Pinard,
(.[Translation]:—This
is
an
appeal
in
the
form
of
an
action
pursuant
to
subsections
172(2)
and
175(3)
of
the
Income
Tax
Act,
SC
1970-71-72,
c
63,
as
amended,
brought
by
the
taxpayer
Louis
Vaillancourt
against
a
notice
of
reassessment
by
the
Minister
of
National
Revenue,
with
respect
to
the
taxation
year
1980.
On
November
20,
1979
SODEFIM
Enr,
a
partnership
consisting
of
Gilles
Gaumont,
Denis
Bredet,
Martin
Racine,
France
Thibault,
Jean
Morin
and
the
plaintiff
Louis
Vaillancourt,
purchased
from
Château
Mont
Ste-Anne
Inc.
real
property
described
as
follows:
A
—
THE
EXCLUSIVE
PORTION,
known
and
described
as
subdivision
FORTY
of
original
lot
SIX
HUNDRED
AND
FIFTY-EIGHT
(658-40)
of
the
official
cadastre
of
the
parish
of
Ste-Anne,
Montmorency
registration
division;
B
—
THE
SHARE
of
the
undivided
rights
in
the
common
portions
pertaining
to
the
exclusive
portion
described
in
paragraph
A
above
.
.
.
This
contract
of
purchase
refers
specifically
to
a
declaration
of
co-
ownership
over
lot
No.
658,
the
destination
of
which
is
defined
as
follows:
4.1
the
aforementioned
real
property,
having
a
number
of
row
houses
erected
thereon,
includes
forty-four
units
or
exclusive
portions
for
use
as
dwellings
and
common
portions;
4.2
as
indicated
in
the
next
heading,
certain
common
portions
will
be
used
in
common
by
all
the
co-owners
and
other
common
portions
will
be
for
the
exclusive
use
of
a
fractional
owner.
The
common
portions
referred
to
in
both
the
contract
of
purchase
and
the
declaration
of
co-ownership
above
are
known
and
described
as
subdivision
1
of
original
lot
658
(658-1)
of
the
cadastre
in
question,
except
for
the
portion
of
the
said
subdivision
transferred
to
the
Town
of
Beaupré
for
use
as
a
roadbed.
In
actual
fact,
the
plaintiff
thereby
bought
for
$85,000
a
single
condominium
unit
for
use
as
a
dwelling,
in
a
building
containing
several
others,
plus
a
share
of
the
common
portions
of
the
condominium
units
as
a
whole,
such
as
yards,
gardens,
patios,
parking
areas
and
so
on.
On
December
28,
1977,
before
the
purchase
in
question
by
SODEFIM
Enr,
the
Canada
Mortgage
and
Housing
Corporation
through
its
officers
issued
a
certificate
for
the
site
of
a
multiple-unit
residential
building
in
accordance
with
Classes
31
and
32
of
Schedule
II
of
the
Income
Tax
Regulations:
this
certificate
was
issued
for
the
condominium
units
as
a
whole,
not
for
each
unit
individually;
the
certificate
referred
generally
to
lots
“658-1
to
658-45,
P.O.
Box
398,
Beaupré,
Québec",
indicating
a
total
residential
area
of
67,660
square
feet;
it
specified
that
the
building
included
four
type
D-2
units,
eighteen
types
A-2,
B-2,
and
B-3
units,
and
twenty-two
types
C-2
and
C-3
units;
finally,
the
certificate
showed
a
drawing
of
the
external
dimensions
of
each
of
these
six
types
of
units.
The
unit
purchased
here
by
the
partnership
SODEFIM
Enr,
to
which
the
plaintiff
belonged,
was
a
type
C-3
unit,
namely
unit
No
29.
The
plaintiff
filed
an
individual
federal
income
tax
return
for
1980
in
which
he
claimed
a
deduction
for
depreciation,
and
reported
a
net
loss
of
rent
for
the
real
property
which
was
the
subject
of
the
above
contract
of
purchase
by
SODEFIM
Enr:
in
so
doing,
the
plaintiff
applied
in
his
favour
the
provisions
of
Class
31
of
Schedule
II
of
the
Income
Tax
Regulations.
On
September
16,
1983
the
defendant
issued
a
notice
of
reassessment
to
the
plaintiff
for
the
taxation
year
1980:
in
it
the
defendant
told
the
plaintiff
she
was
denying
the
depreciation
deduction
requested
on
the
ground
that
the
real
property
in
question
was
not
property
covered
by
Classes
31
or
32
of
Schedule
II
of
the
Income
Tax
Regulations,
but
in
fact
property
in
Class
3;
in
particular,
in
so
assessing
the
plaintiff
the
Minister
of
National
Revenue
assumed
that
the
real
property
in
question
was
not
a
"multiple-unit
residential
building"
within
the
meaning
of
Classes
31
and
32
above.
The
following
applicable
provisions
of
the
Act
and
the
Income
Tax
Regulations
must
now
be
set
out:
Act
20.
Deductions
permitted
in
computing
income
from
business
or
property.
(1)
Notwithstanding
paragraphs
18(1)(a),
(b)
and
(h),
in
computing
a
taxpayer's
income
for
a
taxation
year
from
a
business
or
property,
there
may
be
deducted
such
of
the
following
amounts
as
are
wholly
applicable
to
that
source
or
such
part
of
the
following
amounts
as
may
reasonably
be
regarded
as
applicable
thereto:
(a)
Capital
cost
of
property.
—
such
part
of
the
capital
cost
to
the
taxpayer
of
property,
or
such
amount
in
respect
of
the
capital
cost
to
the
taxpayer
of
property,
if
any,
as
is
allowed
by
regulation;
221.
Regulations
(1)
The
Governor
in
Council
may
make
regulations
(a)
prescribing
anything
that,
by
this
Act,
is
to
be
prescribed
or
is
to
be
determined
or
regulated
by
regulation,
Regulations
Deductions
allowed
1100.
(1)
For
the
purposes
of
paragraph
20(1)(a)
of
the
Act,
there
is
hereby
allowed
to
a
taxpayer,
in
computing
his
income
from
a
business
or
property,
as
the
case
may
be,
deductions
for
each
taxation
year
equal
to
Rates
(a)
subject
to
subsection
(2),
such
amount
as
he
may
claim
in
respect
of
property
of
each
of
the
following
classes
in
Schedule
II
not
exceeding
in
respect
of
property
(iii)
of
class
3,
5
per
cent,
(xxii)
of
class
31,
5
per
cent,
of
the
undepreciated
capital
cost
to
him
as
of
the
end
of
the
taxation
year
(before
making
any
deduction
under
this
subsection
for
the
taxation
year)
of
property
of
the
class;
Rental
properties
(11)
Notwithstanding
subsection
(1),
in
no
case
shall
the
aggregate
of
deductions,
each
of
which
is
a
deduction
in
respect
of
property
of
a
prescribed
class
owned
by
a
taxpayer
that
includes
rental
property
owned
by
him,
otherwise
allowed
to
the
taxpayer
by
virtue
of
subsection
(1)
in
computing
his
income
for
the
taxation
year,
exceed
the
amount,
if
any,
by
which
(a)
the
aggregate
of
amounts
each
of
which
is
(i)
his
income
for
the
year
from
renting
or
leasing
a
rental
property
owned
by
him,
computed
without
regard
to
paragraph
20(1)(a)
of
the
Act,
or
(ii)
the
income
of
a
partnership
for
the
year
from
renting
or
leasing
a
rental
property
of
the
partnership,
to
the
extent
of
the
taxpayer's
share
of
such
income,
exceeds
(b)
the
aggregate
of
amounts
each
of
which
is
(i)
his
loss
for
the
year
from
renting
or
leasing
a
rental
property
owned
by
him,
computed
without
regard
to
paragraph
20(1)(a)
of
the
Act,
or
(ii)
the
loss
of
a
partnership
for
the
year
from
renting
or
leasing
a
rental
property
of
the
partnership,
to
the
extent
of
the
taxpayer's
share
of
such
loss.
(14)
In
this
section
and
section
1101,
“rental
property"
of
a
taxpayer
or
a
partnership
means
(a)
a
building,
other
than
property
of
Class
31
or
32
in
Schedule
II,
owned
by
the
taxpayer
or
partnership
whether
jointly
with
another
person
or
otherwise,
or
(b)
a
leasehold
interest
in
real
property,
if
the
leasehold
interest
is
property
of
Class
3,
6
or
13
in
Schedule
II
and
is
owned
by
the
taxpayer
or
partnership,
if,
in
the
taxation
year
in
respect
of
which
the
expression
is
being
applied,
the
property
was
used
by
the
taxpayer
or
the
partnership
principally
for
the
purpose
of
gaining
or
producing
gross
revenue
that
is
rent,
but,
for
greater
certainty,
does
not
include
any
property
leased
by
the
taxpayer
or
the
partnership
to
a
lessee,
in
the
ordinary
course
of
the
taxpayer’s
or
partnership's
business
of
selling
goods
or
rendering
services,
under
an
agreement
by
which
the
lessee
undertakes
to
use
the
property
to
carry
on
the
business
of
selling,
or
promoting
the
sale
of,
the
taxpayer's
or
partnership’s
goods
or
services.
Schedule
I!
CLASS
3
(5
per
cent)
Property
not
included
in
any
other
class
that
is
(a)
a
building
or
other
structure,
including
component
parts
such
as
electric
wiring,
plumbing,
sprinkler
systems,
air-conditioning
equipment,
heating
equipment,
lighting
fixtures,
elevators
and
escalators;
CLASS
31
(5
per
cent)
Property
that
is
a
multiple-unit
residential
building
in
Canada
that
would
otherwise
be
included
in
Class
3
or
Class
6
and
in
respect
of
which
(a)
a
certificate
has
been
issued
by
the
Canada
Mortgage
and
Housing
Corporation
certifying
(i)
in
respect
of
a
building
that
would
otherwise
be
included
in
Class
3,
that
the
installation
of
footings
or
any
other
base
support
of
the
building
was
commenced
(A)
after
November
18,
1974
and
before
1980,
or
(B)
after
October
28,
1980
and
before
1982,
as
the
case
may
be,
and
(ii)
in
respect
of
a
building
that
would
otherwise
be
included
in
Class
6,
that
the
installation
of
footings
or
any
other
base
support
of
the
building
was
commenced
after
December
31,
1977
and
before
1979,
and
that,
according
to
plans
and
specifications
for
the
building,
not
less
than
80
per
cent
of
the
floor
space
will
be
used
in
providing
self-contained
domestic
establishments
and
related
parking,
recreation,
service
and
storage
areas;
(b)
not
more
than
20
per
cent
of
the
floor
space
is
used
for
any
purpose
other
than
the
purposes
referred
to
in
paragraph
(a);
(c)
the
certificate
referred
to
in
paragraph
(a)
was
issued
on
or
before
the
later
of
(i)
December
31,
1981,
and
(ii)
the
day
that
is
18
months
after
the
day
on
which
the
installation
of
footings
or
other
base
support
of
the
building
was
commenced;
and
(d)
the
construction
of
the
building
proceeds,
after
1982,
without
undue
delay,
taking
into
consideration
acts
of
God,
labour
disputes,
fire,
accidents
or
unusual
delay
by
common
carriers
or
suppliers
of
materials
or
equipment.
Thus,
on
the
one
hand,
the
plaintiff
is
claiming
a
deduction
for
depreciation
based
on
paragraph
20(1)(a)
of
the
Act,
Regulation
1100(1
)(a)(xxii)
and
Class
31
of
Schedule
II
of
the
Regulations;
on
the
other,
the
defendant
is
arguing
that
Class
31
of
Schedule
II
of
the
Regulations
cannot
apply
in
favour
of
the
plaintiff
in
the
case
at
bar,
and
therefore
the
depreciation
deduction
claimed
must
be
denied
pursuant
to
subsections
1100(11)
and
(14)
of
the
Regulations.
Incidentally,
it
is
clear
that
if
the
real
property
purchased
by
the
plaintiff’s
partnership
proves
not
to
be
of
the
kind
described
in
Class
31
of
Schedule
II
of
the
Regulations,
it
is
still
covered
by
Class
3
of
that
Schedule.
Though
the
percentage
of
the
amount
claimed
as
depreciation
is
the
same
depending
on
whether
we
refer
to
Class
3
or
Class
31
of
Schedule
II
of
the
Regulations,
the
significance
of
the
distinction
between
the
two
classes
arises
from
the
provisions
of
subsection
1100(11)
of
the
Regulations,
which
for
all
practical
purposes
limit
the
amount
of
the
depreciation
deduction
on
a
rental
property
to
the
income
from
renting
it;
in
view
of
the
provisions
of
subsection
1100(14)
of
the
Regulations,
such
a
limitation
does
not
apply
to
property
in
Class
31
of
Schedule
II
of
the
Regulations,
as
it
would
then
be
property
which
is
not
a
“rental
property”.
The
Court
thus
has
to
consider
and
interpret
the
language
of
Class
31
of
Schedule
Il
of
the
Regulations,
so
as
to
determine
whether
the
building
purchased
by
the
partnership
to
which
the
plaintiff
belonged
really
is
the
type
of
property
contemplated
in
that
class.
In
the
case
at
bar
one
must
follow
the
modern
rule
of
statutory
interpretation
as
defined
by
the
writer
E.
A.
Dreidger
and
reported
as
follows
by
the
Supreme
Court
of
Canada,
interpreting
the
provisions
of
the
Income
Tax
Act,
in
Stubart
Investments
Limited
v.
The
Queen,
[1984]
C.T.C.
294
at
316;
84
D.T.C.
6305
at
6323:
While
not
directing
his
observations
exclusively
to
taxing
statutes,
the
learned
author
of
“Construction
of
Statutes”,
2nd
ed.,
(1983),
at
p.
87,
E.
A.
Dreidger,
put
the
modern
rule
succinctly:
Today
there
is
only
one
principle
or
approach,
namely
the
words
of
an
Act
are
to
be
read
in
their
entire
context
and
in
their
grammatical
and
ordinary
sense
harmoniously
with
the
scheme
of
the
Act,
the
object
of
the
Act,
and
the
intention
of
Parliament.
Referring
to
this
decision,
MacGuigan,
J.
of
the
Federal
Court
of
Canada
said
in
Lor-Wes
Contracting
Limited
v.
The
Queen,
[1985]
2
C.T.C.
79
at
83;
85
D.T.C.
5310
at
5313:
The
only
principle
of
interpretation
now
recognized
is
a
words-in-total-context
approach
with
a
view
to
determining
the
object
and
spirit
of
the
taxing
provisions.
In
the
latter
case,
the
Federal
Court
also
referred
to
the
budget
speech
of
the
federal
Minister
of
Finance
on
June
23,
1975,
in
analysing
and
examining
the
need
which
an
amendment
to
the
Income
Tax
Act
was
designed
to
meet.
In
the
case
at
bar,
it
is
of
the
very
essence
of
the
provision
contained
in
Class
31
that
the
property
must
be
“a
multiple-unit
residential
building
in
Canada”.
To
my
way
of
thinking,
all
these
words
must
be
read
and
applied
together
to
the
property
defined
in
the
class.
Accordingly,
a
residential
building
in
Canada
consisting
of
a
single
unit
must
be
excluded
from
the
definition;
similarly,
each
of
the
mutiple
units
of
a
residential
building
in
Canada,
taken
separately,
must
be
excluded
from
the
definition.
This
interpretation
appears
to
be
not
only
consistent
with
the
modern
rule
of
interpretation
referred
to
by
the
Supreme
Court
of
Canada
in
Stubart
Investments
Limited,
above,
but
in
addition
completely
responsive
to
the
objective
defined
by
the
federal
Minister
of
Finance
in
his
budget
speech
on
November
18,
1974
(House
of
Commons
Debates,
1st
Session,
30th
Parliament,
Vol.
Il,
1974,
p.
1419),
when
he
said
at
1426:
For
reasons
already
discussed,
I
am
particularly
anxious
to
provide
a
quick
and
strong
incentive
to
the
construction
of
new
rental
housing
units.
I
therefore
propose
to
relax
for
a
period
the
rule
whereby
capital
cost
allowances
on
rental
construction
could
not
be
charged
against
income
from
other
sources.
Specifically,
in
respect
of
new,
multiple-unit
residential
buildings
for
rent,
started
between
tonight
and
December
31,
1975,
the
capital
cost
allowance
rule
will
not
apply.
This
means
that
an
owner
of
an
eligible
rental
unit
will
be
permitted
to
deduct
capital
cost
allowance
against
any
source
of
income
at
any
time.
I
am
confident
that
this
measure
will
attract
a
significant
amount
of
private
equity
capital
into
the
construction
of
new
rental
housing.
As
in
the
case
at
bar
the
plaintiff
was
not
claiming
a
depreciation
deduction
in
respect
of
a
multiple-unit
residential
building
in
Canada,
but
in
respect
of
one
of
the
multiple
units,
namely
unit
29,
of
a
larger
building
containing
some
44
units,
he
thus
cannot
benefit
from
the
provision
in
Class
31
of
Schedule
II
of
the
Regulations.
The
evidence,
it
will
be
recalled,
was
that
members
of
the
partnership
SODEFIM
Enr,
including
the
plaintiff,
were
the
exclusive
owners
of
a
single
unit
in
a
building
which
contained
many
others;
this
unit,
No.
29,
was
the
exclusive
portion
known
and
described
as
subdivision
40
of
original
lot
658
in
the
cadastre
in
question;
at
the
same
time,
the
same
partners
were
coowners
of
a
share
determined
in
a
declaration
of
co-ownership,
with
the
owners
of
the
other
units
in
the
same
building,
of
the
common
portions
known
and
described
as
subdivision
1
of
original
lot
658
of
the
same
cadastre.
It
will
readily
be
seen
that,
even
assuming
that
the
building
in
question
was
“residential”,
which
I
do
not
have
to
decide
in
view
of
my
findings,
the
plaintiff
was
at
most
the
co-owner
of
a
share
of
the
undivided
rights
in
the
common
portions
only
of
a
multiple-unit
residential
building
in
Canada.
Finally,
in
any
case
the
amount
of
the
depreciation
deduction
claimed
by
the
plaintiff
for
the
1980
taxation
year
was
calculated
strictly
on
the
basis
of
unit
29,
without
taking
into
account
the
capital
cost
or
rental
income
from
other
units
contained
in
the
multiple-unit
building.
The
true
co-owner
of
a
“multiple-unit
building
in
Canada”
would
have
to
calculate
depreciation
in
terms
of
his
share
of
the
entire
building
and
also
in
terms
of
the
capital
cost
and
rental
income
of
the
units
and
common
portions
contained
in
the
building
as
a
whole.
The
plaintiff
has
accordingly
failed
to
establish
that
the
provisions
of
Class
31
of
Schedule
II
of
the
Regulations
apply
to
him
and
his
action
must
be
dismissed
with
costs.
Action
dismissed.
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