DUMOULIN,
J.:—The
appellant,
Mr.
Ben
Lechter,
a
successful
Montreal
wholesale
jeweller,
appeals
from
the
decision
of
the
Minister
of
National
Revenue,
dated
October
16,
1962,
in
respect
of
the
income
tax
re-assessment
for
the
taxation
year
ended
December
31,
1956.
Apart
from
his
thriving
jewellery
trade,
the
appellant
has
invested
considerable
sums
in
real
estate
partnerships
or
as
a
leading
shareholder
of
Benaby
Realties
Co.
and,
as
presently,
in
his
own
private
name
and
capacity.
On
March
5,
1952,
Ben
Lechter
purchased
land
in
the
Parish
of
St.
Laurent,
district
of
Montreal,
known
and
designated
as
lot
507
on
the
official
plan
and
book
of
references
of
the
aforesaid
Parish.
The
total
area
thus
bought
was
approximately
2,800,000
sq.
ft.
and
the
price
thereof
$125,000
(cf.
exhibit
1).
This
property
was
allegedly
acquired
‘‘for
the
express
purpose
of
long
range
investment
through
extensive
development’’.
Conformably
to
these
intentions,
Mr.
Lechter
approached
Canadian
Aviation
Electronics
Limited
(hereinafter
abbreviated
to
CAE),
a
progressive
manufacturing
concern,
with
an
offer
to
erect
and
rent
a
building
suitable
to
all
the
company’s
requirements
(see
exhibits
7,
8,
9).
The
proposed
agreement
also
extended
to
CAH
an
‘‘option
to
purchase’’,
subsequently
accepted
as
stated
in
exhibit
9,
a
letter
from
K.
R.
Patrick,
President
of
CAE,
dated
October
5,
1953.
Lechter
submitted
several
tentative
plans
but,
for
some
undisclosed
reason,
the
rental
proposal
was
dropped
and
an
outright
purchase
substituted.
On
April
13,
1953,
appellant
sold
to
CAE
270,000
sq.
ft.
out
of
lot
507,
as
appears
on
plan
exhibit
12.
This
sale,
according
to
paragraph
6
of
the
Notice
of
Appeal,
was
expected
‘
1
to
bring
greater
prestige
to
the
balance
of
appellant’s
holdings
and
further
his
plans
for
extensive
building
thereon’’.
On
January
15,
1954,
Mr.
Lechter
received
a
letter
from
the
Department
of
Transport,
advising
him
that
a
portion
of
lot
507
had
been
expropriated
under
authority
of
the
Expropriation
Act
(R.S.C.
1952,
e.
106,
Section
9),
and,
accordingly,
that
title
thereto
vested
in
the
Crown
from
January
7,
1954
(cf.
Notice
of
Appeal,
para.
11,
and
exhibit
13).
A
few
months
later,
the
Department
of
Transport
realized
its
previous
expropriation
of
part
of
lot
507
was
insufficient
and,
by
the
intermediary
of
the
District
Land
Agent,
Mr.
Jean
Paul
Adam,
duly
authorized
in
virtue
of
a
power
of
attorney
from
Mr.
George
C.
Marler,
then
Minister
of
Transport
for
Canada
(exhibit
18),
informed
Lechter
that
additional
ground
would
be
taken
by
the
government.
As
a
matter
of
convenience
to
both
parties
and
to
avoid
a
second
expropriation,
Mr.
Lechter
agreed
to
sell
outright.
Exhibit
15,
a
registered
letter
dated
at
Montreal
July
13,
1954,
signed
J.
P.
Adam
and
addressed
to
Mr.
Ben
Lechter,
declares
that:
“Pursuant
to
the
expropriation
of
January
7th,
1954
affecting
part
of
lot
507
in
the
Parish
of
St.
Laurent,
we
are
now
authorized
to
make
you
a
formal
offer
of
settlement
in
the
amount
of
$318,776
in
full
compensation
for
the
area
expropriated,
that
part
of
lot
507
severed
by
reason
of
the
expropriation,
and
all
damages
arising
from
the
said
expropriation.
The
foregoing
is
all
without
prejudice
to
the
rights
of
the
Crown.
Would
you
kindly
advise
us
as
soon
as
possible
of
your
decision
with
respect
to
this
offer.’’
This
tender
was
accepted
in
lightning-quick
time
as
evidenced
in
exhibit
16,
a
registered
communication
of
July
14,
1954,
addressed
by
Ben
H.
Lechter
to
the
attention
of
Mr.
J.
P.
Adam
and
worded
thus:
‘‘In
reply
to
your
letter
of
the
13th
instant,
I
wish
to
notify
you
that
I
accept
your
formal
offer
of
settlement
in
the
amount
of
three
hundred
and
eighteen
thousand
seven
hundred
and
seventy-six
dollars
($318,776)
in
full
compensation
for
all
damages
arising
out
of
the
expropriation
of
January
7th,
1954
affecting
part
of
my
property
bearing
lot
No.
507
Parish
of
St.
Laurent.
In
view
of
the
expropriation
having
been
filed
six
months
ago,
I
would
appreciate
payment
within
the
next
sixty
days.”
This
parcel
of
land
sold
to
Her
Majesty
consisted
of
32.25
arpents.
Two
notarial
deeds
of
sale,
respectively
filed
as
exhibits
17
and
18,
executed
the
same
day,
May
13,
1955,
drawn
up
by
Emile
Massicotte,
notary
public
for
the
Province
of
Quebec,
relate
to
the
expropriation
of
January
7,
1954,
and
the
direct
purchase,
the
exact
date
of
which,
though
unspecified,
must
necessarily
be
set
no
later
than
the
first
days
of
July.
It
should
be
noted,
now,
that
the
outright
sale
attained
its
legal
validity
the
moment
it
was
definitely
agreed
upon
by
the
interested
parties,
in
keeping
with
art.
1472
of
the
Civil
Code
enacting
that
sale
‘‘is
perfected
by
the
consent
alone
of
the
parties,
although
the
things
sold
be
not
then
delivered
..
.”?
The
compensation
amount
paid
for
expropriation
was
$140,783
and
for
the
voluntary
sale
$177,993,
a
total
of
$318,776.
In
consequence
of
the
above
transactions,
a
plan,
exhibit
12,
drawn
by
Mr.
Pierre
Lapointe,
Quebec
Land
Surveyor
in
the
employ
of
the
Department
of
Transport,
shows
that,
as
of
September
1,
1954,
only
728,600
sq.
ft.
out
of
a
former
holding
of
2,800,000
sq.
ft.
were
still
owned
by
Ben
Lechter.
The
appellant
further
states
that
“in
the
taxation
year
1956,
[he]
also
was
forced
to
dispose
of
other
parcels
of
land
which
were
no
longer
suitable
for
the
purpose
of
investment
for
which
they
were
acquired’’.
Reverting
now
to
the
expropriation
and
ensuing
deals
of
1954,
the
appellant
“under
date
of
March
15,
1962,
received
a
notice
of
assessment
which
in
part
declares
that
an
amount
of
$109,406.55
and
a
further
amount
of
$125,100.36
were
land
profits
arising
out
of
the
said
lot
507”.
The
first
ground
of
appeal
relied
upon
by
Mr.
Lechter
is
that
the
profits
derived
from
the
expropriation
and
the
several
sales
previously
mentioned
were
enhancements
of
capital
investments.
With
this,
the
Court
can
hardly
agree
since
the
over-all
picture
of
the
case,
i.e.,
the
acquisition
of
lot
507
on
March
5,
1952,
the
initial
sale
to
CAE
in
December
of
that
year,
then,
omitting
for
the
time
being
the
expropriation,
the
1954
sale
to
the
respondent
and
subsequent
disposals
to
private
parties,
is
really
more
germane
than
alien
to
the
oft
stated
assessable
pursuit
included
in
Section
139(1)
(e)
of
our
Act
‘‘an
adventure
or
concern
in
the
nature
of
trade’’.
Mr.
Lechter
may,
so
he
testified,
have
entered
upon
this
deal
on
his
own,
without
any
company
affiliation
or
partnership
connections,
and,
nonetheless,
have
pursued
a
profit
making
scheme
which
the
law
renders
liable
to
income
taxation.
It
would
seem
purportless
to
quote
any
specific
precedent
because
most
would,
I
believe,
support
this
opinion,
and
all
of
these
might
also
offer
some
factual
differences.
The
jurisprudence
in
the
matter
unanimously
suggests
that
each
problem
be
viewed
in
the
light
of
its
own
specific
incidents.
Consequently,
I
probably
would
have
considered
the
appellant
as
engaged
in
a
profitmaking
scheme
or
venture
in
the
nature
of
trade
if
this
question
were
the
only
one
raised
in
the
instant
suit.
That
other
point,
a
decisive
one
herein,
consists
in
the
applicability
of
the
prescriptible
immunity
to
re-assessment,
obtained
by
taxpayers
at
the
expiry
of
the
statutory
period
declared
by
Section
46(4)
(a),
(b)
of
1954,
the
pertinent
year,
as
will
be
hereafter
shown.
This
provision
enacts
that:
“46.
(4)
The
Minister
may
at
any
time
assess
tax,
interest
or
penalties
and
may
(a)
at
any
time,
if
the
taxpayer
or
person
filing
the
return
has
made
any
misrepresentation
or
committed
any
fraud
in
filing
the
return
or
supplying
information
under
this
Act,
and
(b)
within
6
years
from
the
day
of
an
original
assessment
in
any
other
case,
re-assess
or
make
additional
assessments.
’’
Section
46(1),
albeit
first
in
numbering,
is
really
complementary
to
46(4)
;
it
reads:
“46.
(1)
The
Minister
shall,
with
all
due
despatch,
examine
each
return
of
income
and
assess
the
tax
for
the
taxation
year
and
the
interest
and
penalties,
if
any,
payable.’’
(Underlining
not
in
text.
)
Obviously,
the
issue
before
the
Court
calls
for
a
determination
of
the
period
constituting
the
true
‘‘taxation
year’’,
particularly
so
because
respondent
nowhere
alleges
‘‘misrepresentation
or
fraud’’,
vitiating
factors
which,
if
pleaded
and
proved,
relieve
the
Minister
from
all
limitations
as
to
time.
Paragraph
22
of
the
Notice
of
Appeal
invokes
this
defence
in
law,
when
it
argues
that:
“22.
Further,
the
assessment
with
respect
to
the
taxation
year
1956
was
made
in
March,
1962,
a
delay
which
is
completely
contrary
to
the
provisions
of
Section
46(1),
(supra)
of
the
Income
Tax
Act,
and
such
assessment
is
illegal
and
should
be
dismissed
on
such
grounds
alone.’’
A.
statutory
definition
is
in
order,
as
also
a
restatement
of
certain
dates
and
facts,
before
I
attempt
to
solve
this
objection.
To
start
with,
‘‘taxation
year’’
in
the
language
of
Section
139(2)
(b)
is
defined
in
these
terms:
“139.
(2)
For
the
purpose
of
this
Act,
a
‘taxation
year’
is
(a)
.
.
.
(b)
in
the
ease
of
an
individual,
a
calendar
year,
and
when
a
taxation
year
is
referred
to
by
reference
to
a
calendar
year
the
reference
is
to
the
taxation
year
or
years
coinciding
with,
or
ending
in,
that
year.”
(Italics
are
mine.)
Should
I
add
a
superfluous
reminder
that
‘‘calendar
year”
comprises
1
‘the
period
from
January
1
to
December
31
inclusive”.
(Black’s
Law
Dictionary,
4th
ed.)
The
approach
to
the
problem
resorted
to
by
the
respondent
in
para.
13
of
the
Reply
argues
that
:
“13.
.
.
.
in
assessing
the
appellant
for
the
taxation
year
1956,
he
(respondent)
relied
on
the
assumption
that:
(a)
the
Appellant
was
a
dealer
in
real
estate
;
(b)
the
land
purchased
formed
part
of
the
taxpayer’s
real
estate
inventory
or
stock-in-trade
;
(c)
the
profit
realized
on
sale
was
income
from
a
business
within
the
meaning
of
sections
3,
4
and
139(1)
(e)
of
the
Income
Tax
Act.’’
As
already
said,
no
allegation
whatsoever
of
misrepresentation
or
fraud
is
found
in
respondent’s
pleadings,
nor
was
anything
of
the
kind
hinted
at
during
the
trial,
which
would,
indeed,
have
seemed
a
belated
and
illegal
proceedings.
Misrepresentation
or
fraud
must
be
both
alleged
and
proved.
In
this
respect,
Cameron,
J.’s
pronouncement
in
M.N.R.
v.
Maurice
Taylor,
[1961]
Ex.
C.R.
318
at
319,
320,
322,
827;
[1961]
C.T.C.
211
will
afford
ample
justification.
Next
come
the
essential
dates
:
(a)
that
of
the
Notice
of
Expropriation
filed
in
the
office
of
the
Montreal
Registrar
of
Deeds
on
January
7,
1954;
exhibit
13.
(b)
the
‘‘formal
offer
of
settlement
in
the
amount
of
$318,776”
in
full
compensation
for
the
area
expropriated
and
that
bought
in
a
free
sale,
tendered
by
the
duly
authorized
agent
of
the
Minister
of
Transport;
exhibit
15.
(c)
the
acceptance
of
the
above
offer
by
Ben
H.
Lechter
on
July
14,
1954;
exhibit
16.
(d)
the
two
notarial
conveyances
of
May
13,
1955,
exhibits
17
and
18,
describing
topographically
the
parts
of
lot
507
expropriated
or
directly
sold
and
the
price
paid
therefor
but
nowise
constitutive
of
the
obligation
previously
incurred
by
the
Government
of
Canada.
(e)
an
extract
from
the
minutes
of
the
Treasury
Board
held
at
Ottawa
on
February
11,
1955,
authorizing
payment
of
$318,776
“to
Ben
H.
Lechter
in
full
and
final
settlement
of
all
claims
other
than
claims
of
the
Bell
Telephone
Company
of
Canada,
arising
out
of
the
expropriation
of
approximately
703,915
square
feet
of
land,
and
as
com-
pensation
for
the
purchase
of
approximately
1,186,620
square
feet
severed
by
the
expropriation,
all
located
in
Lot
507,
Parish
of
St.
Laurent,
Quebec”;
exhibit
F.
The
text
of
this
document
incontrovertibly
establishes
that
it
does
not
purport
to
create
a
debt
but
merely
acquits
one
11
arising
out
of
the
expropriation
.
.
.
and
as
compensation
for
the
purchase
.
.
.”
of
land.
In
the
notes
submitted
by
the
respondent,
the
latter’s
view
of
the
case
is
expressed
in
these
lines
:
‘“As
appears
from
the
balance
sheet
attached
to
the
Appellant’s
Return
for
the
year
1956,
the
Appellant’s
fiscal
period
ends
on
January
31st.
It
follows
that
any
income
received
or
receivable
by
the
Appellant
between
February
1st
1955
and
January
31st
1956
is
properly
assessable
in
the
taxation
year
1956.”
And,
again,
in
the
ensuing
paragraph
on
page
3
:
‘
Respondent
submits
that
the
approval
of
the
Treasury
Board
was
a
prerequisite
to
the
existence
of
a
binding
agreement
between
the
Crown
and
the
Appellant
and
that
prior
to
such
authority
being
granted
on
February
the
11th
1955,
there
was
no
legal
obligation
binding
on
the
Crown
to
pay
the
amount
in
question
.
.
.”
The
relevant
taxation
year
must
coincide
with
that
during
which
a
debt
or
an
obligation
to
pay,
legally
enforceable,
originated
between
respondent
and
appellant.
No
doubt
can
exist
regarding
the
expropriation
since
Section
9
of
the
Expropriation
Act
expressly
vests
in
Her
Majesty
the
Queen
all
land
expropriated
from
the
day
a
plan
and
description
are
deposited
of
record
in
the
Registration
office,
and
this
for-
mailty
was
duly
effected
on
January
7,
1954.
It
is
equally
assured
that
the
appropriation
by
private
sale
of
the
second
part
of
lot
507
must
have
occurred
during
the
intervening
period
up
to
July
13
and
14,
when
the
departmental
offer
of
payment
was
made
to
the
appellant
and
immediately
accepted
(cf.
exhibits
15
and
16).
The
voluntary
sale
of
1954
required
no
other
essential
element
than
the
mutual
consent
of
the
parties;
the
transmission
of
property
due
to
expropriation
intervened
by
the
sole
authority
of
the
law.
The
respondent
appears
to
confuse
two
completely
different
components
of
all
transactions:
the
creation
of
a.
debt
receivable
and
a
payment
ultimately
received.
In
Simon’s
Income
Tax,
2nd
ed.,
Vol.
IT,
153,
the
distinction
is
made
quite
clear.
I
quote
:
“Normally
an
item
becomes
a
trade
receipt
on
the
day
when
it
is
receivable
even
though
the
date
of
receipt
is
postponed.
Equally,
an
item
becomes
an
admissible
deduction
for
tax
purposes
on
the
date
on
which
it
becomes
a
debt
due
from
the
business,
irrespective
of
the
date
of
its
actual
payment.
Accordingly,
when
a
sale
is
made,
the
sale
price
has
to
be
brought
into
account
at
that
date,
and
it
will
form
part
of
the
total
of
the
sales
in
the
profit
and
loss
account
for
the
then
current
periods
;
and
that
will
be
so
even
if
the
sum
is
not
paid
to
the
trader
until
after
the
end
of
the
current
accounting
period.
The
fact
that
the
consideration
for
a
sale
is
other
than
money,
or
is
an
asset
not
immediately
realisable,
is
no
reason
for
excluding
it.
It
should
be
included
at
the
relevant
accounting
date
as
its
then
value.”
I
would
also
cite
Cameron,
J.’s
interpretation
of
Section
85(b)
of
the
Income
Tax
Act,
in
Wilson
and
Wilson
Ltd.
v.
M.N.R.,
[1960]
Ex.
C.R.
205
at
213;
[1960]
C.T.C.
1
at
10:
‘“The
proviso
in
the
paragraph
quoted
is
not
here
applicable.
The
all
important
word
‘receivable’
is
not
defined
in
the
Act,
but
after
a
most
careful
consideration
of
the
paragraph,
I
have
come
to
the
conclusion
that
in
both
places
where
that
word
is
used,
it
bears
the
ordinary
meaning
‘to
be
received’.
It
would
appear,
therefore,
that
in
enacting
this
subsection,
Parliament
has
extended
somewhat
the
ordinary
concept
of
‘
income
’
in
relation
to
a
business
in
which
property
is
sold
or
services
rendered
and
that
from
and
including
the
1953
taxation
year,
every
amount
to
be
received
in
respect
of
property
sold
or
services
rendered
in
the
course
of
the
business
in
the
year
shall
be
included
notwithstanding
that
the
amount
is
not
to
be
received
until
a
subsequent
year,
subject,
of
course,
to
the
proviso
and
to
the
provisions
of
paragraph
(d)
thereof
relating
to
the
deduction
of
a
reasonable
amount
as
a
reserve
in
some
cases.
The
paragraph
is
drawn
in
very
wide
terms
so
as
to
include
every
amount
so
receivable
and
such
amounts
are
to
be
brought
into
the
computation
of
income
for
the
year
in
which
the
property
was
sold
or
the
services
rendered.”
For
these
reasons,
I
hardly
hesitate
to
conclude
that
the
proper
taxation
year
of
these
transactions
could
be
none
other
than
1954,
the
calendar
year
of
their
inception.
Payment
may
have
been
delayed
until
a
later
period
but
remained
an
enforceable
obligation
from
the
moment
the
expropriation
and
sale
occurred.
The
Treasury
Board’s
authorization
for
payment
did
not
create
a
debt
but
merely
paid
a
pre-existing
one.
For
income
tax
purposes,
Ben
Lechter
was
admittedly
under
the
accrual
system,
his
fiscal
year
ending
on
January
31,
and
respondent
vainly
strove
to
derive
some
advantage
from
this.
The
Minister
mistakenly
transposed
in
taxation
year
1956
a
gain
accruing
in
1954,
which
I
will
regard
as
the
start
of
the
six
years’
delay
extended
to
re-assessment
operations.
My
understanding
of
the
expression
‘‘taxation
year’’
obtaining
in
Section
139(2),
leads
me
to
hold
that
the
revisionary
period
ended
on
December
31,
1960;
however,
should
the
respondent’s
contention
prevail,
which
would
then
extend
the
bar
to
January
31,
1955,
the
situation
would
continue
unchanged,
with
the
limitation
only
put
off
until
February
1,
1961.
Therefore,
the
department’s
notification
to
appellant,
dated
February
15,
1962,
falls
well
beyond
the
prohibitory
limit
of
six
years,
and
is
illegal.
CONSEQUENTLY,
the
appeal
is
allowed
and
respondent’s
reassessment
of
February
15,
1962,
annulled
and
set
aside.
The
appellant
will
be
entitled
to
recover
its
costs
after
taxation.
Judgment
accordingly.
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