Maurice
Boisvert:—This
is
an
appeal
from
assessments
dated
August
27,
1968
in
respect
of
the
taxation
years
1964,
1965
and
1966.
The
appeal
was
heard
in
Montreal,
Province
of
Quebec
on
November
19,
1970
by
the
Tax
Appeal
Board
as
it
was
then
constituted.
The
appellant’s
contention
appears
in
the
first
two
paragraphs
of
the
Notices
of
Appeal
which
read
as
follows:
1.
The
principal
item
at
issue
in
the
assessment
relates
to
a
classification
for
capital
cost
allowance
purposes
of
the
building
owned
by
the
Appellant
in
Class
13
rather
than
Class
3
as
contended
for
by
the
Appellant.
2.
The
Appellant
acquired
an
emphyteutic
lease
right
in
and
to
a
building
located
at
the
corner
of
Guy
and
St
Catherine
Streets,
Montreal.
The
respondent’s
contention
is
to
be
found
in
paragraphs
9
and
10
of
the
Reply
to
Notice
of
Appeal
which
read
thus:
9.
The
respondent
relies
on
Section
11(1)(a)
of
the
income
Tax
Act
and
on
Section
1100
of
the
Income
Tax
Regulations;
10.
The
respondent
submits
that
the
interest
acquired
by
the
appellant
iS
a
leasehold
interest
and
therefore
is
a
property
of
class
13
of
Schedule
“B”’
of
the
Income
Tax
Regulations.
The
matter
raised
in
the
present
appeal
was
discussed
at
great
length
in
the
appeal
of
Moses
Rosenstone
v
MNR,
[1971]
Tax
ABC
1029.
The
reasons
for
judgment
given
in
the
Rosenstone
case
apply
to
this
appeal.
Another
issue
is
expounded
in
paragraph
11
of
the
Notices
of
Appeal
which
reads
as
follows:
11.
A
second
issue
relates
to
costs
incurred
by
the
Appellant
in
an
amount
of
$141,496.18
for
improvements
effected
by
the
Appellant
itself
subsequent
to
the
acquisition.
By
any
interpretation
of
the
basic
issue
in
the
present
case
such
an
expenditure
would
come
within
Class
3
of
the
capita!
cost
allowance
and
by
decision
rendered
on
October
16th,
1969,
the
Department
of
National
Revenue
has
so
acknowledged
and
has
revised
the
assessment
downward
accordingly.
However,
in
effecting
such
a
revision
and
allowance
against
what
would
have
otherwise
been
recaptured,
the
Department
of
National
Revenue’s
decision
only
took
account
of
expenditures
in
the
amount
of
$99,403.26
representing
the
actual
cash
outlay
for
these
improvements
up
to
the
end
of
the
Company’s
fiscal
year
in
the
year
of
acquisition.
The
Company
is
on
an
accrual
basis
of
accounting,
as
indeed
it
must
be,
by
virtue
of
the
Department’s
requirements,
and
the
actual
outlay
incurred
on
an
accrual
basis
was
the
said
sum
of
$141,496.18.
Hence
the
recapture
provisions
should
have
been
extended
to
this
latter
sum
instead
of
to
the
lesser
sum
of
$99,403.26.
The
issue
was
settled
by
the
admission
made
by
the
respondent
which
is
to
be
found
in
paragraph
6
of
the
Reply
to
Notice
of
Appeal:
6.
With
respect
to
the
allegations
contained
in
paragraph
11,
the
respondent
admits
that
an
amount
of
$141,050.18
expended
by
Fanaberia
Investments
Inc
for
improvements
to
the
elevators,
after
it
had
acquired
the
right
of
emphyteusis
with
respect
to
the
said
building
is
subject
to
Section
1102(5)(b)
of
the
Regulations
and
therefore
the
appellant
is
entitled
to
capital
cost
allowances
under
Class
3
at
5%
on
the
$141,050.18.
As
to
the
first
issue,
the
appeal
is
to
be
dismissed.
As
to
the
second
issue
the
appeal
is
allowed
and
the
assessments
are
referred
back
to
the
Minister
for
reconsideration
and
reassessments
to
meet
the
respondent’s
admission.
Appeal
allowed
in
part.
ROSS
P
ALGER
and
PAUL
A
FERNER,
Trustees,
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