Urie,
J:—These
are
appeals
by
way
of
trial
de
novo
by
the
plaintiffs
from
a
decision
of
the
Tax
Review
Board
rendered
on
February
16,
1972
affirming
assessments
made
by
the
defendant
against
them
in
respect
of
income
earned
by
them
for
the
taxation
years
1961
to
1966
inclusive.
By
agreement
the
actions
were
tried
together
and
the
evidence
adduced
is
applicable
in
all
appeals.
The
plaintiffs
are
all
members
of
the
Hutterian
Brethren
Church
which
was
founded
over
four
centuries
ago
in
Germany
by
Jacob
Hutter
and
are
known
colloquially
as
“Huttonites”.
His
successor
was
Peter
Rideman,
whose
Confession
of
Faith,
first
published
in
Germany
in
1565,
is
the
authoritative
source
of
Hutterian
doctrine,
belief
and
practice.
The
Hutterites
are
organized
in
colonies
of
approximately
100
persons
each.
When
the
members
of
a
colony
decide
that
it
has
become
too
large
for
effective
operation
a
small
number
of
them
will
break
off
from
the
“mother”
colony
and
with
the
financial
and
other
material
assistance
thereof
form
a
“daughter”
colony.
In
the
various
documents
which
were
tendered
in
evidence
on
the
trial
of
the
actions
the
colonies
are
described
as
congregations
or
communities
and
these
congregations
or
communities
are
associated
in
groups
known
respectively
as
DARIUS-LEUT,
LEHRER-LEUT
and
SCHMEID-LEUT.
Generally
speaking,
residents
in
the
colony
are
members
of
the
Hutterian
Brethren
Church
which
was
incorporated
in
Canada
by
an
Act
to
Incorporate
the
Hutterian
Brethren
Church,
Statutes
of
Canada,
15
Geo
VI,
c
77.
All
of
the
plaintiffs
herein
are
members
of
colonies
which
are
included
in
the
DARIUS-LEUT
group
of
congregations
or
communities.
section
4
of
the
incorporating
Act
reads
as
follows:
4.
The
objects
of
the
Corporation
shall
be
to
engage
in
and
carry
on
the
Christian
religion,
Christian
worship
and
religious
education
and
teaching
and
to
worship
God
according
to
the
religious
belief
of
the
members
of
the
Corporation.
The
Act
also
empowers
the
corporation
to
old
land
for
the
purposes
of
the
corporation
for
the
periods
of
time
limited
by
the
enactment,
to
borrow
money
for
the
purposes
of
the
corporation
and
to
invest
and
re-invest
any
of
its
funds
in
investments
prescribed
by
the
Act.
On
August
1,
1950
the
constitution
of
the
Hutterian
Brethren
Church
and
rules
as
to
community
of
property
was
enacted
pursuant
to
the
Act
of
incorporation
and
was
signed
by
the
appropriate
officers
of
each
of
the
colonies
then
existing
under
the
headings
of
the
three
aforementioned
groups
to
which
each
colony
belonged.
A
new
amended
constitution
was
enacted
on
May
28,
1970
but
it
was
agreed
that
the
constitution
of
1950,
filed
as
Exhibit
D1,
is
the
applicable
document
in
these
proceedings.
Article
2
of
that
constitution
may
be
summarized
conveniently
as
follows:
The
objects
and
powers
for
which
the
Church
is
formed
are,
it
is
stated,
to
follow
the
religious
precepts
established
by
Jacob
Hutter
in
such
a
way
that
the
members
achieve
one
entire
spiritual
unit
in
complete
community
of
goods
and
all
members,
and
especially
the
eiders,
are
charged
with
the
responsibility
of
carrying
out
the
objects
of
the
Church.
It
is,
moreover,
stated
that
the
capital
and
surplus
produce
and
surplus
funds
of
each
individual
congregation
or
community
of
the
Church
is
to
be
used
by
such
community
for
social
work
to
which
the
Church
is
dedicated.
Each
congregation
or
community
of
the
Church
is
empowered,
inter
alia,
as
follows:
To
engage
in,
and
carry
on
farming,
stock
raising,
milling,
and
all
branches
of
these
industries;
and
to
manufacture
and
deal
with
the
products
and
by-products
of
these
industries;
To
carry
on
any
other
business
(whether
manufacturing
or
otherwise)
which
may
seem
to
said
congregation
or
community
of
the
said
Church
capable
of
being
conveniently
carried
on
in
connection
with
its
business
or
calculated
directly
or
indirectly
to
enhance
the
property
or
rights
of
the
congregation
or
community;
In
general
each
community
is
further
empowered
to
acquire
businesses,
property
and
any
liabilities
of
any
person
or
company
carrying
on
any
business
authorized
by
the
Church;
to
carry
on,
to
apply
for,
purchase
or
otherwise
acquire
patents,
licences,
concessions
and
the
like
either
as
principals,
agents
or
otherwise;
and
to
do
such
other
things
as
are
conducive
to
the
attainment
of
the
objects
of
the
Church.
Each
congregation
is
also
empowered
to
purchase
or
otherwise
acquire
real
or
personal
property
and,
of
course,
to
sell
or
convey
such
property,
to
borrow
money
and
to
issue
security
for
such
borrowing
and
to
make,
amend
or
repeal
such
rules,
regulations
and
by-laws
as
are
necessary
for
the
good
administration
of
the
community.
Article
3
provides
that
the
Church
shall
be
comprised
of
all
of
the
congregations
or
communities
in
the
DARIUS-LEUT,
LEHRER-LEUT
and
SCHMEID-LEUT
groups.
The
following
articles
are
also
relevant
in
the
determination
of
the
issues
herein:
35.
Each
congregation
or
community
shall
be
comprised
of
all
persons
who
have
been
elected
to
membership
in
that
congregation
or
community
upon
their
request
and
who
have
become
members
and
communicants
of
the
Hutterian
Brethren
Church
in
the
manner
set
forth
in
the
book
written
by
Peter
Rideman
hereinbefore
referred
to,
and
who
have
been
chosen
and
elected
to
membership
upon
a
majority
vote
of
all
the
male
members
of
that
congregation
or
community
at
any
annual,
general
or
special
meeting
thereof.
36.
No
individual
member
of
a
congregation
or
community
shall
have
any
assignable
or
transferable
interest
in
any
of
its
property,
real
or
personal.
37.
All
property,
real
and
personal
of
a
congregation
or
community,
from
whomsoever,
whensoever,
and
howsoever
it
may
have
been
obtained,
shall
forever
be
owned,
used,
occupied,
controlled
and
possessed
by
the
congregation
or
community
for
the
common
use,
interest,
and
benefit
of
each
and
all
members
thereof,
for
the
purposes
of
said
congregation
or
community.
38.
AH
the
property,
both
real
and
personal,
that
each
and
every
member
of
a
congregation
or
community
has,
or
may
have,
own,
possess
or
may
be
entitled
to
at
the
time
that
he
or
she
joins
such
congregation
or
community,
or
becomes
a
member
thereof,
and
all
the
property,
both
real
and
personal,
that
each
and
every
member
of
a
congregation
or
community
may
have,
obtain,
inherit,
possess
or
be
entitled
to,
after
he
or
she
becomes
a
member
of
a
congregation
or
community,
shall
be
and
become
the
property
of
the
congregation
or
community
to
be
owned,
used,
occupied
and
possessed
by
the
congregation
or
community
for
the
common
use,
interest
and
benefit
of
each
and
all
of
the
members
thereof.
39.
None
of
the
property,
either
real
or
personal,
of
a
congregation
or
community
shall
ever
be
taken,
held,
owned,
removed
or
withdrawn
from
the
congegation
or
community,
or
be
granted,
sold
transferred
or
conveyed
otherwise
than
by
such
congregation
or
community
in
accordance
with
its
by-laws,
rules
and
regulations
and
the
provisions
of
these
Articles,
and
if
any
member
of
a
congregation
or
community
shall
be
expelled
therefrom,
or
cease
to
be
a
member
thereof,
he
or
she
shall
not
have,
take,
withdraw
from,
grant,
sell,
transfer
or
convey,
or
be
entitled
to
any
of
the
property
of
the
congregation
or
community
or
any
interest
therein;
and
if
any
member
of
the
congregation
or
community
shall
die,
be
expelled
therefrom
or
cease
to
be
a
member
thereof,
his
or
her
personal
representatives,
heirs
at
law,
legatees
or
devisees
or
creditors
or
any
other
person
shall
not
be
entitled
to,
or
have
any
of
the
property
of
the
congregation
or
community,
or
interest
therein,
whether
or
not
he
or
she
owned,
possessed
or
had
any
interest
In
or
to
any
of
the
property
of
the
congregation
or
community
at
the
time
he
or
she
became
a
member
thereof,
or
at
any
time
before
or
thereafter,
or
had
given,
granted,
conveyed
or
transferred
any
property
or
property
interest
to
‘the
congregation
or
community
at
any
time.
40.
Each
and
every
member
of
a
congregation
or
community
shall
give
and
devote
all
his
or
her
time,
labor,
services,
earnings
and
energies
to
that
congregation
or
community,
and
the
purposes
for
which
it
is
formed,
freely,
voluntarily
and
without
compensation
or
reward
of
any
kind
whatsoever,
other
than
herein
expressed.
45.
The
act
of
becoming
a
member
of
a
congregation
or
community
shall
be
considered
as
a
Grant,
Release,
Transfer,
Assignment,
and
Conveyance
to
that
gregation
(sic)
or
community
of
all
property,
whether
real
or
personal
owned
by
any
person
at
the
time
of
his
or
her
becoming
a
member
of
the
congregation
or
community,
or
acquired
or
inherited
at
any
time
subsequent
thereto;
such
property
to
be
owned,
occupied,
possessed
and
used
by
the
congregation
or
community
for
the
common
use
of
ll
its
members.
[The
italics
are
mine.]
From
all
of
the
above
it
is
apparent
that
there
was
a
clear
distinction
drawn
between
(a)
the
religious
affairs
of
the
Church
which
are
under
the
supervision
of
the
board
of
managers
composed
of
nine
persons,
three
of
whom
were
appointed
by
each
of
the
groups,
and
(b)
the
temporal
or
business
affairs
and
concerns
of
each
Church
member
which
were
to
be
managed
by
the
congregation
or
community
(hereinafter
called
the
“colony”)
to
which
each
belonged.
In
this
appeal
each
of
the
plaintiffs
is,
of
course,
a
duly
baptized
member
of
the
Hutterian
Brethren
Church
and
is,
as
well,
a
member
of
a
colony.
The
plaintiffs
Hofer,
Tschetter
and
Wurz
are
members
respectively
of
the
colonies
known
as
the
Hutterian
Brethren
of
Scotford,
the
Hutterian
Brethren
of
Mixburn
and
the
Hutterian
Brethren
of
Wilson,
each
of
which
is
a
company
limited
by
guarantee
and
incorporated
under
the
provisions
of
the
Alberta
Companies
Act.
The
plaintiffs
Joseph
Wipf
and
Jacob
Wipf
are
both
members
of
the
Hutterian
Brethren
of
Lakeside,
an
unincorporated
group.
In
the
cases
of
those
plaintiffs
whose
colonies
have
been
incorporated,
the
memoranda
of
association
in
each
case
include
objects
clauses
similar
to
or
identical
with
the
following
excerpt
from
the
memorandum
of
association
of
Mixburn
colony:
3.
The
objects
for
which
the
Company
is
established
are:
(a)
To
promote,
engage
in
and
carry
on
the
Christian
religion
and
religious
teachings,
and
connected
therewith
and
as
part
thereof,
the
religion
and
religious
teachings
of
the
Hutterian
Brethren
Church,
being
the
belief
of
the
members
of
said
Company;
to
engage
in,
carry
on,
and
conduct
farming,
agriculture,
milling,
manufacturing
of
flour
and
other
articles
from
agricultural
products,
and
mechanics
and
mechanical
arts,
necessary
thereto,
and
to
buy
and
sell
and
deal
in
said
agricultural
products
and
products
made
and
manufactured
therefrom.
and
other
articles,
material,
machinery,
implements
and
things
belonging
to,
or
necessary
to
engage
in,
carry
on
and
conduct
said
farming,
agriculture,
milling,
manufacturing,
mechanics
and
mechanical
arts
necessary
thereto,
and
as
a
part
of
and
connected
with
the
religion
and
religious
teachings
of
said
Company
and
members
thereof,
Each
of
the
memoranda
also
provides,
inter
alia:
(a)
that
all
property,
real
and
personal
of
the
company
shall
be
owned,
used,
occupied
and
possessed
by
the
company
for
“the
common
use,
interest
and
benefit
of
each
and
all
members
thereof”
for
the
purposes
of
the
company;
(b)
that
all
property,
real
and
personal
owned
or
possessed
by
a
member
at
the
time
he
joins
the
company
or
which
he
acquired
thereafter
is
similarly
owned,
used,
occupied
and
possessed
by
the
company
for
the
common
use,
interest
and
benefit
of
each
and
all
members
thereof
for
the
purposes
of
the
company;
(c)
that
no
property
shall
ever
be
withdrawn
by
a
member
on
death,
expulsion
or
withdrawal
from
membership;
(d)
that
each
member
shall
give
and
devote
all
of
his
or
her
time,
labour
services,
earnings
and
energies
to
the
company
and
the
purposes
for
which
it
is
formed
freely,
voluntarily
and
without
compensation
or
reward
of
any
kind;
(e)
that
the
members
of
the
company
shall
be
entitled
to
have
their
husbands,
wives
and
children
who
are
not
members
thereof
reside
with
them
and
be
supported,
maintained,
instructed
and
educated
by
the
company
so
long
as
they
obey,
abide
by
and
conform
to
the
rules,
regulations
and
by-laws
of
the
company.
in
so
far
as
the
unincorporated
colonies
are
concerned,
of
which
the
Lakeside
is
an
example,
a
document
which
might
be
described
as
articles
of
association,
contains
provisions
very
similar
to
those
referred
to
above
contained
in
the
memoranda
of
association
of
the
incorporated
colonies.
In
the
Lakeside
colony
there
are
five
trustees
elected
by
the
members
at
the
annual
meeting
of
the
colony.
Three
of
the
trustees
have
full
charge
and
management
and
control
of
the
affairs,
property
and
business
transactions
of
the
colony.
The
other
two
act
in
an
advisory
capacity
only.
The
above,
then,
sets
the
framework
for
these
appeals.
Counsel
for
the
plaintiffs
early
in
the
trial
acknowledged
that
he
was
not
arguing
that
the
colonies
were
charitable
organizations
within
the
meaning
of
paragraph
62(1
)(e)
of
the
Income
Tax
Act
but
simply
that
the
individual
members
of
each
colony
because
of
their
renunciation
of
private
property
and
the
right
to
compensation
for
their
labours
had
no
earnings,
and,
therefore,
no
taxable
income.
Evidence
was
adduced
that
no
members
of
the
Hutterian
Brethren
had
any
income,
savings,
property,
insurance,
superannuation
benefits,
houses,
livestock,
motor
vehicles,
farm
equipment,
tools
or
were
the
recipients
of
pensions
or
children’s
allowances
from
any
governmental
source.
Their
physical
needs
such
as
for
clothing,
food,
shelter,
medical
and
dental
attention,
equipment,
tools
and
all
other
necessities
were
provided
by
the
colony
through
its
officers
or
trustees.
Most
of
their
food
was
supplied
from
produce
and
meat
grown
or
raised
on
their
communal
farms.
To
a
large
extent
they
manufactured
their
own
clothing
and
footwear
but
purchases
of
food
not
grown
on
the
farm
and
cloth
and
leather
for
clothing
and
footwear
were
made
from
stores
in
nearby
communities.
Their
income
was
derived
from
the
sale
of
livestock,
dairy
products,
poultry,
eggs,
vegetables,
grain
and
hides
and
fur
and
all
receipts
of
such
earnings
were
accounted
for
by
the
Bursar
of
the
colony
and
by
the
Head
Preacher
who
are
also
responsible
for
payment
of
all
expenses
relating
to
the
operation,
including
taxes
on
the
real
estate
owned
by
each
colony.
Those
officers
are
responsible
for
maintaining
proper
books
of
account,
bank
accounts
and
investment
of
surplus
funds.
Surplus
funds
are
said
to
be
used
in
the
work
of
the
Church.
Audited
statements
of
the
accounts
were
prepared
by
professional
accountants
each
year.
The
Hutterites
carry
on
efficient
and
successful
farm
operations.
Financial
statements
filed,
assuming
they
are
typical
of
all
or
most
of
the
colonies’
operations,
indicate
that
they
have
substantial
net
profits
each
year
the
tax-ability
of
which
has
led
to
these
proceedings.
Apparently
until
the
year
1960,
the
colonies
paid
no
income
taxes
of
any
kind.
Whether
returns
were
ever
filed
by
or
on
behalf
of
the
colonies
for
the
individuals
comprising
them
prior
to
that
time
was
not,
to
my
recollection,
disclosed
in
evidence.
However,
some
time
after
1960
assessments
were
levied
at
least
against
the
corporate
entities
from
which
appeals
were
taken.
Ultimately
an
agreement
of
understanding
was
entered
into
in
1968
between
the
Minister
of
National
Revenue
and
certain
of
the
appellants
for
and
on
behalf
of
the
Hutterian
Brethren
colonies
in
Canada.
The
agreement
set
forth
the
method
of
computing
the
taxable
income
of
each
and
every
member
of
each
colony.
The
member
colonies
of
the
LEHRER-LEUT
and
SCHMEID-LEUT
groups
have
since
that
time
abided
by
the
terms
of
the
agreement
and
paid
tax
in
accordance
therewith
for
each
of
the
years
from
and
including
1961
to
date.
THE
DARIUS-LEUT
group,
to
which
the
plaintiffs
herein
belong,
refuses
to
be
bound
by
the
agreement
as
a
result
of
which
the
adult
members
of
each
of
the
colonies
in
the
group
were
assessed
by
the
Minister
for
each
of
the
years
1961
to
1966
inclusive
in
accordance
with
the
principles
set
out
in
the
above
mentioned
agreement
filed
as
Exhibit
D8
in
these
proceedings,
thus
leading
to
the
appeals
to
the
Tax
Review
Board
and
now
to
this
Court.
As
I
understand
his
submissions,
counsel
for
the
plaintiffs
argues
that
(a)
no
income
tax
is
leviable
against
any
Hutterian
Brethren
because
they
are
not
in
receipt
of
any
income
within
the
meaning
of
sections
3
and
4
of
the
Income
Tax
Act;
(b)
even
if
they
are
found
to
be
in
receipt
of
taxable
income
they
are
members
of
a
religious
order
and
had,
as
such,
taken
a
vow
of
perpetual
poverty;
therefore,
the
provisions
of
subsection
27(2)
of
the
Income
Tax
Act
apply
and
each
is
entitled
to
deduct
from
his
income
for
the
year
an
amount
equal
to
his
earned
income
since
that
amount
had
been
paid
to
the
Order;
(c)
if,
in
any
event,
the
income
of
a
member
is
found
to
be
taxable
by
reason
of
the
provisions
of
the
Income
Tax
Act,
such
provisions
are
inoperative
because
they
are
in
conflict
with
the
provisions
of
the
Canadian
Bill
of
Rights
and
in
particular
paragraph
1(c)
thereof
in
that
its
effect
is
to
interfere
with
the
Hutterites’
freedom
of
religion.
It
is
the
position
of
the
defendant
that
the
farmers
in
each
colony
are
collectively
engaged
in
the
business
of
farming
and
that
the
moneys
earned
by
each
are,
by
contract
arising
out
of
the
articles
of
association,
assigned
or
made
over
before
their
receipt
by
such
farmers
to
the
company
for
use
in
accordance
with
the
provisions
of
the
memorandum
and
articles
of
association.
It
is,
therefore,
income
in
the
hands
of
each
for
tax
purposes.
Such
income
is
taxable
on
an
accrual
basis
and
not
on
a
cash
basis
since
there
is
no
evidence
that
an
election
to
be
taxed
on
a
cash
basis
has
been
made
by
the
plaintiffs
as
required
by
paragraph
85F(1)(i)
of
the
Income
Tax
Act.
As
will
hereafter
appear
I
am
of
the
opinion
that
the
plaintiffs
are
in
receipt
of
income
from
a
business
or
property
within
the
meaning
of
section
3
of
the
Income
Tax
Act
and
are,
therefore,
taxable
on
the
profits
therefrom
by
virtue
of
section
4
of
the
said
Act.
I
believe
this
to
be
the
case
because
the
business
of
farming
was
carried
on
by
the
plaintiffs
in
common
with
other
members
of
their
respective
colonies
under
an
agreement
which
operated
as
a
disposition
or
assignment
of
the
income
earned
by
the
plaintiffs
from
such
business,
which
income
was
for
the
common
use
and
benefit
of
each
member
and,
therefore,
the
plaintiffs
were
required
to
declare
their
aliquot
share
notwithstanding
that
it
had
not
been
withdrawn
by
them.
In
Barickman
Hutterian
Mutual
Corporation
v
Nault
et
al,
[1939]
SCR
223,
the
Supreme
Court
was
called
upon
to
decide
whether
the
appellant
was
a
farmer
within
the
meaning
of
that
word
as
used
in
the
Farmers’
Creditors
Arrangement
Act,
1934.
The
appellant
in
that
case,
a
colony
of
the
Hutterian
Brethren
Church,
was
a
corporation
created
by
a
spectal
act
of
the
Manitoba
legislature.
The
objects
of
the
corporation
as
set
out
in
the
Act
were
twofold:
(a)
to
promote,
engage
and
carry
on
the
Christian
religion
according
to
the
beliefs
of
its
members,
and
(b)
to
engage
in
and
carry
on
farming,
stock-raising,
milling
etc.
The
Act
contained
clauses
of
a
similar
nature
to
those
contained
in
the
articles
of
association
of
the
colonies
to
which
the
plaintiffs
herein
belonged,
particularly
in
relation
to
community
of
property
and
devoting
labour
and
earnings
to
the
corporation
without
compensation
or
reward.
At
page
227
Chief
Justice
Duff
found
as
follows:
On
the
other
hand,
the
members
of
the
corporation
are
farmers
dependent
for
their
livelihood
and
the
livelihood
of
their
families
upon
revenues
derived
from
their
labours
and
those
of
their
brethren
in
farming
and
in
necessarily
incidental
pursuits;
the
Corporation
being
the
depositary
of
the
title
to
all
the
property
and
all
the
revenues
of
the
community,
which
it
holds
and
administers
for
their
benefit.
The
Corporation
(which
takes
the
place
of
the
former
trustees)
is
simply
the
legal
instrumentality
by
which
this
autonomous
community
of
farmers
manages
under
the
law
its
affairs
and
those
of
its
members
(according
to
the
plan
of
community
of
property);
and
I
can
see
no
impropriety
in
designating
it
as
a
“farmer”
as
a
“person”
whose
principal
occupation
is
farming.
In
a
temporal
sense,
farming
(with
necessarily
incidental
pursuits)
is
not
only
the
“principal”,
it
is
said
to
be
the
exclusive
occupation
of
the
members
of
this
community.
The
Chief
Justice,
it
can
be
seen,
found
that,
notwithstanding
that
the
corporation
had
religious
objects,
its
principal
occupation
was
that
of
farmer
and
that
the
corporation
was
the
depositary
for
the
revenues
derived
therefrom
which
it
holds
and
administers
for
their
benefit.
On
the
basis
of
this
authority
then,
the
corporations
and
trusteeships
acquiring
the
revenues
earned
by
the
plaintiffs
herein
are
mere
depositaries
for
the
income
earned
by
each
member.
Since
no
distinction
can
be
drawn
between
individual
members
each
is
the
recipient
of
an
equal
share
of
the
net
income,
even
though
it
is
not
drawn
by
them,
and
this
is
income
within
the
meaning
of
sections
2,
3,
and
4
and
therefore
taxable
in
their
hands.
At
page
231
Kerwin,
J,
as
he
then
was,
found,
as
I
do
in
this
case:
The
evidence
is
uncontradicted
that
not
only
the
principal
occupation
but
the
sole
occupation
of
all
its
members
is
farming.
He
then
referred
to
section
2,
paragraphs
(a)
and
(b)
of
the
Act
of
Incorporation
which
are
similar
in
terms
to
the
objects
clauses
in
the
letters
patent
of
the
corporations
of
which
the
plaintiffs
are
members.
Again
on
page
231
he
says:
.
.
.
and
in
section
2
of
the
Act
of
Incorporation
the
first
object
“of
the
corporation”
is
stated
to
be:—
(a)
to
promote,
engage
in
and
carry
on
the
Christian
religion,
Christian
worship
and
religious
education
and
teachings,
and
to
worship
God
according
to
the
religious
belief
of
the
members
of
the
corporation;
This,
I
think,
may
be
taken
to
be
the
spiritual
object.
So
far,
however,
as
the
temporal
object
of
the
“corporation”
and
its
temporal
occupation
and
chief
business
are
concerned,
the
“corporation”
was
by
clause
(b)
of
section
2
authorized:—
(b)
to
engage
in,
and
carry
on
farming,
stock-raising,
milling
and
all
branches
of
‘these
industries;
and
to
manufacture
and
deal
with
the
products
and
by-products
of
these
industries;
subsequent
clauses
authorized
the
“corporation”
to
carry
on
any
other
business
(whether
manufacturing
or
otherwise)
which
might
seem
capable
of
being
conveniently
carried
on
in
connection
with
its
business,
etc,
but
its
principal
occupation
as
carried
on
by
its
members
does
consist
in
farming
or
the
tillage
of
the
soil.
To
summarize,
in
the
Barickman
case
(supra)
the
colony,
a
corporate
entity,
was
seeking
the
benefit
of
a
federal
Act
providing
for
the
compromise
and
rearrangement
of
debts
of
farmers.
In
the
case
at
bar
the
Minister
of
National
Revenue
is
endeavouring
to
apply
the
provisions
of
another
federal
statute,
the
Income
Tax
Act,
to
the
income
earned
by
the
members
of
a
colony
from
the
business
of
farming
as
defined
by
paragraph
139(1
)(p)
of
the
Act.
The
situations
are,
therefore,
analogous
and
the
reasoning
in
the
Barickman
case
is,
in
my
opinion,
applicable
in
this
case
with
the
result
that
it
would
seem
there
is
nothing
to
pre-
clude
the
application
of
the
Income
Tax
Act
to
the
farm
income
merely
because
of
the
reference
iin
each
colony’s
articles
of
association
to
the
promotion
of
religion.
The
reasons
of
the
majority
of
the
Court
in
Hofer
et
al
v
Hofer
et
al,
[1970]
SCR
958,
at
first
glance
would
not
appear
to
support
that
result
although
Ritchie,
J
in
those
reasons
cited
with
approval
the
Barickman
decision.
In
the
Hofer
case
the
parties
were
all
Hutterian
Brethren
but
the
appellants
had
been
expelled
from
the
Church
and
subsequently
the
colony
to
which
they
had
belonged
because
they
had
become
adherents
of
another
faith.
When
the
colony
had
been
formed
each
of
the
seven
parties
to
the
action
had
signed
articles
of
association
which
included
an
objects
clause
very
similar
to
that
of
the
Mixburn
colony
hereinbefore
set
forth
and
many
other
of
the
articles
were
almost
identical
to
those
referred
to
in
the
Mixburn
articles
of
association.
They
sought
a
declaration
that
they
were
still
members
of
the
Hutterian
Brethren
Church,
together
with
an
order
for
the
winding
up
of
the
affairs
of
the
colony,
the
appointment
of
a
receiver
to
gather
in
its
assets,
an
accounting
and
direction
that
all
of
its
assets
should
be
distributed
equally
among
the
appellants
and
the
respondents.
The
Supreme
Court
held
that
the
trial
judge,
whose
judgment
was
affirmed
by
the
Manitoba
Court
of
Appeal,
was
right
in
dismissing
the
action
principally
on
the
ground
that
the
appellants
were
validly
expelled
pursuant
to
the
articles
of
association
which
they
had
voluntarily
signed.
At
page
969,
Ritchie,
J,
whose
reasons
were
concurred
in
by
Martland
and
Judson,
JJ,
states
as
follows:
It
follows
in
my
view
that,
notwithstanding
the
fact
that
the
Interlake
Colony
was
a
prosperous
farming
community,
it
cannot
be
said
to
have
been
a
commercial
enterprise
in
the
sense
that
any
of
its
members
was
entitled
to
participate
in
its
profits.
The
Colony
was
merely
an
arm
of
the
Church
and
the
overriding
consideration
governing
the
rights
of
all
the
Brethren
was
the
fulfilment
of
their
concept
of
Christianity.
To
the
Hutterian
Brethren
the
activities
of
the
community
were
evidence
of
the
living
Church.
In
this
context
I
find
it
impossible
to
view
the
Interlake
Colony
as
any
form
of
partnership
known
to
the
law.
Notwithstanding
the
apparent
conflict
between
the
views
as
to
the
legal
nature
of
the
colony
as
expressed
in
the
Barickman
case
(supra)
and
as
expressed
by
Ritchie,
J
in
the
Hofer
case
(supra),
I
do
not
believe
that
they
are
in
fact
inconsistent.
In
reaching
this
conclusion
it
must
first
be
borne
in
mind
that
articles
of
association
comprise,
in
fact,
an
agreement
between
shareholders
or
members
which
are
binding
upon
all
of
them
(see
MNR
v
Dworkin
Furs
(Pembroke)
Limited
et
al,
[1967]
SCR
223
at
236;
[1967]
CTC
50
at
61;
67
DTC
5035
at
5041).
Secondly
it
must
be
noted
that
Ritchie,
J
expressly
limited
his
view
that
the
colony
was
not
a
commercial
enterprise
by
using
the
words
“in
the
sense
that
any
of
its
members
were
entitled
to
participate
in
its
profits’’.
By
these
words
I
take
it
that
he
recognized
that
an
enterprise
can
be
commercial
and
yet
exclude
the
right
of
shareholders
and
others
to
participate
in
its
profits.
An
example
of
that
type
of
enterprise
is
one
such
as
is
found
in
this
case
where
by
agreement
arising
out
of
the
articles
of
association,
to
which
agreement
the
plaintiffs
were
parties
by
reason
of
their
membership
in
their
respective
colonies,
the
parties
contracted
themselves
out
of
their
right
to
receive
the
share
of
the
net
profits
to
which
they
would
have
been
otherwise
entitled.
The
majority
of
the
Court
refused
to
relieve
against
the
forfeiture
of
all
of
the
appellants’
property
because
such
forfeiture
was
the
result
of
the
contractual
obligation
voluntarily
incurred
by
the
appellants
through
their
articles
of
association,
not
only
because
they
were
members
of
the
colony
governed
by
such
articles
but
also
because
they
were
signatories
thereto.
This
was
the
purport
of
the
reasons
of
Cartwright,
CJ
(with
whom
Spence,
J
concurred)
who
agreed
with
the
result
reached
by
the
majority
but
not
entirely
for
the
same
reasons.
The
contractual
nature
of
the
forfeiture
of
the
right
to
earnings
derived
from
their
labours
similarly,
in
my
opinion,
bars
the
plaintiffs
from
claiming
that
they
are
not
liable
to
pay
tax
on
such
earnings
notwithstanding
the
fact
that
they
did
not
receive
them,
whether
or
not
they
are
members
of
colonies
which
are
incorporated
or
not
incorporated.
The
fact
is
that
by
contract
they
voluntarily
assigned
or
made
a
disposition
of
such
earnings
to
a
depositary
in
the
sense
that
that
term
is
used
by
Chief
Justice
Duff
in
the
Barickman
case
(supra)
and
the
depositary
retained
those
earnings
for
their
use
and
benefit
in
common
with
all
of
their
fellow
members.
It
is
clear
then
that
such
earnings
are
the
earnings
of
the
members
and
are
properly
included
as
income
in
reporting
their
taxable
income
in
any
taxation
year
as
required
by
the
Income
Tax
Act.
The
fact
that
the
assignment
was
made
prior
to
the
income
being
earned
does
not,
from
a
tax
point
of
view,
make
the
result
different
than
if
it
had
been
made
after
earning
t.
The
same
conclusion
may
be
reached
in
another
way.
Lagacé
v
MNR,
[1968]
2
Ex
CR
98;
[1968]
CTC
98;
68
DTC
5143,
is
a
decision
in
which
the
factual
situation
is
entirely
different
from
this
case
but
the
language
used
in
describing
how
revenue
not
actually
received
by
a
business
may
be
income
of
the
business
for
tax
purposes
is
appropriate.
Jackett,
P,
as
he
then
was,
at
page
109
[108,
5149]
said:
...
for
purposes
of
Part
I
of
the
Income
Tax
Act,
profits
from
a
business
are
income
of
the
person
who
carries
on
the
business
and
are
not,
as
such,
income
of
a
third
person
into
whose
hands
they
may
come.
This
to
me
is
the
obvious
import
of
Sections
3
and
4
of
the
Income
Tax
Act
and
is
in
accordance
with
my
understanding
of
the
relevant
judicial
decisions.
At
page
111
[109-10,
5150]
under
the
heading
of
Appendix
in
the
same
judgment,
Jackett,
P
further
stated:
So
that
there
may
be
no
misunderstanding
as
to
the
view
upon
which
I
have
acted
in
deciding
this
case,
I
should
like
to
make
it
clear
that,
as
I
see
it,
there
Is
a
clear
distinction
in
principle
between
(a)
the
case
where
a
trader
carries
out
business
transactions
of
his
business
in
the
name
of
some
other
person
who
is
agent,
trustee
or
“nominee”,
In
which
case,
the
profits
from
selling
his
“stock-in-trade”
are
profits
of
his
business
even
though
the
transactions
are
carried
out
in
the
name
of
somebody
else,
and
(b)
the
case
where
a
trader
takes
stock-in-trade
out
of
his
business
and
uses
It
himself
or
gives
it
to
somebody
else
so
that
there
Is
no
sale
of
it
in
the
course
of
the
business
and
can
therefore
be
no
profit
from
a
sale
of
it
in
the
course
of
his
business.
Again
at
page
112
[110,
5150]
he
says:
If
the
principles
applied
in
such
cases
apply
to
matters
arising
under
the
Canadian
Income
Tax
Act,
It
would
appear,
strangely
enough,
that
the
result
would
depend
on
whether
the
taxpayer
kept
his
accounts
on
a
cash
or
accrual
basis.
If
he
kept
his
accounts
on
a
cash
basis,
he
would
not
bring
in
any
amount
on
the
revenue
side
of
the
accounts
of
the
business
in
respect
of
the
stock-in-trade
removed
from
the
business
even
though
the
cost
of
acquiring
it
was
reflected
in
the
accounts
of
the
business.
If
he
kept
his
accounts
on
an
accrual
basis,
he
would
bring
in,
as
revenue,
the
value
of
the
stock-in-trade
so
removed
as
that
value
was
at
the
time
of
removal.
Counsel
for
the
defendant
contended
on
the
basis
of
the
Lagacé
decision
(supra)
that
the
plaintiffs
were
engaged
in
the
business
of
farming,
had
assigned
or
given
up
the
revenue
rising.
from
such
farming
operation
to
a
company,
not
because
of
a
bona
fide
business
transaction
between
them
but
to
implement
a
contract
between
them,
the
object
of
which
was
to
ensure
that
they
complied
with
the
religious
requirements
of
their
sect.
Since
they
had
not
elected
to
be
taxed
on
a
cash
basis
it
was
necessary
for
them
to
bring
in
as
revenue
the
value
of
the
stock-in-trade
sold
by
the
company
on
behalf
of
the
appellants.
After
the
appropriate
adjustments
to
determine
the
taxable
income
this
then
was
taxable
in
the
hands
of
the
individual
members.
The
amount
of
such
taxable
income
was
determined
using
the
only
method
possible
in
the
circumstances
namely,
by
determining
the
gross
revenue
of
the
corporate
entity
from
which
were
deducted
such
outlays
as
were
incurred
for
the
purpose
of
gaining
or
producing
the
income
and
generally
computing
such
income
in
the
same
manner
as
was
done
In
the
case
of
the
LEHRER-LEUT
and
SCHMEID-LEUT
groups
‘pursuant
to
the
memorandum
of
understanding
hereinbefore
referred
to.
I
am
in
agreement
with
these
submissions
and
find
that
for
these
reasons
too,
the
plaintiffs
are
in
receipt
of
taxable
income.
Having
so
concluded,
I
must
deal
with
the
plaintiffs’
contention
that
a
Hutterite
is
a
member
of
a
“religious
order”
within
the
meaning
of
subsection
27(2)
of
the
Income
Tax
Act
and,
having
taken
a
vow
of
poverty,
may
deduct
from
his
income
for
the
year
the
amount
of
his
earned
income,
if
that
income
was
paid
to
the
order.
Neither
by
its
incorporating
statute
nor
by
its
constitution
is
the
Hutterian
Brethren
Church
empowered
to
engage
in
farming
or
to
receive
and
retain
beneficially
either
the
assets
owned
or
revenue
earned
by
its
members
or
by
its
colonies.
It
does
have
the
power
to
hold
land
but
only
for
the
limited
periods
of
time
permitted
by
section
9
of
its
incorporating
statute.
On
the
other
hand
its
constitution
empowers
colonies
to
hold
property
of
all
kinds
and
requires
members
of
the
colony,
who
must
be
members
of
the
distinct
and
separate
entity,
the
Hutterian
Brethren
Church,
to
assign
all
of
the
property
they
own
when
they
become
members
of
the
Church,
or
acquire
thereafter,
to
the
colony.
It
is
clear
that
the
whole
scheme
of
organization
is
to
make
a
clear
separation
of
the
Church
in
its
purely
religious
context
from
the
colony,
the
members
of
which
engage
in
both
religious
and
secular
activities.
There
are
several
authorities
for
the
proposition
that
when
an
organization
has
both
charitable
and
non-charitable
objects
it
is
deemed
not
to
be
a
charitable
entity
for
purposes
of
taxation.
(See
Keren
Kayemeth
Le
Jisroel
Ltd
v
Commissioner
of
Inland
Revenue,
17
TC
27,
The
Oxford
Group
v
Commissioner
of
Inland
Revenue,
31
TC
221,
and
Guaranty
Trust
Company
of
Canada
v
MNR,
[1967]
SCR
133;
[1966]
CTC
755;
67
DTC
5003.)
In
the
latter
case
Ritchie,
J
pointed
out
that
if
some
of
the
purposes
of
the
letters
patent
of
an
entity
are
exclusively
charitable
then
it
remains
to
be
determined
whether
the
other
objects
and
purposes
for
which
the
association
was
incorporated
are
such
as
to
deprive
it
of
its
character
as
a
charity.
At
page
144
[761,
5006]
he
states
I
am,
however,
of
opinion
that
as
the
Association
is
a
Letters
Patent
Company,
the
question
of
whether
it
was
“constituted
exclusively
for
charitable
purposes”
cannot
be
determined
solely
by
reference
to
the
objects
and
purposes
for
which
it
was
originally
incorporated.
He
then
adopted
the
statement
made
by
Lord
Denning
in
Institution
of
Mechanical
Engineers
v
Cane,
[1961]
AC
696
at
723,
as
follows:
.
.
.
The
first
question
is
whether
the
Institution
of
Mechanical
Engineers
Is
a
“society
instituted
for
the
purpose
of
science
exclusively”.
I
do
not
think
this
question
is
to
be
solved
by
looking
at
the
royal
charter
alone
and
construing
it
as
if
you
were
sitting
aloft
in
an
Ivory
tower,
oblivious
of
the
purposes
which
the
institution
has
in
fact
pursued.
That
would
be
proper
enough
if
you
had
only
to
consider
the
purposes
for
which
the
society
was
originally
instituted.
But
that
is
not
the
test.
A
society
may
be
originally
instituted
for
certain
purposes
and
afterwards
adopt
other
purposes.
You
then
have
to
ask
yourself
this
question:
for
what
purpose
Is
the
society
at
present
instituted?
Drawing
an
‘analogy
then
between
finding
a
body
to
be
one
constituted
exclusively
for
charitable
purposes
and
one
constituted
exclusively
for
religious
purposes,
I
find
that
the
main
purpose
for
which
the
colony,
as
distinct
from
the
Church,
is
constituted,
both
originally
and
at
present,
is
farming,
which
farming
is
not
just
for
the
purpose
of
providing
food
for
each
member
and
his
family
but
for
profit.
The
uses
to
which
the
profits
or
earnings
are
put
are
immaterial
from
the
point
of
view
of
the
Income
Tax
Act.
Since
the
objects
or
purposes
of
each
colony
are
not
exclusively
religious
they
cannot
be,
in
my
opinion,
“religious
orders”
within
the
meaning
of
subsection
27(2)
of
the
Act
and
since
the
issues
in
these
appeals
arise
out
of
the
plaintiffs’
membership
in
their
respective
colonies,
they
are
not,
therefore,
members
of
a
religious
order.
If
that
is
the
case
I
do
not
have
to
decide
whether
the
members,
as
such,
have
taken
a
vow
of
perpetual
poverty
within
the
meaning
of
that
section.
As
previously
indicated,
the
plaintiffs
have
also
argued
that
the
provisions
of
the
Income
Tax
Act,
in
so
far
as
they
are
concerned,
are
inoperative
because
they
are
in
conflict
with
the
provisions
of
the
Canadian
Bill
of
Rights
in
that
their
right
to
freedom
of
religion
has
been
interfered
with.
The
argument
of
the
plaintiffs
it
would
seem
Is
based
upon
the
view
that
if
the
Hutterites
are
forced
to
pay
tax
on
income
earned,
it
means
that,
in
some
mysterious
way,
they
are
being
forced
to
accept
income
which
their
religious
beliefs
do
not
permit
them
to
accept.
The
application
of
the
Income
Tax
Act
in
no
way
Imposes
any
obligation
upon
the
Hutterites
to
accept
income.
All
that
has
been
done
is
to
enact
legislation
within
the
powers
of
the
Parliament
of
Canada
requiring
the
taxing
authorities
to
tax
the
income
earned
by
all
Canadians
including
Hutterites.
This
does
not
mean
that
there
has
been
any
deprivation
of
his
freedom
to
practise
the
religion
of
his
choice
in
the
manner
required
by
his
Church
nor
that
he
is
thereby
forced
to
infringe
any
of
the
tenets
of
his
faith
and
it
does
not
in
any
way
constitute
an
infringement
of
the
basic
rights
given
all
Canadians
under
the
Bill
of
Rights.
As
further
support
for
this
conclusion,
it
must
be
noted
that
there
was
tendered
in
evidence
an
excerpt
from
Peter
Rideman’s
Confession
of
Faith
which
specifically
states
that
We
likewise,
are
willing
to
pay
taxes,
tribute
or
whatever
men
may
term
it
and
in
no
way
oppose
it
for
we
have
learned
this
from
our
Master,
Christ,
who
not
only
paid
it
himself
but
also
commanded
others
to
do
so
saying,
“Render
unto
Caesar
what
is
Caesar’s
and
to
God
what
is
God’s”.
Therefore
we
as
his
disciples
desire
with
all
diligence
to
follow
and
perform
his
command
and
not
to
oppose
the
government
in
this.
The
excerpt
goes
on
to
say
that
where
taxes
are
demanded
for
the
special
purpose
of
going
to
war
they
will
give
nothing.
However,
the
important
thing
to
observe
is,
of
course,
that
notwithstanding
the
fact
that
it
has
been
argued
by
the
plaintiffs’
counsel
that
the
Income
Tax
Act
interferes
with
the
plaintiffs’
freedom
of
religion,
by
their
own
Confession
of
Faith
they.
are
bound
to
pay
taxes
and,
in
fact,
the
evidence
discloses
that
they
do
pay
taxes
on
their
real
property
without
any
such
plea
apparently
being
taken.
For
all
of
the
above
reasons
I
find
that
the
plaintiffs
were
properly
assessed
by
the
defendant
and,
therefore,
the
appeals
are
dismissed
with
costs.
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