Pardee Equipment Ltd. v. Canada
T-3480-90
Reed J.
6/5/97
11 pp.
Whether plaintiff entitled to claim inventory allowances with respect to certain goods for years 1978-1986 and investment tax credits for years 1983-1987-Same issue underlying all claims: nature of plaintiff's interest in goods at relevant times-If taxpayer "held" goods for sale for purposes of Income Tax Act, s. 20(1)(gg), then entitled to both inventory allowance deductions, investment tax credits claimed-Goods with respect to which inventory allowances claimed heavy industrial machines such as excavators, bulldozers, log skidders-Taxpayer selling, servicing, renting equipment at several locations in Alberta-Equipment distributed to dealers in Canada through John Deere Ltd. (Deere Canada)-Plaintiff John Deere equipment dealer since 1956-Dealer agreements providing equipment would be ordered, sent to dealer as "consigned goods"-Machines shipped directly from Deere U.S. factory to plaintiff-Sent f.o.b. factory gate: party to whom goods being shipped has legal possession of goods, bears risk of damage, loss after goods leave plant gate-Plaintiff invoiced for wholesale price of machines-If machine sold by dealer, total wholesale price, or part thereof outstanding, immediately due, payable-In ordinary course of business, plaintiff had no right to return machine to Deere Canada, had never done so-Nor has Deere Canada reclaimed machine from plaintiff-Plaintiff selling, renting machines to customers-Defendant's position machines not part of taxpayer's inventory-Term "inventory", as defined in Act, s. 248(1), should be interpreted by reference to plain meaning of word in accordance with ordinary principles of commercial accounting, business-Indicia of transactions herein more properly characterized as sale subject to secured interest held by Deere Canada until purchase price fully paid-Control exercised by Deere Canada over machines more consistent with control exercised by secured creditor rather than by owner-Machines not, could not be returned to Deere-Treating machines as inventory in plaintiff's hands consistent with ordinary commercial accounting, business practices as risks, rewards associated with ownership rest with plaintiff, not Deere Canada-Plaintiff "held" machines for sale as term used in Act, s. 20(1)(gg)-Action allowed-Income Tax Act, S.C. 1970-71-72, c. 63, ss. 20(1)(gg) (as enacted by S.C. 1977-78, c. 1, s. 14), 248(1).