THURLOW,
J.:—This
is
an
appeal
from
a
judgment
of
the
Tax
Appeal
Board
(25
Tax
A.B.C.
31)
which
dismissed
an
appeal
by
the
appellant
from
a
re-assessment
of
income
tax
for
the
year
1956.
The
matter
in
issue
is
the
liability
of
the
appellant
for
income
tax
in
respect
of
an
amount
of
$4,154.18
which
the
Minister
in
making
the
re-assessment
included
in
the
computation
of
the
appellant’s
income.
Basically
the
appellant’s
case
is
that
this
amount
was
income
of
his
wife,
Eugenia
Wertman
and
was
not
taxable
as
his
income.
The
appellant
and
his
wife
were
married
in
1938
in
Lvov,
Poland,
where
they
were
then
domiciled,
and
after
living
in
Munich
for
three
years
following
the
end
of
the
war
came
to
Canada
early
in
1949.
When
he
came
to
Canada
the
appellant
had
in
his
own
name
in
two
Swiss
banks,
deposits
of
funds
worth
in
excess
of
$100,000
(Canadian
currency).
In
September
and
October
1949
funds
totalling
$104,041.07
were
transferred
from
the
Swiss
bank
accounts
to
an
account
in
his
name
in
a
bank
in
Vancouver,
and
these
were
subsequently
used
to
purchase
early
in
1950
a
parcel
of
real
estate
in
Vancouver
for
$22,500,
title
to
which
was
taken
in
the
names
of
the
appellant
and
his
wife,
and
to
pay
a
part
of
the
cost
of
constructing
an
apartment
building
thereon
pursuant
to
a
contract
made
in
May
1950
by
the
appellant
and
his
wife
with
a
builder.
In
June
1950
a
further
amount
of
$6,018
was
transferred
from
Switzerland
to
the
appellant’s
bank
account
in
Vancouver
and
this
amount
was
later
used
for
the
same
purpose.
These
funds
were
not
however
sufficient
to
pay
the
whole
cost
of
the
building
and
by
the
time
the
project
was
completed
a
further
$210,000
borrowed
by
the
appellant
and
his
wife
from
the
New
York
Life
Insurance
Company
on
the
security
of
the
property,
$13,000
invested
by
the
appellant’s
son,
$11,000
representing
the
proceeds
of
the
sale
of
a
dwelling
house
in
Vancouver
which
the
appellant
had
purchased
in
the
names
of
himself
and
his
wife
shortly
after
their
arrival
in
Canada,
and
some
smaller
amounts
borrowed
from
friends
had
gone
into
the
construction
and
a
further
mortgage
for
$65,000
representing
the
balance
due
on
the
contract
had
been
given
to
the
builder.
When
completed
some
time
in
1951,
the
property,
which
became
known
as
the
Park
Strand’’
represented
a
total
investment
of
an
amount
in
the
vicinity
of
$415,000
of
which
$122,500
was
admittedly
brought
by
the
appellant
from
Europe,
$13,000
was
invested
by
the
appellant’s
son
and
the
remainder
totalling
about
$280,000
was
financed
by
moneys
borrowed
by
the
appellant
and
his
wife.
For
the
years
1952
to
1955
the
appellant’s
income
tax
returns
were
prepared
by
a
Mr.
Hogg,
an
accountant
in
the
employ
of
the
builder
and
in
them
90
per
cent
of
the
net
income
from
the
Park
Strand
was
reported
as
income
of
the
appellant,
the
other
10
per
cent
being
treated
as
income
of
the
appellant’s
son.
Mr.
Hogg
was,
however,
not
in
a
position
to
assist
the
appellant
in
preparing
his
return
for
1956
and
at
his
suggestion
the
appellant
consulted
a
chartered
accountant
who
in
preparing
the
1956
return
treated
45
per
cent
of
the
net
income
of
the
Park
Strand
as
income
of
the
appellant,
another
45
per
cent
of
it
as
income
of
the
appellant’s
wife
and
the
remaining
10
per
cent
as
income
of
the
appellant’s
son.
No
question
arises
in
these
proceedings
as
to
the
10
per
cent
treated
as
income
of
the
appellant’s
son
but
the
Minister
in
making
the
re-assessment
added
to
the
appellant’s
income
the
$4,154.18
representing
the
45
per
cent
of
the
net
income
from
the
Park
Strand
treated
as
the
income
of
his
wife
and
it
was
his
action
in
so
doing
which
gave
rise
to
the
appellant’s
appeal
first
to
the
Tax
Appeal
Board
and
later
to
this
Court.
Both
in
the
notice
of
re-assessment
and
in
the
notification
by
the
Minister
under
Section
58
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148,
following
notice
of
objection
by
the
appellant
it
was
stated
that
the
$4,154.18
was
deemed
to
be
income
of
the
appellant
pursuant
to
Section
21(1)
of
the
Act
but
in
the
latter
document
it
was
also
stated
‘‘that
in
the
alternative
if
there
was
a
parnership
between
the
taxpayer
and
his
wife
the
taxpayer
has
been
correctly
assessed
under
Section
21(4)’’.
On
the
appeal
to
this
Court
it
was
also
sought
to
support
the
assessment
on
the
ground
that
the
interest
of
the
appellant
and
his
wife
in
the
Park
Strand
was
held
by
them
as
community
property
under
the
terms
of
a
pre-nuptial
contract
the
effect
of
which
was
that
the
appellant
was
alone
entitled
to
the
enjoyment
of
the
income
therefrom
and
was
therefore
taxable
in
respect
of
the
whole
of
it.
The
questions
to
be
determined
are
accordingly
:
1.
Whether
the
appellant
was
entitled
to
the
whole
90
per
cent
of
the
income
from
the
Park
Strand
under
the
terms
of
the
pre-nuptial
contract.
If
so
the
appellant
is
taxable
in
respect
thereof
and
that
is
the
end
of
the
matter.
But
if
not
the
further
question
arises
:
2.
Whether
and
to
what
extent
the
interest
of
the
appellant’s
wife
in
the
Park
Strand
is
property
transferred
to
her
by
the
appellant
or
property
substituted
therefor
so
as
to
bring
into
operation
the
provisions
of
Section
21(1)
of
the
Act.
If
the
assessment
cannot
be
supported
in
its
entirety
under
Section
21(1)
there
arises
the
further
question:
3.
Whether
the
appellant
is
taxable
in
respect
of
his
wife’s
income
from
the
Park
Strand
under
the
provisions
of
Section
21(4)
of
the
Act.
I
turn
now
to
the
evidence
respecting
the
terms
and
effect
of
the
pre-nuptial
contract.
While
the
making
of
such
a
contract
was
admitted
by
the
Minister
in
his
reply
to
the
notice
of
appeal
no
copy
of
it
was
available
at
the
trial.
The
appellant
explained
its
absence
by
his
evidence
that
he
had
destroyed
his
copy
in
1939
when
the*
Russians
overran
the
portion
of
Poland
in
which
he
lived
and
that
as
his
part
of
Poland
has
since
the
war
been
Russian
territory
it
was
impossible
under
present
circumstances
to
ascertain
whether
or
not
the
notary’s
copy
is
still
in
existence
let
alone
to
obtain
a
copy
of
it.
His
wife
was
not
called
as
a
witness.
His
evidence,
however,
satisfies
me
that
the
contract
was
of
a
common
type
and
provided
for
a
general
community
of
all
the
property
of
both
spouses
whether
held
at
the
time
of
marriage
or
acquired
subsequently
during
the
marriage.
Evidence
of
the
effect
of
such
a
contract
under
Polish
law
was
given
by
Mr.
Jacob
Kalisky,
a
notary
public
now
residing
in
Vancouver
who
between
1925
and
1939
was
a
member
of
the
Polish
bar
and
practised
as
a
barrister
and
solicitor
in
Warsaw.
Mr.
Kalisky
came
to
Canada
in
1941
and
has
since
then
resided
in
Vancouver.
He
stated
that
in
1938
the
law
respecting
family
relationships
in
that
part
of
Poland
which
prior
to
1918
had
been
under
Austrian
domination
and
in
which
the
City
of
Lvov
was
situated
was
the
General
Civil
Code
of
Austria
which
came
into
effect
by
Imperial
decree
in
1811
and
was
later
applied
to
that
part
of
Poland
which
fell
under
Austrian
rule
following
the
Napoleonic
wars,
and
that
by
1938
as
a
result
of
judgments
of
the
Supreme
Court
of
Poland
married
women
were
no
longer
subject
to
any
legal
disabilities
or
incapacities
in
any
part
of
Poland
and
could
enforce
their
rights
in
the
courts
in
their
own
names
even
against
their
husbands.
He
also
stated
that
under
the
General
Civil
Code
of
Austria
joint
ownership
of
property
with
a
right
of
succession
to
the
whole
of
the
property
vested
in
the
surviving
owner
was
unknown,
that
community
of
property
under
which
a
man
and
his
wife
held
property
in
equal
shares
in
common
was
known
but
arose
only
by
virtue
of
a
pre-nuptial
contract
and
that
while
there
was
complete
freedom
of
contract
as
to
the
terms
which
might
be
inserted
in
them,
such
contracts
ordinarily
provided
either
that
all
property
then
possessed
by
the
intended
spouses
together
with
all
property
that
might
thereafter
during
the
marriage
be
acquired
by
either
of
them
should
be
community
property,
this
type
being
known
as
a
general
community,
or
merely
that
all
property
thereafter
acquired
by
either
spouse
during
the
marriage
should
be
held
in
community,
which
type
was
known
as
a
special
community.
Whether
special
or
general,
however,
the
income
from
community
property
in
his
opinion
belonged
to
the
community,
with
the
management
of
such
income
resting
with
the
husband
not
as
his
own
property
but
in
his
capacity
as
the
head
of
the
family.
During
the
continuance
of
his
management
the
husband
was
not
obliged
to
render
accounts
but
his
power
with
respect
to
the
disposition
of
community
property
including
income
belonging
to
the
community
was
that
of
a
manager
under
a
power
of
attorney.
He
was
obliged
to
provide
proper
maintenance
for
his
wife
and
he
had
authority
to
make
expenditures
of
the
income
of
the
community
suitable
to
his
status
but
in
the
administration
of
his
function,
he
was
bound
to
exercise
the
care
of
a
pater
familias
with
respect
to
both
the
capital
and
income
of
the
community
and
at
the
termination
of
his
management
he
was
required
to
render
an
account
and
was
chargeable
with
amounts
alienated
beyond
his
authority.
In
case
of
emergency
or
danger
to
the
community
property
he
was
removable
from
his
position
as
manager
even
in
cases
where
the
management
had
been
expressly
given
to
him
for
all
time.
In
my
opinion
there
is
nothing
in
the
evidence
of
the
contract
and
of
its
effect
under
the
law
of
Poland
which
would
serve
to
dispel
the
prima
facie
conclusion
arising
from
the
fact
of
ownership
of
the
Park
Strand
by
the
appellant
and
his
wife
and
the
law
of
British
Columbia
that
the
income
from
their
90
per
cent
interest
in
the
property
belonged
to
them
in
equal
shares.
Rather
the
evidence
to
which
I
have
referred
in
my
opinion
serves
to
reinforce
that
conclusion.
The
case
of
Sura
v.
M.N.R.,
[1961]
S.C.R.
65;
[1962]
C.T.C.
1,
which
was
relied
on
by
counsel
on
behalf
of
the
Minister
in
my
view
is
clearly
distinguishable
on
the
marked
differences
between
the
rights
of
the
husband
in
that
case
under
the
law
of
the
Province
of
Quebec
to
deal
with
income
forming
part
of
the
community
of
property
without
being
accountable
therefor
and
the
rights
of
the
appellant
in
this
case
under
the
pre-nuptial
contract
and
the
law
of
Poland
applicable
thereto
when
the
contract
was
made.
In
the
Sura
case
Taschereau,
J.
(as
he
then
was)
described
the
rights
of
the
husband
under
the
Quebee
Law
thus
at
p.
69
:
“Le
mari
administre
les
trois
masses
et
en
perçoit
les
revenus
qui
servent
à
augmenter
l’actif
commun.
Lui
seul
peut
disposer
de
ces
revenus,
lui
seul
en
a
la
jouissance
sans
restrictions,
et
rien
ne
peut
sortir
du
fonds
commun
à
moins
que
ce
ne
soit
comme
résultat
de
l’expression
de
sa
volonté.
Il
reçoit
pour
lui,
et
nullement
comme
mandataire
ou
fiduciaire
pour
le
bénéfice
de
son
épouse.
Cette
dernière
ne
retire
aucun
revenu,
et
son
bénéfice
consiste
dans
l’augmentation
des
biens
communs
dont
elle
est
copropriétaire
et
dans
lesquels
elle
a
un
droit
éventuel
au
partage
futur.”
That
the
judgment
in
the
Sura
case
was
not
intended
to
govern
the
situation
which
might
arise
where
property
is
held
in
community
under
contract
either
in
Quebec
or
elsewhere
is
moreover
made
plain
at
p.
72
where
the
learned
judge
said
:
“De
plus,
quand
il
s’agit
de
communauté
conventionnelle,
il
est
certain
que
la
situation
peut
être
différente,
car
les
conjoints
peuvent
toujours
par
contrat,
tout
en
stipulant
la
communauté
qui
doit
déterminer
le
régime
marital
financier,
faire
toutes
sortes
d’autres
conventions
qui,
évidemment,
ne
doivent
pas
être
contraires
aux
bonnes
moeurs
ni
à
l’ordre
public.
(C.C.
1257,
1262,
1268).
Pour
les
fins
de
la
présente
cause,
il
serait
superflu
de
les
discuter.”
It
follows
from
what
I
have
said
that
the
whole
of
the
income
of
the
90
per
cent
interest
of
the
appellant
and
his
wife
in
the
Park
Strand
is
not
taxable
as
income
of
the
appellant
by
reason
of
any
right
of
his
thereto
under
the
pre-nuptial
contract
and
that
the
assessment
cannot
be
supported
on
that
basis.
Accordingly
it
becomes
necessary
to
consider
the
second
question,
that
is
to
say,
whether
and
to
what
extent
the
assessment
can
be
supported
under
Section
21(1)
of
the
Act.
That
subsection
provides
as
follows:
“21.
(1)
Where
a
person
has,
on
or
after
August
1,
1917,
transferred
property,
either
directly
or
indirectly,
by
means
of
a
trust
or
by
any
other
means
whatsoever,
to
his
spouse,
or
to
a
person
who
has
since
become
his
spouse,
the
income
for
a
taxation
year
from
the
property
or
from
property
substituted
therefor
shall,
during
the
lifetime
of
the
transferor
while
he
is
resident
in
Canada
and
the
transferee
is
his
spouse,
be
deemed
to
be
income
of
the
transferor
and
not
of
the
transferee.
’
’
The
moneys
which
the
appellant
and
his
wife
invested
in
the
Park
Strand
fall
into
two
categories,
viz.
(1)
funds
brought
to
Canada
from
Switzerland
amounting
to
$122,500
or
thereabouts
and
(2)
borrowings
made
by
them
to
complete
the
building
totalling
about
$270,000.
With
respect
to
the
origin
of
the
$122,500
and
the
half
interest
of
the
appellant’s
wife
therein
evidence
was
given
by
the
appellant
that
at
the
time
of
their
marriage
in
1938
he
owned
and
operated
a
cheese
factory
in
which
he
employed
from
16
to
18
persons
and
that
he
was
a
comparatively
wealthy
man.
His
wife
owned
nothing
prior
to
the
marriage
but
as
a
result
of
the
pre-nuptial
contract
and
the
marriage
became
entitled
to
a
one-half
interest
in
all
his
property
whether
held
at
the
time
of
the
marriage
or
subsequently
acquired.
As
early
as
1934
when
Hitler
came
to
power
in
Germany
the
appellant
and
his
brothers
and
sister
foresaw
that
there
was
trouble
ahead
for
people
of
the
Jewish
race
and
each
began
to
limit
his
business
operations
and
to
convert
as
much
of
his
wealth
as
possible
into
gold
or
other
precious
metal
and
to
hide
this
in
some
safe
place.
In
his
case
the
cache
was
hidden
under
the
foundation
of
his
house
and
one
or
more
of
his
brothers
and
sister
hid
their
caches
in
similar
places.
Each
let
the
others
know
where
his
cache
was
stored
and
according
to
the
appellant
there
was
an
understanding
among
them
that
the
survivors
or
survivor,
if
any,
of
them
and
their
spouses
should
be
entitled
to
dig
up
and
take
possession
of
the
caches
if
and
when
the
opportunity
to
do
so
should
arise.
Shortly
after
the
outbreak
of
the
war
Lvov
was
occupied
by
Russian
forees
and
the
appellant’s
factory
was
then
confiscated.
Later
in
1941
the
city
was
occupied
by
German
forces
and
when
this
occurred
the
appellant
and
his
wife
went
into
hiding
and
remained
hidden
until
the
cessation
of
hostilities
in
1945.
The
eastern
portion
of
the
former
Polish
territory,
in
which
Lvov
was
situated,
then
became
Russian
territory
and
the
appellant
and
his
wife
took
advantage
of
an
opportunity
offered
to
Poles
living
there
to
leave
with
their
belongings
which
included
their
cache
of
coin
and
some
United
States
currency.
The
appellant
and
his
wife
moved
first
to
Cracow
in
the
remaining
part
of
Poland
and
later
to
Munich
where
they
resided
for
three
years
while
awaiting
visas
to
come
to
this
country
and
during
that
period
the
appellant
made
a
number
of
trips
to
the
former
homes
of
his
sister
and
brothers,
none
of
whom
were
alive,
and
recovered
their
caches
which
he
deposited
along
with
his
own
in
Swiss
banks.
This
in
brief
outlines
the
appellant’s
account
of
the
origin
of
the
funds
later
brought
to
Canada
from
Switzerland.
With
respect
to
the
alleged
arrangement
the
appellant
in
cross-examination
said
that
he
considered
that
his
children
would
have
been
entitled
to
his
cache
had
he
and
his
wife
not
survived
but
that
the
children
of
his
sister
and
brothers
were
not
told
of
the
hiding
places
or
the
arrangement
and
had
no
claim
on
the
funds
either
of
their
parents
or
uncles
who
did
not
survive.
This
account
of
the
origin
of
the
funds
in
the
Swiss
banks
differs
markedly
from
that
alleged
in
the
notice
of
appeal
to
this
Court
as
well
as
from
the
account
given
in
the
appellant’s
notice
of
objection
and
in
his
evidence
before
the
Tax
Appeal
Board
and
it
leaves
me
unsatisfied
that
either
he
alone
or
he
and
his
wife
jointly
became
entitled
to
the
caches
which
he
recovered
under
any
arrangement
operating
as
a
contract
to
that
effect
between
himself
and
other
members
of
his
family.
Rather
I
am
of
the
opinion
that
the
appellant
simply
came
into
possession
of
the
funds
which
he
deposited
in
the
Swiss
banks,
other
than
the
portion
thereof
representing
his
own
cache,
by
virtue
of
his
knowledge
of
how
to
find
them
and
as
a
result
of
the
efforts
which
he
put
forth
to
recover
them.
It
may
be
that
a
portion
of
them
would
fall
to
him
by
inheritance
on
the
deaths
of
one
or
more
of
his
brothers
who
died
childless
but
there
is
no
evidence
of
the
law
of
inheritance
in
the
places
where
the
caches
were
hidden
and
it
is
impossible
to
ascertain
on
the
evidence
how
much
of
it,
if
any,
would
fall
within
that
category.
Any
that
might
have
fallen
within
that
category
must
accordingly
be
treated
as
in
the
same
category
as
the
remainder
which
must
in
any
event
in
my
view
for
the
purposes
of
this
appeal
be
regarded
as
funds
to
which
he
had
no
greater
right
than
that
which
simple
possession
gave
him.
Turning
now
to
Section
21(1)
there
is
not,
in
my
opinion,
any
element
of
retroactivity
involved,
as
contended
by
counsel
for
the
appellant,
in
applying
the
words
of
the
provision
to
transactions
which
occurred
before
the
appellant
and
his
wife
came
to
Canada.
The
subsection
to
my
mind
is
nothing
more
than
a
statutory
prescription
of
the
manner
in
which
the
income
of
a
person
is
to
be
measured
or
computed
for
the
purposes
of
the
Act,
it
occurs
in
a
group
of
sections
applicable
alike
to
the
computation
for
the
purposes
of
the
Act
of
the
income
of
both
residents
and
non-residents,
and
I
can
see
no
valid
reason
why
its
terms,
which
on
their
face
are
as
applicable
to
residents
as
to
non-residents
should
be
confined
to
situations
in
which
the
transfer
was
made
when
the
transferor
was
resident
in
Canada.
Accordingly,
I
reject
the
contention
that
the
subsection
does
not
apply
to
transfers
made
by
the
appellant
to
his
wife
prior
to
their
coming
to
Canada
and
as
all
that
is
necessary
to
constitute
a
transfer
within
the
meaning
of
the
subsection
is
that
the
owner
of
property
should
so
deal
with
it
as
to
divest
himself
of
it
and
vest
it
in
his
spouse,
regardless
of
the
means
or
route
by
which
he
accomplishes
the
result,
vide
David
Fasken
Estate
v.
M.N.R.,
[1948]
Ex.
C.R.
580;
[1948]
C.T.C.
265,
it
seems
clear
that
insofar
as
the
funds
brought
by
the
appellant
to
Canada
represented
property
which
the
appellant
had
on
hand
at
the
time
of
his
marriage
in
1938
or
property
later
substituted
therefor,
any
interest
which
the
appellant’s
wife
had
in
them
as
a
co-owner
of
the
community
property
came
to
her
by
virtue
of
her
husband
having
entered
into
the
pre-nuptial
contract
and
the
marriage
and
thus
transferred
such
interest
to
her.
Insofar
as
the
funds
brought
to
Canada
might
conceivably
have
represented
additions
to
the
cache
of
the
appellant
arising
from
earnings
between
the
time
of
the
marriage
and
the
summer
of
1941
when
he
and
his
wife
went
into
hiding
it
is
sufficient
to
say
that
there
is
no
evidence
that
anything
arising
from
earnings
during
that
period
was
added
to
his
cache
and
insofar
as
the
funds
represented
amounts
which
he
himself
recovered
and
took
into
his
possession
after
the
end
of
hostilities
there
is
in
my
opinion
no
satisfactory
evidence
upon
which
I
can
reach
the
conclusion
that
the
assumption
of
the
Minister
that
the
interest
of
the
appellant’s
wife
in
the
funds
was
property
transferred
to
her
by
the
appellant
has
been
rebutted.
In
particular
I
am
not
satisfied
that
in
recovering
possession
of
the
caches
he
did
so
as
agent
for
his
wife
or
that
these
should
not
be
regarded
as
property
which
the
appellant
took
into
his
possession
and
put
into
the
community
and
thereby
transferred
an
undivided
one-half
interest
in
his
rights
therein
to
his
wife.
In
the
result
therefore
I
am
of
the
opinion
that
whatever
interest
the
appellant’s
wife
had
in
the
funds
in
the
Swiss
banks
must
for
the
purposes
of
this
case
be
regarded
as
property
transferred
to
her
by
the
appellant
within
the
meaning
of
Section
21(1)
and
that
insofar
as
the
income
of
the
Park
Strand
can
properly
be
regarded
as
income
from
property
substituted
for
the
funds
brought
to
Canada
from
the
Swiss
bank
deposits
her
share
thereof
was
properly
included
in
the
computation
of
the
appellant’s
income
pursuant
to
Section
21(1).
With
respect
to
these
funds
the
result
is
accordingly
the
same
whether
the
appellant’s
wife
is
regarded
as
having
had
a
half
interest
in
them
before
they
were
brought
to
Canada
or
is
regarded
as
having
acquired
her
interest
therein
upon
investment
of
them
in
the
dwelling
and
in
the
Park
Strand
property
in
the
joint
names
of
the
appellant
and
his
wife.
It
does
not,
however,
follow
from
this
that
the
whole
of
the
share
of
the
appellant’s
wife
in
the
income
from
the
Park
Strand
was
income
from
property
transferred
to
her
by
her
husband
within
the
meaning
of
Section
21(1)
for
the
evidence
indicates
that
the
contract
for
the
construction
of
the
Park
Strand
as
well
as
the
mortgages
of
the
property
were
made
by
the
appellant
and
his
wife
and
that
when
the
Park
Strand
became
an
income
producing
property
it
represented
a
capital
investment
not
alone
of
the
money
drawn
from
the
Swiss
bank
accounts
but
of
some
$270,000
as
well
which
the
appellant
and
his
wife
had
jointly
borrowed
or
raised
on
their
joint
credit.
No
part
of
this
money
can
in
my
opinion
properly
be
regarded
as
having
been
property
transferred
by
the
appellant
to
his
wife
and
to
the
extent
of
her
share
in
the
investment
of
these
funds
her
interest
in
the
Park
Strand
cannot
be
regarded
as
property
to
which
Section
21(1)
applies.
The
assessment
in
my
opinion
is
accordingly
supportable
under
Section
21(1)
to
the
extent
that
the
income
in
question
was
income
from
property
substituted
for
money
which
had
been
on
deposit
in
the
Swiss
banks
but
is
not
supportable
under
Section
21(1)
insofar
as
it
represents
income
from
the
remainder
of
the
moneys
invested
by
the
appellant
and
his
wife
in
the
Park
Strand.
It
follows
that
unless
the
assessment
can
be
upheld
in
its
entirety
under
Section
21(4)
it
will
be
necessary
to
refer
it
back
to
the
Minister
for
reconsideration
and
re-assessment
in
accordance
with
the
reasons
and
findings
herein
expressed.
This
brings
me
to
the
issues
which
arise
under
Section
21(4).
This
subsection
provides
as
follows:
“Where
a
husband
and
wife
were
partners
in
a
business,
the
income
of
one
spouse
from
the
business
for
a
taxation
year
may,
in
the
discretion
of
the
Minister,
be
deemed
to
belong
to
the
other
spouse.’’
In
his
reply
to
the
appellant’s
notice
of
appeal
to
this
Court
the
Minister
pleaded
that
the
appellant
and
his
wife
were
partners
in
the
business
of
owning,
managing
and
operating
the
apartment
building
known
as
the
Park
Strand
and
that
determination
made
by
him
by
virtue
of
the
powers
vested
in
him
by
Section
21(4)
of
the
Income
Tax
Act
is
final
and
conclusive
and
not
subject
to
review.
He
did
not,
however,
offer
any
evidence
of
his
having
exercised
or
purported
to
exercise
the
power
given
to
him
by
Section
21(4)
and
the
only
suggestion
of
such
an
exercise
to
be
found
in
the
evidence
is
in
the
words
“‘in
the
alternative
if
there
was
a
partnership
between
the
taxpayer
and
his
wife
the
taxpayer
has
been
properly
assessed
under
subsection
(4)
of
the
said
Section
21’’
which
appeared
in
a
copy
of
the
notification
by
the
Minister
under
Section
58
of
the
Act
offered
in
evidence
by
counsel
for
the
appellant.
I
have
some
doubt
that
this
statement
establishes
that
the
discretion
of
the
Minister
was
in
fact
exercised,
since
it
does
not
say
so
and
does
not
even
say
that
the
Minister
was
of
the
opinion
that
a
partnership
existed,
but
in
view
of
the
conclusion
which
I
have
reached
on
the
applicability
of
the
subsection,
it
is
not
necessary
to
consider
the
effect
of
the
wording
so
used.
The
subsection
applies
only
‘‘where
a
husband
and
wife
are
partners
in
a
business’’,
and
it
can
be
applied
only
to
the
income
of
one
or
the
other
of
the
spouses
from
that
business.
Under
Section
139(1)(e)
of
the
Act
the
word
‘‘business’’
includes
a
profession,
calling,
trade,
manufacture
or
undertaking
of
any
kind
whatsoever
and
includes
an
adventure
or
a
concern
in
the
nature
of
trade,
but
does
not
include
an
office
or
employment.
The
evidence
discloses
that
the
Park
Strand
has
49
apartments
and
that
the
rentals
for
the
year
1956
amounted
to
$55,716.50.
The
appellant
devotes
the
whole
of
his
working
time
to
its
affairs
and
he
said
that
it
keeps
him
busy
from
morning
to
night.
He
arranges
the
letting
of
apartments
to
tenants
and
for
necessary
repairs
even
to
doing
some
of
the
painting
himself
and
he
collects
the
rents
and
pays
the
expenses.
A
janitor
is
employed
to
look
after
the
boiler
room
and
the
sweeping
and
cleaning.
In
the
financial
statement
which
accompanied
the
appellant’s
income
tax
return,
the
wages
of
the
janitor
as
well
as
other
outgoings
including
fuel
and
the
cost
of
operating
a
car
to
take
the
appellant
back
and
forth
between
his
home
and
the
Park
Strand
and
on
errands
in
connection
with
repairs,
are
charged
against
the
rentals
and
the
balance
is
shown
as
belonging
to
the
appellant
and,
his
wife
and
son
in
the
proportions
of
45,
45
and
10
per
cent
respectively.
No
charge
is
made
for
the
appellant’s
services.
The
Minister’s
case
for
applying
Section
21(4)
is
that
the
concepts
of
income
from
property
and
income
from
business
are
not
mutually
exclusive
but
blend
completely
and
that
while
the
rentals
derived
from
the
Park
Strand
can
be
regarded
as
income.
from
property,
they
can
and
should
also
be
regarded
as
income
from
the
business
of
leasing
apartments
in
the
Park
Strand
which
was
a
business
in
which
the
appellant
and
his
wife
were
partners.
The
appellant
on
the
other
hand
submitted
that
the
appellant
and
his
wife
and
son
were
simply
co-owners
of
property,
that
there
was
no
business
carried
on
in
respect
of
the
rental
of
suites,
that
the
three
owners
were
not
partners
in
any
such
business
and
that
in
any
case,
the
source
of
the
income
was
the
property
and
not
a
business
of
letting
suites.
The
question
of
when
receipts
from
the
letting
of
real
property
may
be
considered
to
be
receipts
from
a
business
as
opposed
to
mere
receipts
from
property
has,
so
far
as
I
am
aware,
arisen
in
only
two
cases
in
this
country.
In
the
earlier
of
these,
Martin
v.
M.N.R.,
[1948]
Ex.
C.R.
529;
[1948]
C.T.C.
189,
which
arose
under
the
Excess
Profits
Tax
Act,
O’Connor,
J.,
after
citing
passages
from
the
judgments
of
the
Master
of
the
Rolls,
and
of
Brett,
L.J.
in
Erichsen
v.
Last
(1881),
4
T.C.
422,
as
to
the
meaning
of
trade
said
at
pp.
533
and
193
respectively
:
“A
landowner
in
dealing
with
his
own
land
and
granting
leases
thereof
and
so
receiving
rents
and
profits
is
not
carrying
on
business.
But
the
question
here
is
has
the
appellant
reached
the
point
where
land
ownership
has
passed
into
commercial
enterprise
in
land.
In
The
Rosyth
Building
&
Estates
Co.,
Ltd.
v.
P.
Rogers
(1918-24),
8
T.C.
11
at
17,
the
Lord
President
said
:
4
It
may
in
the
ordinary
case
be
difficult
to
determine
the
point
at
which
mere
ownership
or
heritage
passes
into
the
commercial
administration
by
an
owning
trader,
but
that
is
a
question
of
fact
of
a
kind
which
is
not
infrequently
met
with
under
the
Income
Tax
Acts
.
.
On
the
facts
before
him,
from
which
it
appears
that
the
taxpayer
in
the
case
of
at
least
some
of
her
tenants
provided
services,
heat,
electric
stoves,
furniture
and
linens,
in
addition
to
the
premises,
O’Connor,
J.
then
held
that
the
taxpayer
was
engaged
in
a
commercial
enterprise.
In
the
later
case,
Marks
v.
M.N.R.
(1962),
30
Tax
A.B.C.
155,
where
several
persons
had
joined
in
acquiring
an
apartment
building,
which
was
thereafter
held
by
a
trustee
for
them
and
managed
by
an
agent,
Mr.
Boisvert
in
the
Tax
Appeal
Board
considered
that
the
substance
of
the
transaction
in
which
the
property
was
acquired
was
not
one
of
setting
up
a
business
but
one
of
‘
‘sheer
investment
’
’
and
that
the
owners
were
not
engaged
in
a
business.
In
Great
Britain
income
from
real
property
is
computed
for
taxation
purposes
on
a
special
basis
prescribed
under
Schedule
“A”
and
because
of
this,
cases
in
which
the
revenue
authorities
have
sought
to
bring
the
rentals
of
real
property
into
the
computation
of
profits
taxable
under
Schedule
‘‘D’’
as
profits
of
a
trade
are
not
strictly
parallel
and
thus
not
applicable
in
considering
a
case
arising
under
the
provisions
of
the
Canadian
statute.
They
do,
however,
offer
some
light
on
the
subject
of
what
is
income
from
property
as
distinguished
from
income
from
trading
and
incidentally
indicate
that
there
is
considerable
diversity
of
opinion
on
the
question
whether
the
letting
of
real
property
can
be
regarded
as
a
trade.
In
C.I.R.
v.
Sangster,
[1920]
1
K.B.
587,
Rowlatt,
J.
observed
at
p.
597:
“On
the
other
hand
Mr.
Tomlin
asks,
‘Supposing
he
has
land
and
keeps
on
building
on
it
and
never
sells
it
at
all
but
has
rent
from
the
houses
that
he
builds,
is
he
carrying
on
a
business
?
’
One
cannot
help
feeling
that
the
answer
to
that
question
must
be
‘No,’
because
he
is
merely
investing
his
money
in
new
property
and
keeping
it
;
he
is
not
dealing
with
it
in
any
way.
’
’
In
Fry
v.
Salisbury
House
Estate
Limited,
[1930]
A.C.
482,
where
an
incorporated
company
owned
a
building
containing
some
800
rooms
which
were
let
to
some
200
tenants
as
offices,
singly
or
in
suites,
and
the
company
provided
a
staff
of
porters
and
cleaners
who
performed
certain
services
for
the
tenants
for
which
additional
rents
and
charges
were
paid
to
the
company,
Viscount
Dunedin
in
the
course
of
his
speech
remarked
at
p.
446
:
“that
the
company
is
carrying
on
a
business
I
do
not
doubt.
The
memorandum
of
association
shows
that
it
is.’’
Lord
Warrington
of
Clyffe,
however,
at
p.
451
said:
“There
is
nothing
in
the
facts
stated
in
the
case
which
would
properly
lead
to
the
conclusion
that
in
dealing
with
the
property
the
company
is
acting
otherwise
than
an
ordinary
landowner
would
act
in
turning
to
profitable
account
the
land
of
which
he
is
the
owner.
It
would
in
my
opinion
be
impossible
to
hold
that
in
such
a
case
the
landowner
is
carrying
on
a
trade.
Such
a
person
would
I
think
clearly
be
assessable
under
Schedule
A
only,
and
his
taxable
income
would
be
measured
by
the
conventional
annual
value
and
not
by
the
amounts
of
the
rents
he
actually
received.
But
the
Crown
contends
that
the
fact
that
the
taxpayer
is
a
limited
company
may
distinguish
its
operations
from
those
of
an
individual.
Assuming
the
memorandum
of
association
allows
it,
and
in
this
case
it
unquestionably
does,
a
company
is
just
as
capable
as
an
individual
of
being
a
landowner
and
as
such
deriving
rents
and
profits
from
its
land,
without
thereby
becoming
a
trader,
and
in
my
opinion
it
is
the
nature
of
its
operations,
and
not
its
own
capacity,
which
must
determine
whether
it
is
carrying
on
a
trade
or
not.’’
Lord
Atkin
reached
his
conclusion
without
finding
it
necessary
to
express
an
opinion
on
this
particular
point
saying
at
p.
454
:
“In
my
opinion
it
makes
no
difference
that
the
income
so
derived
forms
part
of
the
annual
profits
of
a
trading
concern.
’
’
He
also
said
at
p.
458:
“My
Lords,
it
may
well
be
that
another
mode
of
expressing
the
result
I
have
stated
is
to
hold
that
a
person
capable
of
being
assessed
under
Schedule
A
cannot
be
said
in
respect
of
his
income
from
land
to
be
earning
profits
from
‘trade’.
This
view
appears
to
commend
itself
to
some
of
your
Lordships.
I
do
not
dissent
from
it,
but
I
view
it
with
some
misgiving.
I
find
it
difficult
to
say
that
companies
which
acquire
and
let
houses
for
the
purposes
of
their
trade,
such
as
breweries
in
respect
of
their
tied
tenants
and
collieries,
and
other
large
employers
of
labour
in
respect
of
their
employees,
do
not
let
the
premises
as
part
of
their
operation
of
trading.
Personally
it
prefer
to
say
that,
even
if
they
do
trade
in
letting
houses,
their
income,
so
far
as
it
is
derived
from
that
part
of
their
trading,
must
be
taxed
under
Schedule
A
and
not
Schedule
D.”’
Opinions
more
closely
connected
with
the
*
particular
statute
under
consideration
were
voiced
by
Lord
Tomlin
who
said
at
p.
463:
“Further
in
my
view
the
perception
of
rents
as
landowner
is
not
an
operation
of
trade
within
the
meaning
of
the
Act.’’
and
by
Lord
Macmillan
who
said
at
p.
467
:
“Landowning,
however
profitable,
is
not
a
trade
within
the
meaning
of
the
income
tax
code.”
Later
at
p.
470
also
with
reference
to
the
division
required
by
the
statute,
Lord
Macmillan
said
:
“This
clearly
contemplates
a
separation
between
the
two
characters
of
landowner
and
trader.
A
landowner
may
conduct
a
trade
on
his
premises,
but
he
cannot
be
represented
as
carrying
on
a
trade
of
owning
land
because
he
makes
an
income
by
letting
it.
The
relatively
insignificant
services
for
which
the
company
makes
charges
to
its
tenants
are
not
in
my
opinion
sufficient
to
convert
the
company
from
a
landowner
into
a
trader,
though
the
profits
so
made
may
quite
properly
be
charged
with
tax
under
Schedule
D.
To
hold
otherwise
would
be
to
invert
the
rule
that
the
principal
follows
the
accessory.”
See
also
the
discussion
by
Lord
Greene,
M.R.
in
Crofts
v.
Sywell
Aerodrome,
Limited,
[1942]
1
K.B.
317.
Under
the
Canadian
statute
what
is
taxed
as
income
from
a
property
or
a
business
is
the
"profit
therefrom’’
for
a
taxation
year,
and
this
poses
the
uestion
‘‘what
is
the
profit
from
the
property
or
business
?
’
j
In
the
great
majority
of
cases
it
is
quite
immaterial
whether
the
profit
is
regarded
as
arising
from
a
business
or
from
property,
but
when
the
question
does
arise,
it
is
my
opinion
simply
one
that
must
be
resolved
on
the
facts
of
the
particular
case
and
I
know
of
no
single
criterion
on
which
it
may
be
determined.
That
the
rentals
are
primarily
or
entirely
receipts
from
property
may
be
a
factor
of
great
importance
but
it
is
not
necessarily
conclusive
for
the
question
in
a
case
such
as
the
present
one
is
not
so
much
what
the
income
is
derived
from
but
whether
the
income
can
be
fairly
described
as
income
from
a
business
within
the
meaning
of
that
term
as
used
in
the
Act.
Moreover,
cases
are
I
think
readily
conceivable
where
particular
income
may
be
accurately
described
as
income
from
property
and
just
as
accurately
regarded
as
income
from
a
business.
On
the
evidence
in
the
present
case
the
sum
received
as
rentals
from
the
Park
Strand
should
I
think
be
regarded
as
having
accrued
to
the
appellant
and
his
wife
and
son
predominantly,
if
not
entirely,
in
their
capacity
as
owners
of
the
property
rather
than
as
traders,
and
I
also
think
that
the
rentals
should
be
regarded
as
having
accrued
predominantly,
if
not
entirely,
from
the
use
by
tenants
of
the
property
in
the
sense
that
they
represent
payments
for
the
tenants’
occupation
thereof
rather
than
payments
arising
from
the
process
of
letting
apartments
and
providing
certain
limited
services
such
as
heat
of
which
the
tenants
have
the
benefit.
To
my
mind
while
there
is
a
sense
in
which
the
rentals
can
be
said
to
be
revenues
from
a
business
of
letting
apartments
or
operating
an
apartment
building
for
the
purpose
of
securing
rentals,
it
is
a
fanciful
and
unrealistic
way
of
describing
them
for
it
puts
the
emphasis
of
the
description
of
their
source
where
it
does
not
belong
viz.,
on
the
mere
sine
qua
non
or
conduit
pipe
of
the
letting
activity
rather
than
on
the
fact
that
they
arise
from
the
use
or
exercise
of
the
owners’
right
of
occupation
of
the
property
by
tenants
who
pay
not
for
the
letting
but
for
the
use
of
the
property.
There
may
well
be
cases
wherein
the
extent
of
various
services
provided
by
the
landlord
under
the
terms
of
the
leasing
contract
is
such
that
the
rental
paid
by
the
tenant
can
be
regarded
as
in
a
substantial
measure
a
payment
for
such
services
as
well
as
for
the
use
of
the
property
and
the
interrelation
of
the
use
of
the
premises
with
the
use
of
such
services
may
be
so
extensive
that
the
whole
sum
paid
could
readily
be
regarded
not
as
mere
rental
of
property
but
as
true
receipts
of
a
business
of
providing
apartments
and
services
to
tenants
but
I
do
not
regard
this
as
a
case
of
that
kind.
The
nature
of
the
services
provided
in
my
opinion
also
has
a
bearing
on
the
question
some,
such
as
maid
service
and
linen
and
laundry
service,
being
more
indicative
of
a
business
operation
than
the
heating
of
the
building
which
in
my
view
is
so
closely
concerned
with
the
property
itself
as
to
offer
no
definite
indication
one
way
or
the
other.
Nor
do
I
think
that
the
fact
that
the
management
of
the
property
occupies
the
appellant’s
time
or
the
fact
that
he
uses
his
ear
to
go
to
and
from
the
property
indicate
that
the
operation
is
a
business
for
at
most
these
facts
indicate
that
he
renders
a
service
to
himself
and
to
the
other
owners
of
the
building
which
so
far
as
charged
for
represents
a
proper
outgoing
against
revenue
for
the
purpose
of
ascertaining
the
net
profit
divisible
among
the
owners
regardless
of
whether
the
rentals
are
mere
income
from
property
or
income
from
a
business.
If
the
appellant
had
a
profit
from
such
charges
it
would
no
doubt
be
taxable
as
his
income
but
there
is
no
indication
that
he
had
any
profit
therefrom
and
no
such
issue
has
been
raised.
Moreover
while
the
appellant’s
share
of
the
net
profit
of
the
Park
Strand
may
to
him
represent
both
his
share
of
the
profit
and
in
a
sense
the
result
of
his
efforts
the
share
or
his
wife
in
her
hands
does
not
represent
return
for
effort
on
her
part
but
simply
income
from
her
property
and
it
is
her
share
alone
with
which
the
case
is
concerned.
On
the
whole
there
appears
to
me
to
be
nothing
in
the
situation
which
affects
the
rentals
with
a
trading
character
as
distinct
from
mere
income
receipts
from
property
and
I
am
accordingly
of
the
opinion
that
the
profits
from
the
Park
Strand
were
not
profits
from
a
business
and
that
the
operation
of
the
Park
Strand
was
not
a
business
in
which
the
appellant
and
his
wife
were
partners.
Section
21(4)
therefore
cannot
be
invoked
to
support
the
assessment.
The
appeal
accordingly
succeeds
in
part
and
it
will
be
allowed
with
costs
and
the
re-assessment
will
be
referred
back
to
the
Minister
for
reconsideration
and
re-assessment
in
accordance
with
these
reasons.