The
Assistant
Chairman:—This
is
an
appeal
of
Waldorf
Hotel
(1958)
Lid
from
a
reassessment
for
its
1968
taxation
year
by
which
the
Minister
reassessed
the
assets
of
the
Bell
Hotel
in
which
the
appellant
had
acquired
50%
interest
and
readjusted
accordingly
the
capital
cost
allowance
claimed
by
the
appellant
subsequent
to
the
purchase
of
the
Bell
Hotel.
It
was
agreed
that
the
evidence
adduced
in
the
appeal
of
the
Waldorf
Hotel
and
the
arguments
made
therein
would
apply
to
the
appeals
of
Mr
Sam
Shok,
Mr
Ben
Luffman
and
Mr
Benjamin
Stone
who
had
acquired
a
/s,
/4
and
/e
interest
respectively
in
the
Bell
Hotel
at
the
time
of
purchase.
The
point
to
be
determined
in
this
appeal
is
whether
the
reassessment
made
by
the
respondent
of
the
values
of
the
land,
the
building
and
the
contents
of
the
Bell
Hotel
and
the
inclusion
by
the
Minister
of
a
value
of
$96,000
for
goodwill
in
the
selling
price
of
the
hotel
are
well
founded.
The
Bell
Hotel
was
purchased
by
the
appellant,
in
effect,
for
$405,000
—
a
reduction
of
$10,000
on
the
original
selling
price
of
$415,000
having
been
subsequently
granted
to
the
appellant
by
the
vendor
for
current
repairs
and
maintenance
of
the
building.
In
the
offer
to
purchase
of
the
Bell
Hotel
(Exhibit
A-1)
was
included
a
breakdown
of
the
selling
price
which
fixed
the
values
as
follows:
land
$15,000,
contents
of
hotel
$90,000,
building
$310,000.
Taking
into
account
the
reduction
of
$10,000
on
the
original
selling
price
of
the
building
mentioned
above,
the
appellant
considered
the
value
of
the
building
to
be
$300,000.
The
pertinent
question
is
whether
the
breakdown
of
the
selling
price
of
the
Bell
Hotel
having
been
agreed
upon
by
the
parties
in
the
transaction,
and
included
in
the
agreement
of
sale,
the
respondent
could
legally
reassess
the
values
of
the
land,
the
contents
and
the
hotel
building
and
include
an
evaluation
for
goodwill
which
had
not
been
mentioned
by
the
parties
in
the
agreement
of
sale.
From
evidence
adduced,
the
negotiations
leading
to
the
sale
of
the
Bell
Hotel
were
at
arm’s
length
and
the
respondent
did
not
produce
any
evidence
of
sham
or
subterfuge
on
the
part
of
the
appellant
in
his
negotiations
on
the
purchase
price
or
the
breakdown
of
the
value
of
the
assets
of
the
Bell
Hotel.
The
respondent
submitted
that
pursuant
to
paragraph
20(6)(g)
of
the
Income
Tax
Act
it
was
unreasonable
to
consider
that
the
purchase
price
of
a
hotel
which
was
operating,
which
held
a
liquor
licence
and
had
outlets
for
the
sale
of
liquor,
did
not
include
an
amount
for
goodwill.
Although
paragraph
20(6)(g)
of
the
Income
Tax
Act
provides
that
the
Minister
can
make
necessary
adjustments
where
an
amount
can
reasonably
be
regarded
as
being
in
part
the
consideration
for
disposition
of
depreciable
property
and
part
for
something
else,
case
law
has
been
consistently
to
the
effect
that
unless
sham
or
subterfuge
in
a
given
transaction
is
proven,
the
terms
of
the
agreement
decided
upon
by
the
parties
is
final
and
decisive.
In
my
opinion,
the
appellant
has
established
that
the
purchase
price
and
the
breakdown
of
the
value
of
the
assets
of
the
Bell
Hotel
included
in
the
agreement
of
sale
were
the
result
of
hard
bargaining
between
the
parties
and
the
respondent
did
not
satisfy
the
onus
that
was
on
him
of
proving
the
existence
of
sham
or
subterfuge
on
the
part
of
the
appellant
in
these
negotiations.
I
conclude,
therefore,
that
the
agreement
signed
by
the
purchaser
and
vendor,
containing
the
breakdown
of
the
value
of
the
assets
of
the
Bell
Hotel
in
the
absence
of
any
evidence
of
sham
or
subterfuge,
is
decisive
and
binding
on
all
third
parties
and
that
the
respondent
is
not
justified
in
the
circumstances
in
reassessing
any
of
the
values
of
the
said
assets
formally
agreed
upon
by
the
parties
in
the
sale
of
the
Bell
Hotel.
The
appeal
is
therefore
allowed.
Appeal
allowed.
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