Timagami Financial Services Limited v. Her Majesty the Queen, [1981] CTC 76, 81 DTC 5064

Gibson, J:—This appeal relates to the 1975, 1976, and 1977 taxation years of Timagami.

Timagami sold to Hurontario Management Services Limited part of its assets by and pursuant to an Agreement between them dated April 30,1975 for $150,000 payable in instalments over 2-1/2 years. Paragraph 4 of their agreement prescribed the amounts and times of the purchase price in these words:

4. Hurontario agrees to pay to Timagami the sum of $20,000 upon the execution of this Agreement. The balance of the purchase price, namely, $130,000, together with interest at the rate of 10% per annum shall be payable in the following manner: the sum of $20,000 on account of principal, plus interest, shall become due and payable on the 1 st day of November, 1975; thereafter the sum of $20,000 on account of principal, plus interest, shall become due and payable on the 1st days of May and November in each of the years 1976 and 1977, and on the 1st day of May, 1978, and the balance of $10,000 together with accrued interest shall become due and payable on the 1st day of November, 1978. Hurontario shall have the privilege of paying the whole or any part of the amount owing to Timagami at any time or times without notice or bonus.

Of this sale price the parties agree $141,474 is attributable to goodwill sold and the balance to the other assets sold.

The position of the Minister in respect to this disposition of goodwill is as follows:

8. He submits that pursuant to subsection 14(1) of the Income Tax Act, upon the disposition of goodwill, the taxpayer was required to add to its income from the business for its 1975 taxation year the amount of $38,905, said amount having been computed as follows:

Sale price of goodwill sold in 1975	$141,474.00
Amount payable to taxpayer pursuant to subsection 21(1)
of the Income Tax Application Rules (55% of $141,474)	77,810.70
Eligible capital amount pursuant to subsection 14(1)
of the Income Tax Act (1/2 of $77,810.70)	38,905.00
Subsection 14(1) of the Income Tax Act reads:

(1) Where, as a result of a transaction occurring after 1971, an amount has become payable to a taxpayer in a taxation year in respect of a business carried on or formerly carried on by him and the consideration given by the taxpayer therefor was such that, if any payment had been made by the taxpayer after 1971 for that consideration, the payment would have been an eligible capital expenditure of the taxpayer in respect of the business, there shall be included in computing the taxpayer’s income for the year from the business the amount, if any, by which 1/2 of the amount so payable (which 1/2 is hereafter in this section referred to as an “eligible capital amount” in respect of the business) exceeds the taxpayer’s cumulative eligible capital in respect of the business immediately before the amount so payable became payable to the taxpayer.

The position of Timagami is that the words “an amount has become payable to taxpayer in a taxation year’’ in subsection 14(1) of the Act in respect to subject matter does not mean that the whole of the purchase price became payable in the sense of due and forthwith payable in the taxation year 1975 but instead at the times and in the amounts prescribed in the Said agreement which in fact were:

The submission is that the meaning of the word “payable” in subsection 14(1) of the Act is synonymous with “due”. Support for this is found in the definition of “due” and “payable” in the Shorter Oxford Dictionary and of “payable” in Jowitt’s Dictionary of English Law, second edition, as follows:

SHORTER OXFORD DICTIONARY

Due: ‘‘1. That is owing or payable, as a debt . .

Payable: “I. comm. Of a sum of money, a bill, etc: That is to be paid; due; falling due (usu at or on a specified date, or to a specified person).”

JOWITT’S DICTIONARY

Payable: “A sum of money is said to be payable when a person is under an obligation to pay it. “Payable” may therefore signify an obligation to pay at a future time, but when used without qualification “payable” means that the debt is payable at once, as opposed to “owing”.”

In my view the word “payable” in subsection 14(1) is synonymous with due, a present obligation to pay.

In view of this finding it is not necessary to consider the alternative submissions.

Accordingly the “eligible capital amount” for Timagami for the years 1975, 1976 and 1977 will have to be recomputed. In doing so the taxable income of Timagami in respect to the subject matter will be increased in 1976 and 1977 over that for which it is presently assessed. Counsel for Timagami agreed that if this meaning of “payable” in subsection 14(1) of the Act was determined to be correct that the Minister may assess it for the years 1976 and 1977 in accordance with this judgment.

The appeal is therefore allowed with costs and the matter referred back for reassessments for the taxation years 1975, 1976 and 1977 in a manner not inconsistent with these reasons.