Elm Ridge Country Club Inc. v. Canada
A-504-95
Décary J.A.
12/11/98
9 pp.
Appeal from TCC decision ([1995] 2 C.T.C. 2810) dismissing appeal against MNR assessment disallowing part of exemption claimed by taxpayer-Appellant golf club having tax exemption under Act, s. 149(5)(e)(i) as non-profit organization "the main purpose of which is to provide dining, recreational or sporting facilities for its members"-Club's income from dues, green fees, locker and cart rental charges, meals, drinks, and interest-Interest income (from term deposits of amount by which revenues exceed operating expenses) in issue-Club also claiming deduction for interest paid on occasional loans-Minister treating interest income as income from taxable property and disallowing deduction for interest paid on loans, on basis not expenses related to taxable source of income-Appeal dismissed-Under Act, ss. 149(1)(l) and 149(5)(e)(i), non-profit organization loses benefit of income tax exemption in respect of such part of income from property-When profit-making entity involved, case law considers interest income business income-Interest income is income from passive investment-Taxpayer claiming instant interest income neither income from property nor income from business in application of theory of incidental business income, but rather sui generis income from activities incidental to activities that can only generate profits incidentally-However, taxpayer clearly introducing distinction where Parliament has not seen fit to draw one-Interest income taxable regardless of activities of clubs that give rise to its production-Very words of Act, s. 149(5)(e)(i), and legislative intent they express, do not permit claim that only interest income from extraordinary activities taxable-Interest income in case at bar undoubtedly income from property within meaning of Act, s. 149(5)(e)(i)-And loan interest costs incurred by taxpayer as result of cash-flow problems not deductible as not expenses related to income-producing or taxable investment-Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, ss. 149(1), (5).