Cam Guard Supply Ltd. v. Minister of National Revenue, (1974) 4 N.R. 525 (FCA)

• Judge: Thurlow and Ryan, JJ.
• Court: Federal Court of Appeal (Canada)
• Case Date: June 24, 1974
• Jurisdiction: Canada (Federal)
• Citations: (1974), 4 N.R. 525 (FCA)

Cam Guard Supply Ltd. v. MNR (1974), 4 N.R. 525 (FCA)

MLB headnote and full text

Cam Guard Supply Ltd. v. Minister of National Revenue

Indexed As: Cam Guard Supply Ltd. v. Minister of National Revenue

Federal Court of Appeal

Thurlow and Ryan, JJ.

and Bastin, D.J.

July 3, 1974.

Summary:

This case arose out of an assessment against a corporate taxpayer which disallowed a deduction of $309,414. The $309,414. represented a past service contribution to a pension fund. The pension fund was established by the company for its executives. Pursuant to the terms of the pension plan the past service contribution was payable only if funds were available. The Trial Division of the Federal Court of Canada dismissed the taxpayer's appeal from the assessment and held that the past service contribution to the pension fund was not deductible from income.

On appeal to the Federal Court of Appeal the appeal was dismissed and the judgment of the Trial Division was affirmed. The Federal Court of Appeal held that the special contribution was not deductible because at the time of the contribution was made there was no obligation by the pension fund to employees.

Bastin, D.J., dissenting, in the Federal Court of Appeal, would have allowed the appeal and would have held that the special pension fund contribution was deductible. Bastin, D.J., stated that the "obligations" as found in s. 76(1) referred to the scale of benefits recited in the pension plan and did not refer to presently enforceable liabilities - see paragraph 17.

Bastin, D.J., also stated that the words in the agreement indicating that the plan was conditional upon the ability of the company to make the special payment did not constitute a defect and was not unreasonable in the case of a small company - see paragraph 21.

Income Tax - Topic 1233

Income from a business - Deductions - Pension fund contributions - Special contribution to "ensure that obligations of a fund or plan to the employees may be discharged" - Income Tax Act, s. 76(1) - A company established an executive pension plan to which contributions for past service were payable if the funds were available - The Federal Court of Appeal held that a past service contribution to the fund of $309,414. was not a deductible expense because at the time the contribution was made there was no obligation by the pension fund to employees.

Words and Phrases

Obligations - The Federal Court of Appeal discussed the meaning of the word "obligations" as found in s. 76(1) of the Income Tax Act, R.S.C. 1952, c. 148.

Cases Noticed:

M.N.R. v. Inland Industries Ltd. (1972), 23 D.L.R.(3d) 677, dist. [para. 13].

Statutes Noticed:

Income Tax Act, R.S.C. 1952, c. 148, sect. 76(1) [para. 2].

Counsel:

G.R. Hunter, Q.C., and A.J. Irving, for the appellant;

J.A. Scollin, Q.C., and C.H. Fryers, for the respondent.

This appeal was heard by the Federal Court of Appeal at Winnipeg, Manitoba, on June 24, 1974. The judgment of the Federal Court of Appeal was delivered on July 3, 1974 and the following opinions were filed:

THURLOW, J. - see paragraphs 1 to 9.

BASTIN, D.J. - see paragraphs 10 to 22.

RYAN, J., concurred with THURLOW, J.