John
B
Goetz:—This
is
an
appeal
by
the
appellant
with
respect
to
reassessments
for
his
income
tax
liability
for
the
taxation
years
1974,
1975
and
1976.
In
reassessing
the
appellant,
the
respondent
relied,
inter
alia,
upon
subsection
15(1)
of
the
Income
Tax
Act,
SC
1970-71-72,
c
63,
as
amended.
The
appellant
was
a
grocery
store
operator
for
a
period
of
18
years
in
Glace
Bay,
Nova
Scotia,
and
during
that
time
his
major
supplier
was
Bolands
Ltd.
On
November
1,
1973,
he
incorporated
a
company
under
the
name
of
Milne’s
Foodliner
Ltd
Bolands,
for
many
years,
had
done
all
of
the
appellant’s
bookkeeping,
drawing
up
quarterly
statements
and
also
his
yearly
statements
and
prepared
and
filed
his
income
tax
returns.
By
an
agreement
dated
October
4,
1974,
entered
into
between
the
appellant
and
Milne’s
Foodliner
Ltd,
the
appellant
agreed
to
sell
and
the
company
agreed
to
buy
all
the
assets
of
the
vendor
in
the
operation
of
his
grocery
business,
for
the
consideration
as
shown
as
the
valuation
of
the
assets
appearing
in
the
opening
balance
sheet
of
the
incorporated
company
dated
the
1st
day
of
November
AD
1973.
At
that
time
the
appellant
owed
Bolands
Ltd
the
sum
of
$107,000,
which
debt
had
grown
over
the
years
because
the
business
of
Mr
Milne
was
not
profitable.
Bolands
would
not
take
a
personal
guarantee
from
the
appellant
for
his
loan
but
preferred
to
have
the
whole
debt
shown
as
being
owed
by
the
limited
company
so
that
they
would
fundamentally
have
control
of
the
company,
which
it
appears
in
fact
they
indeed
did
have.
At
that
time
the
opening
balance
sheet
showed
a
figure
of
$105,000
as
goodwill.
The
$105,000
figure
for
goodwill
was
arbitrarily
set
by
Bolands
Ltd.
The
respondent
alleged
that
such
goodwill
had
no
value
and
consequently
the
total
liabilities
transferred
from
the
appellant
to
his
company
exceeded
the
total
assets
by
a
substantial
amount.
The
respondent
further
alleged
as
follows:
(g)
the
value
of
the
net
assets
transferred
by
the
Appellant
to
Milne’s
Foodliner
Ltd
was
$117,813
and
the
value
of
the
current
payables
and
shares
was
$113,926,
leaving
$3,887
excess
available
to
the
Appellant
without
tax
consequences;
(h)
In
his
1973
taxation
year
the
Appellant
withdrew
from
Milne’s
Foodliner
Ltd
$3,600
of
the
$3,887,
leaving
$287;
(i)
During
his
1974
taxation
year,
the
Appellant
received
$725
from
Milne’s
Foodliner
Ltd
of
which
$438
was
in
excess
of
the
$287
referred
to
in
paragraph
(h)
and
was
a
benefit
to
him;
(j)
in
each
of
the
Appellant’s
1974,1975
and
1976
taxation
years,
Milne’s
Foodliner
Limited
paid
$10,400
to
retire
the
deferred
debt
to
Bolands
Limited
and
the
Appellant
thereby
received
benefits
in
1974,
1975
and
1976.
The
appellant
was
unable
to
explain
why
the
agreement
between
himself
and
his
company
was
executed
almost
a
year
later
than
the
incorporation
of
the
company.
This
is
understandable
because
it
would
seem
that
all
that
happened
in
this
case
was
controlled
by
Bolands
Ltd.
Issue
The
sole
issue
in
this
case
is
whether
the
appellant
had
a
benefit
conferred
upon
him
by
Milne’s
Foodliner
Ltd
in
the
years
under
appeal.
In
my
view
the
goodwill
of
$105,000
was
a
fictitious
figure
pull
out
of
the
air
by
Bolands
Ltd
and
in
the
absence
of
any
documentation
to
the
contrary
any
monies
owing
to
Bolands
Ltd
were
really
owed
by
Mr
Milne
personally.
After
incorporation,
the
company
continue
to
make
payments
of
$200
a
week
in
respect
of
the
debt
and
in
so
doing,
in
my
view,
conferred
a
benefit
upon
the
appellant
by
decreasing
his
liability
to
Bolands
Ltd.
Clearly,
there
was
no
consideration
flowing
to
Milne’s
Foodliner
Ltd
from
the
appellant
with
respect
to
the
alleged
assumption
of
the
debt.
The
debt
arose
basically
from
the
fact
that
the
appellant
overdrew
from
his
account
during
his
personal
proprietorship
and
when
his
debt
was
reduced
by
his
company,
it
constituted
a
benefit.
When
the
liability
of
the
company
to
Bolands
was
decreased
by
the
company
conferring
on
the
appellant
a
benefit,
his
own
deficit
was
decreased
as
the
liability
was
paid.
Thus
the
payments
made
by
his
corporation
to
him
on
account
of
the
said
$105,000
debt
in
the
years
in
question
were
all
“benefits
or
advantages”
conferred
on
him
by
the
corporation
within
the
meaning
of
subsection
15(1)
of
the
Act
and
therefore
subject
to
tax.
The
appellant
has,
in
my
opinion,
failed
to
discharge
the
onus
that
was
upon
him
to
“demolish
the
basic
fact
on
which
the
taxation
rested”
and
they
must
stand.
Vide:
Johnson
v
Might,
[1948]
SCR
486
at
489,
3
DTC
1182
at
1183.
See
also
Herbert
Wallace
Losey
v
MNR,
[1957]
CTC
146;
57
DTC
1098.
For
the
above
reasons,
I
dismiss
the
appeal.
Appeal
dismissed.
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