ABBOTT,
J.:—This
is
an
appeal
by
the
Minister
of
National
Revenue
from
a
judgment
of
the
Exchequer
Court
confirming
a
decision
of
the
Income
Tax
Appeal
Board
which
had
allowed
respondent’s
appeal
against
its
income
tax
assessment
for
1955.
The
facts
are
not
in
dispute.
The
respondent
owns
and
operates
a
large
apartment
house
property
in
Montreal
which
it
acquired
in
1948.
The
buildings
had
been
constructed
in
1924.
Each
year
during
the
period
1950
to
1955,
respondent
incurred
expenses
for
the
replacement
of
stoves,
refrigerators
and
window
blinds
which
had
become
worn
out,
obsolete
or
unsatisfactory
to
its
tenants.
Expenditures
under
this
head
in
the
year
1955
amounted
to
$11,675.95.
In
its
income
tax
return
for
1955,
respondent
treated
this
income
as
an
operating
expense
and
as
such
deductible
from
its
gross
income
for
that
year.
That
deduction
was
disallowed
by
the
Minister
on
the
ground
that
it
was
a
capital
outlay
within
the
meaning
of
Section
12(1)
(b)
of
the
Income
Tax
Act.
Section
12(1)
(a)
and
(b)
reads:
“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.’’
It
is
conceded
by
appellant
that
the
expenditures
in
question
were
incurred
by
respondent
for
the
purpose
of
gaining
or
producing
income.
The
sole
matter
in
issue
here
is
whether
such
expenditures
were
an
income
expense
incurred
to
earn
the
income
of
the
year
1955
and
allowable
as
a
deduction
from
gross
income
in
that
year
under
Section
12(1)
(a)
of
the
Income
Tar
Act,
or
a
capital
outlay
to
be
amortized
or
written
off
over
a
period
of
years
under
the
capital
cost
allowance
regulations
made
under
Section
11(1)
(a)
of
the
said
Act.
The
general
principles
to
be
applied
in
determining
whether
a
given
expenditure
is
of
a
capital
nature
are
fairly
well
established
:
Montreal
Light,
Heat
and
Power
Consolidated
v.
M.N.R.,
[1942]
S.C.R.
89;
[1942]
C.T.C.
1;
British
Columbia
Elec-
trie
Railway
Co.
Ltd.
v.
M.N.R.,
[1958]
S.C.R.
133;
[1958]
C.T.C.
21.
Among
the
tests
which
may
be
used
in
order
to
determine
whether
an
expenditure
is
an
income
expense
or
a
capital
outlay,
it
has
been
held
that
an
expenditure
made
once
and
for
all
with
a
view
to
bringing
into
existence
an
asset
or
an
advantage
for
the
enduring
benefit
of
a
trade
is
of
a
capital
nature.
Expenditures
to
replace
capital
assets
which
have
become
worn
out
or
obsolete
are
something
quite
different
from
those
ordinary
annual
expenditures
for
repairs
which
fall
naturally
into
the
category
of
income
disbursements.
Applying
the
test
to
which
I
have
referred
to
the
facts
of
the
present
case,
the
expenditures
totalling
$11,675.95,
made
by
respondent
in
the
year
1955
for
replacing
refrigerators,
stoves
and
blinds
in
its
apartment
building
were,
in
my
opinion,
clearly
capital
outlays
within
the
provisions
of
Section
12(1)
(b)
of
the
Act.
The
appeal
should
be
allowed,
the
judgments
of
the
Exchequer
Court
and
the
Income
Tax
Appeal
Board
set
aside
and
the
assessment
restored.
It
was
agreed
at
the
hearing
that
in
this
event
there
would
be
no
costs
to
the
appellant
in
this
Court.
The
appellant
is
entitled
to
his
costs
in
the
Exchequer
Court.
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