Bonner,
T.C.J.
[Orally]:—The
appellant
C.I.P.
Inc.
appeals
from
assessments
of
income
tax
for
the
1979
and
1980
taxation
years
of
its
predecessor
company,
Pacific
Forest
Products
Limited.
The
assessments
were
made
on
the
basis
that
outlays
of
$28,963
in
1979
and
$52,222
in
1980
could
not
be
deducted
in
the
computation
of
income
by
virtue
of
the
provisions
of
subparagraph
18(1)(l)(i)
of
the
Income
Tax
Act.
The
Minister
assumed
that
the
amounts
in
question
were
expenses
incurred
for
the
use
and
maintenance
of
a
yacht
which
the
appellant
had
chartered
for
purposes
of
entertainment
and
promotion
with
respect
to
its
business.
The
only
issue
in
these
appeals
is
whether
the
expenditures
in
question
were
“.
.
.
for
the
use
.
.
.
of
property
that
is
a
yacht..
.”
within
the
meaning
of
the
subparagraph.
The
vessel
in
question
is
now
named
the
M.
V.
Breeze.
It
was
constructed
in
1944
for
the
United
States
Army
Transportation
Corps
as
a
tugboat.
It
was
later
sold
as
surplus
and
brought
to
Canada
where
it
was
used
until
1975
for
the
towing
of
log
booms
and
chip
barges.
The
vessel
was
tied
up
at
Victoria
from
1975
to
1977
when
it
was
bought
by
Breeze
Enterprises
Inc.,
a
company
owned
by
the
witnesses
Donald
Grant
Butt
and
his
wife
Noreen.
The
vessel
is
described
in
the
certificate
of
registry
as
a
''wood
tug".
It
is
propelled
by
a
12-cylinder
turbo-charged
diesel
motor
developing
675
horsepower.
It
is
90
feet
in
length,
24
feet
in
breadth
and
has
a
draught
of
12
feet.
It
is
apparently
capable
of
a
speed
of
12
knots.
Following
purchase
by
Breeze
Enterprises
the
winch
at
the
stern
of
the
ship
was
removed.
The
area
where
the
winch
had
been
located
was
enclosed
and
fitted
out
for
use
as
a
lounge.
Paint
was
stripped,
woodwork
was
varnished
and
carpeting
was
installed.
A
piano
and
an
electric
organ
were
also
provided.
Mr.
Butt
testified
that
despite
the
refitting
the
Breeze
could
be
used
for
towing
in
sheltered
waters,
but
that
the
winch
would
have
to
be
reinstalled
if
deep-sea
towing
were
intended.
The
vessel
was,
following
the
refitting,
and
is
now
offered
for
charter.
According
to
the
brochure,
Exhibit
A-5,
the
Breeze
offers
“a
comfortable,
relaxing
holiday".
During
the
fishing
season
the
breeze
is
anchored
at
the
fishing
grounds
and
guests
are
flown
to
it.
They
live
and
eat
on
the
vessel
and
do
their
actual
fishing
from
the
smaller
craft
shown
in
the
picture
in
the
lower
right-hand
corner
of
Exhibit
A-5.
The
Breeze
is
used
for
fishing
charter
purposes
during
a
season
limited
to
the
four-
to
six-week
period
per
year
when
Mr.
Butt
can
take
holidays
from
his
regular
job.
Some
use
is
also
made
of
it
on
day
and
weekend
charters
for
weddings
and
similar
parties.
Mr.
and
Mrs.
Butt
now
reside
on
the
boat
and
I
gather
that
they
have
done
so
since
the
1977
refitting.
Mr.
Kennedy's
argument
rested
primarily
on
the
decision
of
the
Tax
Review
Board
in
John
Barnard
Photographers
Ltd.
v.
Minister
of
National
Revenue,
[1979]
C.T.C.
2678;
79
D.T.C.
592.
It
was
Mr.
Kennedy's
position
that
the
original
design
of
a
vessel
cannot
by
itself
determine
whether
it
is
a
yacht
or
a
vessel
of
some
other
category.
Rather,
he
submitted,
due
regard
must
be
had
to
the
use
to
which
the
vessel
is
put.
He
emphasized
that
the
disputed
amounts
were
expended
by
the
appellant’s
predecessor
to
provide
a
pleasurable
experience
for
its
guests
and
he
concluded
that
despite
the
vessel's
origins
as
a
tug
it
ought,
by
reason
of
such
use,
to
be
regarded
as
a
yacht
or
“bateau
de
plaisance
’,
to
use
the
words
of
the
French
version.
It
was
common
ground
that
the
amounts
now
in
question
would,
were
it
not
for
paragraph
18(1
)(l)
of
the
Act,
be
properly
deductible
in
the
computation
of
profit.
It
is
therefore
necessary
to
pay
careful
attention
to
the
words
used
by
Parliament
in
addressing
the
question
whether
the
statutory
prohibition
has
application.
Of
particular
concern
here
are
the
words
which
I
have
already
quoted,
but
it
would
do
well
to
repeat
them,
.
.
for
the
use
.
of
property
that
is
a
yacht
...”.
Those
words
make
it
plain
that
the
nature
of
the
use
made
of
the
property
is
irrelevant
for
purposes
of
paragraph
18(1
)(l)
except
to
the
extent
that
such
use
identifies
the
nature
of
the
property.
The
Barnard
decision
is
not,
as
I
read
it,
authority
for
the
proposition
that
the
use
of
a
vessel
for
pleasure
identifies
the
vessel
as
a
yacht
during
the
period
of
such
use.
The
words
of
the
Income
Tax
Act
are
to
be
given
their
ordinary
meaning
unless
the
context
indicates
otherwise.
The
Breeze
was
a
tugboat
fitted
out
or
converted
for
use
as
a
residence
and
for
the
entertainment
and
housing
of
fishing
parties.
Despite
the
refitting
it
remained
a
vessel
which
in
ordinary
English
usage
could
accurately
be
described
only
as
a
tugboat
or
perhaps
as
a
converted
tugboat.
It
did
not
by
virtue
of
the
refitting
become
a
vessel
which
could
accurately
be
described
as
a
yacht
or
“bateau
de
plaisance”.
None
of
the
definitions
of
the
word
“yacht"
to
which
reference
was
made
in
argument
made
transitory
use
for
pleasure
purposes
the
sole
criterion
on
which
a
vessel
could
be
identified
as
a
yacht.
The
appeals
will
therefore
be
allowed
with
costs
and
the
assessments
referred
back
to
the
respondent
for
reconsideration
and
reassesment
on
the
basis
that
paragraph
18(1
)(l)
of
the
Income
Tax
Act
does
not
apply
to
prohibit
the
deduction
of
the
expenses
in
question.
Appeals
allowed.
Email this Content