A J Frost:—The appeal herein is hereby dismissed in respect of the taxation years 1966, 1967 and 1968 for the same reasons as are set out in the Reasons for Judgment issued concurrently herewith in Frederick Dennis Beauchamp v MNR.
Appeal dismissed.
KINGSTON DEVELOPMENT COMPANY LIMITED, Appellant.
and
MINISTER OF NATIONAL REVENUE, Respondent.
Tax Appeal Board (R S W Fordham, QC), November 8, 1971.
ductible in 1969, accordingly. The Minister ruled that no allowable expense was involved and that, instead and at the most, a capital loss had been sustained. The present appeal has resulted.
As was stated by me at the conclusion of the argument by counsel, there are several grounds on which this proceeding must fail. To begin with, the so-termed loss was not incurred in the ordinary, or normal, course of appellant’s business. The entire set of circumstances arose solely through the getting into financial difficulties of the appellant’s controlling shareholder, the late Mary Gilmour. This happening was not such as was contemplated in the pursuit of the appellant’s business; it was purely what might be termed an internal matter, for want of a better word. Furthermore, if what resulted is to be styled a “loss”, as the asset through which it arose consisted of mortgages held by the appellant as security for, or in satisfaction of, indebtedness outstanding, the loss was mainly a capital one and therefore prohibited by paragraph 12(1)(a) of the Income Tax Act as a deduction from income. There is still another facet of this series of transactions that militates against the appellant’s stand. The so- called loss arose through an agreement made voluntarily between Mr Cartwright and the mortgagor mentioned and did not come about in any endeavour to earn income in the appellant’s business.
During the hearing, counsel for the appellant asked for and was granted leave to amend its notice of appeal by inserting the following as paragraph 4(a):
These mortgages were taken in the ordinary course of business dealings by the appellant, who subsequently accepted less than face-value in order to preserve the main asset of the company, which asset has since been sold and treated almost exclusively as income.
These submissions were taken into consideration in what is said in the preceding paragraph herein, except that I was not, and still am not, clear as to the significance of the words that I have put in italics, but do not think that these can have any bearing on the outcome hereof, in any event.
An interesting case that may be looked at, regarding the disallowance of expenditures claimed, is No 517 v MNR, 19 Tax ABC 356.
Following what was said by the Board on the completion of the hearing, the appeal will have to be dismissed and the relevant assessment left undisturbed.
Appeal dismissed.
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