THORSON,
P.:—This
is
an
appeal
from
the
decision
of
the
Income
Tax
Appeal
Board
(1951),
4
Tax
A.B.C.
359,
dated
July
17,
1951,
allowing
the
respondent’s
appeal
from
its
income
‘tax
assessment
for
the
taxation
year
ending
December
31,
1947,
on
the
ground
that
the
Minister
had
not
properly
exercised
his
discretion
under
Section
6(1)(n)
of
the
Income
War
Tax
Act,
R.S.C.
1927,
ce.
97.
The
appeal
relates
to
the
nature
and
extent
of
the
discretion
vested
in
the
Minister
to
allow
deductions
in
respect
of
depreciation
from
what
would
otherwise
be
taxable
income.
So
far
as
relevant
to
the
appeal
Section
6(1)
(n)
reads
as
follows:
“6.
In
computing
the
amount
of
the
profits
or
gains
to
be
assessed,
a
deduction
shall
not
be
allowed
in
respect
of
(n)
depreciation,
except
such
amount
as
the
Minister
in
his
discretion
shall
allow,
including
Provided,
however,
that
the
Minister
shall
not
allow
a
deduction
in
respect
of
depreciation
of
assets
owned
by
an
incorporated
taxpayer
from
the
income
of
the
said
taxpayer
if
he
is
satisfied
that
the
said
taxpayer
directly
or
indirectly
had
or
has
a
controlling
interest
in
a
company
or
companies
previously
the
owner
or
owners
of
the
said
assets
or
that
the
said
previous
owner
(which
term
shall
include
a
series
of
owners)
directly
or
indirectly
had
or
has
a
controlling
interest
in
the
said
taxpayer
or
that
the
said
taxpayer
and
the
previous
owner
were
or
are
directly
or
indirectly
subject
to
the
same
controlling
interest
and
that
the
aggregate
amount
of
deductions
which
have
been
allowed
to
the
said
taxpayer
and/or
the
said
previous
owner
in
respect
of
the
depreciation
of
such
assets
is
equal
to
or
greater
than
the
cost
of
the
said
assets
to
the
said
previous
owner
or
to
the
first
of
the
previous
owners
where
more
than
one
;
’
’
The
facts
are
not
in
dispute.
In
1947
the
respondent
purchased
from
Stovel
Company
Limited
certain
land,
buildings,
machinery
and
equipment
for
$1,300,000
of
which
$509,500
was
allocated
to
the
buildings
and
$692,000
to
the
machinery
and
equipment.
The
cost
of
these
assets
to
Stovel
Company
Limited
was
$849,701.74,
that
of
the
buildings
being
$227,591.43
and
that
of
the
machinery
and
equipment
$523,858.22.
Prior
to
the
date
of
the
purchase
the
aggregate
amount
of
the
deductions
in
respect
of
depreciation
of
the
said
assets
which
the
Minister
had
allowed
to
Stovel
Company
Limited
was,
except
in
respect
of
certain
assets,
less
than
their
cost
to
Stovel
Company
Limited.
There
was
an
exception
in
the
case
of
certain
machinery
and
equipment
which
had
been
acquired
by
Stovel
Company
Limited
prior
to
June
30,
1938,
at
a
cost
of
$319,066.06,
in
respect
of
which
an
aggregate
amount
of
$335,243.18
had
been
allowed
as
deductions
for
depreciation.
There
were
also
some
other
assets
which
had
been
fully
depreciated
except
for
the
nominal
amounts
at
which
they
were
carried
on
the
books
of
Stovel
Company
Limited.
At
and
subsequent
to
the
date
of
the
purchase
of
the
said
assets
Stovel
Company
Limited
had
a
controlling
interest
in
the
respondent.
In
its
income
and
excess
profits
tax
return,
dated
April
30,
1948,
for
its
taxation
year
ending
December
31,
1947,
the
respondent
claimed
a
deduction
of
$33,038.03
in
respect
of
depreciation
of
the
buildings,
machinery
and
equipment
which
it
had
purchased
from
Stovel
Company
Limited,
but
the
Minister
in
his
assessment
allowed
a
deduction
of
only
$18,675.03.
In
doing
so
he
did
not
allow
any
deduction
in
respect
of
the
assets
acquired
by
Stovel
Company
Limited
prior
to
June
30,
1938,
to
which
reference
has
been
made,
or
in
respect
of
the
assets
which
had
been
fully
depreciated
as
stated.
In
respect
of
the
buildings
and
other
machinery
and
equipment
he
based
his
allowance
of
deductions
in
respect
of
their
depreciation
on
their
cost
to
Stovel
Company
Limited.
In
doing
so
he
allowed
a
rate
of
10
per
cent
on
such
base
although
the
respondent
had
claimed
only
714
per
cent
on
the
base
on
which
it
claimed
its
deductions.
The
amounts
disallowed
by
the
Minister
were
added
back
to
the
amount
of
taxable
income
reported
by
the
respondent
in
its
return.
The
respondent
objected
to
the
assessment
and
appealed
against
it
to
the
Income
Tax
Appeal
Board.
The
Board
allowed
the
appeal
and
referred
the
assessment
back
to
the
Minister
for
reconsideration
and
reassessment
by
allowing
depreciation
based
on
the
cost
to
the
appellant
(the
respondent
herein)
of
the
plant
and
equipment
purchased
by
it.
The
reasons
for
the
Board’s
decision
were
given
by
Mr.
W.
S.
Fisher,
Q.C.,
with
the
Chairman,
Mr.
F.
Monet,
Q.C.,
concurring.
The
issue
in
this
appeal
is
substantially
the
same
as
that
in
Minister
of
National
Revenue
v.
Simpson’s
Limited
[[1953]
C.T.C.
203]
in
which
I
have
just
rendered
judgment
allowing
the
Minister’s
appeal
from
the
Board’s
decision.
The
reasons
for
judgment
in
that
case
are
applicable,
mutatis
mutandis,
in
this
one
and
are
incorporated
herein
without
repetition
of
them.
I
shall
merely
confine
myself
to
the
submissions
made
in
this
appeal
that
were
different
from
those
put
before
me
in
the
Simpson’s
Limited
case
(supra).
It
was
argued
by
counsel
for
the
respondent
that
the
Minister
had
no
right
to
look
at
the
assets
in
question
separately
and
determine
that
the
first
proviso
of
Section
6(1)
(n)
applied
to
some
of
them,
as
he
did
in
the
ease
of
the
assets
acquired
by
Stovel
Company
Limited
prior
to
June
30,
1938,
and
the
other
assets
that
had
been
fully
depreciated
subject
to
the
nominal
amount
left.
It
was
his
submission
that
the
word
‘‘assets’’
in
the
first
proviso
of
Section
6(1)
(n)
meant
all
the
assets
acquired
in
bulk
and
must
be
so
considered
by
the
Minister
in
determining
whether
the
proviso
applied
and
that
it
was
not
competent
for
him
to
decide
that
the
proviso
was
applicable
in
the
case
of
some
of
the
acquired
assets
and
not
applicable
in
the
case
of
other
assets.
That
being
so,
the
Minister
had
not
exercised
his
discretion
on
proper
legal
principles.
I
do
not
agree
with
this
interpretation
of
the
proviso.
Section
31
(j)
of
the
Interpretation
Act,
R.S.C.
1927,
ce.
1,
provides
that
words
in
the
singular
shall
include
the
plural
and
words
in
the
plural
include
the
singular.
Thus
the
words
‘‘assets’’
in
the
proviso
should
be
read
as
meaning
‘‘asset’’
when
the
occasion
requires.
Moreover,
it
seems
to
me
that
the
Minister
in
determining
whether
the
proviso
applies
must,
of
necessity,
consider
each
asset
in
respect
of
which
a
claim
of
a
deduction
for
depreciation
is
made
to
see
whether
in
respect
of
that
asset
the
aggregate
amount
of
the
deductions
in
respect
of
the
depreciation
which
have
been
allowed
is
equal
to
or
greater
than
its
cost
to
the
former
owner.
The
words
of
the
proviso
are,
in
my
opinion,
capable
of
this
interpretation
and
it
is
the
only
interpretation
that
is
consistent
with
the
workability
of
the
proviso.
The
adoption
of
the
interpretation
urged
for
the
respondent
would
create
such
great
difficulties
of
administration
that
they
could
not
have
been
intended
by
Parliament.
I
am,
therefore,
of
the
opinion
that
the
Minister’s
interpretation
of
the
proviso
was
correct
and
that
his
disallowance
of
the
deduction
claimed
in
respect
of
the
depreciation
of
the
assets
acquired
up
to
June
30,
1938,
was
proper.
The
other
submission
to
which
I
shall
refer
relates
to
a
letter,
dated
August
30,
1948,
from
the
Director
General
of
the
Corporation
Assessments
Branch
of
the
Taxation
Division
of
the
Department
of
National
Revenue
to
the
respondent’s
chartered
accountants
in
which
the
following
statement
appears:
“We
will
not
recognize
for
depreciation
purposes
the
inflated
value
of
the
assets
purchased
by
Stovel
Press
Limited
from
Stovel
Company
Limited.
The
amount
of
depreciation
to
be
allowed
will
be
calculated
on
the
book
value
of
the
assets
turned
over
by
the
latter
Company.
This
is
because
of
the
fact
that
both
Companies
were
controlled
by
the
same
interests
at
the
time
the
sale
of
the
assets
was
completed,
and
the
first
proviso
of
section
6(1)(n)
is
specific
in
this
connection.’’
and
also
to
paragraph
15
in
the
Notice
of
Appeal
herein
which
alleged
:
“15.
That,
in
exercising
his
discretion
under
paragraph
(n)
of
section
(1)
of
Section
6
of
the
Income
War
Tax
Act
to
allow
an
amount
for
depreciation
in
respect
of
the
buildings,
machinery
and
equipment
referred
to
in
paragraph
5
hereof
for
the
1947
taxation
year,
the
Minister
properly
had
regard,
in
determining
the
amount
of
the
allowance,
to
the
fact
that
the
first
proviso
to
the
said
paragraph
(n)
would
operate
in
some
subsequent
year
to
prohibit
any
further
allowance.’’
It
was
stressed
by
Mr.
Fisher
in
the
decision
a
quo
that
until
the
time
arrives
when
both
of
the
conditions
referred
to
in
the
proviso
exist,
the
proviso
can
have
no
application
and
that,
in
the
meantime,
the
Minister’s
discretion
must
be
exercised
without
regard
to
any
special
provision
which
may
be
set
forth
in
it.
I
have
already
in
the
Simpson's
Limited
case
(supra)
indicated
my
disagreement
with
this
view.
But
counsel
for
the
respondent
urged
that
the
Minister
had
no
right
to
assume
what
would
happen
in
the
future
and
that
in
exercising
his
discretion
with
that
assumption
weighing
on
him
he
had
not
exercised
his
discretion
on
proper
principles.
In
my
view
there
was
no
valid
reason
why
the
Minister
in
determining
whether
he
should
base
his
allowance
of
deductions
in
respect
of
depreciation
of
the
assets
in
question
on
their
cost
to
the
former
owner
or
on
the
amount
for
which
they
were
acquired
by
the
respondent
should
not
consider
the
proviso
and
its
possible
effect
in
the
future.
But
that
is
not
the
question
before
the
Court.
It
is
not
so
much
concerned
with
why
the
Minister
did
w
hat
he
did
as
with
whether
what
he
did
was
within
his
discretion
to
do.
He
may
have
been
moved
to
his
decision
by
considerations
in
respect
of
which
there
might
be
differences
of
opinion
but
the
real
question
in
this
appeal
as
in
the
Simpson’s
Limited
case
(supra)
is
whether
he
acted
within
his
discretion
in
basing
his
allowances
of
the
deductions
claimed
in
respect
of
depreciation
of
the
acquired
assets
on
their
cost
to
the
previous
owner.
If
the
Minister
thought
that
in
doing
so
he
was
acting
consistently
with
the
declared
policy
of
Parliament
as
embodied
in
the
proviso,
as
is
by
implication
suggested,
how
can
it
be
said
that
he
exercised
his
discretion
improperly?
I
do
not
think
that
he
did.
Indeed,
I
am
unable
to
find
any
reason
for
holding
that
he
was
precluded
from
exercising
his
discretion
as
he
did.
His
action,
in
my
judgment,
was
a
valid
exercise
of
the
discretion
vested
in
him.
It
follows
from
these
reasons
and
those
in
the
Simpson’s
Limited
case
(supra)
that
the
appeal
herein
must
be
allowed
with
costs
and
the
assessment
appealed
against
restored.
Judgment
accordingly.