Décary
J.A.:
Under
section
31
of
the
Income
Tax
Act,
it
was
incumbent
on
the
Tax
Court
Judge
to
compare
the
sources
of
income
of
the
corporate
taxpayer,
both
actual
and
potential,
in
order
to
determine
whether
farming
was
its
chief
source
of
income.
That,
he
failed
to
do
.
The
judge’s
approach
was
more
consonant
with
that
used
to
determine
whether
there
is
a
reasonable
expectation
of
profit
rather
than
that
used
to
determine
what
is
the
chief
source
of
income
of
the
taxpayer
in
the
taxation
years
at
issue,
i.e.
1985,
1986
and
1987.
No
evidence
was
led
by
the
respondent
which
would
have
allowed
the
judge
to
engage
in
an
analysis
of
what
profit
might
have
been
earned
by
the
taxpayer
in
farming
activities
in
each
of
the
three
taxation
years
in
question,
as
compared
to
the
profit
it
had
earned
during
each
of
these
three
years
from
its
consulting
business.
Furthermore,
the
judge
was
clearly
in
error
when
he
relied
on
the
intention
of
the
taxpayer
to
get
out
of
the
construction
business
and
to
redirect
its
activities
to
farming
operations
by
1985,
rather
than
on
the
actual
redirection
which
was
found
to
have
effectively
taken
place
after
the
taxation
years
at
issue
because
the
taxpayer
had
agreed
to
stay
on
longer
than
it
had
planned
in
order
to
undertake
or
fulfil
important
construction
contracts.
The
fact
is,
that
during
the
three
taxation
years,
the
taxpayer
had
not
yet
displaced,
to
use
the
words
of
Dickson
J.
in
Moldowan
v.
The
Queen\
“the
centre
of
[its]
work
routine”.
Had
he
applied
the
test
properly,
it
would
have
been
obvious
to
the
Tax
Court
Judge,
as
it
is
to
us,
that
in
1985,
1986
and
1987
farming
as
a
source
of
income
was
not
the
chief
source
of
income
of
the
taxpayer.
The
appeal
will
be
allowed
with
costs,
the
judgment
of
the
Tax
Court
of
Canada
will
be
set
aside
and
the
appeal
of
the
Respondent
with
respect
to
the
reassessments
issued
by
the
Minister
of
National
Revenue
concerning
the
1985,
1986
and
1987
taxation
years
will
be
dismissed
with
costs.
Appeal
allowed.
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