A W Prociuk:—The appellant herein appeals from the assessment for the taxation year 1967 by the Minister who determined his taxable income for that year to be $173,293.82. Taxes assessed were as follows: federal— $72,809.98; provincial — $28,229.44, together with interest in the sum of $3,171.37.
The case was heard on September 15, 1971 at a hearing held in the City of London in the Province of Ontario, at which the presiding member was J O Weldon, Esquire, QC, then a member of the Tax Appeal Board which, on December 15, 1971, became the Tax Review Board. However, judgment was reserved and no decision rendered by him prior to his retirement from the Board in March of 1972. Accordingly, by consent of both parties, this Board has now been given jurisdiction to issue its decision and judgment on the basis of the transcript of evidence and the argument taken before Mr Weldon, without further representation by counsel.
The appellant is president and chief operational officer of T W Johnstone Company Limited, an Ontario company doing business of pipeline construction, with head office at London, Ontario.
The evidence establishes that the appellant did not draw a regular salary but was remunerated for his services by bonuses annually, which the company declared at its duly constituted meetings. In November of 1967 the company declared a bonus in favour of the appellant of not less than $100,000 and not more than $110,000 to be paid over a two-year period subsequent to November 27, 1967.
In 1968 the company paid the appellant $70,000 and in 1969 a further amount of $36,500. The appellant declared this income in the years he received same.
During the year 1967 the appellant borrowed from the company a total of $132,763.21. He executed a promissory note in favour of the company for this sum and obligated himself to repay the said sum within one year. This, he did in accordance with the terms of the note, in 1968.
In filing his return for the year in question the appellant declared the sum of $69,093.82. The Minister took the position and so ruled that the bonus received in 1968 and 1969 pursuant to the company’s resolution of November 1967 was deemed to be received in 1967 and taxable in that year. It was argued at the hearing that the advances to the appellant by the company in that year exceeded the total amount of bonuses declared and presumably the appellant ought to be grateful that only $106,500 was added to his declared income and not the full amount of $132,763.21. As stated earlier, the appellant obligated himself by executing a promissory note to repay the full amount of the loan. This obligation was legally enforceable by the company, its creditors or its trustee, and, accordingly, could not be treated as income.
Bonuses received in 1968 and 1969 were properly declared in those years. The appeal, accordingly, is allowed.
Appeal allowed.
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