[OFFICIAL ENGLISH TRANSLATION]
HER MAJESTY THE QUEEN,
Appeal heard on February 27, 2001, at Trois-Rivières, Quebec, by
the Honourable Judge Alain Tardif
For the Appellant: The Appellant himself
Counsel for the Respondent: Janie Payette
The appeal from the assessments made under the Income Tax Act for the 1993 and 1994 taxation years is dismissed, with costs, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 30th day of January 2002.
J. T. C. C.
Translation certified true
on this 15th day of May 2003.
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
HER MAJESTY THE QUEEN,
REASONS FOR JUDGMENT
 This is an appeal in respect of the 1993 and 1994 taxation years. It concerns expenditures that were disallowed as scientific research and experimental development expenditures. The appellant filed a discontinuance in respect of the appeal for the 1995 taxation year.
 In making the assessments, the Minister of National Revenue (the "Minister") made the following assumptions of fact stated in the Reply to the Amended Notice of Appeal (the "Reply"):
1. The respondent takes note that the only points disputed by the appellant are those set out in paragraph (d) of the amended notice of appeal and that the appellant does not dispute the other changes made by the Minister in respect of the reassessments dated October 13, 2000, for the 1993 and 1994 taxation years.
2. He denies all the allegations of fact and findings of law contained in the amended notice of appeal which are not consistent with what is set out below.
3. In filing his income tax returns for the 1993 and 1994 taxation years, the appellant established that amounts of $405,836 and $258,402 respectively represented qualified scientific research and experimental development expenditures of Ferme Piluma Enr. and he claimed farming losses of $291,154 and $131,572 respectively as well as investment tax credits of $81,167 and $51,680 respectively.
. . .
5. By a nil notice of assessment dated April 25, 1997, for the 1993 and 1994 taxation years, the Minister of National Revenue disallowed the scientific research and experimental development expenditures and the investment tax credits claimed by the appellant for his 1993 and 1994 taxation years.
. . .
7. In response to an application made under subsections 220(2.1) and 220(3) of the Income Tax Act, which the appellant filed with the Minister of National Revenue for the 1993 and 1994 taxation years, the Minister of National Revenue issued notices of reassessment dated October 13, 2000, by which he revised the appellant's scientific research and experimental development expenditures and investment tax credits as follows for the 1993 and 1994 taxation years.
SR & ED expenditures
qualified for ITC purposes $81,978 $138,729
Investment tax credit $16,068 $27,191
8. . . .
(a) during the taxation years at issue, the appellant held 98 percent of the shares in Ferme Piluma Enr. (hereinafter "Ferme Piluma");
(b) Ferme Piluma is a farming business most of the income of which during the years at issue came from the sale of dairy products, livestock (calves and cattle) and harvested hay;
(c) during the years at issue, Ferme Piluma engaged in scientific research work having to do with agricultural efficiency in feed crop cultivation and production, dairy herd management, hybridization trials and attempts at new types of production, for example, veal, milk and cheese;
(d) that work was deemed by the Minister of National Revenue to qualify as scientific research and experimental development projects;
(e) for his 1993 and 1994 taxation years, the appellant considered all the expenditures incurred by Ferme Piluma as scientific research and experimental development expenditures;
(f) those expenditures represented sums of $405,836 and $258,402 for 1993 and 1994;
(g) the Minister of National Revenue revised the expenditures incurred by Ferme Piluma that gave rise to investment tax credits, to $81,978 and $138,729 for the 1993 and 1994 taxation years respectively, as described in Appendix A to this reply to the amended notice of appeal, which Appendix forms an integral part hereof;
(h) the majority of the expenditures referred to in subparagraph (f) above were disallowed by the Minister of National Revenue on the ground that they were not deductible expenditures under paragraph 37(1)(a) of the Income Tax Act (hereinafter the "Act") or qualified expenditures for the purposes of the investment tax credit;
(i) the appellant did not prove that the expenditures which he disputes in his notice of appeal were expenditures all or substantially all of which were attributable, or were attributable as provided for in subsection 2900(2) of the Income Tax Regulations, to the prosecution of scientific research and experimental development;
(j) the expenditures disallowed under the "salaries" item are partly expenditures for which there is no supporting documentation and partly capital expenditures made for the construction of a cheese house that are excluded from scientific research and experimental development expenditures under paragraph 37(7)(f) for 1993 and 37(8)(d) for 1994 and that consequently do not qualify for the purposes of the investment tax credit;
(k) the cheese house is a building which is not a special-purpose building contemplated by section 2903 of the Income Tax Regulations.
(l) the expenditures disallowed under the items "transportation of goods and trucking" and "improvement of lot, land, prototype" are capital expenditures made for the construction of the cheese house that are excluded from scientific research and experimental development expenditures under paragraph 37(7)(f) in 1993 and 37(8)(d) in 1994 and that consequently do not qualify for the purposes of computing the investment tax credit;
(m) the expenditures disallowed under the items "interest" and "milk marketing, deduction" are prescribed expenditures under section 2902 of the Income Tax Regulations and do not qualify for the purpose of computing the investment tax credit.
AND SUBJECT TO THE ARGUMENTS SET OUT ABOVE, THE DEPUTY ATTORNEY GENERAL OF CANADA ADDS THE FOLLOWING:
9. The appellant provided no proof of the nature of the expenditures shown under the "interest" item or of the purposes for which the loans with respect to which the interest was claimed were used during the 1993 and 1994 taxation years.
10. The expenditures disallowed under the "interest" item are thus excluded from scientific research and experimental development expenditures under paragraphs 37(7)(f) and 37(8)(d) of the Act since the appellant did not show that the loans in respect of which the interest was paid were used to cover qualified scientific research and experimental development expenditures;
11. The expenditures under the "milk marketing, deduction" item are related to activities which do not constitute scientific research and experimental development within the meaning of paragraphs 2900(1)(d), (e) and (h) of the Income Tax Regulations and are thus not directly attributable to scientific research and experimental development and, consequently, are excluded from that type of expenditure.
 To put the case in context, it would be appropriate to reproduce the wording used by the respondent and the appellant in identifying the issues.
 In paragraphs 10 and 11 of the Reply, the respondent stated the issues as follows:
10. To determine whether the Minister of National Revenue was correct in disallowing the amount of $405,836 in 1993 and $258,402 in 1994 as scientific research and experimental development expenditures.
11. Consequently, to determine whether the Minister of National Revenue was correct in disallowing the investment tax credits claimed by the appellant for his 1993 and 1994 taxation years.
 As the appellant filed a discontinuance for 1995, there is no reason to cite the first issue stated by him since it related solely to the year concerned by the discontinuance.
 The appellant stated the issues as follows in his amended notice of appeal:
1. Revenue Canada's refusal to grant FERME PILUMA the status of a business wholly dedicated to research for the 1993 and 1994 taxation years.
2. Revenue Canada's refusal, for the 1994 taxation year, to allow:
an amount of $31,209 under the item Salaries,
an amount of $20,231 under the item Interest, and
an amount of $16,085 under the item Milk marketing, deduction.
3. Revenue Canada's refusal, for the 1993 taxation year, to allow:
an amount of $117,724 under the item Salaries,
an amount of $7,180 under the item Transportation of goods,
an amount of $21,186 under the item Interest,
an amount of $9,832 under the item Marketing, and
an amount of $96,863 under the item Prototype.
 The appellant, a psychiatrist by profession, stated that he had invested nearly $1.5 million in Ferme Piluma Enr. ("Ferme Piluma"), which, he said, was exclusively dedicated to research and to the development of new consumer products, in particular, beef and various cheeses made from the milk produced by Ferme Piluma. The appellant controlled the farm, but it was managed by his brother.
 Dr. Mailloux described his agri-food research with enthusiasm and determination, explaining that his objective was eventually to be able to produce, at a reasonable price, meat and cheeses containing fats that were exceptional and indeed even beneficial for consumers' health by replacing traditional fats, which are often harmful to health.
 According to the appellant, it was possible to produce meat and cheeses containing fats that were nutritious, wholesome and excellent for the health, whereas existing products often contain fats with harmful effects on consumers' health.
 He provided extensive explanations and information on his theories and on how to go about achieving his objectives. He mainly emphasized his judicious choices in animal cross-breeding and the quality of the feed for his herd.
 With respect to cheeses, he explained at length the pitfalls encountered and his progression along the road which led to his being able to market two highly sought-after cheeses, St-Basile and Chevalier Mailloux. He also described, with considerable well-earned pride, the medals and awards won at the national level for the exceptional quality of these two cheeses. He added that they constituted a reward that had greatly exceeded all expectations and hopes.
 To achieve a result that is so much the envy of producers, Dr. Mailloux explained, he had benefited from the collaboration of a French expert. He also mentioned that he had wasted or lost phenomenal quantities of cheese before finally developing such a remarkable and sought-after product.
 Throughout his testimony, Dr. Mailloux always spoke with conviction and enthusiasm of the various experiments conducted on the farm, which he controlled through his substantial share in its capital stock.
 However, while well acquainted with the objectives, with the various projects, with the progress of these projects and with the various constraints, the appellant was hesitant and even somewhat vague when it came to the details and the components of the expenditures under the various accounting items, even though this was a highly relevant and even fundamental matter in the instant appeal.
 On a number of occasions, I observed that the appellant had quite summary and superficial knowledge of the business's accounting transactions; in other words, as informed and enthusiastic as he was about his research objectives, he was to that same extent poorly informed about aspects which were nevertheless essential to proving the validity of his appeal.
 In the appellant's view, Ferme Piluma was a tax shelter, the consequence of which, according to him, was and ought to be that all the expenditures relating to operations should be accepted by the respondent as research and development expenditures. According to the appellant's testimony, the result of the private experimental farm status should have been that all outlays had to be allowed and considered relevant for research and development purposes. This is quite clear from pages 23 and 24 of the transcript, where the appellant says:
A. Well, we are going to come to the point. So Ferme Piluma is a farming business. That is incorrect. That is not the case at all. It is a private experimental farm. I took the money I made as a doctor and financed that project. And that entitles me to tax credits for research and to . . . It's a tax shelter. Section 37. Oh, yes, it's a tax shelter.
 The appellant devoted most of his testimony to demonstrating the quality, scope and specificity of Ferme Piluma's operations; he underestimated the importance of submitting adequate evidence relevant to his appeal.
 The appellant's strategy was all the more surprising since, from the start of the hearing, the respondent admitted what appeared to be the appellant's main objective: obtaining acknowledgement by the respondent that Ferme Piluma was a private organization dedicated to research and development.
 This is quite clear from the following passage at page 26:
The audit was not at all the same in 91 and 92 in the sense that, before we agreed, recognized that all the activities were dedicated to research and development, the audit had accepted only a certain percentage, whereas, here, we have accepted 100 percent of all his expenditures claimed, except the excluded expenditures. So I do not see how that letter can be relevant here.
 Despite the respondent's clear admission of Ferme Piluma's purpose, the appellant spent most of his energy proving that the objectives pursued were related to research and development. At pages 27, 31 and 32 one finds the following:
A. You're getting ahead of me. The reason I filed that document was precisely to show that the status as an experimental farm entirely devoted to scientific research was granted by the Department for 91 and 92. And now, for reasons of which I am unaware, they are refusing to grant it for 93 and 94, yet there has been no change. The projects are exactly the same.
. . . But the goal, the goal is to produce milk with the most fat possible, not the least, to make a tasty cheese.
Q. Yes, but I also understand from what I just saw on the screen that the milk produced has a second purpose if we're talking about veal calves.
Q. And I also understood . . .
A. That is correct.
Q. . . . that the veal calves are sold to the restaurant industry.
Q. We're getting away from cheese a bit here.
A. Yes. There was, there is indeed a twofold purpose for the milk. It's not so much the milk as genetics. That is, there is another purpose. There are projects having to do with that, and that is on the list of projects. The idea was to develop a dairy animal for two purposes, to produce milk for very high-quality cheese and to produce veal calves of quality as good as if they were raised exclusively for meat. There's quite . . . there's quite a story behind that. Those are my ideas. My brother, the one you saw, my brother Luc carried out the project. And I was the designer and financial backer. That's how it was done. So, Madam, it was indicated in the video in question. Could you show me the wording? That's very important. "TVA Report, January 12, 95." So starting in 95, there were a lot more commercial activities. But, on an experimental basis, we had begun to sell some calves to a few large restaurants. But that was much more to test that market than to live off it as such. So what came of it, Your Honour? To show you the result, it is quite rare to talk about results in research. This will enable you to appreciate-to answer your question-and not simply believe that I'm telling you a story. I would simply like to file a copy of an article published in Le Soleil on October 3, 1998, which states that one of Piluma's two cheeses, "Le Chevalier Mailloux" . . . So the first one you saw was the St-Basile. And we developed a second one, which won the prize for best cheese, all categories, in the country, in Halifax in 1998. So to prevent anyone from questioning my word, I am filing that with you.
 Dr. Mailloux appeared to believe, and argued, that it was sufficient to prove the purpose behind Ferme Piluma in order to be entitled, automatically and without question, to claim all the expenditures entered in the farm's accounting records. Dr. Mailloux said, at page 34:
. . . You know, when I told you at the outset that I have come begging for tax credits, it was because I believe we deserve the tax credits.
And at pages 35, 36 and 37:
A. . . . So I . . . he worked at that, on site, and I was the designer and financial backer of this thing. And that is why I am before you to claim credits. And that is why I am very comfortable in claiming them. So, in all, I have put $1,500,000 into it, and the auditors can certify that for you: $1,484,000. And that enabled me, not paying taxes-since I paid no taxes, I took the money I earned as a doctor and I invested it in that. So for me, it was a tax shelter. And it is a tax shelter. And I claim the status, the same status, Your Honour, which makes ours a farm operation wholly dedicated to scientific research. I would like the Court to please grant me the same status for 93 and 94. Not for 95 because, starting in 95, there was a major commercial operation and, at the end of 95, as my brother preferred to take the business in a commercial direction rather than to continue in research, I withdrew from it. We have settled matters, and it has been over since December 99.
. . .
So I would like 93 and 94, since there was no change in the projects and they resulted in success, I would like to be granted the same status as a farm wholly dedicated to scientific research for 93 and 94. So if . . . look, it's at your discretion, if . . . I have an article here which appeared, that appeared in January 96 in Affaires agricoles. It is very recent. It says that in fact, before we produced the champion, Chevalier Mailloux, we had predicted it. And we worked toward that. So it was not a matter of chance . . . .
. . . and I have brought photocopies, if you want to look at them. So you will see confirmation of my role at the time. And when I state that it was an experimental farm, well, that's what it was. And it cost an arm and a leg, but, in view of the fact that it was a tax shelter, the cost became reasonable.
 Dr. Mailloux argued most energetically that all the farm's economic activities, including the sale of animals, hay and cheeses, were dedicated to research and development; he refused to admit that the operation had produced income from the sale of certain products. On this point, moreover, he provided a very subtle explanation, which appears in the following passage, at pages 44 and 45:
Q. So you had two orientations: the first as a dairy producer and the second as a processor.
A. No. I don't agree with that. It was an experimental farm. What we did was we disposed of research property and products. When we sold livestock, it was mainly, either it was certain calves to test the market, to try to have people discover, to see whether restaurants were a valid route to take. And in the other case, when we sold livestock, we didn't do so as a breeding operation; we simply disposed of research property. Cows are research property for us. And the milk became a product of research. The only animals that we sold that had nothing to do with research were newborn calves. So, yes, it did happen that, in some cases, we sold animals that were, that were not involved in any experiments; those were newborn calves. But that didn't happen often. So each animal had a purpose.
 Assuming that proof that Ferme Piluma was an experimental farm entirely and solely dedicated to scientific research would have as a consequence the sheltering of all expenditures and all income from the tax treatment given conventional businesses, the appellant expressed his concern as follows, at pages 65 and 66:
But I want my tax credits for 93 and 94. And I want my status as an experimental farm wholly dedicated to scientific research. That status was granted to me for 91 and 92, and I want it, if only for my honour. It won't give me much in figures, but I want it. Because that's what, that's what the status was. And the Department has denied me that status for 93 and 94 without giving any reason. Nothing. They said: "No, you won't get it for 93 and 94." Like that.
. . .
Oh yes. There are a number of other things that will be added. We're only at that point. So concerning 8(b), Ferme Piluma is a farming business. I'm sorry; I don't agree with that. It is a private experimental farm wholly dedicated to research. That is why I denied 8(b).
 After admitting and acknowledging Ferme Piluma's predominant purpose, the respondent analyzed the company's accounting. She had allowed a number of expenditures and denied others on the ground that they did not qualify under the Income Tax Act (the "Act") or that they were not justified or supported by relevant vouchers. The disallowances had nothing to do with Ferme Piluma's status and purpose. What was done essentially was to evaluate the expenditures in light of the provisions of the Act.
 The following exchange between the parties clearly illustrates the parameters of the case, at pages 67, 69 and 70:
Q. We were at subparagraph (h).
A. Correct. "the majority of the expenditures referred to in subparagraph (f) above were disallowed by the Department of National Revenue on the ground . . ." Well, here, Your Honour, it is incorrect to say the majority of the expenditures because, for 94, it was the minority of expenditures for 94 that were disallowed. It was not the majority. But, in our preliminary meeting, Ms. Payette understood that in another way. You see, for 94, if you take the $258,000, that represents . . . 41 percent of the expenditures for 94 were disallowed. So that's not the majority. That's because the word "majority" here, depending on how you understand this subparagraph, colours things. It is true that the Department disallowed more than 50 percent of the expenditures I claimed as qualified expenditures for 93, but the Department allowed 59 percent of the expenditures I claimed as qualified expenditures for 94. So $138,000 out of $258,000 is 59 percent. So for that item, if the word "majority" were changed, I would admit subparagraph (h). Otherwise, that subparagraph is incorrect and is not consistent with the . . . own figures . . .
. . .
Q. I am asking you a question on this particular point.
Q. There is a percentage of expenditures that was actually allowed.
JANIE PAYETTE: One hundred percent. If you look. I'm sorry.
THE COURT: Yes.
JANIE PAYETTE: Because I'm specifying the percentage.
A. Those that were recognized as qualified, it was 100 percent.
Q. They allowed all of them, all the expenditures at that point?
A. Yes. Of those expenditures as qualifying for the tax credit. Right?
JANIE PAYETTE: One hundred percent of the expenditures. The items that were allowed were all or substantially all attributable to research conducted relating to those items. Yes, we allowed them.
 Rather than presenting detailed and substantial evidence supported by specific explanations and appropriate documentary evidence, the appellant instead chose to make statements and observations with no relevant or direct effect on the validity of his claims. What is more, he admitted a number of errors and confessed his inability to provide explanations that were nevertheless essential to an analysis of his case. Furthermore, he called no one as a witness to correct the many deficiencies arising from his lack of control or from his ignorance of important facts.
 I think it useful to cite certain quite revealing passages on this point, at pages 75, 76 and 77:
. . . the amended notice of appeal. Salaries $31,000: disallowed. Claimed: $82,000. An amount of $50,000 was allowed. I would like the full amount to be allowed. Your Honour, the reason is this: you have been told that the direct salaries and wages, the wages portion paid to subcontractors was creditable. So I will go no further on that point.
. . .
Q. $20,000 instead of zero?
A. Yes. So I would like the full amount of interest to be recognized as creditable, as allowable.
. . .
Q. Now, do the documents establish the purpose of the loans?
A. No. No, Your Honour. They went into a pool of money and there was no distinction made.
Further, pages 80 and 81:
. . . Look, the auditors will be able to explain to you what was behind that. I don't have the books with me.
. . .
Yes. $117,000. So the difference between the two is the salaries paid by the subcontractor to the employees who worked in the cheese house. So, as we were told to differentiate, that those salaries would be allowable by Revenu Québec, it was for that purpose that it was put with the salaries of the Piluma employees. $7,180 under the item Transportation of goods and trucking. There, you have 03. Look, I can't . . . The auditors will tell you what that consists of. I don't remember.
Then at pages 91 and 92:
Q. Right. So you admitted that this disallowed amount consists of expenditures for which there is no supporting documentation and capital expenditures made for research, for construction, I'm sorry, of the cheese house. My question is this: when you spoke a moment ago about salaries to subcontractors, were they the people who built the cheese house? What do you mean by subcontractors?
A. Yes. That's correct. The individuals . . .
Q. Who built the cheese house.
A. Yes. Yes, yes, yes.
Q. So the . . .
A. The wages portion.
Q. To subcontractors.
A. Yes. To all those who . . . Yes.
Q. Who took part in the construction of the cheese house.
A. Uh-huh, uh-huh.
Q. Thank you.
A. Yes. That's exactly right. On the invoice of a contractor, there is a materials portion and a wages portion. They have been separated, Your Honour.
A. And accounted for. By my brother. I didn't have anything to do with that, but that's what he was supposed to do.
. . .
Also at pages 95 to 102:
A. Probably. No problem.
Q. Perfect. Now, that document . . .
A. It looks like it.
Q. . . . I explained to you, I am explaining to you that this is the interest you claimed in the financial statements, which amounted to $20,186 in 93 and $20,231 in 94.
Q. Was separated by Jacques Prince between 1, 2, 3, well . . . Around 13 loans. You provided us with Exhibit A-4 a moment ago. Can I assume that that document concerns a $25,000 loan from the National Bank paid out on March 1, 1994, on which you took interest, claimed interest of $1,928? Do you have that . . .
A. I don't know. I didn't calculate that, Ms. Payette.
Q. You don't know. You can't tell me.
A. Look, I discovered this on Sunday, and my analysis doesn't amount to all that much. I have no idea.
. . .
A. O.K. I have no idea. I have no idea. I haven't looked at it. I have no idea. So you have the contract in front of you, and it says what it says. I have nothing to add in that regard. I have conducted no analysis, so there is nothing I can add on that.
Q. With regard to those loans, do you know where the loan money came from, what the amount was and what it was used for?
A. The money, yes. That I do know. The money went to pay all the expenditures for research, the work.
Q. All the expenditures for the research.
A. That's correct.
Q. So if we take the third loan here, for example, Caisse populaire St-Basile, car loan of $15,000. That was for research?
A. No. That wasn't. I don't know.
Q. You don't know.
A. I would have to ask. I have no idea what that's doing there. That wasn't used for research although he put it in there.
Q. Well no, but . . .
A. I haven't examined that.
Q. . . . when you say "he", who is "he"?
Q. Luc, your brother?
Q. Who prepared that?
A. Look . . .
Q. I'm sorry.
A. I don't know. I have no idea who prepared it.
Q. Luc Mailloux. Was it Mr. Mailloux who, Mr. Luc Mailloux, who prepared Ferme Piluma's statements of expenses?
A. Yes. That is correct.
Q. So it was Luc Mailloux who claimed the $20,000 and the $20,186 in interest in 93 and 94?
A. Well, if he did it, if it's true, it's not right. I don't know whether he claimed it, but he wasn't the one who made that list.
Q. Good. O.K. I'm sorry, we're going to Tab . . . Tab 3. You have Tab 3 with the red sticker, which is the statement of revenue and expenses. If we look at line 3, interest, there's an amount of $20,231 claimed.
Q. Do you see, do you agree that that $20,000 was entered by Mr. Mailloux, was entered in the statements of . . .
Q. . . . revenue and expenses? Yes. Good.
A. It was done by him. That is correct. It was he who prepared the statement of revenue and expenses.
A. And as to whether it's true that he put, that he included the $15,000 car loan in that, it would only be a portion because a portion of car expenses went for the business, for the farm.
Q. All right. And can we . . .
A. So it's a portion. For that loan, I agree with you. Normally, there should have been some rigour; he should have agreed with the auditor to enter a portion with respect to the car, the allowable portion.
Q. All right.
A. The other loans were taken out directly for the business, unless I am mistaken.
Q. Unless you're mistaken.
A. So you have the cheese house, a loan of $104,000 in October 93, etc.
Q. Yes. Are we to think that that is a loan that was, that was paid for the construction of the cheese house, a mortgage loan?
Q. It was for the construction?
A. Yes, yes. Yes, yes.
Q. Loan of $104,000. And then the loan of . . .
A. Look, let's be careful here.
Q. Yes. You don't know . . .
A. Because there is equipment.
Q. That's right. You don't know . . .
A. Because the loan . . . Wait a minute. In October 93, it was the construction. Wait a minute. Was it for the construction or for the purchase of equipment? I don't know. I don't know the details.
. . .
Q. Perfect. And then, we see, for example, that the loan of $103,000 in 92 was paid into account no. 58521, which would be Ferme Piluma's account, if I understand correctly. And we see it in a number of places.
A. No idea about the accounts.
Q. You don't know.
A. The account numbers.
Q. You don't know.
. . .
A. . . . what happened is that my wife sent invoices from Trois-Rivières.
 I observed on a number of occasions that the appellant was unable to explain, justify or even understand certain information concerning his own case. He could have corrected this significant deficiency by calling qualified persons as witnesses. He chose to do nothing of the kind. I respect that choice, which was quite peculiar in the circumstances, particularly since the appellant alone bears the consequences.
 On a few occasions, he admitted certain errors and irregularities, in particular regarding the salary that his brother paid to his mother to babysit the children and regarding interest on a car loan; the same was true with regard to the amounts from the sale or disposition of hay and even with regard to the crop insurance proceeds, which were no doubt paid following a poor harvest. These admissions were quite revealing of the appellant's incompetence to testify on certain fundamental aspects of his appeal.
 The appellant's approach was very academic and theoretical. A good example of that approach was provided when the question of income arose: the appellant vigorously argued that the income was not income, but the proceeds of disposition of products of research.
 His claims on this score extended to all products, in particular meat, milk, hay and cheese. In other words, according to the appellant, there were never any sales or income; there were essentially just proceeds of disposition relating to or associated with research. It is quite surprising that, in 1995, those same products suddenly became commercial products, without any transition period or any substantial change in operations.
 I think it useful to reproduce the following passages from pages 109, 110, 112, 114 and 115:
Q. They came to pick it up at the farm themselves?
A. So with respect to the sale of milk, it was and is my claim that the research business had to dispose of research property in order to generate official figures. So it was indeed a disposition of research property, not a sale of milk, a commercial transaction.
Q. All right.
A. Your Honour . . .
Q. I'm going to continue my . . .
A. . . . we're not dealing with semantics here. I had longstanding contracts with tax experts in Sherbrooke.
Q. I'm sorry, is that argument, Mr. Mailloux?
A. Well, no, because you asked me a very specific question: "Was it a sale?" I say no.
. . .
Q. Look here. I understand that the questions that are put to you have effects with which you do not necessarily agree.
Q. But this is not the appropriate time or moment to testify. What I mean is, in light of the audit, was this income? In a specific column, there is an amount that appears as sale of milk.
A. No, it is not a sale. And no, it is not income.
Q. O.K. So can you . . .
A. It is a disposition of a research product or of property. In the case of the milk, it is a disposition of research property.
Q. Mr. Mailloux . . .
A. It is not income.
A. And it is not a sale.
Q. There was a cash inflow.
Q. It's a cash inflow?
. . .
A. Your Honour, it's very simple. I was answering the question: "Was there income?" No. But if you are asking me, as you suggested, "Was there a cash inflow?" Yes. So that's all it is. The question must be precise in order to be answered precisely. And I'm not quibbling over words here. The terms used are important.
. . .
. . . That's as you wish. Your Honour, I give you notice right away that I have no intention of objecting to the vast majority of the auditors' remarks. They audited; they had access to the books; I did not have access to them. So it's going to be, I can tell you in advance, announce that, apart from a few very specific minor questions, my cross-examination of the auditors will be extremely brief. If I have any questions at all.
. . . you could let Mr. Mailloux know what you intend to establish through your witnesses. And perhaps he will simply admit that, if he testified, he would say such and such a thing. That will have the effect of considerably shortening your evidence.
PIERRE MAILLOUX: I accept all . . .
JANIE PAYETTE: Your Honour.
PIERRE MAILLOUX: Your Honour, I accept all the figures of the auditors.
 The appellant's discomfort over certain aspects of his case was confirmed by the testimony of Jacques Prince, at pages 124 and 125:
. . .
Q. As well. So it was the audit by the Quebec Department of Revenue?
A. That is correct, yes.
Q. Perfect. Can you explain the purpose of your audit?
A. At the outset, we had . . . the department had asked . . . it was an in-house auditor; he had requested supporting documents from Mr. Mailloux, that he provide us with his supporting documents justifying certain expenditure items which he had claimed in his tax return. Mr. Mailloux was unable to provide those documents since his brother had them on site and Mr. Mailloux did not have access to them. So we disallowed the expenditures in question claimed by Mr. Mailloux, Pierre Mailloux,
Q. The expenditures, what expenditures?
A. The expenditures under the expenditure items for which we had requested supporting documents from him. Since he did not produce the documents, the auditor who conducted the in-house audit disallowed the expenditures claimed by Mr. Mailloux.
. . .
At pages 126 and 127:
. . .
Q. There is something I do not understand. You asked the witness, you said, if I understand your testimony correctly, I requested supporting documents and we never received them.
A. That's right. We requested them in writing. I didn't request them; it was another in-house auditor.
A. He did not receive, he did not get the documents from Mr. Mailloux.
A. Because Mr. Mailloux did not have access to them.
. . .
At pages 130 and 131:
A. . . . Then there were expenditures that could be capitalized, that is, either the purchase of equipment or the construction of a building. In addition there were no supporting documents for $63,439 and $28,653, so there was no document to justify the amounts claimed. And then, lastly, there was depreciation that was disallowed for each of the years. That gives us our total of disallowed expenditures of $258,000 and $79,000.
Q. Well, at page 3 of your report, in paragraph 3, you write in the no supporting documents section:
With the accounting system in place at Ferme Piluma, it was difficult to reconcile the various expenditure items.
Can you explain what you mean by that?
A. O.K. To begin with, with regard to the accounting system, normally, when we conduct an audit, for example, when a maintenance-repair expenditure item is claimed, an amount of $10,000 normally-in the column, we would have $10,000. Then, we can check the invoices. But I could not reconcile the amounts claimed with what I had in the books because there were . . . there were amounts that had been entered in the wages column, and the other part for the same supplier could have been put in another column. I had trouble reconciling the items. So I went with the whole of the invoices that were there for the expenditure items that had to be justified by means of invoices.
Q. So you could not reconcile the statement of revenue and expenses with what was in the books?
A. That is correct, because Luc Mailloux also grouped things together. When he prepared his statement of revenue and expenses at the end of the fiscal year, he grouped certain items together. So I didn't know what he had grouped together. He did not provide me with the details on that. So I couldn't balance each expenditure item separately. That's why I went with his expenditures as a whole.
Q. O.K. When you say that you went with his expenditures as a whole, what do you mean by that? You looked at each invoice, you . . .
At pages 137 and 138:
. . .
A. D17, it was. O.K. If we take, yes. Just the second one; we see: "Yvette Villeneuve $180". I got no explanation of that. I don't know what Ms. Villeneuve could have done for the farms. I don't know; I had no details on that.
Q. So this, here on this page, D17, we have a total of $76,387 at the bottom. What do those amounts represent?
A. They were all amounts that were, for example, entered as salaries.
Q. In the $146,000?
Q. In the wages claimed?
A. That's right, yes.
Q. That would be, the $76,000, that would be a component of the $117,000?
A. That's correct, yes. Yes, the $76,000 is included in the $117,000.
Q. All right. And in that $76,000, there are documents that are not, there are expenditures that are not justified.
Q. That's what you're saying?
A. That's correct. For example, as I was telling you, among other things, Yvette Villeneuve, I don't know what that is. I didn't, I didn't see anything, no documents . . .
At pages 143 to 147:
. . .
Q. These are items that you found where, pages D17 and D18?
A. They may be in . . . either . . . they may be in various expenditure items.
Q. Right. So everything we see on pages D17 or D18 may be in various expenditure items which you have allowed?
Q. Unless they are not justified?
A. That is correct, yes.
Q. So, if they were not justified, they would go in no supporting documents.
A. No supporting documents, right. Because we take, on D17, the first, for example "Coopérative des inséminateurs du Québec". At that point, if there was an invoice, if that invoice was there, well, at that point I added it to the other expenditures and I allowed it. I didn't allow it under wages though, but under other expenditures. But I didn't go and take a portion of labour; I put it in overall terms, so that it would be easier to account for and to analyse a little.
Q. In fact, what you disallowed was essentially those items for which there were no supporting documents?
A. That is correct, yes.
Q. If there was a supporting document, you didn't necessarily respect the heading under which it was presented to you, but you attributed it to the heading that corresponded to it in your assessment, to the heading it should be attributed to.
A. That's right, I added up all the expenditure items. For example, if they came to $200,000, I then added all the invoices that had been submitted to me. For example, if they added up to $180,000 out of $200,000, I allowed $180,000, then I subtracted the expenditures that could be considered personal, and then if we were left with $150,000, well I allowed $150,000 out of the $200,000. I don't know if you understand.
Q. Yes. But not necessarily for the items under which and for which they had been submitted to you?
A. No, that is correct.
A. Right, because I went with the whole. Since for us a subcontractor did not necessarily represent wages.
Q. But it did not mean the expenditure was not allowable just because of that?
A. No, no. That is correct. No, no. I allowed it in full. One hundred percent of the invoice could be allowed, except that it would not be allowed under wages.
A. I would allow it in the other expenditures as a whole.
Q. But we arrive at $258,000 in disallowed expenditures all the same?
A. Yes, yes, that's right.
Q. In 93.
A. If we calculate everything including the expenditures that can be capitalized, and the disallowed depreciation and the personal expenses, yes, we get $258,000, yes.
Q. O.K. And $79,201 in 94.
A. That is correct. That's why the amount is greater in 93; it's mainly due to the building expenditure, which is capitalizable.
Q. Including the construction cost of $157,000?
A. That's right, yes.
Q. For the cheese house.
Q. All right. Now with regard to the interest expense, we looked at page D14 of your report a moment ago on which there are, I don't know, details concerning the interest claimed. So, first, in 94, the statement, the interest claimed was $20,231. Then for 93, you write $20,000. There is an error there, I believe? $20,186, because, in 93, I see $21,186 here on the income statement.
A. Yes. In 93, yes, I made a mistake, yes, a $1,000 error which ultimately benefits the taxpayer. Ultimately, we should have disallowed $1,000 more.
Q. What documents were provided to you so that you could itemize the interest like that, and calculate totals?
A. O.K. Right, I started with the amount claimed in the financial statements. Then I worked with the bank statements that were provided to me by Luc Mailloux. The interest statements that were received, that he received at the end of each year, which stated the principal and the interest paid for each month. And based on that, I determined, from the supporting documents that were submitted to me, I was able to determine the amounts that were paid for each year.
At pages 149 to 151:
A. That's correct. What it is is that, of the $20,000-well, ultimately, it should have been $21,186. There was $12,294 of it in interest presented to us, in statements that could justify that for us. So we disallowed $7,892. And in 94 it was the reverse. We allowed $1,793 more.
Q. Based on the statements that he provided to you?
A. That is correct. Based on the supporting documents that were provided to me.
Q. All right. Did you check to see for what purposes the money borrowed, from those loans, was used?
A. We didn't look at that. I looked only at the principal amounts. If we take 94, there are two amounts of $6,000, if it was for the loan in October 93 and June 92. So we basically knew that it was related to the construction of the cheese house. And the other loans-they go back to-it's said that there were some in 80. The loans were made in 80, so we gave the taxpayer the benefit of the doubt. We said it was for the business; we didn't investigate any further on that point.
Q. O.K, but you did not look at research and development, whether they were loans that had been used for research and development?
A. No, that's right. We allowed them as expenditures. We said, we supposed that . . .
Your Honour. Your Honour, to simplify the discussion, in case we come back to this, I would be prepared to admit that the matter of the car loan has nothing to do with this. I am ready to . . .
JANIE PAYETTE: No, I'm going to continue my examination.
No, but considering that it is a point that had escaped my notice.
THE COURT: Yes. That is an admission we will take note of.
Yes. It's an admission, and it has no relevance. We could scratch it out because it is an error.
JANIE PAYETTE: All right.
THE COURT: Continue.
Q. So you were saying that you did not analyze the purposes for which the borrowed money was used?
A. No, that's correct. It was assumed that it was for the business.
A. So we allowed . . . since the business was also operating at a loss each year, we knew perfectly well that it would eventually need a line of credit or loans to keep it afloat. So we said-and there were some assets-so loans would be needed at some point. So, we allowed the expenditure, we concluded that the various loans had been used for the purposes of the business.
Q. An amount of $12,294 in 93?
A. Yes, that is correct, the last loan. Yes, right, until October, yes, which was the last. O.K. Yes.
Q. Because there is a difference of $7,892, which is what? It wasn't justified, is that it?
A. That's right. Which did not have . . .
Q. It wasn't there.
A. That is correct, which did not have supporting documents to justify it.
Q. Perfect. Did you meet Mr. Mailloux, Pierre Mailloux?
A. Yes, once, on one occasion, yes.
A. At the Department of Revenue . . . .
At page 155:
. . .
All right. I would like to make an admission, Your Honour, if you have no objection. Yvette Villeneuve is my mother. And, once again, it was a monumental error to have put the salary he paid my mother to babysit his children in that statement. So I admit that there are a few minor errors like that which distress me, Your Honour. So is it possible . . .
At page 157:
. . .
I admit-I would like the name of my mother, Yvette Villeneuve, and the amounts beside it, which are salary that he paid my mother to take care of his children, that it be removed from this sheet. Is it possible to request that? It is an error on his part, on Luc Mailloux's part, to put the salary he paid my mother there.
. . .
At page 159:
I am attacking my own figures, no. I'm taking the auditor's figures. I am telling you that this item is an error and should not have been there.
But if I were to come to the conclusion that, if there are so many errors, perhaps there are more of them than those you yourself have identified.
In that case, Mr. Chairman, Your Honour, I would simply ask you, based on what I learned before lunch, to suspend the hearing and to ask Richard Purcell to go and check the figures on site. And then the points will be submitted to me and, before they are submitted to you again, we will remove what does not belong there.
. . .
 These various passages show quite clearly to what extent the appellant was unaware of the day-to-day details of the accounting. That is not a fault in itself, since his considerable responsibilities no doubt occupied him to the point where he was not available to get involved in that aspect, which was clearly secondary in his mind. That being the case, he should have brought in qualified persons to testify and answer any questions relating to his appeal.
 The appellant was pursuing noble and laudable objectives; he wanted to put on the market products (meats and cheeses) of superior quality that were excellent for consumers' health.
 In general, the appellant was more concerned with the progress and results of the research than with the inherent expenditures. He was clearly more comfortable and at ease testifying on that aspect of the case than on the expenditures, which were not within his province. It is very difficult to be, all at the same time, psychiatrist, doctor, lawyer, scientist, veterinarian, agronomist, accountant, dietician and tax expert.
 The appellant had decided to invest in a private experimental farm in order to create a tax shelter for himself; according to him, all the expenditures without exception should have been part of the research project. In his view, the experimental research farm status should have had the effect of making all the expenditures allowable by virtue of the fact that what was involved was a research project set up in the context of a tax shelter.
 The appellant contended and repeated that all the funds invested had been used for a single and exclusive purpose: research and development, until 1995, in which year the farm's orientation changed, for reasons not explained, to that of a broadly commercial undertaking, which moreover accounted for and justified the discontinuance for that taxation year.
 It is curious that the operation became instantly commercial in nature. It appears that what had been proceeds of disposition suddenly became simply revenue from commercial activities.
 Relying on a judgment by the Honourable Pierre Archambault concerning the same business, the appellant contended that all the expenditures claimed must be allowed. He testified that, for the years at issue, administration and accounting had been his brother's responsibility, yet he did not call him as a witness.
 What is rather unusual is that the assessments were issued following an audit initiated at the request of the appellant himself.
 The facts could be succinctly summed up in the following lines. The appellant, a physician specializing in psychiatry, set up a tax shelter for himself by establishing a private experimental farm. He invested therein a large portion of his personal income and set some objectives: namely to produce meats and cheeses containing healthy fats. He controlled the capital invested and drew upon and experimented with his own ideas and knowledge in the hope of achieving very positive results.
 He does not accept and vehemently disputes all the respondent's decisions disallowing certain expenditures on the grounds that, in some cases, no justification was provided and that, in others, they were not authorized by the Act.
 Matters became complicated when the appellant decided to discharge his burden of proof on his own in areas in which he had no knowledge for one thing and-even more prejudicially-did not have the necessary and appropriate information for another.
 Despite these deficiencies, which were moreover admitted by the appellant himself a number of times, he continued to believe that, to succeed, all he had to do was prove that the activities of the experimental farm were essentially centred on research and development; virtually all the appellant's evidence was devoted to achieving that objective.
 Yet, the fact that the operation was indeed a private research farm was never disputed by the Minister. In fact, the outset, the respondent admitted that the experimental farm's purpose was research and development. However, that recognition did not have the effect of preventing the audit and the verification of the appropriateness of certain expenditures.
 The appellant has made his appeal a matter of pride and wishes the Court to confirm his perception and vision of the orientation he had wanted to give his farm. Throughout the hearing, he appeared to believe that the direct effect of the assessment was to deny its research and development status.
 He himself initiated the process leading to the assessment under appeal. Indeed, Dr. Mailloux himself requested that the Quebec Department of Revenue proceed with an audit of the file.
 The appellant's tax file has previously been the subject of an appeal before this Court for a period prior to the one here in issue.
 Dr. Pierre Mailloux would like this Court, first, to confirm that the farm was a private experimental farm absolutely, totally and exclusively dedicated to research and, as a consequence of its obtaining that status, would like the Court simply to allow his appeal.
 To succeed in his appeal, the appellant had to show on a balance of probabilities that his claims were valid. As the assessment consisted of a number of components, some of which included a number of elements, that exercise might constitute a difficult challenge, particularly since Dr. Mailloux's knowledge of the business's administration and accounting was rather limited, as he himself admitted.
 However, he would have had to show, at least through circumstantial evidence, in the absence of direct evidence, that his claims were justified and justifiable. Not only was Dr. Mailloux unable to adduce such circumstantial evidence, but his testimony confirmed rather the validity of a number of aspects of the assessment.
 Lastly, Dr. Mailloux very vigorously argued that the building where the cheese was manufactured was a prototype and that that characterization gave him access to the benefits provided for by the Act.
 Here again, Dr. Mailloux misread the provisions of the Act.
 In the appellant's mind, the provisions of the Act are secondary; he believes that his own assessment and characterization of property should be sufficient for all the expenditures to be allowed.
 The actual situation is quite different. Parliament has enacted provisions which must be complied with. In the exercise of applying the provisions of the Act, I must assess the facts on a balance of probabilities since it is difficult, if not impossible, to obtain evidence whose quality is beyond all doubt.
 In the instant case, the balance of probabilities amply favours the validity of the assessment, since the appellant did not see fit to submit evidence challenging the respondent's evaluations. The only evidence adduced by the appellant concerned the status and purpose of the farm, which evidence he supplemented with various comments and observations suggesting that the statutory provisions should be adjusted to suit the project, not the reverse.
 The Act permits taxpayers engaged in a business to deduct certain expenditures made for the purpose of scientific research and experimental development. Those expenditures may not be otherwise deducted, either because they do not constitute expenses incurred by a taxpayer for the purpose of earning income from a business or property under paragraph 18(1)(a) of the Act, or because they are capital expenditures the deductibility of which is specifically prohibited by paragraph 18(1)(b) of the Act.
 Even if the expenditures are made for the purpose of scientific research and experimental development, the taxpayer is not by virtue of that fact released from the obligation of having in his possession supporting documents demonstrating or certifying the nature and quality of the expenditures claimed.
 That is the case for the activities which took place after February 1995. The term "scientific research and experimental development" is defined in subsection 248(1) of the Act under the heading "scientific research and experimental development". As regards activities which took place prior to February 1995, the term "scientific research and experimental development" is defined in paragraph 37(2)(b) of the Act, which provides that that expression has the meaning given to it by the Income Tax Regulations (the "Regulations"). Subsection 2900(1) of the Regulations defines what constitutes scientific research and experimental development for the purposes of section 37 of the Act.
 The respondent admitted that the appellant was engaged in a business within the meaning of the Act such that, under the appropriate conditions, he could deduct certain expenditures such as those made for the purpose of scientific research and experimental development.
 According to subsection 2900(1) of the Regulations, the investigation or search must be systematic in order to constitute scientific research and experimental development for the purposes of section 37 of the Act.
 The evidence showed that this test had been met. The Minister admitted that, in 1993 and 1994, the appellant had engaged in scientific research and experimental development within the meaning of section 37 of the Act for the purposes of his cheese production business.
 With respect to the appeal, the matters to be determined for 1993 and 1994 are the categories and amounts of the expenditures made for the purposes of the appellant's scientific research and experimental development.
 First, expenditures made in order to acquire or maintain a building do not constitute scientific research and experimental development expenditures under paragraph 37(1)(a) of the Act because an "expenditure of a current nature" within the meaning of subparagraph 37(1)(a)(i) of the Act does not include outlays required for the acquisition of land, an interest in land, or a property on which depreciation may be claimed.
 Expenditures for the acquisition or maintenance of a building may be considered as scientific research and experimental development expenditures under subparagraph 37(1)(b)(i) of the Act.
 However, subparagraph 37(7)(f)(i) of the Act for 1993 and subparagraph 37(8)(d)(i) for 1994 specifically provide that no capital expenditure made for the acquisition of a building after 1987 may be characterized as a scientific research and experimental development expenditure, unless it is for a "special-purpose building" within the meaning of section 2903 of the Regulations.
 At the hearing, the appellant admitted that the building in issue is not a "special-purpose building" within the meaning of section 2903 of the Regulations.
 It would be appropriate to reproduce the exact text of the appellant's admission on this point, at pages 84 and 85:
All right, now, the prototype. There is an amount of $96,000. So you have, at the top, the salary of $117,000, and you have, at the bottom, where it says: "improvement of lot, land, prototype", it is clear that, with respect to land, there was no land purchase. So we'll forget that too. There are a number of terms used, but the word, the $96,863, refers to the construction of the prototype. And I agree entirely with the Department of Revenue that the prototype absolutely does not correspond to the type of building contemplated by the Income Tax Act in paragraph 37(7)(f). I agree with them on that. It is not a special-purpose building within the meaning of that paragraph of section 37. It is plainly a prototype, a capital expenditure.
So that's why, Your Honour, I admitted, I admitted 8(k). If you were surprised at my admission of 8(k), it's just that I agree entirely that the cheese house is a building that is not a special-purpose building contemplated by section-it's not 2909, it's 37(7)(f), I believe, if my memory is correct, 37(7)(i), or something like that. But there is a subsection which concerns-of section 37-which concerns special-purpose buildings, and I agree with the Department that we're not talking about that here.
 Consequently, the expenditures related to "improvement of lot, land, prototype" are not expenditures made for the purpose of scientific research and experimental development and cannot be deducted under subsection 37(1) of the Act.
 As regards capital expenditures made for the acquisition of equipment, they constitute capital expenditures on scientific research and experimental development under subparagraph 37(1)(b)(i) of the Act.
 Subparagraphs 37(7)(f)(i) of the Act for 1993 and 37(8)(d)(i) for 1994 show that Parliament's intent was to exclude deductions that might benefit permanent fixed assets such as a building, even one used for scientific research and experimental development purposes. There were two reasons for this. First, such a building may be depreciated over a number of years. Second, its purpose may change or it may be used for purposes other than those initially intended.
Wages to subcontractors for the construction or maintenance of the building
 The appellant contended that it was normal, customary and appropriate to pay certain workers in cash; and apparently if he did not do so he would have been unable to obtain labour.
 Paying cash does not in itself make it impossible to claim expenditures or outlays. However, when the expense is claimed, it is difficult, indeed very difficult, to prove that expense, particularly if the recipient of the payment does not testify. In the instant case, there is no real proof of payment of the wages claimed, except for the appellant's testimony in that regard, which, like his testimony on all the other aspects of the administrative details, was vague, confused and certainly conclusive.
 In any case, this assessment of his testimony is entirely secondary since such wage expenditures, even if they had been established conclusively, were not allowable as the wages were paid for the construction of the building and, as such, constitute non-deductible expenditures under subparagraph 37(7)(f)(i) of the Act for 1993 and subparagraph 37(8)(d)(i) for 1994.
Transportation of goods and trucking
 According to the Amended Notice of Appeal, the Reply to the Notice of Appeal and the testimony, the expenditures shown under the item "transportation of goods and trucking" constitute expenditures which were made solely for the construction of the building. These expenditures made for the construction of the building thus do not constitute scientific research and experimental development expenditures under subparagraph 37(7)(f)(i) for 1993 or subparagraph 37(8)(d)(i) for 1994. Such expenditures might have been allowable if the evidence had established that they had served another purpose provided for and accepted by the provisions of the Act.
Interest on loans intended for Ferme Piluma Enr.'s operations
 As to the interest on the loans, the portion of such interest corresponding to the interest paid in respect of qualified scientific research and experimental development expenditures was deductible and was allowed.
 However, as regards the interest on the loans taken out for purposes unrelated to scientific research and experimental development, they are clearly not deductible and were not allowed. On this question, the appellant submitted no evidence, and, what is more, with respect to one year, the respondent allowed an amount greater than that claimed by the appellant.
 The expenditures relating to "milk marketing" include the dues paid to the Union des producteurs agricoles ("UPA"). Those dues were mandatory for the operation of the appellant's business, regardless of the purpose of that business. Such dues do not constitute expenditures made for the purposes of scientific research and experimental development within the meaning of subsection 37(1) of the Act. They are mandatory dues which all milk producers, without exception, must pay. However, they do constitute expenditures made for the purpose of gaining or producing a profit or income from a business or property within the meaning of paragraph 18(1)(h) of the Act.
 As to the other amounts paid for "milk marketing", I very much doubt that the appellant never intended marketing the final products resulting from his scientific research activities, particularly the cheeses he described with such pride and enthusiasm.
 Those expenditures were made for the purposes of market research and quality control or routine testing of products within the meaning of paragraphs 2900(1)(d) and (e) of the Regulations. Consequently, the deduction of those expenditures is not allowable under section 2900 of the Regulations.
 For all these reasons, the appeal must be dismissed, with costs.
Signed at Ottawa, Canada, this 30th day of January 2002.
J. T. C. C.
Translation certified true
on this 15th day of May 2003.
Erich Klein, Revisor