At trial, the taxpayer argued that certain expenses should have been allowed in determining his rental income, and that his gain from the disposition of some shares was on income account rather than capital. The trial judge allowed the taxpayer's appeal to give effect to some of his expenses. She agreed that his gain from the shares was on income account, but did not order the Minister to reassess on this basis to the extent of the additional allowed expenses as the effect would be allow the Minister to reassess on the gains issue beyond the limitations period.
The Minster appealed on the basis that the increase in income from the disposition of the shares should be recognized to the extent of the additional expenses allowed, as doing so would not increase the taxes owing.
Dawson JA dismissed the Minister's appeal. Harris v. MNR ([1965] 2 Ex. C.R. 653, aff'd on other grounds [1966] SCR 489) establishes that the Minister cannot appeal her own assessment, and this principle is to be applied to each source of income (para. 23). As noted on the analogous facts in Petro-Canada, 2004 FCA 158, at para. 68, the effect of the Minister's approach would be to indirectly allow the Minister to appeal her assessment on the disposition issue to the extent of such other expenses.