These
appeals
are
from
the
disallowance
by
the
Minister
of
National
Revenue
of
certain
expenses
claimed
by
the
appellant
corporation
in
its
1990
and
1991
taxation
years.
The
expenses
in
question
are
substantial.
The
Minister
disallowed
the
total
of
$44,022
in
1990
and
$8,075
in
1991
on
the
basis
that
these
amounts
were
disbursed
not
for
legitimate
expenses
of
the
business
but
for
items
of
a
personal
nature
for
Mrs.
Kestenberg
and
members
of
her
family.
Mrs.
Kestenberg
was
the
sole
or,
if
not,
almost
the
sole
shareholder
of
the
company.
Its
business
is
retail
ladies
wear,
and
in
the
years
in
question
it
operated
three
outlets
in
the
Toronto
area.
Much,
but
not
all,
of
the
amounts
disallowed
relate
to
trips
taken
by
Mrs.
Kestenberg
and
members
of
her
family
to
cities
in
the
United
States
for
purposes
of
purchasing
inventory.
There
is
no
doubt
that
some
such
trips
were
legitimately
made
for
business
purposes,
and
that
the
expenses
related
thereto
are
deductible.
The
expenses
recorded
for
travel
and
buying
trips
appear
in
the
company’s
statements
of
operations
as
follows:
for
the
taxation
year
1990,
$66,607,
and
for
the
year
1991,
$78,667.
Of
these,
the
Minister
disallowed
$44,222
for
1990
and
$8,075
for
1991.
The
amount
for
1991
disallowed
was
initially
$65,726,
but
on
reassessment
this
was
reduced
to
$8,075,
which,
it
appears
from
the
income
tax
return
for
that
year,
simply
eliminated
the
claimed
loss
in
that
amount
for
the
1991
year.
It
is
clear
from
Mrs.
Kestenberg’s
evidence
that
some
personal
expenses
were
charged
to
her
company’s
credit
card
account.
The
difficulty
is
that
she
did
not
establish
with
any
certainty
in
her
evidence
the
extent
to
which
the
amounts
charged
are
personal
expenses,
and
not
business
expenses.
Exhibit
R-3
is
a
sampling
of
the
credit
card
accounts
of
the
company.
In
addition
to
many
legitimate
expenses,
there
are
numerous
items
which
are
clearly
not
business
related
such
as,
for
example,
a
chiropractor’s
bill
and
theatre
tickets,
to
name
only
two.
Although
Mrs.
Kestenberg
testified
that
the
entries
relating
to
the
theatre
tickets
were
mistakenly
charged
to
the
company’s
account
and
were
later
reversed,
I
can
find
no
corresponding
credit
on
the
bills.
There
are
a
very
large
number
of
bills
for
dining
in
restaurants
in
Toronto,
where
the
company’s
business
is
located.
While
a
retailer
may,
I
suppose,
occasionally
take
a
good
customer
to
a
restaurant
for
a
meal,
I
do
not
believe
that
all
of
the
meals,
or
even
most
of
them,
which
are
charged
to
the
company
in
restaurants
in
the
Toronto
area
in
Exhibit
A-3,
were
business
related
expenses.
It
is
trite
to
say
that
the
appellant
has
the
onus
of
leading
evidence
which
will
displace
the
Minister’s
assumptions
of
fact
which
underlie
the
assessment.
The
appellant
in
this
case
has
not
done
so.
Mrs.
Kestenberg
admitted
on
cross-examination
that
personal
expenses
were
to
some
extent
intermingled
with
the
business
expenses
claimed.
Her
evidence
was
that
there
were
very
few
such
items
of
a
personal
nature.
In
my
view
she
attempted
in
her
evidence
to
minimize
the
extent
of
this,
once
it
had
been
revealed.
For
this
reason,
and
because
no
apparent
effort
had
been
made
to
exclude
the
personal
items
in
the
preparation
of
the
company’s
financial
statements,
I
can
have
little
or
no
confidence
in
her
evidence
on
this
point.
The
company’s
accountant
was
not
called
to
testify,
and
the
only
explanation
offered
for
this
was
that
he
had
at
some
point
ceased
to
be
the
company’s
accountant.
It
was
not
suggested
to
me
that
he
could
not
be
located.
Mr.
Kestenberg,
acting
as
agent
for
the
Appellant,
suggested
to
me
in
argument
that
the
personal
expenses
charged
were
only
5%,
or
maybe
10%,
of
the
total
amount.
However,
I
have
no
basis
in
the
evidence
upon
which
to
make
such
a
finding.
The
Appellant
has
not
discharged
the
onus
upon
it
in
that
regard,
and
the
appeals
are
therefore
dismissed.
Appeal
allowed
in
part.
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