Gay Lea Foods Co-operative Ltd. v. Minister of National Revenue, (1994) 76 F.T.R. 60 (TD)

• Court: Federal Court (Canada)
• Case Date: November 16, 1993
• Jurisdiction: Canada (Federal)
• Citations: (1994), 76 F.T.R. 60 (TD)

Gay Lea Foods Co-op Ltd. v. MNR (1994), 76 F.T.R. 60 (TD)

MLB headnote and full text

Gay Lea Foods Co-operative Ltd. (plaintiff) v. Her Majesty the Queen (defendant)

(T-2179-87)

Indexed As: Gay Lea Foods Co-operative Ltd. v. Minister of National Revenue

Federal Court of Canada

Trial Division

Jerome, A.C.J.

February 10, 1994.

Summary:

The plaintiff Canadian corporation claimed an inventory allowance deduction for the 1981 taxation year pursuant to s. 20(1)(gg) of the Income Tax Act. The Minister of National Revenue disallowed the deduction. The corporation appealed.

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

Income Tax - Topic 1145

Income from a business or property - Deductions - Inventory allowance - The Federal Court of Canada, Trial Division, referred to the four conditions to successfully claiming an inventory allowance deduction under s. 20(1)(gg) of the Income Tax Act - See paragraph 8.

Income Tax - Topic 1145

Income from a business or property - Deductions - Inventory allowance - A producer participated in a price support program of the Canadian Dairy Commission to ensure a steady supply of butter during seasonal strains in the dairy industry - To accomplish this, the Commission purchased butter from participating producers in times of high production and sold the butter back to producers in times of lower production - The Commission contracted to buy the producer's butter for 5.5 months - The producer agreed to repurchase the butter - The producer treated the butter sold as inventory and recorded the amounts received from the Commission as a liability - The Federal Court of Canada, Trial Division, held that the producer could not claim the inventory allowance deduction in s. 20(1)(gg) of the Income Tax Act.

Cases Noticed:

Plaza Pontiac Buick Ltd. v. Minister of National Revenue (1993), 164 N.R. 219 (F.C.A.), refd to. [para 8, footnote 3].

Dresden Farm Equipment Ltd. v. Minister of National Revenue (1988), 91 N.R. 325; 89 D.T.C. 5019 (F.C.A.), reving. (1986), 2 F.T.R. 92; 87 D.T.C. 6167 (T.D.), refd to. [para. 8, footnote 3].

Burrard Yarrows Corp. v. Minister of National Revenue (1986), 5 F.T.R. 101; 86 D.T.C. 6459 (T.D.), refd to. [para. 8, footnote 4].

R.G. & D.H. Holdings Ltd. v. Minister of National Revenue (1986), 86 D.T.C. 1730 (Tax C.C.), refd to. [para. 10, footnote 7].

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 20(1)(gg) [paras. 1, 4-6, 8, 11-13].

Counsel:

Peter H. Harris, Q.C., and Harry Underwood, for the plaintiff;

Donald G. Gibson, for the defendant.

Solicitors of Record:

McCarthy Tétrault, Toronto, Ontario, for the plaintiff;

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

This case was heard in Toronto, Ontario, on November 16, 1993, by Jerome, A.C.J., of the Federal Court of Canada, Trial Division, who delivered the following decision on February 10, 1994.