Hickman Motors Ltd. v. Minister of National Revenue, (1997) 213 N.R. 81 (SCC)
Judge | Cory, McLachlin, Iacobucci and Major, JJ. |
Court | Supreme Court (Canada) |
Case Date | June 26, 1997 |
Jurisdiction | Canada (Federal) |
Citations | (1997), 213 N.R. 81 (SCC);[1998] 1 CTC 213;[1997] SCJ No 62 (QL);[1997] CarswellNat 3046;131 FTR 317;72 ACWS (3d) 194;148 DLR (4th) 1;1997 CanLII 357 (SCC);97 DTC 5363;EYB 1997-01534;JE 97-1394;213 NR 81;[1997] ACS no 62;[1997] 2 SCR 336;AZ-97111072 |
Hickman Motors Ltd. v. MNR (1997), 213 N.R. 81 (SCC)
MLB headnote and full text
[French language version follows English language version]
[La version française vient à la suite de la version anglaise]
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Temp. Cite: [1997] N.R. TBEd. JN.027
Hickman Motors Limited (appellant) v. Her Majesty The Queen (respondent)
(24994)
Indexed As: Hickman Motors Ltd. v. Minister of National Revenue
Supreme Court of Canada
La Forest, L'Heureux-Dubé, Sopinka,
Cory, McLachlin, Iacobucci and
Major, JJ.
June 26, 1997.
Summary:
On December 28, 1984, a subsidiary of the corporate taxpayer was wound-up into the corporate taxpayer. The assets of the subsidiary, including depreciable property with an undepreciated capital cost of $5,196,422, became the property of the corporate taxpayer. Five days later the corporate taxpayer transferred those assets to a newly created subsidiary. In its 1984 tax return, the corporate taxpayer claimed a capital cost allowance of $2,029,942 in respect of the assets which it had acquired from the subsidiary upon the winding-up. The Minister of National Revenue disallowed the claim on the basis that the corporate taxpayer had not acquired the property for the purpose of gaining or producing income. The corporate taxpayer appealed.
The Federal Court of Canada, Trial Division, in a decision reported at 59 F.T.R. 139, dismissed the appeal. The corporate taxpayer appealed.
The Federal Court of Appeal, in a decision reported at 185 N.R. 231, dismissed the appeal. The corporate taxpayer appealed.
The Supreme Court of Canada, Iacobucci, Sopinka and Cory, JJ., dissenting, allowed the appeal.
Income Tax - Topic 1129
Income from a business or property - Deductions - General - Requirement that expense be incurred for producing income - The Supreme Court of Canada, per L'Heureux-Dubé, J., discussed the distinctions between the "reasonable expectation of profit" test and the "purpose of producing income" test - See paragraphs 67 to 72.
Income Tax - Topic 1129
Income from a business or property - Deductions - General - Requirement that expense be incurred for producing income - [See Income Tax - Topic 1199 ].
Income Tax - Topic 1140.4
Income from a business or property - Deductions - General - Business loss - Reasonable expectation of profit - [See first Income Tax - Topic 1129 ].
Income Tax - Topic 1199
Income from a business or property - Deductions - Capital cost allowance - Transferred from wound-up subsidiary - A subsidiary of the corporate taxpayer was wound-up into the corporate taxpayer - The assets of the subsidiary, including depreciable property with an undepreciated capital cost of $5,196,422, became the property of the corporate taxpayer - Five days later the corporate taxpayer transferred those assets to a newly created subsidiary - The corporate taxpayer claimed a capital cost allowance in respect of the assets which it had acquired from the subsidiary upon the winding-up - The Supreme Court of Canada held that the corporate taxpayer was entitled to deduct the capital cost allowance where (1) the corporate taxpayer had a business source of income to which the assets related (Income Tax Act, s. 20(1)), and (2) the assets were acquired for the purpose of producing income (Regulation 1102(1)(c)) - See paragraphs 1 to 9.
Cases Noticed:
Clapham v. Minister of National Revenue (1970), 70 D.T.C. 1012, refd to. [para. 7].
Bolus-Revelas-Bolus Ltd. v. Minister of National Revenue (1971), 71 D.T.C. 5153 (Ex. Ct.), refd to. [para. 7].
Inland Revenue Commissioners v. Westminster (Duke), [1936] A.C. 1 (H.L.), refd to. [para. 8].
Stubart Investments Ltd. v. Minister of National Revenue, [1984] 1 S.C.R. 536; 53 N.R. 241, refd to. [para. 8].
Moldowan v. Minister of National Revenue, [1978] 1 S.C.R. 480; 15 N.R. 476; [1977] C.T.C. 310; 77 D.T.C. 5213; 77 D.L.R.(3d) 112, refd to. [para. 18].
Paquin v. Lessard et al., [1975] 1 S.C.R. 665; 10 N.R. 620, refd to. [para. 25].
Minister of National Revenue v. Mara Properties Ltd., [1996] 2 S.C.R. 161; 197 N.R. 308, dist. [para. 34].
2747-3174 Québec Inc. v. Régis des permis d'alcool du Québec et autres, [1996] 3 S.C.R. 919; 205 N.R. 1, refd to. [para. 37].
Canadian Marconi Co. v. Minister of National Revenue, [1986] 2 S.C.R. 522; 70 N.R. 174, refd to. [para. 41].
Smith v. Anderson (1879), 15 Ch. D. 247 (C.A.), refd to. [para. 41].
Carland (Niagara) Ltd. v. Minister of National Revenue (1964), 64 D.T.C. 139, refd to. [para. 47].
Attridge v. Minister of National Revenue (1991), 41 F.T.R. 276; 91 D.T.C. 5161 (T.D.), refd to. [para. 48].
Bay Centre Apartments Ltd. v. Minister of National Revenue (1981), 81 D.T.C. 489 (T.R.B.), refd to. [para. 48].
Gloucester Railway Carriage and Wagon Co. v. Inland Revenue Commissioners (1923), 129 L.T.R. 691 (K.B.), affd. (1924), 40 T.L.R. 435 (C.A.), refd to. [para. 55].
R. v. Anderson Logging Co., [1925] S.C.R. 45, refd to. [para. 55].
Royal Trust Co. v. Minister of National Revenue (1957), 57 D.T.C. 1055 (Ex. Ct.), refd to. [para. 63].
Ghali v. Canada (Ministre des Transports) et al. (1996), 122 F.T.R. 205 (T.D.), refd to. [para. 63].
Mark Resources Inc. v. R. (1993), 93 D.T.C. 1004 (Tax C.C.), refd to. [para. 64].
Bellingham v. Minister of National Revenue, [1996] 1 F.C. 613; 190 N.R. 204 (F.C.A.), refd to. [para. 64].
Minister of National Revenue v. McLaren, [1991] 1 F.C. 468; 37 F.T.R. 241 (T.D.), refd to. [para. 64].
Vancouver Art Metal Works Ltd. v. Minister of National Revenue (1993), 152 N.R. 309; 93 D.T.C. 5116 (F.C.A.), refd to. [para. 80].
Docherty v. Minister of National Revenue (1991), 91 D.T.C. 537 (Tax C.C.), refd to. [para. 87].
Vander Nurseries Inc. v. Minister of National Revenue (1995), 95 D.T.C. 91 (Tax C.C.), refd to. [para. 87].
Mountwest Steel Ltd. v. Minister of National Revenue (1994), 2 G.T.C. 1087 (Tax C.C.), refd to. [para. 87].
Uphill Holdings Ltd. v. Minister of National Revenue (1993), 93 D.T.C. 148 (Tax C.C.), refd to. [para. 87].
Minister of National Revenue v. Wardean Drilling Ltd. (1969), 69 D.T.C. 5194 (Ex. Ct.), refd to. [para. 87].
Minister of National Revenue v. Société coopérative agricole de la vallée de Yamaska (1957), 57 D.T.C. 1078 (Ex. Ct.), refd to. [para. 87].
Weinberger v. Minister of National Revenue (1964), 64 D.T.C. 5060 (Ex. Ct.), refd to. [para. 87].
Naka v. Canada (1995), 95 D.T.C. 407 (Tax C.C.), refd to. [para. 87].
Page v. Canada (1995), 95 D.T.C. 373 (Tax C.C.), refd to. [para. 87].
Dobieco Ltd. v. Minister of National Revenue, [1966] S.C.R. 95, refd to. [para. 92].
Dalton Cartage Co. v. Continental Insurance Co. and St. Paul Fire and Marine Insurance Co., [1982] 1 S.C.R. 164; 40 N.R. 135, refd to. [para. 92].
Pallan v. Minister of National Revenue (1989), 90 D.T.C. 1102 (Tax C.C.), refd to. [para. 92].
Bayridge Estates Ltd. v. Minister of National Revenue (1959), 59 D.T.C. 1098 (Ex. Ct.), refd to. [para. 92].
Johnston v. Minister of National Revenue, [1948] S.C.R. 486, refd to. [para. 92].
Kennedy v. Minister of National Revenue (1973), 73 D.T.C. 5359 (F.C.A.), refd to. [para. 92].
First Fund Genesis Corp. v. Minister of National Revenue (1990), 34 F.T.R. 313; 90 D.T.C. 6337 (T.D.), refd to. [para. 92].
Kamin v. Minister of National Revenue (1992), 93 D.T.C. 62 (Tax C.C.), refd to. [para. 93].
Goodwin v. Minister of National Revenue (1982), 82 D.T.C. 1679 (T.R.B.), refd to. [para. 93].
MacIsaac v. Minister of National Revenue (1974), 74 D.T.C. 6380 (F.C.A.), refd to. [para. 93].
Zink v. Minister of National Revenue (1987), 87 D.T.C. 652 (Tax C.C.), refd to. [para. 93].
Maglib Development Corp. v. Minister of National Revenue (1986), 7 F.T.R. 258; 87 D.T.C. 5012 (T.D.), refd to. [para. 94].
Waxstein v. Minister of National Revenue (1980), 80 D.T.C. 1348 (T.R.B.), refd to. [para. 95].
Roselawn Investments Ltd. v. Minister of National Revenue (1980), 80 D.T.C. 1271 (T.R.B.), refd to. [para. 95].
Gelber v. Minister of National Revenue (1991), 91 D.T.C. 1030 (Tax C.C.), refd to. [para. 96].
C.B.A. Engineering Ltd. v. Minister of National Revenue, [1971] C.T.C. 504 (F.C.T.D.), refd to. [para. 135].
Poulin v. Canada (1993), 94 D.T.C. 1674 (Tax C.C.), refd to. [para. 135].
Vincent v. Minister of National Revenue, [1965] 2 Ex. C.R. 117, refd to. [para. 135].
Boma Manufacturing Ltd. et al. v. Canadian Imperial Bank of Commerce, [1996] 3 S.C.R. 727; 203 N.R. 321; 82 B.C.A.C. 161; 133 W.A.C. 161, refd to. [para. 141].
Statutes Noticed:
Income Tax Act, S.C. 1970-71-72, c. 63, sect. 20(1) [para. 2]; sect. 88(1) [para. 5].
Income Tax Act Regulations (Can.), C.R.C., c. 945, reg. 1102(1)(c) [para. 2]; reg. 1102(14) [para. 5].
Authors and Works Noticed:
Arnold, B.J. et al., Materials on Canadian Income Tax (10th Ed.), p. 189 [para. 135].
Beechy, Thomas H., Canadian Advanced Financial Accounting (2nd Ed. 1990), pp. 38, 39, 40 [para. 83].
Bennion, F.A.R., Statutory Interpretation (2nd Ed. 1992), pp. 805 et seq. [para. 37].
Canadian Institute of Chartered Accountants Handbook, s. 1000.16 [para. 84].
Chasteen, Lanny G., et al., Intermediate Accounting (1st Canadian Ed. 1992), p. 35 [para. 83].
Couzin, Robert, Current Tax Provisions Relating to the Deductibility and Transfer of Losses, in Policy Options for the Treatment of Tax Losses in Canada, (1991), pp. 3:3, 3:12 [para. 20].
Driedger, Elmer A., Construction of Statutes (3rd Ed. 1994), p. 198 [para. 37].
Durnford, J., The Distinction Between Income from Business and Income from Property, and the Concept of Carrying on Business (1991), 39 Cdn. Tax J. 1131, p. 1191 [para. 47].
Harris, Edwin C., Canadian Income Taxation (4th Ed. 1979), pp. 99 [para. 135]; 143 [para. 144]; 159 [para. 159].
Hogg, Peter W. and Magee, Joanne E., Principles of Canada Income Tax Law (1995), p. 195 [para. 144].
Kerans, Roger P., Standards of Review Employed by Appellate Courts (1994), p. 203 [para. 26].
Krishna, Vern, The Fundamentals of Canadian Income Tax (5th Ed. 1995), pp. 260, 276, [para. 144]; 277, 772 [para. 41].
Owen, John R., The Reasonable Expectation of Profit Test: Is There a Better Approach? (1996), 44 Cdn. Tax J. 979, generally [para. 72].
Wilson, Michael, A Corporate Loss Transfer System for Canada, Department of Finance Budget Papers, Budget Speech, Canada (May 1985), p. 3 [para. 19].
Counsel:
James R. Chalker, for the appellant;
Roger Taylor and André LeBlanc, for the respondent.
Solicitors of Record:
Chalker, Green & Rowe, St. John's, Newfoundland, for the appellant;
George Thomson, Deputy Attorney General of Canada, Ottawa, Ontario, for the respondent.
This appeal was heard on October 30, 1996, before La Forest, L'Heureux-Dubé, Sopinka, Cory, McLachlin, Iacobucci and Major, JJ., of the Supreme Court of Canada.
The judgment of the court was delivered in both official languages on June 26, 1997, and the following opinions were filed:
McLachlin, J. (La Forest and Major, JJ., concurring) - see paragraphs 1 to 9;
L'Heureux-Dubé, J. - see paragraphs 10 to 101;
Iacobucci, J., dissenting (Sopinka and Cory, JJ., concurring) - see paragraphs 102 to 162.
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