A
W
Prociuk:—The
appellant,
Metcalfe
Realty
Company
Limited,
appeals
from
the
respondent’s
assessments
of
its
income
for
the
taxation
years
1970,
1971
and
1972,
wherein
a
special
municipal
charge
of
$54,546.57
paid
by
the
appellant
to
the
City
of
Ottawa
in
1970,
pursuant
to
By-Law
No
449-62
and
charged
to
its
rental
income,
was
disallowed
and
the
charge
added
to
the
capital
cost
of
its
pool
of
Class
3
assets.
The
appellant’s
capital
cost
allowances
were
revised
on
the
increased
pool
of
Class
3
asseis
in
the
said
years
and
its
taxable
income
for
each
of
the
years
in
question
was
revised
accordingly.
The
appellant’s
ground
of
appeal
is
that
the
said
payment
was
a
portion
of
a
municipal
tax
and,
as
such,
is
deductibie
from
its
income
in
the
year
paid.
The
respondent’s
position
is
that
this
was
a
capital,
once-in-a-lifetime,
payment
to
acquire
an
asset
of
an
enduring
nature
and
is
part
of
the
appellant’s
capital
cost
in
much
the
same
manner
as
the
cost
of
a
building
permit
is.
In
1962
the
City
of
Ottawa
enacted
By-Law
No
449-62
which
reads
as
follows:
A
by-law
of
The
Corporation
of
the
City
of
Ottawa
for
the
imposition
of
a
special
capital
charge
respecting
sewerage
and
water
supply.
WHEREAS
all
residential
buildings
in
the
City
of
Ottawa
not
being
a
single
family
building,
a
double
building
or
a
duplex
building,
all
non-
residential
buildings
in
the
City
of
Ottawa
having
more
than
1500
square
feet
of
gross
floor
area
and
all
combined
residential
and
non-residential
buildings
having
more
than
two
dwelling
units
or
more
than
1500
square
feet
of
gross
floor
area
erected
or
enlarged
pursuant
to
a
building
permit
issued
subsequent
to
the
2nd
day
of
May,
1960
may
impose
a
heavy
load
on
the
sewer
system
or
water
system
of
the
Corporation
or
both
by
reason
of
which
expenditures
may
be
required
to
provide
additional
sanitary
or
storm
sewer
or
water
supply
capacity
which
in
the
opinion
of
the
Council
would
not
otherwise
be
required;
AND
WHEREAS
it
is
expedient
to
impose
a
special
charge
upon
the
owners
of
the
above-mentioned
buildings
subject
to
the
exceptions
hereinafter
set
forth,
to
pay
for
part
of
the
cost
of
providing
the
additional
capacity;
AND
WHEREAS
the
Council
is
by
section
4
of
The
City
of
Ottawa
Act,
1960-61,
with
the
approval
of
the
Ontario
Municipal
Board,
authorized
to
enact
as
hereinafter
set
forth;
AND
WHEREAS
the
Ontario
Municipal
Board
has
by
its
order
dated
the
17th
day
of
December,
1962
approved
of
this
by-law;
THEREFORE
the
Council
of
The
Corporation
of
the
City
of
Ottawa
enacts
as
follows:
1.
In
this
by-law,
(a)
“combined
residential
and
non-residential
building’’
means
a
building
containing
(i)
a
dwelling
unit
or
dwelling
units
and
(ii)
space
devoted
to
other
purposes
which
space
is
not
accessory
to
a
dwelling
unit
or
dwelling
units
only;
(b)
“dwelling
unit’
means
one
room
or
two
or
more
rooms
connected
together
or
having
access
one
to
another
intended
for
use
as
a
separate
unit
in
the
same
building
and
constituting
an
independent
housekeeping
unit
for
residential
occupancy;
(c)
“gross
floor
area”
means
the
total
floor
area
obtained
by
adding
together
the
area
contained
within
the
perimeter
of
the
exterior
of
the
building
at
each
floor
level;
(a)
“non-residential
building”
means
a
building
containing
no
dwelling
units;
(e)
“residential
building”
means
a
building
containing
only
(i)
a
dwelling
unit
or
dwelling
units
or
(ii)
a
dwelling
unit
or
dwelling
units
and
space
accessory
to
such
use
only.
2.
It
Is
the
opinion
of
the
Council
that
all
residential
buildings
in
the
City
of
Ottawa
not
being
a
single
family
building,
a
double
building
or
a
duplex
building,
all
non-residential
buildings
in
the
City
of
Ottawa
having
more
than
1500
square
feet
of
gross
floor
area
and
all
combined
residential
and
non-
residential
buildings
having
more
than
two
dwelling
units
or
more
than
1500
square
feet
of
gross
floor
area
erected
or
enlarged
pursuant
to
a
building
permit
issued
subsequent
to
the
2nd
day
of
May,
1960
may
impose
a
heavy
load
on
the
sewer
system
or
water
system
of
the
Corporation
or
both
by
reason
of
which
expenditures
may
be
required
to
provide
additional
sanitary
or
storm
sewer
or
water
supply
capacity
which
would
not
otherwise
be
required.
3.
(1)
Subject
to
subsections
2
and
3
and
to
section
5
the
following
Charges
are
hereby
imposed
upon
the
owner
of
every
building
in
the
City
of
Ottawa
for
the
erection
or
enlargement
of
which
a
building
permit
was
or
is
issued
subsequent
to
the
2nd
day
of
May,
1960:
(a)
In
the
case
of
a
residential
building
or
the
residential
part
of
a
combined
residential
and
non-residential
building,
a
charge
of
$125.00
for
each
dwelling
unit
the
creation
of
which
is
authorized
by
the
permit,
(b)
in
the
case
of
a
non-residential
building
or
the
non-residential
part
of
a
combined
residential
and
non-residential
building,
a
charge
of
17
cents
for
each
square
foot
of
gross
floor
area
the
creation
of
which
is
authorized
by
the
permit.
(2)
In
calculating
the
charge
under
subsection
(1)
each
residential
building
or
residential
part
of
a
combined
residential
and
non-residential
building
shall
be
credited
with
an
exemption
of
two
dwelling
units
and
each
non-
residential
building
or
non-residential
part
of
a
combined
residential
and
non-residential
building
shall
be
credited
with
an
exemption
of
1500
square
feet
and
in
applying
such
exemption
dwelling
units
and
floor
area
created
pursuant
to
a
building
permit
issued
on
or
before
the
2nd
day
of
May,
1960
shall
be
counted.
(3)
In
calculating
the
charge
under
subsection
(1)
in
respect
of
a
combined
residential
and
non-residential
building,
that
part
of
each
floor
used
for
dwelling
units
only
shall
be
excluded
from
the
gross
floor
area
of
the
building.
4.
(1)
All
charges
imposed
under
this
by-law
shall
be
calculated
by
the
Building
Inspector
of
the
Corporation
at
the
time
of
issuance
of
the
building
permit
or,
in
the
case
of
building
permits
issued
prior
to
the
date
of
enactment
of
this
by-law,
forthwith
after
such
date
and
the
Building
Inspector
shall
certify
the
amount
of
the
charge
to
the
Treasurer
of
the
Corporation.
(2)
The
Treasurer
shall
(a)
prepare
a
special
roll
showing
(i)
the
name
of
the
owner
(ii)
a
description
of
the
land
on
which
the
building
is
erected
or
enlarged
and
(iii)
the
amount
of
the
charge
Imposed
under
section
3.
(b)
send
a
notice
to
the
owner
at
least
fifteen
days
before
the
next
sitting
of
the
Court
of
Revision
at
which
an
appeal
from
the
charge
may
be
heard,
setting
out
the
information
contained
on
the
roll
prepared
under
clause
(a)
and
also
the
time
and
place
of
the
said
sitting
of
the
Court
of
Revision.
(3)
The
charges
Imposed
by
this
by-law
are
a
lien
upon
the
land
on
which
the
building
is
erected
and
shall
be
collected
by
the
Treasurer
in
the
same
manner
and
with
the
same
remedies
as
provided
by
The
Assessment
Act
for
the
collection
of
real
property
taxes.
5.
This
by-law
shall
not
apply
to
(a)
any
building
used
for
educational,
religious
or
charitable
purposes
which
is
entitled
to
exemption
from
(i)
all
kinds
of
municipal
taxation,
or
(ii)
all
kinds
of
municipal
taxation
other
than
school
taxes
or
local
Improvement
rates
or
both
school
taxes
and
local
improvement
rates
(b)
a
building
on
a
lot
or
block
in
respect
of
which
lot
or
block
a
charge
was
imposed
on
or
after
the
21st
day
of
June,
1961
as
a
condition
of
the
approval
of
a
plan
of
subdivision,
pursuant
to
the
resolution
of
the
Council
of
the
said
date,
(c)
any
single
family,
double
building
or
duplex
building.
In
his
opening
remarks,
learned
counsel
for
the
appellant
stated
that
when
this
money
is
collected
by
the
City
of
Ottawa
it
is
placed
in
a
special
redevelopment
reserve
fund
and
used
for
updating
the
sewage
system
of
the
City.
The
program
of
updating
the
sewage
system
is
set
up
on
the
basis
of
priorities
and
is
unrelated
to
the
source
of
funds.
The
appellant
is
a
well-known
corporation
in
Ottawa,
where
it
builds
and
operates
office
buildings.
It
has
eight
office
buildings
at
the
present
time
and
each
is
a
source
of
rental
income.
In
1968
it
commenced
construction
of
the
Varette
Building,
municipally
known
as
130
Albert
Street,
and
substantially
completed
same
in
December
of
1969.
It
is
a
19-storey
high-rise
office
building,
with
four
basement
levels,
located
in
the
downtown
area.
By
January
1,
1970,
the
appellant
was
preparing
accommodation
for
tenants
and
the
first
lease
was
executed
on
March
1,
1970.
By
December
1,
1970,
80%
of
the
building
was
occupied.
On
November
10,
1970,
the
appellant
received
its
Notice
of
Entry
in
Special
Roll,
filed
as
Exhibit
A-2,
in
the
amount
stated
earlier.
The
Said
amount
was
paid
on
December
15,
1970.
The
issue
herein
is
whether
or
not
the
sum
of
$54,546.47
paid
by
the
appellant
in
1970
pursuant
to
the
notice
is
chargeable
to
its
revenue
account
for
that
year.
It
is
settled
law
that
the
special
sewer
charge
herein
is
a
municipal
tax.
See
The
Corporation
of
The
City
of
Ottawa
v
The
Royal
Trust
Co
et
al,
[1964]
SCR
526;
and
New
Mount
Sinai
Hospital
v
The
Corporation
of
The
City
of
Toronto,
[1973]
SCR
541.
Counsel
for
the
respondent
in
his
argument
conceded
that
the
said
expenditure
was
incurred
for
the
purpose
of
gaining
or
producing
income
from
the
property
within
the
meaning
of
paragraph
12(1)(a)
of
the
Income
Tax
Act
as
it
was
then
in
force,
but
argued
that
it
was
an
expenditure
on
account
of
capital
and
consequently
became
part
of
the
appellant’s
capital
cost
of
the
building.
A
building
permit
authorizes
the
construction
of
a
building
but
the
sewer
tax
is
assessed
on
the
gross
floor
area
of
the
building.
In
my
opinion
it
has
nothing
to
do
with
the
right
to
erect
a
building.
The
owner
has
a
right
to
appeal
against
the
said
assessment
to
the
Court
of
Revision.
The
charges
are
a
lien
upon
the
land
on
which
the
building
is
erected
and
their
collection
is
enforceable
in
the
same
manner
as
that
provided
for
the
collection
of
real
property
taxes.
The
owner
of
the
building
is
of
necessity
obliged
to
make
payment
within
a
given
period
to
protect
his
income-producing
asset.
By
making
this
payment,
he
has
not
acquired
an
asset
nor
does
he
know
when,
if
ever,
there
may
be
sewage
redevelopment
in
the
vicinity
adjacent
to
his
building.
In
the
decision
of
the
Exchequer
Court
of
Canada
in
Canada
Starch
Company
Limited
v
MNR,
[1969]
1
Ex
CR
96;
[1968]
CTC
466;
68
DTC
5320,
President
Jackett,
as
he
then
was,
stated
at
pages
102,
472
and
5323
respectively:
(a)
on
the
one
hand,
an
expenditure
for
the
acquisition
or
creation
of
a
business
entity,
structure
or
organization,
for
the
earning
of
profit,
or
for
an
addition
to
such
an
entity,
structure
or
organization,
is
an
expenditure
on
account
of
capital,
and
(b)
on
the
other
hand,
an
expenditure
In
the
process
of
operation
of
a
profit-making
entity,
structure
or
organization
is
an
expenditure
on
revenue
account.
In
the
instant
case,
the
appellant
was
notified
by
Notice
of
Entry
in
Special
Roll
of
the
amount
of
sewer
tax
it
was
required
to
pay,
calculated
on
the
gross
floor
area
of
its
revenue
producing
structure.
I
am
of
the
opinion
that
it
was
an
expenditure
on
revenue
account
in
1970
and
the
entire
amount
is
deductible
as
a
business
expense
in
that
year.
The
appeals
are
therefore
allowed
and
the
matter
is
referred
back
to
the
respondent
for
reassessment
accordingly.
Appeal
allowed.
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