deducted

In finding that the reduction of capital cost pursuant to s. 13(7.1) occurs in the year in respect of which the investment tax credit was utilized, rather than the subsequent year in which the return was filed claiming that credit, Hugessen J.A. stated (p. 6190):

"On their ordinary meaning the words 'has deducted' and 'deducted' in subsection 13(7.1) refer to operations effected in respect of the taxation year to which those deductions were applied, notwithstanding that the actual mathematical operations themselves may have taken place at a subsequent time."

A reserve which the taxpayer had erroneously deducted from income in his 1984 taxation year (which now was statute-barred) was required to be included in income for his 1985 taxation year. Mogan TCJ. stated (p. 1257):

"... if a reserve is in fact claimed and allowed in a particular taxation year, the legality of the allowance is not material and the amount that was in fact deducted must be included in computing the income for the immediately following year".

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.

Stone JA stated (at p. 6163) that the words of s. 85B(1)(e) (now, s. 12(1)(e)) "are directed toward the inclusion in income of an 'amount' that was 'deducted' in the previous year and not toward an amount that was 'deductible' in that year." Where an amount was in fact deducted in a previous year by a taxpayer purporting to comply with the provisions of what now is s. 20(1)(m), that amount was to be brought into income under s. 12(1)(e) notwithstanding that the deduction in the previous year may not have been properly taken.