MHL Holdings Ltd. v. Minister of National Revenue, (1988) 21 F.T.R. 65 (TD)

• Judge: Joyal, J.
• Court: Federal Court (Canada)
• Case Date: May 20, 1988
• Jurisdiction: Canada (Federal)
• Citations: (1988), 21 F.T.R. 65 (TD)

MHL Holdings Ltd. v. MNR (1988), 21 F.T.R. 65 (TD)

MLB headnote and full text

MHL Holdings Ltd. (plaintiff) v. Her Majesty the Queen (defendant)

(T-2285-86)

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

Federal Court of Canada

Trial Division

Joyal, J.

May 20, 1988.

Summary:

The plaintiff corporation carried on the business of acquiring and developing industrial and commercial properties in and around Calgary, Alberta. In order to obtain a development permit, the plaintiff corporation paid the City of Calgary $826,000.00, including $712,000.00 in lieu of constructing parking places and $114,000.00 to satisfy the plaintiff's obligation to pay the costs of future skywalk connections. The plaintiff included both payments as a current expense when filing its income tax for 1980. The Minister of National Revenue contended that the amounts represented capital outlays under s. 18(1)(b) of the Income Tax Act, and reassessed the plaintiff's income. The plaintiff appealed against the reassessment.

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

Income Tax - Topic 1127

Income from business or property - Deductions - Expenses - General - To obtain a development permit to build a highrise, the plaintiff development company paid the city $712,000.00 in lieu of constructing parking places and $114,000.00 to satisfy the plaintiff's obligation to pay the cost of future skywalk connections - The payments were made to acquire an asset of lasting benefit in value, as a condition to obtain the permit and to prevent delay of the project and further expense - The payment was not of a recurring nature attributable from time to time to the gaining of revenue from rental or leasing operations - The Federal Court of Canada, Trial Division, agreed with the Minister that the payment constituted a capital expense under s. 18(1)(b) of the Income Tax Act to be added to the capital cost of the building and deducted pursuant to s. 20(1)(a) of the Act.

Income Tax - Topic 1303

Income from business or property - Deductions not allowed - Respecting capital outlays - [See Income Tax - Topic 1127 above].

Cases Noticed:

Royal Trust Co. v. M.N.R., 57 D.T.C. 1055, refd to. [para. 18].

B.C. Electric Ry. v. M.N.R., 58 D.T.C. 1022, refd to. [para. 19].

British Insulated & Helsby Cables v. Atherton, [1926] A.C. 205, refd to. [para. 20].

Anglo-Persian Oil Ltd. v. Dale (1931), 16 Tax Cas. 253 (C.A.), refd to. [para. 22].

B.P. Australia Ltd. v. Commr. of Taxation of Commonwealth of Australia, [1966] A.C. 224 (P.C.), refd to. [para. 23].

Golden Horse Shoe (New) Ltd. v. Thurgood, [1934] 1 K.B. 548, refd to. [para. 24].

Minister of National Revenue v. Algoma Central Railway, [1948] S.C.R. 447, refd to. [para. 25].

Tucker v. Granada Motorway Services Ltd., [1979] 2 All E.R. 801, refd to. [para. 26].

Sun Newspapers Ltd. v. Federal Commissioner of Taxation (1938), 61 C.L.R. 337, refd to. [para. 27].

Johns-Manville Canada Inc. v. Minister of National Revenue, [1985] 2 S.C.R. 46; 60 N.R. 244, refd to. [para. 27].

The Queen v. Metropolitan Properties Co. Limited (1985), 85 D.T.C. 5128, refd to. [para. 40].

Edmonton Plaza Hotel (1980) Limited v. Minister of National Revenue (1987), 13 F.T.R. 101; 87 D.T.C. 5371, refd to. [para. 44].

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 18(1)(b), sect. 20(1)(a) [para. 14].

Authors and Works Noticed:

Krishna, Vern, The Fundamentals of Canadian Income Tax (2nd Ed. 1986), p. X-10, para. 23 [para. 21].

Counsel:

H. George McKenzie and F.B. Perry, for the plaintiff;

D.D. Graham Reynolds and Naomi R. Goldstein, for the defendant.

Solicitors of Record:

Bell Felesky Flynn, Calgary, Alberta, for the plaintiff;

F. Iacobucci, Q.C., Deputy Attorney General of Canada, Ottawa, Ontario, for the defendant.

This appeal was heard before Joyal, J., of the Federal Court of Canada, Trial Division, at Calgary, Alberta, on March 20 and 30, 1988. The decision of Joyal, J., was delivered on May 20, 1988.