'logging' ”. If the Court decides that it was in the business of "logging" the company was entitled to an "income tax credit". In this case the Federal Court of Appeal decided that the company was entitled to an income tax credit on equipment purchased for use in this business since the relevant statutory provision should be interpreted with a "word-in-total-context" approach with a view to determining the object and spirit of the legislation. No distinction could be made between the logging company itself and a subcontractor such as the taxpayer.

The Minister of National Revenue in the case at bar submits that the machinery acquired by the appellant was not used by him primarily for the purpose of farming within the meaning of subparagraph 127(10)(c)(viii) of the Act and as a consequence this machinery was not qualified property within the meaning of subsection 127(10) of the Act and as a consequence the appellant is not entitled to deduct any amount as income tax credit under subsection 127(5) of the Act in respect to the said machinery.

As I have said previously the appellant supplied the Court with a list of 99 names of customers for whom he had done custom farm work. On cross- examination, he was asked to tell the Court what kind of work he had done for certain customers. Counsel for the respondent presented him with at least a half a dozen names. In each case, he stated the customer was a back-yard gardener for whom he had done some tilling. When asked to name at least one farmer for whom he had done some work, he answered something to the effect "I don't know who is a farmer—Revenue Canada has everybody's record they should know who amongst those named are farmers".

At this point counsel for the respondent said "no further questions".

The appellant then closed his case. He was then given an opportunity to address the Court.

Counsel for the respondent then presented his reply.

After the close of arguments, I told the appellant I did not believe he had proven his case.

The appellant then requested to call an auditor of Revenue Canada as his witness. I told him this was a most unusual request made since "both sides had closed their case and presented argument". Since the appellant was not represented by counsel and in spite of the objection of counsel for the respondent, I bent the rule and allowed the witness to be called. The evidence given by the witness Charles A. Melanson, a senior auditor for Revenue Canada, did not assist the appellant.

In appeals of this nature the burden of proof lies with the appellant. In order for the appellant to succeed in applying the reasoning given in the Lor- Wes Contracting Ltd. case cited above, the appellant had to prove that there was a contractor and a contractée. There is no question he has established himself as a contractor but there is no evidence as to what farmer he might have done work for. He did not tell the Court whether he worked an hour, a day, a week or a month for any one farmer. There are some basic elements, which the appellant must establish in order to qualify as a farm contractor and be entitled to be declared as being engaged in the business of farming.

After having considered all of the evidence and the submissions of the parties, I have concluded that the appellant has not proven his case by a preponderance of evidence. For the above reasons the appeals are dismissed.

Appeals dismissed.