THORSON,
P.:—This
is
an
appeal
from
the
decision
of
the
Income
Tax
Appeal
Board
(1953),
8
Tax
A.B.C.
293,
dated
May
26,
1953,
dismissing
the
appellant’s
appeal
against
its
income
tax
assessment
for
1950.
While
the
actual
issue
in
the
appeal
is
a
narrow
one
it
is
desirable
to
set
out
the
facts
in
their
chronological
order.
Prior
to
1949
Jacob
Mayer
carried
on
business
at
Stoney
Plain
in
Alberta
as
a
garage
operator
under
the
name
of
J.
Mayer
&
Sons.
The
business
was
entirely
his
and
he
owned
all
its
assets.
In
the
business
he
employed
his
three
sons,
Edward
H.
Mayer,
Frederick
W.
Mayer
and
Jack
O.
Mayer.
They
were
not
satisfied
with
this
arrangement
but
were
anxious
to
have
a
share
in
the
business.
Jacob
Mayer
appreciated
their
views
and
generously
fell
in
with
them.
Sometime
in
1949
he
entered
into
a
partnership
agreement
with
them
whereby
his
business
was
to
be
carried
on
under
the
name,
style
and
firm
of
J.
Mayer
&
Sons.
This
agreement
was
subsequently
put
into
writing
by
a
deed
of
partnership,
dated
December
1,
1949.
It
was
provided
in
this
deed
that
Jacob
Mayer
should
receive
50
per
cent
of
the
profits
of
the
business
and
his
sons
18,
16
and
16
per
cent
respectively.
But
it
was
expressly
stated
that
the
assets
and
liabilities
should
remain
in
the
sole
ownership
and
obligation
of
Jacob
Mayer
as
they
stood
on
January
1,
1949.
The
partnership
arrangement
was
for
the
term
of
one
year
to
be
computed
from
January
1,
1949,
but
before
it
expired
Jacob
Mayer
or
Jacob
Mayer
and
his
sons
decided
to
form
a
limited
company.
This
step
was
decided
upon
after
consultation
with
Jacob
Mayer’s
solicitor
and
advice
from
Mr.
Auxier
on
the
advantages
of
incorporation
over
a
co-partnership
in
the
matter
of
income
tax
liability
incidence.
There
was
also
the
desire
on
the
part
of
the
sons
to
have
a
permanent
share
in
the
assets
of
the
business
as
well
as
its
profits
and
Jacob
Mayer’s
desire
to
keep
them
in
the
business
with
him
and
his
willingness
to
meet
their
wishes.
Accordingly,
Jacob
Mayer
and
two
of
his
sons,
Edward
H.
Mayer
and
Jack
O.
Mayer,
on
December
21,
1949,
signed
a
memorandum
and
articles
of
association
for
the
incorporation
of
a
company
under
the
name
of
Jacob
Mayer
&
Sons
Ltd.,
the
name
of
the
appellant
herein,
with
an
authorized
capital
of
$60,000,
divided
into
600
shares
of
$100
each,
each
of
the
signatories
to
the
memorandum
subscribing
for
one
share.
On
January
16,
1950,
the
appellant
was
duly
incorporated
under
The
Companies
Act
of
Alberta.
The
appellant
then
held
its
first
meeting
on
February
4,
1950.
At
the
first
general
meeting
of
the
shareholders,
consisting
of
Jacob
Mayer
and
his
two
sons,
Edward
H.
Mayer
and
Jack
O.
Mayer,
they
were
elected
as
directors
and
the
directors
were
authorized
to
negotiate
with
Jacob
Mayer
for
the
purchase
of
the
business
operated
under
the
name
and
style
of
J.
Mayer
&
Sons.
A
meeting
of
the
directors
followed
immediately
afterwards.
At
that
meeting
Jacob
Mayer
was
elected
President
and
Edward
H.
Mayer
Secretary-Treasurer.
According
to
the
minutes
of
the
meeting
the
Secretary
advised
that
Edward
H.
Mayer,
Jack
0.
Mayer
and
Fred
W.
Mayer
had
each
applied
for
102
shares
of
the
capital
stock
and
had
agreed
to
tender
in
payment
his
promissory
note
for
$10,200.
The
offer
was
accepted
and
the
Secretary
instructed
to
issue
the
shares
on
receipt
of
the
notes.
The
minutes
also
stated
that
the
Secretary
advised
that
Jacob
Mayer
had
agreed
to
sell
the
business
operated
under
the
name
and
style
of
J.
Mayer
&
Sons,
including
the
real
property,
stock,
equipment,
good
will,
accounts
payable
and
receivable,
to
the
company
for
$60,000
and
had
agreed
to
accept
the
notes
made
in
favour
of
the
company
by
his
three
sons
in
payment
of
$30,600,
provided
that
the
shares
issued
to
them
were
deposited
with
him
as
collateral
to
the
notes,
together
with
294
shares
of
the
capital
stock
in
payment
of
the
balance.
The
sons
agreed
to
deposit
the
shares
as
collateral
to
their
notes.
The
minutes
also
stated
that
it
was
agreed
that
the
company
should
purchase
the
assets
of
J.
Mayer
&
Sons
for
the
sum
of
$60,000
to
be
paid
by
the
issue
of
294
shares
of
the
capital
stock
to
Jacob
and
the
assignment
of
the
notes
to
him
and
the
President
and
Secretary
were
instructed
to
make
all
the
necessary
arrangements
for
carrying
out
the
transaction
and
issuing
the
shares.
At
the
same
meeting
Fred
W.
Mayer
was
added
to
the
board
of
directors.
On
February
4,
1950,
the
shares
were
issued
to
Jacob
Mayer
and
his
three
sons
in
the
amounts
mentioned
but
no
promissory
notes
were
given
to
the
company
by
the
sons.
But
on
February
18,
1950,
the
three
sons
made
promissory
notes
for
$10,200
each
payable
to
Jacob
Mayer
on
demand.
The
sons
have
never
paid
Jacob
Mayer
anything
on
these
notes
but
each
year
he
has
given
them
a
credit
of
$1,000
so
that
the
notes
now
stand
at
$6,200
each.
It
is
not
entirely
clear
how
the
three
sons
came
to
be
shareholders
in
the
company.
While
the
minutes
are
as
stated,
the
appellant
wrote
a
letter
to
the
Director
of
Income
Tax
at
Edmonton
which
it
attached
to
its
income
tax
return
for
1950,
in
which
it
was
stated,
inter
alia,
that
‘‘at
the
end
of
1949
Jacob
Mayer
decided
to
incorporate,
the
three
sons
agreeing
to
buy
from
the
father
shares
in
the
business,
which
it
was
agreed
should
be
valued
at
$60,000.00’’.
It
may
possibly
be,
and
I
do
not
have
to
decide
the
matter,
notwithstanding
the
statement
in
the
minutes,
that
the
real
transaction
was
that
Jacob
Mayer,
being
the
owner
of
all
the
assets
was
entitled
to
all
the
shares
and
that
in
effect
he
turned
them
over
to
his
sons,
although
they
were
issued
directly
to
them
instead
of
being
issued
first
to
him
and
then
transferred
to
them.
The
making
of
the
notes
payable
to
him
is
consistent
with
this
view
of
the
matter.
On
March
11,
1950,
Jacob
Mayer
transferred
the
land,
including
the
building,
to
the
appellant
for
the
expressed
consideration
of
$24,500
and
on
the
same
date
gave
it
a
bill
of
sale
of
his
other
assets
for
the
expressed
consideration
of
$35,500.
The
upshot
of
the
matter
was
that
Jacob
Mayer,
who
had
been
the
sole
owner
of
all
the
property
acquired
by
the
appellant,
was
now
the
owner
of
294
shares
of
its
capital
stock
and
the
holder
of
three
promissory
notes
of
$10,200
each
given
to
him
by
his
sons
and
that
each
of
them
was
the
owner
of
102
shares
of
the
capital
stock,
Jacob
Mayer
holding
the
said
shares
as
collateral
to
the
unpaid
notes.
In
its
income
tax
return
for
1950,
dated
April
5,
1951,
the
appellant
claimed
capital
cost
allowances
on
the
property
which
it
had
acquired
from
Jacob
Mayer
and
also
on
property
acquired
during
1950.
We
are
not
concerned
here
with
the
additional
property.
The
appellant
based
its
claim
for
an
allowance
on
the
garage
building
and
building
fixtures
on
$24,539.00
as
undepreciated
capital
cost
at
the
beginning
of
the
year
and
the
cost
of
additions
during
the
year.
The
first
figure
is
the
amount
of
a
valuation
of
the
building
made
for
the
appellant
by
the
Royal
Trust
Company,
as
appears
from
a
letter
dated
January
23,
1950.
The
claim
for
an
allowance
on
the
machinery
and
equipment
was
based
on
$6,793.13
as
undepreciated
capital
cost
at
the
beginning
of
the
year
and
the
cost
of
additions
during
the
year.
The
claim
for
an
allowance
on
the
furniture
and
fixtures
was
based
on
$3,000
as
undepreciated
capital
cost
at
the
beginning
of
the
year.
The
figures
of
$6,793.13
and
$3,000
were
valuations
made
by
Jacob
Mayer
and
his
sons.
The
Minister
in
re-assessing
the
appellant
took
the
position
that
the
transaction
between
it
and
Jacob
Mayer
by
which
it
acquired
his
property
was
not
an
arm’s
length
transaction
between
them
and
that
it
was
consequently
entitled
only
to
capital
cost
allowances
based
on
the
capital
cost
of
the
assets
to
their
former
owner
Jacob
Mayer.
He
consequently
cut
down
the
allowances
claimed
by
it
and
based
them
on
the
undepreciated
cost
of
the
assets
to
their
former
owner.
These
he
put
at
$4,787.76
for
the
building,
$1,790.07
for
the
machinery
and
equipment
and
$189.21
for
the
furniture
and
fixtures.
The
amounts
of
the
claims
for
capital
cost
allowance
which
he
thus
disallowed
were
added
to
the
amount
of
taxable
income
reported
by
the
appellant
on
its
return,
as
appears
from
notices
of
re-assessment,
dated
February
2,
1952,
and
October
21,
1952.
The
details
of
the
claims
made
by
the
appellant
and
the
amounts
allowed
by
the
Department
are
set
out
in
Exhibit
16.
In
taking
this
action
the
Minister
relied
upon
Sections
20(2)
(a)
and
127(5)
(a)
of
the
Income
Tax
Act,
Statutes
of
Canada,
1947-48,
3.
52.
Section
20(2)
(a)
provides
as
follows:
“20(2)
Where
depreciable
property
did,
at
any
time
after
the
commencement
of
1949,
belong
to
a
person
(hereinafter
referred
to
as
the
original
owner)
and
has,
by
one
or
more
transactions
between
persons
not
dealing
at
arms
length,
become
vested
in
a
taxpayer,
the
following
rules
are,
notwithstanding
section
17,
applicable
for
the
purposes
of
this
section
and
regulations
made
under
pargaraph
(a)
of
subsection
(1)
of
section
11
:
(a)
the
capital
cost
of
the
property
to
the
taxpayer
shall
be
deemed
to
be
the
amount
that
was
the
capital
cost
of
the
property
to
the
original
owner
;
And
Section
127(5)
(a)
deals
with
what
is
meant
by
arm’s
length
as
follows
:
“127.(5)
For
the
purposes
of
this
Act,
(a)
a
corporation
and
a
person
or
one
of
several
persons
by
whom
it
is
directly
or
indirectly
controlled,
shall,
without
extending
the
meaning
of
the
expression
‘
‘to
deal
with
each
other
at
arms
length’’,
be
deemed
not
to
deal
with
each
other
at
arms
length.’’
The
Minister
considered
that
Jacob
Mayer
was
‘‘a
person
or
one
of
several
persons’’
by
whom
the
appellant
was
directly
or
indirectly
controlled
and
that
the
transaction
between
him
and
the
appellant
was,
therefore,
a
transaction
between
persons
not
dealing
at
arm’s
length,
from
which
it
followed
that
the
capital
cost
of
the
property
to
the
appellant
must
be
deemed
to
be
the
amount
that
was
the
capital
cost
of
it
to
its
original
owner,
Jacob
Mayer.
The
appellant
objected
to
the
assessment
and
appealed
to
the
Income
Tax
Appeal
Board.
The
appeal
was
heard
by
the
chairman
of
the
Board,
Mr.
F.
Monet,
Q.C.,
who
dismissed
it.
From
this
decision
the
present
appeal
is
brought.
The
only
question
in
the
appeal
is
whether
the
transaction
between
Jacob
Mayer
and
the
appellant
by
which
it
acquired
his
property
was
a
transaction
between
a
corporation
and
a
person
or
one
of
several
persons
by
whom
it
was
directly
or
indirectly
controlled
within
the
meaning
of
Section
127(5)
(a)
of
the
Act.
And
the
narrow
issue
is
whether
Jacob
Mayer
was
one
of
several
persons
by
whom
the
appellant
was
directly
or
indirectly
controlled.
In
my
opinion,
there
is
no
difficulty
in
the
case.
Jacob
Mayer
was
clearly
one
of
several
persons
by
whom
the
appellant
was
directly
or
indirectly
controlled.
I
do
not
see
how
there
can
be
any
doubt
about
it.
The
word
‘‘several’’
has
a
great
many
meanings
but
we
are
here
concerned
only
with
its
meaning
in
the
context
in
which
it
is
used,
which
is
clearly
numerical
in
character.
In
this
sense,
the
New
English
Dictionary,
vol.
VIII,
page
568,
defines
“several”
as
follows
:
“A.
4.
As
a
vague
numeral:
Of
an
indefinite
(but
not
large)
number
exceeding
two
or
three;
more
than
two
or
three
but
not
many.
(The
chief
current
sense.)
’’
Webster’s
New
International
Dictionary,
Second
Edition,
gives
this
definition
:
“4.
a
More
than
one;
—
so
constructed
in
legal
use.
b
Consisting
of
an
indefinite
number
more
than
two,
but
not
very
many
;
divers
;
sundry;
as,
several
persons
were
present.
e
Dial.
Quite
a
large
number’’.
And
Funk
&
Wagnail’s
New
Standard
Dictionary
puts
it
as:
“1.
Being
of
an
indefinite
number,
more
than
one
or
two,
yet
not
large;
divers;
as,
several
visitors
called
today.”
While
the
precise
limits
of
the
application
of
the
word
“several”
may
not
be
possible
to
define
it
is
clear
that
it
means
more
than
two
or
three
but
not
many.
It
is
limitative
in
its
effect.
It
is,
therefore,
not
necessary
to
go
as
far
in
the
application
of
Section
127
(5)
(a)
as
the
Income
Tax
Appeal
Board
appeared
to
think
possible
in
No.
112
v.
Minister
of
National
Revenue
(1953),
9
Tax
A.B.C.
14.
In
this
view
I
am
confirmed
by
the
recent
judgment
of
Fournier,
J.,
in
Miron
&
Frères
Limitée
v.
Minister
of
National
Revenue,
[1954]
Ex.
C.R.;
[1954]
C.T.C.
45.
But
whatever
may
be
the
extent
of
the
limitation
implied
in
the
word
‘‘several’’
it
is
plain
that
four
persons
would
not
be
outside
its
range.
Counsel
for
the
appellant
argued
that
Section
127(5)
(a)
should
not
apply
in
this
case
because
there
had
never
been
any
agreement
between
Jacob
Mayer
and
his
sons
that
they
should
vote
together.
I
do
not
agree.
It
is
not
a
necessary
condition
of
the
applicability
of
Section
127(5)
(a)
of
the
Act
that
there
should
be
an
agreement
between
the
several
persons
referred
to
in
it
that
they
should
act
in
concert
in
directly
or
indirectly
controlling
the
corporation.
There
is
no
such
requirement
in
the
section.
If
Section
127(5)
(a)
does
not
apply
in
the
present
case
it
is
difficult
to
see
where
it
could
apply.
Here,
Jacob
Mayer
was
the
largest
shareholder
and
had
the
largest
salary
:
vide
Exhibit
11.
He
was
not
a
figurehead.
Mr.
Bryan
said
that
he
was
prepared
to
take
49
per
cent
of
the
stock,
because,
while
he
did
not
want
two
sons
to
out
vote
him,
he
was
quite
prepared
to
fall
in
if
all
his
sons
voted
against
him.
But
the
fact
is
that
while
there
have
been
differences
of
opinion
Jacob
Mayer
always
went
along
with
his
sons.
They
never
out-voted
him
or
did
anything
that
he
did
not
agree
with
and
they
never
made
any
major
decision
against
his
will.
The
fact
is
that
they
always
worked
together
in
harmony.
There
were
four
persons
who
controlled
the
appellant
and
Jacob
Mayer
was
one
of
them.
He
was,
therefore,
one
of
several
persons
by
whom
the
appellant
was
controlled
within
the
meaning
of
Section
127(5)
(a).
The
transaction
between
him
and
the
appellant
was,
therefore,
not
a
dealing
at
arm’s
length,
so
that
Section
20(2)
(a)
applied
and
the
Minister
was
right
in
basing
capital
cost
allowances
on
the
capital
cost
of
the
assets
to
Jacob
Mayer,
their
previous
owner.
The
appeal
herein
must,
therefore,
be
dismissed
with
costs.
Judgment
accordingly.
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