Gibson,
J
(orally):—At
issue
is
the
character
of
the
payments
(namely
whether
on
capital
or
on
revenue
account)
of
$100,000
paid
by
the
appellant
to
Parlton
Drugs
Limited,
$2,100
paid
by
the
appellant
for
the
surrender
of
a
lease
of
premises,
and
$780.90
paid
by
the
appellant
for
legal
fees
in
connection
with
the
transactions,
in
execution
of
the
contract
dated
June
5,
1969,
Exhibit
2
in
this
appeal.
Having
carefully
considered
the
evidence
of
Philip
William
Goldman
as
to
the
nature
of
the
business
of
the
appellant,
its
method
of
carrying
on
business,
the
facts
of
the
subject
contracts
in
this
case,
and
generally
and
the
documentary
evidence,
the
conclusions
I
have
reached
on
the
facts
of
this
case
are
as
follows:
The
genesis
contract,
so
to
speak,
is
Exhibit
2
dated
June
5,
1969.
and
paragraphs
1
and
2
of
it
are
of
predominant
significance.
The
other
contracts
(Exhibits
3,
4
and
5)
are
contracts
in
implementation
of
Exhibit
2
or
ancillary
and
incidental
to
it.
The
making
of
franchise
agreements
was
the
method
by
which
the
appellant
earned
its
income.
The
appellant
in
executing
the
contracts
was
mainly
motivated
to
obtain
and
did
obtain
the
services
of
Gollom
and
Binder.
The
appellant
did
not
obtain
by
the
execution
of
these
contracts
any
asset
of
“enduring
benefit”
or
of
a
“permanent
character”
as
these
terms
are
employed
in
the
cases.
(See
for
principles
Canada
Starch
Company
Limited
v
MNR,
[1968]
CTC
466;
68
DTC
5320.)
The
fact
that
the
$100,000
was
directed
to
be
paid
to
Parlton
Drugs
Limited
is
irrelevant.
The
payment
of
$2,100
for
the
surrender
of
lease
was
incidental
and
ancillary
to
the
main
purpose
of
the
contracts.
All
the
contracts
must
be
read
together
and
considered
as
one
transaction
for
the
purpose
of
determining
their
legal
significance
for
tax
purposes.
The
payment
of
legal
fees
of
$780.90
is
dependent
for
its
characterizing
as
an
income
or
capital
payment
on
the
characterization
for
a
similar
purpose
of
the
whole
transaction.
As
a
consequence
the
deduction
of
these
three
said
sums
is
not
prohibited
by
paragraph
12(1)(b)
of
the
Income
Tax
Act,
and
there
is
no
question
in
this
case
that
the
outlay
of
these
sums
was
for
the
purpose
of
gaining
or
producing
income
from
the
business
of
the
appellant
within
paragraph
12(1)(a)
of
the
Act.
The
appeal
is
therefore
allowed
with
costs.
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