Tomenson Inc. v. The Queen, 86 DTC 6267, [1986] 1 CTC 525 (FCTD), aff'd 88 DTC 6095, [1988] 1 CTC (FCA)

Rouleau, J.:—This is an action brought by the plaintiff who disputes the reassessment by the defendant for the taxation year 1975. At issue in these proceedings is the nature of a payment made by the plaintiff in the amount of $322,461 for the acquisition of some general insurance agency lists of customers. The plaintiff contends that the payment was an expense item properly deductible in the calculation of its taxable income. The defendant submits that the expenditure was a capital outlay and therefore not deductible in computing the taxable income. All this pursuant to paragraph 18(1)(b) of the Income Tax Act S.C. 1970-71-72, c. 63 as amended and applicable in 1975:

18. (1) In computing the income of a taxpayer from a business or property no deduction shall be made in respect of

(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;

The plaintiff Tomenson Inc. is an insurance broker with its head office in the City of Toronto and subsidiaries across Canada. It carried on business in 11 offices across Canada, including Edmonton, Calgary, Vancouver and Prince George in Western Canada. In 1975 it acquired from the O'Bryan Group of insurance agencies some lists of clients along with their files for a limited number of their offices located in the Provinces of British Columbia and Alberta. In filing its return for the 1975 taxation year, it deducted against revenue the moneys advanced to acquire these lists. The Minister reassessed and found that this expenditure was in the nature of capital.

The O’Bryan Group, loosely interrelated, was made up of the following entities: J.T. O'Bryan & Co., a British Columbia partnership, J.T. O’Bryan Company, a separate Alberta partnership and the estate of Bass Insurance Agencies Limited; collectively they operated approximately 16 offices in the two western provinces.

During 1974 it was common knowledge within the insurance industry that J.T. O'Bryan and Co. was experiencing financial difficulties. The plaintiff, because of its reputation in the industry, having acquired numerous other agencies in the past, was approached in early 1974 by the O’Bryan Group to consider a merger or an acquisition. This offer was declined. The president of the plaintiff company testified that it was their view that they did not, at that particular time, have in their employ a sufficient number of qualified personnel, nor the available capital to acquire another substantial operation. In mid-November of 1974, because of the acute financial problems facing the O’Bryan Group, and at the request of one of the plaintiff's officials located in the Vancouver office, it reassessed its position. They were gravely concerned with a bankruptcy and the impact this could have on the industry as a whole. At this stage, the O'Bryan Group had lost credibility as well as their credit with underwriters and were no longer able to place any of their customers' insurance.

Tomenson Inc., together with some of the major underwriters, looked into the situation with the ultimate aim of preventing a financial disaster from occurring. As a result, a loose arrangement was entered into; new premiums that were being collected by the O’Bryan Group were transferred to the plaintiff who in turn would place the insurance with underwriters. All this to avoid bankruptcy, provide coverage for the customers and preserve the industry's reputation.

This procedure could not go on forever and, after some weeks, a Vancouver vice-president of Tomenson Inc. met with the principals of J.T. O'Bryan and the underwriters, the major creditors, to work out an arrangement and submit a proposal to creditors. An agreement was entered into and a trustee in bankruptcy in the service of Clarkson Gordon & Co. was retained to oversee the administration.

The financial statement of the O’Bryan Group as at December 31, 1974 indicated that they had assets and cash in the bank in the amount of approximately $2,533,000 of which some $2,400,000 was cash or receivables. Their liabilities were $4,500,000 of which some $3,775,000 were premiums payable to insurance companies. Though they did not all go bankrupt, it is obvious that without the proposal and the consent of the underwriters, the various entities would have collapsed and the customers insured by the O’Bryan Group would have been faced with serious problems.

The plaintiff agreed to purchase the lists of clients of the O’Bryan Group for the operations that were being conducted in certain offices, three in British Columbia and two in Alberta. They included the major producers from the approximately 16 offices operated by the O’Bryan Group.

A letter of intent, issued by the plaintiff on January 17,1975 (Exhibit P-2), undertook to take over the lists of insurance customers, their files, copies of issued insurance policies, expiration slips as well as other documents relating to the customers. Tomenson Inc. was to collect the outstanding receivables and in the future would pay to the trustee 30 per cent of the net commission income (less return commissions) for the years 1975, 1976, 1977 and 1978 of all new and renewal insurance premiums received from existing customers who continued to do business with them. All of these undertakings became part of the proposal submitted by the trustee and were eventually approved by the creditors as well as the Court.

Other lists were sold by the trustee to other companies who were competitors of the plaintiff.

The president of the plaintiff company testified that by obtaining these lists they did not acquire exclusive rights to deal with the customers because competitors were also seeking them out.

The plaintiff undertook to offer some of the partners and employees positions. Particulars of these offers can be found in the proposal submitted to the trustee in bankruptcy as well as the creditors (see Exhibits P-2 and D-3). Essentially, a considerable number of equity holders of the O’Bryan Group were personally liable for substantial sums of money. The plaintiff, through its offer, induced the various partners to join them and if they did so their personal obligations would be diminished if not dissipated entirely.

Some of the employees were retained, others went into business on their own account and some were hired by other brokers. Some remained for a while and left. There were no non-competition clauses with any of the O'Bryan Group. Out of all the offices that the former owners had occupied, only two small spaces were rented and renegotiated directly with the landlords, one in Port William and the other in Prince George where the plaintiff already had an office. However, because of the increased personnel, they required additional space.

During the subsequent years, the trustee received approximately $1 million based on the 30 per cent net commission derived from the existing customers that remained for the period; Tomenson Inc. retained 65 per cent of the clients from the original lists.

The president of the plaintiff company testified that success in the general insurance business was derived from personal contact and acquisition of lists of customers; that knowledge of an expiry date of existing coverage was most crucial in determining if one was to retain an insured.

From the evidence I have concluded that, when acquiring an ongoing insurance agency, it is customary in the trade to pay between 1 and 1.5 times one year's net commissions.

Plaintiff's Principal Arguments

The substance of plaintiff's argument is that the annual payments made for the customer lists were a current expense incurred for the purpose of gaining or producing income and thus were not a payment on account of capital.

In support of this submission it was argued that all it acquired under its agreement with the trustee was customer lists. Specifically, it contended that the acquisition of the lists did not give the plaintiff the exclusive right to represent any of the O’Bryan Group customers. In fact, the plaintiff was required to solicit the insurance business of the customers named on the lists in competition with other insurance brokers. It was further submitted that the O'Bryan Group was not contractually bound to assist the plaintiff in maintaining the customers nor was it to refrain from competing. Finally, plaintiff contends that it did not acquire the insurance brokerage business as a going concern, nor, as a result, the goodwill formerly held by the O’Bryan Group.

To support the contention, the plaintiff cited several cases and articles as authority. The case law submitted that dealt specifically with customer lists was Murray S. Partykan v. M.N.R., [1980] C.T.C. 2540; 80 D.T.C. 1475 (T.R.B.) and Harbord Investments Limited v. M.N.R., [1970] Tax A.B.C. 717; 70 D.T.C. 1488 (T.A.B.).

In Partykan (supra) the taxpayer, an officer of a general insurance company, left the company to start his own insurance business and in doing so relinquished his shares in the company in return for a copy of his customer list and related information concerning their policies. Taxpayer purchased neither the goodwill nor the company as a going concern. Of significance is the distinguishing factor that both the taxpayer and his former company were free to compete for the clients on that list and on the same basis: both taxpayer and company possessed the same information in relation to the clients on the purchased list.

In the case at bar, it is clear that the O'Bryan Group was in the process of liquidation and had relinquished its proprietary right to its customer lists, and was not in open competition with the plaintiff in respect of the policies or the lists acquired by Tomenson Inc. It is also clear that competitors were not favoured with the particulars and details concerning the customers' coverage.

In Harbord (supra), a general insurance agency purchased lists of clients and copies of policies from another insurance agency. The taxpayer did not purchase the other company as a going concern. This latter point was crucial in the Tax Appeal Board’s determination that the expenditure constituted a deductible business expense, having been paid out for the purpose of earning income. But of note and some importance, the Vendor offered to refrain from carrying on business for five years in the province where the taxpayer operated. Although this offer was gratuitous, the taxpayer tacitly accepted the restrictive covenant. Thus the purchase of the customer list was the direct cause of and resulted in the effective elimination of a competitor.

Harbord (supra) is open to question in light of the Federal Court of Appeal decision in Cumberland Investments Limited v. The Queen, [1975] C.T.C. 439; 75 D.T.C. 5309 (F.C.A.). Although the material facts in that case are distinguishable from those in Harbord, Mr. Justice Thurlow stated that the effective elimination of a competitor was one of the critical factors in deciding whether the acquisition of a customer list was a capital outlay (i.e., having eliminated the competitor through the absorption of the business as a going concern). Nevertheless he did not stipulate that eliminating competition was the sole condition to the characterization of a purchase being on account of capital.

Defendant's Principal Arguments

In assessing the plaintiff for its 1975 taxation year, the Minister of National Revenue submitted that the payment of $322,461 in 1975 constituted a payment on account of capital. He argued that the sum represented a payment to acquire the insurance brokerage business of the O'Bryan Group, as well as the goodwill formerly held by the Group; that the acquisition of the customer lists not only constituted an addition to the business structure of the plaintiff but was for the plaintiff's enduring benefit.

The Minister further claimed that Tomenson Inc. not only acquired lists of customers, but also relevant information pertaining to the insurance coverage, binders, applications for insurance, renewal dates, etc. It hired key employees and equity holders from the O'Bryan Group to maintain contacts with the former customers.

Conclusion

Although defendant cited several cases as authority for its submission, in my view the Federal Court of Appeal's decision in Cumberland (supra) establishes the criteria in determining such cases.

In Cumberland (supra) the agency acquired a going concern, a list of the competitor's sub-agents, particulars of the policy holders, a covenant not to compete, and paid a price based on volume.

Although Mr. Justice Thurlow and Mr. Justice Urie emphasized different factors in characterizing the outlay as capital, both Justices seem to consider that the elimination of the Vendor as a competitor and acquiring a going concern, which would include goodwill, were both essential to their characterization of the outlay as being on account of capital.

In contrast, the plaintiff submits that the present dispute discloses that one of the agencies from the O’Bryan Group was bankrupt and no doubt the others would also have met the same fate had it not been for the proposal. It cannot be argued that payments made by the plaintiff eliminated a competitor, nor can it be substantiated that the purchase of some of the customer lists resulted in the absorption of the O’Bryan Group as a going concern, and thus supported any transfer of goodwill.

In C./.R. v. Muller & Co.'s Margarine Ltd., [1901] A.C. 217; [1900-3] All E.R. 413 Lord Lindley commented on the connectivity between the concept of "goodwill" and that of "business as a going concern"; at 235 (All E.R. 423) he noted:

Goodwill regarded as property has no meaning except in connection with some trade, business, or calling. In that connection I understand the word to include whatever adds value to a business by reason of situation, name and reputation, connection, introduction to old customers, and agreed absence from competition, or any of these things, and there may be others which do not occur to me. In this wide sense, goodwill is inseparable from the business to which it adds value, and, in my opinion, exists where the business is carried on.

[Emphasis added.]

Goodwill appears to be dependent upon a going concern. Therefore, it is difficult to accept the proposition that the acquisition of some assets of a business, in the process of liquidation, imports the acquisition of goodwill.

Counsel for both the plaintiff and the defendant, through their respective submissions, have attempted to extract from the facts certain features that would categorize this transaction as being either one of expense or one of capital. This appears to be an almost insurmountable task. Indeed, as Mr. Justice Collier noted in Burian v. The Queen, [1976] C.T.C. 725; 76 D.T.C. 6444 in relation to the characterization of an outlay incurred to acquire a customer list (at 730 [D.T.C. 6447]):

.. . The appellations “purchase of a business as a going concern", “purchase of goodwill”, or purchase of a “list of customers" neither clarify the dispute nor provide the solution.

This is particularly true when one is dealing with the acquisition of a customer list from a group of agencies in the process of liquidation. It is one thing to use appellations and characterize them as a purchase of a customer list; it is another matter to apply the terms to the purchase of some customer lists of a business that is in the process of liquidation. On the other hand one cannot simply disregard them because the transaction involves an insolvent business.

It becomes relevant to examine those general principles enunciated in several cases where the courts have established guidelines to distinguish expenditures on revenue account as opposed to the capital account.

The Nature of Capital

In an examination of the jurisprudence classifying transactions as being either an expense or capital, it appears that the courts have adopted either an "accretion to the income earning structure of the business” test or an "enduring benefit” test.

The concept that a capital outlay is that which is expended to acquire a substance (tangible or intangible) inherently productive of income, i.e., a substance from which income arises, has its origin in the classic dictum of Mr. Justice Dixon in Sun Newspapers Ltd. et al. v. Federal Commissioner of Taxation (1938), 61 C.L.R. 337 (at 359-60) wherein he noted:

The distinction between expenditure and outgoings on revenue account and on capital account corresponds with the distinction between the business entity, structure, or organization set up or established for the earning of profit and the process by which such an organization operates to obtain regular returns by means of regular outlay, the difference between the outlay and returns representing profit or loss. The business structure or entity or organization may assume any of an almost infinite variety of shapes and it may be difficult to comprehend under one description all the forms in which it may be manifested [. . .] But in spite of the entirely different forms, material and immaterial, in which it may be expressed, such sources of income contain or consist in what has been called a “profit-yielding subject,” the phrase of Lord Blackburn in United Collieries Ltd. v. Inland Revenue Commissioners. (1930) S.C. 215, at p. 220.

[Emphasis added.]

This characterization of capital expenditure was held to be applicable to the Canadian Income Tax Act in Canada Starch Company Ltd. v. M.N.R., [1968] C.T.C. 466; 68 D.T.C. 5320 (Ex. Ct.).

Mr. Justice Dixon elaborated on the dichotomy between that which is an outlay on account of capital and that which is a revenue expenditure. In his dissenting judgment in Hallstroms Pty. Ltd. v. Federal Commissioner of Taxation (1946), 72 C.L.R. 634 (at 647) he wrote:

... [T]he contrast between the two forms of expenditure corresponds to the distinction between the acquisition of the means of production and the use of them; between establishing or extending a business organization and carrying on the business; [.. .] between an enterprise itself and the sustained effort of those engaged in it.

[Emphasis added.]

In the decision of the Privy Council in Commissioner of Taxes v. Nchanga Consolidated Copper Mines Ltd., [1964] A.C. 948; [1964] 2 W.L.R. 339, Viscount Radcliffe indicated his approval of the test enunciated by Dixon, J. in Sun Newspapers (supra) and Hallstroms (supra) when he stated (at 960 [W.L.R. 346]):

Again, courts have stressed the importance of observing a demarcation between the cost of creating, acquiring or enlarging the permanent (which does not mean perpetual) structure of which the income is to be the produce or fruit and the cost of earning that income itself or performing the income-earning operations.

Probably this is as illuminating a line of distinction as the law by itself is likely to achieve, . . .

[Emphasis added.]

The second test of characterization that has been adopted by the courts — the "enduring benefit” test — has its source in the decision of the House of Lords in British Insulated and Helsby Cables Ltd. v. Atherton, [1926] A.C. 205; [1925] All E.R. 623 wherein Viscount Cave enunciated (at 213-14 [All E.R. 629]) the “enduring benefit” test:

. . . 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 a 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.

[Emphasis added. I

Although Viscount Cave did not elaborate on the meaning of the expression “enduring benefit”, in commenting on the “once and for all” test enunciated by Lord Dunedin in Vallambrosa Rubber Co. v. Farmer, [1910] S.C. 519 at 525; 5 T.C. 529 at 536 he did determine that, notwithstanding the lump sum method of payment in securing an asset or advantage, such payment would not be characterized as an expenditure on capital account if that sum “would be properly chargeable against the receipts for the year”.

One can infer from Viscount Cave's dictum that if the benefit or value derived from the acquisition of an asset is consumed in the year in which it was acquired, or over at least a two-year period, the cost of the acquisition of the asset or advantage might reasonably be considered as a revenue expenditure.

This line of reasoning was pursued in the decision of the House of Lords in Hinton v. Maden and Ireland Ltd., [1959] 1 W.L.R. 875; [1959] 3 All E.R. 356 wherein Lord Reid, in commenting on the demarcation between an expenditure on revenue account and a capital outlay, stated (at 886 [All E.R. 360]):

. . . I claim no expert knowledge of accountancy or of business methods, and the only practical difference that occurs to me — and none other was suggested in argument — is that if you treat a sum as capital expenditure you do not write it all off in one year or set it all against the income of one year, whereas if you treat it as revenue expenditure the whole of it is set off against the revenue of the year when it is expended.

I would suppose that accounts are intended to have as close a relation as is reasonably practicable to reality. If you buy plant which still has a substantial value at the end of the year I would suppose that that value ought to be reflected somewhere in the accounts. If the cost is treated as capital expenditure there seems to be no difficulty in writing off that cost year by year as the plant wears out or becomes obsolete, but if the cost is treated as revenue expenditure I do not know what item in the next year's accounts would reflect the continuing value of the plant. I do not suggest that this distinction is or should be an inflexible rule. There may, for all I know, be good reasons for not following it in particular cases, but in the absence of any indication of any specialty in this case I am inclined to approach this case in that way.

[Emphasis added. I

In relation to the case at bar, it may therefore be stated that to the extent that the plaintiff’s acquisition from the trustee of selected customer lists of the O’Bryan group constitutes an accretion to the income-earning structure of plaintiff's business, or constitutes an asset that is of an enduring benefit within the meaning of Viscount Cave's dictum in the Atherton case, the purchase price of the acquisition is not merely a revenue expenditure but is an outlay of capital within the meaning of paragraph 18(1)(b) of the I.T.A.

Analysis of Transaction

As stated previously, the characterization of the acquisition of a customer list as being on capital or on revenue account is not furthered — in the case of lists purchased from a business in the process of liquidation — by the

mechanical application of such concepts as: “Purchase of Business as Going Concern”, “Presence of Restrictive Covenant”, etc.

Indeed, the jurisprudence indicates that the substance, and not the form of the transaction is the critical factor in determining the characterization of an outlay. Thus in The Queen v. Baine, Johnstone & Company Limited, [1977] C.T.C. 556 at 558; 77 D.T.C. 5394 at 5396 Addy, J. noted, in considering the issue of whether or not the purchase of a customer list was on capital account, that:

. . . In considering the issue one must look at the true nature and substance of the transaction, not merely at the words used by the parties in describing it.

[Original emphasis.]

In applying the law to the facts of plaintiff’s transaction it is relevant to note the pronouncement by Lord Wilberforce in Tucker v. Granada Motorway Services, [1979] 2 All E.R. 801 at 804 wherein he stated:

It is common in cases which raise the question whether a payment is to be treated as a revenue or as a Capital payment for indicia to point different ways. In the end the courts can do little better than form an opinion which way the balance lies.

[Emphasis added.]

Given the fact that the purchase of customer lists together with relevant insurance policies and other related documents constitutes the very essence of an insurance agent's business, the threshold that must be crossed by the taxpayer in having the balance tip in favour of characterizing the outlay as revenue is necessarily high.

Examining the substance of the transaction between plaintiff and the trustee, one may note several indicators that point to the determination of the transaction as being of a capital nature within the meaning of the “enduring benefit” or “profit yielding subject” test.

The plaintiff purchased several customer lists at an agreed upon valuation of 30 per cent of the net commission earned per annum relating to new and renewed insurance placed for customers on those lists for the four-year period commencing March 19, 1975 and ending April 29, 1979. Thus, the plaintiff chose to assess the value of the customer lists secured in the agreement with the trustee on the basis of a four-year open format wherein 120 per cent of the future net commission earned constituted consideration for the purchased lists — payments being deferred until actual commissions (profits) per annum were ascertained.

Indeed, it is not open to the plaintiff to argue the contrary. The method of payment chosen was a reflection of its inability to anticipate whether in fact the customer lists were a source of future earning capability since it proposed to contribute an amount of 30 per cent of net commission income from clients on purchased customer lists over the agreed four-year period on the basis of estimated commissions of $7,000,000 (Exhibit D-3).

In effect the plaintiff appears to have employed a capitalization multiple of 1.2 as the basis for establishing a value for anticipated or prospective earnings to be derived from the acquisition. In fact, William E. Toyne, president of the plaintiff company, did testify that it was standard practice, in purchasing an insurance agency, to apply a multiple of 1.0 to 1.5 of the prospective earnings of an agency in submitting a proposal of acquisition.

The proposed and agreed method of payment provides an indicator, or at least an inference that the purchased customer lists were considered in the nature of a profit yielding asset capable of projected earning capacity.

The calculation of consideration on the basis of total anticipated future earnings over the duration of the agreement with the trustee provides a second indicator that the nature of the asset acquired was capital. As stated in the Auditors’ Report of the plaintiff’s organization — as of December 31, 1975 — expenditures associated with the acquisition of the customer lists (i.e. 30 per cent net commission earned) were to be charged against related revenue over the four-year period of the agreement as and when those expenditures became due. While the reporting of revenues gained and related expenses incurred in the same accounting period as a means of determining net income for that period is merely the application of the generally accepted accounting principle of “matching”, it is significant to note that the procedure employed “effectively amortizes the cost of such lists over their estimated four-year useful life.” In effect the cost of acquiring the customer lists in 1975 was to be ascertained in and allocated to future accounting periods when the benefits associated with the purchase of those assets were to be realized.

Consequently it is not open to the plaintiff to argue that the sum of $322,461 payable to the trustee as consideration for the O’Bryan Group customer lists for the 1975 taxation year constituted a revenue expenditure that brought a benefit that was entirely consumed in the taxation year that the expenditure was incurred.

Thus, to the extent that only part of the benefit associated with the acquisition in 1975 of the customer lists was consumed in that taxation year, it is clear that the plaintiff’s agreement with the trustee resulted in the purchase of an asset of “enduring benefit” within the meaning of that test as enunciated by Viscount Cave in the Atherton case (supra) and by Lord Reid in Hinton v. Maden (supra).

A third indicator that it was a capital outlay can be noted by the significant importance the plaintiff placed on the addition, to its team, of a number of former equity holders in the O’Bryan Group. The evidence supports the notion that it was crucial to the acquisition of the customer lists that former partners of the O'Bryan Group be retained. Although the plaintiff anticipated several millions of dollars in insurance commission revenues over the four-year period, this could only be accomplished and assured by the cooperation of those former O’Bryan Group partners selected to remain in the on-going operations (Exhibit D-3).

As noted in testimony by the president of the plaintiff corporation, it placed a high priority in securing the addition of certain equity holders from the O’Bryan Group. Business connections are maintained and developed in the insurance business by personal contact with various clients. To this end, insurance agencies attempt to hire agents with good reputations as well as skills and abilities in the insurance field.

It is clear that the acquisition of key personnel of the insolvent O’Bryan Group was a crucial factor to complete the transition of the customer lists and related insurance policies into a profit yielding subject of the plaintiff company.

As a means of obtaining their services the plaintiff offered — which offer was subsequently accepted and incorporated into the terms of the Agreement between the plaintiff and the trustee — to redistribute five per cent (i.e., one-sixth of 30 per cent) of the net commissions earned over the duration of the agreement to those key personnel desired. Of significance is the fact that the equity holders sought by the plaintiff were personally in debt to an amount equal to approximately $875,000. In fact several of the partners were facing personal insolvency. Thus pursuant to the proposal in bankruptcy (Exhibit D-6) — which proposal formed the basis of the net commission income distribution scheme found in the Agreement between plaintiff and the trustee — a loan not in excess of $900,000 was extended to the desired equity holders of the O’Bryan Group to satisfy their personal debt obligations in consideration of which those former partners would repay $100,000 — the remainder to be forgiven over the four-year duration of the Agreement. In turn, the debt of $100,000 would be extinguished over the duration of the Agreement with the trustee on the basis of the receipt of five per cent of net commission income from new and renewed insurance placed or arranged with the acquired customers.

A substantial majority of the equity holders, crucial to the acquisition, accepted the plaintiff’s offer of employment as proof of the success of this part of the proposal.

Although the former partners were not contractually liable to accept employment and remain employees of the plaintiff’s organization, their personal financial liabilities as well as an attractive financial package aimed at substantially reducing their personal debt load afforded the plaintiff an effective mechanism with which to eliminate the competition of former O’Bryan Group partners and a means of absorbing the personnel for the advantage of the Tomenson group.

All these factors taken together indicate to me that the sum of $322,461 constituted a payment on account of capital.

I hereby confirm the reassessment by the Minister of National Revenue for taxation year 1975. The action is dismissed with costs.

Action dismissed.