Delmer
E
Taylor
[TRANSLATION]:—This
appeal
was
heard
at
the
City
of
Montreal,
Quebec,
on
April
12,
1979,
and
was
filed
following
income
tax
assessments
for
the
years
1971,
1972,
1973
and
1974,
in
which
the
Minister
of
National
Revenue
disallowed
certain
of
the
expenses
the
appellant
claimed.
The
respondent
based
his
assessment,
inter
alia,
on
sections
3,18
and
20
of
the
Income
Tax
Act,
SC
1970-71-72,
c
63,
as
amended,
sections
23
and
26
of
the
Pharmacy
Act,
RSQ
1964,
c
255,
and
sections
17,19,
25,
27
and
31
of
the
Pharmacy
Act,
SQ
1973,
c
51.
Facts
The
appellant
is
a
company
of
which
the
principal
shareholder
is
Mr
Guy
Barrette,
a
pharmacist
who
is
a
member
of
the
Order
of
Pharmacists
of
Quebec.
The
expenses
claimed
were
the
fees
of
the
pharmacists
who
replaced
Mr
Barrette
in
his
absence.
These
fees
are
broken
down
as
follows:
|
1971
|
$2,870.00
|
|
1972
|
$7,546.20
|
|
1973
|
$3,595.00
|
|
1974
|
$4,899.31
|
Claims
The
appellant’s
position
is
the
following:
—
It
operates
a
pharmacy
in
the
City
of
Berthierville,
Province
of
Quebec,
under
the
name
Produits
Guy
Barrette
Inc;
—
It
used
the
services
of
a
specialized
agency
which
does
business
under
the
name
of
the
Association
professionelle
des
Pharmaciens
salariés
du
Québec
and
provides
various
pharmacies
with
staff
when
needed;
—
It
usually
made
out
a
negotiable
cheque
in
advance,
which
could
be
readily
converted
into
cash
to
pay
the
replacement
pharmacist
the
fees
owed
to
him
for
his
day’s
work.
The
respondent’s
position
is
the
following:
—
Under
the
above-mentioned
section
of
the
two
Pharmacy
Acts,
the
appellant
cannot
employ
pharmacists
to
operate
the
pharmacy.
—The
appellant
failed
to
demonstrate
that
it
had
actually
incurred
the
expenses
claimed
for
the
purpose
of
earning
income.
Testimony
Mr
Guy
Barrette
stated
that
for
tax
purposes,
he
operated
two
types
of
businesses
on
the
same
premises:
‘‘La
Pharmacie
Berthierville”,
which
required
the
services
of
a
pharmacist
to
fill
prescriptions;
and
the
appellant
company,
which
sold
all
the
other
pharmaceutical
products.
He
also
testified
that
the
records
to
support
the
specific
payments
which
had
been
challenged
had
been
destroyed
during
a
flood.
Representatives
of
the
Association
professionnelle
des
Pharmaciens
salariés
du
Québec
testified
that
other
pharmacists
replaced
Mr
Barrette
when
he
requested
it.
The
appellant’s
accountant
prepared
and
submitted
to
the
Board
summaries
of
the
fees
paid
to
pharmacists
(based
on
the
available
accounting
records)
which
indicated
that
payments
had
been
made
for
these
replacements.
He
also
described
the
internal
system
under
which
all
payments
(purchases
and
expenditures)
had
been
made
by
the
appellant
company
and
he
stated
that
at
the
end
of
the
year,
according
to
a
formula,
a
percentage
of
the
payments
was
deducted
from
the
income
of
the
pharmacy.
Included
in
this
percentage
were
the
services
of
the
replacement
pharmacists
because
they
filled
prescriptions
(for
the
pharmacy)
and
sold
the
other
related
products
(for
the
company).
Arguments
Counsel
for
the
appellant
made
a
considerable
effort
to
prove
that
even
if
the
law
did
not
allow
the
appellant
to
hire
a
pharmacist,
the
figures
for
income
and
expenditures
were
correct,
including
part
of
the
fees.
counsel
TOr
tine
respondent
stated
tnat
there
was
insufficient
evidence
that
the
payments
had
been
made,
and
even
if
they
had
been,
they
should
have
been
deducted
from
the
prescriptions
income
and
not
from
the
appellant’s
income.
Conclusions
Mr
Barrette’s
statement
to
the
effect
that
there
had
been
a
flood
is
acceptable,
and
the
evidence
shows
that
several
records
were
destroyed.
In
the
circumstances,
it
is
my
opinion
that
he
did
his
best
to
satisfy
the
Board
that
the
payments
had
been
made
and
that
his
accounting
system
correctly
deducted
the
expenditures
from
the
relevant
income.
I
do
not
consider
that
the
question
of
whether
the
pharmacy
was
or
could
have
been
operated
under
the
appellant’s
actual
name
has
any
significance
with
regard
to
tax.
Decision
The
appeal
is
allowed
with
respect
to
the
1971,
1972,
1973
and
1974
taxation
years,
and
the
matter
is
referred
back
to
the
respondent
for
reassessment
in
accordance
with
the
above
reasons
for
judgment.
Appeal
allowed.
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