Couture,
C.J.T.C.C.:—The
assessment
issued
by
the
respondent
from
which
this
appeal
was
instituted
concerns
the
1986
taxation
year
of
the
appellant.
In
his
income
tax
return
for
the
year
in
issue,
the
appellant
claimed
expenses
of
$11,781
in
respect
of
the
operation
of
an
activity
under
the
registered
business
name
of
Canifrem
Conseil
Enr.
The
appellant
reported
the
amount
of
$2,500
as
income
from
that
operation,
resulting
in
a
surplus
of
expenses
of
$9,281.
He
also
reported
employment
income
of
$62,996.
In
addition,
he
claimed
a
$4,906
deduction
for
carrying
charges
on
the
basis
that
those
expenses
were
incurred
for
the
purpose
of
earning
income
from
property.
In
assessing
the
appellant,
the
respondent
disallowed
the
deduction
of
$11,781
in
expenses
on
the
ground
that
they
had
not
been
incurred
for
the
purpose
of
earning
income
from
a
business.
As
regards
the
carrying
charges,
the
respondent
allowed
an
amount
of
$234
out
of
the
$4,906
claimed.
The
net
loss
established
by
this
surplus
of
expenses
incurred
by
the
appellant
was
deducted
from
his
employment
income
according
to
his
income
tax
return.
The
evidence
clearly
shows
that
the
appellant
had
no
reasonable
expectation
of
profit
in
the
continued
operation
of
his
activity.
Consequently,
that
operation
could
not
constitute
a
business.
The
respondent
was
therefore
entitled
to
disallow
the
claimed
expenses
in
the
amount
of
$11,781.
Whereas
the
appellant's
activity
did
not
constitute
the
operation
of
a
business
within
the
meaning
of
the
Act,
the
amount
of
$2,500
declared
by
the
appellant
as
income
must
therefore
be
deducted
from
his
taxable
income.
As
regards
the
carrying
charges,
I
am
satisfied
on
the
basis
of
the
evidence
that
the
appellant
is
entitled
to
a
deduction
of
$2,453
in
computing
his
income.
For
these
reasons,
the
appeal
is
allowed,
and
the
assessment
is
referred
back
to
the
respondent
for
reconsideration
and
reassessment.
Appeal
allowed.
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