Business interruption insurance receipts for lost profits were treated as taxable income under the provincial statute.

Insurance money received under use and occupancy policies for loss of net profits and fixed charges after a fire was treated as income under the provincial taxing statute. The receipt was connected with the carrying on of the business and was a substitute for expected trading gains during the interruption, so it fell within the wide statutory meaning of income derived from business sources. The fire policies covered capital loss, but the separate indemnity for loss of profits was a business receipt to be brought into account in computing net income. The statutory exclusion for losses or expenses recoverable under insurance did not prevent taxation of a receipt substituting for trading profits.

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Issues: Whether insurance moneys received under use and occupancy policies, representing loss of net profits and fixed charges after fire, constituted income liable to assessment under the provincial taxing statute.

Analysis: The receipt was connected with the carrying on of the business and arose from a revenue premium paid to protect expected trading gains during the interruption caused by fire. The statutory definition of income was wide enough to include amounts derived or received from business sources, and the return of income was required to reflect the business profit and loss account. The Court distinguished between the capital loss covered by the fire policies and the separate indemnity for loss of profits, holding that the latter was a business receipt falling to be brought into account in computing net income. The statutory exclusion relating to losses or expenses recoverable under insurance did not prevent the receipt from being treated as income where it was a substitute for trading profits.

Conclusion: The insurance receipt for loss of net profits was taxable income and had to be brought into account in computing assessable income.

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