Victor Hammond Woodland v. Minister of National Revenue, [1953] CTC 111

CAMERON, J.:—This appeal by the taxpayer from a decision of the Income Tax Appeal Board dated October 16, 1951 (5 Tax A.B.C. 114), dismissing his appeal from an assessment made upon him for the taxation year 1949, came on for hearing this morning. Before any evidence was heard I was advised by counsel that an agreement had been arrived at and that in the result no evidence would be given. The written agreement was in part as follows :

“(a) Respondent found that in the $7,041.35 (which is the

net income declared by the appellant in his T1 Return for 1949) there was $2,020.00 salary in 1948, which is not taxable in 1949, and is willing to reduce the assessment by this amount ;

(b) Appellant agrees that, as to the said $9,000.00 the taxpayer is correctly assessed.’’

By consent of the parties, I referred the re-assessment back to the Minister to further re-assess the appellant by deducting from the previous assessment the sum of $2,020.00.

The parties, however, were unable to reach an agreement as to the costs, and after hearing argument, I reserved my finding on that point only.

It now becomes necessary to set out briefly the proceedings leading up to this appeal. The appellant was for some years employed as superintendent of the Cardinal Road Building Company. That appears to have been his main source of income, although it was stated that he had other income from commissions earned in selling farm machinery. In 1949 he severed his connection with the Cardinal Road Building Company and under the terms of a written agreement dated March 26, 1949, that company agreed to pay him the sum of $21,000.00 “as a bonus or commission for services rendered’’. Pursuant to that agreement, he received $6,000.00 on March 26, 1949, which amount he declared as income in his return for 1949. On or about June 1, 1949, he received a further payment of $9,000.00, which amount he did not include in his 1949 return. The Minister, however, added that amount to his declared income and assessed him accordingly.

In his Statement of Objections, the appellant took the position that his T1 Return for 1949 was on the basis of a fiscal year ending April 30, 1949, and that therefore the sum of $9,000.00 received on June 1, 1949, should not be included in his taxable income for 1949, but for the following year.

In his Notice of Appeal to the Income Tax Appeal Board, the sole ground raised was that the sum of $9,000.00 was a return of capital or payment on the sale of a right to future income. That ground of appeal was abandoned before the Board, and as stated in the Board’s judgment, ‘‘he relied solely on the ground that, as the $9,000.00 was received about the first of June, 1949, and he was reporting his income on a fiscal-year basis on a year which ended on the 30th of April, 1949, he was not liable for tax in 1949 on the said amount of $9,000.00.”

The Board dismissed the appeal on the ground that the sum so received was from an office or employment and not from a business, and that therefore the appellant was required to report his income on a calendar year basis, and that that sum of $9,000.00 was properly added to his declared income.

In the Notice of Appeal to this Court, the appellant submitted that as a commission agent he had adopted a practice over several years of filing his income tax return on the basis of a fiscal year ending on April 30 and was entitled to do so for the taxation year 1949; that such a practice could only be changed by the taxpayer with the concurrence of the Minister. He further submitted that in any taxation year not more than twelve months’ income could be included, and that if the sum of $9,000.00 were added to his income he would be required to pay taxes in one year on the income of a period of twenty months. The whole tenor of the Notice of Appeal was his contention that he was entitled to elect to have his taxation year 1949 fixed as ending on April 30, 1949, and that the appeal should be allowed and the matter referred back to the Minister for re-assessment on that basis.

The issue raised by the Notice of Appeal to this Court was solely whether the appellant was entitled to base his 1949 return on a fiscal year ending on April 30, 1949. If he succeeded on that issue, it would follow that $9,000.00 was improperly added to his income. Under the circumstances of this case and inasmuch as that sum was received from an office or employment and not from a business, it is quite clear that he was required to report that income on a calendar-year basis (see Section 127(2) of the Income Tax Act). He now admits for the first time that such is the case and that the sum of $9,000.00 was properly included in his assessment. The issue between the parties has therefore been determined as contended for by the respondent.

It is true that as one of the terms of settlement, the appellant has had his taxable income reduced by $2,020.00. I am informed that that amount represents the portion of the appellant’s salary received from the Cardinal Road Building Company for the period May 1, 1948, to December 31, 1948. But that deduction was never claimed by the appellant at any time. He was concerned solely with his attempt to exclude the payment of $9,000.00 in his 1949 income. Moreover, there is no indication whatever in his T1 General Return for 1949 that it was made out on any basis other than that of a calendar year. His previous returns seem to have been of the same nature, for the Board stated that they did not disclose any covering business statements or give any indication that they had been filed on a fiscal- year basis rather than on a calendar-year basis. In my opinion, the appellant is the author of his own difficulties. Had his return for 1949 shown that it included income received in 1948, the matter would have been brought to the attention of the respond- ent and all proper adjustments would doubtless have been made. Had he included his salary earned in 1949 only, and the payment received on June 1, 1949, as he should have done, he would have been in no difficulty whatever.

The real issues in dispute having been determined in favour of the respondent, I see no reason for departing from the general rule that the successful party is entitled to his costs. I direct, therefore, that the appellant do pay the respondent’s costs after taxation.

Judgment accordingly.