Date: 20060314
BETWEEN:
LES PRODUITS POUR TOITURES FRANSYL INC.
and
Hearing held at Montréal, Quebec, on March 14, 2006.
Judgment delivered at Montréal, Quebec, on March 14, 2006.
REASONS FOR JUDGMENT OF THE COURT BY: DESJARDINS J.A.
Docket: A-202-05
Citation: 2006 FCA 112
CORAM: DESJARDINS J.A.
LÉTOURNEAU J.A.
NOËL J.A.
BETWEEN:
LES PRODUITS POUR TOITURES FRANSYL INC.
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the bench at Montréal, Quebec, March 14, 2006)
[1] This is an appeal from a decision of the Tax Court of Canada (Les Produits pour Toitures Fransyl Ltée v. Her Majesty the Queen, [2005] D.T.C. 564, Angers J.) that confirmed a reassessment denying in part a deduction of $1,865,726 claimed by the appellant as rental expenses for the 1995 taxation year, on the grounds that this expense did not meet the requirements of section 67 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) and was not reasonable in the circumstances.
[2] That section reads:
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RULES RELATING TO COMPUTATION OF INCOME |
RÈGLES RELATIVES AU CALCUL DU REVENU |
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67. In computing income, no deduction shall be made in respect of an outlay or expense in respect of which any amount is otherwise deductible under this Act, except to the extent that the outlay or expense was reasonable in the circumstances. |
67. Dans le calcul du revenu, aucune déduction ne peut être faite relativement à une dépense à l’égard de laquelle une somme est déductible par ailleurs en vertu de la présente loi, sauf dans la mesure où cette dépense était raisonnable dans les circonstances. |
[Emphasis added.]
[3] The amount of $1,865,726 was almost three times greater than the rent paid by the appellant to two related corporations in 1994 and in 1996.
[4] It was also significantly greater than the fair rental market value established by the expert evidence.
[5] The appellant tried to justify the expense by proving that it was an attempt to ensure the financial survival of the corporation to which it was related.
[6] In this regard, it was the trial judge’s view that the appellant only submitted vague evidence concerning its financial obligations and the obligations of the related corporations.
[7] The trial judge found that the appellant did not succeed in proving that the increase was reasonable in the circumstances.
[8] After reviewing the evidence as presented, we are of the opinion that the trial judge was justified in reaching the conclusion that he did.
[9] The appeal will be dismissed with costs.
FEDERAL COURT OF APPEAL
SOLICITORS OF RECORD
DOCKET: A-202-05
APPEAL FROM A JUDGMENT BY ANGERS J. OF THE TAX COURT OF CANADA DATED MARCH 31, 2005, DOCKET 2000-4673(IT)G.
STYLE OF CAUSE: LES PRODUITS POUR TOITURES FRANSYL INC.
v. HER MAJESTY THE QUEEN
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: March 14, 2006
REASONS FOR JUDGMENT OF THE COURT BY: DESJARDINS J.A.
LÉTOURNEAU J.A.
NOËL J.A.
DELIVERED FROM THE BENCH BY: DESJARDINS J.A.
APPEARANCES:
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FOR THE APPELLANT
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FOR THE RESPONDENT
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SOLICITORS OF RECORD:
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Montréal, Quebec
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FOR THE APPELLANT
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Deputy Attorney General of Canada Montréal, Quebec |
FOR THE RESPONDENT
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