The
Chairman
(orally:
September
18,
1973):—This
is
an
appeal
by
Souwesto
Broadcasters
Limited
against
a
reassessment
by
the
Minister
of
National
Revenue
with
respect
to
the
1970
taxation
year.
The
basis
of
the
reassessment
is
the
disallowance
of
the
appellant’s
claim
for
capital
cost
allowance
on
the
ground
that
the
Minister’s
decision
is
that
the
appellant
did
not
incur
any
capital
cost
for
the
depreciable
items
and
therefore
is
not
entitled
to
any
allowance
under
the
Income
Tax
Act
and
regulations
made
thereunder.
The
facts
are
very
brief.
The
evidence
is
short
and
was
given
by
Mr
John
Leigh
Moore,
who
is
the
president
and
general
manager
of
the
appellant
company.
Apparently,
according
to
Exhibit
A-1,
a
company
known
as
Rogers
Broadcasting
Limited
and
the
appellant,
Souwesto
Broadcasters
Limited,
were
both
broadcasting
on
the
frequency
of
680.
This
was
apparently
causing
some
difficulty
to
the
Rogers
programming
in
the
late
evening
in
the
areas
where
the
approved
patterns
of
the
two
stations
cross-hatched
or
overlapped.
In
1968
Rogers
approached
Souwesto
with
a
view
to
getting
it
to
change
its
frequency
from
680
to
1570.
Some
negotiations
transpired
and
I
think
Mr
Moore
indicated
that
at
one
time
the
appellant
had
opposed
the
change.
The
question
is
a
difficult
one
in
law,
as
is
evidenced
by
the
two
main
cases
on
the
point,
both
of
which
were
decided
by
Chief
Justice
Jackett
of
the
Federal
Court
of
Canada
when
he
was
President
of
the
Exchequer
Court
of
Canada.
The
first
of
these
is
Ottawa
Valley
Power
Company
v
MNR,
[1969]
2
Ex
CR
64;
[1969]
CTC
242;
69
DTC
5166,
and
the
other
is
The
D’Auteull
Lumber
Co
Ltd
v
MNR,
[1970]
Ex
CR
414;
[1970]
CTC
122;
70
DTC
6096.
On
the
face
of
it,
these
two
cases
would
appear
to
contradict
each
other,
and
unquestionably
the
learned
Chief
Justice
had
a
very
difficult
time
in
resolving
in
his
own
mind
the
correct
result
for
each
of
these
cases.
I
suppose,
therefore,
that
I
can
presume
that
a
lesser
mortal
such
as
myself
might
be
excused
for
failing
to
attain
the
absolute
ultimate
in
correctness
in
this
decision.
As
I
have
said,
the
facts
are
very
simple.
The
thrust
of
the
respondent’s
argument
is
that
there
is
no
evidence
of
any
value
to
what
the
appellant
gave
up
by
virtue
of
agreeing
to
this
change
of
frequency;
that
the
$353,133
spent
by
Rogers
on
the
appellant’s
behalf,
pursuant
to
the
agreement
filed
as
Exhibit
A-1,
was
not
money
spent
in
any
way
related
to
the
value
of
what
the
appellant
company
was
giving
up,
and
that
therefore
it
should
not
be
eligible
to
be
treated,
under
the
relevant
provisions
of
the
Income
Tax
Regulations,
as
a
capital
cost
for
capital
cost
allowance
purposes.
I
think
it
should
be
said
at
this
stage
that
the
two
parties
were
unquestionably
acting
at
arm’s
length.
The
appellant
company
had
a
coverage
of
some
1,500,000
potential
listeners
and,
by
the
change,
according
to
figures
issued
by
the
Dominion
Bureau
of
Statistics,
this
would
be
reduced
to
some
400,000.
According
to
Mr
Moore,
Souwesto
had
been
at
680
on
the
dial
for
over
20
years
and
its
BBM
rating
after
the
change
of
frequency
took
a
considerable
drop.
I
think
one
can
almost
take
judicial
notice
of
the
fact
that
radio
stations
spend
a
great
deal
of
their
time
trying
to
inform
the
public,
or
educate
the
public,
as
to
their
frequency
location,
and
this
is
obviously
because,
when
the
ratings
are
taken,
it
is
important
that
anyone
surveyed
should
know
the
correct
frequency.
So
I
think
there
is
a
definite
advantage
to
Rogers
and
a
monetary
loss
that
the
appellant
suffered
in
this
exchange,
which
is
related
to
the
broadcasting
frequency
alone.
The
operation
itself
was
not,
and
is
not,
for
sale,
and
it
was
purely
a
question
of
negotiations
between
the
parties
as
to
what
would
take
place.
In
his
evidence
Mr
Moore
was
quite
frank
and
quite
ready
to
admit
that
the
picture
was
not
all
black,
because
the
company
could
concentrate
on
running
a
smaller
operation,
thereby
reducing
its
operating
costs
and
perhaps
maintaining
what,
to
its
shareholders,
would
be
a
reasonable
return
on
their
investment.
But
the
station
could
not
operate
on
a
frequency
of
1570
without
a
new
transmitter
site,
and
anyone
connected
with
the
radio
field
knows
that
this
is
one
of
the
most
expensive
aspects,
if
not
the
most
expensive
aspect,
of
getting
a
station
into
operation.
The
agreement
(Exhibit
A-1)
sets
out
that
the
usual
application
must
be
made
to
the
Canadian
Radio
and
Television
Commission—
or
to
the
Board
of
Broadcast
Governors
(I
am
not
sure
which
it
was
in
1968)—and
that
Rogers
will
pay
such
costs.
It
also
provides
that
Rogers
shall
be
fully
responsible
for
all
of
the
costs
of
constructing
the
new
facilities
and
of
getting
them
approved,
and
may
discharge
such
liability
by
effecting
payment
directly
to
the
vendor
(the
appellant
company)—those
are
my
words—and/or
suppliers
or,
at
the
election
of
Rogers,
by
placing
Souwesto
in
funds
to
enable
it
to
effect
such
payments
partly
in
one
manner
and
partly
in
the
other.
To
accept
the
argument
of
the
Crown
would
be,
at
the
very
least,
to
completely
overlook
the
replacement
cost
of
the
existing
transmitting
site
that
the
appellant
was
then
using.
It
was
necessary
to
purchase
a
new
site,
in
fact
to
purchase
considerably
more
land
than
was
actually
needed,
and
to
construct
eight
towers
and
several
small
buildings
necessary
in
the
tuning
operations
of
the
radio
station.
Their
construction
was
undertaken,
completed,
and
paid
for
by
Rogers,
and
the
depreciation
thereon
is
the
subject
of
this
appeal.
I
have
stated
that
Chief
Justice
Jackett
had
difficulty
in
the
two
cases
I
have
mentioned,
both
of
which
were
appealed
to
the
Supreme
Court
of
Canada.
In
the
Ottawa
Valley
Power
case
(supra),
which
has
been
upheld
in
the
Supreme
Court
of
Canada
without
written
reasons
([1970]
CTC
305;
70
DTC
6223),
Jackett,
CJ
closes
on
a
note
that
he
is
still
not
satisfied
with
his
decision
and
affords
the
opportunity
for
written
argument.
In
the
D'Auteuil
case
(supra)
he
goes
to
great
lengths,
towards
the
end
of
his
reasons
for
judgment,
to
explain
to,
or
to
assist,
those
of
us
who
have
to
interpret
his
findings
in
the
two
judgments,
by
adding
a
reference
to
the
Ottawa
Valley
Power
case
and
saying,
at
page
29
[6100]:
...
There,
I
was
considering
a
case
where
the
consideration
given
for
the
“plant”
was
“entering
Into
the
low-priced
supply
contract”—a
consideration
very
difficult
to
put
a
value
on—and
what
I
am
sure
that
I
had
in
mind
is
that,
“prima
facie”,
the
value
of
the
consideration
is
equal
to
the
value
of
what
is
received
for
it,
so
that
where,
as
in
my
hypothetical
case,
what
was
received
can
easily
be
valued,
and
what
was
given
is
almost
impossible
to
value,
it
is
a
fair
statement
that
“prima
facie,
what
he
pays
for
the
plant
is
the
value
of
the
plant”.
Thus,
in
any
particular
case,
there
may
arise
a
question
as
to
what
evidence
Is
admissible.
Where
the
value
of
the
thing
given
for
the
capital
asset
in
question
can
be
determined
with
the
same
kind
of
effort
as
is
required
to
value
the
capital
asset
itself,
I
should
have
thought
that
the
Court
would
not
look
kindly
on
attempts
to
lead
evidence
as
to
the
value
of
the
capital
asset
in
lieu
of,
or
in
addition
to,
evidence
as
to
the
value
of
what
was
given
for
it.
In
this
case,
it
is
clear
to
me
that
what
was
given
for
the
right
to
use
this
frequency
had
a
value
far
in
excess
of
the
plant
itself,
and
that
the
parties
have
arrived,
by
their
own
means,
at
what
this
asset,
namely,
the
frequency
of
the
appellant
company,
is
worth.
Therefore
I
find
that
the
value
as
agreed
upon
by
the
parties
is
the
value
which
should
be
applied,
and
the
matter
should
be
referred
back
to
the
Minister
for
reassessment
accordingly.
The
appeal
is
therefore
allowed.
Appeal
allowed.