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Minister of National Revenue, [1974] CTC 2274 Judge K A Flanigan (orally: May 7, 1974):—This is an appeal by Miss Sun Valley Limited, a company originally incorporated under the laws of the Province of Ontario under the name of Joseph Gould & Sons (Ladies’ Division) Limited in 1951, the name being subsequently changed to the name of the appellant in this case in 1952. ... When Billie Burke and Malvern were no longer able to compete n the markets in which they were originally established, they had the necessary equipment and there was a good use for it to be put to > by the appellant company. ...

Together the two buildings had an average of 35 tenants and the employees consisted of a janitor, two elevator operators, and three cleaners — all on a daily basis. ... It seems that the wife kept the books and the appellant looked after the employees and tenants — conducting the inter- views, signing leases, training employees, etc. ...

Further, the respondent maintains that the appellant did not make any outlays or expenditures on his land for the purpose of gaining or producing income from the farming operation but the lands were purchased and retained for the appellant’s personal use — all of which is pursuant to paragraphs 12(1)(h), 139(1)(p) and 139(1)(ae) of the Income Tax Act, RSC 1952, c 148 as amended. ... Nor can the appellant be considered, as was Mr Brown, as an absentee farmer, since the appellant worked on the farm every day — admittedly on off hours. ...

These figures are as follows: 10% of $244,802 $ 24,480 175 jobs at $750 each $131,250-------- $155,730 Less 20% holdback as required by the Regional Development Incentives Act $ 31,146-------- Net payment received by appellant $124,584 6 In calculating the capital cost of the property pursuant to paragraph 20(6)(h) of the Income Tax Act, the appellant deducted only $24,480, contending that only that portion of the grant was directly related to the capital cost of the project and should be deducted in computing the capital cost allowance thereon. 7 By notices of assessment dated July 26, 1974 the capital cost allowances claimed by the appellant for each of the taxation years 1971 and 1972 were reduced by the Minister by also including as part of the deduction referred to in paragraph 20(6)(h) of the Income Tax Act that portion of the grant which was calculated on the basis of new jobs to be created and which amounted to $105,000 after taking into account the 20% holdback required by the Regional Development Incentives Act. 8 The appellant, who was represented by Mr Barry Klar, the company's comptroller, contends that the criteria for determining the amount of the incentive are not based solely on the cost of the project and that section 6 of the Regional Development Incentives Act refers to several other economic and social factors on which the amount of the grant is determined. ...

Remuneration is based on T & R Factors. The R Factor is the professional component of the fee. ... Of those expenses, some were refused by the respondent: Travel Expenses to Roseway $1,919.69 Accountant $ 175.00 Auto $3,016.18 $5,110.87 3.7 Following the notice of reassessment dated August 30, 1977, disallowing those expenses the appellant filed a notice of objection. ...

Counsel for the respondent, through Mr Jarrell, introduced and identified the following exhibits: Exhibit R-1—Charles Roy Stewart Department’s Calculation of Assets & Liabilities as at Dates Shown (the dates are December 31 of each year, from 1967 through 1972). ... He pointed out that on Exhibit R-2, the items indicated by an asterisk (*) denoted the various individual amounts of additional income of Charles Roy Stewart for which the source was identified, either external or internal, to the appellant company. ... From the decision in Lagueux & Frères Inc (supra) the following is quoted from page 687 [6570]: Accordingly, the question before the Court is as to the nature of the contracts in dispute. ...

She was fully aware then of what she was doing — at least, her lawyer was there to tell her. ... Victor St-Onge will stay in Montreal” — the chief meaning of these words is that she will not be obliged to return to Port Cartier, but will stay in Montreal where she has already gone. ... It may be prolonged by tacit renewal. — N 1780. 1668. (Am 1949, c 69). ...

Contentions It was the position of the appellant that: — both partnerships earned substantial profits in all of the taxation years up to 1971. ... A-5—Copy of Financial Statements of Cousins Drapery Track as at February 28, 1969, prepared by Starkman, Kraft, Rothman, Berger & Grill, Chartered Accountants, Toronto, Ontario. ... A-8—Copy of Financial Statements of Cousins Interiors Limited for the year ended February 29, 1972, prepared by Laventhol, Krekstein, Horwath & Horwath, Chartered Accountants, Toronto. ...

For the appellant: Dunkel man v MNR, [1959] CTC 375; 59 DTC 1242; Fasken Estate v MNR, [1948] CTC 265; 4 DTC 491; St Aubyn et al v Attorney General, [1952] AC 15; Re Viscount Hambleden’s Will Trusts, [1960] 1 All ER 353; In re Hambleden’s Will Trusts, [1960] 1 WLR 82; In re Holt’s Settlement Wilson & others, [1969] 1 Ch 100; In re Steed’s Will Trusts, [1960] 1 Ch 407; Re Burney’s Settlement Trusts, [1961] 1 All ER 856; Pott’s Executors v Inland Revenue Commissioners, [1951] 1 All ER 77; Donald v Lewis (1929), 64 OLR, 301; Words & Phrases (Vol 1)—Concurrence (p 754); Massawippi Valley Railway Co v MNR, 21 Tax ABC 1; 58 DTC 725; MNR v Massawippi Valley Railway Co, [1961] CTC 78; 61 DTC 1040. ... Thus, when Mrs McCreath received income, the benefit came from property which she had purported fully to have given away, her interest in the shares of Mount Royal Paving & Supplies Limited. ... The substance of the matter in my view is that there was one gift, the subject-matter being 99,986 common shares in the capital stock of Mount Royal Paving & Supplies Limited. ...

The expenditure was thus, in my view, incurred to work an immediate and substantial expansion of the appellant’s business and to expand and enhance the goodwill attaching thereto by adding to it as much of the business and goodwill of W R Maclnnes & Co as, with the blessing of its owner, Austin E Hayes, the appellant could retain. ... In his reasons at page 442 [5312] he states as follows: On October 25, 1971 the appellant entered into an agreement in writing with Austin E Hayes, who carried on business as a general insurance agent in Halifax under the firm name of W R Maclnnes & Co. ... The Vendor covenants that on and after the Closing Date he will cease carrying on the business of a provincial general insurance agent under the firm name and style of W R Maclnnes & Co.” ...