Delmer E Taylor:—This is an appeal against an income tax assessment in which the Minister of National Revenue disallowed the deduction of $1,749.95 for the purchase of 10 new chesterfields in 1972 but claimed as “repairs and maintenance’’, and of $5,317.40 for 15 chesterfields, 1 coffee table, 1 end table and 6 clothes dryers in 1973, treated in the same manner. The respondent relied, inter alia, upon paragraphs 18(1 )(a) and 18(1 )(b) of the Income Tax Act, SC 1970-71-72, c 63 as amended.
Facts
The appellant owns two apartment blocks in the City of Regina in the Province of Saskatchewan, containing 72 suites, 61 of which are furnished. The appellant agreed at the hearing that the only item which remained in dispute was the expenditure for the 25 new chesterfields, and not the tables or clothes dryers.
Contentions
In the notice of objection, dated January 17, 1975, for the year 1973, the position of the appellant was:
We object to the reassessment from repairs and maintenance to fixed assets account for the reupholstery, and purchase of chesterfields and chairs, and small furniture purchases. (ie end-tables and coffee-tables), as the cost of replacing was cheaper than the recovering of such items. (letter enclosed).
It is our contention that these items are not classified as major repairs and might be replaced in such short periods of time as two-three years. We therefore contend that they are repairs and maintenance and are properly shown as such.
The position of the respondent was that:
the expenditures in respect of the purchase of the chesterfields and small furniture claimed as deductions from income were capital outlays within the meaning of paragraph 18(1 )(b) of the Income Tax Act.
Evidence
The appellant presented the following information in support of his contention:
December 16, 1974.
Dear Sir:
We are enclosing a copy of a quotation from Sally’s Upholstery for charges to recover chesterfield suites.
We would also like to inform you (sic) office that when we first checked on the price of recovering chesterfield suites during our early years the cost was between $200-$250, this price we received from Wheat City Upholstery.
After checking the price of new suites and found them to be much cheaper than recovering, we naturally purchased the new suites.
We would like to stress the fact that buying new suites was much more economical than having the old ones recovered.
Also, up until the last two years we felt quite justified in writing them off as an expense seeing as we were not increasing the capital expense of the furniture but were just keeping the furniture at an even level of quality.
Yours truly,
(Sgd) C W Cudmore
Citation Investments Ltd per C W Cudmore.
Enclosed.
January 3, 1974.
Citation Investments Ltd,
1109 Grey Street,
Regina, Saskatchewan.
Dear Sirs:
Please be advised that the price for recovering chesterfield suites for the year 1974 will be as follows: f,
1. To recover suites using standard materials
a) Labour $150.00 b) Cushions—$5.00 each plus 5% tax 27.25 c) Material—11 yards average @ $6.95 plus tax 80.27 $257.42 2. To recover suites using top quality materials and the type of suite that is more complicated in design and structure
a) Labour (depends on design) $200.00 $250.00 b) Cushions (foam rubber) $15.00 ea 78.75 78.75 c) Material—20 yds at $12.00-$15.00 yd. plus 5% tax 252.00 315.00 $530.75 to $643.75 Note—The price of material will vary as price increases from suppliers dictates.
Thank you for your past patronage and I hope that we can be of service to you in the future.
Yours truly,
(Signature)
Sally’s Upholstery.’
Argument
The proposition of the appellant was that the expenditure incurred was less than that which would have been involved had the furniture been recovered, and such recovering would have been deductible as a current expense.
Counsel for the respondent while recognizing the basic logic from a business viewpoint of the appellant’s position, nevertheless did not agree it should have any merit in determining the nature of the final expenditure. Reference was made to two cases:
Alexandra Hotel (1960) Ltd v MNR, [1971] Tax. ABC 1135; .71 DTC 767; \ ,
MNR v Haddon Hall Realty Inc, [1961] CTC. 509: 62 DTC 1001.
Findings
In my view, the matter is determined by the one phrase in the notice of objection quoted above:
. . . might be replaced in such short periods of time as two-three years. (Italics mine).
I would refer to the recent decision of this Board In David Calvin v MNR (not yet reported), dealing with the same subject.
Decision
The appeal is dismissed.
Appeal dismissed.