CAMERON,
J.:—In
the
matter
of
the
appeal
by
the
Minister
of
National
Revenue,
appellant,
and
the
Lakeview
Golf
Club
Limited,
respondent,
this
is
an
appeal
by
the
Minister
of
National
Revenue
from
a
decision
of
the
Income
Tax
Appeal
Board,
dated
November
19,
1951,
which
allowed
the
appeals
of
the
respondent
herein
from
assessments
to
income
tax
made
upon
it
for
the
taxation
years
1946,
1947,
1948
and
1949.
The
Income
Tax
Appeal
Board
upheld
the
contention
of
the
company
that
it
was
totally
exempt
from
taxation
under
the
provisions
of
certain
sections
of
the
Income
War
Tax
Act
applicable
in
the
years
1946,
1947,
1948
and
of
the
Income
Tax
Act
for
the
year
1949.
For
the
years
1946,
1947
and
1948,
Section
4(h)
of
the
Income
War
Tax
Act
provided
as
follows:
“A
The
following
incomes
shall
not
be
liable
to
taxation
hereunder
:—
*
(h)
The
income
of
clubs,
societies
and
associations
organized
and
operated
solely
for
social
welfare,
civic
improvement,
pleasure,
recreation
or
other
non-profitable
purposes,
no
part
of
the
income
of
which
inures
to
the
benefit
of
any
stockholder
or
members.”
For
the
year
1949,
Section
57,
subsection
(l)(g)
of
the
Income
Tax
Act
is
as
follows:
1
‘No
tax
is
payable
under
this
Part
upon
the
taxable
income
of
a
person
for
a
period
when
that
person
was—
(g)
A
club,
society
or
association
organized
and
operated
exclusively
for
social
welfare,
civic
improvement,
pleas-
use
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.’’
While
the
wording
of
the
two
subsections
is
not
precisely
the
same,
I
am
unable
to
perceive
any
essential
difference
between
them
so
far
as
this
case
is
concerned.
The
respondent
was
incorporated
on
March
5,
1941,
by
a
Provincial
Charter
with
an
authorized
capital
of
$100,000
divided
into
4,000
shares
of
a
par
value
of
$25.00
each.
At
all
relevant
times
the
number
of
issued
shares
did
not
exceed
2,505
and
the
number
of
shareholders
did
not
exceed
7.
Following
its
incorporation
the
company
immediately
acquired
the
assets
of
The
Lakeview
Golf
Club
from
five
individuals
all
of
whom
were
among
the
applicants
for
incorporation
and
who
became
directors
of
the
company.
One
of
such
individuals
was
Harry
W.
Phelan,
who
from
the
time
of
its
incorporation
until
his
death
in
1946,
held
a
controlling
interest
in
the
company.
Another
of
such
directors
was
A.
W.
Purtle
who,
since
the
sale
by
the
executors
of
Harry
W.
Phelan
of
his
stock
in
1946
to
him,
has
had
the
controlling
interest
in
the
company,
Mr.
Purtle
and
members
of
his
family
owning
all
the
issued
shares
except,
perhaps,
certain
qualifying
shares.
It
is
shown
in
each
of
the
years
1946,
1947,
1948
and
1949
the
company
made
a
profit
and
that
at
the
end
of
the
taxation
year
1949
had
an
accumulated
surplus
of
$22,538.62.
Bylaw
No.
35
of
the
General
Bylaws
of
the
company,
which
has
been
in
effect
throughout
the
taxation
years
in
question,
provided
as
follows:
“Dividends
upon
the
capital
stock
of
the
company
when
earned
and
declared
shall
be
paid
according
to
the
amount
paid
up
on
the
shares.’’
Bylaw
No.
33
is
as
follows:
“Certificates
of
stock
shall
be
surrendered
and
cancelled
at
time
of
transfer.
No
transfer
of
stock
shall
be
made
within
10
days
next
preceding
the
day
appointed
for
the
payment
of
a
dividend
or
for
holding
a
general
meeting
of
the
shareholders
of
the
company.”
It
is
common
ground
that
since
the
incorporation
of
the
company
no
dividends
have
been
declared.
Membership
in
and
use
of
the
facilities
of
the
club
are
acquired
by
payment
of
an
annual
fee,
but
such
members
are
not
required
to
own
or
purchase
shares
of
the
company
and
have
no
share
in
the
company
or
its
management
by
reason
of
such
membership.
The
contention
of
the
respondent
is
that
it
is
a
club
organized
for
recreation
or
pleasure
and
is
a
non-profit
organization.
The
purposes
and
objects
of
the
company
are
set
forth
in
the
Charter,
and
are
as
follows
:
(a)
TO
purchase
or
otherwise
acquire
and
to
hold
lands
and
buildings
or
any
interest
therein
for
the
purposes
of
golf,
sport,
recreation,
amusement
and
entertainment
or
for
any
other
purpose
and
to
sell,
lease,
exchange,
mortgage
or
otherwise
dispose
of
the
whole
or
any
portion
thereof
or
all
or
any
buildings
that
are
now
or
may
hereafter
be
erected
thereon;
(b)
TO
erect
buildings
on
such
lands
or
any
part
thereof
for
golf,
riding,
polo,
skating,
curling,
hockey
and
other
amusements
and
for
the
purpose
of
entertainment
or
for
occupation
as
dwellings
or
for
any
other
purpose;
to
equip
the
same
with
all
necessary
apparatus
and
to
use,
convert,
adapt
and
maintain
all
or
any
of
such
lands,
buildings
or
premises
for
the
purposes
aforesaid
or
any
of
them
with
their
usual
and
necessary
adjuncts;
(c)
TO
conduct,
hold
and
promote
golf,
polo,
horticultural,
agricultural
and
other
exhibitions
;
and
to
give
and
contribute
towards
prizes,
cups,
stakes
and
other
awards;
(d)
TO
serve
refreshments
of
all
kinds
to
its
shareholders,
members,
patrons
and
their
friends;
and
(e)
TO
take
or
hold
mortgages
for
any
unpaid
balance
of
the
purchase
money
on
any
of
the
lands
or
buildings
sold
by
the
Company
and
to
sell,
mortgage
or
otherwise
dispose
of
such
mortgages.
It
is
doubtless
true
that
those
who
become
members
of
the
club
upon
payment
of
an
annual
fee
do
so
for
purposes
of
personal
recreation
and
pleasure.
So
also
do
those
who
by
payment
of
an
annual
fee
acquire
the
right
to
bowl
in
a
privately
owned
rollodrome
operated
for
profit,
or
to
skate
in
a
privately
owned
skating
rink
operated
for
profit.
The
question
to
be
determined,
however,
is
not
whether
those
using
the
facilities
of
the
club
do
so
for
recreation
or
pleasure,
but
whether,
to
use
the
words
of
Section
4,
subsection
(l)(h),
supra,
it
is
a
club
organized
and
operated
solely
for
pleasure
or
recreation
or
other
non-profitable
purposes,
no
part
of
the
income
of
which
enures
to
the
benefit
of
any
stockholder
or
members,
or
in
the
words
of
Section
57,
subsection
(l)(g),
supra,
it
is
a
club
organized
and
operated
exclusively
for
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.
Mr.
Purtle,
president
and
general
manager
of
the
respondent
company
was
called
as
a
witness
on
behalf
of
the
appellant,
and
gave
his
evidence
in
a
very
frank
manner.
As
general
manager
he
received
an
annual
salary
of
$7,000.
The
incorporators
had
in
mind
the
provision
of
golfing
facilities
for
those
who
could
not
afford
to
belong
to
the
more
expensive
clubs.
About
100
members
pay
an
annual
fee
of
$90.00
and
have
the
full
use
of
the
club
facilities,
arrange
their
own
tournaments
and
the
like,
but
are
not
required
to
acquire
stock
in
the
club,
and
in
fact,
do
not
do
so,
and
consequently,
have
no
voice
in
the
election
of
the
directors
or
control
of
company
matters.
Some
800
or
900
associate
members
pay
a
nominal
annual
fee
of
$5.00
plus
a
green
fee
on
each
occasion
when
playing
golf,
but
have
nothing
to
do
with
the
conduct
of
the
company’s
business.
Casual
visitors
may
play
golf
at
any
time
on
payment
of
a
somewhat
larger
green
fee
than
is
paid
by
the
associate
members.
Neither
the
Charter
of
the
company
nor
its
bylaws
(as
they
were
in
effect
in
the
years
in
question)
contain
any
suggestion
that
the
company
was
organized
for
non-profitable
purposes.
On
the
contrary,
Bylaw
No.
35,
which
I
have
quoted
above,
provides
that
the
dividends
when
earned
and
declared,
shall
be
paid
to
the
shareholders.
That
is
the
clearest
possible
evidence
that
the
directors
and
shareholders
contemplated
the
possibility
of
profits
being
earned
and
that
in
such
a
case
they
would
be
available,
when
declared,
to
the
shareholders.
As
I
have
stated
above,
the
company,
in
each
of
the
years
in
question
earned
profits
which
constituted
taxable
income
unless
the
total
exemptions
now
claimed
are
available
to
it.
They
are
as
follows
:—
1946—$
2,840.54
1947—
$
3,143.02
1948—
$12,870.30
1949—
$
9211.27.
At
the
end
of
the
fiscal
year
in
1949
the
company
had
a
total
surplus
on
hand
and
in
cash
of
$22,538.62.
While
that
amount
was
not
distributed
to
the
shareholders,
it
was
at
all
times
possible
for
the
directors
to
declare
dividends
to
the
shareholders
to
such
extent
as
they
had
profits
on
hand.
|The
value
of
the
shares
increased
to
the
extent
of
such
income
was
earned
and,
therefore,
in
my
opinion
such
income
enured
to
the
benefit
of
the
shareholders
or
was
available
for
the
personal
benefit
of
the
shareholders
although
not,
in
fact,
paid
to
them.
‘
In
this
connection
reference
will
be
made
to
Moose
Jaw
Flying
Club
v.
The
Minister
of
National
Revenue,
[1949]
C.T.C.
279.
Mr.
Purtle
stated
that
one
of
the
purposes
of
building
up
and
maintaining
the
surplus
was
to
provide
funds
for
improvements
to
the
club
property.
He
instanced
his
intention
of
constructing
a
fence
around
the
property
at
a
probable
cost
of
$15,000.
The
property
has
had
no
such
fence
since
the
company
came
into
existence,
and
Mr.
Purtle
frankly
admitted
that
if
constructed,
it
would
undoubtedly
enhance
the
value
of
the
club,
and
thereby
increase
the
value
of
the
shares.
In
my
opinion,
therefore,
the
facts
established
in
evidence
show
:
1.
That
the
company
was
not
a
club
organized
and
operated
exclusively
for
recreation
or
pleasure
within
the
meaning
of
the
exempting
sections
but,
on
the
contrary,
was
organized
and
operated
for
the
purpose
of
profit-making
and
did,
in
fact,
make
a
profit
during
each
of
the
relevant
years.
2.
That
the
income
derived
from
such
operations
enured
to
the
benefit
of
the
stockholders
and
was
available
for
the
personal
benefit
of
such
shareholders.
I
have
not
overlooked
the
further
submission
by
counsel
for
the
respondent.
The
evidence
indicates
that
in
its
initial
year
of
operation,
that
is
1941,
the
company
showed
a
small
operating
profit
in
its
income
tax
return.
‘When
that
return
and
those
for
1942
and
1943
were
under
consideration
in
1944
an
Assessor
of
the
Department
apparently
reached
the
conclusion
that
the
company
was
exempt
under
the
provision
of
Section
4,
subsection
(1)(h).
That
conclusion
was
arrived
at
after
he
had
received
a
copy
of
the
resolution
of
the
directors
dated
October
23,
1944,
Exhibit
A-10,
the
essential
part
of
which
was
as
follows
:—
“It
was
moved
by
the
secretary,
seconded
by
Joseph
B.
Cherrier,
and
duly
carried
that
the
treasurer
be
and
he
is
hereby
authorized
to
complete
for
the
Income
Tax
Department
Form
T2
showing
that
the
club
is
a
non-profit
sharing
association,
and
that
any
earned
surplus
is
to
be
used
to
make
repairs
or
improvements
or
supply
necessary
equipment
required
by
the
club
in
its
operation.’’
Accordingly,
the
company
was
not
assessed
to
tax
for
the
year
1941.
For
the
years
1942,
1943
and
1945
the
company
had
operating
losses.
In
1944
it
had
an
operating
profit
of
$160.24
and
was
not
assessed
to
tax.
It
does
not
clearly
appear
whether
in
that
year
exemption
was
granted
under
Section
4,
subsection
(1)
(h),
or
whether
it
was
found
that
after
taking
into
consideration
the
previous
years’
losses,
there
was
no
taxable
income.
The
returns
for
1946,
1947,
1948
and
1949
were
not
processed
until
1950,
and
it
was
not
until
that
year
that
the
company
was
made
aware
that
the
‘‘understanding’’
arrived
at
in
1944
for
the
year
1941
was
no
longer
available
to
it.
That
resolution,
Exhibit
A-10,
merely
authorized
the
treasurer
to
make
representations
to
the
Department
that
the
company
was
‘‘a
nonprofit
sharing
association.’’
It
was
not
binding
in
any
sense
and
could
have
been
altered
at
any
time.
It
specifically
provides
for
the
possibility
of
making
“improvements”
to
the
club,
a
step
which
would
have
enhanced
the
value
of
the
shares.
I
cannot
agree
that
such
an
“understanding”,—to
use
the
word
of
Exhibit
A-5—,
can
be
of
any
assistance
to
the
respondent,
and
an
estoppel
cannot
override
the
law
of
the
land,
and
the
Crown
is
not
bound
by
the
errors
or
omissions
of
its
servants.
In
the
case
of
Woon
v.
The
Minister
of
National
Revenue,
[1951]
Ex.
C.R.
18;
[1950]
C.T.C.
263,
I
had
to
consider
a
similar
submission
to
that
made
here.
It
is
not
necessary
to
refer
to
more
than
a
few
extracts
from
that
case
commencing
at
page
24.
There
I
referred
to
Phipson
on
Evidence,
8th
Edition,
667,
where
it
is
stated:
Estoppels
of
all
kinds,
however,
are
subject
to
one
general
rule
:
they
cannot
override
the
law
of
the
land.
Thus,
where
a
particular
formality
is
required
by
statute,
no
estoppel
will
cure
the
defect.’’
I
then
refer
to
Maritime
Electric
Company
Limited
v.
General
Dairies
Limited,
[1937]
A.C.
610,
in
which
it
was
held:
That
the
appellants
were
not
estopped
from
recovering
the
sum
claimed.
The
duty
imposed
by
The
Public
Utilities
Act
on
the
appellants
to
charge,
and
on
the
respondents
to
pay,
at
scheduled
rates,
for
all
the
electric
current
supplied
by
the
one
and
used
by
the
other
could
not
be
defeated
or
avoided
by
a
mere
mistake
in
the
computation
of
accounts.
The
relevant
sections
of
the
Act
were
enacted
for
the
benefit
of
a
section
of
the
public,
and
in
such
a
case
where
the
statute
imposed
a
duty
of
a
positive
kind,
it
was
not
open
to
the
respondents
to
set
up
an
estoppel
to
prevent
it.
An
estoppel
is
only
a
rule
of
evidence,
and
could
not
avail
to
release
the
appellants
from
an
obligation
to
obey
the
statute,
nor
could
it
enable
the
respondents
to
escape
from
the
statutory
obligation
to
pay
the
scheduled
rates.
The
duty
of
each
party
was
to
obey
the
law.”
I
then
refer
to
the
judgment
of
Lord
Maugham
in
that
case
where
at
page
620
he
said
:
‘‘,
.
.
The
court
should
first
of
all
determine
the
nature
of
the
obligation
imposed
by
the
statute,
and
then
consider
whether
the
admission
of
an
estoppel
would
nullify
the
statutory
provisions
.
.
.’’
Then
in
the
Woon
case,
I
stated
as
follows
at
p.
25
:
“It
was
therefore
the
duty
of
the
taxing
authority
to
apply
the
provisions
of
the
section
to
the
case
of
any
taxpayer
falling
within
its
terms
and
it
was
the
duty
of
such
taxpayer
to
pay
such
tax
as
might
properly
be
payable
thereunder.
It
was
the
duty
of
both
to
obey
the
law.
I
think
it
is
quite
clear
that
the
‘ruling’
said
to
have
been
made
in
this
case,
was
made
without
authority
and
was
not
in
any
way
binding
upon
the
Crown.
There
is
nothing
in
the
section
itself
which
confers
any
sort
of
discretionary
powers
on
the
Minister
or
his
officials.
Parliament
has
said
that
under
certain
circumstances
certain
things
are
deemed
to
be
dividends
and
manifestly
the
Commissioner
of
Taxation
had
no
power
to
declare
otherwise
or
to
settle
the
limit
of
taxation
thereunder,
other
than
according
to
the
statute
itself.
’
’
In
the
same
case
I
referred
to
Anderton
and
Halstead
Limited
v.
Birrell,
[1932]
1
K.B.
271,
in
which
the
Inspector
of
Taxes
after
full
disclosure
of
all
the
facts
had
agreed
in
writing
to
the
writing
down
for
two
years
successively
of
a
doubtful
debt.
Subsequently,
by
an
assessment,
the
writing
down
of
the
doubtful
debt
was
disallowed
on
certain
grounds.
In
considering
an
appeal
from
the
Commissioners
of
Inland
Revenue,
Rowlatt,
J.,
said
at
page
279:
“In
order
to
clear
the
ground,
I
may
point
out
at
once
that
there
is
no
question
of
the
Crown
having
been
bound
by
the
first
action
of
the
inspector
by
way
of
mere
contract.
No
officer
has
power
to
do
that.”
In
the
result,
the
appeals
will
be
allowed.
The
decision
of
the
Income
Tax
Appeal
Board
will
be
set
aside
and
the
assessments
made
by
the
Minister
for
each
of
the
years
in
question
are
affirmed.
The
appellant
is
entitled
to
be
paid
his
costs
after
taxation,
and
there
will
be
judgment
accordingly.
Judgment
accordingly.
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