Bowie T.C.J.:
1 The Appellant is in the armed forces. During her free time she also operates a business known as Spruce Ridge Equicentre. During 1995, the year under appeal, this business consisted of teaching riding, and, to a lesser extent, boarding horses. This was her first year in the business, and she suffered a loss of $35,074.71. In assessing her under the Income Tax Act (the Act) for that year the Minister of National Revenue (the Minister) has taken the position that her business falls within section 31of the Act, and has allowed her only a restricted farm loss of $8,750.00 to set off against her income from other sources. The Minister does not argue that she had no reasonable expectation of profit in 1995; she does not argue that her chief source of income is the Equicentre, or a combination of the Equicentre and her military duties. The only issue is whether or not her business is, in the words of secton 31, “a farming business”, or in French, “une entreprise agricole”. Surprisingly, there does not appear to be any authority directly on point.
2 The Appellant has been riding horses for many years. Prior to 1995, she had her own horse, which she kept at her parents' farm, and she gave lessons to people on their horses only, either by going to their stables, or by having them bring their horses to her by trailer. She also managed a small boarding operation with about six stalls at her parents' farm during this period. At the same time, she was a full-time member of the military.
3 In 1991 she bought 71 acres of land near Pembroke, Ontario. About half of it is bush, and the other half arable. In 1994 she built a house on the land, and in 1995 she built a steel building 100′ by 150′. About three quarters of this building is used as a riding arena for giving lessons; the remainder is devoted to 10 stalls for horses, a tack room, a lounge from which to view the arena, and an area for storage of feed.
4 In May 1995, the Appellant left her military career to start her Equicentre business on a full-time basis. She started with her own horse, which she brought from her parents' farm, which she rides and takes to horse shows, and three other horses which she obtained to use for teaching. Initially she took in horses to board, but later restricted herself to teaching riding, and boarding horses only for people who took lessons from her, because she found that there was no profit to be made from boarding horses. It is a teaching business that she intends to develop. By the end of 1995 it was apparent to her that, at least in the initial stages, she would have to have another source of income, and she returned to working for the armed forces, first on contract, and later on a full-time basis.
5 The Appellant's income statements for 1995 and 1996 were put into evidence. Her gross revenue in 1995 was $3,494.63; of this, $420.56 came from boarding horses, and $2,917.17 from teaching. In 1996 her gross revenue was $6,275.03; less than $200.00 was from board.The price list for Spruce Ridge Equicentre shows that the services offered include lessons, boarding of horses, including feeding, bedding and grooming, together with such items as special grooming services, tack cleaning, trailering, first aid care, and use of horses for shows and other events. The Appellant has some 35 acres of arable land. She has an arrangement with a neighbouring farmer whereby he takes hay from the land, half of which he keeps for his own use, the other half going to the Appellant.
6 Is the Appellant engaged in farming? I do not think so. A review of dictionary definitionsshows that the Appellant's business does not come within the ordinary meaning of the word “farming” in English, or the expression “entreprise agricole” in French. In their ordinary meaning these are concerned with the growing of plants and the raising of animals, and more recently fish, for use as food, or as the raw materials for industrial production. The evidence is clear that the Appellant is not in any way engaged in breeding horses, but only in teaching people to ride them, and at the same time teaching them to be ridden, and to a very minor extent in boarding and grooming them. The nature of the business is, I think, well expressed by the motto which appears on the letterhead of Spruce Ridge Equicentre - “QUALITY EDUCATION AND CARE FOR THE HORSE AND RIDER”.
7 Section 248(1) of the Act gives an extended meaning to the words farming and agriculture.The only aspects of that extended meaning which might conceivably be brought to bear in the present case are “tillage of the soil”, to the extent that the Appellant is receiving some hay from her excess land, and “livestock raising or exhibiting”, to the extent that the Appellant does from time to time attend and compete in equestrian events with her own horse. As to the first of these, she receives no income from the hay grown on her land, nor is it a significant part of her operation. No doubt having some hay from her land helps to keep the cost of feed for the horses down, but it is far from being a central element of her business, or even an important sideline.
8 The Appellant does no breeding of horses, and her attendance at equestrian events is not a source of revenue for her. No doubt there is some promotional value in her attendance at these events, because people who see her compete there may later become paying students, but it cannot be said to be her business. Nor is it principally the horse that is being exhibited on these occasions, but herself and her riding skill. It is noteworthy that Parliament, in enacting this extended definition, chose to include “maintaining of horses for racing”, which is, of course, a popular pastime of well-to-do city people which would not necessarily fall within the ordinary meaning of the word farming, although it has long been an avocation of many farmers, particularly in England. Instruction in riding is, I think, farther removed than racing from the normal activities of a farmer. Had Parliament intended that it should be included in the activities which are the subject of section 31 of the Act, it would no doubt have said so.
8 As the Federal Court of Appeal has recently pointed out,the purpose of section 31 of the Act is to prevent “gentlemen” farmers from offsetting the full extent of their farming losses against their income from other sources. To apply the section to cases such as the present would go much further, and deny to people who are trying to start genuine fledgling businesses the full benefit of a provision which, according to the scheme of the Act, should be available to them.
9 The appeal is allowed. The assessment is referred back to the Minister for reconsideration and reassessment on the basis that the Appellant's loss from her equestrian business is not subject to the limitations imposed by section 31 of the Act.
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