Kerr, J:—This is in respect of an application pursuant to paragraph 174(3)(b) of the Income Tax Act. I am informed that it is the first application under that section of the Act, and that there is no jurisprudence relating particularly to the section.
The relevant portion of section 174 reads as follows:
174. (1) Where the Minister is of the opinion that a question of law, fact or mixed law and fact arising out of one and the same transaction or occurrence or series of transactions or occurrences is common to assessments in respect of two or more taxpayers, he may apply to the Tax Review Board or the Federal Court—Trial Division for a determination of the question.
(2) An application under subsection (1) shall set forth
(a) the question in respect of which the Minister requests a determination,
(b) the names of the taxpayers that the Minister seeks to have bound by the determination of the question, and
(c) the facts and reasons on which the Minister relies and on which he based or intends to base assessments of tax payable by each of the taxpayers named in the application,
and a copy of the application shall be served by the Minister on each of the taxpayers named in the application and on any other persons who, in the opinion of the Tax Review Board or the Federal Court—Trial Division, as the case may be, are likely to be affected by the determination of the question.
(3) Where the Tax Review Board or the Federal Court—Trial Division is satisfied that a determination of the question set forth in an application under this section will affect assessments in respect of two or more taxpayers who have been served with a copy of the application and who are named in an order of the Board or the Court, as the case may be, pursuant to this subsection, it may
(a) if none of the taxpayers so named has appealed from such an assessment, proceed to determine the question in such manner as it considers appropriate, or
(b) if one or more of the taxpayers so named has or have appealed, make such order joining a party or parties to that or those appeals as it considers appropriate.
(4) Where a question set forth in an application under this section is determined by the Tax Review Board or the Federal Court—Trial Division, the determination thereof is, subject to any appeal therefrom in accordance with the Federal Court Act, final and conclusive for the purposes of any assessments of tax payable by the taxpayers named by it pursuant to subsection (3).
The application, which was by notice of motion, supported by an affidavit of Ronald J Thrasher, asks:
(a) for an order pursuant to paragraph 174(3)(b) of the Income Tax Act joining Arthuro Brez and Alcide Fortuna to the action aforesaid for the purpose of determining the question, in what amounts the partnership profits of AB & Lafortune Contractors for its 1969 taxation year are allocable for income tax purposes among the three partners that comprised the partnership; namely Gerald Dain, Arthuro Brez and Alcide Fortuna;
(b) for a determination of the question set forth in paragraph (a) hereof;
(c) for an order that the said Gerald Dain, Arthuro Brez and Alcide Fortuna shall be bound by the determination; and
(d) for an order for directions as to the manner in which evidence will be adduced in the determination of the question.
The notice of motion states that the facts upon which the Minister based his assessments for the 1969 taxation year of each of the persons mentioned in paragraph (c) are as follows:
1. On or about the 1st day of January 1967, the said Gerald Dain, Arthuro Brez and Alcide Fortuna entered into a partnership which carried on the business of general contractors under the firm name and style of AB & Lafortune Contractors.
2. Each of the partners had a 1/3 interest therein.
3. The partnership had a fiscal year end of June 30th.
4. The profits of the said partnership for its 1969 fiscal year were $92,070.63.
5. Prior to June 30, 1969 the said Gerald Dain notified his partners that as of June 30, 1969 he would be terminating his interest in the partnership.
6. Pursuant to litigation commenced in the Supreme Court of Ontario by the said Gerald Dain a form of settlement was drawn up and executed by the said Gerald Dain, which settlement reads as follows:
“DATED at Ottawa this 21st day of July, 1969.
l, GERALD DAIN, upon the dissolution of the partnership known as AB and Lafortune Contractors and carried on by Alcide Fortuna, Arthuro Brez, and Gerald Dain, hereby acknowledge receipt of the sum of $15,000.00 plus the sum of $350.00 for costs and I accept the sum of $15,000.00 as complete and final withdrawal of my one-third interest in the partnership assets of AB and Lafortune Contractors including, without limiting the generality of the foregoing, cash on hand, accounts receivable, all other assets, both fixed and current, and good will.
I hereby release any interest that I may have in the assets, the name and the operation of AB and Lafortune Contractors and I release all claims that I may have on or against the assets of Arthuro Brez and Alcide Fortuna and AB and Lafortune Contractors, as of July 1st, 1969.
I hereby undertake to sell any shares or interest that I may have in AB and Lafortune Contractors Limited, a private company not yet fully incorporated, to any person or persons as directed by Arthuro Brez and Alcide Fortuna for the total sum of $1.00.
I further undertake to provide the aforementioned Arthuro Brez and Alcide Fortuna with my resignation from the Board of Directors of the aforementioned company upon request.
I hereby authorize and direct my solicitors to file a Notice of Discontinuance of an action commenced at my request on the 14th day of July, 1969, in the Supreme Court of Ontario at Ottawa as Action No. 525/69.
Having been advised by my solicitor, I hereby agree to accept the sum of $15,000.00 in the following manner:
(a) $2,000.00 having been already accepted.
(b) $12,000.00 by way of cheque from Chiarelli & Guzzo, Barristers and Solicitors, solicitors for Arthuro Brez and Alcide Fortuna.
(c) $1,000.00 by way of promissory note payable on August 31st, 1969.
(d) I direct that the sum of $350.00 be paid to my solicitors, Gowling, MacTavish, Osborne & Henderson, for costs.
I hereby declare that I have made no contracts nor agreements of any kind on behalf of AB and Lafortune Contractors with any customers of the aforementioned AB and Lafortune Contractors to perform any additional services or provide additional materials under existing contracts other than what has been brought to the attention of Arthuro Brez and Alcide Fortuna.
Signed Signed Witness Gerald Dain” 7. Subsequent to the execution of the release the financial statements were prepared and each of the said partners was credited therein with a one-third interest of the profits in the amount of $30,690.21 each.
8. The said partners were assessed for income tax by assessments reflecting the said allocation of profits.
9. The said Dain objected to and ultimately appealed the said assessment to the Tax Review Board.
10. The Tax Review Board by judgment dated the 27th day of February 1973, and mailed on the 28th day of February 1973 [not reported] allowed the appeal of the said Gerald Dain from the said assessment and referred it back to the Minister of National Revenue on the basis that the sum of $12,682.42 should not be taxed in his hands because this amount was not and will never be received by him.
The notice of motion also states that the reasons on which the Minister relies to support the assessments are as follows:
11. Each of the said partners, having had one-third interest in the partnership, was entitled to receive a like proportion of the profits for the partnership’s 1969 tax year.
12. Each partner’s share of the 1969 profits came to $30,690.21 and was payable to the partners in their 1969 tax year.
13. By virtue of section 6(1 )(c) of the Income Tax Act each taxpayer was required to add the amount of $30,690.21 into his income for the 1969 taxation year.
14. The form of settlement executed by the said Gerald Dain as set out in paragraph 6 above operated solely as a release of his interest In the capital of the partnership and did not operate to disentitle him to his share of proceeds of the partnership profits in the partnership’s 1969 fiscal year.
At the hearing of the application counsel on behalf of the plaintiff argued in support of the motion, and it was opposed by counsel for the defendant Dain and by counsel for Arthuro Brez. There apparently was an oversight in giving Alcide Fortuna notice of this hearing, which had been adjourned from an earlier date, and he did not appear and was not represented.
Here the situation is that one of the taxpayers, Dain, appealed to the Tax Review Board from his assessment, and consequently paragraph 174(3)(b) applies.
Counsel for the plaintiff argued, inter alia, that the onus of proving an assessment erroneous remains on the taxpayer throughout on appeal to the Tax Review Board and to the Federal Court, and in this instance the appeal to the Federal Court in respect of Dain’s assessment should be treated as an appeal by the taxpayer within the context of section 174; that one of the purposes of the section is to obviate litigation and avoid separate appeals or hearings where there are common questions, such as dovetailing assessments; that, on an appeal by a taxpayer to the Tax Review Board, the Minister may await the result of that appeal without precluding his right, in an appeal by him to the Federal Court from an adverse decision of the Board, to apply for a determination under section 174 and to have other taxpayers added to such latter action; and that, if the section is not so construed, anomalous consequences would follow.
Counsel for Brez and counsel for Dain argued that section 174 is a code, that the appeal referred to in paragraph 174(3)(b) is an appeal by a taxpayer, not an action or appeal by the Minister, and that the time for the Minister to apply for a determination in this instance was when there was an appeal by the taxpayer before the Tax Review Board.
Section 174 is designed to have a determination of such questions as are referred to in subsection (1), and it contemplates two situations, namely, (a) where none of the taxpayers has appealed from an assessment, and (b) where one or more of the taxpayers has or have appealed. In the first situation, the Tax Review Board or the Federal Court, whichever has the application for a determination, may proceed to determine it in such manner as it considers appropriate. In the other situation, where one (or more than one) of the taxpayers has appealed from his assessment, the section affords an opportunity to the Minister to apply under section 174 to the tribunal that has the taxpayer’s appeal, and it can deal with the appeal and with the question under section 174 and can join other parties to the appeal. However, I do not find in section 174, either in express words or by reasonable and necessary implication, any authority in the Federal Court to join a party or parties to an action or appeal by the Minister from a decision of the Tax Review Board, which the present action is, for although this action is in consequence of the decision on the taxpayer’s appeal to the Tax Review Board and as defendant in this action he still has the onus of showing the assessment to be erroneous, and the action is a trial de novo, it nevertheless is not an appeal by the taxpayer but by the Minister.
If a taxpayer appeals in the first instance to the Tax Review Board and follows it with a further appeal to this Court from the Board’s decision, it may possibly be that the Minister has a right to apply to this Court for a determination under section 174 even although he did not apply to the Tax Review Board when it had the taxpayer’s initial appeal, and in that situation the Court may have authority to join other parties to the taxpayer’s latter appeal, but that is not the situation here.
In addition to asking for an order joining Brez and Fortuna to the action for the purpose of determining the question as to allocation of the partnership profits among the partners, the application asks for a determination of the question and for an order that the three partners be bound by the determination. It appears to me that joining Brez and Fortuna to the action would be a prerequisite to the making of a determination binding on them, and if the Court has no authority to join them to the action there would be no point in making an order for the determination of the question.
The application will therefore be dismissed, with costs.