Central Amusement Co. v. Minister of National Revenue, (1992) 52 F.T.R. 261 (TD)

• Judge: Rouleau, J.
• Court: Federal Court (Canada)
• Case Date: Tuesday December 03, 1991
• Jurisdiction: Canada (Federal)
• Citations: (1992), 52 F.T.R. 261 (TD)

Central Amusement Co. v. MNR (1992), 52 F.T.R. 261 (TD)

MLB headnote and full text

Central Amusement Company Limited (plaintiff) v. Her Majesty the Queen (respondent)

(T-1363-90)

Indexed As: Central Amusement Co. v. Minister of National Revenue

Federal Court of Canada

Trial Division

Rouleau, J.

February 19, 1992.

Summary:

In 1983 the taxpayer purchased replace­ment circuit boards (conversion kits) for its video game machines. The taxpayer deducted the entire cost of acquiring the conversion kits as a current deductible expense. The M.N.R. reassessed and disal­lowed the deduction, claiming that the outlay was on account of capital. The taxpayer appealed.

The Tax Court of Canada dismissed the appeal. The taxpayer appealed again.

The Federal Court of Canada, Trial Divi­sion, allowed the appeal.

Income Tax - Topic 1127

Income from a business or property - Deductions - Expenses - General - [See both Income Tax - Topic 1303].

Income Tax - Topic 1303

Income from business or property - De­ductions not allowed - Respecting capital outlays - The taxpayer was in the business of leasing, owning and servicing coin-operated amusement machines, including video game machines - Before the 1980's, to purchase a new game, the taxpayer had to buy the entire machine including the cabinet - Thereafter it was possible to buy "conversion kits", which were circuit boards containing new games, that could be inserted in the old cabinets - In 1983, the taxpayer spent $175,026 on conversion kits - The Federal Court of Canada, Trial Division, held that the $175,026 was a currently deductible expense rather than an outlay on account of capital (Income Tax Act, s. 18(1)(b)).

Income Tax - Topic 1303

Income from business or property - De­ductions not allowed - Respecting capital outlays - The Federal Court of Canada, Trial Division, reviewed the principles applicable in determining whether a par­ticular outlay is a currently deductible expense or on account of capital, such that the taxpayer is entitled to claim capital cost allowance - See paragraphs 19 to 25.

Cases Noticed:

Vallambrosa Rubber Co. Ltd. v. Farmer (1910), 5 T.C. 529, refd to. [para. 20].

Atherton v. British Insulated and Helsby Cables Ltd. (1925), 10 T.C. 155, refd to. [para. 21].

Gold Bar Developments Ltd. v. Minister of National Revenue (1987), 9 F.T.R. 303; 87 D.T.C. 5152 (F.C.T.D.), refd to. [para. 22].

Thompson Construction (Chemong) Ltd. v. Minister of National Revenue (1957), 57 D.T.C. 1114, refd to. [para. 23].

Minister of National Revenue v. Vancouver Tug Boat Co. Ltd. (1957), 57 D.T.C. 1126, refd to. [para. 23].

Damon Developments Ltd. v. Minister of National Revenue (1988), 88 D.T.C. 1129 (T.C.C.), refd to. [para. 24].

Oxford Shopping Centres Ltd. v. Minister of National Revenue (1979), 79 D.T.C. 5458 (F.C.T.D.), refd to. [para. 25].

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 18(1)(b) [para. 1].

Counsel:

Edwin Harris, for the plaintiff;

Donald Gibson, for the defendant.

Solicitors of Record:

Daley, Black & Moreira, Halifax, Nova Scotia, for the plaintiff;

John C. Tait, Q.C., Deputy Attorney Gen­eral of Canada, Ottawa, Ontario, for the defendant.

This appeal was heard in Halifax, Nova Scotia, on December 3, 1991, before Rouleau, J., of the Federal Court of Canada, Trial Division, who delivered the following decision on February 19, 1992.