Tremblay,
T.C.C
J.:—
1.
Point
at
Issue
The
question
is
whether
the
appellant
company
was
correct
in
claiming
an
investment
tax
credit
in
calculating
its
tax
for
1982.
The
qualified
property
involved
in
the
tax
credit
calculation
consists
of
buildings
and
equipment
for
piggeries.
The
latter
were
built
by
the
appellant
and
leased
to
J.N.
Brochu
Inc.
The
appellant
is
a
wholly-owned
subsidiary
of
J.N.
Brochu
Inc.
Besides
leasing
piggeries,
the
appellant
operates
in
two
other
areas,
namely
milling
and
pig
rearing.
The
appellant
maintains
that
the
buildings
and
piggery
equipment
are
qualified
property,
since
they
are
used
by
the
lessee
for
farming
within
the
meaning
of
subparagraph
127(10)(c)(viii)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act").
The
respondent
refused
to
consider
the
piggery
equipment
as
qualified
property
within
the
meaning
of
subsection
127(10)
of
the
Act,
since,
it
said,
the
appellant's
principal
business
was
not
leasing
property
within
the
meaning
of
clause
127(10)(d)(i)(A).
Each
party
supplied
figures
from
financial
statements
in
support
of
its
argument.
2.
Burden
of
Proof
2.01
The
appellant
has
the
burden
of
showing
that
the
respondent's
assessments
are
incorrect.
This
burden
of
proof
results
from
several
judicial
deci-
sions,
including
a
judgment
of
the
Supreme
Court
of
Canada
in
Johnston
v.
M.N.R.,
[1948]
S.C.R.
486,
[1948]
C.T.C.
195,
3
D.T.C.
1182.
2.02
In
the
same
judgment,
the
Court
decided
that
the
facts
presumed
by
the
respondent
in
support
of
the
assessments
or
reassessments
are
also
presumed
to
be
true
until
the
contrary
is
shown.
In
the
instant
case,
the
facts
presumed
by
the
respondent
are
described
in
paragraph
5(a)
to
(i)
of
the
respondent's
reply
to
the
notice
of
appeal.
That
paragraph
reads
as
follows:
5.
In
assessing
the
appellant
for
its
1982
taxation
year,
the
respondent
Minister
of
National
Revenue
assumed,
inter
alia,
the
following
facts:
(a)
in
1979,
1980,
1981
and
1982,
the
appellant
rented
piggeries
with
related
equipment
to
J.N.
Brochu
Inc.,
the
appellant's
shareholder;
[admitted]
(b)
the
appellant's
costs
for
the
rental
of
the
said
property
related
to
financing,
insurance
and
property
tax;
[admitted]
(c)
in
1979,
1980,
1981
and
1982,
the
appellant
operated
a
mill
and
a
farm;
[denied]
(d)
the
farm
income
consisted
of
the
sale
of
pigs
and
the
rearing
of
pigs
was
done
on
a
farm
owned
by
the
taxpayer
and
by
a
third
party,
which
was
responsible
for
rearing
the
pigs;
[denied]
(e)
the
appellant's
employees'
time
and
energy
was
spent
on
operating
the
appellant's
mill;
[denied]
(f)
the
total
income
from
the
mill
made
up
most
of
the
appellant’s
turnover;
[admitted]
Proportion
of
Sales
(Mill
and
Farm
and
Rental
Income)
|
1979
|
1980
|
1981
|
1982
|
Mill
|
$1,598,109
$2,302,000
$4,258,460
$
991,540
|
Farm
|
$
370,956
$
291,363
$
402,562
$
215,596
|
Rental
|
$
51,308
$
306,197
$
304,370
$
257,076
|
|
$2,020,373
|
$2,902,560
|
$4,965,392
|
$1,464,212
|
Percentage
|
|
Mill
|
79%
|
79%
|
86%
|
68%
|
Farm
|
18.5%
|
10.5%
|
8%
|
14.5%
|
Rental
|
2.5%
|
10.5%
|
6%
|
17.5%
|
Total
|
100%
|
100%
|
100%
|
100%
|
|
[admitted]
|
(g)
the
appellant’s
main
business
during
the
1979,
1980,
1981
and
1982
taxation
years
was
not
the
leasing
of
property;
[denied]
(h)
the
respondent
refused
to
treat
the
equipment
leased
in
each
of
the
1979,
1980,
1981
and
1982
taxation
years
as
qualified
property
within
the
meaning
of
s.
127(10)
of
the
Income
Tax
Act;
[admitted]
(i)
the
investment
tax
credit
at
the
end
of
1982
was
determined
in
accordance
with
s.
127(9)
and
(10)
of
the
Income
Tax
Act;
[denied]
3.
Facts
3.01
At
the
outset
of
the
inquiry,
the
Court
was
told
that
the
buildings
were
not
involved,
as
they
had
been
allowed.
The
only
point
at
issue,
therefore,
is
the
equipment.
3.02
The
appellant
is
a
wholly-owned
subsidiary
of
J.N.
Brochu
Inc.
("Brochu
Inc.”).
3.03
The
appellant's
fiscal
year
is
from
November
1
of
one
year
to
October
31
of
the
next
year.
3.04
In
1979-80
and
1982-83,
the
appellant
built
piggeries
which
it
subsequently
leased
to
Brochu
Inc.,
which
operates
them.
3.05
Mr.
Marc
Landry
of
Saint-Isidore
de
Dorchester
is
the
general
manager
of
Brochu
Inc.
and
of
its
subsidiaries,
namely:
(1)
Salaison
Brochu
Inc.
of
Saint-Henri
de
Lévis
(pork
butchery);
(2)
Alphonse
Lafleur
Limitée
of
Saint-Henri
de
Lévis,
which
markets
the
products
of
Salaison
Brochu
Inc.;
(3)
Charcuterie
Le
Baron
of
Saint-Henri
de
Lévis;
(4)
Les
Aliments
C.D.J.
Inc.
of
Cap-de-la-Madeleine;
(5)
R.
Rousseau
&
Fils
Ltée
(the
appellant)
of
Saint-Agapit.
J.N.
Brochu
Inc.
is,
independently
of
its
subsidiaries,
the
owner
of
the
Saint-
Isidore
mill
and
its
activities
are
80
per
cent
operation
of
the
mill
and
20
per
cent
pig
rearing.
Mr.
J.N.
Brochu
owns
25
per
cent
of
the
company's
shares
and
private
interests
own
75
per
cent.
3.06
The
appellant's
base
is
in
Saint-Agapit,
county
of
Lotbiniére,
Quebec.
It
was
purchased
by
Brochu
Inc.
in
June
1978
for
$160,000.
The
appellant
was
then
a
small
mill
producing
50
metric
tons
a
week.
In
fall
1989,
it
was
producing
3,000
tons
a
week.
It
had
300-400
pigs
in
1978.
In
1989,
it
had
1,000.
3.07
In
late
1978
and
early
1979,
the
decision
was
made
to
give
the
appellant
another
activity,
that
of
constructing
the
buildings
required
by
Brochu
Inc.
and
its
subsidiaries
and
leasing
them.
It
was
decided,
first,
to
build
piggeries.
The
piggery
plans
were
supplied
by
Brochu
Inc.
Construction
began
in
April
or
May
of
1979.
The
piggery
was
divided
into
nine
buildings
each
of
which
could
hold
750
pigs.
Elimination
of
waste
and
distribution
of
water
and
food
were
done
mechanically.
3.08
The
cost
of
these
buildings
is
shown
in
the
appellant's
statement
of
assets
(I-1,
pp.
4a,
05,
38).
It
appears
that
the
appellant's
assets
rose
from
$349,484
in
1978
to
$1,399,907
in
1979.
This
increase
came
from
the
building
of
piggeries.
3.09
The
first
step
in
financing
the
piggeries
in
1979
was
a
long-term
loan
from
the
Bank
of
Nova
Scotia.
In
1978,
it
was
$8,773
and
in
1979
$581,890
(1-1,
pp.
05,
010).
Short-term
loans
to
the
parent
company
and
affiliates
rose
from
$20,015
in
1978
to
$334,336
in
1979.
The
capital
invested
by
shareholders
rose
from
$84,067
in
1978
to
$161,762
in
1979
(I-1,
p.
05).
3.10
Mr.
Landry
testified
that
on
May
4,
1981
the
Saint-Isidore
mill
burned
down.
J.N.
Brochu
Inc.
rebuilt
at
Saint-Isidore.
In
fact,
the
Saint-Isidore
mill
did
not
become
operational
until
November
1983.
The
witness,
confirming
his
statement
by
a
letter
from
the
accountant
Gaudet
[sic]
to
the
respondent,
dated
March
20,
1985,
maintained
that
after
the
fire
J.N.
Brochu
Inc.,
in
1981,
in
order
to
continue
serving
its
customers,
had
to
have
its
feed
made
on
contract
by
third
parties,
including
the
appellant.
Thus,
during
1981,
1982
and
1983
the
turnover
of
the
appellant's
milling
division
was
swollen
by
this
additional
production
volume.
|
Volume
usually
|
Additional
|
|
|
manufactured
|
volume
due
to
|
|
|
by
R.
Rousseau
|
fire
at
J.N.
|
|
|
&
Fils
Ltée
|
Brochu
Inc.
|
Total
volume
|
1981
|
24,000
M.T.
|
8,000
M.T.
|
32,000
M.T.
|
1982
|
24,000
M.T.
|
51,000
M.T.
|
75,000
M.T.
|
1983
|
24,000
M.T.
|
24,000
M.T.
|
48,000
M.T.
|
1984
|
25,000
M.T.
|
—
|
25,000
M.T.
|
According
to
Mr.
Landry,
during
this
period
it
was
J.N.
Brochu
Inc.
which
in
practice
took
control
of
the
appellant's
mill,
using
buildings,
equipment
and
employees
specialized
in
the
preparation
of
450
types
of
feed.
3.11
In
July
1982,
three
of
the
appellant's
nine
piggeries
burned
down.They
were
piggeries
numbered
three
(3),
four
(4)
and
five
(5).
They
were
rebuilt
using
the
insurance
compensation
and
a
loan.
3.12
Sales
from
the
activity
"piggery
leasing"
and
“gross”
profit
in
the
financial
statements,
after
operating
costs
(interest
on
long-term
debt,
insurance
and
taxes,
but
excluding
depreciation),
are
as
indicated
below
in
the
financial
statements
from
1979
to
1982:
|
Sales
|
Gross
Profit
|
1979
|
$
51,308
|
$
28,584
|
1980
|
$306,197
|
$145,351
|
1981
|
$304,370
|
$146,134
|
1982
|
$257,076
|
$103,581
|
(11
months)
|
|
It
appears
from
the
financial
statements
that
the
leasing
of
piggeries
ceased
to
be
one
of
the
appellant's
activities
in
late
1984.
In
that
year,
this
activity
brought
in
$249,900
in
sales
and
$147,615
in
profit
after
deducting
operating
expenses
(Exhibit
1-4).
It
appears
from
the
financial
statements
that
the
1980-85
turnover
from
the
appellant's
mill
and
gross
profit
are
broken
down
as
follows:
|
Sales
|
Gross
Profit
|
1980
|
$2,087,923
|
$116,751
|
1981
|
$4,528,460
|
$197,162
|
1982
$
991,203
$229,497
1984
$
712,333
$237,769
1985
$
907,016
$441,537
In
order
to
obtain
net
income
based
on
this
calculation
of
gross
income,
other
expenses
must
be
deducted,
including
depreciation.
On
sales
from
the
"pigs"
activity
(Exhibit
1-1),
Mr.
Landry
testified
that
the
appellant
bought
piglets
and
had
them
raised
by
third
parties,
paying
for
feed
and
medication.
This
resulted
from
contracts
remaining
after
the
shares
of
Rousseau
&
Fils
were
acquired
in
1978.
This
activity
lasted
until
late
1982.
Sales,
the
gross
margin
after
the
cost
of
sales
and
gross
profit
after
operating
costs
from
this
activity
broke
down
as
follows
between
1979
and
1982:
|
Sales
|
Gross
Margin
|
Gross
Profit
|
1979
$370,956
$27,842
|
$
8,832
|
1980
|
$291,363
|
$63,712
|
$27,605
|
1981
|
$402,562
|
$65,138
|
$39,859
|
1982
|
$215,596
|
($2,785)
|
($14,161)
|
(11
months)
|
|
In
1985,
the
activity
"pig
rearing"
appears
in
the
financial
statements
with
sales
of
$543,749
and
profits
of
$224,727
after
operating
costs,
including
$174,492
in
salaries.
To
summarize,
for
the
year
1982
at
issue
and
1981,
gross
profits
from
the
appellant's
activities
were
as
follows:
1982
|
1981
|
|
(11
months)
|
(12
months)
|
|
GROSS
PROFIT
(LOSS)
(statements)
|
|
Mill
|
$229,497
|
$197,162
|
Pigs
|
($14,161)
|
$39,859
|
Leasing—piggeries
|
$103,581
|
$146,134
|
3.13
As
to
the
salaries
paid,
the
financial
statements
show
in
Exhibit
I-1
the
following
figures
for
1978-82
against
the
activity
mill”:
1978:
|
$
62,984
|
1979:
|
$
87,950
|
1980:
|
$
86,588
|
1981:
|
$238,146
|
1982:
|
$409,736
|
The
number
of
employees
varied
from
three
to
five,
including
two
part-time
employees.
Salary
expenses
do
not
appear
in
the
activities
"piggery
leasing”,
"pigs"
and
"transport".
However,
there
are
management
fees
(for
example,
$32,000
for
1981)
which
apply
as
a
deduction
from
the
appellant's
overall
income.
These
fees
are
those
paid,
inter
alia,
to
Mr.
Marc
Landry,
whose
work
concerned
in
part
the
appellant's
various
sources
of
activity.
3.14
Mr.
Michel
Gaudette,
a
member
of
the
accounting
firm
Gaudette,
Gaudette
et
Potvin,
filed
and
discussed
the
fixed
assets
statement
(Exhibit
A-1,
Appendix
I
hereof)
and
profitability
statement
(Exhibit
A-2,
Appendix
ll
hereof)
of
the
sources
of
income
of
the
appellant,
with
the
percentage
relating
to
each
source,
for
1979-84.
3.15
Mr.
Gaudette
explained
in
connection
with
the
profitability
statement
(A-2)
that
1979
is
not
shown
because
in
that
year
there
were
no
profits,
only
losses.
This
was
the
year
building
took
place.
There
were
only
two
months
of
income.
3.16
Mr.
Gaudette
also
explained
that
the
"transport"
source
of
income
consisted
essentially
of
the
leasing
of
trucks
with
bulk
permits.
3.17
On
the
activity
"pig
rearing"
which
began
in
1985,
Mr.
Gaudette
explained
that
as
with
the
leasing
of
piggeries,
the
appellant
did
not
own
the
pigs.
It
supplied
the
buildings
and
equipment.
It
paid
employees
and
other
fixed
expenses
such
as
municipal
taxes
and
interest
on
debt.
J.N.
Brochu
Inc.
provided
the
piglets,
paid
for
feed
and
paid
for
veterinary
fees,
purchases
of
materials,
transportation,
marketing
and
delivery,
and
so
on.
3.18
On
the
fixed
assets
statement,
Mr.
Gaudette
said
that
Exhibit
A-2
confirms
what
he
had
already
written
to
the
respondent
in
a
letter
dated
March
20,
1985,
namely
that
the
building
of
piggeries
in
1982
and
1984
at
a
cost
of
about
$1,500,000
must
be
compared
with
the
improvements
to
the
mill
in
the
same
period,
on
the
order
of
$725,000.
3.19
The
equipment
which
is
at
issue,
namely
whether
it
was
qualified
property
in
1982,
had
a
value
of
$27,600
at
the
time.
In
previous
years,
its
value
was
$112,000
in
1979,
$50,000
in
1980
and
$7,500
in
1981.
4.
Act—Case
Law—Analysis
4.01
Act
The
provisions
of
the
Income
Tax
Act
on
the
investment
tax
credit
involved
in
the
instant
appeal
are
the
following:
127(5),
127(10)(b)
and
127(10)(d)(i)(A).
They
read
as
follows:
127.
(5)
Investment
tax
credit.—There
may
be
deducted
from
the
tax
otherwise
payable
by
a
taxpayer
under
this
part
for
a
taxation
year
an
amount
not
exceeding
the
lesser
of
(a)
his
investment
tax
credit
at
the
end
of
the
year,
and
(b)
the
aggregate
of
(i)
$15,000,
and
(ii)
the
amount,
if
any,
by
which
the
tax
otherwise
payable
by
him
under
this
part
for
the
year
exceeds
$15,000.
127.
(10)
Qualified
property.—For
the
purposes
of
subsection
(9),
a
“
qualified
property"
of
a
taxpayer
means
a
property
(other
than
a
certified
property)
that
is
(b)
prescribed
machinery
and
equipment
acquired
by
the
taxpayer
after
June
23,
1975,
that
has
not
been
used,
or
acquired
for
use
or
lease,
for
any
purpose
whatever
before
it
was
acquired
by
the
taxpayer
and
that
is
(d)
to
be
leased
by
the
taxpayer,
to
a
lessee
(other
than
a
person
exempt
from
tax
under
section
149)
who
can
reasonably
be
expected
to
use
the
property
in
Canada
primarily
for
any
of
the
purposes
referred
to
in
subparagraphs
(c)(i)
to
(x),
but
this
paragraph
does
not
apply
in
respect
of
property
that
is
a
prescribed
property
for
the
purposes
of
paragraph
(b)
unless
(i)
the
property
is
leased
by
the
taxpayer
in
the
ordinary
course
of
carrying
on
a
business
in
Canada
and
the
taxpayer
is
a
corporation
whose
principal
business
is
(A)
leasing
property
4.02
Case
law
and
doctrine
1.
Combined
Appraisers
&
Consultants
Ltd.
v.
M.N.R.,
[1983]
C.T.C.
2606,
83
D.T.C.
543;
2.
Hady
Construction
(1971)
Ltd.
v.
M.N.R.,
[1980]
C.T.C.
2135,
80
D.T.C.
1101;
3.
M.W.A.
Gaz
&
Oil
Ltd.
v.
M.N.R.,
[1974]
C.T.C.
140,
74
D.T.C.
6123;
4.
Thomas
Company
(Niagara)
Ltd.
v.
M.N.R.,
[1984]
C.T.C.
2733,
84
D.T.C.
1641;
5.
Canadian
Dyno
Mines
Ltd.
v.
M.N.R.,
41
Tax
A.B.C.
21,
66
D.T.C.
299;
6.
Canvil
Ltd.
v.
M.N.R.,
[1985]
2
C.T.C.
2541,
85
D.T.C.
699;
7.
Interpretation
Bulletin
IT-371.
4.03
4.03.1
Because
of
the
conditions
set
by
cl.
127(10)
(d)
(i)
(A)
above
and
on
the
basis
of
the
evidence
submitted,
therefore,
it
remains
to
determine
which
of
the
appellant's
businesses
was
the
principal
one
in
the
year
at
issue.
Was
it
the
leasing
of
property,
as
the
appellant
maintains,
or
the
mill,
as
the
respondent
contends?
4.03.2
During
the
inquiry
counsel
for
the
appellant
objected
to
the
filing
of
Exhibit
1-2,
the
appellant's
tax
return
for
1985,
including
the
comparative
financial
statements
for
1984
and
1985.
I
then
reserved
judgment
on
the
objection
for
resolution
in
a
decision
to
be
rendered.
My
decision
is
to
accept
this
evidence,
even
though
it
was
subsequent
to
the
year
1982
at
issue.
The
appellant
itself
filed
in
A-1
and
A-2
information
relating,
inter
alia,
to
1983
and
1984.
Further,
the
activity
titled
"piggery
leasing"
terminated
in
1984
and
in
1985
this
same
activity
essentially
began
again
in
another
form,
namely
"pig
rearing".
As
these
changes
gave
rise
to
arguments
by
counsel,
I
wanted
to
elucidate
these
points.
4.03.3
To
clarify
the
point
at
issue,
counsel
properly
referred
to
Interpretation
Bulletin
117-371,
which
deals,
inter
alia,
with
the
meaning
of
"principal
business”.
Paragraphs
5,
7
and
8
are
worth
citing:
5.
Whether
or
not
a
business
is
a“
principal”
business
is
a
matter
of
significance
only
where
the
taxpayer
carries
on
more
than
one
business
in
the
taxation
year.
The
phrase
"principal
business”
is
not
defined
by
the
Act
or
the
Regulations
and
accordingly
the
words
must
be
given
their
usual
meaning
and
the
identity
of
a
taxpayer's
principal
business
determined
from
the
facts
of
the
particular
case.
7.
There
is
no
standard
set
of
criteria
that
may
be
looked
to
where
the
nature
of
each
of
a
taxpayer's
businesses
is
known
but
it
must
be
determined
which
of
them
is
his
principal
business;
the
significant
factors
of
each
case
must
be
searched
out
and
evaluated.
In
the
department's
view
the
following
are
among
the
factors
which
may
be
relevant;
(a)
the
profits
realized
by
each
of
the
businesses;
(b)
the
volume
and
the
value
of
the
gross
sales
or
transactions
of
each
business;
(c)
the
value
of
the
assets
of
each
business;
(d)
the
capital
employed
in
each
business;
and
(e)
the
time,
attention
and
effort
expended
by
the
employees,
agents
or
officers
in
each
business.
8.
Although
the
determination
of
which
of
a
taxpayer's
businesses
is
the
principal
business
is
made
in
respect
of
a
particular
taxation
year,
it
is
often
necessary
to
consider
patterns
over
several
years.
Thus,
if
a
particular
business
has
been
the
principal
business
and
in
a
particular
year
(evaluated
in
isolation
from
preceding
and
succeeding
years)
it
fails
to
satisfy
many
of
the
tests,
it
does
not
necessarily
follow
that
another
business
has
become
the
principal
business
in
that
year.
For
example
it
may
be
that,
because
of
economic
conditions
and
not
because
of
the
change
in
management's
policies,
there
has
been
in
a
particular
year
a
reduction
in
the
level
of
activities
of
the
business
which
was
the
principal
business,so
that
another
business
appears
to
have
assumed
that
role.
If
this
condition
continues
only
in
the
short
run
and
thereafter
the
business
again
satisfies
the
tests
of
being
the
principal
business,
the
Department's
view
is
that
the
principal
business
may
not
have
changed
during
that
period.
Whether
this
is
so
in
any
particular
case
can
only
be
determined
by
a
review
of
the
circumstances
of
that
case.
4.03.4
The
basis
of
the
assessment
for
disallowing
the
tax
credit
on
the
piggery
equipment
is
that
the
appellants
principal
business
is
the
mill.
The
respondent
relied
on
the
fact
that
the
volume
of
gross
sales
from
the
mill
makes
up
most
of
the
appellant's
turnover.
The
accounting
information
for
1979-82
contained
in
paragraph
5(f)
of
the
reply
to
the
notice
of
appeal,
cited
above
in
para.
2.02,
is
in
fact
admitted
by
the
appellant.
Further,
in
1984
and
1985
the
mill’s
turnover
increased
to
$712,333
and
$907,016
(3.12),
which
supports
the
respondent's
argument
on
this
point.
4.03.5
However,
turnover
is
not
the
only
criteria.
There
is
also
the
question
of
time,
attention
and
effort
expended
by
employees,
offices
or
managers
on
each
business”,
counsel
for
the
respondent
noted,
citing
Canadian
Dyno
Mines
Ltd.
According
to
the
evidence,
the
salaries
paid
were
paid
particularly
for
the
activity
of
the
mill.
In
the
year
at
issue
the
mill
accounted
for
nearly
$410,000
in
salaries
(3.13).
4.03.6
The
appellant's
argument
is
that
the
“
mill”
activity
in
1981,1982
and
1983
was
not
really
representative.
It
argued
that
it
was
because
the
Saint-
Isidore
mill
owned
by
the
parent
company
burned
down
in
May
1981
that
J.N.
Brochu
Inc.
decided
to
use
the
appellant’s
mill
during
the
rebuilding
period,
which
ended
in
November
1983.
During
1982,
the
year
at
issue,
the
production
of
the
appellant's
mill
was
75,000
metric
tons,
51,000
tons
of
which
came
from
customers
of
J.N.
Brochu
Inc.
(3.10).
Further,
during
that
period,
the
appellant
only
provided
manpower
to
keep
up
the
building
and
pay
the
overhead
(3.10).
The
appellant's
position
on
this
point
finds
support
both
in
paragraph
8
of
Interpretation
Bulletin
IT-371,
cited
above
(4.03.3),
and
in
M.W.A.
Gaz
&
Oil
Ltd.
(4.02.3).
4.03.7
The
appellant
further
argued
that
the
“fixed
assets"
test
must
be
considered.
It
is
clear
from
Exhibit
A-1
that
this
test
strongly
favours
the
appellant's
argument
(3.08
and
3.18).
4.03.8
The
appellant
argues
that
the
profit
test
is
by
far
the
most
important
one.
Referring
to
Combined
Appraisers
and
Consultants
Ltd.
(4.02.1)
and
Hady
Construction
(1971)
Ltd.
(4.02.2),
counsel
noted
that
the
ultimate
objective
of
any
business
is
to
make
a
profit.
In
the
final
analysis,
Exhibit
A-2
shows
that
the
business
with
the
best
profit
was
the
leasing
business,
especially
as
according
to
the
appellant
the
"transport"
activity
was
simply
the
leasing
of
trucks
to
transport
bulk
merchandise
(3.16).
This
activity
can
thus
be
taken
with
the
leasing
of
real
property,
as
both
are
the
leasing
of
property
within
the
meaning
of
clause
127(10)(d)(i)(A),
cited
above
(4.01).
4.03.9
Counsel
for
the
appellant
even
alleged
in
oral
argument
that
the
use
of
the
appellant's
mill
by
J.N.
Brochu
Inc.
during
the
period
from
June
1981
(after
the
fire
at
the
Saint-Isidore
mill
in
May
1981
(3.10))
to
1983
(end
of
rebuilding
at
the
Saint-Isidore
mill
(3.10))
was
essentially
a
leasing.
The
appellant
only
paid
salaries
and
overhead,
and
J.N.
Brochu
Inc.
paid
the
rest
and
had
overall
control.
The
Court
is
not
prepared
to
share
this
view,
but
is
willing
to
admit
that
the
sudden
increase
in
the
"mill"
business
was
due
simply
to
a
temporary
or
occasional
cause,
the
fire
at
Saint-Isidore
in
May
1981,
while
reconstruction
was
under
way.
Additionally,
the
Court
is
persuaded
that
"profit"
and
"investment"
are
the
key
factors
in
this
matter,
based
on
the
weight
of
evidence
in
this
regard
(4.03.7
and
4.03.8).
4.03.10
I
consider
that
the
weight
of
the
evidence
support
the
appellant's
argument.
5.
Conclusion
The
appeal
is
allowed
with
costs.
Appeal
allowed.