DUMOULIN,
J.:—This
is
an
appeal
from
a
decision
rendered,
August
19,
1959,
by
the
Minister
of
National
Revenue,
dismissing
appellant’s
Notice
of
Objection
to
a
re-assessment
of
its
1957
taxable
income,
which
had
thereby
been
raised
from
$105,055.19
to
$124,054.42.
This
increase,
according
to
Exhibit
4,
a
Notice
of
Assessment,
and
more
explicitly
to
subsections
(i)
and
(ii)
of
Section
8
in
respondent’s
Reply
to
Notice
of
Appeal,
was
brought
about
by
the
disallowance,
“8.
.
.
.
(i)
as
an
expense
the
sum
of
$1,987.99
claimed
in
respect
of
the
operation
of
the
said
Piper
Apache
aircraft,
and
(ii)
as
a
deduction
the
sum
of
$18,299.59
of
the
sum
of
$84,836.20
claimed
as
a
capital
cost
allowance.”
The
grounds
for
such
a
decision
were
outlined
in
subsections
(a)
and
(b)
of
the
same
Section
8,
and
would
be:
“8.
.
.
.
(a)
that
the
Piper
Apache
aircraft
was
not
acquired
by
the
Appellant
for
the
purpose
of
gaining
or
producing
income
from
its
business,
and
(b)
the
expenses
incurred
by
the
Appellant
in
operating
the
said
Piper
Apache
aircraft
were
not
outlays
or
expenses
incurred
by
the
Appellant
for
the
purpose
of
gaining
or
producing
income
from
its
business.”
The
framework
of
the
case
is
quite
simple.
Canim
Lake
Sawmills
Limited,
as
its
trade
name
denotes,
operates
a
saw
and
planing
mill
in
the
vicinity
of
100
Mile
House,
Cariboo
County,
a
vantage
point
of
British
Columbia’s
heavily
wooded
hinterland,
some
240
air
miles
from
Vancouver
City.
I
also
understand
this
firm
owns
an
assembly
yard
at
Exeter,
B.C.
The
company’s
industrial
and
financial
growth
since
its
corporate
inception,
in
1943,
and
more
so
from
1950
up
to
the
material
year,
1957,
may,
aptly
enough,
be
qualified
spectacular.
Exhibit
8
uniformly
traces
a
sustained
climb
towards
the
upper
commercial
brackets.
Totals,
out
of
this
document’s
last
row
of
figures,
show
that
the
sales
footage,
F.B.M.
of
4,945,925,
in
1950,
had
risen
to
29,283,811
feet
by
1957.
One
of
the
two
witnesses
heard,
Mr.
Rudolph
Jens,
Canim
Sawmills’
President,
General
Manager
and
half-owner
of
the
enterprise
with
his
brother,
Theodore
Jens,
lucidly
describes
its
extensive
and
steady
expansion.
I
could
do
no
better
than
quote
from
pages
22
and
23
of
the
official
transcript.
Page
22:
“I
am
Sales
Manager
of
Canim
Lake
Sawmills
Ltd.
and
in
the
year
1950
we
sold
some
5,000,000
board
feet
of
lumber.
In
my
capacity
as
Sales
Manager
I
made
numerous
trips
in
1950
to
Vancouver
to
dispose
of
the
production
of
Canim
Lake
Saw-
mills
Ltd.
In
1951
our
production
increased
to:
‘approximately
7,000,000
board
feet.
In
1952
it
again
increased
to
approximately,
11,000,000
feet.
In
1953
it
increased
to
some
16,000,000
feet
and
my
trips
to
Vancouver
at
this
time
were
becoming.
so
numerous
that
I
maintained
an
apartment
in
Vancouver
for
‘my
convenience
when
I
came
to
Vancouver
to
sell
this
production.”
Page
23:
“In
1954
we
shipped
approximately
18,000,000
feet.
In
1955
we
again
increased
our
production
to
approximately
24,000,000
feet
and
my
presence
in
Vancouver
to
handle
this
increased
production
was
becoming
so
necessary
that
as
a
company
we.
decided
to
establish
our
Sales
Manager
who
was
myself
in
‘Vancouver
to
look
after
the
sales
of
the
company’s
production.”
The
witness.
(page
23
of
transcript)
next
proceeds
to
mark
out
the
company’s
added
sources
of
supply
and
also
a
particular
aspect
of
its
industrial
activities;
he
says:
Now,
our
company’s
production
is
not
derived
from
one
sawmill
but
rather
from
30
sawmills
who
ship
their
production
to
our
assembly
yard
at
Exeter,
B.C.
.
.
.
In
order
to
keep
the
Sales
Manager
fully
conversant
with
the
production
and
the
production
capabilities
of
these
various
small
mills
it
was
decided
that
the
Sales
Manager
would
be
in
Vancouver
weekly
to
attend
to
sales
of
this
production
and
during
this
same
week
to
be
at
100
Mile
House
to
have
full
knowledge
of
the
production
capabilities
and
the
actual
production
of
these
various
mills.
This
was
necessary
in
order
to
obtain
the
most
premium
business
that
could
be
had
for
our
production.”
This
business
policy
proved
effective
as
evidenced
in
Mr.
Rudolph
J
ens’
own
words
reported
at
page
36:
.
.
.
We
discussed
this
with
MacMillan
&
Bloedel
[possibly
the
largest
lumber
concern
in
Canada,
with
Head
Office
at
Vancouver]
and
as
a
result
of
these
discussions
an
arrangement
was
arrived
at
between
the
two
companies
wherein
Canim
Lake
Sawmills
agreed
to
market
its
entire
production
through
MacMillan
&
Bloedel.
This
production
was
to
be
increased
to
approximately
3,000,000’
per
month.
MacMillan
&
Bloedel
in
turn
agreed
to
handle
this
production
for
a
flat
sum
of
$2
per
thousand
and
as
opposed
to
the
minimum
five
per
cent
commission
charge
which
was
the
practice
prior
to
this
agreement.”
To
this
‘exceptionally
favourable
rate
of
$2
per
thousand
feet
F.B.M.
marketed
through
MacMillan
&
Bloedel’s
contacts,
Mr.
Jens
credits
a
large
proportion
of
the
1957
‘‘
premium
business”
listed
on
Exhibit
11,
at
no
less
than
$66,250.
One
can
readily
conceive
that
supervising
the
weekly
output
of
30
sawmills,
spread
over
a
broad
extent
of
wooded
territory,
coupled
with
the
essential
obligation
of
ensuring
constant
selling
facilities
for
3,000,000
feet
of
lumber
each
month,
through
regular
business
trips
to
Vancouver,
a
distance
of
240
air
miles,
would
indeed
require
an
unwonted
degree
of
dispatch,
made
possible
by
a
recourse
to
the
speediest
modes
of
transport
available,
obviously
air
travel.
Consequently,
Canim
Sawmills
Ltd.
acquired,
in
1955,
its
first
plane,
a
‘‘Cessna
180’’,
and
another
in
1957,
a
twin-engined
“Piper
Apache”
craft,
the
latter
at
a
price
of
$44,189.50,
less
a
trade-in
allowance
of
$13,000
for
the
older
and
slower
‘‘
Cessna
180”
cf.
Ex.
9,
dated
July
15,
1957).
Due
to
the
manifold
calls
incumbent,
as
noted,
upon
the
sales
manager,
one
aeroplane
could
not
suffice.
On
July
2,
1957,
a
‘‘Cessna
182”
was
purchased,
costing
$17,076.75
(cf.
Ex.
A),
but
exclusively
detailed
to
a
special
purpose,
namely,
forestry
work,
which
the
witness
describes
thus
(transcript,
p.
31)
:
“.
.
.
in
1956
the
Forestry
Department
[of
British
Columbia]
came
out
with
a
regulation
that
said
all
timber
sales
would
in
future
have
to
be
accompanied
by
a
logging
plan
and
to
facilitate
the
making
of
these
logging
plans
we
used
an
aircraft
and
this
aircraft
has
to
be
of
a
particular
type,
a
high
wing
aircraft
and
slow
flying
aircraft,
a
very
manoeuvreable
aircraft
and
such
an
aircraft
is
the
182.”
Jens
also
unhesitatingly
corroborated
the
explanation
hereunder
vouchsafed
by
his
learned
counsel,
that
(transcript,
p.
30):
.
.
.
The
182
.
.
.
was
used
for
another
purpose
entirely,
not
for
the
purpose
of
the
trips
from
100
Mile
House
to
Vancouver
to
sell
the
production
of
these
mills
but
for
forestry
work
at
100
Mile
House
.
.
.”
In
order
to
sum
up
this
aspect
of
the
matter,
I
should
say
Mr.
J
ens
testified
his
company
obtained
six
(6)
additional
timber
sales
in
1956,
and
seven
(7)
others
in
1957,
thereby
extending
considerably
those
holdings
over
which
it
should
exercise
its
surveillance
as
a
legal
requirement.
We
already
know
that
the
appellant’s
claim,
in
its
1957
income
tax
return,
to
an
85%
capital
and
operating
costs
deduction,
in
relation
to
the
Piper
Apache
plane,
was
disallowed
under
the
pretext
that
such
expenditures
had
not
been
incurred
for
the
purpose
of
gaining
or
producing
income,
albeit
similar
deductions
were
granted
for
the
Cessna
180
in
1955
and
1956.
The
information
conveyed
in
the
preceding
pages
about
the
financial
achievements
of
Canim
Lake
Sawmills
surely
indicates
that
a
pursuit
of
this
nature,
to
flourish
as
it
did,
is
dependent
upon
both
managerial
skill
and
well
suited
material
devices.
Did
this
Piper
Apache
plane,
piloted
by
appellant’s
president
and
sales
manager,
afford
a
regular
and
practical
contribution
in
securing
vitally
important
contacts,
or,
in
statutory
wording,
did
it
concur
in
‘‘the
purpose
of
gaining
or
producing
income”!
A
comparable
question
could
arise
in
relation
to
a
country
doctor’s
automobile.
Let
us,
to
begin
with,
investigate
the
saving
in
man
hours
and
in
corresponding
terms
of
dollars,
consequent
upon
the
utilization
of
aerial
transport.
I
will
again
resort
to
Rudolph
Jens’
evidence,
citing
at
some
length
from
the
official
transcript
at
pages
33
and
34:
“A.
.
.
.1
have
had
occasion
to
look
at
the
logs
of
both
aircraft
[i.e.,
the
Cessna
180
and
Piper
Apache]
for
1955,
1956
and
1957.
We
purchased
the.
twin-engined
aircraft
[Apache]
in
1957,
in
August,
and
flew
it
until
December
of
that
same
year
I[cf.
Ex.
E].
In
1955
in
the
180
[Cessna]
we
were
able
to
make
22
trips
from
100
Mile
House
to
Vancouver
or
Vancouver
to
100
Mile
House
and
in
1956
we
were
able
to
make
19
such
trips.
In
1957
through
the
use
of
the
twin-engined
aircraft
[Apache],
we
were
able
to
make
33
such
trips,
this
at
a
time
when
the
same
number
of
trips
was
required
to
be
made
each
year
and
the
trips
that
were
not
made
by
plane
in
1955
and
1956
[previous
to
the
acquisition
of
the
Apache]
had
to
be
made
by
ear.
Q.
What
is
the
difference
in
the
time
involved
between
making
the
trip
by
car
and
making
it
by
air?
À.
The
use
of
a
motor
car
for
trips
in
question
would
take
approximately
one-third
of
our
working
year
on
the
road.
I
think
it
would
be
closer
to
two-fifths
of
our
working
year
on
the
road
driving
time
and
to
tie
up
the
services
of
an
executive
and
director
of
the
company
for
two-
fifths
ofr
the
working
year
did
not
seem
to
be
economic
as
far
as.the
Canim
Lake
Sawmills
Ltd.
was
concerned.?
Q.
And
your
salary
is
what?
;
y
A;
My
salary
1
is
$40,000
a
year,
sir.
Q.
And
two-fifths
of
that
would
be
6,
000
À.
That
i
1S
correct.
would
the
company
-,
:
,
-
Q.
That
would
be
the
cost
to
the
company
of
driving
if
you
did
it
by
automobile?
A.
By.
working
time
lost
that
is
the
cost.
Q.
And
what
proportion
of
your
yea
’s
time
would
be
taken
up
by
Aying
?
A.
The
proportion
of
the
time
lost
in.
using
an
aircraft
for
this
trip
would
be
18
working
days
per
year
out
of
the:
total
working
year
of
240_
days.
Q.
That
would
be
about
three-fortieths?
A.
Yes.
Q.
Or,
a
cost
to
the
company
for
your
time
of
about
$3,
0001,
A.
Yes.
~
These
figures
3
remained
uncontradicted,
thereby
substantiating
a
$13,000
economy
in
travelling
expenses,
a
result
which
assuredly
does
not
run
counter
to
any
notion
of
“producing
income’’,
However,
there
is
better
still,
as
a
glance
at
the
company
8
“Statement
of
Profit
and
Loss”
(Ex.
8)
will
prove.
Comparing
the
company’s
net
profits
for
the
years
1950
and
1957,
the
latter
a
poor
period
in
lumber
industry,
we
find
a
progression
from
$32,587.03
to
$64,026.52.
The
year
preceding,
1956,
attested
net
profit
gains
in
a
sum
of
$118,120.10.
Of
greater
significance,
I
presume,
in
respondent’s
appraisal,
three
columns
of
this
audit
sheet
(Ex.
8),
labelled
‘‘Provision
for
Income
Taxes’’,
read
as
follows
:
1950
:
$17,616.27
—
1956
:
$94,559.34
—
1957
:
$43,975.94.
«Even
this
last
figure,
although
somewhat
shrunk
through
cyclical
regression,
does
not
operate
as
an
anti-climax
to
‘‘the
purpose
of
gaining
or
producing
income
from
its
business”,
as
mentioned
in
Section
8,
subsection
(a)
of
the
Reply.
The
witness!
at
bar
wound
up
this
part
of
his
testimony
by
stating
that,
for
1957,
out
of
111
nights,
he
spent
43
at
100
Mile
House,
and
the
remainder
in
Vancouver
or
elsewhere.
It
could
go
without
saying
that,
since
his
people
reside
in
this
city,
he
naturally
took
his
abode
at
the
family
home.
Moreover,
Jens’
repeated
assertions
that
imperative
business
needs
urged
his
weekly
attendance
at
MacMillan
&
Bloedel’s
offices,
are
enhanced
by
the
fact
that
the
frequency
of
such
trips
persist
throughout
the
summer
months,
when
his
wife
and
children
are
absent
from
Vancouver,
vacationing
at
Qualicum.
The
learned
counsel
for
respondent,
in
cross-examination,
drew
the
witness’
attention
to
certain
replies
of
his
at
an
examination
for
discovery,
held
April
4,
1960.
I
now
refer
to
excerpts
of
this
evidence
as
read
in
Court,
viz.
questions
302-303-304-305
and
answers
thereto;
the
examining
lawyer,
Mr.
J.
G.
A.
Hutcheson,
Q.C.:
302
“Q.
Putting
the
matter
generally,
first,
without
getting
down
to
specific
flights,
I
notice
that
from
your
logs
there
is
a—running
throughout
it
is
local
flying
done
in
Vancouver?
A.
Yes.
303
Q.
Would
it
be
fair
or
right
to
assume
that
that
was
pleasure
flying?
A.
In
some
instances,
yes.
In
the
bulk
of.
it
it
would
probably
be
right
to
say
that.
304
Q.
Was
there
any
business
at
all
for
local
flying
in
Van-
couver
?
A.
Yes,
there
would
be
a
business
reason
for
local
flying
in
Vancouver.
305
Q.
What,
for
instance,
would
be
the
nature
of
a
business
reason
which
would
call
for
local
flights
in
Vancouver!
A.
Well,
there
could
be
a
check-out
of
the
aircraft,
for
one
thing
:
another
was
that
we
were
interested
in
timber
around
Pemberton
way.”
The
notion
conveyed
to
my
mind
by
the
expression
“pleasure
flying’’
pales
into
vagueness
after
reading
the
deponent’s
explanatory
commentaries.
To
be
sure,
engine
testing
flights,
perilous
chores
at
most
times;
the
aerial
inspection
of
timber
lands
around
Pemberton,
where
no
landing
facilities
exist,
are
hardly
reconcilable
with
idle
pleasure
cruising.
And
again,
the
frequency
of
such
flights
remained
unspecified.
I
cannot
attach
any
significance
to
what
assuredly
is,
in
the
light
of
unshaken
evidence,
an
inaccurate
expression.
Should
any
lingering
doubt
persist
as
to
the
compelling
nature
of
the
regular
business
attendance
in
Vancouver,
of
Canim’s
sales
manager,
the
second
and
last
witness,
Mr.
C.
Bruce
Campbell,
would
completely.
dispel
it.
At
the
material
time,
Campbell
was
one
of
MacMillan
&
Bloedel’s
lumber
buyers,
since
promoted
to
head
buyer.
He
has
checked
the
summary
of
appellant
company’s
export
shipments
for
1957,
as
expressed
in
Exhibit
11,
and
is
satisfied
with
its
accuracy.
Furthermore,
Mr.
Campbell
insists
upon
the
all-
important.
necessity
of
continued
personal
liaison
between
both
firms,
his
and
Canim
Sawmills
Ltd.,
so
as
to
ensure
a
satisfactory
expedition
of
their
heavy
industrial
commitments,
transacted
on
the
before-mentioned
premium
basis.
Business
of
such
magnitude,
says
the
witness,
never
could
be
secured
‘‘over
the
telephone”.
A
few
excerpts
of
his
evidence,
in
reply
to
quite
a
probing
cross-examination,
may
shed
conclusive
enlightenment
concerning
the
number
and
duration
of
those
business
conferences.
At
page
158
of
the
transcript
:
“Q.
How
often
or
how
frequently
would
Mr.
Jens
see
you
in
the
years,
take
first
1956
and
then
1957?
A.
Certainly
once
a
week
at
a
minimum.”
On
page
160:
“Q.
These
meetings
you
said
on
Monday,
how
long
would
they
last
or
take?
A.
It
varies—two
to
three
hours.
If
the
business
warrants
they
will
go
on
longer
and
will
be
more
frequent.
Q.
You
mean
more
frequent
on
the
Monday
?
A.
Or
Tuesday.
Q.
If
he
was
here?
A.
Well,
if
there
was
business
of
that
nature
he
would
be
here.’’
I
now
quote
from
pages
162
and
163;
Mr.
Hutcheson
is
pursuing
the
cross-examination:
“Q.
Am
I
right
in
assuming
.
.
.
that
practically
all
the
meetings
with
Mr.
Jens
were
on
the
Monday
or,
for
instance,
the
Tuesday?
A.
In
the
main
they
would
be
in
the
early
part
of
the
week.
However,
we
did
meet
on
other
occasions.
Q.
Well,
in
the
two
years
[i.
e.
.,
1956
and
1957]
I
have
spoken
of
were
there
any
meetings
which
you
recall
took
place
on
Saturday
?
A.
Yes.
Q.
What
number
would
that
be?
Was
it
a
frequent
thing
or
seldom?
A.
During
those
years,
it
was
fairly
frequent
that
we
met
on
a
Saturday.
Q.
That
would
be
by
his
being
in
and
calling
you
.
.
.
and
then
meeting
you
at
the
office,
would
that
be
it?
A.
No,
perhaps
we
would
meet
at
his
place
of
residence
to
discuss
the
matter.
Q.
They
were
not
merely
phone
conversations
?
A.
No.
Q.
If
you
considered
it
was
necessary
for
Mr.
Jens
to
come
down
to
Vancouver
other
than
on
a
week-end
.would
.
would
you
notify
him?
A.
Yes,
sir.
Q.
You
have
mentioned
the
mills
for
whom
you
act
as
the
elling
outlet,
.
.
.
Was
Canim
Lake
Sawmills
one
of
the
larger?
A.
Yes,
sir.
Q.
Was
it
the
largest?
A.
Yes.”
The
whole
problem,
I
repeat,
narrows
down
to
a
reversal,
in
1957,
of
the
respondent’s
erstwhile
practice
of
allowing
a
15%
operating
deduction
for
planes,
plus
a
second
one
annually,
equivalent
to
40%
of
their
capital
cost,
as
would
appear
from
Exhibit
4.
Strangely
enough,
the
underlying
explanation
of
this
‘‘new
departure’’
seems
to
be
none
other
but
the
purely
coincidental
presence
of
the
Rudolph
Jens
family
in
Vancouver,
and
the
far
from
startling
fact
that
appellant’s
president
incidentally
enjoys,
during
business
trips,
the
comforts
of
his
home.
It
goes
without
saying
that
this
grievance
is
not
proffered
in
so
flimsy
a
disguise,
and
that
an
attempt
was
made
to
clothe
it
in
the
more
decorous
raiment
of
legal
phraseology,
such
as
found
in
subsection
(1)
of
Section
11,
subsections
(l)(a)
and
(2)
of
Section
12
of
the
Income
Tax
Act,
and
also
subsection
(5)
of
Section
20.
In
the
instant
case,
the
governing
legal
proposition
is
the
oft
quoted
Section
12(1)
and
(l)(a),
reading:
Should
figures
appearing
in
Section
8,
subsections
(i)
and
(ii)
of
the
Reply
be
correct,
then
the
respective
deductions
hereabove
enjoined,
translated
in
monetary
exponents,
would
be,
in
the
first
instance
85%
of
$1,987.99,
ie,
$1,689.
79,
in
the
second,
5%.
of
$18,299.59,
viz.
$15,554.65*
Therefore
I
would
allow
the
appeal
with
costs,
set
aside
said
Notice
of
Assessment
for
the
taxation
year
1957,
dated
December
22,
1958,
and
direct
the
record
of
this
case
be
returned.
to
the
Minister
and
a
further
assessment
made
pursuant
to
the
findings
above.
Judgment
accordingly.
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