T-1608-72
Minister of National Revenue (Appellant)
v.
Anthony Thomas Leon (Respondent)
and
T-1609-72
Minister of National Revenue (Appellant)
v.
Edward Leon (Respondent)
and
T-1611-72
Minister of National Revenue (Appellant)
v.
Lewie Leon (Respondent)
and
T-1612-72
Minister of National Revenue (Appellant)
v.
Norman Leon (Respondent)
and
T-1610-72
Minister of National Revenue (Appellant)
v.
Frank Ahman (Respondent)
Trial Division, Sweet D.J.—Toronto, April 18,
19, 22-26, 1974; July 9, 1974.
Income Tax—Five companies under control of five taxpay-
ers—Assessment for income in fees paid to companies—
Whether companies personal corporations—Income Tax
Act, s. 68.
The respondent taxpayers were associated in various
branches of a furniture business, which they directed
through the limited partnership, Ablan Leon Distributors.
The latter employed five companies to perform services (in
three cases, expressly managerial). None of the companies
had any employees of significance, other than the respond
ents who controlled them and the companies lacked some of
the usual facilities of a business. For the years 1968 and
1969 the Minister assessed each of the respondents for the
fees paid by Ablan Leon Distributors to the employed
companies. The respondents claimed that they performed
services for, and were paid salaries by, the employed com
panies. The position of the respondents was upheld by the
Tax Review Board. The Minister appealed.
Held, 1. Dismissing the Minister's appeal against Anthony
Thomas Leon, Edward Leon and Lewie Leon, the effect of
the interposition of three management companies was to
reduce the tax liability of respondents, and the plans involv
ing the management companies were implemented. What
was projected was actually carried out. The respondents had
discharged the onus of proving that the management compa
nies were each carrying on an "active commercial business"
outside the scope of the definition of a "personal corpora
tion" in section 68(1)(c) of the Income Tax Act and hence
were not subject to section 67 et seq. of the Act respecting
personal corporations.
2. Allowing the appeal against the respondent Norman
Leon; this respondent controlled a company which entered
into an agreement with Ablan Leon Distributors to do public
relations work. The services of the respondent to this com
pany extended far beyond public relations, to management.
The amount paid to the respondent by this company includ
ed managerial services. The items of payment by Ablan
Leon Distributors to the company were all for services
performed by Norman Leon, who had failed to discharge
the onus of proving that the assessment erred in treating the
items as income in his hands.
3. Allowing the appeal against Frank Ahman: this
respondent controlled a company which had no written
agreement or other evidence of the management agreement
alleged by the respondent to exist between Ablan Leon
Distributors and the employed company. The management
fees paid by Ablan Leon Distributors to the employed
company were consistent with the Minister's position that
Ablan Leon Distributors paid the fee to the employed com
pany at the request of the respondent, Frank Ahman. The
latter had failed to discharge the onus of proving error in the
Minister's assessment and must be found to have received
the fees for services to Ablan Leon Distributors.
Foreign Power Securities Corporation Ltd. v. M.N.R.
[1966] Ex.C.R. 358; Rose v. M.N.R. [1973] F.C. 65;
Sazio v. M.N.R. [1969] 1 Ex.C.R. 373 and Cameron v.
M.N.R. 71 DTC 5068, considered.
INCOME tax appeal.
COUNSEL:
N. A. Chalmers, Q.C., and R. G. Pyne for
appellant.
R. E. Shibley, Q.C., M. L. O'Brien and G. J.
Corn, for respondents.
SOLICITORS:
Deputy Minister of Justice for appellant.
Shibley, Righton & McCutcheon, Toronto,
for respondents.
The following are the reasons for judgment
delivered in English by
SWEET DJ.: All of these matters are appeals
from decisions of the Income Tax Review
Board which allowed the respondents' appeals
from assessments made by the appellant.
The above entitled causes will respectively be
referred to as the Anthony Thomas Leon
matter, the Edward Leon matter, the Lewie
Leon matter, the Norman Leon matter, and the
Frank Ahman matter.
Contemporaneously with the delivery of these
reasons, reasons for judgment are delivered in
an appeal by the Minister of National Revenue
wherein Ablan Leon (1964) Limited is the
respondent. That will be referred to as the
Ablan Leon (1964) Limited matter.
By an order made on consent all relevant
evidence adduced in the Ablan Leon (1964)
Limited matter was made to apply to all of the
above entitled causes. By agreement of counsel
some of the evidence in the Anthony Thomas
Leon matter was to be treated as evidence in
the Edward Leon and Lewie Leon matters as
well.
Although, factually, all of these matters are
not identical there is much of similarity among
them. Furthermore, there are some legal princi
ples which are applicable to all of them.
Accordingly it is preferable that the reasons
for judgments in all be in one combined
statement.
It would be helpful to have in mind some of
the history of the Leon furniture enterprises
including Ablan Leon (1964) Limited and the
business carried on under the firm name of
Ablan Leon Distributors. Since that history is
stated in the Ablan Leon (1964) Limited matter
it need not be repeated here.
In the Anthony Thomas Leon matter the dis
pute is regarding the following items of assess
ment for income tax:
1965 — $43,250
1966 — $45,000
1967 — $86,750
1968 — $56,000
The Minister alleges that Anthony Thomas
Leon, having an arrangement with Ablan Leon
Distributors and he, during 1965, 1966, 1967
and 1968 taxation years having devoted his full
time to the management, supervision, oversee
ing and superintending of the operations of cer
tain of the stores of Ablan Leon Distributors,
became entitled to receive the above amounts
and that Ablan Leon Distributors, at his request,
paid those amounts to Antomel Limited.
A position of the respondent, Anthony
Thomas Leon, is that during the 1965, 1966,
1967 and 1968 taxation years he was employed
by and received a salary from Antomel Limited
and that company had an arrangement with
Ablan Leon Distributors to provide manage
ment services to Ablan Leon Distributors for
which services it received management fees.
The respondent claims that he, as an employee
of Antomel Limited, devoted time to the man
agement, supervision, overseeing and superin
tending of the operation of certain stores of
Ablan Leon Distributors and Antomel Limited
was paid those amounts for those services.
In the Edward Leon matter the dispute arises
out of the following items of assessment for
income tax:
1965 — $61,000
1966 — $69,000
1967 — $91,000
1968 — $68,000
The Minister alleges that Edward Leon,
having an arrangement with Ablan Leon Dis
tributors and he, during the 1965, 1966, 1967
and 1968 taxation years having devoted his full
time to the management, supervision, oversee
ing and superintending of the operations of cer
tain of the stores of Ablan Leon Distributors,
became entitled to receive those amounts and
that Ablan Leon Distributors, at his request,
paid those amounts to Timmyal Limited.
A position of the respondent, Edward Leon,
is that during 1965, 1966, 1967 and 1968 taxa
tion years he was employed by and received a
salary from Timmyal Limited and that company
had an arrangement with Ablan Leon Distribu
tors to provide management services to Ablan
Leon Distributors for which services it received
management fees. The respondent, claims that
he, as an employee of Timmyal Limited, devot
ed time to the management, supervision, over
seeing and superintending of the operations of
certain stores of Ablan Leon Distributors and
Timmyal Limited was paid those amounts for
those services.
In the Lewie Leon matter the dispute arises
out of the following items of assessments for
income tax:
1965 — $22,000
1966 — $50,000
1967 — $89,000
1968 — $64,000
The Minister alleges that Lewie Leon, having
an arrangement with Ablan Leon Distributors
and he, during the 1965, 1966, 1967 and 1968
taxation years having devoted his full time to
the management, supervision, overseeing and
superintending of the operations of certain of
the stores of Ablan Leon Distributors, became
entitled to receive those amounts and that Ablan
Leon Distributors, at his request, paid those
amounts to Midgemar Limited.
A position of the respondent, Lewie Leon, is
that during the 1965, 1966, 1967 and 1968
taxation years he was employed by and received
a salary from Midgemar Limited and that com-
pany had an arrangement with Ablan Leon Dis
tributors to provide management services to
Ablan Leon Distributors for which services it
received management fees. The respondent
claims that he, as an employee of Midgemar
Limited, devoted time to the management,
supervision, overseeing and superintending of
the operations of certain stores of Ablan Leon
Distributors and Midgemar Limited was paid
those amounts for those services.
In the Norman Leon matter the dispute arises
out of the following items of assessment for
income tax:
1968 — $ 8,000
1969 — $39,000
The Minister alleges that Norman Leon,
having an arrangement with Ablan Leon Dis
tributors and he, during the 1968 and 1969
taxation years having devoted his full time to
the management, supervision, overseeing and
superintending of the operations of certain
stores of Ablan Leon Distributors, became en
titled to receive those amounts and that Ablan
Leon Distributors, at his request, paid those
amounts to Nor-Mar Projects Limited.
A position of the respondent, Norman Leon,
is that during the 1968 and 1969 taxation years
he was employed by and received a salary from
Nor-Mar Projects Limited and that company
had an arrangement with Ablan Leon Distribu
tors to provide management services to Ablan
Leon Distributors for which services it received
management fees. The respondent claims that
he, as an employee of Nor-Mar Projects Lim
ited, devoted time to the management, supervi
sion, overseeing and superintending of the oper
ations of certain stores of Ablan Leon
Distributors and Nor-Mar Projects Limited was
paid those amounts for those services.
In the Frank Ahman matter the dispute arises
out of the following items of assessment for
income tax:
1968 — $13,600
1969 — $18,700
The Minister alleges that Frank Ahman,
having an arrangement with Ablan Leon Dis
tributors and he, during the 1968 and 1969
taxation years having devoted his full time to
the management, supervision, overseeing and
superintending of the operations of certain of
the stores of Ablan Leon Distributors, became
entitled to receive those amounts and that Ablan
Leon Distributors, at his request, paid those
amounts to Frank Ahman Ltd.
A position of the respondent is that during the
1968 and 1969 taxation years he was employed
by and received a salary from Frank Ahman
Ltd. and that company had an arrangement with
Ablan Leon Distributors to provide manage
ment services to Ablan Leon Distributors for
which services Frank Ahman Ltd. received
management fees. The respondent claims that
he, as an employee of Frank Ahman Ltd.,
devoted time to the management, supervision,
overseeing and superintending of the operations
of certain stores of Ablan Leon Distributors and
Frank Ahman Ltd. was paid those amounts for
those services.
In the Frank Ahman matter the Minister was
also appealing in respect of the sum of $62 the
respondent received as a dividend on shares
held in The Bell Telephone Company of
Canada. This item of the appeal was abandoned
on behalf of the Minister.
There is no allegation of sham in the appel
lant's pleadings.
Because of their similarities the Anthony
Thomas Leon, Edward Leon and Lewie Leon
matters may conveniently, be dealt with
together.
In each there is a "management agreement"
dated the 1st day of May 1964 purporting to be
executed by all parties in which indicated as
being employers are: Ablan Leon (1964) Lim
ited, the George Leon Trust, the Lewie Leon
Trust, the Anthony Leon Trust, the Edward
Leon Trust, the Joseph M. Leon Trust, the
George Leon Family Trust and the Joseph M.
Leon Family Trust. They are also indicated as
carrying on business under the name Ablan
Leon Distributors.
In the Anthony Thomas Leon matter the
"management company" is Antomel Limited. In
the Edward Leon matter it is Timmyal Limited.
In the Lewie Leon matter it is Midgemar
Limited.
All three agreements have provisions to the
following effect:
the employers are to employ the respective
management companies to manage, supervise,
oversee and superintend the operations of
certain stores engaged in the retail sale of
furniture, furnishings and appliances, such
stores to be designated from time to time by
the employer and whether or not such stores
were then in existence and in actual operation
or thereafter acquired and operated by the
employer;
the management company is to devote its
full time and effort properly to complete and
fulfill all duties which are normally allocated
to a manager, supervisor, superintendent and
overseer and more specifically in connection
with stores engaged in the business therein
before referred to;
the management company is to be fully
responsible for all decisions which shall be
made in the said stores as to management and
operation and including the matter of pur
chase of stock-in-trade and merchandise
which shall be offered for sale in the said
stores, save and except that in the event of
any dispute between the employee and the
employer the decision of the employer shall
always prevail;
the management company is also to be
responsible for and to be in charge of all
advertising in connection with the said stores
whether by newspaper, radio or otherwise.
Each of the agreements provides for the man
agement company being paid for such services
in the amount set out in the documents and
includes a provision for a bonus. There is varia
tion in the amounts of remuneration.
In the Anthony Thomas Leon agreement
there is an additional provision that the manage
ment company is also to be responsible for the
supervision of the head office of "Ablan Leon
Distributors" at 65 State Street, Welland,
Ontario.
There are three employment agreements
which bear date the 1st day of May 1964. One
provides for the employment of Anthony Leon
by Antomel Limited, another for the employ
ment of Edward Leon by Timmyal Limited and
the third for the employment of Lewie Leon by
Midgemar Limited. There is provision in each
for the employer employing the employee to
manage, supervise, oversee and superintend the
operations of all stores entrusted to its charge
by Ablan Leon Distributors. Each of the
employment agreements has a provision for
payment to the employee for his services. All of
these agreements appear to be executed and
each contains a provision for payment of a
bonus.
During the 1965, 1967, 1968 and 1969 taxa
tion years:
(a) Anthony Thomas Leon had control in and
over Antomel Limited. I do not consider that
any interest his wife had in that company
would in any practical sense affect that
control.
(b) Edward Leon had control in and over
Timmyal Limited.
(c) Lewie Leon had control in and over
Midgemar Limited.
Thus there is a situation where Anthony
Thomas Leon, Edward Leon and Lewie Leon,
who together, having the controlling interest in
Ablan Leon (1964) Limited, would be in a posi
tion to exert influence in the important matter
of the bonuses to be paid to the management
companies. They respectively would, for all
practical purposes, be in a position to control
the salaries paid by their management compa
nies to themselves.
In every case the management companies had
no employee or none of any significance other
than the respondent who controlled it. All of
them were without some of the common and
usual facilities of a business—such as a tele
phone or an office of its own.
All the services the management companies
were to supply under the management agree
ments were performed by the respondents. That
which was important to the business of Ablan
Leon Distributors was the services of the
respondents as distinguished from the manage
ment companies. I am satisfied that the
respondents would have insisted on performing
the services they did because of their financial
interests in Ablan Leon Distributors and
because of the remuneration to be received for
those services.
I find that the sole purpose of the interposi
tion of the management companies was to
reduce the respondents' liabilities for income
tax. I find, too, that the utilization of the man
agement companies for that purpose was
accomplished through the respondents' control
of Ablan Leon Distributors along with the co
operation of George Leon and Joseph Leon who
also had financial interests in it.
Some of the legal principles applicable to
these cases are dealt with in the reasons for
judgment in the Ablan Leon (1964) Limited
matter. However, it may be of advantage to
refer again to two statements which in my opin
ion mark out the course to be followed here.
There is what Noel J. (as he then was) said in
Foreign Power Securities Corporation Ltd. v.
M.N.R. [1966] Ex.C.R. 358 at pages 386 and
387:
There is indeed no provision in the Income Tax Act which
provides that, where it appears that the main purpose or one
of the purposes for which any transaction or transactions
was or were effected was the avoidance or reduction of
liability to income tax, the Court may, if it sees fit, direct
that such adjustments shall be made as respects liability to
income tax as it considers appropriate so as to counteract
the avoidance or reduction of liability to income tax which
would otherwise be effected by the transaction or
transactions.
Then there is the following statement of Jack-
ett C.J. in Rose v. M.N.R. [1973] F.C. 65, at
page 69:
It does not seem to be in doubt that the reasons for the
scheme under which the corporations in question would be
constituted a partnership to undertake management services
for Central Park Estates Limited was to achieve tax advan
tages for the individuals owning the shares of some or all of
those corporations. While this does not affect the result
actually achieved by what was done, it does, in my view,
warrant a very careful appraisal of the evidence when
considering whether what was projected with that end in
view was actually carried out.
In these cases, too, a very careful appraisal of
the evidence is warranted to ascertain whether
the plan in mind was actually implemented.
The reasons for judgment of Cattanach J. in
Sazio v. M.N.R. [1969] 1 Ex.C.R. 373 and Cam-
eron v. M.N.R. 71 DTC 5068 are instructive.
In the Ablan Leon (1964) Limited matter it
was claimed that the e business carried on under
the firm name Ablan Leon Distributors was a
limited partnership. I found that no partnership
existed. These respondents were not parties to
that action. In my view that finding is irrelevant
to this action. There was a furniture business
carried on under the name Ablan Leon Distribu
tors and whatever contracts were made were
made with the operator or operators of that
business.
Each of Antomel Limited, Timmyal Limited
and Midgemar Limited were separate, distinct
and existing corporate entities. It is a common
place that notwithstanding a shareholder may be
in control of a corporation of which he is a
shareholder, the shareholder and the corpora
tion are also separate and distinct entities.
I find:
(a) that Ablan Leon Distributors entered into
an agreement with each of the three corpora
tions namely Antomel Limited, Timmyal Lim
ited and Midgemar Limited whereby those
corporations respectively were to provide
management services to Ablan Leon
Distributors;
(b) that those corporations did supply the ser
vices they respectively undertook to provide
for Ablan Leon Distributors; and
(c) that those corporations were entitled to be
paid and were paid for those services.
It seems to me to be irrelevant under the
circumstances of these three matters that it was
intended that the services which the corpora-
tions werè to provide would be and were per
formed by the respondents.
It is my view that the plans involving the
management corporations in the Anthony
Thomas Leon, the Edward Leon and the Lewie
Leon matters were implemented and what was
projected was actually carried out.
I am satisfied that the onus which rests upon
each of Anthony Thomas Leon, Edward Leon
and Lewie Leon, heavy as it is under the cir
cumstances here, has been met.
It follows that Antomel Limited, Timmyal
Limited and Midgemar Limited were carrying
on active commercial businesses and that the
provisions of the Income Tax Act regarding
"personal corporations" would not apply.
The appeals in the Anthony Thomas Leon,
Edward Leon and Lewie Leon matters are dis
missed with costs.
There are similarities between the situations
in the Norman Leon and Frank Ahman matters
and the situations in the other three matters.
Norman Leon controlled Nor-Mar Projects
Limited. Frank Ahman controlled Frank Ahman
Ltd. Neither Nor-Mar Projects Limited nor
Frank Ahman Ltd. had any employee or any
employee of significance other than the
respondent who controlled it. In each case the
corporation was without some of the common
and usual facilities of a business. The persons
actively performing services for Ablan Leon
Distributors were Norman Leon and Frank
Ahman. That which was important to the busi
ness of Ablan Leon Distributors was the ser
vices of the respondents Norman Leon and
Frank Ahman as distinguished from Nor-Mar
Projects Limited and Frank Ahman Ltd.
One difference between the Norman Leon
and Frank Ahman matters and the others was
that neither Norman Leon nor Frank Ahman
were shareholders of Ablan Leon (1964)
Limited.
I find that the sole purpose of interposition of
Nor-Mar Projects Limited and Frank Ahman
Ltd. was to reduce the liability for income tax
of Norman Leon and Frank Ahman. I am satis
fied that those in control of Ablan Leon (1964)
Limited were willing to co-operate with the
respondents Norman Leon and Frank Ahman to
that end.
Applicable also in these two appeals are the
principles enunciated by Jackett C.J. and Noel
J. (as he then was) in Rose v. M.N.R. (supra)
and Foreign Power Securities v. M.N.R. (supra).
Nor-Mar Projects Limited, entered into an
employment agreement, dated the 1st day of
May 1964, in which the named employers were
the same as in the Anthony Thomas Leon, the
Edward Leon and Lewie Leon matters. The
Nor-Mar Projects Limited agreement is not the
same as the agreement in those three other
matters.
The services to be rendered by Nor-Mar
Projects Limited as set out in its employment
agreement are:
1. Leon shall employ Nor-Mar to take charge of and be
responsible for all promotion and public relation work which
may be required in connection with the operation of any
stores owned by Leon whether these stores may be owned
at this date or may be hereafter acquired.
2. Nor-Mar shall devote its full time and effort to properly
complete and fulfill all duties which are normally allocated
to a person or corporation charged with promotion or public
relations work and specifically in connection with stores
engaged in the business herein above referred to.
3. Nor-Mar shall be fully responsible for all decisions which
shall be made as to any promotion or public relation activi
ties but in the event there may be a conflict betwen Leon
and Nor-Mar as to a particular course of conduct or opera
tion in connection with any of the stores, the decision of
Leon shall always prevail.
Accordingly the total responsibility of Nor-
Mar Projects Limited had to do with promotion
and public relations and nothing else.
I find that the services which were performed
by Norman Leon went far beyond the services
(promotion and public relations) which Nor-Mar
Projects Limited was to supply pursuant to its
agreement. I find that Norman Leon also
managed, supervised, oversaw and superintend
ed the operations of some stores.
It might also be pointed out that the respond
ents' pleading indicates that the services actual
ly performed by Norman Leon were more than
matters relating to promotion and public
relations.
Paragraph 4 of the reply to notice of appeal in
the Norman Leon matter is:
With respect to paragraphs 3 and 4 of the Notice of Appeal,
the Respondent says that he, as an employee of Nor-Mar
Projects Limited devoted time to the management, supervi
sion, overseeing and superintending of the operations of
certain stores of Ablan Leon Distributors and Nor-Mar
Projects Limited was paid for those services the sum of
1968 — $ 8,000.00
1969 — $39,000.00
Of course the Nor-Mar Projects Limited
agreement did not provide for supply of ser
vices for "the management, supervision, over
seeing and superintending of the operations of
certain stores".
The provision for remuneration of Nor-Mar
Projects Limited in accordance with its agree
ment was:
Nor-Mar shall be paid for the above services the sum of
twelve hundred and fifty dollars ($1,250.00) per month and
it shall in addition be paid a bonus based on the volume of
sales achieved in the said stores or any of them, such bonus
to be worked out and completed in accordance with a
subsequent agreement between the parties hereto.
The "above services" referred to in the remu
neration provision would, of course, be the pro
motion and public relations work which Nor-
Mar Projects Limited was to supply. It would
not be for managing, supervising, overseeing
and superintending the operations of stores.
It is not to be assumed that the services
rendered by Norman Leon in managing, superv
ising, overseeing and superintending operations
were done or intended to be done gratuitously.
One is impelled to the conclusion that the items
of payment by Ablan Leon Distributors which_
are in issue, namely $8,000 in the taxation year
1968 and $39,000 in the taxation year 1969,
were for all services performed by Norman
Leon including those which were managerial.
If there were services solely within the cate
gory of promotional and public relations along
with the managerial services so as to indicate
what might be the appropriateness of an appor
tionment between them no attempt was made at
such apportionment. In my opinion the onus for
establishing both a right to apportionment and
what the apportionment should be would rest on
the respondent. He has not met that onus.
In any event I would think that the obligations
of Antomel Limited, Timmyal Limited and
Midgemar Limited regarding advertising as set
out in their employment agreements would sub
stantially reduce the amount of work in connec
tion with promotion and public relations under
taken by Nor-Mar Projects Limited in its
agreement.
The respondent, Norman Leon, says in his
pleading "that the appellant, by not issuing
notices of re-assessment to Nor-Mar Projects
Limited is, in effect, confirming the fact that
Nor-Mar Projects Limited is properly taxable
on the income which it received. To permit the
appellant to re-assess the respondent and not
Nor-Mar Projects Limited would be to sanction
double taxation".
There is a similar pleading in the Frank
Ahman matter with a reference to Frank Ahman
Ltd.
These positions are rejected in both cases. In
the Ablan Leon (1964) Limited matter I dealt
with the effect of assessment by the Minister of
a person not a party to the cause before the
Court.
I find that the respondent, Norman Leon, has
not discharged the onus which is on him to
establish that the position of the appellant in
connection with the assessments in the Norman
Leon matter, the basis for making them or the
appellant's relevant assumptions were wrong.
The appeal of the Minister of National Reve
nue in the Norman Leon matter is allowed. The
assessments by the appellant in that matter are
restored. The appellant will have his costs in
that matter here and below.
Frank Ahman Ltd. was incorporated in 1963.
From then to the present Mr. Frank Ahman was
the only person really interested in it. In 1964
he transferred to that corporation a store he had
been operating in Niagara Falls. In 1968 that
business was sold to Leon interests. Mr. Ahman
said that he sold it because "Tom Leon" asked
him if he would go to Welland and manage their
store which was having problems, that his com
pany would look after the Welland store and
that he was to get $20,000 a year and a percent
age of the profits. He said he still went around
to the Niagara Falls store to check items and
supply them with merchandise.
Mr. Ahman's evidence was that there was no
written agreement between Frank Ahman Ltd.
and the Leons regarding the management of the
Welland store. He said the Leons paid the
$20,000 and bonus to Frank Ahman Ltd. and
the arrangement still continues, that the arrange
ment between himself and Frank Ahman Ltd.
from 1968 forward was the same arrange-
ment,—Leons paid Frank Ahman Ltd. and he
drew his salary from Frank Ahman Ltd. He said
he was not aware as to which company owned
the Welland store.
On cross-examination Mr. Ahman was shown
a photocopy of a statement of Frank Ahman
Ltd. for the year ended May 31, 1969. It shows,
as part of the income, management fees of
$22,100. Mr. Ahman said that it was paid by a
Leon enterprise but that he did not know which
one.
When Mr. Ahman was asked on cross-exami
nation if there was any particular business
reason for Frank Ahman Ltd. entering into a
management arrangement with Ablan Leon Dis
tributors as opposed to himself his answer was
that he did not know if there was a difference.
No written management agreement was pro
duced. No resolution of Frank Ahman Ltd.
regarding a management agreement was
produced.
I do not find that the absence of a written
management agreement or of a resolution of the
corporation regarding a management agreement
would necessarily be fatal to the respondent's
position. However it would be expected, under
the circumstances here, that if there were a
valid management agreement, as the respondent
claims, some supporting written evidence of it
would have been available. The absence of such
supporting evidence is, in my view, of
significance.
The payments to Frank Ahman Ltd. are con
sistent with the allegation of the appellant that
Ablan Leon Distributors made them at the
request of the respondent.
I find that the respondent has not met the
onus upon him in this matter.
I find that the respondent Frank Ahman was
entitled to receive from Ablan Leon Distribu
tors the sum of $13,600 in respect of the taxa
tion year 1968 and the sum of $18,700 in
respect of the taxation year 1969 and to receive
it for services which he rendered to Ablan Leon
Distributors as an employee of Ablan Leon
Distributors.
The appeal of the Minister of National Reve
nue in the Frank Ahman matter is dismissed in
respect of, but only in respect of, the abandoned
item of $62 received as a dividend on shares of
The Bell Telephone Company of Canada. In all
other respects the appeal of the Minister of
National Revenue in the Frank Ahman matter is
allowed. The assessments by the appellant in
that matter are restored except in respect of the
item of $62. Appropriate adjustments in the
assessment necessitated because of the aban
doned item of $62 are to be made.
Having regard to the size of the $62 item
compared with the other items in issue and the
time occupied at the trial by the $62 item com
pared with the other items I do not consider that
the appellant should be deprived of his costs.
The appellant will have his costs in the Frank
Ahman matter.
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.