This case involved a Company which purchased both a category "C" vessel based licence and a category "ZN" personal licence in 1992 for $150,000 dollars. The purchaser claimed the cost of purchasing the licences as an expense when filing its 1992 income tax return. Revenue Canada disallowed this deduction.
The issue of the case was whether the cost of acquisition could be expensed against income or whether it had to be treated as capital.
After considering considerable evidence on the nature of fishing licences, the court ruled that the cost of acquisition had to be treated as capital for the following reasons:
1. Licences are a necessary foundation of a fishing business which cannot be obtained without a one time outlay of a very substantial amount of money;
2. The large purchase price was paid because of the expectation of a long series of renewals of the licences by the Department of Fisheries in the future.
As an aside, this case contains some interesting observations on the property type nature of licences.
Counsel for the Appellant: Werner H.G. Heinrich
Counsel for the Respondent Patricia A. Babcock