Hugessen, J [ORALLY]:—Subparagraph 40( l)(a)(iii) of the Income Tax Act allows a taxpayer to take a reserve
in respect of such of the proceeds of disposition of the property that are not due to him until after the end of the year.
In the present case, part of the proceeds of disposition were represented by a promissory note expressed to be payable “on demand after December 31, 1976’’. In the now classic words of Parke, B, in Norton v Ellam, 2 2M & W 461:
a promissory note, payable on demand, is a present debt, and is payable without any demand (at page 464).
That case has been many times approved.* [1]
The learned trial judge held that in the absence of a demand in the year 1977 the note in question was not “due” to the taxpayer in that year. She said:
. . . what was intended was to tax the taxpayer not at the time he was entitled to the money but at the time when it was required to be paid to him.
With respect we think that she was wrong and that the words “due to him” look only to the taxpayer’s entitlement to enforce payment and not to whether or not he has actually done so.
Here, the taxpayer, alone and at his sole option, was entitled to enforce payment of the note in 1977. From January 1, 1977, it became a present debt and could be sued on without any demand. It was owing and payable. It was, therefore, “due to him”.
The appeal will therefore be allowed with costs here and in the Trial Division.
* Brown v Brown, [1893] 2 Ch 300; Royal Bank v Hogg, [1930] 2 DLR 488; Spencer Investments Ltd v Hansford, 48 DLR (3d) 474.