KERWIN J.-This is an appeal against a decision of the Exchequer Court affirming the assessment of the appellant, the Borden Company Limited, under The Excess Profits *PRESENT:-Kerwin. Taschereau, Rand, Kellock and Estey JJ.
S.C.R.]
Tax Act, chapter 32 of the Statutes of 1940 as amended, for the taxation year 1942. Either under its present or a prename, the has been in existence for a numvous ametheappellant hsbe neitnefranm ber of years, manufacturing milk products and also carrying on a fluid milk and dairy products business. It is, I think, unnecessary to state in detail the various changes that occurred in the nature of the business carried on by the appellant before 1937 because in that year it purchased all the shares of twenty-six operating companies from a subsidiary of a United States parent concern and all the assets and business of one of its own subsidiaries, and by this step re-entered the fluid milk business which for some time previous, it had ceased to operate.
Among the companies the shares of which the appellant had purchased in 1937 were Laurentian Dairy Limited, Moyneur Co-operative Creamery Limited, and Caulfield's Dairy Limited. As of January 1, 1941, it purchased the assets of the first two companies and as of June 1, 1942, it purchased the assets of the third company.
Under section of The Excess Profits Tax Act there is to be assessed, levied and paid a tax upon the excess profits of every corporation or joint stock company residing or ordinarily resident in Canada or carrying on business in 'Canada. The appellant did not file a consolidated return pursuant to subsection 3 of section 35 of the Income War Tax Act and, therefore, it does not come within paragraph (i) of section 2(c) of The Excess Profits Tax Act but within paragraph (ii) so that, as to it, "excess profits" means the amount by which its profits exceed one hundred and sixteen and six hundred and sixty-six one thousandths per centum of its standard profits. ' For present purposes, "standard profits" means the average yearly profits in the years 1936 to 1939 both inclusive because it is admitted that the appellant was during those years carrying on the same class of business as it did in the year in question, 1942.
Unless, therefore, the appellant can bring itself within some other provision of the Act, there can be no question that it was correctly assessed. The contention is that subsection 2 of section 4 applies:- I think that the learned trial judge was right in deciding .that it cannot be said that the appellant acquired its business as a going concern after January 1, 1938. The case of J. a company which starts a new business is referred to in other provisions of the Act, and apparently what Parliament had in mind in subsection 2 of section 4 is a new taxpayer who has acquired its business as a going concern after the specified date. The appellant is not a new taxpayer with reference to the business carried on by it. It is the same taxpayer carrying on a business, enlarged, it is true, to some extent by its purchase of the assets of the three companies, but it is still the same business, and it cannot be said that that was acquired as a going concern after January 1, 1938. Furthermore, "predecessor" is not an apt word in the context in which it is found to describe any of the three companies.
The trial judge dealt with the question as to whether in any event the power of the Minister to "direct" is to direct the Board of Referees for whose appointment provision is made by section 13 of the Act. At the moment I have grave doubts as to whether this is so but I prefer to express no opinion on the subject since my conclusion on the first point is sufficient to dispose of the appeal. The standard profits of Laurentian Dairy Limited, Moyneur Co-operative Creamery Limited and Caulfield's Dairy Limited were quite properly not taken into account in ascertaining the standard profits of the appellant.
The appeal should be dismissed with costs.
J.-The appellant carried on a large business during the standard period under The Excess Profits Tax Act, 1940, and its standard profits standing alone are not in question.
In. 1941 and 1942 it acquired the assets and business of three subsidiaries as going concerns which themselves were carried on during that period, but without altera- .tion in its share capital. It now seeks to have added to its own standard profits those of the businesses taken over and section 4(2) of the Act is invoked.
S.C.R.]
I think it clear that section 4(2) is confined to a case where after January 1, 1938, a person acquires "his business" .
s distinguished 'from an addition to his business, as a going concern that was carried on in the standard period and continues it in substance as it was under his or its predecessor. In that situation section 5(2) comes into play. If the acquisition has been made in 1938, on the application of the taxpayer, or if after January 2, 1939, without an application, the Minister refers the case to the Board of Referees. Section 4(2) provides that in either case the Minister may direct the Board to take into account the standard profits, if there were such, of the predecessor. Two years is ordinarily the minimum period for the determination of such profits as average yearly profits, under the definition section 2(1) (i), and where the successor has less than that time within the standard period the case thus becomes or may become one for the Board. What the appellant did was to add to the capital employed in its business. The Act makes provision for such cases, but the conditions laid down were not here complied with.
The appeal must, therefore, be dismissed with costs. J.-Section 4, subsection 2, of The Excess Profits Tax Act, as it stood with relation to the year 1942, is as follows:
As of January 1, 1941, the appellant purchased, as a going concern in each case, the business and assets of Laurentian Dairy Limited and Moyneur Co-operative Creamery Limited, and as of June 1, 1942, the business and assets of Caulfield's Dairy Limited.
Appellant contends that the above subsection is applicable to entitle it to have included in its standard profits for the year 1942, or the proportionate part thereof, the standard profits previously applicable to the companies whose assets were purchased. It is contended by the respondent, and this contention has been given effect to by the court below, that the subsection
Statutes and regulations cited
-
Unresolved citations
- section 35 of the Income War Tax Act
- paragraph (i)
- section 2(c)
- paragraph (ii)
- section 4
- section 13
- section 4(2)
- section 5(2)
- Section 4(2)
- section 2(1)
- Section 4