Couture
C.J.T.C.
[Translation]
:—This
appeal
is
from
an
assessment
dated
September
16,
1983
for
the
1979
taxation
year.
In
this
assessment
the
respondent
disallowed
a
deduction
for
inventory
claimed
by
the
appellant
in
computing
its
income
in
the
amount
of
$7,879.50.
At
the
hearing
the
parties
admitted
that
the
amount
disallowed
should
have
been
$7,259.44,
not
the
amount
mentioned
above.
The
relevant
facts
of
this
appeal
are
fairly
simple
and
can
be
summarized
as
follows.
The
appellant
is
a
Ford
car
and
truck
dealer.
As
at
December
31,
1978
its
financial
statements
showed
inventory
in
the
amount
of
$1,789,548.
Included
in
this
amount
was
a
sum
of
$241,981.31
representing
the
cost
of
certain
trucks
the
appellant
had
on
consignment,
according
to
the
respondent.
The
evidence
showed
clearly
that
the
trucks
in
question
were
physically
held
by
the
appellant
for
sale.
The
appellant
relied
on
the
provisions
of
paragraph
20(1)(gg)
in
support
of
its
arguments
regarding
the
validity
of
the
deduction
of
$7,259.44
claimed
in
computing
its
income.
The
respondent
for
his
part
also
relied
on
the
provisions
of
paragraph
20(1)(gg)
but
gave
these
provisions
an
interpretation
that
does
not
seem
to
me
to
be
consistent
with
the
one
that
must
be
drawn
from
their
wording
as
enacted
by
Parliament.
The
respondent
insisted
that
in
order
to
benefit
from
this
deduction
for
inventory,
the
taxpayer
must
in
fact
own
it,
a
requirement
which
in
my
view
is
not
contained
in
the
said
paragraph
20(1)(gg),
which
reads
as
follows:
20(1)(gg)
an
amount
in
respect
of
any
business
carried
on
by
the
taxpayer
in
the
year,
equal
to
that
portion
of
3%
of
the
cost
amount
to
the
taxpayer,
at
the
commencement
of
the
year,
of
the
tangible
property
(other
than
real
property
or
an
interest
therein)
that
was
(i)
described
in
the
taxpayer's
inventory
in
respect
of
the
business,
and
(ii)
held
by
him
for
sale
or
for
the
purposes
of
being
processed,
fabricated,
manufactured,
incorporated
into,
attached
to,
or
otherwise
converted
into
or
used
in
the
packaging
of,
property
for
sale
in
the
ordinary
course
of
the
business
that
the
number
of
days
in
the
year
is
of
365.
As
mentioned
previously,
the
evidence
clearly
showed:
(a)
that
the
trucks
in
question
were
included
in
the
appellant’s
inventory;
(b)
that
it
he/d
this
property
for
sale
(emphasis
added).
I
have
no
intention
of
analysing
the
legislation
in
depth
since
this
was
done
by
Mr.
J.B.
Goetz,
Q.C.
when
he
was
a
member
of
the
Tax
Review
Board
in
Dresden
Farm
Equipment
Ltd.
v.
M.N.R.,
reported
at
[1982]
C.T.C.
2377;
82
D.T.C.
1388,
which
was
affirmed
by
a
judgment
of
Associate
Chief
Justice
Jérôme
of
the
Federal
Court
of
Canada,
reported
at
[1986]
1
C.T.C.
349;
86
D.T.C.
6167.
The
facts
in
the
two
appeals
are
more
or
less
identical,
except
that
in
the
Dresden
case
the
appellant
was
a
distributer
of
farm
equipment,
not
trucks.
In
both
cases
the
assessments
were
issued
by
the
respondent
on
the
basis
that
the
taxpayers
did
not
own
the
inventory
in
question
since
it
had
been
sent
to
them
on
consignment.
At
pages
353-4
(D.T.C.
6170)
the
learned
judge
stated
the
following
concerning
the
application
of
paragraph
20(1)(gg):
The
result
of
all
of
this
is
that
both
parties
acted
in
a
manner
at
least
as
consistent
with
the
concept
of
ownership
in
the
distributor
as
in
the
parent
company.
Of
far
greater
significance
to
me
is
that
the
legislation
does
not
contain
any
reference
to
ownership,
title
or
purchase
of
the
inventory,
only
that
it
be
a
part
of
the
taxpayer's
stock-in-trade.
At
first
reading
I
also
assumed
that
if
the
taxpayer
were
to
overcome
the
ownership
hurdle
it
could
not
meet
the
issue
of
"cost".
Evidence
in
this
case
clearly
substantiates
that
there
was
no
obligation
upon
this
defendant
to
pay
for
any
merchandise
at
the
time
of
acquistion
with
the
possible
exception
of
certain
items
which
became
subject
to
a
25
per
cent
carry-over
deposit.
How
could
this
taxpayer
be
entitled
to
a
percentage
of
non-existent
cost?
The
legislation,
however,
also
contains
its
own
definition;
subsection
248(1)
defines
"cost
amount"
as
follows:
248.
(1)
In
this
Act,
“cost
amount”
to
a
taxpayer
of
any
property
at
any
time
means,
except
as
expressly
otherwise
provided
in
this
Act,
(c)
where
the
property
was
property
described
in
an
inventory
of
the
taxpayer,
its
value
at
that
time
as
determined
for
the
purpose
of
computing
his
income,
Cost
is
therefore
specifically
defined
not
in
terms
of
price
but
in
terms
of
value
at
the
time
of
acquisition.
Surely
had
Parliament
intended
to
confine
the
allowance
in
paragraph
20(1)(gg)
to
the
cost
of
merchandise
bought
and
paid
for,
it
could
not
unintentionally
have
overlooked
these
two
opportunities
to
so
state,
the
first
by
defining
ownership
in
plain
legal
terms,
the
second
by
defining
cost
in
terms
of
purchase
price
at
the
time
of
acquistion.
[Emphasis
added.]
To
these
comments
by
Jérôme,
J.,
I
shall
add
those
of
Estey,
J.
of
the
Supreme
Court
of
Canada
in
Johns-Manville
Canada
Inc.
v.
The
Queen,
[1985]
2
S.C.R.
46
at
72;
[1985]
2
C.T.C.
111
at
126,
and
I
quote:
Such
a
determination
is,
furthermore,
consistent
with
another
basic
concept
in
tax
law
that
where
the
taxing
statute
is
not
explicit,
reasonable
uncertainty
or
factual
ambiguity
resulting
from
lack
of
explicitness
in
the
statute
should
be
resolved
in
favour
of
the
taxpayer.
There
is
clearly
a
reasonable
uncertainty
with
respect
to
the
meaning
the
respondent
wishes
to
give
the
provisions
of
paragraph
20(1)(gg).
For
these
reasons
the
appeal
is
allowed.
The
appellant
is
entitled
to
party-
and-party
costs.
Appeal
allowed.
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