65302 British Columbia Ltd. v. Minister of National Revenue,

• Jurisdiction: Federal Jurisdiction (Canada)
• Judge: L'Heureux-Dubé, Gonthier, McLachlin, Iacobucci, Major, Bastarache and Binnie, JJ.
• Citation: (1999), 248 N.R. 216 (SCC)
• Court: Supreme Court (Canada)
• Date: 25 November 1999

65302 B.C. Ltd. v. MNR (1999), 248 N.R. 216 (SCC)

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[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [1999] N.R. TBEd. NO.027

65302 British Columbia Limited (appellant) v. Her Majesty The Queen (respondent)

(26352)

Indexed As: 65302 British Columbia Ltd. v. Minister of National Revenue

Supreme Court of Canada

L'Heureux-Dubé, Gonthier, McLachlin, Iacobucci, Major, Bastarache and Binnie, JJ.

November 25, 1999.

Summary:

A provincial egg marketing board imposed an over-quota levy on the taxpayer, an egg producer. The taxpayer deducted the levy, a carry back loss and related interest and legal expenses as business expenses pursuant to s. 18(1)(a) of the Income Tax Act. The Minis­ter disallowed the deductions. The taxpayer appealed. The Tax Court of Canada allowed the deduction. The Minister appealed.

The Federal Court of Appeal, in a decision reported at 221 N.R. 175, allowed the appeal. The taxpayer appealed.

The Supreme Court of Canada allowed the appeal, holding that the levy was a de­ductible business expense. The court, Bastarache and L'Heureux-Dubé, JJ., dis­agreeing on this point, held that fines and penalties could fall within the ambit of s. 18(1)(a).

Income Tax - Topic 1133

Income from a business or property - Deductions - General - Fines, penalties, levies and damage awards - The taxpayer, an egg producer, deducted an over-quota levy as a business expense (Income Tax Act, s. 18(1)(a)) - The Minister disallowed the deduction - The Supreme Court of Canada held that the levy was a deductible business expense - The court rejected the assertion that the deduction of fines and penalties should be disallowed as being contrary to public policy - On its face, fines and penalties could fall within the broad and clear language of s. 18(1)(a) - Allowing the deduction was consistent with tax policy goals of neutrality and equity - Furthermore, when Parliament chose to prohibit other deductions on public policy grounds, it had done so explicitly - See paragraphs 1 to 47.

Income Tax - Topic 1133

Income from a business or property - Deductions - General - Fines, penalties, levies and damage awards - Section 18(1)(a) of the Income Tax Act provided that in computing a taxpayer's income from business or property, no deduction could be made regarding an outlay or expense except to the extent that it was made or incurred for the purpose of gain­ing or producing income - The Supreme Court of Canada stated that it did not see how the language of s. 18(1)(a) could support a requirement that the expense need be unavoidable in order to be de­ductible - See paragraphs 17 to 27.

Income Tax - Topic 1303

Income from a business or property - Deductions not allowed - Respecting capi­tal outlays or losses - The taxpayer, an egg producer, deducted an over-quota levy as a business expense under s. 18(1)(a) of the Income Tax Act - The Minister sub­mitted that the levy was an outlay of capi­tal prohibited under s. 18(1)(b) because its payment allowed the taxpayer to retain its quota - The Supreme Court of Canada rejected the submission - The provincial egg marketing board could cancel or sus­pend a producer's license and quota when any provision of a standing order was violated - The taxpayer would face the same threat of the loss of its quota if it failed to pay the levy - Furthermore, the over-quota levy was best characterized as a current expense rather than a capital outlay - See paragraphs 48 to 50 and 52.

Income Tax - Topic 3901

Interpretation - General - At issue was whether a deduction of a levy as a busi­ness expense under s. 18(1)(a) of the Income Tax Act should be disallowed for public policy grounds - In determining the issue, the Supreme Court of Canada dis­cussed the principles of statutory interpre­tation re­specting the Act - Specifically, the court quoted academic commentary that stated that: "it would introduce intolerable uncer­tainty into the Income Tax Act if clear language in a detailed provision of the Act were to be qualified by unex­pressed excep­tions derived from a court's view of the object and purpose of the provision" - The court commented that this was not an endorse­ment of a literalist approach, but a recog­nition that in apply­ing the principles of interpre­tation to the Act, attention had to be paid to the fact that the Act was one of the most detailed, complex and compre­hen­sive statutes and courts should be reluc­tant to embrace unexpressed notions of policy or principle in the guise of statutory inter­pre­tation - See paragraphs 28 and 29.

Statutes - Topic 501

Interpretation - General principles - Pur­pose of legislation - Duty to promote object of statute - [See Income Tax - Topic 3901].

Statutes - Topic 522

Interpretation - General principles - Tax­ing statutes - [See Income Tax - Topic 3901].

Statutes - Topic 1201

Interpretation - Construction where mean­ing is plain - General principles - [See Income Tax - Topic 3901].

Cases Noticed:

Agricultural Products Marketing Act, R.S.C. 1970, Re, [1978] 2 S.C.R. 1198; 19 N.R. 361; 84 D.L.R.(3d) 257, refd to. [para. 8].

Imperial Oil Ltd. v. Minister of National Revenue (1947), 3 D.T.C. 1090 (Ex. Ct.), not folld. [para. 9].

TNT Canada Inc. v. Minister of National Revenue, [1988] 2 C.T.C. 91; 20 F.T.R. 214 (T.D.), refd to. [para. 9].

Day & Ross Inc. v. Canada, [1977] 1 F.C. 780 (T.D.), refd to. [para. 9].

Royal Trust Co. v. Minister of National Revenue (1957), 57 D.T.C. 1055 (Ex. Ct.), refd to. [para. 10].

Amway of Canada Ltd. v. Minister of National Revenue (1996), 193 N.R. 381 (F.C.A.), refd to. [para. 13].

Symes v. Minister of National Revenue, [1993] 4 S.C.R. 695; 161 N.R. 243, refd to. [para. 17].

Inland Revenue Commissioners v. von Glehn (Alexander) & Co., [1920] 2 K.B. 553 (C.A.), not folld. [para. 19].

Robinson v. Commissioner of Inland Rev­e­nue, [1965] N.Z.L.R. 246 (S.C.), refd to. [para. 19].

Herald and Weekly Times v. Federal Com­missioner of Taxation (1932), 2 A.T.D. 169 (Aust. H.C.), refd to. [para. 19].

Mayne Nickless Ltd. v. Federal Commis­sioner of Taxation (1984), 71 F.L.R. 168 (Vic. Sup. Ct.), refd to. [para. 19].

Rizzo & Rizzo Shoes Ltd. (Bankrupt), Re, [1998] 1 S.C.R. 27; 221 N.R. 241; 106 O.A.C. 1, refd to. [para. 28].

Stubart Investments Ltd. v. Minister of National Revenue, [1984] 1 S.C.R. 536, 53 N.R. 241; 84 D.T.C. 6305; [1984] C.T.C. 294, refd to. [para. 28].

Antosko v. Minister of National Revenue, [1994] 2 S.C.R. 312; 168 N.R. 16, refd to. [para. 29].

Tank Truck Rentals Inc. v. Commissioner of Internal Revenue (1958), 356 U.S. 30 (U.S. Sup. Ct.), refd to. [para. 31].

Commissioner of Inland Revenue v. Sullivan (1958), 356 U.S. 27 (U.S. Sup. Ct.), refd to. [para. 33].

Minister of National Revenue v. Eldridge, [1964] C.T.C. 545 (Ex. Ct.), refd to. [para. 34].

Espie Printing Co. v. Minister of National Revenue, [1960] Ex. C.R. 422 (Ex. Ct.), refd to. [para. 34].

Royal Bank of Canada v. Sparrow Electric Corp., [1997] 1 S.C.R. 411; 208 N.R. 161; 193 A.R. 321; 135 W.A.C. 321, refd to. [para. 40].

Canderel Ltd. v. Minister of National Revenue, [1998] 1 S.C.R. 147; 222 N.R. 81; 98 D.T.C. 6100; 155 D.L.R.(4th) 257, refd to. [para. 40].

Beresford v. Royal Insurance Co., [1938] 2 All E.R. 602 (H.L.), refd to. [para. 42].

Minister of National Revenue v. Alberta (Treasury Branches) et al., [1996] 1 S.C.R. 963; 196 N.R. 105; 184 A.R. 1; 122 W.A.C. 1; 133 D.L.R.(4th) 609, refd to. [para. 56].

Friesen v. Minister of National Revenue, [1995] 3 S.C.R. 103; 186 N.R. 243; 95 D.T.C. 5551, refd to. [para. 56].

McKnight (Her Majesty's Inspector of Taxes) v. Sheppard, [1999] N.R. Uned. 073; [1999] 3 All E.R. 491 (H.L.), refd to. [para. 65].

Hall v. Hebert, [1993] 2 S.C.R. 159; 152 N.R. 321; 26 B.C.A.C. 161; 44 W.A.C. 161, refd to. [para. 68].

Statutes Noticed:

British Columbia Egg Marketing Board, Standing Order - see Natural Products Marketing Act Regulations (B.C.).

Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, sect. 18(1)(a), sect. 18(1)(b) [para. 7].

Natural Products Marketing Act Regu­lations (B.C.), British Columbia Egg Marketing Board, Standing Order, sect. 6 [para. 7]; sect. 17(g) [para. 48].

Authors and Works Noticed:

Brooks, Neil, The Principles Underlying the Deduction of Business Expenses, in Hansen, Brian G., Krishna, Vern, and Rendall, James A., Essays on Canadian Taxation (1981), pp. 242 [para. 30]; 244, 245 [para. 36]; 297 [para. 59].

Côté, Pierre-André, Interprétation des lois (3rd Ed. 1999), pp. 364 to 373 [para. 56]; 426, 429 [para. 62]; 433 to 440 [para. 58].

Driedger, Elmer A., Construction of Stat­utes (2nd Ed. 1983), p. 87 [para. 56].

Driedger, Elmer A., Construction of Stat­utes (3rd Ed. 1994), pp. 131 [para. 56]; 288 [para. 58].

Hansen, Brian G., Krishna, Vern, and Rendall, James A., Essays on Canadian Taxation (1981), pp. 242 [para. 30]; 244, 245 [para. 36]; 297 [para. 59].

Hogg, Peter W., and Magee, Joanne E., Principles of Canadian Income Tax Law (2nd. Ed. 1997), pp. 40 [para. 38]; 243 [paras. 37, 38]; 475, 476 [para. 29].

Krasa, Eva, The Deductibility of Fines, Penalties, Damages and Contract Termi­nation Payments (1990), 38 Can. Tax J. 1399, p. 1417 [para. 42].

Krever, Richard, The Deductibility of Fines: Considerations From Law and Policy Perspectives (1984), 13 Aust. Tax Rev. 168, p. 185 [para. 32].

Krishna, Vern, Public Policy Limitations on the Deductibility of Fines and Penal­ties: Judicial Inertia (1978), 16 Osgoode Hall L.J. 19, pp. 31 [para. 42]; 32 [paras. 36, 42]; 33 [para. 36].

Counsel:

S. Kim Hansen, for the appellant;

Gordon Bourgard and Brent Paris, for the respondent.

Solicitors of Record:

Thorsteinssons Tax Lawyers, Vancouver, British Columbia, for the appellant;

Department of Justice, Ottawa, Ontario, for the respondent.

This appeal was heard on April 20, 1999, by L'Heureux-Dubé, Gonthier, McLachlin, Iacobucci, Major, Bastarache and Binnie, JJ., of the Supreme Court of Canada.

On November 25, 1999, the judgment of the court was delivered in both official languages including the following opinions:

Iacobucci, J. (Gonthier, McLachlin, Major and Binnie, JJ., concurring) - see paragraphs 1 to 51;

Bastarache, J. (L'Heureux-Dubé, J., concurring) (concurring in the result) - see paragraphs 52 to 73.