Pruneault v. R., [1998] 3 CTC 2412

St-Onge T.C.J.:

The appeal of André Pruneault was heard on August 18, 1997 in the city of Québec. This case was previously heard by a colleague of the Tax Court of Canada who dismissed the appeal.

On August 20, 1996, André Pruneault applied to the Federal Court under section 28 of the said Court which ruled as follows:

[TRANSLATION] By consent of the parties, the application for judicial review is granted, the judgment of the Tax Court of Canada is set aside and the case is referred back for a new hearing before another judge of that Court.

The ruling is an integral part of my judgment.

In his appeal to the Federal Court, the appellant alleged the following:

(The paragraph after the line: “The grounds for the application are as follows … ” is an integral part of my judgment).

According to the judgment rendered, the learned judge states that because the appellant held 40 per cent of the shares in the accounting firm Pruneault-Drolet, he is jointly and severally responsible for the full repayment of a debt to André Pruneault & Associés. Accordingly, he concludes that the loan was made to the appellant personally and therefore section 15(2) applies.

The appellant testified that the loan of 31,000 dollars was made to him personally by his company, André Pruneault & Associés Inc., hereafter called “API”, and he adduced a cheque to this effect (Exhibit A-1).

It is appropriate to mention at this time that the 31,000 dollar loan had been treated by the Minister as though the loan had been made to the appellant and that, as of December 31, 1989, the said amount had not been repaid. Consequently, on October 23, 1992, through reassessments, the Minister added to the appellant’s income for the 1989 taxation year, among other amounts, the amount of the 31, 000 dollars as an advance to a shareholder and allowed a loss carryover of 3,302 dollars from the 1990 taxation year, in accordance with sections 15(2) and 20(1 )(/) of the Income Tax Act.

Apparently this decision was made based on a document from a financial statement of the said firm for 1989, which identified the appellant as the person who loaned 31,000 dollars to Pruneault-Drolet and not API.

In this appeal, the respondent claims that the 31,000 dollar loan was made by API to the accounting firm Pruneault-Drolet.

In API’s financial statements, at December 1990 and 1991, there is an advance to the accounting firm of 41,495 dollars, as well as a shareholder advance of 10,474 dollars (the appellant is the only shareholder of API)

Another advance, of 31,021 dollars this time, was made to the accounting firm in 1990 and no advance was made in 1991. Furthermore, no shareholder advance was made in 1990.

Further, bank documents show that the advances were made directly from the bank account of API to the bank account of Pruneault-Drolet and the financial statements of API, as at December 31, 1989, indicate that the amount receivable is from the accountants and not from a shareholder.

On June 23, 1993, the appellant sent documents to show that he had repaid the advances received from API in the amount of 3 5,000 dollars on September 27, 1991.

The cheque is signed by André Pruneault in trust but no deposit of 3 5,000 dollars appears in API’s account.

The appellant told the appeals officer that he did not think it necessary to send him the 31,000 dollar cheque adduced as Exhibit A-1, which allegedly proves that the loan was made to him by his company, API. On several occasions, the appellant stated that he had no recollection when the answers to the questions might have been compromising.

The appellant argued that the cheque. Exhibit A-l, was undeniable evidence, corroborated by the official financial statements, that the 31,000 loan had been made to him by his company, API, and that Mr. Simard, the appeals officer, had never asked him for the corrected financial statements.

Counsel for the respondent argued that the loan had been made by the company, that the cheque filed as Exhibit I-1 [sic] was not enough to contradict the documentary evidence adduced and that the appellant had not succeeded in reversing the burden of proof.

The Court was not impressed with the appellant’s testimony and the respondent’s documentary and oral evidence is enough to find that the loan was granted by API to the accounting firm of Pruneault-Drolet.

Accordingly, the appeal is dismissed.

Appeal dismissed.