Sears Canada Inc. v. The Queen, 89 DTC 5039, [1989] 1 CTC 128 (FCA) -- summary under Paragraph 12(1)(e)

By services, 28 November, 2015

The amount of a s. 20(1)(m) reserve which RC had allowed as a deduction in computing the taxpayer's income in 1975 (a year not subject to appeal) was required to be added back in 1976 notwithstanding that the 1975 deduction was contrary to law. Mahoney JA stated (at p. 5039):

[T]he obligation to add back the 1975 reserve depends entirely on the fact that it had been claimed and allowed, the legality thereof being immaterial.

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Income Tax Act - s. 12(1)(e)
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inclusion of deduction taken contrary to law
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deducted
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