The Chairman:—This is another appeal arising from the disallowance by the respondent of a claimed deduction from a company’s taxable income. The taxation year involved is 1966 and the place of hearing, Toronto.
The material facts are quite simple. Appellant has an insurance agency at 151 Bloor Street West. On November 1, 1962, August 23, 1963, and November 29, 1963, it lent $7,500, $4,000 and $3,500, re- spectively, with interest at 15%, to American International Bowling of Canada Limited, hereinafter called “Bowling”, which was one of its valued customers, but had got into deep water, financially. The said loans were made in the hope of saving Bowling from going out of business. There was some temporary relief afforded, but in the long run Bowling proved unable to weather the crisis that ensued and finally collapsed. The total of $15,000 so advanced by the appellant was set up in its books as a bad debt and deducted from income in 1966, this deduction being disallowed by the respondent in 1969. The present proceeding is the result.
Respondent contends that the advances constituted a capital outlay, on the grounds that the appellant was not in the money-lending business and such a bad debt did not arise from its usual and ordinary dealings. Furthermore, the advances did not serve to earn any income for the appellant. It is also to be noted that the appellant did not recover any part of the moneys advanced nor did it receive any interest thereon. Moreover, the appellant’s financial position hardly warranted the lending of money to a customer as, in 1966 for instance, the appellant did not declare any income, but reported a loss.
I am in full agreement with the position taken by the respondent and consider that the appeal cannot succeed and should be dismissed, as was intimated by me when the hearing was concluded.
Appeal dismissed.