Tremblay,
T.C.J.:—This
appeal
was
heard
on
common
evidence
with
the
appeal
of
Monique
Beauregard
(87-646
(IT))
in
Montréal,
Quebec
on
October
14,
1988.
1.
Point
at
Issue
The
question
is
whether
the
appellant
Robert
Lamarre
was
correct,
in
calculating
his
income
for
1982,
1983
and
1984,
to
include
in
the
income
of
the
partnership
Séri
+,
a
silk-screen
printing
business
in
which
he
is
a
partner
with
his
spouse
Monique
Beauregard,
the
salary
received
personally
from
the
Vieux-Montréal
CEGEP
as
a
teacher,
namely
$31,988
in
1982,
$26,954
in
1983
and
$30,905
in
1984.
The
respondent,
who
taxed
the
appellant
directly
on
these
amounts
received
without
first
including
them
in
the
partnership,
maintained
that
under
the
Income
Tax
Act
(the
Act),
employment
income
cannot
be
part
of
the
income
of
a
partnership
as
the
latter
is
taxed
only
on
business
income.
The
appellant
on
the
other
hand,
relying
on
paragraph
96(1)
(a)
of
the
Act,
argued
that
when
a
taxpayer
is
a
member
of
a
partnership
the
latter's
income
must
be
calculated
as
if
the
partnership
was
a
separate
person.
The
appellants
further
argued
that
under
the
partnership
contract,
all
income
of
each
partner
and
that
resulting
from
the
diffusion
by
teaching
or
other
means
of
knowledge
or
expertise
developed
by
the
partnership
belongs
to
it.
2.
Burden
of
Proof
2.01
The
appellant
has
the
burden
of
showing
that
the
respondent's
assessments
are
incorrect.
This
burden
of
proof
results
from
several
judicial
decisions,
including
a
judgment
of
the
Supreme
Court
of
Canada
in
Johnston
v.
M.N.R.,
[1948]
S.C.R.
486;
[1948]
C.T.C.
195;
3
D.T.C.
1182.
2.02
In
the
same
judgment
the
Court
held
that
the
facts
assumed
by
the
respondent
in
support
of
assessments
or
reassessments
are
also
presumed
to
be
true
until
the
contrary
is
shown.
In
the
instant
case
the
facts
presumed
by
the
respondent
are
described
in
paragraph
4(a)
to
(m)
of
the
reply
to
the
notice
of
appeal.
This
paragraph
reads
as
follows:
4.
In
making
the
reassessments
of
June
11,
1986
for
the
taxation
year
1983
and
20
March,
1987
for
the
taxation
years
1982
and
1984,
the
respondent
relied
inter
alia
on
the
following
presumed
facts:
[facts
marked
“confirmed”
mean
that
they
were
confirmed
by
the
evidence]
(a)
the
appellant
was
hired
as
a
teacher
by
the
Vieux-Montréal
CEGEP
on
September
1,
1979
by
a
contract
of
employment
concluded
between
this
CEGEP
and
the
appellant
personally;
[confirmed—Exhibits
1-3
and
1-6]
(b)
as
such
the
appellant
received
from
the
Vieux-Montréal
CEGEP
gross
salary
of
$31,988,
$26,954
and
$30,905
respectively
in
the
taxation
years
1982,
1983
and
1984;
[confirmed
—Exhibit
1-5]
(c)
deductions
were
made
from
these
respective
salary
amounts
for
the
Vieux-
Montréal
CEGEP
pension
fund,
union
dues,
Quebec
Pension
Plan
(Q.P.P.)
premiums
and
unemployment
insurance
premiums;
[confirmed
—Exhibit
1-5]
(d)
the
appellant
is
covered
by
the
agreement
concluded
between
the
colleges’
Comité
patronal
de
négociation
and
the
Fédération
national
des
enseignants
québécois
(C.N.T.U.);
[confirmed—Exhibit
1-4]
(e)
during
the
taxation
years
at
issue
the
appellant
was
a
partner
in
the
partnership
Séri
+
with
his
wife
Monique
Beauregard;
[confirmed
—Exhibit
A-2]
(f)
the
partnership
Séri
+
is
a
silk-screen
printing
business
and
its
fiscal
year
corresponds
to
the
calendar
year;
[confirmed
—Exhibit
A-3]
(g)
the
purpose
of
the
partnership
Séri
4-
indicated
in
clause
two
of
the
partnership
agreement
made
between
the
appellant
and
Monique
Beauregard
on
July
10,
1974
is
as
follows:
"to
manufacture,
import,
export,
buy,
sell
and
generally
trade
in
and
perform
all
other
operations
relating
to
fabrics
of
all
kinds,
natural
or
synthetic,
as
well
as
all
their
products";
[confirmed
—Exhibit
I-2]
(h)
by
a
partnership
declaration
filed
and
registered
in
the
office
of
the
prothonotary
of
the
Superior
Court,
district
of
Montréal,
on
August
1,
1974
the
appellant
and
Monique
Beauregard
further
stated
that
their
work
was
to
"design,
produce
and
sell
at
wholesale
textile
and
graphic
designs
under
the
names
and
trade
names
of
'Séri
+
"';
[confirmed—Exhibit
A-1]
(i)
similarly,
by
an
amended
partnership
declaration,
filed
and
registered
in
the
office
of
the
prothonotary
of
the
Superior
Court,
district
of
Montréal,
in
February
1979,
indicating
a
change
of
address
and
of
the
matrimonial
status
of
the
appellant
and
Monique
Beauregard,
as
the
latter
had
become
his
spouse,
they
stated:
That
we
are
doing
business
and
intend
to
do
business
as
a
partnership
in
the
district
of
Montréal,
in
the
field
of
graphic
and
textile
design
and
production
and
in
the
printing
and
finishing
of
fabrics
and
sewn
items
using
our
fabrics
and
sewn
items,
as
wholesalers
and
retailers;
[confirmed
—
Exhibit
A-2]
(j)
teaching
is
not
one
of
the
activities
of
the
partnership
Séri
+
;
[denied]
(k)
the
salary
received
by
the
appellant
from
the
Vieux-Montréal
CEGEP,
mentioned
in
paragraph
(b),
is
employment
income
not
included
in
the
calculation
of
the
income
of
the
partnership
Séri
+
;
[denied]
(l)
the
partnership
Séri
+
accordingly
sustained
revised
losses
of
$5,731,
$7,899
and
$14,622
respectively
in
the
fiscal
years
1982,
1983
and
1984;
[denied]
(m)
the
appellant’s
business
losses
for
the
taxation
years
1982,
1983
and
1984
are
accordingly
not
$18,545,
$9,347
and
$21,213,
but
$2,866,
$3,945
and
$7,311
respectively.
[denied]
2.03
The
facts
assumed
by
the
respondent
regarding
Monique
Beauregard
are
described
in
paragraph
4(a)
to
(h)
of
the
reply
to
the
notice
of
appeal
in
case
87-646(IT).
This
paragraph
reads
as
follows:
4.
In
making
the
reassessments
of
August
6,
1986
for
the
taxation
years
1982,
1983
and
1984
the
respondent
relied
inter
alia
on
the
following
presumed
facts:
[those
followed
by
the
word
"confirmed"
are
facts
confirmed
by
the
evidence]
(a)
in
the
taxation
years
1982,
1983
and
1984
the
appellant
was
a
partner
in
the
partnership
Séri
+
with
her
husband,
Robert
Lamarre;
[confirmed
—Exhibit
A-2]
(b)
the
partnership
Séri
+
is
a
silk-screening
business
and
its
fiscal
year
corresponds
to
the
calendar
year;
[confirmed—Exhibit
A-3]
(c)
teaching
is
not
one
of
the
activities
of
the
partnership
Séri
+;
[denied]
(d)
only
the
appellant's
husband,
Robert
Lamarre,
devoted
his
time
to
teaching
Vieux-Montréal
CEGEP
students
during
the
taxation
years
1982,
1983
and
1984;
(e)
the
salary
received
by
the
appellant's
husband
from
the
Vieux-Montréal
CEGEP
for
this
work
during
the
taxation
years
1982,
1983
and
1984
is
employment
income
of
the
appellant's
husband,
which
is
not
included
in
the
calculation
of
income
of
the
partnership
Séri
+
;
(f)
the
partnership
Séri
+
accordingly
sustained
revised
losses
of
$5,731,
$7,899
and
$14,622
for
the
fiscal
years
1982,
1983
and
1984
respectively;
(g)
the
appellant
accordingly
sustained
business
losses
from
her
share
as
a
partner
in
the
partnership
Séri
+
in
the
taxation
years
1982,
1983
and
1984
of
$2,866,
$3,945
and
$7,311
respectively,
rather
than
having
business
income
of
$11,658,
$4,583
and
$6,991
respectively;
(h)
the
reassessments
of
August
6,
1986
for
the
taxation
years
1982
and
1984
indicate
no
tax
payable
by
the
appellant.
3.
Facts
The
facts
are
quite
straightforward
and
not
in
dispute.
3.01
The
appellant
was
born
in
1950.
After
completing
Grade
11
he
studied
applied
arts
for
four
years
and
then
studied
graphic
design
for
a
year
at
the
Université
du
Québec
at
Montréal.
In
1973
he
became
a
design
consultant
on
a
government
project,
the
Développement
des
métiers
d'art
dans
I'Est
du
Québec
in
Rimouski.
3.02
At
that
time
he
met
the
appellant
Monique
Beauregard,
who
was
working
on
the
same
project.
The
latter
had
returned
from
a
three-year
study
period
in
London,
also
in
the
field
of
graphic
design.
3.03
On
August
1,
1974
the
partnership
Séri
+
was
formed
and
registered
to
“design,
produce
and
sell
at
wholesale
textile
and
graphic
designs"
(Exhibit
A-1).
This
partnership
registration
was
preceded
by
a
partnership
agreement
signed
on
July
10,
1974
(Exhibit
1-2).
In
clause
2
of
this
agreement,
entitled
"Purpose",
it
states
the
following,
after
what
is
cited
above
in
paragraph
4(g)
of
the
reply
to
the
notice
of
appeal
(para.
2.02):
(TRANSLATION)
.
.
.
All
income,
earnings
and
fees
from
the
aforementioned
activities,
as
well
as
all
income
of
any
kind
earned
by
each
of
the
partners
and
resulting
from
the
diffusion,
by
teaching
or
other
means,
of
knowledge
or
expertise
acquired
or
developed
by
the
partnership
or
having
to
do
with
the
aforesaid
purpose,
shall
belong
to
the
partnership.
3.04
In
January
1975
the
two
partners
were
married
under
the
regime
of
separation
of
property.
3.05
In
1979,
following
a
fire
in
the
workshop,
the
appellant
Lamarre
filed
an
application
with
the
Vieux-Montréal
CEGEP
for
employment
as
a
teacher
of
the
silk-screen
reproduction
technique.
He
was
selected
from
five
candidates.
Specifically,
the
material
taught
was
the
design
of
images
and
transposition
by
the
silk-screen
technique.
3.06
An
average
of
60
students
per
session
were
divided
into
three
groups
of
20.
They
were
taught
theory
in
their
classes.
However,
the
students
spent
two
weeks
a
year
working
in
the
Séri
+
workshop.
3.07
Besides
teaching,
the
appellant
Lamarre
worked
at
the
workshop
40
to
50
hours
a
week.
3.08
It
was
admitted
that
the
appellant
Lamarre
received
a
salary.
The
CEGEP
did
not
agree
to
the
contract
being
signed
by
the
appellant
on
behalf
of
the
partnership.
It
was
clearly
a
contract
of
service
between
the
CEGEP
and
the
appellant.
3.09
Mrs.
Monique
Beauregard
testified
that:
(a)
after
four
years'
study
at
the
Institut
des
arts
appliqués,
she
studied
for
three
years
at
the
Goldsmiths'
College
of
the
University
of
London;
(b)
during
the
years
on
appeal
she
worked
at
Séri
+
for
an
average
of
60
hours
a
week;
(c)
during
the
years
on
appeal
she
helped
her
husband
prepare
courses
and
made
suggestions
for
student
work.
When
the
students
came
to
Séri
+
for
training
she
also
took
part
in
the
practical
courses
given.
3.10
Mrs.
Michèle
Hardy,
the
accountant
who
prepared
the
appellants'
tax
return,
said
that
she
relied
on
clause
2
of
the
partnership
contract
(Exhibit
I-2)
in
including
Mr.
Lamarre's
salary
in
the
partnership
income.
According
to
that
clause,
all
the
partners'
income
was
to
be
included
in
the
partnership
income.
4.
Act-Case
Law-Analysis
4.01
Act
The
principal
sections
of
the
Act
involved
in
the
instant
case
are
subsections
5(1),
9(1),
96(1)
and
248(1),
the
definition
of
"business".
They
will
be
cited
during
the
analysis
if
necessary.
4.02
Case
Law
Counsel
cited
the
following
case
law:
1.
Stubart
Investments
Limited
v.
M.N.R.,
[1984]
1
S.C.R.
536;
[1984]
C.T.C.
294;
84
D.T.C.
6305;
2.
Marotta
v.
The
Queen,
[1986]
1
C.T.C.
393;
86
D.T.C.
6192
(F.C.T.D.);
3.
Wiebe
Door
Services
Ltd.
v.
M.N.R.,
[1986]
2
C.T.C.
200;
87
D.T.C.
5025
(F.C.A.);
4.
Rosen
v.
The
Queen,
[1976]
C.T.C.
462;
76
D.T.C.
6274
(F.C.T.D.);
5.
Molot
v.
M.N.R.,
[1977]
C.T.C.
2170;
77
D.T.C.
111
(T.R.B.);
6.
Hecht
v.
M.N.R.,
[1980]
C.T.C.
2513;
80
D.T.C.
1438
(T.R.B.);
7.
Thibault
v.
M.N.R.,
[1983]
C.T.C.
2211;
83
D.T.C.
183
(T.R.B.);
8.
Bowater
Mersey
Paper
Company
Limited
v.
The
Queen,
[1987]
2
C.T.C.
159;
87
D.T.C.
5382
(F.C.A.);
9.
Abrahams
[No.
1]
v.
M.N.R.,
[1967]
1
Ex.
C.R.
314;
[1966]
C.T.C.
690;
66
D.T.C.
5451;
10.
Publishers
Guild
of
Canada
Ltd.
v.
M.N.R.,
[1956-60]
Ex.
C.R.
32;
[1957]
C.T.C.
1;
57
D.T.C.
1017.
4.03
Analysis
4.03.1
The
problem
is
not
whether
Robert
Lamarre
received
a
salary
from
the
Vieux-Montréal
CEGEP
during
the
years
at
issue,
which
is
not
disputed
by
the
appellants,
but
whether
that
salary
income
can
be
regarded
as
income
of
the
partnership
Seri
+.
4.03.2
On
the
evidence
there
is
no
doubt
that
the
instruction
given
by
the
appellant
Lamarre
at
the
Vieux-Montréal
CEGEP
had
to
do
with
the
purpose
of
the
partnership
Séri
+
(paras.
3.03,
3.04
and
3.05)
and
that
under
the
partnership
contract
the
appellant
was
to
include
his
salary
income
in
the
partnership.
4.03.3
However,
the
agreements
concluded
between
the
two
partners,
while
they
are
binding
on
the
partners,
do
not
necessarily
bind
the
Department
of
National
Revenue
if
the
said
agreements
are
contrary
to
the
Act.
4.03.4
The
question
therefore
is
whether
the
salary
received
by
the
appellant
Lamarre
in
the
years
at
issue
can
be
included,
under
the
Income
Tax
Act,
in
the
income
of
the
partnership
and
calculated
with
the
partnership's
other
income
or
losses.
Further,
can
the
result
be
divided
between
the
two
partners
and
tax
calculated
on
the
income,
and
the
loss
applied,
if
any?
4.03.5
Appellant's
argument
4.03.5(1)
Counsel
for
the
appellant
first
referred
to
subsection
5(1)
of
the
Act.
It
reads
as
follows:
5.
(1)
Subject
to
this
Part,
a
taxpayer's
income
for
a
taxation
year
from
an
office
or
employment
is
the
salary,
wages
and
other
remuneration,
including
gratuities,
received
by
him
in
the
year.
In
his
submission,
with
this
provision
as
written
it
is
impossible
"that
only
an
individual
can
include
salary
income
in
his
income"
(trans.
p.
3).
He
then
referred
to
an
individual
who
is
a
member
of
a
partnership,
as
covered
by
subsection
96(1),
which
reads
as
follows:
96.
(1)
Where
a
taxpayer
is
a
member
of
a
partnership,
his
income,
net
capital
loss,
non-capital
loss
and
restricted
farm
loss,
if
any,
for
a
taxation
year,
or
his
taxable
income
earned
in
Canada
for
a
taxation
year,
as
the
case
may
be,
shall
be
computed
as
if
(a)
the
partnership
were
a
separate
person
resident
in
Canada;
(b)
the
taxation
year
of
the
partnership
were
its
fiscal
period
.
.
.
4.03.5(2)
Counsel
for
the
appellant
pointed
out
that
when
the
partnership
contract
was
concluded
in
August
1974
the
two
partners
were
not
married.
They
married
in
January
1975
(para.
3.04).
Further,
the
appellant
Lamarre
was
not
doing
any
teaching
at
that
time.
He
did
not
begin
teaching
until
1979
(para.
3.05).
He
further
noted
that
the
requirements
of
the
teaching
institution,
the
CEGEP,
were
the
reason
why
the
appellant
Lamarre
could
not
sign
the
contract
in
the
name
of
Séri
+
(Exhibit
1-3).
4.03.5(3)
Counsel
for
the
appellant
pointed
out
that
subsection
96(1)
does
not
exclude
income.
It
does
not
state
“if
a
taxpayer
is
a
member
of
a
partnership,
his
income,
excluding
his
employment
income,
and
so
on".
There
is
no
exclusion
in
the
Act.
If
the
civil
agreement
is
as
it
is
in
the
instant
case,
all
the
taxpayer's
income
must
be
part
of
the
partnership
income
“as
if
the
partnership
were
a
separate
person".
Referring
to
Stubart
Investments
Ltd.
(para.
4.02(1)),
decided
by
the
Supreme
Court
of
Canada,
he
cited
the
fundamental
rule
that
any
person
is
entitled
to
arrange
his
affairs
so
as
to
pay
as
little
tax
as
possible.
According
to
the
Supreme
Court,
this
"principle
is
too
deeply
entrenched
in
Canadian
law
to
be
rejected
in
the
absence
of
clear
statutory
authority".
4.03.5(4)
Counsel
for
the
appellant
stated
that
it
is
standard
practice
in
law
firms
for
income
from
teaching
done
by
a
member
of
the
partnership
to
be
part
of
the
income
of
the
partnership,
depending
on
the
partnership
contract.
4.03.6
Respondent's
argument
4.03.6(1)
Counsel
for
the
respondent
referred
to
Rosen
(para.
4.02(4)),
Molot
(para.
4.02(5)),
Hecht
(para.
4.02(6))
and
Thibault
(para.
4.02(7)),
where
it
was
held
that
teachers
who
give
courses
as
part
of
a
program,
as
opposed
to
lecturers,
were
employees
and
not
independent
contractors.
Accordingly,
the
expenses
claimed,
other
than
those
authorized
by
the
Act
for
an
employee,
were
disallowed.
Such
expenses
could
only
be
deducted
in
connection
with
a
business.
In
the
instant
case
this
point
is
not
at
issue,
since
the
appellant
admits
having
received
a
salary
from
the
CEGEP
for
the
years
at
issue.
4.03.6(2)
Counsel
for
the
respondent's
theory
is
that
as
partnership
income
can
only
be
income
from
a
business
or
property,
any
salary
income
cannot
be
income
of
the
partnership.
4.03.6(3)
To
prove
this
theory,
counsel
first
cited
subsection
9(1)
of
the
Act,
which
reads
as
follows:
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.
He
then
referred
to
the
definition
of
"business"
in
subsection
248(1)
of
the
Act,
which
reads
as
follows:
248.
(1)
In
this
Act,
"business"
includes
a
profession,
calling,
trade,
manufacture
or
undertaking
of
any
kind
whatever
and,
except
for
the
purposes
of
paragraph
18(2)(c),
an
adventure
or
concern
in
the
nature
of
trade
but
does
not
include
an
office
or
employment;
[Emphasis
added.]
The
same
section
defines
the
word
"employment"
as
follows:
"employment"
means
the
position
of
an
individual
in
the
service
of
some
other
person
(including
Her
Majesty
or
a
foreign
state
or
sovereign)
and
"servant"
or
"employee"
means
a
person
holding
such
a
position;
In
the
submission
of
counsel
for
the
respondent,
while
section
3
of
the
Act,
which
is
of
general
application,
refers
to
the
principal
sources
of
income
(as
office,
employment,
business
or
property),
paragraph
4(1)(a)
states
that
the
income
(or
loss)
from
each
source
must
be
calculated
separately,
as
if
each
were
the
only
source.
Paragraph
4(1)(a)
reads
as
follows:
4.
(1)
For
the
purposes
of
this
Act,
(a)
a
taxpayer's
income
or
loss
for
a
taxation
year
from
an
office,
employment,
business,
property
or
other
source,
or
from
sources
in
a
particular
place,
is
the
taxpayer's
income
or
loss,
as
the
case
may
be,
computed
in
accordance
with
this
Act
on
the
assumption
that
he
had
during
the
taxation
year
no
income
or
loss
except
from
that
source
or
no
income
or
loss
except
from
those
sources,
as
the
case
may
be,
and
was
allowed
no
deductions
in
computing
his
income
for
the
taxation
year
except
such
deductions
as
may
reasonably
be
regarded
as
wholly
applicable
to
that
source
or
to
those
sources,
as
the
case
may
be,
and
except
such
part
of
any
other
deductions
as
may
reasonably
be
regarded
as
applicable
thereto;
Referring
now
to
subsection
96(1),
counsel
for
the
respondent
said
the
following:
(TRANSLATION)
.
.
.
which
applies
specifically
to
the
computation
of
income
in
the
case
of
partnerships
.
.
.
or
rather
partners.
When
the
Act
states
"Where
a
taxpayer
is
a
member
of
a
partnership,
his
income"
—but
it
is
his
income
as
a
partner,
namely
as
a
partner
operating
a
business—"shall
be
computed
as
if
the
partnership
were
a
separate
person"
.
.
.
In
other
words,
the
net
profit
of
the
partnership
Seri
+
is
business
income
of
the
partnership
Séri
+,
treated
as
a
separate
entity
for
the
purposes
of
this
computation,
but
one
can
go
further
and
say
"employment
income
is
also
added”,
because
the
Act
makes
a
very
clear
distinction
between
income
.
.
.
the
calculation
of
employment
income
and
the
calculation
of
business
income;
and
just
as,
basically,
a
corporation
cannot
have
employment
income
a
partnership
which
is
.
.
.
seen
for
the
purposes
of
the
Act
as
a
person
but
also
cannot
hold
a
position
or
have
employment
income.
There
may,
for
example,
be
property
income,
in
addition
to
business
income,
but
not
employment
income.
It
is
contrary
to
the
spirit
of
the
Act
and,
once
again,
to
the
definition
of
“business”
in
s.
248.
(trans.
pp.
16-17)
4.03.6(4)
Marotta
(para.
4.02(2)).
In
that
case
a
hospital’s
senior
physician
taught
at
the
hospital
as
part
of
courses
given
by
the
University
of
Toronto.
The
taxpayer
was
responsible
to
the
director
of
the
Faculty
of
Medicine
for
the
quality
of
the
medical
instruction
he
gave
to
students.
He
was
paid
by
the
University.
In
late
1971
the
taxpayer
became
a
partner
with
other
doctors
in
the
operation
of
a
business.
In
1972
and
1973,
he
included
in
the
income
of
the
partnership
income
from
his
teaching
at
the
hospital
as
part
of
the
Faculty
of
Medicine
of
the
University
of
Toronto.
The
question
was
as
to
the
nature
of
the
teaching
income
and
whether
it
could
be
included
in
partnership
income.
The
Federal
Court-Trial
Division
held
that
it
was
employment
income
in
the
same
sense
as
the
preceding
cases
(para.
4.03(6)).
However,
McNair,
J.
concluded
as
follows
at
page
399
(D.T.C.
6196):
In
my
opinion,
the
weight
of
evidence
shows
that
the
plaintiff's
relationship
with
the
University
of
Toronto
was
that
of
an
employee
and
not
that
of
an
independent
contractor.
The
nature
of
the
remuneration
received
was
salary
and
the
mode
of
its
application
by
the
partnership
does
not
change
it
into
business
income
for
tax
purposes.
The
plaintiff's
appeal
is
therefore
dismissed,
with
costs.
[Emphasis
added.]
4.03.6(5)
Thibault
(para.
4.02(7)).
Counsel
for
the
respondent
placed
great
emphasis
on
this
case.
During
1977
the
taxpayer
gave
nine
courses
in
five
different
institutions.
He
claimed
$3,123.45
as
business
expenses.
Taylor,
J.,
then
a
member
of
the
Tax
Review
Board,
held
on
the
evidence
that
in
each
of
the
contracts
concluded
with
the
five
institutions
the
taxpayer
Thibault
was
an
employee
and
that
the
taxpayer
did
not
become
an
independent
contractor
from
treating
the
five
contracts
together.
Counsel
for
the
respondent
cited
this
judgment
primarily
because
of
the
comments
made
following
argument
by
the
taxpayer
that
certain
professionals,
engineers,
accountants
and
lawyers,
who
teach,
include
the
pay
received
for
their
teaching
as
business
income.
No
evidence
was
presented
to
the
Court
to
this
effect.
Nevertheless,
the
member
gave
the
following
obiter
dictum
at
page
2214
(D.T.C.
185):
.
.
.
However,
another
point
has
troubled
me
considerably
in
reviewing
this
appeal.
How
do
I
distinguish
this
appellant
from
a
lawyer,
accountant,
engineer,
etc.,
apparently
doing
the
same
thing
as
this
appellant
alleges
that
he
did
—setting
out
to
sell
professional
expertise
to
a
range
of
"clients"
while
retaining
his
own
independence
and
decision-making
capability?
On
the
surface
there
would
seem
to
be
little
distinction
to
be
made,
and
this
appellant
eloquently
highlighted
that
point
for
the
Board.
But
this
appellant
is
assuming
that
a
lawyer,
accountant,
engineer,
etc.,
could
do
precisely
that
which
he
did
and
still
somehow
retain
that
elusive
designation
“businessman”.
In
my
view,
there
is
a
point
of
distinction
that
must
be
drawn.
It
would
appear
to
me
that
even
if
a
taxpayer
(lawyer,
accountant,
engineer
or
teacher)
sets
out
with
the
avowed
purpose
of
putting
himself
into
business,
but
in
the
process
of
so
doing,
he
enters
into
a
contract(s)
providing
another
party
with
the
elements
of
control
—(that
is
he
signs
a
personal
service
contract),
then
for
the
purposes
of
the
Income
Tax
Act
his
alleged
plan
of
business
definition
has
been
aborted.
An
independent
contractor
by
definition
may
enter
into
separate
business
arrangements
with
several
parties.
But
if
one
or
all
of
those
contracts
can
be
described
as
a
"contract
of
service”
rather
than
a
"contract
for
service”,
then
the
“business”
identification
is
clearly
at
risk
to
that
extent
when
challenged
by
the
Minister.
The
teaching
profession
may
leave
less
room
for
the
“independent
contractor”
to
operate
than
that
which
obtains
for
some
other
professions
because
of
the
requirement
to
co-ordinate
all
efforts
toward
one
single
objective—education,
according
to
the
standards
and
policies
established
for
the
institution.
4.03.6(6)
As
regards
the
appellant
Monique
Beauregard,
counsel
for
the
respondent
stressed
the
fact
that
the
reassessments
indicated
no
tax
payable
for
the
years
in
question,
namely
1982
and
1984.
He
argued
that
as
a
consequence
of
this,
because
of
Bowater
(para.
4.02(8))
and
Abrahams
[No.
1]
(para.
4.02(9)),
the
appeal
should
be
dismissed.
The
appellant
could
not
appeal
from
a
nil
assessment.
A
document
finding
that
there
is
no
tax
payable
is
not
an
assessment.
Accordingly,
no
one
can
appeal
something
that
does
not
exist.
Counsel
for
the
respondent
went
so
far
in
applying
this
principle
that
even
if
the
appeal
was
allowed
with
respect
to
the
appellant
Lamarre,
the
appeal
with
respect
to
the
appellant
Monique
Beauregard
should
be
dismissed.
Only
the
appellant
Lamarre
would
thus
be
taxed
on
half
the
partnership
income.
4.04
Decision
4.04.1
Appeal
by
the
appellant
Monique
Beauregard
For
the
reasons
given
by
counsel
for
the
respondent,
the
appeal
by
the
appellant
Beauregard
must
be
dismissed,
whatever
the
decision
rendered
in
the
appeal
by
the
appellant
Lamarre.
4.04.2
Lawyers
teaching
There
was
no
evidence
regarding
the
point
raised
by
counsel
for
the
appellant
about
lawyers
and
members
of
firms
who
teach
and
whose
pay
is
included
in
the
partnership
income
(para.
4.03.5(4)).
By
way
of
comment
I
would
say
that
ordinarily,
where
members
of
law
firms
are
concerned,
such
teaching
is
done
at
the
bar
school.
Large
firms
are
asked
to
provide
teachers.
Efforts
are
made
to
ensure
that
no
two
teachers
come
from
the
same
firm.
It
will
sometimes
happen
that
a
lawyer
assigned
from
a
firm
to
teach
is
unable
to
give
the
course
on
a
particular
day,
for
one
reason
or
another.
He
is
then
replaced
on
that
day
by
another
lawyer
from
the
same
firm.
No
source
deductions
are
made
and
the
pay
is
treated
as
fees
to
the
firm
obtained
by
the
person
teaching.
4.04.3
Appeal
by
the
appellant
Robert
Lamarre
4.04.3(1)
The
crucial
point
in
this
appeal
is
whether
the
salary
earned
by
the
appellant
can
be
partnership
income.
In
the
respondent's
submission,
the
partnership
cannot
have
salary
income,
only
income
from
a
business
or
property.
4.04.3(2)
It
is
true,
first,
that
from
a
civil
standpoint
a
partnership
is
a
legal
person
separate
from
the
partners,
even
though
at
civil
law
a
partner
is
responsible
for
the
partnership's
debts
and
from
the
tax
point
of
view
the
partnership
is
not
taxed
as
a
person.
Once
the
income
(or
loss)
has
been
calculated,
it
is
divided
between
the
partners
and
taxed
(or
applied)
to
the
income
of
each
one.
4.04.3(3)
Why
could
this
person,
the
partnership,
not
have
salary
income?
At
first
sight
it
would
appear
from
the
very
broad
language
of
subsection
96(1)
of
the
Act
that
a
partner's
income
from
whatever
source
(and
as
counsel
for
the
appellant
pointed
out
(para.
4.03.5(3)),
subsection
96(1)
makes
no
exclusions)
may
be
included
in
the
income
of
the
partnership.
Although
the
literal
wording
of
this
provision
appears
at
first
sight
to
support
the
appellant's
argument,
I
think
it
is
necessary
to
look
at
the
nature
of
the
taxpayer
in
question,
that
is
in
this
case
the
partnership,
and
consider
other
related
provisions
of
the
Act.
Under
the
definition
in
subsection
248(1)
of
the
Act,
a
taxpayer
includes
"any
person
whether
or
not
liable
to
pay
tax";
and
the
partnership
is
a
person.
How
could
a
partnership
have
salary
income,
since
salary
income
is
from
employment
and
an
employment,
under
the
above
definition
in
para.
4.03.6(3),
is
a
“position
of
an
individual”?
A
partnership,
which
is
an
artificial
person,
therefore
cannot
hold
employment
or
have
a
salary.
However,
can
a
salary
earned
by
an
individual
not
become
business
income
by
its
transfer
to
the
partnership?
If
the
individual
pays
for
the
services
provided
to
him
by
a
partnership
with
his
salary
income,
it
is
quite
clear
that
in
that
case
the
amount
received
is
business
income
of
the
partnership.
In
the
case
at
bar
the
partnership
provided
no
services
to
the
appellant
Lamarre.
Rather,
there
was
simply
a
transfer
of
the
income
from
Mr.
Lamarre
to
the
partnership.
4.04.3(4)
In
my
opinion
the
partnership
can
only
have
income
from
a
business
or
property,
and
I
apply
to
the
instant
case
the
decision
of
McNair,
J.
in
Marotta
(para.
4.03.6(4)):
The
nature
of
the
remuneration
received
was
salary
and
the
mode
of
its
application
by
the
partnership
does
not
change
it
into
business
income
for
tax
purposes.
I
consider
that
the
meaning
of
the
words
“his
income"
in
line
2
of
subsection
96(1)
above
(para.
4.03.5(1))
is
that
it
must
be
income
of
the
partner
as
a
member
of
the
partnership
operating
a
business
or
receiving
income
from
property,
as
counsel
for
the
respondent
pointed
out
(para.
4.03.6(3)
in
fine).
From
the
civil
standpoint
contract
I-2
is
perfectly
legal,
but
from
a
tax
standpoint
I
do
not
see
how
under
the
Income
Tax
Act
the
salary
earned
by
a
partner
can
become
income
of
the
partnership
to
which
he
belongs.
The
appeal
of
the
appellant
Robert
Lamarre
must
accordingly
be
dismissed
as
well.
5.
Conclusion
The
appeals
are
dismissed
for
the
foregoing
reasons
for
judgment.
Appeals
dismissed.
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