LOCKE,
J.
(Fauteux
and
Abbott,
JJ.,
concurring)
:—This
is
an
appeal
from
a
judgment
of
Dumoulin,
J.,
delivered
in
the
Exchequer
Court
by
which
a
judgment
of
the
Income
Tax
Appeal
Board,
allowing
the
appeal
of
the
present
appellant
from
a
ruling
of
the
Minister,
was
set
aside
and
the
assessment
restored.
The
appellant
is
a
lumber
manufacturer
and
during
the
taxation
year
1952
carried
on
its
business
at
Prince
George,
B.C.
Martin
S.
Caine,
prior
to
the
year
1949,
operated
a
saw
mill
and
planing
mill
at
Prince
George
and
in
the
course
of
his
operations
purchased
a
timber
limit
for
$250.
The
appellant
was
incorporated
for
the
purpose
of
taking
over
his
business
and
in
the
year
1951
Caine
sold
the
limit
to
the
company
for
the
sum
of
$15,000.
In
the
interval
between
the
date
of
the
purchase
of
the
limit
by
Caine
and
the
sale
to
the
company,
the
former
had
expended
on
the
property
a
sum
of
$2,678.60.
Caine
had
never
claimed
or
been
allowed
any
capital
cost
allowance
in
connection
with
the
property.
The
parties
agreed
for
the
purpose
of
the
trial
that
the
company
was
a
person
with
whom
Caine
was
not
dealing
at
arm’s
length
within
the
meaning
of
Section
17
of
the
Income
Tax
Act
(Statutes
of
1948,
c.
52).
During
the
year
in
question
the
appellant
cut
timber
on
the
limit
and,
under
the
provisions
of
the
Act
and
the
regulations
made
under
it,
was
entitled
to
claim
a
capital
cost
allowance.
This
was
claimed,
calculated
on
the
price
paid
by
it
to
Caine.
The
Minister
allowed
the
claim
based
on
a
purchase
price
of
$2,928.60,
being
the
aggregate
of
the
amount
paid
by
Caine
for
the
limit
and
the
amount
expended
on
it
by
him
while
it
was
his
property.
Section
11(1)
provides
that
there
may
be
deducted
in
computing
the
income
of
a
taxpayer
in
a
taxation
year
:
“(a)
such
part
of
the
capital
cost
to
the
taxpayer
of
prop-
erty,
or
such
amount
in
respect
of
the
capital
cost
to
the
taxpayer
of
property,
if
any,
as
is
allowed
by
regulation
;
(b)
such
amount
as
an
allowance
in
respect
of
an
oil
or
gas
well,
mine
or
timber
limit,
if
any,
as
is
allowed
to
the
taxpayer
by
regulation.’’
The
regulations,
in
so
far
as
they
affect
the
present
question,
read
as
follows:
“1100.
(1)
Under
paragraph
(a)
of
subsection
(1)
of
section
11
of
the
Act,
there
is
hereby
allowed
to
a
taxpayer,
in
computing
his
income
from
a
business
or
property,
as
the
case
may
be,
deductions
for
each
taxation
year
equal
to
(e)
such
amount
as
he
may
claim
not
exceeding
the
amount
calculated
in
accordance
with
Schedule
C
to
these
Regulations
in
respect
of
the
capital
cost
to
him
of
a
timber
limit
or
a
right
to
cut
timber
from
a
limit.”
Schedule
C
reads
in
part
as
follows:
“1.
For
the
purpose
of
paragraph
(e)
of
subsection
(1)
of
section
1100
of
these
Regulations,
the
amount
that
may
be
deducted
in
computing
the
income
of
a
taxpayer
for
a
taxation
year
in
respect
of
a
timber
limit
is
the
lesser
of
(a)
an
amount
computed
on
the
basis
of
a
rate
(computed
under
section
2
of
this
Schedule)
per
cord
or
board
foot
cut
in
the
taxation
year,
or
(b)
the
undepreciated
capital
cost
to
the
taxpayer
as
of
the
end
of
the
taxation
year
(before
making
any
deduction
under
section
1100
of
these
Regulations
for
the
taxation
year)
of
the
timber
limit.
2.
The
rate
for
a
taxation
year
is
(a)
if
the
taxpayer
has
not
been
granted
an
allowance
in
respect
of
the
limit
for
any
previous
year,
an
amount
determined
by
dividing
the
capital
cost
of
the
limit
to
the
taxpayer
minus
the
residual
value
by
the
total
quantity
of
timber
in
the
limit
(expressed
in
cords
or
board
feet)
as
shown
by
a
bona
fide
cruise.’’
The
provisions
of
Section
11
of
the
Act
and
of
the
regulations
above
referred
to
are
required
in
order
to
afford
a
means
of
properly
ascertaining
the
trading
profit
of
persons
engaged
in
such
businesses
as
mining
and
lumbering,
where
capital
assets
are
depleted
by
the
operations.
Section
14(2)
provides
for
other
cases
and
declares
that
for
the
purpose
of
computing
income
the
property
described
in
an
inventory
shall
be
valued
at
its
cost
to
the
taxpayer
or
its
fair
market
value,
whichever
is
lower,
or
in
such
other
manner
as
may
be
permitted
by
regulation.
Section
17(1)
provides
that
where
a
taxpayer
has
purchased
anything
from
a
person
with
whom
he
was
not
dealing
at
arm’s
length
at
a
price
in
excess
of
the
fair
market
value,
the
fair
market
value
thereof
shall,
for
the
purpose
of
computing
the
taxpayer’s
income
of
the
business,
be
deemed
to
have
been
paid.
Subsection
(2)
provides
for
the
case
where,
in
similar
circumstances,
the
purchase
is
for
a
price
less
than
the
fair
market
value.
Section
20,
with
some
slight
differences
which
do
not
affect
the
present
matter,
first
appeared
in
the
Income
Tax
Act
by
an
amendment
made
in
1949
(Section
7,
ce.
25).
Subsection
(1)
as
applicable
to
the
year
1952
reads:
“Where
depreciable
property
of
a
taxpayer
of
a
prescribed
class
has,
in
a
taxation
year,
been
disposed
of
and
the
proceeds
of
disposition
exceed
the
undepreciated
capital
cost
to
him
of
depreciable
property
of
that
class
immediately
before
the
disposition,
the
lesser
of
(a)
the
amount
of
the
excess,
or
(b)
the
amount
that
the
excess
would
be
if
the
property
had
been
disposed
of
for
the
capital
cost
thereof
to
the
taxpayer
shall
be
included
in
computing
his
income
for
the
year.”
Subsections
(2)
and
(8),
so
far
as
they
need
be
considered,
read
:
“(2)
Where
depreciable
property
did,
at
any
time
after
the
commencement
of
1949,
belong
to
a
person
(hereinafter
referred
to
as
the
original
owner)
and
has,
by
one
or
more
transactions
between
persons
not
dealing
at
arm’s
length,
become
vested
in
a
taxpayer,
the
following
rules
are,
notwithstanding
section
17,
applicable
for
the
purposes
of
this
section
and
regulations
made
under
paragraph
(a)
of
subsection
(1)
of
section
11
:
(a)
the
capital
cost
of
the
property
to
the
taxpayer
shall
be
deemed
to
be
the
amount
that
was
the
capital
cost
of
the
property
to
the
original
owner;
(b)
where
the
capital
cost
of
the
property
to
the
original
owner
exceeds
the
actual
capital
cost
of
the
property
to
the
taxpayer,
the
excess
shall
be
deemed
to
have
been
allowed
to
the
taxpayer
in
respect
of
the
property
under
regulations
made
under
paragraph
(a)
of
subsection
(1)
of
section
11
in
computing
income
for
taxation
years
before
the
acquisition
thereof
by
the
taxpayer.
(3)
In
this
section
and
regulations
made
under
paragraph
(a)
of
subsection
(1)
of
section
11,
(a)
‘depreciable
property
of
a
taxpayer’
as
of
any
time
in
a
taxation
year
means
property
in
respect
of
which
the
taxpayer
has
been
allowed,
or
is
entitled
to
a
deduction
under
regulations
made
under
paragraph
(a)
of
subsection
(1)
of
section
11
in
computing
income
for
that
or
a
previous
taxation
year.’’
The
assessment
complained
of
applied
the
provisions
of
subsection
(2).
The
case
for
the
appellant
is
that
the
words
“depreciable
property’’
in
the
first
line
of
subsection
(2)
should
bear
the
meaning
assigned
to
the
expression
‘‘depreciable
property
of
a
taxpayer”
in
subsection
(3).
Accordingly,
it
is
said
that
since
Caine,
during
the
time
he
owned
the
limit,
did
not
cut
any
timber
from
it
and
was
never
allowed
and
never
became
entitled
to
a
deduction
under
the
regulations,
Section
2
was
improperly
applied
by
the
Minister
in
refusing
to
allow
for
depreciation
based
on
the
full
cost
of
the
limit
to
the
company.
Counsel
for
the
Minister
agrees
with
the
contention
that
the
words
“depreciable
property’’
are
to
be
given
the
meaning
assigned
to
the
expression
‘‘depreciable
property
of
a
taxpayer”
in
subsection
(3).
The
factum
filed
for
the
respondent
contends
that
if
the
definition
of
the
phrase
‘‘depreciable
property
of
a
taxpayer”
is
applied
mutatis
mutandis
in
regard
to
the
expression
“depreciable
property’’
in
subsection
(2),
the
subsection
would
read:
“Where
the
property
in
respect
of
which
a
taxpayer
has
been
allowed,
or
is
entitled
to,
a
deduction
under
regulations
made
under
paragraph
(a)
of
subsection
(1)
of
section
11
in
computing
income
for
that
or
a
previous
taxation
year,
did,
at
any
time
after
the
commencement
of
1949,
belong
to
a
person,
(hereinafter
referred
to
as
the
original
owner),
and
has,
by
one
or
more
transactions
between
persons
not
dealing
at
arm’s
length,
become
vested
in
the
taxpayer,
the
following
rules
are,
notwithstanding
section
17,
applicable
for
the
purposes
of
this
section
and
regulations
made
under
paragraph
(a)
of
subsection
(1)
of
section:
.
.
.”
The
expression
depreciable
property
of
a
taxpayer,
as
it
appears
in
subsection
(3)(a)
is
contained
in
quotations
and
it
is
these
words
when
used
together
that
are
defined.
The
words
depreciable
property,
standing
alone,
are
not
defined
anywhere
in
the
Act.
The
expression
depreciable
property
of
a
taxpayer
appears
in
subsection
(1)
of
Section
20
and
in
subsection
(4)
(g)
of
that
section
and
is
to
be
there
construed
in
accordance
with
the
definition.
It
will
be
seen
that
other
expressions
used
in
the
section
are
also
defined,
namely,
‘‘disposition
of
property’’,
‘‘proceeds
of
disposition’’,
‘‘total
depreciation
allowed
to
a
taxpayer’’
and
‘‘undepreciated
capital
cost
to
a
taxpayer
of
depreciable
property”
in
paragraphs
(b),
(c),
(d)
and
(e)
of
subsection
(3).
Since
the
words
‘‘depreciable
property
of
a
taxpayer”
do
not
appear
in
subsection
(2),
subsection
(3)
(a)
does
not
apply.
The
words
‘‘depreciable
property’’
in
subsection
(2)
are
accordingly,
in
my
opinion,
to
be
construed
without
the
assistance
of
a
statutory
definition.
The
words
clearly
refer
to
property
such
as
a
timber
limit,
the
value
of
which
depreciates
as
the
timber
is
cut
and,
as
the
operation
of
Section
17
is
excluded,
the
assessment
complained
of
was
properly
made.
I
would
dismiss
this
appeal
with
costs.
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