A
J
Frost:—This
is
an
appeal
from
an
income
tax
assessment
in
respect
of
the
appellant’s
1967
taxation
year.
Upon
notice
of
objection
duly
signed
and
filed,
the
Minister
of
National
Revenue
reconsidered
the
assessment
and
confirmed
it
on
the
ground
that
net
commission
income
in
the
amount
of
$20,775.51
from
Great
Western
Garment
Co
Ltd
(hereinafter
referred
as
“GWG’’)
reported
as
income
by
G
J
Burns
Sales
Ltd
was
properly
included
in
computing
the
taxpayer’s
income
under
the
appropriate
provisions
of
the
Income
Tax
Act,
and
that
an
amount
of
$2,135.26
claimed
as
a
deduction
was
not
expended
by
the
taxpayer
for
the
purposes
of
earning
income
under
subsection
11(6)
of
the
said
Act.
The
appellant
was
a
manufacturer’s
agent
selling
different
lines
of
merchandise.
On
October
21,
1966
he
caused
to
be
incorporated
G
J
Burns
Sales
Ltd
(hereinafter
referred
to
as
“the
Company”).
The
Company
actively
carried
on
business
in
1967
maintaining
a
separate
office
and
employing
nine
persons
including
the
taxpayer.
According
to
the
testimony
of
Mr
Floyd
Nattras,
general
sales
manager
of
GWG,
Mr
Burns
was
advised
to
incorporate,
as
it
was
considered
desirable
from
a
financial
viewpoint
for
a
manufacturer’s
agent
operating
his
own
business
when
his
total
gross
annual
sales
exceeded
$1,000,000,
the
advantage
being
that
the
appellant
would
employ
his
own
staff
and
do
his
own
financing.
Mr
Nattras
testified
that
he
himself
had
over
100
persons
under
his
direct
control
as
general
sales
manager
and
that
the
Company
and
not
the
appellant
was
acting
as
sales
agent
for
GWG.
He
added
that
his
company
had
a
sales
turnover
of
over
$25,000,000
and
that
a
large
part
of
his
company’s
sales
were
generated
through
20
large
sales
offices,
about
one-half
of
which
were
incorporated
companies,
and
that
he
knew
that
the
Company
carried
lines
other
than
GWG’s
products
and
that
all
arrangements
with
salesmen
and/or
their
incorporated
companies
were
informal.
In
this
particular
case,
according
to
Mr
Nattras,
the
verbal
sales
arrangement
was
with
the
Company,
not
with
the
appellant
in
his
personal
capacity.
The
evidence
adduced
further
indicated
that
all
income
flowed
through
the
books
of
the
Company.
All
cheques
(mainly
commission
cheques)
were
deposited
and
all
disbursements
other
than
petty
cash
items
were
paid
by
cheque,
thus
giving
support
to
the
appellant’s
contention
that
the
Company
and
not
the
appellant
was
the
sales
agent.
In
respect
of
the
Stable
account
charged
to
promotional
expenses
in
the
sum
of
$2,135.26
and
added
back
to
the
income
of
the
appellant
on
the
ground
that
it
represented
personal
expenses,
the
Board
agrees
with
the
position
taken
by
the
respondent.
Although
there
may
well
be
some
causal
connection
between
the
boarding
and
training
of
horses,
riding
lessons
and
entrance
fees
for
riding
competitions
and
the
development
of
a
sales
promotion
program
to
encourage
the
sale
of
western
clothes,
the
fact
that
only
the
appellant’s
daughter
rode
the
horse
and
the
appellant
was
not
reimbursed
for
advertising
outlays
of
this
nature,
convinces
the
Board
that
the
said
item
was
a
personal
and
living
expense
and
cannot
be
deducted
under
paragraphs
12(1)(a)
and
(h)
of
the
Income
Tax
Act.
The
appeal
is
allowed
in
part
and
referred
back
to
the
Minister
for
reassessment
on
the
ground
that
the
net
commissions
earned
in
the
appellant’s
1967
taxation
year
were
earned
by
the
Company
as
sales
agent
for
GWG,
but
the
appeal
is
dismissed
in
respect
of
the
Stable
account
for
the
reasons
stated.
Appeal
allowed
in
part.
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