s. 9(1) which authorizes the deduction of business expenses; the provisions of
s. 18(1) are limiting provisions only.13
Iacobucci J addresses the relationship between subsection 9(1) and
paragraph 18(1)(a) as follows:
. . . the well accepted principles of business practice encompassed by s. 9(1) would
generally operate to prohibit the deduction of expenses which lack an income
earning purpose, or which are personal expenses, just as much as ss. 18(1)(a) and
(h) operate expressly to prohibit such deductions. For this reason, there is an
artificiality apparent in the suggestion that one can first examine s. 9(1) in order to
determine whether a deduction is authorized, and can then turn to s. 18(1) where
another analysis can be undertaken . . . .
Although ss. 18(1)(a) and (h) may, therefore, simply be analytically repetitive or
confirmatory of prohibitions already embodied in s. 9(1), they may serve to
reinforce the point already made, namely, that the s. 9(1) test is a legal test rather
than an accountancy test. At the same time, they conveniently summarize what
might otherwise be abstract principles of commercial practice. . .
There is no doubt that, in some cases, s. 9(1) will operate in isolation to scrutinize
deductions according to well accepted principles of business practice. In this
respect, I refer to cases, also noted by the trial judge, in which the real issue was
whether a particular method of accounting could be used to escape tax liability . . . .
In other cases, including the present case, however, the real issue may be whether a
deduction is prohibited by well accepted principles of business practice for the
reason that it is not incurred for the purpose of earning income, or for the reason
that it is a personal or living expense. In such cases, any treatment of the issue will
necessarily blur s. 9(1) with ss. 18(1)(a) and (h).14
The courts have consistently held that tax imposed upon the income of a
taxpayer is not deductible in computing the income of that taxpayer under the ITA.
In Munich Reinsurance, Sharlow JA stated this principle in the following terms:
In support of that proposition, the appellant cites the well established principle that
the payment of income tax is not an expenditure made for the purpose of
earning income because it is an expenditure of income already earned: Roenisch v.
M.N.R.,  Ex. C.R. 1,  2 D.L.R. 90, 1 D.T.C. 199, First Pioneer
13 Ibid, page 722. See, also, page 725 and L’Heureux-Dubé J’s comments in dissent at page 788. Iacobucci J, writing
for a unanimous Court, restated his comments in Symes regarding subsection 9(1) of the ITA in Canderel Limited v
The Queen,  1 SCR 147 at paragraph 31.
14 Ibid, pages 723h to 725b.