FOURNIER,
J.:—This
is
an
appeal
from
a
decision
of
the
Income
Tax
Appeal
Board,
dated
August
14,
1958
(20
Tax
A.B.C.
161),
allowing
in
part
the
respondent’s
appeal
from
an
assessment
for
its
taxation
year
1955
made
and
confirmed
by
the
Minister
of
National
Revenue
and
a
cross-appeal
by
the
respondent
from
that
part
of
the
decision
dismissing
the
respondent’s
appeal.
In
its
income
tax
return
for
1955
the
respondent
claimed
as
a
deduction
from
income
an
amount
of
$17,705
which
had
been
expended
for
the
purchase
and
the
installation
of
a
new
elevator
in
its
building
known
as
‘‘Bank
Street
Chambers’’
and
also
an
amount
of
$10,925
representing
expenditure
for
the
rebuilding
of
the
elevator
shaft
in
the
said
building
in
the
1955
taxation
year.
In
his
re-assessment
the
Minister
disallowed
the
two
amounts
as
deductions
and
re-assessed
accordingly.
The
respondent
objected,
but
the
re-assessment
was
confirmed
by
the
appellant.
The
respondent
appealed
to
the
Income
Tax
Appeal
Board,
which
allowed
the
appeal
in
part
and
referred
the
assessment
to
the
Minister
for
him
to
allow
as
a
deduction
the
amount
expended
for
the
new
elevator
and
to
disallow
the
expenditures
incurred
for
the
rebuilding
of
the
elevator
shaft,
and
other
works
connected
therewith,
because
they
were
capital
outlays.
It
is
from
that
decision
that
the
appellant
has
given
notice
of
appeal
and
the
respondent
notice
of
a
cross-appeal.
The
appellant
contends
that
the
expenses
for
the
purchase
and
the
installation
of
the
new
elevator,
as
well
as
the
expenditures
for
the
rebuilding
of
the
elevator
shaft
and
other
works
connected
therewith,
were
payments
on
account
of
capital
within
the
meaning
of
Section
12(1)(b)
of
the
Income
Tax
Act,
and
were
not
expenses
made
or
incurred
by
the
respondent
for
the
purpose
of
gaining
or
producing
income
from
a
business
or
property
within
the
meaning
of
Section
12(1)
(a)
of
the
Act.
On
the
other
hand,
the
respondent
submits
that
both
the
expenditures
for
the
new
elevator
and
the
rebuilding
of
the
elevator
shaft
and
other
works
were
made
to
earn
income
from
a
property
or
business
and
were
deductible
in
computing
taxable
income.
The
important
and
relevant
facts
established
before
the
Court
are
hereinafter
summarized.
The
respondent,
a
body
corporate,
is
resident
in
Canada
with
its
head
office
in
the
city
of
Ottawa.
It
is
the
owner
of
a
number
of
buildings
in
Ottawa
amongst
which
is
the
Bank
Street
Chambers,
a
store
and
office
building.
The
respondent
derives
revenue
from
the
renting
of
store
and
office
space
to
tenants
in
this
building.
It
purchased
this
property
in
1943
for
the
sum
of
$150,000.
The
construction
of
the
building
dates
back
to
1890.
About
forty
years
ago
a
manually
operated
elevator
was
installed
to
accommodate
the
tenants
of
the
upper
floors.
Since
its
installation
and
up
to
1955
it
was
maintained
in
a
good
state
of
repair.
Though
no
written
lease
was
filed
for
the
period,
at
the
trial
a
sample
copy
was
produced.
The
appellant
admitted
that
the
service
of
an
elevator
was
one
of
the
conditions
of
the
leases
between
the
respondent
and
its
tenants.
It
appears
that
no
complaints
were
made
by
the
tenants
as
to
the
service
given
and
that
they
were
satisfied
with
the
old
elevator.
The
respondent
was
fulfilling
his
obligation
towards
its
tenants
and
the
old
elevator
could
have
continued
to
be
operated
for
some
time.
But
in
1955
the
respondent
was
notified
in
writing
by
the
Ontario
Department
of
Labour
that
the
elevator
did
not
comply
with
the
law
and
regulations
of
the
Province
and
would
have
to
be
repaired
so
as
to
meet
the
requirements
of
the
statute
providing
for
the
licensing
and
regulating
of
elevators.
If
the
indicated
repairs
were
not
made,
the
elevator
would
be
condemned
and
the
tenants
barred
from
using
it.
After
obtaining
estimates
as
to
the
cost
of
the
repairs,
the
respondent
inquired
about
the
cost
of
a
new
elevator
which
would
conform
to
all
the
requirements
of
the
law.
Believing
the
cost
of
repairs
to
the
old
elevator
to
be
too
great
an
expenditure
to
be
made
on
an
old
elevator,
it
was
decided
to
purchase
and
install
a
new
elevator.
After
giving
a
contract
to
implement
this
decision,
the
respondent
was
informed
that
certain
regulations
of
the
city
of
Ottawa
dealing
with
the
installation
of
new
elevators
would
have
to
be
complied
with.
A
rebuilding
of
the
elevator
shaft
and
other
works
would
have
to
be
effected
to
receive
the
new
elevator.
Even
the
motor
would
have
to
be
moved
from
the
basement
to
a
penthouse
on
the
roof.
Though
the
cost
of
these
works
would
be
high,
the
respondent,
instead
of
proceeding
with
the
repairs
to
the
old
elevator
as
requested
by
the
authorities,
decided
to
have
a
new
elevator
installed.
The
cost
of
the
rebuilding
of
the
shaft
was
$10,925
and
that
of
the
new
elevator
$17,705,
or
a
total
of
$28,630.
So
the
question
to
be
answered
is
whether
the
amounts
of
$10,925
and
$17,705
which
were
claimed
by
the
respondent
as
a
deduction
in
computing
its
income
and
which
were
disallowed
by
the
appellant
come
within
the
ambit
of
Section
12(1)
(a)
or
Section
12(1)
(b).
These
sections
read
as
follows:
“12.
(1)
In
computing
income,
no
deduction
shall
be
made
in
respect
of
(a)
an
outlay
or
expense
except
to
the
extent
that
it
was
made
or
incurred
by
the
taxpayer
for
the
purpose
of
gaining
or
producing
income
from
property
or
a
business
of
the
taxpayer,
(b)
an
outlay,
loss
or
replacement
of
capital,
a
payment
on
account
of
capital
or
an
allowance
in
respect
of
depreciation,
obsolescence
or
depletion
except
as
expressly
permitted
by
this
part,
.
.
.”
To
answer
the
question,
it
is
necessary
to
read
alternately
one
provision
after
the
other
to
determine
if
the
facts
of
the
case
meet
the
tests
required
to
allow
the
amounts
involved
to
be
deducted
in
computing
income.
Section
12(1)
expresses
the
general
rule
that
in
computing
income
no
deduction
shall
be
made
in
respect
of
a
revenue
outlay
or
expense,
nor
of
a
capital
expenditure.
But
exceptions
are
provided
for
in
the
two
subsections.
In
Section
12(1)
(a)
there
is
an
exception
for
expenses
made
or
incurred
for
the
gaining
or
producing
income;
in
Section
12(1)
(b)
there
are
exemptions
when
they
are
expressly
permitted
by
the
Act.
In
most
cases,
one
meets
the
difficulty
that
outlays
or
expenses
under
the
two
subsections
may
have
the
result
of
gaining
or
producing
income.
Certain
rules
have
been
devised
to
indicate
that
an
expense
is
of
a
revenue
nature
or
of
a
capital
nature.
Though
a
taxation
provision
in
principle
should
be
in
expressed
words,
under
our
fiscal
law
taxes
are
imposed
through
general
principles
and
not
by
enumerating
everything
that
should
be
considered
as
income.
So
various
tests
have
been
devised
to
be
applied
to
certain
sets
of
facts
to
determine
if
they
come
within
the
ambit
of
the
general
principle.
A
short
review
of
the
tests
applicable
to
the
facts
of
this
case
is
necessary
to
determine
the
present
dispute,
because
I
believe
no
one
test
is
sufficient
to
arrive
at
a
proper
decision.
The
first
test
which
came
to
my
mind,
after
considering
the
facts
adduced
in
evidence,
was
whether
the
expenditure
for
a
practically
new
elevator
shaft
with
necessary
adjuncts
and
the
purchase
and
installation
of
a
new
elevator
were
recurrent
outlays
chargeable
against
the
respondent’s
current
expenses
for
the
operation
of
his
business
or
not.
I
believe
the
answer
should
be
in
the
negative
in
this
case
for
the
following
reasons.
In
1955,
the
respondent’s
property,
the
“Bank
Street
Chambers”,
was
an
old
building
with
an
old
elevator.
Both
the
building
and
the
elevator
had
been
repaired
and
maintained
for
amounts
commensurate
to
the
value
of
the
property
and
the
income
derived
therefrom.
The
maintenance
and
repair
costs
were
charged
in
the
respondent’s
current
expenses
and
allowed
in
computing
its
income.
This
had
been
going
on
for
years.
The
tenants
entitled
to
elevator
service
did
not
complain
and
I
assume
that
they
were
satisfied.
This
could
have
continued
for
how
long,
nobody
knows.
One
thing
is
certain,
the
building
and
property
continued
to
produce
a
stable
amount
of
income.
But
in
1955
the
respondent
was
advised
by
the
authorities
that
extensive
repairs
to
the
old
elevator
were
needed
to
comply
with
the
laws
and
regulations
of
the
Province
of
Ontario
relating
to
elevators.
After
due
consideration,
the
respondent
decided
to
install
a
new
elevator
rather
than
repair
the
old
one.
After
having
taken
this
decision,
the
respondent
was
informed
that,
in
order
to
comply
with
the
city
of
Ottawa
regulations
dealing
with
the
installation
of
new
elevators,
the
elevator
shaft
would
have
to
be
practically
renewed.
Even
at
that,
it
was
decided
that
the
elevator
shaft
would
be
rebuilt
and
the
new
elevator
installed.
The
repairing
of
the
old
elevator
would
have
been
sufficient
to
comply
with
the
provincial
law
and
regulations.
I
do
not
believe
this
was
a
recurrent
expenditure
chargeable
to
operation
expense
account
or
made
or
incurred
to
produce
income,
but
rather
to
comply
with
provincial
regulations
dealing
with
elevators.
Without
the
above
interventions,
the
old
elevator
would
have
continued
to
fulfil
its
function
perhaps
for
the
lifetime
of
the
old
building.
This
brings
me
to
the
next
test,
which
is
whether
the
expense
was
made
to
yield
an
enduring
benefit
or
made
once
and
for
a
very
long
period.
There
is
no
doubt
that
the
rebuilding
of
the
shaft
and
the
installation
of
a
new
elevator
were
made
to
replace
equipment
which
could
still
be
used.
The
life
of
the
new
work
was
estimated
to
be
at
least
forty
years.
So
the
outlay
for
the
new
equipment
would
not
be
repeated
annually
or
gradually
or
for
a
short
period.
The
object
of
the
expenditure
was
to
continue
in
existence
and
usefulness
over
a
period
of
four
of
five
decades,
as
stated
in
evidence
and
admitted
in
the
respondent’s
defence.
Not
only
did
the
respondent
incur
the
expense
claimed
as
a
deduction
on
account
of
certain
regulations,
but
it
seems
to
me
that
it
undertook
the
replacement
of
the
old
elevator
instead
of
having
it
repaired,
because
it
was
expected,
and
rightly
so,
that
expense
would
be
made
once
and
for
all.
The
expenditure
was
not
made
to
cover
the
wear
and
tear
of
the
old
elevator.
This
could
have
been
done
for
much
less.
The
facts
lead
me
to
think
that
the
outlays
were
made
to
create
a
new
asset
and
to
produce
an
enduring
benefit
to
the
respondent’s
business.
It
was
a
new
means
of
transportation
in
the
respondent’s
building
and
pro-
vided
something
which
could
have
been
given
by
the
use
of
the
old
elevator
if
repaired,
but
perhaps
not
as
efficiently
or
for
all
time.
There
is
no
evidence
that
the
replacement
of
the
old
elevator
by
a
new
one
was
necessary
to
the
earning
of
income
in
the
operation
of
the
respondent’s
business
or
to
fulfil
its
obligation
towards
its
tenants.
In
my
view
it
was
replacement
of
capital.
In
the
case
of
British
Insulated
&
Helsby
Cables
Ltd.
v.
Atherton,
[1926]
A.C.
205,
Lord
Cave,
dealing
with
the
question
of
what
would
constitute
a
capital
expenditure,
says
(p.
213,
in
fine)
:
"But
when
an
expenditure
is
made,
not
only
once
and
for
all,
but
with
a
view
to
bringing
into
existence
an
asset
or
an
advantage
for
the
enduring
benefit
of
a
trade,
I
think
that
there
is
very
good
reason
(in
the
absence
of
special
circumstances
leading
to
an
opposite
conclusion)
for
treating
such
an
expenditure
as
properly
attributable
not
to
revenue
but
to
capital.
.
.
.”?
In
my
view,
this
test
applies
to
the
facts
here
and
justifies
the
conclusion
that
the
outlays
were
attributable
to
capital
and
not
revenue.
The
expense
was
made
not
only
once
and
for
all
and
to
comply
with
certain
regulations,
but
also
to
bring
into
existence
an
asset
or
an
advantage
for
the
enduring
benefit
of
the
business.
Counsel
for
respondent
urged
that
the
facts
in
this
case
could
meet
the
test
laid
down
by
the
Lord
President
in
Samuel
Jones
Co.
(Devondale)
Ltd.
v.
C.I.R.,
32
T.C.
513,
wherein
a
chimney
of
a
factory
was
replaced
because
it
was
in
a
dangerous
condition.
The
cost
to
do
so
was
claimed
as
a
deduction,
which
was
disallowed.
On
appeal,
the
Court
held
‘that
the
whole
cost
of
replacing
the
chimney
was
an
admissible
deduction’’.
The
Lord
President
(Cooper)
at
p.
518
said:
66
It
is
doubtless
an
indispensable
part
of
the
factory,
doubtless
an
integral
part;
but
none
the
less
a
subsidiary
part,
and
one
of
many
subsidiary
parts,
of
a
single
industrial
profitearning
undertaking.
So
viewing
the
matter
I
am
unable
to
see
why
the
expenses
incurred
in
relation
to
this
transaction
should
not
be
treated
as
an
admissible
revenue
expenditure
on
repairs,
.
.
.”?
One
of
the
reasons
given
by
the
Lord
President
for
treating
the
expenditure
as
a
revenue
expense
is
expressed
thus:
C
and
I
am
in
part
influenced
in
reaching
that
conclusion
by
the
fact
that
the
factory
as
a
whole
is
insured
for
something
in
the
region
of
£165,000
whereas
the
expense
incurred
in
taking
down
the
old
chimney
and
building
a
substitute
is
only
a
matter
of
£4,300
or
about
2
per
cent.
.
.
.”
The
facts
in
the
present
instance
may
be
distinguished
from
those
in
the
above
ease.
Taking
for
granted
that
the
new
elevator
is
a
subsidiary
part
of
the
building,
capital
cost
allowances
are
made
at
an
annual
rate
of
five
per
cent
on
the
two
items
of
expenditure
amounting
to
$28,630.
In
the
Jones
case,
the
expenditure
for
the
chimney
was
one
to
restore
property
on
which
there
was
no
allowance
for
depreciation.
The
chimney
had
become
so
dangerous
that
it
had
to
be
replaced.
The
elevator,
after
having
been
repaired,
would
have
met
the
requirements
of
the
law
and
regulations.
I
understand
the
condition
of
the
chimney
was
such
that
it
could
not
be
used
for
the
purpose
for
which
it
was
built.
The
old
elevator,
once
repaired,
could
have
fulfilled
its
function.
The
cost
of
the
chimney
was
only
two
per
cent
of
the
amount
for
which
the
factory
was
insured.
The
shaft
and
the
new
elevator
cost
$28,630
or
eighteen
per
cent
of
the
amount
for
which
the
building
was
insured,
to
wit
$150,000.
True,
after
the
new
elevator
was
installed,
the
insurance
was
raised
to
$180,000,
but
the
secretary
of
the
respondent
said
that
according
to
the
insurance
people
the
former
amount
was
not
sufficient.
So,
in
the
Jones
case
the
Court
was
influenced
by
the
insignificance
of
the
expenditure
as
compared
to
the
amount
of
the
insurance
on
the
building.
In
this
case,
I
am
impressed
by
the
magnitude
of
the
expenditure
as
compared
to
the
amount
for
which
the
whole
building
was
insured,
especially
when
the
evidence
is
to
the
effect
that
the
expense
for
the
maintenance
and
repair
of
the
old
elevator
was
in
the
neighbourhood
of
$500
per
year.
The
size
of
the
expenditure
is
of
assistance
in
determining
the
nature
of
the
outlay.
The
building
in
question
was
purchased
in
1948
for
a
sum
of
$150,000.
The
respondent’s
auditors
in
preparing
its
financial
statements
for
income
tax
returns
apportioned
the
value
of
the
property
as
being
$96,525
for
the
land
and
$56,299.97
for
the
building.
Since
then,
every
year
a
depreciation
allowance
at
the
rate
of
five
per
cent
has
been
allowed
on
the
building.
During
those
same
years,
except
for
1955,
the
costs
of
the
repairs
to
the
building
were
never
in
excess
of
$3,000
and
the
maintenance
costs
to
the
elevator
in
the
order
of
$500
or
less
each
year.
But
in
1955
the
cost
of
rebuilding
the
shaft
and
the
installation
of
a
new
elevator
amounted
to
$28,630.
A
witness
heard
on
behalf
of
the
respondent
as
an
expert
in
appraisal
matters
and
property
management
stated
that
he
knew
the
building
but
had
not
examined
it
thoroughly
in
1955
from
an
appraisal
point
of
view
and
was
not
prepared
to
express
an
opinion
as
to
its
value
at
that
time.
Only
the
secretary
of
the
company
gave
evidence
on
that
point
and
he
believed
that
its
value
was
between
$225,000
and
$250,000.
Though
he
had
some
experience
in
the
cost
of
buildings,
he
did
not
impress
me
as
an
expert
in
appraisals
of
properties.
So
the
evidence
as
to
the
value
of
the
building
in
1955,
to
my
mind,
was
not
satisfactory
or
conclusive.
As
to
the
rental
value,
it
is
understood
that
it
was
$44,075.
The
book
value
of
the
building
as
appears
in
the
respondent’s
income
return
for
the
year
1955
is
$38,696.40.
I
am
sure
the
book
value
was
not
the
market
value
of
the
building,
but
having
no
satisfactory
evidence
on
that
point
it
is
most
difficult
to
compare
the
cost
of
the
new
installation
with
the
real
value
of
the
whole
building.
I
do
know
that
the
normal
repair
expenses
for
a
building
of
that
type
would
be
between
five
per
cent
to
seven
per
cent
of
the
gross
revenue.
The
gross
rentals
being
$44,075,
the
amount
that
should
be
spent
on
the
building
would
be
from
$2,000
to
$3,000
per
year.
This
was
what
was
spent
before
1955.
During
that
year,
the
repair
outlays
were
those
claimed
by
the
respondent
as
a
deduction.
The
sum
expenses
was
out
of
line
with
the
amounts
spent
in
former
years
and
cannot
be
justified
as
spent
for
an
accumulation
of
repairs,
because
it
is
far
larger
than
the
amount
required
to
repair
the
elevator
so
that
it
would
conform
to
the
law
and
the
regulations.
The
only
reasonable
conclusion
is
that
the
expenditure
was
to
bring
into
existence
an
advantage
which
would
be
of
a
continuous
and
permanent
nature.
As
to
the
magnitude
of
the
expenditure
in
relation
to
the
value
of
the
building,
the
only
comparison
that
can
be
made
would
of
necessity
be
based
on
the
amount
for
which
the
building
was
insured,
namely
$150,000,
and
five
per
cent
of
this
sum,
viz.
$7,500.
In
this
case
the
expenditure
was
incurred
for
a
new
elevator
and
shaft
and
amounted
to
more
than
$28,000
or
approximately
eighteen
per
cent
of
the
amount
of
the
insurance.
It
cannot
be
said
in
this
case
that
the
money
value
of
the
renewal
and
replacement
of
the
old
elevator
by
a
new
elevator
and
shaft
was
insignificant
in
relation
to
the
value
of
the
building
or
the
income
derived
from
its
rental.
The
tests
I
have
applied
in
this
matter
were
discussed
by
Cameron,
J.,
in
the
case
of
Thomson
Construction
Company
v.
M.N.R.,
[1957]
Ex.
C.R.
97;
[1957]
C.T.C.
155.
The
appellant,
a
road
building
contractor,
in
1949
purchased
a
used
power
shovel
powered
by
a
diesel
engine
for
$27,075.
Up
to
the
end
of
the
year
1952,
the
shovel
was
treated
by
both
parties
as
a
depreciable
asset
and
under
regulations
authorized
by
Section
11(1)
(a)
of
the
Income
Tax
Act
the
annual
capital
cost
allowance
claimed
and
allowed
had
for
depreciation
purposes
reduced
the
shovel’s
book
value
to
$9,268.
In
1953,
the
engine,
in
need
of
major
repairs,
was
replaced
by
a
new
one
at
a
cost
of
$8,894
less
$3,200,
the
trade-in
value
of
the
old
engine,
or
a
net
cost
of
$6,000.
The
appellant
in
its
income
tax
return
for
that
year
deducted
the
latter
amount
as
an
outlay
for
the
purpose
of
gaining
income
from
its
business.
The
Minister
disallowed
the
amount.
On
appeal
before
the
Income
Tax
Appeal
board,
the
appeal
was
dismissed.
This
decision
was
appealed
from
in
the
Exchequer
Court.
Cameron,
J.,
held:
:2.
That,
although
as
a
general
rule
repairs
necessitated
by
wear
and
tear
of
equipment
used
in
the
business
are
allowed
as
deductions
(although
no
specific
reference
is
found
in
the
Income
Tax
Act
regarding
‘repairs’)
if
the
outlay
brings
into
existence
a
capital
asset,
such
as
a
new
piece
of
machinery,
such
outlay
will
not
be
allowed
as
a
deduction.
3.
That
the
outlay
here
brought
into
existence
a
new
capital
asset,
namely
the
new
engine,
M.N.R.
v.
Dominion
Natural
Gas
Co.,
[1941]
S.C.R.
19;
[1940-41]
C.T.C.
155,
and
consequently
could
not
be
considered
an
outlay
on
revenue
account.
(The
Court
was
influenced
in
part
by
the
magnitude
of
the
outlay
when
related
to
the
value
of
the
power
shovel
as
a
whole.)
Samuel
Jones
&
Co.
(Devondale)
Ltd.
v.
C.I.K.,
supra.
4.
That
to
allow
a
deduction
in
full
as
an
operating
expense
of
an
outlay
such
as
this
which
brought
into
existence
a
new
capital
asset
would
be
to
frustrate
the
clear
intent
of
the
provisions
of
Section
11(1)
(a)
of
the
Act
and
the
regulations
passed
thereunder
in
regard
to
capital
cost
allowances.
5.
That
the
outlay
for
the
purchase
of
a
new
engine
would
properly
be
considered
in
accounting
practice
as
a
capital
expenditure
because
of
the
enduring
nature
of
the
new
asset.”
I
believe
the
rules
laid
supra
would
be
applied
to
the
facts
established
in
the
present
dispute.
In
the
case
of
M.N.R.
v.
Vancouver
Tugboat
Company
Limited,
[1957]
Ex.
C.R.
160;
[1957]
C.T.C.
178,
wherein
the
respondent
was
stated
to
have
operated
a
tugboat
service
on
the
Pacific
coast
of
Canada
in
the
performance
of
which
its
tugboats
often
covered
distances
exceeding
800
miles
in
a
single
voyage,
and
a
trip
may
have
lasted
from
five
to
fifteen
days.
In
1951,
it
placed
a
new
engine
in
one
of
its
tugboats
at
a
total
cost
of
$42,086.71,
which
amount
it
claimed
as
a
deduction
from
income
for
that
year.
The
claim
was
allowed
by
the
Income
Tax
Appeal
Board
from
whose
decision
the
Minister
of
National
Revenue
appealed
to
this
Court.
Thurlow,
J.,
applying
all
the
tests
to
the
facts
I
have
mentioned
in
these
notes,
found
that
the
outlay
in
question
was
an
outlay
or
replacement
of
capital
within
the
meaning
of
Section
12
(1)
(b)
and
was
not
deductible
from
income.
He
allowed
the
Minister’s
appeal.
For
all
the
reasons
hereinabove
stated
and
also
in
view
of
the
evidence
as
to
the
amount
of
the
sums
spent
in
relation
to
the
amount
for
which
the
building
as
a
whole
was
insured
and
the
amount
of
the
gross
income
derived
from
the
rental
of
Space
in
the
building,
I
find
that
(1)
The
outlays
for
the
replacement
of
the
old
elevator
by
a
new
one
and
the
rebuilding
of
the
elevator
shaft
and
other
works
connected
therewith
were
not
current
expenses
made
in
the
ordinary
course
of
the
respondent’s
business
operations
to
earn
income
within
the
meaning
of
the
Income
Tax
Act,
Section
12(1)
(a).
(2)
The
outlays
were
not
recurrent
but
were
made
or
incurred
to
create
a
new
asset
and
bring
into
existence
an
advantage
of
enduring
benefit.
(3)
The
expenses
were
outlays
or
replacements
of
capital
within
the
meaning
of
Section
12(1)
(b)
of
the
Act.
Therefore,
the
appeal
is
allowed
and
the
cross-appeal
dismissed.
The
assessment
will
be
restored.
The
appellant
is
entitled
to
his
costs
to
be
taxed
in
the
usual
way.
Email this Content