Kempo,
J.T.C.C.
(orally):—These
informal
procedure
appeals
concern
the
appellant’s
1990
and
1991
taxation
years.
Paragraphs
3
to
7
inclusive
of
the
respondent's
reply
to
notice
of
appeal
identify
the
issue
raised
and
the
assessing
position
of
the
respondent
acting
through
the
Minister
of
National
Revenue
(the
"Minister")
respecting
that
issue
tnusly:
3.
In
computing
income
for
the
1990
and
1991
taxation
years,
the
appellant
deducted
the
amount
of
$12,300
for
each
year
in
respect
of
leasing
costs
of
a
vehicle.
4.
The
appellant’s
1990
and
1991
taxation
years
were
assessed
on
December
24,
1990
and
December
30,
1991,
respectively.
5.
In
reassessing
the
appellant
for
the
1990
and
1991
taxation
years
on
February
8,
1993,
the
Minister
of
National
Revenue
(the
"Minister")
reduced
the
claim
for
leasing
costs
by
$12,300,
from
$12,300
to
nil
for
1990
and
by
$8,061.26,
from
$12,300
to
$4,238.74.
6.
In
so
reassessing
the
appellant,
the
Minister
made
the
following
assumptions
of
fact:
(a)
at
all
relevant
times
the
appellant
operated
a
business
with
a
fiscal
period
of
May
1
to
April
30;
(b)
Carlos
Rodrigues
is
the
sole
shareholder
as
well
as
a
director
and
authorized
signing
officer
of
the
appellant;
(c)
on
May
11,
1987
Carlos
Rodrigues,
on
behalf
of
the
appellant,
signed
a
document
with
Anglo
Canadian
Motors
indicating
his
intent
to
lease
a
1987
Jaguar
XJ6
Sovereign;
(d)
the
appellant
did
not
carry
through
with
its
intention
to
lease
a
1987
Jaguar
XJ6
Sovereign
from
Anglo
Canadian
Motors;
(e)
on
July
18,
1987,
Carlos
Rodrigues,
on
behalf
of
the
appellant
entered
into
a
lease
agreement
(the
"agreement")
with
Edmonton
Motors
Limited
dated
July
18,
1987;
(f)
the
agreement
provided
for
the
five-year
lease
of
a
1987
Jaguar
XJ6
Sovereign
(hereinafter
referred
to
as
the
"automobile")
commencing
on
July
18,
1987
and
ending
on
July
17,1992;
(g)
pursuant
to
the
agreement,
the
lease
payments
were
$1,025
per
month
commencing
July
18,
1987;
(h)
the
automobile
is
a
passenger
vehicle
pursuant
to
subsection
248(1)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act");
(i)
no
more
than
90
per
cent
of
the
cost
of
leasing
the
automobile
was
in
respect
of
gaining
or
producing
income
from
business
or
property;
(j)
the
appellant
is
entitled
to
deduct
lease
payments
in
the
amount
of
nil
for
1990
and
$4,238.74
for
1991
calculated
in
accordance
with
Schedules
“A”
and
“B”
attached.
[Schedules
"A"
and
“B”
are
omitted.]
7.
The
issue
is
whether
the
leasing
costs
in
respect
of
the
automobile
are
restricted
pursuant
to
section
67.3
of
the
Act.
The
appellant's
position
in
its
notice
of
appeal
was
briefly
stated
as:
.
.
.an
enforceable
contract
to
lease
the
vehicle
was
entered
into
on
May
11,
1987,
thereby
rendering
section
67.3
inapplicable.
Thus
the
essential
issue
turned
on
the
effective
date
upon
which
the
appellant
had
leased
the
vehicle.
Section
67.3
of
the
Act
limits
the
cost
of
leasing
a
passenger
vehicle
which
term
is
defined
in
subsection
248(1)
as
follows:
248(1)
“passenger
vehicle"
means
an
automobile
acquired
after
June
17,
1987
(other
than
an
automobile
acquired
after
that
date
pursuant
to
an
obligation
in
writing
entered
into
before
June
18,
1987)
and
an
automobile
leased
under
a
lease
entered
into,
extended
or
renewed
after
June
17,
1987;
The
evidence
produced
for
the
appellant
was
given
by
Carlos
Rodrigues
who
participated
in
the
transactions
under
review
on
its
behalf.
His
testimony
was
that
he
approached
Anglo
Canadian
Motors
Inc.
("Anglo
Motors")
as
then
being
the
only
dealer
in
Edmonton
handling
Jaguar
motor
vehicles,
that
he
signed
a
contract
with
them
dated
May
11,
1987
(Exhibit
A-1)
and
that
he
put
down
a
deposit
of
$2,000
so
that
they
could
go
ahead
and
order
the
car
as
it
was
not
in
inventory
at
that
time.
While
his
testimony
was
that
he
was
“buying”
a
car
from
Anglo
Motors
and
that
he
had
simply
been
referred
to
Edmonton
Motors
for
mortgage
or
financing
purposes,
it
is
quite
clear
this
was
not
what
had
happened
because
the
vehicle
was
actually
leased
for
a
term
of
60
months
pursuant
to
a
leasing
contract
dated
July
17,
1987
between
himself
(acting
for
the
appellant)
and
Edmonton
Motors.
The
leasing
contract
gave
the
lessee
via
a
letter
dated
July
18,
1987
emanating
from
Edmonton
Motors
(Exhibit
R-2)
the
right
to
purchase
the
vehicle
on
July
21,
1992
provided
there
was
no
indebtedness
outstanding
to
Edmonton
Motors.
Nothing
was
advanced
in
evidence
to
indicate
that
the
$2,000
paid
to
Anglo
Motors
could
or
would
be
applied
against
the
leasing
or
purchasing
costs.
Apparently
a
credit
check
was
carried
out
by
Edmonton
Motors
on
May
11,
1987
(see
attachment
to
Exhibit
A-2)
so
it
may
reasonably
be
inferred
that
some
sort
of
communication
occurred
between
them
and
Anglo
Motors.
However
the
lease
agreement
itself
(Exhibit
R-1)
makes
no
mention
of
Anglo
Motors.
It
simply
identifies
Edmonton
Motors
as
a
company
engaged
in
the
lease
hiring
of
motor
vehicles.
There
is
no
mention
of,
nor
any
acknowledgment
of,
any
relationship
it
may
have
had
with
Anglo
Motors
nor
has
any
real
evidence
been
presented
supportive
of
an
ostensible
agency
relationship
between
them
respecting
this
transaction.
The
lease
itself
required
a
deposit
of
$1,050
(which
Mr.
Rodrigues
does
not
recall
paying)
plus
$1,025
per
month
for
the
total
period
of
60
months.
No
prepayment
privileges
are
extant
other
than
payments
on
account
of
liquidated
damages
for
early
cancellation
and
Edmonton
Motors
always
had
the
right
to
provide
a
replacement
vehicle.
For
the
appellant
to
succeed
it
must
establish
that
it
had
entered
into
a
contract
to
lease
the
vehicle
prior
to
June
17,
1987
and
that
its
contractual
leasing
rights
arose
out
of
an
arrangement
with
Anglo
Motors
on
May
11,
1987.
In
my
view
the
evidence
falls
short
of
accomplishing
this
end.
I
am
unable
to
find
an
agency
relationship
existing
wherein
either
of
Edmonton
Motors
or
Anglo
Motors
were
acting
for
or
through
each
other
instead
of
purely
on
their
own
particular
account.
t
accept
respondent-counsel's
submission
as
to
what
had
happened
which
is
that
Anglo
Motors
was
acting
merely
as
a
broker
or
intermediary
on
its
own
account
with
the
$2,000
deposit
paid
to
it
being
in
the
nature
of
a
finder's
fee.
Anglo
Motors
did
not
obligate
itself
to
lease
the
vehicle,
nor
did
it
obligate
itself
to
sell
it
outright
at
the
end
of
the
lease
term.
Edmonton
Motors
took
on
these
rights
and
obligations
on
its
own
account
which
commenced
July
18,
1987
according
to
the
terms
of
the
lease
contract.
For
the
reasons
given
I
find
that
the
Jaguar
was
a
"passenger
vehicle”
within
the
meaning
of
subsection
248(1)
of
the
Act
as
an
automobile
leased
under
a
lease
entered
into
after
June
17,
1987
and
therefore
the
appeals
are
dismissed.
Appeals
dismissed.
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