Cochren Construction Co Limited v. Minister of National Revenue, [1982] CTC 2848, 82 DTC 1833

Roland St-Onge [ORALLY]:—The appeal of the company, Cochren Construction Co Limited came before me on June 30, 1982, in the City of Toronto, Ontario, and the issue is whether some charitable donations were effectuated within the meaning of paragraph 110(1)(a) of the Income Tax Act, SC 1970-71-72, c 63, as amended, with respect to the appellant’s 1974, 1975 and 1976 taxation years.

The facts of this appeal are well spelled out in paragraphs 6 to 9(a) inclusive of the amended reply to the notice of appeal which read as follows:

6. In computing its income for the 1974 taxation year the Appellant sought to deduct $100,000 on the basis that it was a charitable donation made to the Holy Rosary Church, Burlington, Ontario, a registered charity under the Income Tax Act.

7. In computing its income for the 1975 taxation year the Appellant sought to deduct $70,000 on the basis that it was a charitable donation made to St Joseph’s Church, Kitchener, Ontario, a registered charity under the Income Tax Act.

8. The Respondent assessed the Appellent for its 1974 and 1975 taxation years on the basis that the amounts in respect of which deductions were claimed were not paid to the said churches and therefore were not gifts made by the Appellant to the churches. The payments were made by the Appellant to Reverend H B Smith, who made disbursements on behalf of the Appellant to various registered charities out of the payments received by him from the Appellant and it was at the time of making such disbursements that gifts from the Appellant were made to registered charities and were therefore eligible for deduction in the year in which they were so made.

9. In assessing the Appellant for the 1974, 1975 and 1976 taxation years the Respondent made the following assumptions, inter alia,

(a) the Appellant issued a cheque dated December 31, 1974, for $100,000 payable to the Very Reverend H B Smith and the said cheque was deposited at Cuna of Ontario, Credit Union Limited, under the name “H B Smith In Trust”;

At the hearing, counsel agreed that there was no dispute as to the figures and the only issue was whether the charitable donations were effectively within the meaning of paragraph 110(1 )(a) of the Act.

Mr Cochren, president of the appellant company and an acquaintance of Father Smith for sixty years, testified as follows:

In 1973, he had some discussion with Father Smith and learned that the latter had a personal interest in convalescent homes in the United States.

On December 31, 1973, his company gave a cheque of $20,000 made in the name of Father Smith. This cheque was filed as Exhibit A-1, and shows that it was deposited in the current account of the Holy Rosary Church parish.

On December 31, 1974, another cheque in the name of Father Smith, for $100,000, made by the appellant company, was delivered to him and deposited to H B Smith In Trust to the credit of Cuna of Ontario, Credit Union Limited.

On December 31, 1975, another cheque in the name of Father Smith, was made by the appellant company for the sum of $70,000 and deposited under the name of H B Smith In Trust.

For the last two cheques, the appellant company received a receipt as follows:

December 31, 1974, received from the Holy Rosary Church, for $100,000, signed by H B Smith.

December 31, 1975, received from St. Joseph’s Church, for $70,000, signed H B Smith.

When the cheques were given it was well understood that they were not charitable donations to the Holy Rosary or St. Joseph’s churches. Father Smith had the liberty to effectuate the donation to the charitable organization of his choice at the time he wanted.

The appellant company never directed Father Smith where to disburse the money and made the cheque out to him personally because he was a representative of the church. There was never any discussion between them as to whether Father Smith was to act for the appellant company as agent or trustee.

Father Smith testified that he has been a priest since 1934, Holy Rosary Parish priest since 1964 and dean of the diocese of Hamilton.

When he received the cheques in 1974 and 1975, he did not want to deposit the said cheques in the parish account in order to avoid paying the 7% that usually goes to the diocese. He was then advised to deposit the money in his name in trust. He never received any instructions as to what to do with the money from the appellant company and he was never told to act as an agent or a trustee for the company. He admitted that all the donations he usually received went into the parish account, but because these donations were not to go to the two churches, the money was deposited in his name in trust.

Counsel for the appellant argued that the donations in 1974 and 1975 were a complete gift effectuated to a registered charitable organization. The priest was a representative of the parish and once the cheque was given, the appellant company had no control over the money.

The cheque made on December 31, 1973 was accepted by the Minister and it was identical to the two other cheques made in 1974 and 1975, with the exception that the money was deposited in the Father’s name in trust instead of the parish account, and this was done to avoid paying the 7% to the diocese.

He then referred the Board to various definitions of gift in the dictionary and jurisprudence.

Counsel for the respondent admitted that the cheques in 1974 and 1975 were gifts but according to him they were not gifts to a charitable organization in the years the appellant company sought to deduct them because:

1. According to the Act, the church and each parish are registered charitable organizations, but not a priest.

2. The cheques were made in the name of the priest personally.

3. The money was deposited in the name of the priest in trust and consequently never went into the Holy Rosary or St Joseph’s parish accounts.

4. The appellant company’s intent was not to give a donation to the said parishes.

5. Four letters indicate that substantial gifts were effectuated by Father Smith on behalf of the appellant company in 1975 and 1976.

He argued that if Father Smith was not an agent for the company, he was certainly a trustee because of the mention on the back of the two cheques that a trust was set up, and in that respect, he referred the Board to some decisions and to the doctrines on it.

According to the evidence adduced, it is obvious that the gifts were not made to the priest personally nor to the parishes he represented, but only to those to whom he chose to give. Father Smith was only instrumental to effectuate the gifts and the latter became complete only when they were accepted by the donees which, according to the letters filed, occurred in 1975 and 1976.

For these reasons, the appeal is dismissed.

Appeal dismissed.