Borstad Welding Supplies ( 1972 ) Ltd. v. Canada
T-3066-90
Reed J.
30/12/93
9 pp.
Plaintiff owned and operated industrial gas and welding products business, employing fifty persons, conducting business in various locations in Alberta and B.C. -- Revenue, expenses and assets declined sharply after June 1, 1985 -- Only two employees remaining, most of working assets sold to Union Carbide -- Refillable gas cylinders rented to Union Carbide under its sole possession and control -- Plaintiff not intending to re-enter industrial gas and welding product business -- Whether rental income active business income or income from property -- If active business income, plaintiff can claim small business deduction -- Defendant arguing plaintiff's activities changing so radically plaintiff no longer conducting active industrial gas and welding product business -- Appeal allowed -- Rental income from cylinders business income -- Although business different from what had been before, not ceasing to be business -- Presumption income earned by company incorporated for certain business purposes business income -- To clarify overlap between income from property and income from business, Income Tax Act s. 129(4.1) definition providing income from property not including income from any property pertaining to active business or from any property used for purpose of gaining or producing income from active business -- In so far as income from property might also pertain to active business, falls into business income category pursuant to s. 129(4.1), not income from property -- Distinction between active, inactive business no longer relevant -- Act characterizes any business carried on by corporation as active business unless falls within exceptions specified i.e. personal services business or specified investment business -- Renting of chattels expressly excluded by s. 125(7)(e) from definition of specified investment business[cad 211]Therefore not falling into exceptions described in s. 125(7)(a) -- Also since income from property source defined by s. 129(4.1) to include income from specified investment business, but to exclude income from any other business, and since leasing of chattels expressly stated not to be specified investment business, income from business of leasing chattels presumptively active business income -- Reference to any business in s. 125(7)(a) presumptively including all business income (whether from active or inactive business) within category of active business income unless business falling within exception, i.e. personal service business or specified investment business -- Income Tax Act, S.C. 1970-71-72, c. 63, ss. 125(7)(a) (as am. by S.C. 1984, c. 45, s. 40), (c) (as am. idem), (e) (as am. idem), 129(4) (as am. by S.C. 1979, c. 5, s. 41; 1980-81-82-83, c. 48, s. 74; c. 140, s. 90; 1984, c. 1, s. 75; 1985, c. 45, s. 74), (4.1) (as enacted by S.C. 1979, c. 5, s. 41(4); 1985, c. 45, s. 47(3).