The Chairman (orally):—This is an appeal by Gottfried Pfisterer from a reassessment of the Minister for the taxation year 1969 wherein the Minister has made a substantially different interpretation and ap- lication of paragraph 27(1 )(e) than has the taxpayer in computing his taxable income for that taxation year. The appellant produces a very ingenious argument and one that gives the Board much concern.
The sections dealt with under the various arguments by the Minister’s counsel are section 3, being the closest thing to a definition of “income” in the Act, and paragraph 139(1)(x), which is the statutory definition of “loss” contained in the Act, and the interpretation which the Minister places on clause 27(1 )(e)(iii)(A).
The situation arises out of the fact that the appellant apparently is engaged in ventures that provide him with two sources of income, one as a sole proprietor and the other as a partner in a partnership known as Conestoga Sales Acceptance Syndicate. Only his loss in that partnership is in question and no dispute arises as to the figures contained in the calculations.
The appellant is represented by his son, who presents the argument as an accountant, and, as I have said, in a very persuasive manner. To try and sum up his case, he says that one must first determine the income under Division B of the Income Tax Act, and not bring into play Division C, a computation of taxable income, until this computation under Division B has been completed.
I think it is trite law to say that “income” means, as section 3 says, all income from all sources, or world income as it is usually referred to, and by applying to it certain deductions provided in the Act and any losses that may be incurred in the taxation year.
The point in question here is whether or not, by paragraph 27(1)(e), the taxpayer can “net out”, as the expression is, the income, or if he must apply the loss that he has available to carry forward only to the income or positive income that he has earned in the taxation year. He refers to clause 27(1 )(e)(iii)(A), and if one looks at that, and I quote, it says:
(iii) no amount is deductible in respect of losses from the income of any year except to the extent of the lesser of (A) the taxpayer’s income for the taxation year from the business in which the loss was sustained and his income for the taxation year from any other business . . .
In this situation before the Board one of the ventures of the taxpayer is making money, one of them is showing a loss. The taxpayer appellant says that in computing the taxpayer’s income for the taxation year one should subtract from the profitable business the loss from the unprofitable business before applying the loss available for carry forward. In other words, he says that “income” where it is used in clause 27(1 )(e)(iii)(A) must be taken, and I paraphrase his argument, as what is left in the taxpayer’s hands after he has taken his profit from one business and deducted his loss from another business.
The Minister, on the other hand, says that that would in effect give rise to the taxation of negative income, which, of course, would be contrary, in my view, to the purpose of the Act. I think it is quite clear that Parliament, in assembling the Income Tax Act and its various amendments from time to time, had in mind taxing the moneys in the hands of the taxpayer after certain specific deductions and exemptions were allowed to the taxpayer as specified in the Income Tax Act.
It is also trite law to say that a taxpayer is entitled to avoid the payment of tax, and it is quite legal to do so, as distinguished from evading the payment of tax, provided he can bring himself within the confines of the sections upon which he relies. In my view, ingenious although the argument of the appellant is in this case, and logical though it may seem on presentation and on reflection, it is in my view not sufficient to disturb the obvious intent of Parliament in taxing positive income in the hands of the taxpayer. In my view there could be no interpretation of section 3, or any section for that matter in the Income Tax Act, to mean that Parliament intended the taxation of a minus figure in the hands of the taxpayer for a given year. I think, therefore, the interpretation of clause 27(1 )(e)(iii)(A) means exactly what it says, and that the second reference to “income” in that section refers to a positive income, and that the taxpayer has not discharged the onus upon him to show that the Minister’s assessment is wrong in law or in fact.
The appeal for these reasons must, therefore, be dismissed.
Appeal dismissed.