Date: 20000317

     Docket: A-888-96

Coram:      DÉCARY J.A.

         LÉTOURNEAU J.A.

         NOËL J.A.

Between:

     GARAGE MONTPLAISIR INC.,

     Appellant,

     - and -

     HER MAJESTY THE QUEEN,

     Respondent.

     Hearing held at Montréal, Quebec, Friday, March 17, 2000

     Judgment from the bench at Montréal, Quebec, Friday, March 17, 2000

REASONS FOR JUDGMENT OF THE COURT BY:      NOËL J.A.

     Date: 20000317

     Docket: A-888-96

Coram:      DÉCARY J.A.

         LÉTOURNEAU J.A.

         NOËL J.A.

Between:

     GARAGE MONTPLAISIR INC.,

     Appellant,

     - and -

     HER MAJESTY THE QUEEN,

     Respondent.

     REASONS FOR JUDGMENT OF THE COURT

     Delivered from the bench at Montréal, Quebec,

     Friday, March 17, 2000

NOËL J.A.

[1]      This is an appeal from a judgment by Tremblay-Lamer J. of the Trial Division that dismissed the appellant"s appeal from assessments made by the Minister of National Revenue for the 1985 and 1986 taxation years.¹

[2]      Despite the excellent argument by Mr. Ménard, we all consider that the trial judge properly concluded that in the case at bar the business operated by Pinard Ltée before the merger was not operated by the appellant during its 1985 and 1986 taxation years as required by s. 111(5) of the Income Tax Act.²

[3]      On the other hand, in her reasons the trial judge cited with approval a passage from the Tax Court of Canada decision in the case at bar to the effect that the purpose of s. 111(5) "is not the carryover of losses as such but the strengthening or survival of a declining business".³

[4]      We do not feel that the wording of s. 111(5) supports such a statement. All that can be said is that the business of a company subject to a takeover must still be "a going concern"⁴ after the takeover if the company resulting from the merger is to be entitled to the accumulated losses.

[5]      That being said, the trial judge nonetheless came to the correct conclusion since, on the evidence, the business of Pinard Ltée was not a going concern at the relevant time.

---

[6]      The appeal will therefore be dismissed with costs.

Marc Noël      J.A.

Certified true translation

Bernard Olivier, LL. B.

     FEDERAL COURT OF CANADA

     APPEAL DIVISION

     NAMES OF COUNSEL AND SOLICITORS OF RECORD

FILE No.:          A-888-96

STYLE OF CAUSE:      Garage Montplaisir Inc. v. The Queen

PLACE OF HEARING:      Montréal, Quebec

DATE OF HEARING:      March 17, 2000

REASONS FOR JUDGMENT OF THE COURT:      Noël J.A.

APPEARANCES:

Mario Ménard      FOR THE APPELLANT

Richard Gobeil      FOR THE RESPONDENT

SOLICITORS OF RECORD:

Spiegel, Sohmer      FOR THE APPELLANT

Attorneys

Montréal, Quebec

Morris Rosenberg, Q.C.      FOR THE RESPONDENT

Deputy Attorney General of Canada

__________________

¹ [1996] D.T.C. 6557.

² Supra, note 1, at 6560.

³ Reasons for judgment, appeal book, p. 684.

⁴ Duha Printers Ltd. v. Canada, [1998] 1 S.C.R. 795, at 806.