Roland
St-Onge:—This
appeal
was
heard
at
Victoria,
BC
on
November
3,
1971,
by
the
Tax
Appeal
Board
as
it
was
then
constituted,
and
is
from
a
reassessment
dated
July
30,
1970
wherein
the
sum
of
$25,677.98
was
added
to
the
appellant’s
income
in
respect
of
its
taxation
year
1968.
The
appellant
was
incorporated
in
the
year
1955
to
take
part
in
the
management,
supervision
and
control
of
the
operations
of
Hickman
Tye
Hardware
Co
Ltd,
a
subsidiary
company
incorporated
in
1933
to
carry
on
business
as
a
distributor
of
general
hardware
and
electrical
merchandise
from
warehouses
in
Victoria
and
Vancouver.
About
the
year
1955
the
shares
of
Hickman
Tye
Hardware
Co
Ltd
were
owned
by
a
number
of
shareholders
who
were
not
active
in
the
conduct
of
its
business.
In
mid-1964
the
appellant
purchased
a
lot
on
the
corner
of
Clover-
dale
and
Oak
Streets
from
the
Municipality
of
Saanich
for
the
alleged
purpose
of
erecting
a
warehouse
in
Victoria.
After
the*purchase
of
said
lot,
which
alone
would
not
have
been
large
enough
for
the
erection
of
a
warehouse,
the
appellant
purchased
two
adjoining
parcels
of
land
—
one
on
September
9,
1964
and
the
other
on
October
21
of
the
same
year.
The
total
cost
of
the
three
parcels
was
$64,322.02.
When
the
property
was
sold,
the
Minister
included
the
profit
of
$25,677.98
in
the
taxpayer’s
income
for
the
1968
taxation
year
on
the
ground
that
it
was
income
from
a
business
or
adventure
in
the
nature
of
trade.
At
the
time
the
three
parcels
were
purchased
by
the
appellant
the
zoning
regulations
did
not
permit
the
construction
of
a
warehouse
on
the
property,
and
there
is
no
evidence
to
show
that
the
appellant
made
any
application
to
erect
a
warehouse
or
to
have
the
by-laws
changed.
At
the
hearing,
Mr
L
H
Noble,
president
of
the
appellant
company,
testified
that
the
zoning
was
in
good
order
—
which
explained
why
the
appellant
did
not
make
any
application
to
have
the
by-laws
changed.
However,
it
appears
that
such
was
not
the
case
because
Miss
Brownell,
the
real
estate
agent
involved
in
these
transactions,
explained
that
some
discussion
with
respect
to
zoning
regulations
had
taken
place
with
the
representative
of
the
municipality,
but
she
did
not
know
whether
or
not
the
appellant
had
made
application
to
have
the
by-laws
changed.
Mr
Noble
also
testified
that
no
architectural
building
plans,
blue
prints,
feasibility
studies
or
cost
estimates
were
ever
prepared
for
the
erection
of
a
warehouse
—
apparently
because
they
knew
what
they
wanted
and
felt
that
such
preparations
were
not
necessary
for
the
building
of
a
one-storey
warehouse.
There
were
only
a
few
sketches
prepared
at
that
time
and
they
were
not
filed
at
the
hearing.
Miss
Brownell
testified
that
one
of
the
conditions
of
the
sale
was
that
the
appellant
would
undertake
to
complete
the
tiling
of
a
watercourse
on
the
property
and
also
grant
to
the
municipality
an
easement
over
this
watercourse.
She
stated
that
she
had
discussed
this
problem
with
another
official
of
the
municipality
and
learned
that
it
would
cost
between
$7,000
and
$10,000
to
do
this
construction
work.
She
also
stated
that,
prior
to
the
purchase,
the
municipality
was
ready
to
allow
the
construction
of
a
warehouse
but
that
after
the
sale
of
the
land
the
authorities
changed
their
minds.
It
is
also
in
evidence
that
the
appellant
was
involved
in
a
similar
situation
in
1962
when
it
realized
an
untaxed
gain
in
excess
of
$10,000
on
the
sale
of
two
adjoining
lots
which
it
had
purchased
in
1953
and
1958
respectively
for
the
alleged
purpose
of
building
a
warehouse,
which
was
never
erected
either.
Also
in
1962
Hickman
Tye
Hardware
Co
Ltd
realized
an
untaxed
gain
of
$20,000
on
the
sale
of
a
parking
lot
in
the
city.
Similarly,
Mr
A
V
Lea,
a
shareholder,
officer
and
director
of
the
appellant
company,
had
been
involved
in
the
development
and
sale
of
an
apartment
block.
With
respect
to
the
transaction
under
discussion,
Messrs
Lea
and
Noble
personally
received
the
sums
of
$2,500
and
$5,000
respectively,
but
Mr
Noble
explained
that
this
money
was
paid
to
them
personally
because
for
a
while
they
operated
the
company
without
pay
and
re-
ceived
the
money
only
when
the
funds
from
the
sale
became
available.
He
also
explained
that
in
1958
they
ceased
the
retail
business
to
operate
as
a
wholesale
business
only,
and
that
this
change
necessitated
the
acquisition
of
a
one-storey
warehouse
in
order
to
operate
more
efficiently.
However,
the
warehouse
was
never
constructed
because
in
1964
or
1965
the
appellant
obtained
a
franchise
from
Pro
Hardware
which
permitted
it
to
carry
on
business
in
accordance
with
new
methods
of
selling.
Apparently
this
new
system
afforded
a
better
display
and
turnover
of
the
appellant’s
merchandise
and
a
more
efficient
Operation.
The
evidence
does
not
convince
me
that
the
appellant
purchased
the
lots
with
the
intention
of
erecting
a
warehouse
thereon.
Its
shareholders
and
directors
—
especially
Mr
Lea
who
had
been
involved
in
real
estate
transactions
before
—
knew
the
area
very
well
and
were
not
unaware
of
the
fact
that
the
actual
zoning
of
the
lots
was
a
deterrent
to
the
appellant’s
project.
Apparently,
the
appellant
made
no
attempt
to
have
the
regulations
changed,
although
the
real
estate
agent
who
dealt
with
this
matter
testified
that
some
discussion
did
take
place
with
the
municipality
in
respect
of
zoning.
Admittedly,
this
corner
lot
was
a
prime
commercial
site
and
the
appellant
purchased
it
without
knowing
whether
or
not
it
could
acquire
the
other
lots
in
order
to
assemble
enough
land
to
realize
its
project.
Furthermore,
the
appellant
and
its
directors
had
been
involved
in
so
many
real
estate
transactions
of
one
kind
and
another,
that
it
is
difficult
for
the
Board
to
conclude
that
the
subject
property
was
acquired
by
the
companny
for
the
express
purpose
of
building
warehouse
facilities.
The
alleged
need
to
erect
a
warehouse
was
used
in
the
past
by
the
appellant
as
an
excuse
for
purchasing
property
and
I
do
not
see
why
it
should
succeed
again.
The
fact
that
not
only
did
Messrs
Noble
and
Lea
fall
back
on
this
worn-out
excuse
for
purchasing
the
property
but
also
received
personally
and
directly
from
the
purchaser
of
the
lots
moneys
rightfully
due
to
the
company
is
more
than
enough
to
cast
doubt
upon
the
real
purpose
for
which
the
appellant
company
purchased
the
subject
lots.
Consequently,
for
the
above
reasons,
the
appeal
is
dismissed.
Appeal
dismissed.
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