CAMERON,
J.:—This
is
an
appeal
by
the
Minister
of
National
Revenue
from
a
decision
of
the
Income
Tax
Appeal
Board
dated
June
11,
1951
(4
Tax
A.B.C.
270),
which
allowed
an
appeal
by
the
respondent
company
from
an
assessment
to
income
tax
made
upon
it
on
February
3,
1950,
in
respect
of
the
taxation
year
ending
December
31,
1947.
In
computing
its
taxable
income
for
that
year,
the
respondent
claimed
as
a
deduction
the
sum
of
$316,087.16
which
it
had
paid
to
the
Minister
of
Hydraulic
Resources
for
the
Province
of
Quebec
under
the
provisions
of
*
An
Act
to
Ensure
the
Progress
of
Education,’’
enacted
by
the
Legislature
of
the
Province
of
Quebec,
10
George
VI,
c.
21.
That
deduction
was
disallowed
by
the
Minister
on
the
ground
that
it
was
a
corporation
tax
as
defined
by
the
regulations
contained
in
P.C.
5948
passed
under
the
authority
of
Section
6(1)
(o)
of
the
Income
War
Tax
Act,
and
therefore
under
the
provisions
of
that
subsection
was
not
deductible.
An
appeal
to
the
Income
Tax
Appeal
Board
was
allowed,
the
Board
being
of
the
opinion
that
the
Quebec
Act
did
not
impose
a
corporation
tax,
and
that
the
Governor
in
Council
in
enacting
P.C.
5948
exceeded
the
powers
conferred
on
him
by
Section
6(1)
(o)
of
the
Income
War
Tax
Act,
and
that
it
was
therefore
ultra
vires.
The
Board
also
held
that
in
any
event
a
portion
of
the
deduction
claimed
was
within
the
express
provisions
of
certain
exceptions
contained
in
P.C.
5948,
as
being
rents
or
royalties
in
respect
of
natural
resources.
The
Board
referred
the
assessment
back
to
the
Minister
for
re-assessment
and
to
allow
the
full
amount
of
the
deduction
claimed,
‘‘as
it
was
an
expense
wholly,
exclusively
and
necessarily
laid
out
for
the
purpose
of
earning
its
income
for
the
year
1947.”
In
submitting
that
the
appeal
should
be
allowed
and
the
assessment
restored,
counsel
for
the
appellant
vigorously
attacked
each
of
these
conclusions
of
the
Board.
This
appeal
was
heard
at
the
same
time
as
eight
others
in
which
the
Minister
was
the
appellant
and
in
which
the
respondents
were
seven
other
power
corporations,
also
in
the
Province
of
Quebec,
namely:
St.
Maurice
Power
Corporation,
The
Canadian
Light
&
Power
Company,
Ottawa
Valley
Power
Company,
Saguenay
Power
Company,
Ltd.,
Gatineau
Power
Company,
Northern
Quebec
Power
Company,
Ltd.,
Southern
Canada
Power
Company,
and
MacLaren-Quebec
Power
Company.
In
each
case
the
issue
was
the
same
as
I
have
outlined
above,
and
in
each
case
the
appeals
of
the
corporations
have
been
allowed
by
the
Income
Tax
Appeal
Board.
I
am
advised
that
in
every
case
the
full
amounts
now
claimed
by
the
Minister
as
payable
have,
in
fact,
been
paid,
no
doubt
under
protest.
It
was
agreed
at
the
hearing
of
the
appeals
that
the
evidence
given
before
the
Income
Tax
Appeal
Board,
and
a
certain
admission
of
facts
supplementary
thereto
which
was
filed
with
the
consent
of
all
parties,
would
be
the
evidence
on
these
appeals,
subject
only
to
the
question
of
the
admissibility
of
certain
evidence
tendered
to
the
Board.
At
the
hearing
I
heard
counsel
for
all
the
respondents,
each
of
whom
in
the
main
adopted
the
arguments
of
the
others.
In
one
respect,
however,
they
were
not
in
accord.
Counsel
for
Ottawa
Valley
Power
Company
and
for
MacLaren-Quebee
Power
Company
did
not
join
with
counsel
for
the
other
respondents
in
the
submission
that
Section
6(1)
(o)
of
the
Income
War
Tax
Act
was
ultra
vires
the
Parliament
of
Canada.
In
all
cases
the
respondents
submit
that
P.C.
5948
exceeded
the
powers
conferred
on
the
Governor
in
Council
by
Section
6(1)
(o)
of
the
Act
and
was
therefore
ultra
vires,
that
in
any
event,
the
payments
sought
to
be
deducted
were
within
the
exceptions
provided
for
in
P.C.
5948
and
were
also
disbursements
and
expenses
wholly,
exclusively,
and
necessarily
laid
out
and
expended
for
the
purpose
of
earning
the
income,
and
therefore
deductible
under
the
provisions
of
Section
6(1)
(a)
of
the
Act.
Very
many
issues
were
raised
during
the
course
of
the
argument.
In
my
opinion,
however,
the
issue
as
a
whole
will
be
determined
by
considering
five
major
questions
as
follows:
1.
Is
paragraph
(o)
of
Section
6(1)
of
the
Income
War
Tax
Act
invalid?
2.
Is
P.C.
5948
enacted
thereunder
ultra
vires
the
Governor
in
Council?
3.
Does
the
disbursement
made
by
the
respondent
fall
within
the
general
provisions
of
P.C.
5948,
defining
corporation
tax
and
specific
corporation
tax
?
4.
If
Question
3
is
answered
in
the
affirmative,
is
the
respondent
entitled
to
the
benefit
of
the
exceptions
contained
in
the
definition
of
specific
corporation
tax?
5.
In
any
event,
is
the
deduction
permissible
under
the
provisions
of
Section
6(l)(a)
of
the
Income
War
Tax
Act?
1.
PARAGRAPH
(0)
OF
THE
INCOME
War
Tax
Act
The
disputed
paragraph
(o)
in
the
form
below
was
enacted
by
Section
5(1)
of
ec.
63,
Statutes
of
Canada,
1947,
and
by
Section
17
of
the
same
Act,
it
and
the
regulations
passed
pursuant
thereto
were
made
applicable
to
1947
and
subsequent
years.
“6.
In
computing
the
amount
of
the
profits
or
gains
to
be
assessed,
a
deduction
shall
not
be
allowed
in
respect
of
(o)
any
corporation
tax,
as
defined
by
regulation
made
by
the
Governor
in
Council,
paid
to
the
government
of
a
province
or
to
a
municipality.”
It
is
not
suggested
that
Parliament
could
not
delegate
to
the
Executive
the
power
to
define
‘‘corporation
tax’’.
Nor
could
it
be
suggested
that
in
exercising
the
power
of
‘‘raising
of
money
by
any
mode
or
system
of
taxation’’,
as
provided
in
Section
91(3)
of
the
British
North
America
Act,
Parliament
could
not
in
enacting
or
amending
an
Income
Tax
Act
specify
those
expenses
or
outlays
which
would
be
deductible
and
those
which
would
not
be
deductible
in
computing
taxable
income.
Prima
facie
at
least,
paragraph
(0)
is
intra
vires
of
Parliament.
I
may
note
here
that
the
Income
Tax
Appeal
Board
found
in
unnecessary
to
reach
any
conclusion
on
this
question.
Paragraph
3
of
the
respondent’s
reasons
contained
in
its
Reply
summarizes
its
submission
that
paragraph
(0)
is
ultra
vires.
It
is
as
follows:
“3.
Section
6(1)
(0)
is
ultra
vires
the
Parliament
of
Canada
and
in
its
purpose,
object,
and
effect
it
does
not
come
within
Section
91(3)
of
the
British
North
America
Act.
The
purpose
and
object
of
6(1)
(o)
is
to
prevent
any
Province
from
exercising
its
constitutional
power
of
direct
taxation
by
levying
a
corporation
tax.
Moreover
under
the
guise
of
Income
Tax
legislation
Section
6(1)
(o)
encroaches
and
trespasses
upon
the
exclusive
powers
of
the
Government
of
a
Province
or
of
a
municipality
to
raise
revenue
by
direct
taxation
for
maintaining
the
schools
within
such
Province
or
such
municipality.”
On
the
first
point
it
was
submitted
that
paragraph
(o)
in
its
real
nature
and
substance
is
not
intended
for
the
purpose
of
“raising
of
money
by
any
mode
or
system
of
taxation’’
as
provided
in
Section
91(3)
of
the
British
North
America
Act;
but
that
its
real
purpose
was
to
bring
pressure
to
bear
upon
the
various
provinces
to
enter
into
the
agreements
contemplated
by
the
Dominion-Provincial
Tax
Rentals
Agreement
Act,
1947,
and
“to
penalize
the
people
in
any
province
that
did
not
elect
to
suspend
the
authority
given
to
it
under
the
constitution
(Section
92(2)
of
the
British
North
America
Act)
to
levy
personal
income
taxes,
succession
duty
taxes
and
corporation
taxes”—
that
is,
the
provinces
that
did
not
enter
into
such
agreements.
The
provinces
of
Ontario
and
Quebec
had
not
then
entered
into
such
agreements
and
I
understand
that
the
Province
of
Quebec
in
which
all
the
respondent
corporations
carry
on
business,
has
not
as
yet
entered
into
any
such
agreement.
Now
while
it
is
the
fact
that
paragraph
(0)
was
re-enacted
in
the
form
set
out
above
at
the
same
session
of
Parliament
as
the
Dominion-Provincial
Tax
Rentals
Agreement
Act,
1947,
and
received
the
Royal
assent
on
the
same
date,
I
am
quite
unable
to
find
that
the
purpose
of
its
provisions
denying
the
deductibility
of
corporation
tax
was
to
penalize
the
inhabitants
of
any
province
which
did
not
enter
into
an
agreement
under
that
Act,
or
to
bring
pressure
on
the
provinces
to
enter
into
such
agreements.
It
must
be
noted
that
the
Income
War
Tax
Act
had
long
since
established
the
general
principle
that
taxes
paid
to
a
province
were
not
deductible.
Paragraph
(o)
was
first
enacted
in
1940
and
by
it
deductions
were
not
allowed
in
respect
of
:—
“(o)
any
tax,
license
fee
or
other
levy,
or
the
amount
represented
by
the
increase
in
any
tax,
license
fee
or
levy
imposed,
exacted
or
increased
after
the
24th
day
of
June,
1940,
by
virtue
of
the
authority
contained
in
any
provincial
statute
or
Order
in
Council,
save
such
amount
as
the
Minister
in
his
discretion
may
allow.”
In
that
form
paragraph
(0)
was
not
limited
to
corporations,
but
applied
to
all
taxpayers.
However,
by
Section
5(2)
of
Statutes
of
Canada,
1946,
c.
55,
paragraph
(o)
in
that
form
was
repealed
and
the
following
substituted
therefor
(applicable
to
the
year
1947
but
never
used
in
that
form)
:—
“
(o)
any
corporation
tax
paid
to
the
government
of
a
province
except
any
such
tax
the
deduction
of
which
may
be
allowed
by
the
Minister
as
a
royalty
or
rental
on
natural
resources
in
the
province.”
In
that
form
the
general
principle
was
established
that
corporation
tax
paid
to
the
Government
of
a
province
was
not
to
be
deducted,
the
only
exception
being
such
corporation
taxes
as
might
be
allowed
by
the
Minister
as
a
royalty
or
rental
on
natural
resources.
As
will
be
noted
later,
Section
6(6)
of
the
Act
provided
a
definition
of
corporation
tax
as
applicable
to
paragraph
(o)
in
that
form.
It
is
the
fact—as
will
be
noted
later—that
the
change
in
the
final
form
of
paragraph
(o)
was
brought
about
because
of.the
prospective
agreements
to
be
entered
into
by
the
Dominion
with
the
provinces
and
that
such
agreements
made
provision
for
the
non-deductibility
of
corporation
taxes,
save
as
excepted
therein.
In
substance,
there
was
no
change
in
the
general
policy
regarding
corporation
taxes—they
continued
to
be
non-deductible;
but
the
prohibition
was
broadened
to
include
such
taxes
paid
to
municipalities
as
well
as
to
a
province.
I
can
find
nothing
to
support
the
respondent’s
submission
that
the
purpose
and
object
of
enacting
paragraph
(o)
in
its
final
form
was
to
prevent
a
province
from
exercising
its
constitutional
powers
of
direct
taxation
by
levying
a
corporation
tax;
or
that
it
encroaches
or
trespasses
upon
the
exclusive
powers
of
the
government
of
a
province
or
a
municipality
to
raise
revenue
by
direct
taxation
for
maintaining
its
schools.
The
constitutional
powers
of
a
non-agreeing
province
and
of
its
municipalities
were
not
affected
in
the
slightest
degree
by
the
passage
of
paragraph
(0).
It
seems
to
me
that
in
attacking
the
validity
of
paragraph
(0)
the
respondents
have
stressed
the
possible
consequential
effect
of
the
legislation
rather
than
the
subject
matter.
The
distinction
was
pointed
by
Rand,
J.,
in
Reference
re
Saskatchewan
Farm
Security
Act,
[1947]
3
D.L.R.
689
at
705.
The
judgment
of
the
Supreme
Court
of
Canada
in
that
case
was
affirmed
in
the
Privy
Council,
[1949]
2
D.L.R.
145
at
149,
in
which
Viscount
Simon
stated
:
1
‘
There
was
abundant
evidence
that
agriculture
is
the
main
industry
of
Saskatchewan
and
that
it
is
the
principal
source
of
revenue
of
its
inhabitants.
It
is
moreover
clear
that
the
result
of
the
impeached
legislation,
if
it
is
validly
enacted,
would
be
to
relieve
in
some
degree
a
certain
class
of
farmers
from
financial
difficulties
due
to
the
uncertainties
of
their
farming
operations.
But,
as
Rand
J.
points
out,
there
is
a
distinction
between
legislation
‘in
relation
to’
agriculture
and
legislation
which
may
produce
a
favourable
effect
upon
the
strength
and
stability
of
that
industry.
Consequential
effects
are
not
the
same
thing
as
legislative
subject-matter.
It
is
‘the
true
nature
and
character
of
the
legislation’—not
its
ultimate
economic
results—that
matters:
Russell
v.
The
Queen
(1882),
7
App.
Cas.
829
at
pp.
839-40.
Here,
what
is
sought
to
be
statutorily
modified
is
a
contract
between
two
parties
one
of
which
is
an
agriculturist
but
the
other
of
which
is
a
lender
of
money.
However
broadly
the
phrase
‘Agriculture
in
the
Province’
may
be
construed,
and
whatever
advantages
to
farmers
the
reshaping
of
their
mortgages
or
agreements
for
sale
might
confer,
their
Lordships
are
unable
to
take
the
view
that
this
legislation
can
be
regarded
as
valid
on
the
ground
that
it
is
enacted
in
relation
to
agriculture.’’
Reference
may
also
be
made
to
the
Margarine
case,
[1950]
4
D.L.R.
689,
where
Lord
Morton
of
Henryton
in
delivering
the
judgment
of
the
Privy
Council,
quoted
the
paragraph
just
referred
to
and
continued
at
p.
702
as
follows:
‘Although
the
prohibition
now
under
consideration
relates
to
a
different
subject-matter,
the
passage
just
quoted
would
seem
to
apply
with
much
force
to
the
present
case.
The
prohibition
might
well
‘produce
a
favourable
effect
on
the
strength
and
stability’
of
the
dairy
industry;
but
the
passage
just
quoted
shows
that
this
fact
alone
is
not
sufficient
to
make
it
legislation
‘in
relation
to
agriculture’
within
s.
95
;
and
there
is
no
other
ground
on
which
it
can
be
brought
within
s.
95.
To
sum
up,
the
connection
between
the
prohibition
and
the
operations
carried
on
by
farmers
is
too
indirect
and
remote
to
bring
the
prohibition
within
the
terms
of
s.
95,
and
for
this
reason
counsel’s
fourth
and
last
argument
fails.
’
’
Now
in
the
instant
case
it
is
suggested
that
the
trespass
on
provincial
rights
is
occasioned
by
the
effect
of
the
passage
of
paragraph
(o)
;
that
taxpayers
would
complain
to
the
provincial
taxing
authorities
that
they
were
not
entitled
thereunder
to
deduct
corporation
taxes,
and
in
particular,
the
tax
imposed
by
the
Province
of
Quebec
under
the
Act
to
Insure
the
Progress
of
Education,
and
to
urge
the
povince
not
to
levy
any
such
taxes.
I
am
unable
to
see
that
such
a
contention
in
any
way
affects
the
true
nature
of
the
subject-matter
of
the
legislation.
It
is
merely
a
consequential
effect
of
the
exercise
of
the
undoubted
power
of
Parliament
to
raise
money
by
imposing
a
tax
on
income.
It
could
scarcely
be
suggested
that
a
general
income
tax
which
would
include
levies
on
those
engaged
in
farming
would
be
legislation
‘‘in
relation
to
agriculture’’
although
it
would
undoubtedly
affect
farmers,
and
indirectly
agriculture.
Similarly,
it
cannot
be
found
that
the
disallowance
of
a
deduction
from
income
of
a
corporation
tax
is
legislation
‘‘in
relation
to
education,”
even
if
that
tax
be
one
which
has
for
its
purpose
the
raising
of
funds
to
be
used
for
school
purposes.
Paragraph
(o)
is
part
of
the
disallowance
section
of
the
Income
War
Tax
Act,
is
meaningless
by
itself
and
must
be
read
with
the
Act
as
a
whole.
The
Act
itself
is
clearly
within
the
competence
of
Parliament.
In
determining
what
income
is
to
be
the
subject
of
taxation,
it
is
necessary
to
determine
what
deductions,
if
any,
should
be
allowed
or
disallowed.
In
doing
so,
consideration
has
to
be
given
to
the
question
as
to
whether
or
not
municipal
and
provincial
taxes
should
be
considered
as
proper
deductions.
Its
power
to
give
priority
to
provincial
and
muni-
cipal
taxes
or
to
declare
them
as
non-deductible,
is
completely
unfettered.
In
my
opinion,
it
was
competent
for
Parliament
to
enact
paragraph
(o)
of
Section
6(1)
of
the
Income
War
Tax
Act,
and
I
must
therefore
reject
the
submission
of
counsel
for
the
respondent
that
it
is
ultra
vires.
2.
Is
P.C.
5948—
Dated
DECEMBER
23,
1948—
ULTRA
VIRES
THE
GOVERNOR
in
COUNCIL
?
The
Order
in
Council
revoked
the
regulation
contained
in
a
previous
one—P.C.
332,
dated
January
30,
1948
(as
amended
by
P.C.
953
dated
March
6,
1948)—which
regulation
had
defined
“corporation
tax”
pursuant
to
the
provisions
of
Section
6(1)
(o),
and
provided
a
new
regulation
defining
that
term;
it
further
provided
that
the
new
regulation
was
to
apply
to
1947
and
subsequent
taxation
years.
One
of
the
submissions
was
that
the
Governor
in
Council,
having
made
earlier
regulations
pursuant
to
the
authority
of
paragraph
(0),
was
functus
officio
and
therefore
had
no
power
to
substitute
other
regulations
therefor.
Section
31(1)
(g)
of
the
Interpretation
Act,
R.S.C.
1927,
ce.
1,
as
amended,
provides
a
complete
answer
to
that
submission
and
I
must
reject
it.
P.C.
5948
is
as
follows:
‘‘Income
War
Tax
Act—Regulations
defiining
Corporation
Tax
P.C.
5948
AT
THE
GOVERNMENT
HOUSE
AT
OTTAWA
Thursday,
the
23rd
day
of
December,
1948.
PRESENT:
HIS
EXCELLENCY
THE
GOVERNOR
GENERAL
IN
COUNCIL
His
Excellency
the
Governor
General
in
Council,
on
the
recommendation
of
the
Minister
of
National
Revenue
and
pursuant
to
the
powers
conferred
by
the
Income
War
Tax
Act,
Revised
Statutes
of
Canada,
1927,
Chapter
97,
is
pleased
to
order
as
follows:
1.
The
regulations
established
under
paragraph
(o)
of
ss.
(1)
of
Section
6
of
the
Income
War
Tax
Act
by
Order
in
Council
P.C.
332
of
30th
January,
1948,
as
amended,
are
hereby
revoked;
and
2.
The
following
Regulation,
defining
corporation
tax
for
the
purposes
of
paragraph
(o)
of
subsection
(1)
of
Section
6
of
the
Income
War
Tax
Act,
is
hereby
made
and
established
in
substitution
for
the
regulation
hereby
revoked:
(1)
For
the
purpose
of
paragraph
(0)
of
subsection
one
of
section
six
of
the
Income
War
Tax
Act,
a
corporation
tax
means
a
specific
corporation
tax
or
a
corporation
gross
revenue
tax
as
hereinafter
defined
except
any
such
tax
that
was
imposed
on
or
before
September
1,
1941,
if
the
rate
of
or
manner
of
imposing
the
tax
has
not
been
changed
since
that
day
;
Provided
that
where
the
rate
of
or
manner
of
imposing
any
such
tax
that
was
imposed
on
or
before
September
1,
1941,
has
been
changed
after
that
day,
the
tax
shall
be
deemed
to
be
the
amount
of
tax
payable
by
the
taxpayer
minus
the
amount
that
would
have
been
payable
by
him
if
there
had
been
no
change.
(2)
An
amount
deemed
to
be
a
corporation
tax
under
paragraph
(a)
of
subsection
five
of
this
Regulation
is
a
corporation
tax
for
the
purposes
of
paragraph
(o)
of
subsection
one
of
section
six
of
the
Income
War
Tax
Act
notwithstanding
anything
contained
in
subsection
one.
(3)
For
the
purposes
of
this
Regulation
where
a
charge
by
way
of
a
corporation
tax
is
imposed
on
one
class
of
persons
and
that
charge
or
a
like
charge
is
imposed
on
another
class
of
persons
on
whom
such
a
charge
might
be
deemed
to
be
imposed
by
way
of
royalty
or
rental,
the
charge
or
the
like
charge
on
the
second
class
of
persons
is
a
corporation
tax.
(4)
Where
a
corporation
tax
was
imposed
under
legislation
in
force
on
or
before
September
1,
1941,
but
the
legislation
was
suspended
or
repealed
pursuant
to
a
Wartime
Tax
Agreement
and
that
legislation
or
a
new
enactment
in
the
place
thereof
imposing
the
same
tax
was
brought
into
force
after
the
expiration
of
the
Wartime
Tax
Agreement,
the
tax
shall
be
deemed
to
have
been
imposed
on
or
before
September
1,
1941,
for
the
purpose
of
this
Regulation.
(5)
In
this
Regulation
‘specific
corporation
tax’
means
a
tax
or
fee
other
than
a
tax
on
net
income
or
gross
revenue,
the
imposing
of
which
singles
out
for
taxation
or
for
discriminatory
rates
or
burdens
of
taxation
corporations,
or
any
class
or
classes
thereof,
or
any
individual
corporation,
either
formally
or
in
effect,
by
imposing
a
tax
or
fee
on
or
in
respect
of
any
act,
matter
or
thing
or
any
activities
or
operations
mainly
done
by,
or
affecting,
or
carried
on
by
corporations,
or
otherwise,
except
(a)
a
bona
fide
and
reasonable
provincial
licence,
registration,
filing
or
other
fee
of
an
amount
not
in
excess
of
(i)
the
amount
of
$250.00
per
annum
for
each
corporation;
or
(11)
the
amount
of
the
fee
imposed
on
or
immediately
prior
to
September
1,
1941,
whichever
is
greater,
and
if
it
does
not
exceed
the
said
greater
amount,
the
amount
of
the
excess
shall
be
deemed
to
be
a
corporation
tax
for
the
purpose
of
this
Regulation
;
(b)
a
licence
fee
or
other
fee
or
tax
for
specific
rights,
benefits
or
franchises
granted
by
a
municipality,
or
where
they
are
exercised
or
enjoyed
only
on
territory
not
included
in
any
municipality
by
any
authority
(including
a
province)
having
jurisdiction
in
such
territory
;
(c)
any
assessment
under
The
Workmen’s
Compensation
Act
of
any
province
;
(d)
a
business
or
occupancy
tax
based
on
floor
space
or
on
the
rental
or
assessed
value
of
property,
imposed
by
a
municipality,
or
in
territory
not
included
in
any
municipality
by
any
authority
(including
a
province)
having
jurisdiction
in
such
territory
;
or
(e)
any
royalty
or
rental
on
or
in
respect
of
natural
resources
within
a
province.
(6)
In
this
Regulation
‘corporation
gross
revenue
tax’
means
a
tax
that
is
levied
on
the
gross
revenue
or
any
part
thereof
of
a
corporation
but
does
not
include
(a)
a
bona
fide
and
reasonable
business
or
occupancy
tax
imposed
by
a
municipality
or,
in
a
territory
not
included
in
a
municipality,
by
any
authority
(including
a
province)
having
jurisdiction
in
such
territory
on
the
gross
revenue
or
gross
receipts
within
the
municipality
or
territory
from
all
or
part
of
the
business
of
:
(i)
a
telephone,
electric
light,
electric
power,
gas,
street
railway
or
bus
company,
in
lieu
of
taxes
imposed
on
power
lines,
pole
lines,
towers,
cables,
wires,
conductors,
conduits,
equipment,
mains,
tracks,
and
other
like
property
or
improvements,
at
a
rate
not
in
excess
of
three
per
cent
of
the
gross
receipts
or
gross
revenue
subject
to
the
tax;
or
(ii)
of
any
other
corporation
if
(A)
the
tax
is
imposed
under
legislation
enacted
prior
to
June
27,
1946;
(B)
the
tax
is
in
lieu
of
such
a
tax
based
on
floor
space
or
upon
the
rental
or
assessed
value
of
property
;
(C)
the
tax
is
imposed
on
a
corporation
or
class
of
corporations
that
is
subject
to
the
said
tax
under
legislation
enacted
prior
to
June
27,
1946;
and
(D)
the
rate
of
tax
is
not
in
excess
of
the
general
tax
rate;
(b)
a
licence
fee
or
other
fee
or
tax
for
specific
rights,
benefits
or
franchises
granted
by
a
municipality,
or
where
they
are
exercised
or
enjoyed
only
in
territory
not
included
in
any
municipality,
by
any
authority
(including
a
province)
having
jurisdiction
in
such
territory.
(7)
In
this
Regulation
(a)
‘natural
resources’
means
lands
and
waters,
any
rights
to
or
interests
in
lands
and
waters,
vested
in
the
Crown
in
right
of
a
province,
including
forests,
lands
and
waters
and
rights
vested
in
the
Crown
in
the
said
right
to
take
wild
animals
and
fish
on
or
in
such
lands
and
waters;
(b)
‘rental’
means
a
charge
imposed
on
a
person
in
respect
of
the
occupation
or
use
by
him
of
a
natural
resource,
whether
improved
or
unimproved,
including
the
use
of
water
or
water
power
sites,
without
severance,
taking,
extraction
or
removal
thereof
or
of
any
part
thereof,
the
real
intent
and
purpose
of
which
charge
is
to
compensate
for
the
value
of
such
occupation
or
use;
and
(e)
‘royalty’
means
a
charge
(i)
required
to
be
paid
by
a
person
in
respect
of
of
any
right
conferred
on
or
vested
in
him
to
sever,
take,
extract
or
remove
anything
forming
part
of
the
natural
resources
of
a
province
including
therein
timber,
mineral
ore,
petroleum
and
natural
gas,
and
wild
animals
or
fish
the
right
to
take
which
forms
part
of
said
natural
resources
;
(ii)
the
amount
of
which
is
determined
by
reference
to
the
quantity
or
value
or
both
of
the
thing
that
he
severs,
takes,
extracts
or
removes,
alternatively
in
the
case
of
mineral
ore,
the
value
at
market
prices
of
the
minerals
contained
therein
after
extraction
therefrom;
and
(iii)
the
real
intent
and
purpose
of
which
is
to
compensate
a
province
for
the
value
in
whole
or
in
part
of
the
said
thing
prior
to
its
severance,
taking,
extraction
or
removal;
but
does
not
include
a
charge,
the
amount
of
which
is
determined
in
relation
to
the
profits
or
gross
receipts
derived
by
the
said
person
from
the
sale
of
products
produced
by
the
processing
or
manufacturing
of
the
said
thing
unless
provision
is
made
for
a
reasonable
deduction
from
the
profits
or
gross
receipts
in
determining
the
amount
of
the
charge,
in
respect
of
the
costs
and
value
added
to
the
said
thing
by
reason
of
the
processing
or
manufacturing
for
the
purpose
of
eliminating,
in
the
determination
of
the
amount
of
the
charge,
any
value
added
to
the
said
thing
by
the
said
processing
or
manufacturing.
(8)
This
Regulation
applies
in
respect
of
the
1947
and
subsequent
taxation
years.
(Signed)
A.
D.
P.
Heeney,
Clerk
of
the
Privy
Council.”
The
Income
Tax
Appeal
Board
held
that
the
Order
in
Council
was
invalid
on
the
ground
that
the
Governor
in
Council
in
enacting
it
had
exceeded
the
powers
conferred
by
paragraph
(o).
It
was
of
the
opinion
that
in
defining
4
‘specific
corporation
tax’’
(paragraph
(5)
of
the
Regulation—supra),
the
definition
was
wide
enough
to
include
taxes
levied
on
other
than
corporations.
Its
conclusions
on
this
point
were
as
follows
:
‘‘Surely
when
Parliament
enacted
Section
6(1)
(o)
and
quite
clearly
stated
that
it
was
‘any
corporation
tax’
which
was
to
be
disallowed
as
a
deduction,
it
meant
a
tax
imposed
solely
upon
corporations.
In
any
event,
I
have
reached
the
conclusion
that
that
is
the
meaning
which
must
be
given
to
the
words
‘any
corporation
tax’
as
contained
in
Section
6(1)
(o),
and
that
those
words
cannot
be
interpreted
to
mean
‘any
tax
imposed
upon
a
corporation’.
That
being
the
case,
I
am
of
the
opinion
that
the
words
‘as
defined
by
Regulation
made
by
the
Governor
in
Council’
which
immediately
follow
the
phrase
‘any
corporation
tax’
merely
give
the
Governor
in
Council
the
right
to
set
forth
by
regulation
such
purely
corporation
taxes
as
he
might
determine
should
not
be
permitted
to
be
a
deduction
from
income,
but
that
the
Governor
in
Council
had
no
power,
in
the
regulations
which
he
was
authorized
to
make,
to
include
any
tax
which
might
happen
to
be
payable
by
a
corporation
but
was
payable
also
by
individuals
or
partnerships
or
other
types
of
association
and
say
that
such
a
tax
or
rental
or
supplementary
charge
or
royalty
is
a
corporation
tax
and
will
be
disallowed
as
a
deduction
under
the
provisions
of
Section
6(1)
(o).
In
my
opinion,
the
Governor
in
Council
has
exceeded
his
powers
in
the
regulation
contained
in
P.C.
5948,
having
gone
far
beyond
what
Parliament
authorized
him
to
do,
which
was
to
settle
the
corporation
taxes—within
the
limits
of
what
were
purely
corporation
taxes—which
would
not
be
allowed
as
deductions
under
Section
6(1)
(o).
Having
reached
this
conclusion,
it
is
not
necessary
for
me
to
decide
whether
the
Governor
in
Council
was
functus
officio
after
he
passed
the
first
Order
in
Council,
P.C.
332,
dated
30th
January,
1948.”
Before
me
the
Regulation
was
said
to
be
invalid
on
at
least
two
grounds.
It
was
submitted
that
Parliament
in
using
the
word
‘‘define’’
did
not
have
in
mind
a
lengthy
definition
such
as
is
found
in
the
Regulation,
but
something
of
a
much
more
limited
nature,
something
that
would
set
out
or
enumerate
such
taxes
within
the
limits
of
levies
made
on
corporations
alone
as
could
not
be
deducted;
and
that
by
the
use
of
the
words
‘‘any
corporation
tax”,
Parliament
intended
that
the
Governor
in
Council
should
have
no
power
to
pass
any
regulation
save
in
regard
to
taxes
levied
on
corporations
alone.
In
my
opinion,
the
nature
and
extent
of
the
power
conferred
by
paragraph
(o)
upon
the
Governor
in
Council
to
define
corporation
tax
is
sufficiently
clear
in
the
words
of
the
paragraph
itself.
Later
herein
reference
will
be
made
to
various
definitions
of
the
word
‘‘define’’.
For
the
moment
it
is
sufficient
to
say
that
it
here
means
‘‘to
state
precisely,
declare
or
set
forth”?
what
the
term
‘‘corporation
tax”
means.
That
is
what
was
done
by
the
Regulation
contained
in
the
Order
in
Council.
But
if
there
is
any
doubt
on
the
matter,
it
is
entirely
removed
by
a
consideration
as
to
how
the
law
stood
and
the
state
of
things
existing
at
the
time
paragraph
(o)
in
its
final
form
was
enacted.
I
have
no
doubt
that
I
am
entitled
to
enter
upon
such
a
consideration.
In
Re
Mayfair
Property
Co.,
[1898]
2
Ch.
28
at
p.
35,
Lindley,
M.R.,
said:
4
"In
order
properly
to
interpret
any
statute
it
is
as
necessary
now
as
it
was
when
Lord
Coke
reported
Heydon’s
Case,
to
consider
how
the
law
stood
when
the
statute
to
be
construed
was
passed,
what
the
mischief
was
for
which
the
old
law
did
not
provide,
and
the
remedy
provided
by
the
statute
to
cure
that
mischief.’’
In
Keates
v.
Lewis
Merthyr
Consolidated
Collieries,
[1911]
A.C.
641
at
p.
642,
Lord
Atkinson
said:
“In
the
construction
of
a
statute
it
is,
of
course,
at
all
times
and
under
all
circumstances
permissible
to
have
regard
to
the
state
of
things
existing
at
the
time
the
statute
was
passed
and
to
the
evils
which,
as
appears
from
its
provisions,
it
was
designed
to
remedy.’’
Again,
in
Murray
v.
I.R.C.,
[1918]
A.C.
541
at
p.
549,
Lord
Lindley
said:
‘‘I
think
reasons
can
be
conceived
why
the
Legislature
should
have
desired
to
impose
the
tax
in
this
way,”
and
proceeded
to
state
the
reasons.
As
I
have
stated
above,
the
special
provision
prohibiting
the
deduction
of
corporation
taxes
as
such
was
contained
in
paragraph
(o)
by
Section
5(2),
Statutes
of
Canada,
1946,
c.
55.
By
the
next
subsection
(3)
of
the
same
amending
Act,
Parliament
itself
defined
corporation
tax
as
follows:
44
(6)
For
the
purpose
of
paragraph
(0)
of
subsection
one
of
this
section
‘corporation
tax’
means
any
tax
or
fee
other
than
a
tax
on
net
income,
the
imposing
of
which
in
the
opinion
of
the
Minister
singles
out
for
taxation
or
for
discriminatory
rates
or
burdens
of
taxation,
either
formally
or
in
effect,
corporations
or
any
class
or
classes
thereof
or
any
individual
corporation,
but
does
not
include
.
.
.’’
It
is
to
be
noted
particularly
that
in
that
definition
Parliament
stated
what
corporation
tax
meams,
and
did
not
enumerate
the
various
provincial
Acts
which
were
corporation
taxes.
It
may
be
noted,
also,
that
the
exceptions
contained
in
the
definition
(but
not
here
set
out)
are
in
many
respects
the
same
as
the
exceptions
contained
in
the
definition
of
specific
corporation
tax’’
in
P.C.
5948,
but
did
not
include
an
exemption
for
royalty
or
rental
on
natural
resources
within
a
province,
the
deductibility
thereof
being
left
to
the
Minister’s
discretion
in
paragraph
(o)
itself.
Then
in
1947
an
entirely
new
situation
arose.
The
wartime
agreements
which
had
been
entered
into
between
the
Dominion
of
Canada
and
all
the
provinces
pursuant
to
the
Dominion-
Provincial
Taxation
Agreement
Act,
1942,
were
about
to
expire.
On
July
17,
1947,
the
Dominion-Provincial
Tax
Rental
Agreements
Act,
1947,
received
the
Royal
assent.
Briefly,
it
empowered
the
Minister
of
Finance
with
the
approval
of
the
Governor
in
Council
on
behalf
of
the
Government
of
Canada,
to
enter
into
agreements
with
the
provinces
by
the
terms
of
which
compensation
would
be
paid
to
such
agreeing
provinces
(together
with
their
municipalities)
as
would
refrain
for
a
five-year
period
from
levying
personal
income
taxes,
corporation
income
taxes,
corporation
taxes
and
succession
duties,
all
as
defined
in
the
several
agreements
to
be
entered
into.
It
was
necessary,
of
course,
that
the
definition
of
corporation
tax
in
the
Income
War
Tax
Act
should
include
within
its
scope
the
definitions
of
that
term
in
all
of
the
prospective
agreements
to
be
negotiated
and
entered
into
by
the
Minister
with
the
various
provinces
under
the
Dominion-Provincial
Tax
Rental
Agreements
Act,
1947.
For
that
reason,
the
original
statutory
definition
of
corporation
tax
formerly
found
in
Section
6(6)
was
repealed
and
by
the
amended
paragraph
(o)
the
power
to
define
that
term
was
conferred
on
the
Governor
in
Council—the
same
authority
as
was
required
to
approve
the
terms
of
any
agreement
entered
into
by
the
Minister
of
Finance
with
a
province—and
in
each
of
which
agreements
4i
corporation
tax”
was
to
be
defined.
The
non-deductibility
of
such
corporation
taxes
was
also
extended
to
those
paid
to
municipalities.
In
construing
the
nature
of
the
power
conferred
on
the
Governor
in
Council
to
define
corporation
tax,
it
seems
clear
that
what
Parliament
intended
was
that
the
Governor
in
Council
should
by
regulation
declare
or
state
what
the
term
means—as
Parliament
itself
had
previously
done
in
the
repealed
Section
6(6)—taking
also
into
consideration
the
definition
or
definitions
which
would
be
included
in
the
Dominion-Provincial
Agreements
themselves.
In
Dill
v.
Murphy,
Moore’s
P.C.
Cases,
N.S.
Vol
1,
p.
487,
the
Judicial
Committee
of
the
Privy
Council
considered
the
meaning
of
the
word
‘‘define’’
as
found
in
the
Colonial
Act
of
1854.
By
that
Act
the
Legislature
of
Victoria
was
empowered
to
“define”
the
privileges,
immunities
and
powers
to
be
held,
enjoyed
and
exercised
by
the
Council
and
Assembly
and
by
the
members
thereof.
The
Colonial
Legislature
in
pursuance
of
that
power
enacted
that
such
bodies
and
their
members
should
hold
and
enjoy
such
of
the
like
privileges,
immunities
and
powers
as
at
the
passing
of
the
Imperial
Act
of
Parliament,
18
and
19th
Viet.
c.
55,
were
held
and
enjoyed
by
the
Commons
House
of
Parliament
of
Great
Britain
and
Ireland,
and
by
the
committees
and
members
thereof.
It
was
held
that
this
enactment
had
properly
defined
their
privileges
and
sufficiently
exercised
the
power
delegated
to
the
Local
Legislature.
Lord
Cranworth
in
that
case
said
at
p.
514:
1
‘
The
question
solely
turns
upon
the
true
construction
and
interpretation
of
the
word
‘define’
used
in
the
35
section
of
the
Colonial
Act.
There
can
be
little
doubt
on
this
ground.
The
attempt
of
the
Appellant
to
interpretate
and
give
it
the
meaning
of
‘enumerate’
is
absurd,
and
plainly
untenable.
The
word
‘define’,
in
the
opinion
of
their
Lordships,
is
equivalent
to
the
word
‘declare’.
It
has
been
also
urged,
that
when
the
Colonial
Legislature
was
required
to
define
its
privileges,
it
was
bound
to
specify,
one
by
one,
the
privileges
it
decided
upon
claiming
;
but
it
would
be
impossible
and
could
not
be
intended,
that
it
was
to
go
by
an
exhaustive
process
through
the
whole
series
of
Parliamentary
immunities
and
privileges.
The
Colonial
Parliament
have
clearly
defined
the
privileges
claimed,
and
could
not
have
done
so
in
any
way
more
convenient.’’
In
the
Oxford
Dictionary
(Unabridged)
the
following
are
included
among
the
meanings
of
‘‘define’’
“4.
To
determine,
lay
down
definitely;
to
fix,
decide;
to
decide
upon,
fix
upon;
5.
To
state
precisely
or
determinately;
to
specify
;
6.
To
state
exactly
what
(a
thing)
is;
to
set
forth
or
explain
the
essential
nature
of:
(b)
To
set
forth
or
explain
what
(a
word
or
expression)
means;
to
declare
the
signification
of
(a
word).”
In
enacting
P.C.
5948
containing
the
Regulation,
the
Governor
in
Council
is
stating
what
‘‘corporation
tax”
means,
has
set
forth
and
explained
the
essential
nature
of
that
term,
has
stated
precisely
or
determinately
what
it
means
and
that
I
think
is
what
Parliament
intended
it
should
do.
The
major
attack,
however,
is
directed
against
the
extent
of
the
power
conferred
on
the
Governor
in
Council.
It
is
said
that
in
the
term
‘‘corporation
tax’’,
corporation
is
an
adjective
qualifying
the
noun
‘‘tax’’
and
that
its
effect
is
to
limit
the
power
of
definition
of
those
taxes
which
are
actually
imposed
and
levied
solely
on
corporations.
For
the
respondents
it
was
contended
that
the
appellant
to
succeed
must
depend
on
the
catch-all
phrase
‘‘or
otherwise’’,
found
at
the
conclusion
of
the
definition
of
‘‘specific
corporation
tax’’.
Counsel
for
the
appellant,
however,
disclaimed
any
intention
in
this
case
of
placing
any
weight
on
those
words
but
directed
his
argument
to
the
words
‘‘the
imposing
of
which
singles
out
for
discriminatory
rates
or
burdens
of
taxation,
corporations
or
any
class
or
classes
thereof,
or
any
individual
corporation,
either
formally
or
in
effect’’,
and
more
particularly
the
concluding
words
‘‘either
formally
or
in
effect’’.
The
import
of
these
words
is
to
bring
within
the
definition
of
specific
corporation
tax
those
enumerated
taxes
which
formally
or
specifically
are
levied
on
corporations
or
classes
of
corporations
or
on
an
individual
corporation,
and
also
those
which,
though
not
formally
or
specifically
so
levied,
are
in
effect
so
levied.
Now
it
cannot
be
doubted
that
Parliament
could
have
included
in
the
Income
War
Tax
Act
the
same
definitions
of
corporation
tax
and
of
specific
corporation
tax
as
those
enacted
by
P.C.
5948
and
could
have
included
therein
the
same
words
‘
‘
either
formally
or
in
effect’’
as
are
found
in
the
Regulation.
Indeed,
it
had
used
precisely
these
words
in
the
repealed
Section
6(6)
defining
“corporation
tax’’.
Surely
the
Governor
in
Council
in
exercising
the
power
to
define
a
term
could
take
into
consideration
and,
if
thought
advisable,
adopt
part
or
all
of
the
language
Parliament
itself
had
used
in
defining
the
same
term
for
the
same
purpose,
namely,
the
non-deductibility
of
such
taxes.
Again,
if
the
terms
of
the
Regulation
in
P.C.
5948
be
compared
with
the
relevant
provisions
of
the
agreements
(Ex.
RC5)
entered
into
by
eight
of
the
provinces
with
the
Dominion
pursuant
to
the
Dominion-Provincial
Tax
Rentals
Agreement
Act,
1947
(seven
of
which
were
entered
into
prior
to
the
date
of
P.C.
5948),
it
will
be
found
that
while
the
Regulation
defines
corporation
tax
as
including
both
a
specific
corporation
tax
and
a
gross
revenue
tax
(both
as
later
defined
therein),
the
agreements
provided
definitions
of
corporation
tax
and
corporation
income
tax
which
in
their
terms
correspond
precisely
and
almost
verbatim
with
the
definitions
of
specific
corporation
tax
and
gross
revenue
tax
respectively
as
found
in
the
Regulation.
I
have
not
examined
them
individually
but
I
am
informed
that
the
Agreement
with
the
Province
of
Manitoba
dated
August
20,
1947,
is
typical
of
all.
In
the
Interpretation
section
thereof
(Section
16)
the
meaning
of
‘
corporation
tax
’
1
is
word
for
word
the
same
as
that
of
‘
specific
corporation
tax”
in
the
Regulation,
including
the
words
‘‘either
formally
or
in
effect’’,
and
the
exceptions
are
the
same,
including
that
applicable
to
rental
or
royalty
in
respect
of
natural
resources
within
a
province.
Likewise,
the
definitions
of
rental,
royalty
and
natural
resources
are
precisely
the
same.
I
think
that
these
agreements
are
admissible
in
evidence,
inasmuch
as
the
change
in
the
wording
of
paragraph
(o)
of
the
Income
War
Tax
Act
(which
conferred
the
power
on
the
Governor
in
Council
to
define
corporation
tax)
and
the
Dominion-
Provincial
Tax
Rental
Agreements
Act,
1947,
form.part
of
the
same
legislative
scheme.
The
latter
Act
is
pleaded
in
the
respondent’s
Reply
and
as
I
have
mentioned
above
it
provides
that
the
term
‘‘corporation
tax’’
in
the
Act
shall
be
as
defined
in
the
agreements
themselves.
In
any
event,
I
think
that
in
entering
upon
the
legislative
scheme
of
providing
for
agreements
with
the
provinces
under
the
1947
Act,
and
which
included
the
necessity
of
changing
the
form
of
paragraph
(o),
Parliament
must
have
had
in
mind
certain
provincial
Acts
which
had
already
been
entered
into
to
enable
the
provinces
to
enter
into
such
agreements.
Four
or
five
of
the
provinces
had
already
passed
such
enabling
legislation
prior
to
the
coming
into
effect
of
the
new
form
of
paragraph
(o)
or
the
Dominion-Provincial
Tax
Rentals
Agreement
Act.
Of
these,
I
am
informed
that
that
of
Manitoba—Statutes
of
1947,
c.
56—is
an
example.
Appended
to
that
Act
itself
is
the
form
of
agreement
which
the
Provincial
Treasurer
was
authorized
to
execute.
That
form,
in
so
far
as
it
is
here
relevant,
is
in
precisely
the
same
language
as
in
the
completed
agreement
to
which
I
have
referred
above.
I
was
informed
by
counsel
for
the
appellant
that
in
some
other
cases
similar
definitions
were
contained
in
the
enabling
provincial
Acts
and
then
embodied
in
the
Agreement.
The
definitions
of
corporation
tax,
in
its
various
forms,
as
defined
in
these
Acts
or
in
an
appendix
thereto,
were
surely
available
to
the
Governor
in
Council
in
carrying
out
its
power
to
define
the
same
term,
and
I
think
that
Parliament
necessarily
intended
that
he
should
take
them
into
consideration
;
otherwise,
the
whole
intent
and
purpose
of
the
Legislative
scheme
would
have
been
frustrated.
He
did
take
them
into
consideration
and
for
all
practical
purposes
adopted
them
in
their
entirety
in
the
Regulation,
and
in
my
view
was
entitled
to
do
so.
It
may
be
noted,
also,
that
the
Dominion
had
previously
entered
into
agreements
with
the
then
nine
provinces
of
Canada
pursuant
to
the
provisions
of
the
Dominion-Provincial
Taxation
Agreement
Act,
Statutes
of
Canada,
1942-43,
ce.
13.
In
many
respects
these
agreements
were
for
the
same
purpose
as
the
later
agreements
of
1947.
By
the
Act,
the
Minister
of
Finance
was
empowered,
with
the
approval
of
the
Governor
in
Council,
to
enter
into
agreements
regarding
provincial
and
municipal
personal
income
and
corporation
taxes
“as
defined
in
such
agree-
ment’’.
These
agreements
are
found
in
Ex.
RC4.
I
refer
only
to
that
with
the
Province
of
Quebec
dated
May
28,
1942,
which
I
am
informed
is
typical
of
all.
That
agreement
remained
in
effect
until
March
31,
1947,
and
was
therefore
in
effect
for
part
of
the
taxation
year
in
question
and
for
that
reason
alone
I
think
it
is
admissible.
Therein
‘‘corporation
tax’’
was
defined
as
follows:
“
(1)
In
this
agreement
or
any
appendix
thereto,
unless
the
context
otherwise
requires,
the
expression,—
(a)
‘Corporation
tax’
means
the
tax
or
fee
the
imposing
of
which
singles
out
for
taxation
or
for
discriminatory
rates
or
burdens
of
taxation,
either
formally
or
in
effect,
corporations
or
any
class
or
classes
thereof
or
any
individual
corporation
except—”
There
again
are
found
the
words
‘
‘
either
formally
or
in
effect.
’
’
The
Province
of
Quebec
by
ec.
27,
Statutes
of
Quebec,
1942,
empowered
its
representatives
to
enter
into
an
agreement
in
that
form
and
similar
enactments
were
passed
by
the
other
provinces.
Section
9
of
that
Act
provided
as
follows:
“9.
(1)
Notwithstanding
anything
herein
contained,
this
agreement
shall
not
be
construed
as
interfering
with
the
right
of
the
Province
to
levy
and
collect
taxes,
license
fees
and
royalties
upon
or
in
respect
of
natural
resources
within
the
Province
but
any
such
taxes,
license
fees
and
royalties
imposed
after
June
twenty-fourth
1940,
and
increases
in
taxes,
license
fees
and
royalties
after
the
said
date
will
be
subject
to
the
provisions
of
section
6(0)
of
the
Income
War
Tax
Act.
(2)
Taxes,
license
fees
and
royalties
imposed
by
the
enactments
enumerated
in
Appendix
C
to
this
agreement
shall
be
deemed
to
be
upon
or
in
respect
of
natural
resources.’’
Appendix
C
thereto
included
c.
90,
R.C.Q.
1941,
“An
Act
to
Provide
for
the
Erection
of
an
Education
Fund
from
the
Natural
Resources
of
the
Province’’,
an
Act
which
was
said
to
be
the
predecessor
or
parent
of
‘‘An
Act
to
Insure
the
Progress
of
Education,
1946’’.
It
is
submitted
by
the
respondents
that
as
the
former
Act
was
similar
to
the
latter
and
included
a
provision
for
levies
on
power
corporations,
by
its
inclusion
in
Appendix
C
there
was
a
recognition
that
such
levies
were
recognized
as
in
the
nature
of
rentals
or
royalties
on
natural
resources
within
the
province,
and
were
therefore
to
be
deductible;
and
that
the
same
treatment
should
be
accorded
to
the
levies
made
under
the
later
Act
of
1946.
It
is
common
ground,
however,
that
no
levies
on
power
corporations
were
ever
made
under
the
old
Act
at
any
time.
The
provisions
of
Section
9,
while
providing
that
the
levies
under
the
old
Act
should
be
deemed
to
be
upon
or
in
respect
of
natural
resources,
clearly
provide
that
if
levied
after
June
24,
1940,
they
would
be
regarded
as
being
subject
to
the
provisions
of
the
then
paragraph
(o)
and
therefore
prima
facie
non-deductible.
Moreover,
c.
27
of
Statutes
of
Quebec,
1942,
did
not
define
‘‘natural
resources’’
or
rental
or
royalty,
but
provided
that
all
the
taxes
imposed
by
the
enactments
enumerated
in
Appendix
A
thereto,
not
being
income
taxes,
should
be
deemed
to
be
corporation
taxes,
and
all
those
imposed
by
the
enactments
set
forth
in
Appendix
B
should
be
deemed
to
be
neither
corporation
nor
income
taxes.
I
am
unable
to
conclude
that
the
inclusion
of
the
former
Act
in
Appendix
C
can
be
of
any
assistance
to
the
respondent
herein.
The
Governor
in
Council
in
exercising
the
power
to
define
corporation
tax
was
not
precluded
from
using
part
or
all
of
the
language
which
Parliament
itself
had
used.
In
framing
its
definition
he
had
also
to
use
language
which
would
be
adequate
to
include
taxes
and
levies
which
were,
in
fact,
taxes
on
corporations,
although
called
by
some
other
name,
or
which
in
terms
were
made
applicable
to
other
than
corporations,
but
in
fact
were
levies
only
on
corporations.
The
whole
purpose
and
intent
of
paragraph
(o)
would—or
readily
could—be
frustrated
if
the
definition
of
corporation
tax
were
confined
to
taxes
which
were
named
by
levying
authority
as
corporation
taxes
and
if
it
did
not
include
taxes
which
formally
were
made
applicable
to
individuals
or
partnerships
as
well
as
corporations,
but
in
effect
applied
only
to
corporations.
The
mere
form
of
the
Act
or
bylaw
levying
the
tax
might
be
sufficient
in
some
cases
to
establish
that
the
tax
singled
out
corporations
for
taxation.
In
others
it
might
be
necessary
to
go
behind
the
form
in
order
to
ascertain
whether
in
effect
corporations
had
been
singled
out
to
bear
the
burdens
of
the
tax.
In
using
the
words
‘‘either
formally
or
in
effect
”,
the
Governor
in
Council
was
ensuring
that
the
substance
as
well
as
the
form
of
the
taxing
enactment
would
be
taken
into
consideration.
That
was
an
ordinary
and
necessary
precaution
to
take—one
which
Parliament
itself
had
stamped
with
its
approval.
If
that
precaution
had
not
been
taken,
any
other
legislative
body,
provincial
or
municipal,
could
have
framed
the
taxing
enactments
in
such
a
way
as
to
nullify
the
intent
and
purpose
of
paragraph
(o)
by
making
the
tax
in
form
applicable
to
individuals
as
well
as
to
corporations,
and
then
imposing
limitations
and
conditions
which
in
effect
would
exclude
other
than
corporations
from
payment
of
the
tax.
For
these
reasons
I
am
of
the
opinion
that
the
Governor
in
Council,
in
enacting
P.C.
5948
and
the
Regulation
established
thereunder,
has
defined
‘‘corporation
tax’’
in
accordance
with
the
duty
imposed
on
him
by
paragraph
(o)
;
and
in
using
the
words
‘‘either
formally
or
in
effect’’,
or
otherwise,
has
not
exceeded
the
power
conferred
by
that
paragraph.
It
follows
that
the
Order
in
Council
and
the
Regulation
established
thereunder
must
be
declared
valid
and
intra
vires
the
Governor
in
Council.
3.
Does
THE
DISBURSEMENT
Made
BY
THE
RESPONDENT
FALL
WITHIN
THE
GENERAL
Provisions
oF
P.C.
5948
Defining
Corporation
TAX
and
SPECIFIC
Corporation
TAX?
By
Section
2(1)
of
the
Order
in
Council,
‘‘corporation
tax”
means
‘‘a
specific
corporation
tax
or
a
corporation
gross
revenue
tax
as
hereinafter
defined
.
.
.”
The
appellant
submits
that
the
disbursement
falls
within
the
later
definition
of
specific
corporation
tax
in
Section
2(5)
(supra).
It
becomes
necessary
to
consider
first
the
nature
of
the
disbursement
made
by
the
respondent.
The
Act
to
Insure
the
Progress
of
Education,
Statutes
of
Quebec,
10
George
VI,
3.
21,
was
assented
to
on
April
17,
1946.
It
repealed
a
similar
Act
entitled
‘‘An
Act
to
Provide
for
the
Creation
of
an
Education
Fund
from
the
Natural
Resourees
of
the
Province”
(R.S.Q.
1941,
e.
90;
16
George
V,
c.
45),
but
it
is
common
ground
that
under
that
Act
no
taxes
or
levies
had
been
imposed
on
power
corporations.
The
preamble
to
the
new
Act
is
as
follows
:
“WHEREAS
the
financial
situation
and
the
insufficiency
of
resources
of
a
large
number
of
school
corporations
place
them
in
the
impossibility
of
suitably
meeting
the
needs
of
education
;
Whereas
such
a
state
of
affairs
is
of
a
nature
to
hinder
the
normal
progress
of
public
instruction
and
prevent
the
population
from
entirely
benefiting
by
the
advantages
to
which
it
is
entitled
;
Whereas
there
is
reason
to
relieve
immoveable
property
and
particularly
small
property,
an
essential
factor
of
stability
and
social
order,
from
the
excessive
burden
of
real
estate
taxes
;
Whereas
it
is
necessary
to
create
new
sources
of
revenue
to
meet
such
a
situation
without
further
involving
immoveable
property,
and
it
is
deemed
just
that
the
natural
resources
of
the
Province
contribute
a
reasonable
share
of
the
cost
of
public
instruction
in
the
Province;
Whereas
it
is
expedient
to
adopt
measures
for
such
purposes
’
’
;
Sections
2
and
3
and
3a
as
amended
and
as
applicable
to
the
year
1947
provide
for
the
creation
of
the
Education
Fund
and
its
constitution,
as
follows
:
‘2.
In
order
to
assist
school
corporations
to
improve
and
stabilize
their
financial
position
and
ensure
the
progress
of
teaching
in
the
province,
a
special
fund
designated
under
the
name
of
Education
Fund
is
created
by
this
Act.
This
fund,
exclusively
affected
for
the
purposes
of
this
Act,
shall
be
constituted
and
provided
for
by
the
sums
derived
from
the
various
sources
enumerated
in
sections
3
and
8a.
3.
For
the
civil
year
1946
and
for
each
subsequent
year,
a.
Every
holder
of
timber
limits
situated
within
the
province
shall
pay
to
the
Minister
of
Lands
and
Forests
an
additional
stumpage
due
of
fifteen
cents
per
cord
of
wood
cut
on
such
timber
limits
and
destined
to
the
manufacture
of
pulp
or
of
paper,
or
of
the
accessory
by-products
and
products
of
pulp
;
b.
Every
owner
of
wooded
territories
situated
within
the
province,
save
settlers
and
farmers,
shall
pay
to
the
Minister
of
Lands
and
Forests
a
contribution
of
fifteen
cents
per
cord
of
wood
cut
on
such
wooded
territories
and
destined
to
the
manufacture
of
pulp
or
of
paper,
or
of
the
accessory
or
byproducts
of
pulp;
c.
Every
holder
of
hydraulic
powers
of
the
public
domain
shall
pay
to
the
Minister
of
Hydraulic
Resources
an
additional
charge
of
fifteen
cents
per
thousand
kilowatt-hours
of
electricity
generated
and
derived
from
such
hydraulic
powers
;
d.
Every
owner
of
hydraulic
powers
situated
within
the
province
shall
pay
to
the
Minister
of
Hydraulic
Resources
a
contribution
of
fifteen
cents
per
thousand
kilowatt-hours
of
electricity
generated
and
derived
from
such
hydraulic
powers
;
e.
The
Quebec
Hydro-Electric
Commission
shall
pay,
out
of
its
revenues,
to
the
Minister
of
Hydraulic
Resources,
a
sum
of
two
million
eight
hundred
thousand
dollars;
f.
The
Provincial
Treasurer
shall
pay
to
the
said
education
fund,
notwithstanding
any
provision
to
the
contrary
in
the
Retail
Sales
Tax
Act
(Revised
Statutes,
1941,
chapter
88).
one-half
of
the
revenues
derived
from
the
tax
collected
in
virtue
of
the
said
act;
such
payment
shall,
however,
be
restricted,
as
to
the
year
1946,
to
one-half
of
the
revenue
collected
after
the
thirty-first
of
March.
The
provisions
of
paragraphs
c
and
d
shall
not
apply
to
municipal
corporations
nor
to
electricity
co-operatives
formed
in
virtue
of
the
Rural
Electrification
Act,
nor
to
any
organization
acting
as
an
agent
of
the
Crown,
nor
to
any
holder
or
proprietor
of
water-powers
of
a
natural
output
of
less
than
ten
thousand
horse-power
per
six
months.
The
additional
stumpage
dues,
contributions,
charges
and
instalments
provided
for
in
this
section
shall
be
exigible
on
the
first
of
August
of
each
year.
The
Minister
of
Lands
and
Forests
and
the
Minister
of
Hydraulic
Resources
shall,
upon
reception,
remit
the
proceeds
of
such
contributions
to
the
Provincial
Treasurer,
who
shall
pay
them
into
the
education
fund
constituted
in
virtue
of
section
2.
da.
For
every
civil
year
1947
and
for
each
subsequent
year,
a.
every
company
refining
petroleum
in
the
province
shall
pay
annually
to
the
Provincial
Treasurer
a
tax
of
one-third
of
one
per
centum
of
the
amount
of
its
paid-up
capital;
b.
every
company
owning,
operating
or
utilizing,
in
the
province,
a
telephone
system
or
part
of
a
telephone
system
and
whose
paid-up
capital
is
in
excess
of
one
million
dollars
shall
pay
annually
to
the
Provincial
Treasurer
a
tax
of
one-
third
of
one
per
centum
of
the
amount
of
its
paid-up
capital.
’’
Section
18
makes
provision
for
reduction
in
the
amount
of
contributions,
and
as
amended
is
as
follows:
1
‘The
contribution
which
a
holder
or
owner
of
hydraulic
powers
must
pay
to
the
Education
Fund
in
virtue
of
paragraph
e
or
of
paragraph
d
of
section
3
is
reduced,
each
year,
by
the
amount
equal
to
that
which
he
has
paid
in
school
taxes
for
the
school
year
ending
on
the
30th
of
June,
1946.’’
The
general
provisions
of
the
Act
need
not
be
particularized,
it
being
sufficient
to
say
that
the
Quebec
Municipal
Commission
is
empowered
to
inquire
into
the
financial
position
of
every
school
corporation,
to
declare
any
such
corporation
in
default
which
the
Commission
considers
unable
to
meet
its
obligations,
to
prepare
a
financial
re-organization
of
such
corporations
as
may
have
been
declared
in
default,
to
issue
bonds
guaranteed
by
the
government
of
the
province
in
lieu
of
the
bonds
or
debentures
in
default,
and
to
pay
out
of
the
revenue
from
the
Education
Fund
the
principal
and
interest
of
such
bonds,
any
deficiency
therein
to
be
paid
out
of
the
Consolidated
Revenue
Fund.
Omitting
for
the
moment
any
consideration
as
to
whether
the
sums
paid
by
the
respondent
under
the
Quebee
Act
fall
within
the
exceptions
contained
in
Section
2(5)
(e)
of
the
Regulation
as
being
‘‘any
penalty
or
rental
on
or
in
respect
of
natural
resources
within
the
province”,
do
such
payments
fall
within
the
term
‘‘a
tax
or
fee
other
than
a
tax
on
net
income
or
gross
revenue?”
The
respondent’s
business
is
the
production,
transmission,
distribution
and
sale
of
electric
energy
derived
from
hydraulic
powers
in
the
Province
of
Quebec.
Part
of
such
hydraulic
powers
is
held
by
the
respondent
under
emphyteutic
leases
from
the
Province
of
Quebec,
as
enumerated
in
its
Reply,
and
the
remaining
part
is
owned
by
the
respondent
in
full
ownership
under
title
from
the
Crown
in
the
right
of
the
Province
of
Quebec.
In
1947,
1,891,334,000
kilowatt-hours
of
electricity
were
generated
and
derived
from
powers
held
under
such
leases,
and
2,681,630,000
kilowatt-hours
from
power
held
by
the
respondent
in
full
ownership.
Under
the
Act,
therefore,
it
became
liable
to
payments
under
both
subsection
e
and
d
of
Section
3.
In
1947
the
‘‘additional
charges’’
under
¢,
and
the
“contribution”
under
d,
aggregated
$684,022.30,
which
amount
was
reduced
under
Section
18
by
the
amount
paid
in
school
taxes
of
$367,935.14—
a
net
payment
of
$316,087.16.
It
will
be
noted
that
under
paragraph
(c)
the
respondent
was
required
to
pay
an
additional
charge
of
fifteen
cents
per
1,000
k.w.h.
of
electricity
generated
and
derived
from
such
hydraulic
powers.
Considerable
stress
is
laid
by
the
respondents
on
the
word
‘‘charge’’
which
is
also
used
in
some,
but
not
all,
of
the
emphyteutic
leases
filed.
I
have
examined
one
filed
by
the
Gatineau
Power
Company
dated
August
8,
1922,
which
provides
that
in
addition
to
the
fixed
annual
price
or
rental
of
$1,000.00,
the
lessees
shall
pay
‘‘an
annual
supplementary
charge
or
royalty
on
each
h.p.
installed
as
follows:
(a)
Up
to
16,000
h.p.—nothing.
(b)
On
⅕
of
h.p.
installed
in
excess
of
16,000
h.p.—50
cents.’’
Then
provision
is
made
for
the
revision
of
such
supplementary
charges
at
the
end
of
each
ten-year
period
of
the
lease
(which
was
for
50
years)
and
if
the
parties
could
not
agree
on
the
revision,
the
matter
was
to
be
referred
to
arbitration.
I
am
invited
to
find
that
because
of
the
use
of
the
term
“additional
charge’’
in
para,
c,
that
it
is
of
the
same
nature
as
the
“supplementary
charge
or
royalty’’
provided
for
in
the
leases,
and
it
is
not
therefore
a
tax,
but
I
find
nothing
to
support
that
contention.
There
is
no
evidence
whatever
that
the
supplementary
charge
or
royalty
was
being
revised
or
that
the
time
of
such
revision
had
arrived.
Moreover,
the
‘‘additional
charge’’
in
paragraph
ce
is
based
on
the
electricity
actually
generated
and
developed,
whereas
the
‘‘supplementary
charge
or
royalty”
in
the
lease
I
have
mentioned,
is
computed
from
the
actual
total
turbine
power
or
other
hydraulic
motors
in
h.p.
as
may
be
from
time
installed.
The
provisions
for
initiating
the
revision
of
the
supplementary
charge
or
royalty
had
not
been
undertaken.
Likewise,
it
could
not
be
considered
as
merely
‘‘raising
the
rent’’.
There
is
still
another
reason
why
the
levy
made
under
paragraph
(c)
cannot
be
considered
as
in
the
nature
of
a
rental.
In
terms
of
levy
is
made
on
a
‘‘holder
of
hydraulic
powers
of
the
public
domain’’,
and
is
not
confined
to
those
holding
leases
from
the
Province
of
Quebec.
In
the
appeal
of
one
of
the
respondents
—Canadian
Light
and
Power
Company—the
Income
Tax
Appeal
Board
stated
that
it
had
been
proven
that
that
company
was
such
a
holder
under
leases
from
the
government
of
the
Province
of
Quebec.
However,
that
does
not
appear
to
be
the
fact.
Exhibits
A-3
and
A-4
in
that
case
are
the
company’s
returns
for
the
year
1947
to
the
Department
of
Hydraulic
Resources
under
the
Act
to
Insure
the
Progress
of
Education.
Therein
it
is
stated
that
its
hydraulic
powers
are
held
under
‘‘a
lease
from
Department
of
Railways
and
Canals,
Ottawa”.
Ex.
A-2
is
the
renewal
of
the
lease
itself,
dated
April
29,
1946,
and
the
lessor
therein
is
His
Majesty
the
King
represented
by
the
Minister
of
Transport.
Certainly,
as
to
that
company,
the
levy
could
not
be
considered
in
any
way
as
a
rental,
there
being
nothing
in
the
nature
of
a
lease
between
the
parties
affected.
As
to
that
company
it
is
a
tax
and
nothing
more
and
I
am
quite
unable
to
find
that
the
same
words
as
are
used
to
impose
a
tax
on
one
taxpayer
can
be
of
a
different
character
and
mean
something
quite
different
such
as
rental,
when
applied
to
other
taxpayers.
In
my
opinion,
the
‘‘additional
charge’’
levied
under
paragraph
(c),
and
the
“contribution”
levied
under
paragraph
(d),
were
taxes
just
as
much
as
were
the
taxes
levied
on
the
paid-up
capital
of
oil
refining
companies
and
telephone
companies
under
paragraph
3a,
where
they
are,
in
fact,
called
taxes.
The
test
is
not
answered
by
the
mere
name
of
the
impost
or
levy,
but
rather
by
ascertaining
its
essential
nature.
In
the
ease
of
Attorney-General
of
Canada
v.
Registrar
of
Title,
[1934]
4
D.L.R.
764,
Macdonald,
C.J.B.C.,
said
at
p.
764:
“The
definition
of
a
tax
includes
inter
alia
the
imposition
of
it
by
competent
authority.
It
must
be
imposed
in
clear
and
unambiguous
language,
and
requires
compulsory
payment.
There
can
be
no
option
on
the
part
of
the
taxpayer
to
pay
or
not
to
pay
a
tax.”
In
the
same
case
Macdonald,
J.A.,
said
at
p.
773:
“The
essentials
of
a
tax
were
discussed
by
Duff,
J.
(now
C.J.C.),
in
Lawson
v.
Interior
Tree
Fruit
&
Vegetable
Committee,
[1931]
2
D.L.R.
193,
at
pp.
197-8,
referred
to
with
approval
by
the
Judicial
Committee
in
Lower
Mainland
Dairy
Products
Sales
Adjustment
Committee
v.
Crystal
Dairy
Ltd.,
[1933]
1
D.L.R.
82,
at
p.
86.
The
tests
are
(1)
it
must
be
enforceable
by
law,
(2)
imposed
by
a
public
body
under
legislative
authority
and
for
a
public
purpose.
In
addition
‘compulsion
is
an
essential
feature’
(Halifax
v.
Nova
Scotia
Car
Works
(1914)
18
D.L.R.
649,
at
p.
652).”’
Again,
‘‘tax’’
is
defined
in
Corpus
Juris,
Vol.
61,
p.
65,
and
in
the
notes
that
follow
other
definitions
are
extracted
from
certain
decisions,
including
the
following:
“Any
Government
charge
imposed
for
raising
revenue
Is
a
‘tax’
regardless
of
name
by
which
it
is
called.
As
indicated
in
its
definition,
the
essential
characteristics
of
a
tax
are
that
it
is
not
a
voluntary
payment
or
donation
but
an
enforced
contribution
exacted
pursuant
to
legislative
authority
in
the
exercise
of
the
taxing
power,
the
contribution
being
of
a
proportional
character
and
payable
in
money
and
imposed,
levied
and
collected
for
the
purpose
of
raising
revenue
to
be
used
for
public
of
Government
purposes
and
not
as
payment
for
some
special
privilege
or
service
rendered.”’
In
my
view,
the
levies
imposed
upon
the
respondent
by
the
Act
meet
all
those
tests
and
are
therefore
taxes.
It
is
obvious,
of
course,
that
they
were
not
imposed
on
net
income
or
gross
revenue.
The
Act
to
Insure
the
Progress
of
Education
has
for
its
main
purpose
the
rendering
of
assistance
to
school
corporations
in
default.
Instead
of
directing
that
the
costs
thereby
incurred
should
be
paid
entirely
out
of
the
Consolidated
Revenue
Fund,
it
established
a
special
Education
Fund
to
be
built
up
by
the
annual
taxes
levied
under
Clauses
a,
b,
ce
and
d
of
Section
3,
and
of
Clauses
a
and
b
of
Section
3a,
supplemented
by
an
annual
payment
of
$2,800,000.00
by
one
of
its
own
Crown
companies
(The
Quebec
Hydro-Electric
Commission)
and
by
a
further
payment
by
the
Provincial
Treasurer
of
one-half
of
the
revenues
collected
under
the
Retail
Sales
Tax
Act.
The
taxes
so
levied
are
of
various
sorts,
but
in
this
case
I
am
concerned
only
with
the
tax
levied
under
paragraphs
(c)
and
(d),
all
other
taxes
being
levied
on
quite
a
different
basis.
It
is
apparent
that
the
imposition
of
such
taxes
does
not
single
out
for
taxation
or
for
dis-
criminatory
rates
or
burdens
all
corporations
or
any
single
corporation.
Nor
does
it
formally
single
out
any
class
or
classes
of
corporations.
It
is
made
applicable
to
every
holder
or
owner
of
hydraulic
powers
within
the
province
and
therefore
formally
paragraphs
(c)
and
(d)
could
include
individuals
and
partnerships
as
well
as
corporations.
It
is
to
be
noted,
however,
that
Section
3
provides
that
the
provisions
of
paragraphs
(c)
and
(d)
shall
not
apply
to
municipal
corporations,
to
electricity
cooperatives,
to
an
agency
of
the
Crown,
nor
to
any
holder
or
proprietor
of
water
powers
of
a
natural
output
of
less
than
10,000
h.p.
per
6
months.
The
effect
of
that
limitation
which
I
have
underlined
is
shown
by
the
Admissions
of
Fact,
filed.
Such
Admissions
show
that
in
1947
twelve
power
corporations
only
(including
the
nine
respondents
herein)
paid
additional
charges
or
contributions
under
paragraphs
(c)
and
(d)
;
that
no
person
other
than
a
corporation
has
ever
paid
or
been
liable
to
pay
any
of
such
additional
charges
or
contributions;
that
some
corporations,
holders
or
owners
of
hydraulic
powers
in
Quebec
and
who
have
generated
electricity
therefrom
have
never
paid
or
been
liable
to
pay
any
of
such
additional
charges
or
contributions
(presumably
because
of
the
deductions
for
school
taxes
permitted
under
Section
18)
;
that
in
the
years
1946
and
1947
persons
other
than
corporations
were
holders
or
owners
of
hydraulic
powers
in
the
Province
of
Quebec
within
the
meaning
of
paragraphs
(c)
and
(d)
and
generated
and
derived
electricity
therefrom,
but
no
person
in
the
Province
of
Quebec
other
than
a
corporation
was
the
holder
or
proprietor
of
water
powers
of
a
natural
output
of
more
than
10,000
h.p.
at
ordinary
six
months’
flow.
These
admissions
establish
that
at
least
for
the
years
1946
and
1947
(and
there
is
no
suggestion
in
the
evidence
that
there
has
since
been
any
change)
the
taxes
levied
under
paragraphs
(c)
and
(d)
were
borne
solely
by
corporations,
either
as
holders
or
proprietors
of
water
power
of
a
natural
output
of
10,000
h.p.
per
6
months
or
over
and,
whose
taxes,
levied
under
paragraphs
(c)
and
(d),
exceeded
the
school
taxes
which
were
deductible
under
Section
18.
It
can
scarcely
be
doubted
that
the
legislature
had
full
knowledge
that
only
corporations
were
the
proprietors
or
holders
of
water
power
of
a
natural
output
of
more
than
10,000
h.p.,
at
ordinary
6
months’
flow
and
that
such
corporations
alone
would
be
called
upon
to
bear
the
burden
of
the
additional
taxes.
In
effect,
therefore
(although
not
formally),
the
imposition
of
these
taxes
singled
out
classes
of
corporations,
namely
those
holding
or
owning
water
power
rights
for
taxation
or
for
discriminatory
rates
or
burdens
of
taxation,
by
imposing
a
tax
in
respect
of
the
activities
or
operations
mainly
done
by
or
carried
on
by
corporations,
namely,
electricity
generated
and
derived
from
hydraulic
powers.
Such
taxes
are
therefore
within
the
definition
of
1
‘specific
corporation
tax”
and
may
not
be
deducted
unless
they
fall
within
the
exceptions
provided
for
in
subsection
5
of
the
Regulation.
4.
ls
THE
RESPONDENT
ENTITLED
to
THE
BENEFIT
OF
THE
THE
Exemptions
CONTAINED
in
THE
DEFINITION
OF
SPECIFIC
CORPORATION
Tax?
From
the
definition
contained
in
Section
2(5)
of
the
Regulation,
there
are
excepted
five
categories
of
levies,
the
only
one
relied
upon
by
the
respondent
being
(e)—‘‘any
rental
or
royalty
on
or
in
respect
of
natural
resources
within
a
province.’’
The
Regulation
also
provides
definitions
for
natural
resources,
rental
and
royalty
in
Section
2(7)(a)(b)(c)
(supra).
The
Income
Tax
Appeal
Board
came
to
the
conclusion
that
as
to
the
amounts
paid
by
the
respondent
under
paragraph
(c),
the
respondent
was
in
any
event
entitled
to
that
deduction.
Its
reasons
were
stated
as
follows
:
“There
is,
however,
still
another
reason
for
this
taxpayer’s
appeal
to
succeed
at
least
in
part.
Even
if
I
were
wrong
in
my
conclusion
that
the
Governor
in
Council
had
exceeded
his
powers
in
making
the
regulation
contained
in
P.C.
5948,
paragraph
(e)
of
subsection
(5)
of
Section
2
of
that
regulation
provides
for
an
exception
in
respect
of
‘any
royalty
or
rental
on
or
in
respect
of
natural
resources
within
a
province’,
as
such
charges
shall
not
be
deemed
to
be
a
corporation
tax
within
the
provisions
of
the
Order-in-Council.
I
have
already
found
that
the
additional
charge
imposed
upon
the
appellant
herein
under
the
provisions
of
paragraph
(c)
of
Section
3
of
the
Quebec
Hducation
Act
by
reason
of
the
fact
that
the
appellant
is
a
holder
of
hydraulic
powers
of
the
public
domain,
was
in
the
nature
of
a
rent,
an
annual
supplementary
charge,
or
a
royalty,
and
not
a
tax.
In
so
far,
therefore,
as
the
appellant
was
called
upon
to
pay
an
additional
charge
under
the
Quebec
Education
Act
by
reason
of
being
the
holder
of
hydraulic
powers
of
the
public
domain
under
leases
from
the
Crown,
such
additional
charge,
in
my
opinion,
was
clearly
a
royalty
or
rental
and,
to
that
extent
at
least,
it
came
within
the
express
provisions
of
the
exception
contained
in
paragraph
(e)
of
subsection
(5)
of
Section
2
of
the
Order-in-Council
P.C.
5948.”
In
view
of
the
conclusion
which
I
have
reached
as
to
the
interpretation
to
be
placed
upon
the
definition
of
‘‘rental’’,
it
becomes
unnecessary
to
discuss
or
determine
the
question
as
to
whether
the
Crown
in
the
right
of
the
province
of
Quebec
owns
the
water,
the
use
of
which
was
taken
without
severance
by
the
respondent
in
developing
electricity.
The
definition
of
‘‘rental’’
concludes
with
the
words
‘‘the
real
intent
and
purpose
of
which
charge
is
to
compensate
for
the
value
of
such
occupation
or
use’’.
An
examination
of
the
various
charges
which
are
excepted
out
of
the
definition
of
“specific
corporation
tax”
indicates
that
such
charges
in
the
main,
if
not
entirely,
are
not
in
fact
taxes
in
the
ordinary
sense
but
rather
in
the
nature
of
fees
or
charges
for
which
the
payer
receives
some
form
of
compensation
in
return.
The
same
connotation
is
involved
in
the
definitions
of
rental.
Not
all
rental
charges
are
deductible,
but
only
those
charges
in
respect
of
natural
resources,
the
real
intent
and
purpose
of
which
is
to
compensate
for
the
value
of
such
occupation
or
use,
and
in
this
case
that
means
for
the
occupation
of
a
water
power
site
or
the
use
of
the
water.
From
what
has
been
said
above,
it
is
apparent
that
the
taxes
levied
under
paragraphs
(c)
and
(d)
were
not
levied
to
compensate
for
the
value
of
the
occupation
of
the
water
power
sites
or
of
the
use
of
the
water.
They
were
levied
solely
for
the
purpose
of
raising
funds
to
establish
the
Education
Fund
and
thereby
promote
the
progress
of
education.
The
compensation
for
the
occupation
of
water
power
sites
and
the
use
of
the
water
had
already
been
determined
and
agreed
upon
in
the
leases
themselves.
There
is
nothing
in
the
Act
to
suggest
that
the
value
of
the
rented
property
had
increased
from
the
time
the
leases
were
granted
or
that
the
compensation
provided
for
therein
was
inadequate.
The
additional
charges
and
contributions,
or
taxes
as
I
have
found
them
to
be,
were
not
therefore
within
the
definition
of
‘‘rental’’.
Likewise,
they
were
not
‘‘royalties’’
as
that
term
is
defined
in
the
Regulation.
The
definition
applies
to
things
severed,
taken,
extracted
or
removed
and
which
formed
part
of
the
natural
resources
of
the
province,
such
as
timber,
minerals,
oil,
wild
animals,
fish
and
the
like.
Here
nothing
of
that
nature
occurred.
Moreover,
the
definition
requires
that
to
be
a
royalty,
the
real
intent
and
purpose
of
the
payment
is
to
compensate
a
province
for
the
value
in
whole
or
in
part
of
the
said
thing
prior
to
its
severance,
taking,
extraction
or
removal.
I
place
the
same
interpretation
on
that
requirement
as
I
have
done
in
the
similar
words
found
in
the
definition
of
rental.
My
opinion,
therefore,
is
that
the
payments
in
question
made
by
the
respondent,
fall
within
the
definition
of
“specific
cor-
poration
tax’’
as
found
in
the
Regulation
and
do
not
fall
within
any
of
the
exceptions
contained
therein.
5.
Is
THE
DEDUCTION
PERMISSIBLE
UNDER
SECTION
6(1)
(a)
OF
THE
INCOME
War
Tax
Act?
That
subsection
is
as
follows
:
“6.
In
computing
the
amount
of
the
profits
or
gains
to
be
assessed,
a
deduction
shall
not
be
allowed
in
respect
of
(a)
disbursements
or
expenses
not
wholly,
exclusively
and
necessarily
laid
out
or
expended
for
the
purpose
of
earning
the
income’’;
On
this
point
also
the
Income
Tax
Appeal
Board
ruled
in
favour
of
the
respondents,
although
its
reasons
for
so
doing
are
not
apparent
in
the
judgment
itself.
As
I
understand
the
argument
of
counsel
for
the
respondents,
the
submission
on
this
point
is
based
on
the
allegation
that
while
the
Income
War
Tax
Act
does
not
specifically
provide
for
the
deduction
of
local
school
taxes
in
computing
taxable
income,
such
are
invariably
allowed
(perhaps
with
very
minor
exceptions)
as
being
wholly,
exclusively
and
necessarily
laid
out
for
the
purpose
of
earning
the
income.
It
is
said
that
the
Education
Fund
was
used
to
advance
education
within
the
province
and
is
therefore
a
school
tax
which
likewise
should
be
deducted.
As
far
as
I
am
made
aware,
the
only
provision
in
the
Income
War
Tax
Act
which
specifically
provides
for
the
deduction
of
taxes
in
computing
taxable
income
is
that
found
in
Section
6(1)
(w),
namely,
such
amount
as
the
Governor
in
Council
may
by
regulation,
allow
in
respect
of
taxes
on
income
for
the
year
from
mining
or
logging
operations;
that,
of
course,
has
no
application
to
this
case.
The
mere
fact
that
local
school
taxes,
paid
to
a
municipality
for
the
use
of
school
boards
and
commissions,
and
levied
upon
all
classes
of
property
owners—whether
Roman
Catholic,
Protestant
or
neutrals
(such
as
corporations
on
which
the
levies
in
some
cases
are
higher
than
on
individuals)—have
been
allowed
as
a
deduction,
does
not
lead
to
the
conclusion
that
taxes
paid
to
the
province
under
the
Act
to
Insure
the
Progress
of
Education
by
special
classes
of
taxpayers
throughout
the
province
as
a
whole
should
also
be
deducted.
These
expenses
when
measured
by
sound
commercial
and
accounting
practices
alone
would
appear
to
be
deductible.
But
that
fact
alone
does
not
make
them
deductible
under
Section
6(1)
(a).
As
stated
by
Davis,
J.,
in
Montreal
Light,
Heat
&
Power
Consolidated
v.
Minister
of
National
Revenue,
[1942]
S.C.R.
89
at
p.
104;
[1942]
C.T.C.
1
at
p.
10
:
‘“‘The
Court
must
interpret
the
statutes
without
reference
to
its
own
views
of
the
fairness
or
unfairness,
in
a
commercial
sense,
of
the
result
in
any
particular
case.
Parliament
has
made
the
law;
we
are
merely
to
interpret
and
apply
it.’’
It
has
been
well
settled,
moreover,
that
sound
commercial
and
accounting
practices
are
not
to
be
followed
where
the
statute
contains
some
express
direction
or
prohibition
which
diverges
from
such
practices.
In
Usher’s
Wiltshire
Brewery
v.
Bruce,
6
T.C.
399
at
p.
429,
the
principle
was
stated
shortly
as
follows
:
‘“Where
a
deduction
is
proper
and
necessary
to
be
made
to
ascertain
the
balance
of
profits
and
gains,
it
ought
to
be
allowed
.
.
.
provided
there
is
no
prohibition
against
such
allowance
.
.
.”
Here
the
Regulation
clearly
prohibits
the
deduction
of
specific
corporation
taxes,
and
having
found
that
the
payments
made
by
the
respondent
fall
within
the
definition
of
that
term,
such
payments
are
not
deductible.
There
is
another
submission
to
which
I
must
refer
in
order
to
indicate
that
it
has
not
been
overlooked.
One
of
the
clauses
in
the
agreed
Statement
of
Facts
was
as
follows:
“5.
Persons
other
than
corporations
paid
additional
stumpage
dues
or
contributions
under
paras.
(a)
and
(b)
of
s.
3
of
the
above-mentioned
Act
(i.e.,
An
Act
to
Insure
the
Progress
of
Education).”
It
is
submitted
by
counsel
for
some
of
the
respondents
that
Section
3
of
that
Act
must
be
read
as
a
whole
and
that
when
so
read
it
should
be
found
that
the
levies—to
use
a
neutral
word—
imposed
by
Clauses
(a),
(b),
(c)
and
(d)
of
Section
3,
and
all
included
in
one
section
of
the
Act,
should
be
treated
as
one
levy.
The
argument
is
then
advanced
that
because
levies
made
under
paragraphs
(a)
and
(b)
are
shown
to
be
payable
by
individuals
as
well
as
by
corporations,
none
of
the
levies,
and
particularly
those
under
paragraphs
(c)
and
(d),
are
in
fact
corporation
taxes.
If
that
argument
is
sound
it
could
logically
be
extended
to
the
provisions
of
paragraph
(f)
of
the
same
section
(supra)
which
require
the
Provincial
Treasurer
to
pay
to
the
fund
a
proportion
of
the
revenue
under
the
Retail
Sales
Tax
Act,
a
payment
which
is
not
a
tax
but
merely
an
allocation
of
monies
to
be
received
by
the
Treasurer.
It
seems
to
me,
however,
that
in
seeking
to
ascertain
what
is
or
is
not
a
corporation
tax,
it
is
necessary
to
look
at
the
partic-
ular
subsection
under
which
the
tax
is
paid
and
that
the
nature
of
the
levy
is
not
to
be
determined
by
reference
to
other
subsections
which
impose
different
levies
in
differnt
ways
on
different
persons,
notwithstanding
that
all
such
levies
constitute
part
of
the
same
fund,
but
made
up
from
many
miscellaneous
sources.
If
the
argument
submitted
were
valid,
it
would
follow
that
the
levies
made
on
companies
refining
petroleum
and
on
companies
owning
or
operating
a
telephone
system,
under
Section
3a,
(a)
and
(b),
could
not
be
corporation
taxes
although
counsel
for
at
least
some
of
the
respondents
admitted—and
I
think
properly
so—that
these
levies
came
squarely
within
the
definition
of
specific
corporation
tax
in
P.C.
5948.
It
is
true
that
Section
3a
did
not
form
part
of
the
original
Act,
but
was
added
in
1947
by
11
George
VI,
c.
32
(Quebec)
;
it
was
made
applicable
to
the
year
1947
and
its
provisions
cannot
in
any
respect
be
considered
as
differing
from
those
of
Section
3.
In
my
opinion,
this
submission
cannot
be
supported
and
I
reject
it.
For
the
reasons
given
the
appeal
herein
will
be
allowed,
the
decision
of
the
Income
Tax
Appeal
Board
set
aside,
and
the
assessment
made
upon
the
respondent
by
the
Minister
will
be
affirmed.
The
appellant
is
entitled
to
be
paid
its
costs
after
taxation.
Judgment
accordingly.
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