Stone
J.A.:
-
This
is
an
appeal
from
a
judgment
of
the
Tax
Court
of
Canada
of
September
29,
1995,
dismissing
an
appeal
from
an
assessment
of
the
Appellant’s
income
for
the
taxation
years
1987
and
1988.
In
paragraph
5.2
of
its
Notice
of
Appeal
in
the
proceedings
below,
the
Appellant
pleaded
that
“the
Minister
erred
in
not
finding
that
part
of
the
expenses
were
management
fees
and
not
interest”,
that
the
“expense
by
definition
could
not
constitute
interest
except
for
the
portion
as
computed
under
the
promissory
notes”
and
that
the
“management
fees
were.
reasonable
in
amount
and
deductible
as
claimed”.
By
way
of
reply
the
Respondent
pleaded
the
following
assumptions
in
paragraphs
7
f)
and
g):
(f)
there
was
no
agreement
between
the
Appellant
and
the
shareholder,
James
Wilson,
to
pay
management
fees
to
the
shareholder
in
respect
of
services
performed;
(g)
none
of
the
amounts
claimed
as
interest
expense
were
management
fees
paid
or
payable
to
James
Wilson;
In
his
reasons
for
judgment
the
Tax
Court
Judge
made
the
following
findings
of
fact
in
Tetrad
Resources
Ltd.
v.
R.,
[1996]
1
C.T.C.
2622,
at
page
2627:
The
testimony
of
both
Mr.
Wilson
and
Mr.
Moeller
concerning
the
“interest”
calculations
to
nil
Tetrad’s
income
has
been
described.
Mr.
Moeller
stated
that
it
was
his
idea.
But
Mr.
Wilson
reviewed
drafts
of
the
financial
statements.
He
knew
the
interest
rate
was
14%
and
the
Court
has
no
doubt
that
the
knew
what
his
shareholder’s
loan
balance
was.
He
knew
that
the
amounts
shown
as
interest
in
Tetrad’s
financial
statements
were
fiction.
and
at
page
2628:
On
the
evidence
before
the
Court
Mr.
Wilson
did
not
care
how
the
accounting
was
done
or
how
Tetrad
paid
money
out
to
him
so
long
as
it
was
to
his
advantage.
That,
in
essence,
was
his
original
direction
to
Mr.
Moeller
and
describes
the
financial
statements
and
income
tax
returns
of
Tetrad
which
were
put
in
evidence.
It
also
describes
the
after-the-fact
story
about
management
fees.
The
story
of
management
fees
is
a
fiction.
We
have
not
been
persuaded
that
the
Tax
Court
Judge
erred
in
a
way
which
would
justify
interference
by
this
Court.
In
our
view
it
was
for
him
as
finder
of
fact
to
determine
on
the
evidence
in
light
of
the
issues
pleaded
whether
the
excess
“interest”
amounts
represented
in
substance
“management
fees”.
From
the
reasons
which
he
gave,
read
as
a
whole,
it
is
apparent
to
us
that
he
was
not
satisfied
that
the
excess
amounts
had
been
paid
as
management
fees
for
services
performed.
That
conclusion,
based
as
is
was
in
large
measure
on
credibility,
was
open
to
the
Tax
Court
Judge
on
the
evidence
before
him.
We
can
see
no
basis
in
law
for
interfering
with
it.
The
appeal
will
be
dismissed
with
costs.
Appeal
dismissed.
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