Birmount Holdings Ltd. v. Minister of National Revenue, (1978) 21 N.R. 451 (FCA)

• Judge: Heald, Ryan, JJ. and Kelly, D.J.
• Court: Federal Court of Appeal (Canada)
• Case Date: April 14, 1978
• Jurisdiction: Canada (Federal)
• Citations: (1978), 21 N.R. 451 (FCA)

Birmount Holdings Ltd. v. MNR (1978), 21 N.R. 451 (FCA)

MLB headnote and full text

Birmount Holdings Ltd. v. Minister of National Revenue

(No. A-231-77)

Indexed As: Birmount Holdings Ltd. v. Minister of National Revenue

Federal Court of Appeal

Heald, Ryan, JJ. and Kelly, D.J.

April 14, 1978.

Summary:

This case arose out of an appeal by a corporation from the assessment of income tax on the profit from the sale of land. A foreign industrialist bought 78 acres of undeveloped land outside Toronto in 1960. The land was held by an Ontario company incorporated for the purpose, which was wholly owned by the industrialist. The expressed purpose of the industrialist in buying the land was to hold it for relations in Canada as security for them. There was a small income from the land from grazing rental, which was far exceeded by the expense of owning the land. The land was not otherwise used or developed until it was sold by the industrialist at a significant profit in 1972, when it was ripe for development. The Minister of National Revenue assessed the holding company income tax on the profit on the basis that it resulted from an adventure or concern in the nature of trade and not an investment resulting in a capital gain. The company appealed. The Federal Court of Canada, Trial Division, dismissed the appeal and affirmed the assessment. The company appealed.

The Federal Court of Appeal dismissed the appeal and affirmed the assessment. The Federal Court of Appeal held that the profit was income from an adventure or concern in the nature of trade within the meaning of s. 248(1) of Income Tax Act, S.C. 1970-71-72, on c. 63, and was taxable as such.

Income Tax - Topic 1055

Income from business - What constitutes an adventure or concern in the nature of trade - Income Tax Act, S.C. 197071-72, c. 63, s. 248(1) - A foreign industrialist bought 78 acres of undeveloped land outside Toronto in 1960 - The land was held by an Ontario company incorporated for the purpose, which was wholly owned by the industrialist - The expressed purpose of the industrialist in buying the land was to hold it for relations in Canada as security for them - There was a small income from the land from grazing rental, which was far exceeded by the expense of owning the land - The land was not otherwise used or developed until it was sold by the industrialist at a significant profit in 1972, when it was ripe for development - The Minister of National Revenue assessed the holding company income tax on the profit on the basis that it resulted from an adventure or concern in the nature of trade and not an investment resulting in a capital gain - The Federal Court of Appeal held that the profit was income from an adventure or concern in the nature of trade and was taxable as such - See paragraphs 1 to 26.

Income Tax - Topic 1062

Income from business - What constitutes carrying on business in Canada - Income Tax Act, S.C. 1970-71-72, c. 63, s. 250(4)(c) - A foreign industrialist bought 78 acres of undeveloped land outside Toronto in 1960 - The land was held by an Ontario company incorporated for the purpose, which was wholly owned by the industrialist - The expressed purpose of the industrialist in buying the land was to hold it for relations in Canada as security for them - There was a small income from the land from grazing rental, which was far exceeded by the expense of owning the land, which included mortgage and tax payments and administration - The land was not otherwise used or developed until it was sold by the industrialist in 1972, when it was ripe for its development - The Federal Court of Appeal stated that the company was carrying on business in Canada within the meaning of s. 250(4)(c) - See paragraphs 1 to 20 and 39.

Income Tax - Topic 4478

Corporations - Definitions - Residence of corporation - Income Tax Act, S.C. 1970-71-72, c. 63, s. 250(4)(c) - A foreign industrialist bought 78 acres of undeveloped land outside Toronto in 1960 - The land was held by an Ontario company incorporated for the purpose, which was wholly owned by the industrialist - The directors of the company were all Ontario residents and the company was administered and managed by a Canadian trust company, which made all tax and mortgage payments - The trust company did not consult the industrialist on most matters of management - The head office of the company was in Toronto - It filed income tax returns in Canada and nowhere else - The company's only business related to the land - There was a small income from the land from grazing rental, which was far exceeded by the expense of owning the land - The Federal Court of Appeal held that the company was resident in Canada within the meaning of s. 250(4)(c) - See paragraphs 27 to 38.

Practice - Topic 8800

Appeals - Duty of appeal court regarding fact findings by trial judge - The Federal Court of Appeal stated that it was not part of the function of an appeal court to substitute its assessment of the balance of probability for the fact findings of the trial judge - The Federal Court of Appeal refused to disturb the fact findings of a trial judge based on credibility, where the trial judge made no palpable or overriding error which affected his assessment of the facts - See paragraphs 24 to 26.

Cases Noticed:

Pine Ridge Property Ltd. v. M.N.R., [1973] C.T.C. 201, appld. [para. 22].

Racine et al. v. M.N.R., 65 D.T.C. 5098, appld. [para. 22].

Stein Estate v. The Ship "Kathy K" (1975), 6 N.R. 359; [1976] 2 S.C.R. 802, appld. [para. 24].

Metivier v. Cadorette (1975), 8 N.R. 129; [1977] 1 S.C.R. 371, appld. [para. 25].

Consolidated Mines Ltd. v. Howe, [1960] A.C. 455, appld. [para. 29].

Bedford Overseas Freighters Ltd. v. Minister of National Revenue, 70 D.T.C. 6072, appld. [para. 31].

Union Corporation Ltd. v. Inland Revenue Commissioners, [1952] 1 All E.R. 646, refd to. [para. 32].

Exploration and Development Limited v. Minister of National Revenue, [1970] D.T.C. 6370, dist. [para. 35].

Unit Construction Co. Ltd. v. Bullock, [1960] A.C. 351, dist. [para. 34].

R. v. Rockmore Investments Ltd., [1976] 2 F.C. 428, refd to. [para. 39].

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 248(1) [para. 2]; sect. 250(4)(c) [para. 27].

Counsel:

D.J. Wright, Q.C., for the appellant;

D.H. Aylen, Q.C. and J. Gaum, for the respondent.

This case was heard on January 25 and 26, 1978, at Toronto, Ontario, before HEALD, RYAN, JJ., and KELLY, D.J., of the Federal Court of Appeal.

On April 14, 1978, HEALD, J., delivered the following judgment for the Federal Court of Appeal: