Teitelbaum,
J.:—By
means
of
a
direct
action
in
the
Federal
Court
of
Canada,
Trial
Division,
the
plaintiff
is
contesting
the
reassessment
made
by
the
Minister
of
National
Revenue.
The
said
reassessment,
dated
April
7,
1982,
added
the
sum
of
$50,000
to
plaintiff’s
income
for
the
1977
financial
year.
On
May
26,
1982,
the
plaintiff
objected
to
the
notice
of
reassessment.
Unfortunately
for
plaintiff,
the
Minister
of
National
Revenue,
by
notice
dated
March
24,
1983,
reconfirmed
the
said
notice
of
reassessment.
Plaintiff
corporation,
to
1979,
was
an
active
shoe
store
retailer
who,
in
1977,
had
22
shoe
stores,
selling
both
ladies’
and
men’s
shoes.
The
evidence
was
that
its
business
consisted
of
selling
90
per
cent
ladies’
shoes
and
10
per
cent
men's
shoes.
In
1979,
the
plaintiff
corporation
sold
all
of
its
assets
but
still
legally
exists.
The
22
retail
outlets
plaintiff
had
in
1977
were,
according
to
Mr.
Gérard
Gingras,
plaintiff’s
only
witness,
all
leased
stores
and
all,
but
one,
were
situated
in
shopping
centres
and
supposedly
in
the
Montreal
area.
In
1977,
the
plaintiff
had
a
retail
store
in
Cowansville
and
it
is
as
a
result
of
this
store
that
plaintiff's
problem
arose.
Sometime
in
1976,
a
certain
Mr.
Bacariar
approached
plaintiff,
Mr.
Gérard
Gingras,
then
secretary-treasurer
of
plaintiff,
to
see
if
plaintiff
would
be
interested
in
leasing
a
store
in
a
proposed
shopping
centre
to
be
situated
in
the
City
of
Cowansville.
At
this
time,
the
shopping
centre
was
under
construction
and
only
completed
in
1977.
Mr.
Gingras
testified,
and
it
was
in
no
way
contradicted,
as
Mr.
Gingras
was
the
only
witness
to
be
heard
by
me,
that
he
immediately
informed
Mr.
Bacariar
that
plaintiff
was
in
no
way
interested
in
leasing
a
store
in
Cowans-
ville
as
Cowansville
was
not
the
type
of
location
where
plaintiff
would
want
to
have
a
retail
outlet
for
its
merchandise.
Mr.
Gingras
explained
that
for
the
price
range
of
its
merchandise,
Cowansville
was
not
the
place
for
one
of
their
stores.
The
quality
of
shoe
sold
by
plaintiff
was
too
expensive
for
the
average
resident
of
the
area.
As
Mr.
Gingras
stated,
it
was
“pas
notre
marché”.
It
seems
that
after
Mr.
Gingras'
initial
refusal,
he
was
approached
by
Mr.
Bacariar
on
several
occasions
whereby
Mr.
Bacariar
offered
various
types
of
inducements
to
Mr.
Gingras
so
that
plaintiff
would
sign
a
lease
and
be
a
tenant,
a
desirable
tenant,
in
the
shopping
centre
of
Cowansville.
Some
of
the
inducements
offered
were:
(a)
No
base
rent
(b)
No
maintenance
charges
(c)
No
cost
for
advertising
(d)
Lessor
would
build
store
These
types
of
offers
were
being
made
to
plaintiff
but
without
success.
It
seems
that
Mr.
Bacariar
could
find
no
inducement
sufficiently
appealing
to
convince
Mr.
Gingras
to
agree
to
sign
a
lease
and
be
a
tenant
in
the
shopping
centre.
Probably,
in
frustration,
I
presume,
and
after
a
period
of
six
months,
Mr.
Bacariar
finally
said
to
Mr.
Gingras,
“What
is
it
that
will
convince
you
to
have
French
Shoes
Ltd.
sign
a
lease?”’
To
this
question,
and
as
Mr.
Gingras
stated,
he
replied
in
jest,
“$50,000”.
To
the
surprise
of
plaintiff
and
Mr.
Gingras,
its
representative,
Mr.
Bacariar
came
back
soon
after
and
agreed
to
pay
plaintiff
the
$50,000
requested.
Plaintiff
accepted
because,
as
Mr.
Gingras
states,
plaintiff
had
nothing
to
lose.
The
lessor
was
to
do
all,
plaintiff
only
had
to
furnish
the
inventory
and
the
equipment
necessary
to
operate
a
retail
shoe
store,
e.g.
cash
register,
chairs,
etc.
Plaintiff
decided
that
this
store
would
be
a
discount
shoe
store
where
shoes
not
selling
in
its
regular
stores
would
be
shipped
to
Cowansville
for
sale.
A
lease,
Exhibit
P-1,
was
produced
as
being
the
lease
signed
between
Les
Galeries
de
Cowansville
Inc.
as
lessor
and
French
Shoes
Ltd.
as
lessee.
According
to
Mr.
Gingras,
the
sum
of
$50,000
was
paid
by
Les
Galeries
de
Cowansville
Inc.
to
plaintiff
at
the
signing
of
the
lease
which
was
on
June
22,
1977
even
though
the
lessor
only
obligated
himself
to
pay
this
sum
“on
or
before
July
1st,
1977”
(last
page
of
Exhibit
P-1).
It
is
the
receipt
of
this
$50,000
that
is
the
crux
of
the
present
problem.
The
legal
issue
is
to
determine
whether
the
sum
received
by
plaintiff
from
the
lessor,
the
sum
of
$50,000,
is
to
be
considered
as
revenue,
as
claimed
by
the
Minister
of
National
Revenue,
or
as
“a
windfall
gain
realized
by
the
plaintiff
which
is
not
income
within
the
meaning
of
the
Income
Tax
Act”
(Paragraph
10
of
Plaintiff's
declaration).
I
believe
plaintiff's
witness
when
he
stated
he
never
had
any
intention
to
lease
the
store
in
Cowansville
until
he
received
the
consent
of
Les
Galeries
de
Cowansville
Inc.
that
it
would
pay
plaintiff
the
$50,000
requested
as
well
as
the
other
benefits
promised,
such
as,
no
base
rent,
no
maintenance
charges,
etc.
In
examining
the
lease,
Exhibit
P-1,
one
can
see,
from
the
last
page
of
the
lease,
that
the
sum
of
$50,000
received
by
plaintiff
was
given
with
what
seems
to
me
to
be
a
condition
or
obligation.
It
states:
“Lessee
shall
receive
the
sum
of
$50,000
to
be
applied
against
its
inventory”
[Emphasis
is
mine.]
In
cross-examination
the
witness
Gingras
stated
that
it
was
himself
and
an
associate
who
negotiated
all
the
leases
for
plaintiff
and
from
the
date
he
joined
the
company
to
the
time
the
company’s
assets
were
sold
in
1979,
he,
on
behalf
of
plaintiff,
leased
22
stores
and
renegotiated
12
leases
for
a
total
of
34
negotiations.
This
indicates
to
me
that
a
very
important
part
of
the
company’s
business
is
in
the
negotiation
of
leases.
The
better
the
conditions,
that
is,
rent,
extra
charges,
etc.,
the
more
the
profit
will
be
from
any
individual
store.
There
is
no
doubt
that
the
main
business
of
the
plaintiff
is
the
selling,
at
retail,
of
shoes.
Although
the
witness
stated
in
his
examination
in
chief
that
the
plaintiff's
stores
were
all
in
the
Montreal
area,
in
cross-examination
he
admitted
that
plaintiff
had
one
store
in
Joliette,
from
1967,
one
in
Chicoutimi,
from
1975
and
three
stores
in
Ottawa
in
1979.
Furthermore,
the
witness
stated
he
was
really
not
interested
in
having
a
store
in
Cowansville
as
he
was
convinced
it
would
not
be
profitable,
“pas
rentable".
He
admitted
his
definition
of
“pas
rentable”
meant
the
store
would
only
“break
even".
The
$50,000
that
the
company
received
did
not
change
the
question
that
the
store
would
still
be
“pas
rentable"
but
with
$50,000,
he
was
quite
prepared
to
go
into
the
store
in
Cowansville.
The
witness
also
admitted
that
the
sum
of
$50.000
received
by
plaintiff
was
included
as
“revenue"
in
plaintiff's
Statement
of
Earnings
and
Retained
Earnings
for
the
year
ended
July
31,
1977
(Exhibit
D-1,
page
10)
but
later,
at
the
suggestion
of
his
accountant,
deducted
the
said
sum
(Exhibit
D-1,
page
4)
and
therefore
no
tax
of
any
kind
was
paid
on
the
receipt
of
the
said
sum
of
$50,000.
Mr.
Gingras
informed
me
that
he
was
often
solicited
to
be
a
tenant
in
shopping
centres
as
plaintiff
is
considered
a
very
desirable
tenant.
It
was,
the
witness
presumes,
this
reason
why
he
was
approached
by
Mr.
Bacariar
and
why
he
was
offered
the
$50,000
plus
the
other
benefits
previously
mentioned.
In
all
the
years
that
he
was
negotiating
leases
for
plaintiff
and
to
his
knowledge,
this
was
the
only
time
that
the
company
received
a
cash
inducement
of
$50,000.
The
attorney
for
plaintiff
informed
me
that
it
was
not
his
intention
to
claim
that
the
receipt
of
the
sum
of
$50,000
represents
a
payment
in
respect
of
business
carried
on
by
plaintiff
within
the
meaning
of
clause
14(5)(a)(IV)(A)
of
the
Income
Tax
Act
and
as
a
result
I
have
ignored
the
testimony
of
Ronald
Singer,
C.A.
whose
testimony
would
only
have
referred
to
this
problem.
No
witnesses
were
offered
by
defendant.
In
argument,
the
attorney
for
plaintiff
submitted
that
the
receipt
of
the
$50,000
was
not
taxable
as
it
was
not
revenue,
the
revenue
of
plaintiff
only
coming
from
the
retail
sale
of
shoes.
He
claimed
that
the
receipt
of
the
money
was
a
unique
event,
it
never
having
occurred
before.
It
was
plaintiffs
contention
that
revenue
can
be
derived
from
three
main
sources:
(a)
Employment
(b)
Property
(c)
Business
as
well
as
from
capital
gains,
alimentary
pension,
etc.
The
attorney
argued
that
plaintiff
never
solicited
Les
Galeries
de
Cowansville
Inc.
but
that
it
was
the
representative
of
the
lessor
who
took
over
six
months
to
convince
plaintiff
to
sign
a
lease.
The
plaintiff
submits
five
cases
as
its
authorities
for
claiming
that
the
sum
of
$50,000
received
by
plaintiff
is
not
taxable.
Plaintiff
cites
the
case
of
Walker
(Inspector
of
Taxes)
v.
Carnaby,
Narrower,
Barham
&
Pykett,
[1970]
1
All
E.R.
502;
[1970]
1
W.L.R.
276
as
a
case
that
parallels
the
one
before
me.
In
this
case,
a
firm
of
accountants
were
auditors
to
a
company
and
five
other
associated
companies.
In
the
case
of
the
company,
they
had
acted
for
27
years
and
in
the
case
of
one
of
the
other
companies,
for
59
years.
After
1962,
the
auditors
were
told
their
services
would
no
longer
be
required
and
they
received
a
cheque
for
12,567.5
(English
pounds)
(being
the
equivalent
of
one
year’s
fees
as
auditors)
as
“solatium”
for
the
loss
of
the
office
of
auditors
(see
Head
Note).
The
Court
determined
that
this
payment
was
not
taxable
as
it
was
not
part
of
the
firm's
business.
Pennycuick,
J.
states
at
511
(W.L.R.
287):
When
one
looks
at
the
particular
facts
of
this
case
one
finds
that
the
taxpayers
were
carrying
on
the
business
of
chartered
accountants,
which
consists
in
rendering
services
of
a
certain
professional
character
in
return
for
reward.
They
rendered
those
services
to
these
five
companies
over
a
number
of
years
and
duly
received
their
reward
for
so
doing.
At
the
end
of
their
final
term
of
office
they
had
no
legal
claim
of
any
description
to
receive
any
further
payment
from
the
companies.
The
companies
then
proceeded
to
make
a
wholly
voluntary
payment
to
the
taxpayers.
It
is,
I
think,
irrelevant
that
the
companies
elected
to
make
that
payment
in
an
amount
identical
to
a
penny
with
the
fees
paid
to
the
firm
during
their
last
year
of
office.
It
seems
to
me
that
a
gift
of
that
kind
made
by
a
former
client
cannot
reasonably
be
treated
as
a
receipt
of
a
business
which
consists
in
rendering
professional
services.
The
subject-matter
of
the
assessments
under
Cases
I
and
II
is
the
full
amount
of
the
profits
or
gains
of
the
trade
or
profession.
Those
profits
have
to
be
computed,
it
is
well
established,
on
ordinary
commercial
principles.
It
does
not
seem
to
me
that
ordinary
commercial
principles
require
the
bringing
into
account
of
this
sort
of
voluntary
payment,
not
made
as
the
consideration
for
any
services
rendered
by
the
firm,
but
by
way
of
recognition
of
past
service
or
by
way
of
consolation
for
the
termination
of
a
contract.
It
is
difficult
to
amplify
the
point
any
further.
I
fully
appreciate
that
the
taxpayer
would
not
have
received
this
payment
if
they
had
not
previously
rendered
professional
services
to
the
companies.
Again,
I
fully
appreciate
that
the
payment
was
made
to
them
as
a
firm
and
not
because
the
companies
had
a
particular
affection
for
any
member
of
the
firm
personally.
[Emphasis
is
mine]
The
case
before
me
is
very
different.
In
the
Walker
case
(supra)
the
payment
is
made
“by
way
of
recognition
of
past
services".
The
payment
in
the
Walker
case
is
a
gift.
The
client
wanted
to
give
a
gift
to
its
past
auditors
for
many
years
of
loyal
service.
In
the
case
before
me
one
cannot
state
that
Les
Galeries
de
Cowansville
Inc.
wanted
to
give
a
gift
to
plaintiff
for
past
services
rendered.
What
Les
Galeries
de
Cowansville
Inc.
wanted
to
do
was
induce
the
plaintiff
to
rent
premises
in
its
shopping
centre
to
give
the
shopping
centre
some
sort
of
credibility
in
order
to
convince
other
prospective
tenants
to
lease
space.
At
the
same
time,
the
plaintiff,
by
accepting
the
sum
of
$50,000
received
a
substantial
benefit
in
terms
of
the
conditions
of
rental.
It
received
$50,000
and
should
have,
if
it
did
not,
apply
the
said
sum
to
its
inventory
as
required
by
Exhibit
P-1,
the
lease.
A
second
case
submitted
by
plaintiff
is
Murray
(Inspector
of
Taxes)
v.
Goodhews,
[1978]
2
All
E.R.
40;
[1978]
1
W.L.R.
499,
which
plaintiff
believes
is
similar
to
the
case
before
me.
Unfortunately,
I
do
not
agree
with
this
contention.
The
Murray
case
is
very
different.
In
the
Murray
case
one
of
the
main
considerations
for
making
the
payment
was,
at
page
40,
“(c)
that
Watney
had
made
the
payments
to
acknowledge
a
long
and
friendly
association
with
Goodhews
and
to
maintain
its
name,
goodwill
and
image
in
the
brewing
industry".
It
was
as
a
result
of
terminating
a
long
standing
contract
that
the
sum
was
paid.
It
was,
once
again,
paid
as
a
gift
and
not,
as
was
said,
for
“lost
profits".
In
the
case
before
me,
the
money
was
paid
to
induce
plaintiff
to
lease
a
store,
which
it
did,
and
to
cover
the
cost
of
part
of
its
inventory.
It
was
paid
as
part
of
the
terms
and
conditions
of
a
commercial
lease.
I
am
satisfied
the
money
received
by
plaintiff
is
a
benefit
of
leasing
as
the
benefits
plaintiff
received
when
it
was
agreed
that
plaintiff
woud
not
have
to
pay
any
cost
of
advertising
or
costs
of
maintenance
or
costs
to
prepare
the
premises,
as
is
normally
done
in
shopping
centre
leases.
The
payment
of
$50,000
is
simply
an
additional
benefit
to
the
other
benefits
granted
plaintiff
as
a
condition
to
plaintiff
leasing
space
in
the
shopping
centre.
I
was
also
referred
to
the
case
of
J.E.
Cranswick
v.
The
Queen,
[1980]
C.T.C.
93;
80
D.T.C.
6057;
and
Federal
Farms
Ltd.
v.
M.N.R.,
[1959]
C.T.C.
98;
59
D.T.C.
1050
(Ex.
Ct.)
by
the
attorney
for
Plaintiff
because
of
the
six
criteria
listed
by
Cameron
J.
in
the
Federal
Farms
case
and
followed
by
Grant,
D.J.
in
the
Cranswick
case.
The
six
criteria
listed
by
Cameron,
J.
and
quoted
by
Grant,
D.J.
are,
at
96
(D.T.C.
6059):
(a)
the
payment
was
entirely
voluntary;
(b)
it
was
given
by
persons
who
had
no
business
relations
with
the
taxpayer;
(c)
it
was
unrelated
to
the
taxpayer’s
business
activities;
(d)
the
taxpayer
had
no
legal
right
to
demand
any
portion
of
the
fund;
(e)
at
the
time
of
the
loss
he
had
no
expectation
of
being
so
compensated;
(f)
it
was
unlikely
ever
to
happen
again.
I
was
told
by
the
attorney
for
plaintiff
that
plaintiff’s
case
“fits
in".
Once
again
I
cannot
agree.
The
proof
indicates
that
the
$50,000
was
paid
after
a
request
for
same.
It
was
offered
as
an
incentive
by
Les
Galeries
de
Cowansville
Inc.
but
only
after
Mr.
Gingras
was
asked
what
would
it
take
to
convince
plaintiff
to
sign
a
lease.
The
reply
by
Mr.
Gingras
was
$50,000.
Therefore,
payment
of
the
sum
of
$50,000
was
requested
by
plaintiff
as
a
condition
to
plaintiff
signing
a
ease.
In
so
far
as
the
question
of
business
relations
are
concerned,
there
is
no
doubt
that
there
were
business
relations
between
the
parties.
Les
Galeries
de
Cowansville
Inc.
wanted
to
lease
premises
to
plaintiff
and
plaintiff
was
prepared
to
accept
to
lease
if
it
received
the
sum
of
$50,000
plus
other
benefits.
There
was,
according
to
plaintiffs
witness,
at
least
one-sided
negotiations
going
on
for
six
months.
Was
the
payment
unrelated
to
the
taxpayer’s
business
activities?
At
first
glance
one
would
have
to
answer
in
the
affirmative,
it
was
not
related
to
the
taxpayer’s
business
activity
of
selling
shoes.
This
would
be
true
if
I
would
only
be
restricted
to
looking
at
the
business
activity
of
plaintiff
as
only
selling
shoes
to
the
public.
It
is
important,
as
part
of
plaintiff's
business
activity,
to
sign
leases
for
stores
under
the
best
possible
conditions,
that
is,
the
cheapest
rent,
the
least
amount
of
expenditures
for
start-up
costs,
etc.
In
the
present
case,
there
was
an
additional
benefit,
a
single
payment
of
$50,000
in
addition
to
the
other
benefits
already
described.
I
also
believe
that
the
plaintiff,
after
signing
the
lease,
had
a
right
to
legally
claim
the
$50,000
promised
and
moreover
had,
according
to
the
lease,
an
obligation
to
apply
the
sum
to
its
inventory.
I
am
not
so
convinced
as
to
believe
that
such
a
payment
could
not
have
happened
again.
It
is
my
belief
that
there
was
a
good
possibility
of
its
happening
again
for
plaintiff
because
of
plaintiff's
outstanding
reputation.
Plaintiff
was
a
very
desirable
tenant
and,
as
such,
could
arrange
for
such
an
inducement
if
an
owner
of
a
shopping
centre
really
wanted
plaintiff
as
a
tenant.
Plaintiff’s
case
does
not
fit
into
the
criteria
cited
in
the
Federal
Farm
case.
Article
9(1)
of
the
Income
Tax
Act
states
very
clearly
what
is
income
from
business
or
property:
9.
(1)
Subject
to
this
Part,
a
taxpayer's
income
for
a
taxation
year
from
a
business
or
property
is
his
profit
therefrom
for
the
year.
I
am
satisfied
that
the
$50,000
received
by
plaintiff
is
part
of
its
revenue.
When
a
taxpayer
receives
an
inducement
to
sign
a
lease,
then
those
moneys
received
must
form
part
of
the
taxpayer's
revenue
for
the
year
in
which
the
inducement
was
received.
An
inducement
is
not
a
“windfall",
it
is
an
incentive,
a
reason
for
doing
something.
Taxpayers
and
lessors
use
inducements
as
a
form
of
doing
business.
For
the
lessor,
it
rents
out
space
and
for
the
taxpayer
it
is
a
benefit
received.
In
the
end,
the
receipt
of
the
benefit
helps
to
make
a
profit.
It
is
part
of
the
taxpayer's
revenue
that
is
derived
because
of,
and
is
part
of,
its
business
activity.
In
the
present
case,
the
money,
$50,000,
received
by
plaintiff
is
part
of
its
business
revenue.
Although
each
case
must
be
judged
on
the
facts
of
that
particular
case,
I
am
of
the
opinion
that
incentive
payments,
inducements,
generally
form
part
of
the
revenue
of
the
taxpayer.
The
payment
is
received
as
a
result
of
the
business
activity
carried
on
by
the
taxpayer
and
would
not
have
otherwise
been
received.
Plaintiff
contends
that
the
defendant,
in
1985,
amended
the
Income
Tax
Act
by
adding
paragraph
12(1)(x)
which
states:
12.(1)(x)
payments
as
inducement
or
as
reimbursement
etc.
—
any
amount
(other
than
a
prescribed
amount)
received
by
the
taxpayer
in
the
year,
in
the
course
of
earning
income
from
a
business
or
property,
from
(i)
a
person
who
pays
the
amount
(in
this
paragraph
referred
to
as
“the
payor”)
in
the
course
of
earning
income
from
a
business
or
property
or
in
order
to
achieve
a
benefit
or
advantage
for
himself
or
for
persons
with
whom
he
does
not
deal
at
arm's
length,
or
(ii)
a
government,
municipality
or
other
public
authority
where
the
amount
can
reasonably
be
considered
to
have
been
received
(iii)
as
an
inducement,
whether
as
a
grant,
subsidy,
forgivable
loan,
deduction
from
tax,
allowance
or
any
other
form
of
inducement,
or
(iv)
as
a
reimbursement,
contribution,
allowance
or
as
assistance
whether
as
a
grant,
subsidy,
forgivable
loan,
deduction
from
tax,
allowance
or
any
other
form
of
assistance,
in
respect
of
the
cost
of
property
or
in
respect
of
an
expense
to
the
extent
that
the
amount
(v)
was
not
otherwise
included
in
computing
the
taxpayer’s
income
for
the
year
or
a
preceding
taxation
year.
(vi)
except
as
provided
by
subsection
127(11.1),
does
not
reduce,
for
the
purposes
of
this
Act,
the
cost
or
capital
cost
of
the
property
or
the
amount
of
the
expense,
as
the
case
may
be,
(vii)
does
not
reduce,
pursuant
to
subsection
13(7.4)
or
paragraph
53(2)(s),
the
cost
or
capital
cost
of
the
property,
as
the
case
may
be,
or
(viii)
may
not
reasonably
be
considered
to
be
a
payment
made
in
respect
of
the
acquisition
by
the
payor
or
the
public
authority
of
an
interest
in
the
taxpayer,
his
business
or
his
property.
thus
admitting
that
before
the
amendment,
inducement
payments
such
as
received
by
plaintiff
were
not
revenue.
I
do
not
agree.
Subsection
37(2)
of
the
Interpretation
Act
1970
R.S.C.
c.
I-23
states:
37.
(2)
The
amendment
of
an
enactment
shall
not
be
deemed
to
be
or
to
involve
a
declaration
that
the
law
under
such
enactment
was
or
was
considered
by
Parliament
or
other
body
or
person
by
whom
the
enactment
was
enacted
to
have
been
different
from
the
law
as
it
is
under
the
enactment
as
amended.
Therefore,
the
amendment
of
the
Income
Tax
Act
does
not
imply
a
change
in
the
law,
it,
in
this
case,
clarifies
the
law
with
regard
to
inducement
payments.
For
the
reasons
herein
above
given,
plaintiff’s
action
is
dismissed
with
costs.
Action
dismissed.
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