Gull Bay Development Corp. v. The Queen, 84 DTC 6040, [1984] CTC 159 (FCTD)

Walsh, J:—Plaintiff in these proceedings is a corporation incorporated by Province of Ontario Letters Patent on February 28, 1974, as a corporation without share capital having its head office on the Gull Bay Indian Reserve (No 55), at Gull Bay, Ontario, a reserve of some 16 square miles on the west shore of Lake Nipigon some 120 miles north of Thunder Bay. The Letters Patent of the corporation provide that the objects of the corporation include:

To promote the economic and social welfare of persons of native origin who are members of the Gull Bay Indian Reserve (No 55) and to provide support for recognized benevolent and charitable enterprises, federations, agencies and societies engaged in assisting the development, both economic and social, of native people who are members of the Gull Bay Indian Reserve (No 55).

They further provide that the corporation may hire employees, maintain offices, and incur reasonable expenses in connection with its objects, that the corporation shall be carried on without purpose of gain for members and that any profits or other accretion to the corporation will be used in promoting its objects. It is further provided that the directors shall serve without remuneration and no director shall directly or indirectly receive any profit from his position, provided only that he may be paid reasonable expenses incurred by him in the performance of his duties. In the event of dissolution of the corporation all remaining property is to be distributed or disposed of to incorporated native peoples’ organizations in Ontario.

Plaintiff contends that it has from its inception been involved in working for the social and economic development of the Gull Bay Indian Reserve and its members and in the improvement of the social and economic conditions of the members of the Band living there, which activities include the establishment of a viable commercial logging operation to provide employment for members of the Reserve, the training of Indian students from the Reserve to work both as loggers and as managers in the office facilities, the carrying out of maintenance work on the recreational and administrative buildings and facilities on the Reserve, providing funds to Reserve programmes established to give food, clothing and other necessities to needy members of the Gull Bay Indian Reserve, providing funds for travel expenses for school age children on the Reserve to enable them to take educational excursions that the school from time to time determines to be beneficial, providing of other assistance activities on the Reserve determined to be beneficial to the social and economic welfare of the members of the Reserve, and that it was therefore a non-profit organization within the meaning of that term as defined in paragraph 149( 1 )(1) of the Income Tax Act.

While a further argument was raised at trial based on paragraph 149(l)(d) of the Income Tax Act to the effect that the members and directors of plaintiff are members of the Band Council which controls plaintiff and that the Band Council carries out the functions of municipal government on the Reserve, so that plaintiff is a municipal corporation, this was rejected by the Court at the trial. During the course of the argument plaintiff also invoked paragraph 149(l)(f) of the Act which reads as follows:

149. (1) No tax is payable under this Part upon the taxable income of a person for a period when that person was

(f) a charitable organization, whether or not incorporated, all the resources of which were devoted to charitable activities carried on by the organization itself and no part of the income of which was payable to, or was otherwise available for the personal benefit of, any proprietor, member or shareholder thereof.

Paragraph 149(1)(1) reads as follows:

149. (1) No tax is payable under this Part upon the taxable income of a person for a period when that person was

(1) a club, society or association organized and operated exclusively for social welfare, civic improvement, pleasure or recreation or for any other purpose except profit, no part of the income of which was payable to, or was otherwise available for the personal benefit of, any proprietor, member or shareholder thereof unless the proprietor, member or shareholder was a club, society or association the primary purpose and function of which was the promotion of amateur athletics in Canada.

On June 14, 1977 plaintiff was assessed for corporate income tax for the year 1975 in the amount of $3272.40 A notice of objection was made but plaintiff sent notice of confirmation. This action is an appeal from the assessment.

Defendant contends that in its 1975 taxation year plaintiff carried out with a view to profit a logging business from which it earned a profit of at least $23,538, taking the position that plaintiff was not exempt from tax as it was not a non-profit organization within the meaning of paragraph 149(1)(1) of the Act nor a municipal corporation within the meaning of paragraph 149(l)(d) of the Act and that Plaintiff is not an organization described by subsection 149(1) of the Act.

While the issue is a clearly defined one, the extensive jurisprudence to which the Court was referred by both parties indicates that it is very controversial and to a considerable extent depends on the facts of each case so that it was necessary to introduce considerable factual evidence. At the opening of the hearing plaintiffs counsel indicated that arguments based on paragraph 149(l)(f) of the Income Tax Act would be added, although it was not specifically pleaded and defendant’s counsel did not object to this.

Chief Tim Esquega testified that he has lived on the Reserve all his life and has seven children. There are 323 people in all on the Reserve. Since 1962 he has worked as a caretaker employed by the Department of Indian Affairs and was elected Chief of the Band from 1972 to 1978 and again since 1980, as such being a member of the Band Council which administers the funds provided by the Department of Indian Affairs. The only work which could be done on the Reserve prior to the formation of the Gull Bay Development Corporation was some commercial fishing and trapping which is very poor and some seasonal work in firefighting. By 1972 membership on the Reserve was depleting and alcohol, vandalism and rape were prevalent. The Hudson Bay store in the community moved away as did the teachers. A few members of the Band worked outside the community in logging operations. The community had acquired a bad reputation so that the Government was taking the core funding back and administering it themselves. As Chief in 1972 he wanted to create some work in the community. He had helpful advice from John Blair, a professor at Lakehead University, who was working on a contract basis with other bands giving them advice on underbrushing and other forestry operations. The corporation was formed as a vehicle to provide employment.

When questioned by the Court as to why the Band itself could not have carried on the lumbering operation he said that this would not be feasible because of the many social problems. The Government money was slow to come in. The by-laws of the corporation provided for nine directors, of whom the Chief and all three councillors of the Gull Bay Indian Reserve would hold office ex-officio.

Chief Esquega testified that the other directors were selected from reputable members of the Band. A lawyer from Thunder Bay was engaged to assist them. The corporation had approximately 25 employees and initiated logging operations and gave work of a social nature, cleaning up the community, cutting wood for elderly residents, moving unsightly abandoned cars, moving a garbage dump which was not objectionable on windy days, making hockey rinks, improving the fencing around the cemetery, and painting old buildings. Younger women were engaged to help older ones who could not do washing for themselves. Some members were taken on tours of the logging operation to show them how the work was done. A generating system was built as there were frequent power failures and fuel was sometimes bought for persons on the Reserve who could not afford it. An alcoholic control programme was initiated and a programme worker hired for this. The Government money was always slow in coming in even after the corporation was formed. The Government funds were provided for the Band, but the corporation was able to build up and improve the lifestyle of the community with the corporation and the Band Council working closely together. If the corporation had to advance money to the Band Council for necessary expenses for which Government funds had not yet been received most of these advances were paid back by the Band, and conversely if the corporation received any advances from the Band Council, it would pay them back. Perhaps 15 members of the Band worked in the logging operation while the others worked on the other social activities of the corporation. Unfortunately the initial audited statements for 1975 did not clearly separate the logging operations from Band business. A revised statement of March 31, 1976 restated the 1975 figures and the Crown indicated it would accept these figures as the basis for the assessment, but even this does not show the breakdown although subsequent statements for the 1977 to 1981 years separate the figures of the logging operations. In reply to a question from the Court as to why the net income figures show a dramatic drop from substantial profit in 1978 to an actual loss in 1979 and 1981 and only a small net income in 1980, the Chief explained that he had lost the election in 1978 and not only he but all directors of the corporation had been replaced. The resulting operations of the corporation were very poor and when he was re-elected the corporation owed some $90,000 which has since been paid off. He testified that little assistance was obtained from the Department of Indian Affairs for most of the social programmes carried on by the corporation. In 1975 for instance a beach area was cleared on the lake for swimming and picnic tables were put in the park. No directors were ever paid anything as such, but one who worked as a foreman in the logging operation was paid for this and another one was paid for looking after the office books. There are now about 72 employees of the corporation, some 49 engaged in logging and 22 others engaged in other activities paid by the Band.

He testified that the head office of the corporation is in a building owned by the Band and the corporation pays for a share of the rent and heating. The logging contract from Northern Wood Preservers which was negotiated by Mr Blair and the Council is a standard contract given to all logging operators.

John Blair, professor of Forestry at Lakehead University has had great expe rience in forest harvesting, transportation and forest management having worked for 24 years with Boise-Cascade in Kenora and Fort Francis. In 1972 the Department of Indian Affairs asked him to assess the work being done by the Band members on the Reserve some of whom are employed in thinning out the woods. He discussed this with the then Chief and met Esquega who told him that he would be running as Chief. He suggested that by using resources near the community the Band could provide employment for its members. While on the Reserve he saw evidence of alcoholism, unsightly junk, cars abandoned here and there, buildings in disrepair, and the garbage disposal site which was an eyesore with loose papers being thrown around by the wind. While some baseball was being played there was no formal diamond and no recreational facilities that he could see. He subsequently worked with Chief Esquega and the Council applying for the Charter of the corporation which was to be used as a key to bringing the desired social improvements about. He estimates that in 1975 there were about 12 to 15 employees working directly in logging while the others were doing work in the community. He went there from the university every Thursday for over a year, going through the bush with the logging crew who were very inexperienced and needed training. He brought along with him logging films as well as travelogues, cartoons for the children and put on a film show on Thursday evening. The only remuneration he received from the corporation was for his expenses. The Department of Indian Affairs paid him for the feasibility studies which he was doing.

To his personal knowledge some firewood was cut for elderly residents, and work was done on the houses and the schools. The old cars were removed out of sight and a new garbage disposal site was created. The office staff at the start consisted of the Band administrator who was knowledgeable and was assisted by a lady Band clerk.

Before setting up the corporation several community meetings were held. While it was enthusiastically received some concern was expressed by the trappers and guides who worked during the hunting and fishing season as to the damage which would be caused to the environment and wildlife by the logging operation. Moose hunting supplied a major source of food for the Band. He concluded that the logging must not be done in a conventional manner by large clear cuts but rather it was done by what might be described as a checker board pattern, areas of about six acres being cut with adjacent areas of similar size being left untouched. Cutting rights for the area in question belong to Northern Wood Preservers (Saskatchewan) Limited and an agreement was entered into with them to permit plaintiff to do the logging and sell the wood to Northern Wood Preservers at a price fixed by the agreement. The area in question consisted largely of stands of jack pine and Northern Wood Preservers wanted it in tree lengths to use as telephone poles. Great Lakes Paper Company which had provided the corporation with a licence had an excess inventory of jack pine at the time and Domtar, the only other operator in the area would accept wood but wanted it in eight foot lengths and it was a long haul to their mill. He testified that marking the blocks to be cut is quite labour intensive, and also requires more roads. In a fully commercial operation an entire area would be cleared which would be more profitable, but would destroy the wildlife. He eventually increased the size of the areas marked to be cut from six-acre blocks to 10-acre blocks so the equipment could be moved more readily, but about 50 per cent of the total timber was left uncut as a browse for the wildlife. Everybody including the timber licencees was happy with what they were doing. He testified that he was successful in working out a very favourable agreement with Northern Wood Preservers (Saskatchewan) Limited due to his friendship with a Mr Headley their vice-president. Initially the purchaser wanted wood delivered to the mill, but he was able to persuade them to build the roads as they had the equipment to do so, deducting the cost of the roads from the initial price. He was also able to arrange to have Northern Wood Preservers do the hauling of the wood themselves and they only charged a token amount for this. He was also able to persuade them to supply the necessary skidders and to assist in training the operators in the care and operation of these machines. Once a week a mobile repair truck was sent to the site to perform maintenance training for the loggers who were operating these machines. He was also able to persuade Northern Wood Preservers to do the scaling of the wood; if they had not done so somebody else would have had to be paid to do this work. Plantiff therefore contends that the agreement with Northern Wood Preservers was almost of a quasi-charitable nature, as it would not have been able to make nearly as much profit, carrying on the operations as it did in a manner to preserve the environment if Northern Wood Preservers had not been sympathetic with what they were doing for the community and given them a very generous contract.

With respect to the argument based on paragraph 149(1)(1) of the Act plaintiff contends that the primary motive for setting up the corporation was to deal with problems on the Reserve and to create activity to raise funds to use for these purposes. The members (ie, directors) were not themselves in a position to get any benefit from the corporation. Reference was made to the case of St Catharines Flying Training Schools Limited v MNR, [1953] CTC 362; 53 DTC 1232, in which although appellant was incorporated under Part I of the Companies Act of Canada to give elementary flying training in conjunction with the British Commonwealth Air Training Plan there was a provision in the charter which prohibited the declaration of dividends. The company actually made profits and the Minister contended that as it was incorporated as a commercial company and was not organized for non-profitable purposes its profits were taxable. Thorson, P held however that non-profitable purposes does not mean that no profits would ever result from carrying the purposes.out but simply that the purposes are to be carried out without the intention of making profits. Appellant could not keep or distribute profits and it was not in the business of conducting a school for profit even if it did make profits. Dealing with the argument that paragraph 4(h) (which was the predecessor of paragraph 149(1)(1) although the wording is not identical) Thorson, P stated at 1235:

One of the contentions of counsel for the respondent was that section 4(h) did not apply to the appellant at all, the submission being that it was not a club or a society and that the term association excluded a company incorporated, as the appellant was, under Part I of The Companies Act, 1934. This submission cannot be accepted. The term “association” in its ordinary meaning is wide enough to include an incorporated company.

While the section of the Act on which the learned president was relying used the words “non-profitable purposes” whereas the present paragraph 149(1)(1) uses the words “or for any other purpose except profit” his comments at 1236 might be applicable. He states:

In my judgment, the purposes referred to must be purposes that are carried out without the motive or intention of making a profit, that is to say, purposes other than that of profit making. That being the meaning of the term, I am satisfied that the appellant was organized and operated solely for non-profitable purposes. Its purpose was the conduct of a school for the elementary flying training of prospective pilots under the British Commonwealth Air Training Plan. It was organized and operated for that purpose and it had no other purposes. It was not part of its purpose to make profits and it operated without any profit making motive or intention. Mr Seymour’s evidence to that effect was clear. Moreover, it is supported by the fact that the appellant could never keep any of its profits or distribute them to its stockholders or members. How could it properly be said that it was in the business of conducting its school for the purpose of making a profit when it was quite impossible for it to keep or distribute any profit that might come to it in the course of carrying out the purpose for which it was organized and operated? The question answers itself.

This judgment was partially reversed in appeal, [1955] CTC 185; DTC 1145, in which it was held that, like other companies incorporated under Part I of the Companies Act, the respondent had profit-making as one of its objects and that the prohibition against declaring dividends was restricted to a certain period after which time the profit could be ultimately distributed. However, the profits earned in a second agreement which provided that they should not be distributed but held in a reserve account until the termination of the contract after which they would be paid to a flying club approved by the Minister or revert to the Crown, were not taxable. The present plaintiff is in a much stronger position having been organized as a non-profit organization.

Plaintiff also relies on the Tax Appeal Board case of Forest Lawn Cemetery Company v MNR, 26 Tax ABC 26; 52 DTC 84, in which appellant showed a profit from the sale of plots although by virtue of the provincial Act under which it was incorporated this could not be distributed to shareholders. It was held that it was a non-profit organization operating solely for civic improvement and hence was tax exempt. Dividends had never been declared and could not be declared by virtue of the Cemetery Companies Act.

In a recent Supreme Court case of the The Regional Assessment Commissioner et al v Caisse Populaire de Hearst Limitée, a judgment pronounced on February 3, 1983, the issue was not income tax but the liability of the respondent credit union for assessment under the Assessment Act of Ontario for land it occupied and used in connection with its operation. At 9 of the typewritten copy of the decision McIntyre, J states:

The preponderant purpose test is based upon a determination of the purpose for which an activity is carried on. If the preponderant purpose is the making of a profit, then the activity may be classified as a business. However, if there is another preponderant purpose to which any profit earned is merely incidental, then it will not be classified as a business.

At 18 he states:

Many community and charitable organizations, relying from time to time on what would be termed commercial activity to raise funds for the fulfilment of their objectives, could be classed as businesses by such a test. To attach primary importance to the commercial aspect of an operation in question will offer, in my opinion, no sure or helpful guide. In my view, the commercial activity test is too indefinite to allow consistent application. I agree that, in deciding whether or not any activity may be classed as a business under the provisions of s 7(l)(b) of the Assessment Act, all relevant factors regarding an operation must be considered and weighed. However, they must be considered and weighed in order to determine not whether in some general sense the operation is of a commercial nature or has certain commercial attributes, but whether it has as its preponderant purpose the making of a profit. If it has, it is a business; if it has not, it is not a business.

This viewpoint was carried very far by Dumoulin, J in MNR v Charles-August Bégin, [1962] CTC 148; 62 DTC 1099, in which leading citizens of a Quebec town organized the formation of a partnership to sell beer in the community with the purpose of distributing all profits for purposes of social welfare, charity, education and civic improvement. The agreement specified that the partners could not draw, retain or appropriate any of the sums to be distributed and that if the partnership were dissolved all assets would be distributed for the same charitable purposes. It was held that it was tax exempt as neither the respondent nor his partners ever received anything from the profits from the sale of beer; they had no claim and no right to the profits of the partnership.

Defendant would distinguish this case since plaintiff in the present case did actually receive the profits from the lumbering operations. Plaintiff concedes that if a company makes profits from a commercial operation it cannot avoid taxation on them by turning them all over to charity. There are limits to the charitable donations which a commercial corporation can make. However in the present case the corporation was not merely turning the profits over to someone else but was itself actively engaged in social objectives for which it was formed. In fact perhaps more than 50 per cent of the time of its actual employees was spent on these activities.

Certainly plaintiff although incorporated for charitable purposes with a provision that none of its income was payable for the personal benefit of any member could nevertheless not claim exemption under paragraph 149(l)(g) since that subsection has a further requirement that the corporation must not carry on any business. For this reason plaintiff does not invoke paragraph 149(l)(g), but rather paragraph 149(l)(f) which deals with “charitable organizations” rather than “non-profit corporation” under paragraph 149(l)(g). In the St Catharines Flying Club case, (supra), Thorson, J had held that the word “association” is broad enough to include an incorporated company. Paragraph 149(1)(1) under the heading “Non-profit Organizations” includes an “association” operated exclusively for social welfare, civic improvement, pleasure or recreation or for any other purpose except profit.

In the case of Peter Birtwistle Trust v MNR, [1938-39] CTC 363; 1 DTC 419, it was held that a charitable institution is an organization created for the promotion of some public object of a charitable nature and functioning as such; that a charitable institution was clearly distinguishable from a charity, or a charitable trust. In the case of The King and The Assessors of the Town of Sunny Brae, [1952] 2 SCR 76, the profits of a laundry operated by a religious society devoted to the education of wayward girls and orphans were held to be taxable although there were three dissenting decisions. The remarks of Cartwright, J in his dissent however at 85 would appear to be particularly apt in the present case. He states:

... In the contemplation of the legislature as expressed in the Statute and in fact as shewn by the material filed, the operation of the laundry business, large though it be, is merely incidental to the charitable purposes of the appellant and for the maintenance thereof. This is not the case of an institution carrying on a commercial business and incidentally performing sundry charitable works or paying over its profits to be used by others for charitable purposes but rather that of a society or institution of which all the primary purposes are purely charitable which is actively engaged in carrying on charitable works and which as an incidental means of providing some of the money which is required for the prosecution of such charitable works carries on a business under statutory powers.

That case dealt with municipal rates rather than income tax.

Defendant also refers to considerable jurisprudence. The case of Hutterian Brethren Church of Wilson v The Queen, [1979] CTC 1; 79 DTC 5474, dealt with profits from a farming operation conducted by the taxpayer. It was held that the taxpayer was engaged in the business of farming for a profit, an activity which itself is neither religious nor charitable in nature. In rendering the judgment of the Court of Appeal, Pratte, J stated at 5475:

The evidence also shows that the business of farming for a profit actually was, during

the years here in question, the appellant’s main activity and that most of its assets were used to buy farm land and agricultural equipment. In those circumstances, it is clear, in my view, that the appellant could not benefit from section 149(1)(f) because it did not devote all its resources to charitable activities carried on by itself. The business of farming is neither a religious nor a charitable activity; it is a commercial activity.

and again:

Moreover, a commercial activity like farming for a profit does not become a charitable activity within the meaning of section 149 for the sole reason that it is carried on by a charitable person with the intention of using the income derived from that business for charitable purposes.

That case can perhaps be distinguished however since it was pointed out that one of the main objects for which appellant was established was, according to its memorandum of association “to engage in and carry on farming, agriculture, stock-raising, milling and all branches of these industries” and it was found that this was its main activity.

The same comment also applies in the case of Woodward s Pension Society v MNR, [1959] CTC 399; 59 DTC 1253, in which the sole business of appellant, a non-profit organization was to acquire shares of the operating companies of Woodwards and sell them to employees, surplus funds going from time to time to appointed pension trustees to provide funds for payment of pensions. Thorson, P accepted the argument that exempting provisions of the taxing Statute must be applied strictly referring to the case of Lumbers v MNR, [1943] Ex CR 202; [1943] CTC 281; 2 DTC 631. At 1260 he states:

The section presupposes that if a club, society or association is to be exempt from tax under it it should be organized and operated exclusively for a purpose “except profit”, that is to say, for a purpose other than a profit one. That necessary condition does not exist in the present case.

and again on the same page:

... The raising of money was its basic purpose and for that purpose, namely, the raising of money, it was directed to deal in shares of the various Woodward companies by acquiring and selling them and it was intended that its dealings should result in the raising of money so that it could provide the necessary monetary assistance to the pension trustees. Thus the purpose of the appellant’s actual organization was a profit one. It was certainly not organized for a purpose “except profit” within the meaning of the term “any other purpose except profit”.

The facts are clearly different in the present case, for the raising of money was not the basic purpose of the corporation, and its charter makes no reference to logging operations.

Defendant points out that paragraph 149(1)(f) requires that the club, society, or association must be organized and operated exclusively for social welfare, civic improvement, pleasure or recreation or for any other purpose except profit. He refers to the case of British Launderers’ Research Association v Central Middlesex Assessment Committee and Hendon Rating Authority, [1949] 1 All ER 21, in which Lord Denning stated at 23:

There is one thing which is clear both on the wording of the statute and on the cases. The words “exclusively” must be given its full effect. It is not sufficient that the society should be instituted “mainly” or “primarily” or “chiefly” for the purposes of science, literature, or the fine arts. It must be instituted “exclusively” for those purposes.

In the Hutterian Brethren Church case, (supra), Ryan, J stated at 5478:

I am satisfied, however, that the correct analysis of the evidence in this case is that the business purpose of the corporation was not merely an aspect of a single overriding religious purpose. The corporation had a business as well as a religious objection — farming on a commercial basis — and activity which was pursued on a large scale and pursued profitably. The motivation of the individuals who farmed may well have been religious. But the farming itself was conducted by the corporation as a business. The business profits were not, of course, available as such to the members of the corporation. They were, however, available for the future use of the corporation in the pursuit of its objectives, religious and commercial. In these circumstances, it can hardly be said that all of the resources of the corporation were devoted to charitable activities carried on by it, even assuming that its religious objects were for legal purposes charitable.

There is no doubt that in the present case the logging operations of plaintiff were extensive and provided considerable revenue much of which is still held in surplus, so these remarks may well be apt, but, as has been pointed out previously the farming operation was part of the objects set out in the memorandum of association of the church, while in the present case the letters patent make no reference to any business operations whatsoever. I believe that this is a substantial distinction.

During the course of argument there was a generalized discussion as to the manner in which the Department deals with activities such as the sale of Christmas greeting cards and calendars by UNICEF or apples, candy bars, Christmas cakes and Christmas trees by organizations such as Rotary and Kiwanis clubs to raise funds for their welfare activities, and it was generally conceded that it is unlikely that tax would be claimed on the profits derived therefrom, although such operations are frequently quite substantial in nature and frequently competitive with businesses carrying on the same commercial activity.

The real issue in the present case appears to be that the corporation was not set up, as its letters patent indicate, to carry on a commercial activity although it is no doubt true that the motive for forming the corporation may have been that it was desirable to provide employment and training to otherwise unemployed Indians on the Reserve by engaging in a commercial activity which would not only provide such employment but raise funds to be used for the very worthy social and charitable activities required on the Reserve. However, it was more efficient to carry on this activity through a corporation than to have the Band Council attempt to do it itself. Elections from time to time change the membership of the Band Council and different factions in the Band have different objectives, and while even the corporation was not immune from this, as appears from what happened during the brief period when Chief Esquega was replaced by another Chief and his associates, it was nevertheless more practical to operate as a corporation and negotiate as such with the company for whom the lumber was being cut. If this lumbering operation had been carried out by the Band Council itself it is unlikely that any attempt would have been made to tax the profits of the enterprise. It is certainly the policy of the Department of Indian Affairs to encourage Indian Bands to become self-reliant and to improve living and social conditions on the Reserves, and there is no doubt from the evidence in this case that a great deal has been accomplished in improving living conditions on the Reserve by the work done by employees of the Corporation with funds derived from the lumbering operations, and in providing gainful employment for members of the Band who would otherwise be on welfare.

I do not believe that because a corporation was formed for these purposes this should alter the liability for income tax.

The social and welfare activities of plaintiff are not a cloak to avoid payment of taxation on a commercial enterprise but are the real objectives of the Corporation.

While the jurisprudence in this difficult area has led to varying results, depending on the facts applicable in each case. I have concluded that in the present case, whether by the application of paragraph 149( l)(f) or of paragraph 149(1)(1) plaintiffs appeal should be maintained. The Corporation is operated “exclusively” for the purpose set out in paragraph 149(1)(1) pursuant to its charter, even though it may raise funds for this purpose by its commercial lumbering enterprise.