Axler & Palmer Limited v. Minister of National Revenue, [1973] CTC 2167

The Chairman (orally):—This is an appeal by Axler & Palmer Limited against the reassessment of the Minister of National Revenue for the taxation year 1969. The basis of the reassessment is that the appellant should be required to file on an accrual basis, whereas apparently for many years past the appellant has been filing on a cash basis. It is agreed between the parties that if the appellant is within the definition of a profession in paragraph 85F(1)(b) of the Income Tax Act, as it was in 1969, then the appeal must succeed unless, and this is not agreed by the appellant but it is asserted by the respondent, the appellant is precluded by virtue of subsection (2) of section 85F. The first issue then that I must determine is whether or not the appellant falls within the term of a profession in section 85F(1)(b) of the Act. There is no definition of a profession within the Income Tax Act.

Several cases have been cited to me and dictionary definitions have been provided by the appellant. As well, I have obtained my own dictionary definition. I refer for a moment to a brief historical reference to the use of the term “profession”. I think it is well established and one can almost take judicial notice that in the years prior to the Second World War the term “profession” was applied almost exclusively to the medical and legal professions. The term was jealously guarded by them and is in my belief still regarded by them as their true description and that they are the only true professions in existence in modern day society.

The respondent has cited to me a case decided by the former President of the Exchequer Court of Canada (as it then was), President Thorson, in which he was dealing with a case under the Excess Profits Tax Act and he held in that case that an optometrist who was also engaged in the filling of prescriptions for glasses failed to meet the qualification of professional within the meaning of the Act. I have indicated to counsel for the respondent in his argument, which I have perhaps interrupted on too many occasions, that I believe the decision of President Thorson in 1949 in Bower v MNR, [1949] CTC 77; 49 DTC 554, would have been accepted almost without question at that time. However, one can almost take judicial notice of the fact that over the past twenty-five years there has been an adoption of the term “professional” by many businesses or trades that formerly, if they had existed at all, would not have been allocated such a lofty position in the business world.

Of this, judicial notice I think could be taken, although it is not really necessary to do so. Counsel for the respondent has cited the case of Blackwell v MNR, [1949] CTC 362; 49 DTC 677, determined by the Exchequer Court, which even at that early date had the comment at page 367 [679] (again a decision of President Thorson):

Having regard to the facts of the present case, I have no hesitation in saying that even if all due allowance is made for the fact that the meaning of the word “profession” has been greatly enlarged so as to bring within its ambit occupations that were not previously regarded as professions, it would be a distortion of it to say that it extends to the activities of a commercial traveller.

SO even as early as 1949 President Thorson recognized that the term “profession” was being given a wider usage than had ever existed before.

The dictionary definition of the term in the Shorter Oxford Dictionary at page 1593, and I pick out only one or two phrases, describes “profession” as “a vocation in which a professed knowledge of some department of learning is used in its application to the affairs of others or in the practice of an art founded upon it. In wider sense, any calling or occupation by which a person habitually earns his living’. This definition is quite old, but I think is one that is applicable to the acceptance that the term now receives, not only from the general public, but from courts of law. Again, in Black’s Law Dictionary at page 1375, “profession” is described as “a vocation, calling, occupation or employment involving labour, skill, education, special knowledge and compensation or profit, but the labour and skill involved is predominantly mental or intellectual rather than physical or manual”. Cited for support of that proposition are American cases. There is a quotation further down the page which reads:

The term originally contemplated only theology, law, and medicine, but as applications of science and learning are extended to other departments of affairs, other vocations also receive the name, which implies professed attainments in special knowledge as distinguished from mere skill.

This again is a quotation from an American case. I think the definition of “profession” as it appears in these dictionaries and as the widening of the term is acknowledged as far back as 1949 by President Thorson, can safely be said to include a person engaged in a vocation or business or a body of persons engaged in an occupation or calling. In this case we have a limited company which is created by letters patent in the Province of Ontario and given the right to act as a real estate broker which by the terms of The Real Estate and Business Brokers Act of Ontario, RSO 1970, c 401, gives the broker the power to act for others for compensation or gain, and the evidence is that since its inception in 1956 the company has done nothing but act as a broker, although it did have the right to act in general insurance.

There has been filed as appellant’s Exhibit 2 an exclusive listing as one of the samples of the work it does. The Income Tax Act, in its definition section, includes corporate entities as well as individuals as “persons” within the meaning of the Act. Therefore, I am satisfied that the appellant Axler & Palmer Limited is, in fact, in a profession within the meaning of paragraph 85F(1)(b). In passing I would further comment, as I did during the course of the argument, that the legal profession, which has so jealously attempted to reserve to itself and a small group the term “profession”, is more than amply represented in the House of Commons and in the Parliament that drafted the legislation in question. They, in their wisdom, did not choose to define the term “profession” and therefore it is not for this Board or a court of law to seek any unusual meaning for the term, but to accept the ordinary everyday meaning that would be placed upon it by a layman reading an Act such as the Income Tax Act by which he is bound.

Having disposed of that part of the appellant’s case I am now faced with subsection (2) of section 85F of the Income Tax Act which states, and I quote:

(2) Subsection (1) does not apply for the purpose of computing the income of a taxpayer for a taxation year from a business carried on by him jointly with one or more other persons, unless each of the other persons by whom the business is jointly carried on has elected to have his income from the business for that year computed in accordance with the method authorized by that subsection.

We come back then to the purpose of section 85F which is to allow a special method of computing income to the farming community and those who are treated as professions. This election is whether or not they shall file on an accrual or cash basis. The appellant in this case has made an election and has filed on a cash basis for some time. In the year 1969 it is challenged, on the basis that it is not in a profession, and I have disposed of that portion of the objection. In subsection

(2) I take it to mean that the subsection allowing this election of the method of reporting tax only applies to a taxpayer who does not carry on business with another whose taxation year does not correspond with his. The only indication is that the appellant is a party to a syndicate that owns some real estate and that has or will eventually receive profits from that venture. To me that has nothing whatsoever to do with the words in subsection (2). In my view the business referred to is the business of a profession as it was carried on by Axler & Palmer Limited as an incorporated company and not in partnership or jointly with any other person. That it may have income from another source is, in my view, not sufficient to deprive it of the election contemplated by subsection 85F(1) of the Act. I would therefore allow the appeal in full and refer the matter back to the Minister for reassessment accordingly.

Appeal allowed.