Christie,
A.C.J.T.C.:—
These
appeals
were
heard
together
at
the
request
of
the
parties
and
with
the
consent
of
the
Court.
The
question
is
whether
the
respondent
was
correct
in
reassessing
the
appellants
to
include
the
sum
of
$15,000
in
computing
the
income
of
each
for
their
1980
taxation
year.
By
resolution
of
the
directors
of
W.
S.
Gibson
&
Sons
Limited
("the
company")
dated
March
25,
1977,
15
common
shares
of
the
company
were
allotted
to
each
of
the
appellants.
The
price
was
$1,000
per
share
for
a
total
of
$30,000,
receipt
of
which
was
acknowledged
by
the
company.*
The
document
also
recites
"that
the
Company
do
loan
$15,000
to
each
of
Berkeley
G.
Square
and
Thomas
E.
Merriman,
employees
of
the
Company,
to
enable
them
to
subscribe
for
15
common
shares
of
the
Company
each
to
be
held
by
them
by
way
of
beneficial
ownership."
It
further
states:
Such
loan
shall
be
secured
by
promissory
notes
from
each
of
Berkeley
G.
Square
and
Thomas
E.
Merriman
in
the
amount
of
$15,000.00
repayable
in
20
equal
quarterly
instalments,
the
first
of
which
shall
be
payable
on
the
31st
day
of
March,
1977
subject
to
the
balance
becoming
immediately
due
and
payable
in
the
event
of
default
in
payment
of
any
instalment.
Two
promissory
notes
were
also
tendered
in
evidence.
One
is
dated
March
18,
1977,
and
signed
by
the
appellant
Merriman
and
the
other
is
dated
March
1977
without
specifying
the
day
in
March
and
is
signed
by
the
appellant
Square.
The
body
of
these
notes
reads:
FOR
VALUE
RECEIVED
I
hereby
promise
to
pay
to
W.
S.
Gibson
&
Sons
Limited
at
its
head
office
the
sum
of
Fifteen
Thousand
—
($15,000.00)
—
Dollars
by
twenty
(20)
equal
instalments
of
Seven
Hundred
and
Fifty
—
($750.00)
—
Dollars
each
upon
the
last
days
of
March,
June,
September
and
December
in
each
year,
the
first
of
such
payments
to
be
made
on
the
31st
day
of
March,
1977,
subject
to
the
entire
unpaid
balance
becoming
due
and
payable
upon
default
in
any
such
payment.
The
italicised
words
are
struck
out.
Minutes
of
a
meeting
of
the
board
of
directors
of
the
company
held
on
December
16,
1980,
are
also
in
evidence.
The
appellants
attended
at
this
meeting.
The
relevant
portion
of
the
minutes
reads:
The
following
resolution
was
duly
moved
and
seconded:
“BE
IT
RESOLVED
that
the
Company
do
forgive
the
indebtedness
of
Messrs.
Thomas
E.
Merriman
and
Berkeley
G.
Square
to
the
Corporation
in
the
amount
of
$15,000.00
each,
included
all
arrears
of
payments,
pursuant
to
the
resolution
No.
4
passed
by
the
Directors
of
the
Corporation
on
the
24th
day
of
March,
1977.”
Messrs.
Merriman
and
Square
took
no
part
in
the
discussion
of
the
above
resolution
and
did
not
vote.
After
discussion,
the
resolution
was
passed
unanimously.
The
appellants
testified
that
the
foregoing
documents
do
not
correctly
reflect
what
transpired
between
them
and
the
company.
It
is
said
that
there
was
a
verbal
understanding
that
repayment
of
the
indebtedness
was
to
be
made
out
of
anticipated
dividends
to
be
declared
quarterly
in
March,
June,
September
and
December.
The
company
incurred
losses
in
1977
and
1979.
Dividends
were
not
declared
and
repayment
of
the
indebtedness
was
not
made
and,
as
previously
indicated,
the
company
forgave
the
indebtedness
on
December
16,
1980.
The
appellant
Merriman
said
in
cross-examination
that
legal
advice
was
sought
and
obtained
in
respect
of
the
share
transactions.
Paragraph
15(1)(c)
of
the
Income
Tax
Act
provides
that
where
in
a
taxation
year
a
benefit
or
advantage
has
been
conferred
on
a
shareholder
by
a
corporation,
the
amount
or
value
thereof
shall
be
included
in
computing
the
income
of
the
shareholder
for
the
year.
This
is
subject
to
a
number
of
qualifications,
e.g.
where
the
benefit
or
advantage
has
been
conferred
on
the
reduction
of
capital,
none
of
which
have
any
application
to
these
appeals.
It
was
alleged
by
the
appellants
that
they
“never
received
any
loan
from
the
corporation”.
I
have
no
hesitation
in
rejecting
this.
Not
only
is
it
contradicted
by
the
documents
already
referred
to,
but
attached
to
the
notice
of
appeal
is
a
document
bearing
the
company's
letterhead
dated
March
3,
1982,
and
signed
by
six
of
the
directors
of
the
company.
It
was
referred
to
at
the
hearing
by
the
agent
representing
the
appellants.
The
re-line
on
the
document
reads:
“Debt
in
the
amount
of
$15,000
between
W.
S.
Gibson
&
Sons
Limited
and
T.
E.
Merriman
and
B.
G.
Square
(Year
1977).”
It
goes
on
to
refer
to
the
"subject
debt”
and
"repayment
of
same.”
It
states
that
"repayment
of
this
debt
was
conditional
upon”
the
appellants
receiving
dividends.
Accepting
as
correct,
as
did
the
respondent
in
reassessing
the
appellants,
that
the
true
relationship
between
the
appellants
and
the
company
was
that
of
debtor
and
creditor
with
repayment
of
the
loans
subject
to
the
contingency
of
dividends
being
declared
which
would
be
the
source
of
repayment
this,
in
my
opinion,
does
not
militate
in
favour
of
the
appellants.
The
fact
that
some
of
the
anticipated
dividends
were
not
declared
by
the
company
did
not
abrogate
the
appellants’
indebtedness.
It
simply
placed
in
abeyance
their
legal
obligation
to
make
repayment.
The
fact
that
this
was
regarded
to
be
the
situation
by
the
appellants
and
the
company
is
confirmed
by
the
previously
referred
to
Minutes
of
the
meeting
of
the
directors
of
the
company
on
December
16,
1980,
at
which
time
it
was
decided
to
"forgive
the
indebtedness
of
Messrs.
Thomas
E.
Merriman
and
Berkeley
G.
Square
to
the
Corporation
in
the
amount
of
$15,000
each,
included
all
arrears
of
payments.”
In
his
notice
of
appeal
and
at
the
hearing
the
agent
for
the
appellants
relied
on
an
Interpretation
Bulletin
regarding
shares
sold
subject
to
an
earn-out
agreement
and
an
Advance
Ruling
pertaining
to
the
tax
consequences
of
the
forgiveness
of
employees’
obligations
under
a
stock
purchase
plan.
I
do
not
regard
either
of
these
documents
as
being
of
any
assistance
in
the
determination
of
these
appeals.
This
passage
from
Wollenberg
v.
M.N.R.,
[1984]
C.T.C.
2043
at
2045;
84
D.T.C.
1055
at
1057
is
apposite:
What
Parliament
has
decreed
shall
be
the
rules
applicable
in
determining
what
is
payable
by
way
of
tax
under
the
provisions
of
the
Act
is
paramount
and
cannot
be
repealed
or
amended
in
any
manner
by
whatever
Revenue
Canada
may
choose
to
publish
by
way
of
Tax
Guides,
Interpretation
Bulletins
or
otherwise.
This
is
not
to
say
that
publications
of
the
kind
just
mentioned
are
totally
void
of
potential
legal
impact.
They
can
have
limited
legal
consequences
in
the
sense
that
if
a
particular
provision
of
the
Act
is
ambiguous,
or
is
ambiguous
in
a
specific
context,
thereby
giving
rise
to
doubt
about
its
meaning,
administrative
policy
and
interpretation
as
reflected
in
Revenue
Canada
publications
such
as
Tax
Guides
and
Interpretation
Bulletins
are
“entitled
to
weight”
and
can
be
an
“important
factor”
in
the
process
of
proper
interpretation.
See
Harel
v.
The
Deputy
Minister
of
Revenue
of
the
Province
of
Québec,
[1978]
1
S.C.R.
851,
per
de
Grandpré,
J.
delivering
the
judgment
of
the
Supreme
Court
of
Canada
at
pages
858-9,
and
Nowegijick
v.
The
Queen,
[1983]
C.T.C.
20;
83
D.T.C.
5041,
per
Dickson,
J.
delivering
the
judgment
of
the
same
Court
at
page
5044.
No
such
doubt
exists
in
this
case
and
therefore,
I
do
not
regard
the
1980
Tax
Guide
as
germane.
I
am
satisfied
that
the
appellants
are
within
paragraph
15(1
)(c)
in
respect
of
their
1980
taxation
year
and
the
reassessments
by
the
respondent
are
correct.
The
appeals
are
dismissed.
Appeals
dismissed.
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