W
O
Davis:—Andrew
Graham
Tulloch
has
appealed
from
an
assessment
to
income
tax
dated
July
18,
1969
in
respect
of
his
1964
taxation
year,
wherein
the
net
proceeds
from
the
sale
of
a
vessel
known
as
the
“Sea
Prince”
have
been
added
to
his
reported
income
for
the
year
and
additional
tax
levied
in
respect
thereof.
In
his
income
tax
return
for
the
said
year,
the
appellant
described
himself
as
engaged
in
the
fish
business
in
the
employ
of
North
Coast
Fisheries
Ltd,
a
T4
statement
of
remuneration
attached
to
his
income
tax
return
indicating
that
he
had
been
employed
with
that
firm
for
nine
months
of
the
year.
A
second
T4
slip
also
attached
indicates
that
he
was
employed
for
the
other
three
months
of
the
year
by
Tulloch-
Western
Fisheries
Limited
(hereinafter
referred
to
as
“Tulloch-Western”)
of
which
company
he
was
both
president
and
a
minority
shareholder,
that
company
having
gone
into
voluntary
liquidation
on
December
31,
1963.
He
was
also
an
officer
and
a
50%
shareholder
of
Crescent
Enterprises
Limited
(hereinafter
referred
to
as
“Crescent’’),
which
organization
had
leased
two
boats,
the
“Sea
Queen”
and
the
“Sea
Prince”
from
Pacific
Leasing
Corporation
and
chartered
them
to
Tulloch-Western,
the
latter
undertaking
to
pay
all
the
operating
expenses
of
the
two
vessels.
The
evidence
is
that
when
Tulloch-Western
went
into
voluntary
liquidation
on
December
31,
1963
its
receiver
was
obliged
to
turn
back
to
Pacific
Leasing
Corporation
(hereinafter
referred
to
as
“Pacific”)
the
two
boats,
“‘Sea
Prince”
and
“Sea
Queen”,
which
had
been
leased
for
a
term
of
sixty
months
under
an
agreement
with
Pacific
dated
December
15,
1959.
On
February
19,
1964
Pacific
entered
into
an
agreement
with
Crescent,
whereby
the
latter
company
agreed
to
purchase
the
“Sea
Prince”
from
Pacific
for
$37,000,
of
which
$1,000
was
paid
as
a
deposit
to
apply
on
account
of
the
purchase
price,
but
with
the
proviso
that
the
bill
of
sale
was
to
be
made
in
the
name
of
Crescent
or
its
nominée.
The
said
agreement
also
provided
for
Pacific
to
lease
the
“Sea
Queen”
and
certain
equipment
belonging
to
Pacific,
“the
rental
to
be
paid
.
.
.
to
be
the
same
as
would
have
been
paid
by
Tulloch-Western
under
its
Lease
dated
the
15th
day
of
December
1959”.
This
agreement
between
Pacific
and
Crescent
was
made
subject
to
Pacific
being
able
to
make
satisfactory
arrangements
with
the
Vancouver
Shipyard
Division
of
Vancouver
Tug
and
Barge
Co
Ltd
for
the
release
of
the
said
vessels
free
of
any
lien
or
encumbrance
by
that
company.
By
an
agreement
of
sale
dated
February
20,
1964
Pacific,
at
the
request
of
Crescent
and,
more
specifically,
on
the
instructions
of
the
appellant
Andrew
Tulloch,
transferred
the
“Sea
Prince”
to
a
company
known
as
Blaine
Myers
&
Co
Ltd
and
one
Norman
Sigmund
for
a
consideration
of
$40,000
and,
on
February
21,
1964,
entered
into
an
agreement
of
indemnity
whereby
Pacific
agreed
to
indemnify
the
purchasers
from
all
manner
of
actions,
suits,
claims
and
demands,
etc,
with
respect
to
any
liens,
encumbrances
or
other
charges
attaching
to
the
boat
“Sea
Prince”.
Of
the
$40,000
purchase
price,
the
purchasers’
solicitors
paid
$36,000
to
Pacific
and,
at
the
request
of
the
appellant
Andrew
Tulloch,
on
February
20,
1964,
issued
a
cheque
for
the
balance
of
$4,000
to
the
Main
&
Hastings
Branch
of
The
Royal
Bank
of
Canada
in
Vancouver,
which
amount
was
deposited
in
the
Manager’s
Account
at
that
bank.
A
covering
letter
accompanied
the
cheque,
worded
as
follows:
At
the
request
of
Mr
A
G
Tulloch
we
enclose
our
cheque
in
your
favour
in
the
sum
of
$4,000.00
on
behalf
of
our
client
Pacific
Leasing
Corporation
Limited
which
kindly
disburse
as
you
shall
be
directed
by
Mr
Tulloch.
The
evidence
was
that
on
the
day
following,
that
is,
on
February
21,
1964,
the
appellant
instructed
the
manager
of
that
branch
of
The
Royal
Bank
to
issue
a
cheque
for
$4,000
in
favour
of
the
appellant’s
wife
Mona
Tulloch,
which
cheque
was
deposited
on
February
24,
1964
to
the
credit
of
her
account
in
the
West
Vancouver
Branch
of
the
same
bank.
On
the
day
after
that
(February
25),
the
sale
of
the
boat
“Sea
Prince”
to
Blaine
Myers
and
Co
Ltd
was
closed,
but
not
before
the
appellant
had
intervened
and
demanded
that
he
be
paid
$3,000
by
Blaine
Myers
&
Company,
the
said
amount
to
be
over
and
above
the
$40,000
they
had
obligated
themselves
to
pay
Pacific
in
the
agreement
of
February
21,
1964.
Being
eager
to
complete
the
transaction
and
put
the
“Sea
Prince”
into
service
with
as
little
delay
as
possible,
Blaine
Myers
&
Co
Ltd
somewhat
reluctantly
issued
their
cheque
for
$3,000
to
the
appellant
personally
on
February
25,
1964.
This
cheque
was
cashed
by
the
appellant
at
the
Main
and
Hastings
Street
Branch
of
The
Royal
Bank
of
Canada
at
Vancouver
and
the
said
sum
of
$3,000
was
subsequently
deposited
to
Mona
Tulloch’s
account
at
the
West
Vancouver
Branch
of
the
said
bank.
From
the
appellant’s
evidence,
it
is
reasonable
to
conclude
that
he
personally
had
advanced
the
$1,000
deposit
paid
under
the
agreement
of
February
19,
1964,
whereby
the
“Sea
Prince”
was
sold
to
Crescent
by
Pacific
and
also
an
amount
of
$1,246.54
necessary
to
pay
off
certain
liens
and
claims
against
the
“Sea
Prince”
and
the
“Sea
Queen”
in
respect
of
unpaid
wages
and
other
unpaid
amounts
which
had
apparently
been
guaranteed
by
the
appellant
personally.
There
is
no
room
for
doubt
that,
in
the
course
of
these
several
agreements
to
buy
and
sell,
lease
and
indemnify,
the
appellant
did
receive
personally
the
two
payments
of
$4,000
and
$3,000
respectively.
What
disposition
he
made
of
those
funds
thereafter
is
somewhat
less
clear.
In
assessing
the
appellant,
the
Minister
of
National
Revenue
started
from
the
premise
that
the
appellant
had
received
this
$7,000
and
then
proceeded
to
make
allowance
for
the
disbursements
totalling
$2,246.54
which
the
appellant
appeared
to
have
made
in
connection
with
the
execution
of
the
said
agreements.
The
balance
of
$4,753.46
remaining
was
treated
by
the
Minister
as
unreported
income
of
the
appellant
in
the
form
of
net
commissions
which
the
appellant
had
succeeded
in
garnering
from
the
sale
of
the
“Sea
Prince”.
It
should
be
noted
here
that,
although
Crescent
was
the
party
that
had
agreed
to
purchase
the
“Sea
Prince”
under
the
agreement
of
February
19,
1964,
none
of
the
transactions
whereby
the
“Sea
Prince”
was
eventually
transferred
or
sold
to
Blaine
Myers
&
Co
Ltd
was
recorded
in
the
books
or
financial
records
of
Crescent.
From
a
consideration
of
all
the
evidence
adduced,
it
appears
well
established
that
the
two
payments
totalling
$7,000
which
the
appellant
received
from
Blaine
Myers
&
Co
Ltd
and
from
Pacific
were
in
the
nature
of
commissions
earned
by
the
appellant
in
the
course
of
an
adventure
in
the
nature
of
trade
and
that
the
net
proceeds
thereof
were
taxable
income
in
his
hands.
The
-appellant
has
failed
to
establish
any
error
on
the
part
of
the
Minister
in
assessing
him
as
he
did.
The
transactions
involved
were
so
arranged
as
to
create
a
complicated
network
of
dealings
and
it
was
not
unreasonable
in
the
circumstances
for
the
Minister
to
reach
the
conclusion
he
did.
The
appeal
is
therefore
dismissed.
Appeal
dismissed.