J. L. Guay Ltée (Appellant)
v.
Minister of National Revenue (Respondent)
Court of Appeal, Jackett C.J., Smith and Perrier
D.JJ.—Montreal, December 5, 1972.
Income tax—Business income, computation—Reserves or
contingent accounts—General contractor—Percentage of
progress payments withheld until 35 days after architect's
approval—Whether deductible in year withheld—Income Tax
Act, s. 12(1)(e).
Appellant, a general contractor, made monthly progress
payments to sub-contractors based upon their estimates but,
in accordance with the contracts between them, withheld a
percentage of the estimates until 35 days after the archi
tect's final approval of the work. The contracts provided
that if approval was not given the sub-contract might be
cancelled and the work done be paid for at current prices.
The amount being withheld by appellant at the close of its
1965 taxation year was $277,428.48, and appellant sought
to deduct this sum in computing its taxable income for that
year. The Minister disallowed the deduction and his disal-
lowance was upheld by the Tax Appeal Board.
Held, affirming Noël A.C.J. [1971] F.C. 237, the amounts
being withheld at the close of 1965 were prohibited from
deduction in computing appellant's business profit for that
year by s. 12(1)(e) of the Income Tax Act as being a reserve
or contingent account.
APPEAL from Noël A.C.J. [1971] F.C. 237.
Maurice Paquin and H. Paul Lemay for
appellant.
Paul Boivin for respondent.
The judgment of the Court was delivered by
PERRIER D.J.—The judgment of the Honour
able Camil Noël A.C.J., [1971] F.C. 237, is
hereby affirmed.
Our conclusion is that appellant's profit
cannot be computed by taking, on the one hand,
90% of the value of all work done for the owner
and, on the other hand, deducting the total sums
paid by the appellant to the sub-contractors for
their work.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.