FOURNIER,
J.:—This
is
an
appeal
from
the
decision
of
the
Income
Tax
Appeal
Board,
dated
December
29,
1953,
which
allowed
the
respondent’s
appeal
from
its
income
tax
assessment
for
its
taxation
years
1947
and
1948,
on
the
ground
that
the
respondent
was
not
deriving
any
profit
for
itself
from
its
operations
but
was
acting
on
behalf
of
its
members
and
had
no
taxable
income.
The
question
to
be
determined
is
whether
the
respondent
had
income
liable
to
tax
in
respect
of
these
taxation
years.
In
the
affirmative,
was
the
amount
of
the
tax
to
be
paid
by
the
respondent
under
the
provisions
of
the
Income
War
Tax
Act,
R.S.C.
1927,
ce.
97,
and
amendments
thereto,
in
each
of
its
1947
and
1948
taxation
years,
properly
determined.
According
to
its
Memorandum
of
Association
the
respondent
is
an
association
incorporated
under
the
provisions
of
the
Saskatchewan
Agricultural
Co-operative
Associations
Act
and
registered
as
such
on
April
14,
1914,
and
its
objects
were
to
produce,
purchase
or
sell
livestock,
farm
products,
building
and
fencing
material,
fuel,
flour,
feed
and
such
other
commodities
as
may
be
shipped
in
car
lots
and
distributed
from
a
warehouse
upon
the
co-operative
plan.
The
capital
stock
of
the
Association
was
to
consist
of
500
shares
of
$10
each.
It
is
admitted
that
during
its
taxation
years
1947
and
1948
the
respondent
was
a
corporation
registered
under
The
Co-operative
Associations
Act,
R.S.S.
1940,
c.
179,
and
amendments
thereto.
The
purpose
of
associations
incorporated
under
the
above-mentioned
Act
is
to
establish
and
operate
any
co-operative
business
or
enterprise
specified
in
its
memorandum
of
association.
The
objects
of
these
associations
are
enumerated
in
Section
5
of
the
Act
as
follows:
“(a)
purchasing,
procuring,
selling,
exchanging,
hiring
and
dealing
in
goods,
wares
and
merchandise;
(b)
producing,
purchasing
and
selling
livestock
and
farm
products
;
(c)
preparing,
adapting,
producing,
processing
and
manufacturing
goods,
wares
and
merchandise
for
sale
by
it
to
its
consumer
members
and
patrons
;
(d)
establishing,
maintaining
and
operating
any
one
or
more
of
the
following:
a
library,
a
rest
room,
a
club
room
or
a
public
hall
;
(e)
erecting,
purchasing,
taking
on
lease
or
otherwise
acquiring
apartment
blocks,
houses,
dwellings
and
lodgings,
and
operating
the
same;
(f)
rendering
to
its
members
and
patrons
services
of
any
kind
whatsoever
incidental
to
its
objects.’’
These
associations
have
ancillary
and
incidental
powers
to
do
all
the
things
conducive
to
the
attainment
of
the
above
objects
and
their
memorandum
of
association
may
be
amended
with
the
approval
of
the
registrar.
They
may
also
pass
by-laws
not
inconsistent
with
the
provisions
of
the
Act
or
of
the
standard
by-laws.
Section
10
of
the
above
statute
reads
as
follows:
“10.
(1)
An
association
may
at
an
annual
meeting
or
a
general
meeting
called
for
the
purpose
pass
such
supplemental
bylaws
not
inconsistent
with
the
provisions
of
the
standard
bylaws
as
may
be
deemed
advisable
by
the
association,
and
without
limiting
the
generality
of
the
foregoing
may,
notwithstanding
anything
in
this
Act
contained,
pass
supplemental
bylaws
.
.
.”
These
supplemental
by-laws
may
deal
with
the
application
of
members
or
patrons
dividends,
the
retention,
variation
or
limitation
of
dividends,
the
payment
or
non-payment
of
interest
on
loan
capital,
etc.
On
March
21,
1947,
the
respondent
passed
and
registered
supplemental
by-laws
providing
that
the
standard
by-laws
as
prepared
by
the
Registrar
of
Co-operatives
shall
not
apply
to
their
association.
The
by-law
hereinafter
referred
to
and
passed
on
or
after
the
above-mentioned
date
were
passed
in
accordance
with
the
provisions
of
the
aforesaid
section
of
the
Statute.
The
respondent
association,
from
its
incorporation
till
October
29,
1943,
operated
on
a
share
capital
basis.
But
on
that
date,
by
By-law
No.
23,
it
purchased
all
the
shares
held
by
each
of
its
members,
except
two
which
were
retained
by
the
said
members.
From
there
on,
members
could
not
own
more
than
two
shares
each.
The
purchase
was
made
by
crediting
the
shareholders
with
an
amount
equivalent
to
the
value
of
the
shares
on
a
demand
loan
account
in
the
name
of
the
member,
on
which
interest
at
the
rate
of
4
per
cent
was
to
be
paid.
On
March
21,
1947,
by
By-law
No.
30,
it
was
provided
that
the
remaining
two
shares
held
by
each
member
were
re-purchased
and
an
amount
equivalent
to
their
value
was
placed
to
the
member’s
credit
in
a
deposit
account.
These
deposits
were
repayable
to
the
member
on
his
leaving
the
district,
on
the
association
being
dissolved,
on
the
death
of
the
member
or
on
the
association
deciding
to
repay
a
member
his
deposit
account.
The
same
by-law
also
provided
that
61
a
member
shall
be
a
person
who
obtains
his
supplies
or
part
thereof
through
the
Association’’.
It
further
provided
that
no
patronage
dividend
would
be
payable
to
a
member
in
cash
until
he
had
$20
on
deposit
in
the
association
and
that
any
patronage
refunds
due
to
him
would
be
credited
to
his
account
until
it
reached
that
amount.
On
the
same
date,
By-law
No.
32
was
passed
providing
that
members
could
deposit
funds
with
the
Association
in
addition
to
the
$20
deposit,
such
funds
repayable
on
demand.
Interest
could
be
paid
on
these
deposits
and
has
been
paid
to
members
since
1947
and
for
many
years
has
been
paid
at
a
rate
of
4
per
cent
per
annum.
While
operating
on
a
share
capital
basis,
the
respondent
had
at
its
disposal
for
its
operations,
amongst
others,
the
amount
paid
by
the
shareholders
for
the
shares.
Since
its
reorganization,
it
has
for
its
operations
the
amount
of
the
repurchase
price
of
the
shares,
credited
to
the
members
as
a
loan
deposit
and
the
membership
fee
deposits.
It
also
has
the
accumulated
sum
of
the
cooperative’s
surplus
fund
and
the
accumulated
amount
of
what
it
calls
the
Patrons
Emergency
Benefit
fund.
Interest
is
paid
at
an
annual
rate
of
4
per
cent
on
the
member’s
loan
and
membership
deposits
and
on
the
surplus
and
emergency
benefit
funds.
The
amounts
of
the
deposits
and
funds
are
administered
by
the
directors
of
the
respondent
Association
but
no
trust
was
set
up
for
the
aforesaid
purposes
and
no
special
bank
account
was
opened
to
set
aside
these
deposits
or
funds
but
were
kept
by
the
respondent
and
carried
in
its
books.
It
would
appear
that
the
surplus
funds
and
the
Emergency
Benefit
funds,
for
bookkeeping
purposes,
were
noted
in
special
accounts.
Useless
to
say
that,
when
the
need
arises,
it
also
borrows
monies
from
the
banks
to
finance
its
operations.
The
above
facts
outlining
the
basis
on
which
the
respondent
operates
are
not
in
dispute.
The
respondent
association’s
objects
set
forth
in
its
memorandum
of
association
and
in
the
Statute
under
which
it
operates
are
as
above
described,
to
wit:
6
‘To
produce,
purchase
or
sell
livestock,
farm
products,
building
and
fencing
materials,
fuel,
flour,
feed
and
other
such
commodities
upon
the
co-operative
plan’’.
l'he
evidence,
written
and
oral,
establishes
that
the
respondent
purchases,
as
any
other
retailer,
its
merchandises
from
manufacturers
or
wholesalers.
It
also
purchases
from
other
co-operatives.
When
the
goods
are
received
the
selling
price
is
marked
down.
Mr.
Wilson
stated
that
prices
thus
marked
were
about
the
same
as
the
selling
prices
of
other
merchants
in
the
district.
This
was
carefully
checked,
so
that
there
would
be
as
little
discrepancy
as
possible
between
the
respondent’s
prices
and
those
of
the
other
tradesmen.
In
other
words,
the
prices
that
were
put
on
its
goods
were
the
same
or
practically
the
same
as
the
local
prices
so
as
to
keep
in
line
with
the
price
structure
in
the
other
stores
of
the
district.
It
would
follow
that
those
prices
comprised
the
respondent’s
overhead
cost,
plus
the
ordinary
profit
on
the
goods
handled.
Then
the
goods
were
sold
not
only
to
members
but
the
public
at
large.
The
income
tax
returns
show
that
over
14
per
cent
of
the
business
was
done
with
the
general
public.
The
respondent
does
business
on
the
same
basis
as
the
ordinary
businessman,
only
there
is
a
return
to
the
members
at
the
end
of
the
year.
The
invoice
issued
to
the
customers
bears
the
words
‘‘Sold
to’’
and
the
words
‘‘This
is
an
interim
charge’’.
At
the
end
of
the
year,
the
books
and
accounts
are
totalled
up
and
a
patronage
dividend
is
credited
to
the
members
account.
It
may
be
also
paid
in
cash,
but
it
would
seem
that
the
general
practice
is
to
credit
the
member’s
account
for
these
dividends.
If
a
customer
has
during
the
year
purchased
for
$50
or
more
of
goods,
an
amount
is
credited
to
him
as
part
of
his
membership
fee,
up
to
$20,
which
entitles
him
to
become
a
member.
But
before
paying
the
patronage
dividends,
interest
at
the
rate
of
4
per
cent
per
annum
is
credited
to
the
loan
and
member’s
deposits
and
to
the
surplus
and
emergency
benefit
fund;
also
one
per
cent
of
the
total
sales
is
credited
to
this
last
fund.
This
summary
of
the
situation,
in
my
mind,
covers
the
essential
facts
on
which
the
respondent
based
its
income
tax
returns
for
the
years
1947
and
1948
and
on
which
the
appellant
based
its
appeal
from
the
decision
of
the
Income
Tax
Appeal
Board.
On
or
about
April
10,
1948,
and
November
26,
1949,
the
respondent
filed
with
the
appellant
its
income
tax
returns
for
the
taxation
years
1947
and
1948
in
which
it
reported
that
it
had
no
income
subject
to
tax
in
those
two
years
because
it
was
a
consumer’s
co-operative,
and
a
non-profit
purchasing
agency.
The
appellant
not
satisfied
that
the
business
carried
on
by
the
respondent
in
its
1947
and
1948
taxation
years
was
that
of
a
purchasing
agency,
and
that
there
existed
any
contract
between
the
respondent
and
its
members
requiring
that
the
respondent
make
no
income,
assessed
the
respondent
under
the
Income
War
Tax
Act,
R.S.C.
1927,
c.
97,
and
amendments,
for
its
taxation
years
1947
and
1948.
Notices
of
these
assessments
were
sent
to
the
respondent
on
February
8,
1951.
On
April
3,
1951,
the
respondent
sent
notices
of
objection
to
the
appellant
from
the
above
assessments,
wherein
a
tax
in
the
sum
of
$844.79,
plus
interest
of
$56.41,
was
levied
in
respect
of
income
for
the
taxation
year
1947
and
a
tax
of
$909.86,
plus
penalty
$45.49
and
interest
$63.42,
in
respect
of
the
income
for
the
taxation
year
1948.
On
November
6,
1951,
the
appellant,
after
having
reconsidered
the
assessments
and
having
considered
the
facts
and
reasons
of
the
respondent
in
the
notices
of
objection,
confirmed
the
assessments
as
having
been
made
in
accordance
with
the
provisions
of
the
Act.
These
assessments
were
appealed
to
the
Income
Tax
Appeal
Board
and
the
appeal
was
allowed.
From
this
decision,
the
Minister
of
National
Revenue
appeals
to
this
Court.
The
appellant
contends
that
the
respondent
is
a
duly
incorporated
co-operative
association
and
is
a
distinct,
separate
and
legal
person
as
distinguished
from
its
members,
in
the
same
way
that
an
ordinary
joint
stock
company
is
a
separate
legal
entity
as
distinguished
from
its
individual
shareholders.
On
the
other
hand,
the
respondent
claims
that
it
owns
nothing
and
that
everything
it
possesses
is
the
property
of
its
members
collectively.
It
is
only
the
agent
of
the
members
in
the
carrying
on
of
the
business.
The
business
and
the
profits
derived
therefrom
belong
to
the
members;
therefore,
the
association
as
such
has
no
income,
and
having
no
income,
is
not
liable
to
taxation.
To
my
mind,
the
respondent
was
duly
incorporated
under
a
provincial
statute
and
the
moment
the
incorporation
formalities
were
fulfilled
it
became
a
legal
entity.
As
a
legal
person,
it
has
objects
and
powers
which
may
be
found
in
its
memorandum
of
association
and
the
Co-operative
Associations
Act,
R.S.S.
1940,
c.
179,
and
amendments.
The
request
for
incorporation
states
that
the
Association
desires
to
go
into
the
business
of
producing,
purchasing
or
selling
goods.
There
is
no
mention
in
its
application
that
it
intends
to
do
business
for
a
group
of
shareholders
or
members
or
that
in
organizing
the
business
it
would
divest
itself
of
its
powers
or
purposes
as
a
corporation
or
forgo
its
right
to
have
income
or
profits.
As
to
the
Act
itself
it
states
clearly
that
any
five
or
more
persons
who
desire
to
associate
themselves
together
as
a
co-operative
association
for
any
purpose
permitted
by
the
Act
may
do
so
by
fulfilling
certain
formalities.
When
incorporated,
the
association
is
empowered
to
establish
and
operate
any
co-operative
business
or
enterprise
specified
in
its
memorandum
of
association
in
its
own
name
and
not
as
agent
for
its
members.
I
have
no
hesitation
in
finding
that
The
Davidson
Co-operative
Association
Limited,
the
respondent
in
this
instance,
is
a
corporation
and
as
such
a
separate
legal
entity
as
distinguished
from
its
individual
members.
As
a
legal
person,
the
respondent
is
the
owner,
in
its
own
right,
of
land,
buildings,
furniture
and
equipment,
merchandise
and
other
personal
property,
including
Dominion
of
Canada
Bonds,
it
employs
officials
and
servants,
takes
depreciation
on
its
plant,
pays
taxes
and
other
business
expenses
and
makes
provision
for
bad
debts
in
exactly
the
same
manner
as
any
ordinary
corporation.
It
even
collects
from
its
patrons
and
pays
over
to
the
Province
of
Saskatchewan
sales
tax
imposed
by
the
Province.
This
tax
is
collected
and
remitted
to
the
provincial
authorities
by
the
vendor
in
respect
of
a
retail
sale
made
to
a
purchaser
in
the
Province.
The
evidence
before
the
Court
is
to
the
effect
that
the
respondent
bought
goods
on
its
own
account
from
the
ordinary
sources
of
supply,
paid
for
these
goods,
stocked
them
in
its
store
and
put
them
up
for
sale,
as
any
other
storekeeper,
in
the
usual
course
of
business.
These
goods
were
not
purchased
to
fulfil
orders
previously
received.
They
were
sold
to
members
and
customers
at
a
marked
up
price
in
line
with
prices
available
in
the
other
stores
of
the
region.
These
prices
comprised
the
cost
of
purchase,
the
overhead
expenses
and
a
profit,
plus
the
education
tax.
I
find
that
everything
the
respondent
did
in
the
carrying
on
of
its
business
was
similar
to
what
is
generally
done
by
businessmen
or
business
firms.
According
to
the
evidence
of
the
respondent’s
manager
the
only
difference
in
the
procedure
followed
in
making
a
sale
in
the
respondent’s
place
of
business
was
the
handing
to
its
patrons
and
customers
an
invoice
carrying
the
words
‘
‘
This
is
an
interim
charge’’.
A
copy
of
this
invoice
was
not
available
at
the
trial,
nor
is
it
on
file
before
the
Court.
In
my
opinion,
these
words
could
not
mean
that
at
some
time
in
the
future
the
prices
paid
for
these
specific
goods
would
be
less
than
the
invoice
price.
The
fact
is
that,
at
the
end
of
the
year,
the
accountant
totalled
up
the
books
and
the
difference
between
the
total
cost
of
the
goods
with
the
overhead
expenses,
the
interest
paid
on
the
loan
credits,
the
membership
credits,
the
emergency
benefit
fund
and
the
surplus
fund,
plus
one
per
cent
of
the
total
sales
credited
to
the
Emergency
Benefit
Fund,
and
the
moneys
received,
became
the
respondent’s
surplus
earnings
or
income.
Most
of
this
income
was
credited
to
the
members
account
in
proportion
to
patronage
or
(which
does
not
appear
to
have
been
the
practice)
paid
in
cash,
but
could
have
been.
The
patron
or
customer
dividend
was
calculated
on
the
amount
of
money
paid
by
the
member
or
customer
to
the
respondent
during
the
year.
It
would
seem
that
prior
to
1947
no
difficulty
arose
concerning
the
taxation
of
the
respondent’s
income.
This
is
easily
understood
because
previous
to
1947
the
Income
War
Tax
Act,
under
Section
4,
paragraph
(p),
provided
that
the
income
of
co-operative
companies
and
associations
was
not
liable
to
taxation.
Section
4,
paragraph
(p)
reads
as
follows:
“4.
Incomes
not
liable
to
tax.—The
following
incomes
shall
not
be
liable
to
taxation
hereunder:
(p)
Co-operative
companies
and
associations.—The
income
of
farmers’,
dairymen’s,
livestockmen’s,
fruit
growers’,
poultrymen’s,
fishermen’s
and
other
co-operative
companies
and
associations,
whether
with
or
without
share
capital,
organized
and
operated
on
a
co-operative
basis,
which
organization
(a)
market
the
products
of
the
members
or
shareholders
of
such
co-operative
organizations
under
an
obligation
to
pay
to
them
the
proceeds
from
the
sales
on
the
basis
of
quantity
and
quality,
less
necessary
expenses
and
reserves
;
(b)
purchase
supplies
and
equipment
for
the
use
of
such
members
under
an
obligation
to
turn
such
supplies
and
equipment
over
to
them
at
cost,
plus
necessary
expenses
and
reserves.
Such
companies
and
associations
may
market
the
produce
of,
or
purchase
supplies
and
equipment
for
non-members
of
the
company
or
association
provided
the
value
thereof
does
not
exceed
twenty
per
centum
of
the
value
of
produce,
supplies
or
equipment
marketed
or
purchased
for
the
members
or
shareholders.”
But
in
1946
the
Act
was
amended,
the
above
provision
disappeared
from
the
Statute
and
was
replaced
by
a
new
paragraph
(p).
The
new
section
gave
temporary
relief
only
to
corporations
commencing
business
on
or
after
January
1,
1947.
The
income
during
the
first
three
taxation
years
after
the
commencement
of
the
business
of
these
corporations
was
not
liable
to
tax.
I
do
not
believe
the
respondent
was
entitled
to
avail
itself
of
this
new
provision
of
the
Act.
The
business
carried
on
by
the
Association
was
the
continuation
of
a
previous
business
in
which
a
large
number
of
members
of
the
corporation
had
a
substantial
interest,
either
as
shareholders
or
otherwise.
To
benefit
from
the
relief
provided
for
by
this
paragraph
(p)
the
respondent
had
to
establish
that
it
fell
within
the
ambit
of
its
terms.
Clause
(vi)
of
paragraph
(p)
of
Section
4
of
the
Act
reads
as
follows:
“(vi)
the
business
carried
on
by
the
Corporation
is
not,
in
the
opinion
of
the
Minister,
a
continuation
of
a
previous
business
in
which,
in
the
opinion
of
the
Minister,
a
substantial
number
of
members
of
the
Corporation
had
a
substantial
interest,
either
as
shareholders
of
a
corporation
carrying
on
the
previous
business
or
otherwise.”
It
seems
to
me
that
the
respondent
cannot
claim
the
relief
provided
for
in
this
section.
In
1947
it
continues
the
business
it
was
carrying
on
previously
and
the
patrons
and
members
had
a
substantial
interest
in
that
business,
if
not
as
shareholders,
as
members,
if
the
contention
of
the
respondent
that
it
owns
nothing
and
has
no
income
and
that
the
members
collectively
are
the
sole
owners
of
the
business
is
to
be
taken
into
account.
The
amount
of
the
value
of
the
shares
repurchased
by
the
association
was
deposited
to
the
account
of
the
members,
and
the
evidence
does
not
establish
that
this
amount
was
reimbursed
to
the
members.
Therefore,
the
members’
interest
in
the
business
would
be
the
same
as
it
was
when
they
were
shareholders.
Furthermore,
the
Minister
by
making
the
assessment
referred
to
above,
clearly
indicated
that
he
was
of
the
opinion
that
the
respondent’s
income
was
liable
to
tax.
Had
he
thought
that
the
business
carried
on
by
the
respondent
was
not
a
continuation
of
a
previous
business,
he
would
not
have
made
the
assessment
in
dispute.
Having
found
that
the
respondent
was
a
legal
person
doing
business
in
its
own
right
on
a
profit
basis
and
did
have
an
income
in
the
taxation
years
referred
to
herein,
the
next
question
to
be
determined
is
whether
its
income
was
liable
to
tax.
The
contention
put
forward
on
behalf
of
the
respondent
is
that
the
difference
between
the
proceeds
of
its
sales
and
the
cost
of
the
goods,
the
overhead
and
the
disbursements
heretofore
described
having
been
distributed
to
its
members,
at
the
end
of
each
year
in
proportion
to
patronage,
in
an
aggregate
amount
equal,
or
almost
equal,
to
its
surplus
earnings,
it
had
no
income
liable
to
tax.
It
was
also
contended
that
it
was
never
intended
that
the
Association
should
make
any
profits
and
this
was
done
by
paying
nearly
all
its
earned
surplus
to
the
members.
In
this
last
submission
it
is
admitted
that
the
respondent
had
earned
surpluses,
though
it
is
claimed
that
they
were
not
income
liable
to
tax
because
most
of
these
surpluses
were
paid
over
to
its
members.
In
my
view,
once
it
has
been
established
that
the
respondent
derived
profits
from
its
business,
the
liability
to
pay
income
tax
is
to
be
governed
by
the
terms
and
provisions
of
the
taxation
statute,
though
the
intention
of
the
respondent
was
that
no
profit
should
be
made
out
of
the
operation
of
its
trade
or
business.
Viscount
Simon
in
Simon’s
Income
Tax,
Second
Edition,
Vol.
IT,
paragraph
27,
states
:
“There
may
be
a
carrying
on
of
a
trade
for
tax
purposes
even
though
there
is
no
intention
to
make
a
profit.
The
question
is
whether
or
not
a
trade
is
or
was
being
carried
on,
and
once
that
question
is
answered
in
the
affirmative
there
is
liability
to
tax
on
any
resulting
profit,
irrespective
of
whether
the
trading
activities
were
directed
to
the
making
of
the
profit
and
irrespective
of
the
purpose
to
which
the
profit
is
applied.”
What
is
material
to
the
present
issue
is
not
the
respondent’s
intention,
but
what
was
the
result
of
its
carrying
on
of
a
business.
If
it
derived
profits
from
its
operation,
were
those
profits
liable
to
tax
or
exempted
from
taxation
by
some
provision
of
the
Income
War
Tax
Act?
To
answer
this
question,
different
provisions
of
the
Act
have
to
be
considered.
In
the
Income
War
Tax
Act,
R.S.C.
1927,
c.
97,
and
amendments,
in
1947
and
1948
the
word
“person”
is
defined
in
Section
2,
paragraph
(h),
which
reads
thus:
“2.
(h)
‘person’
includes
any
body
corporate
or
politic
and
curators
or
other
legal
representatives
of
such
person,
any
association
or
other
body,
and
the
heirs,
executors,
administrators,
according
to
the
law
of
that
part
of
Canada
to
which
the
context
extends,
(k)
‘Taxpayer’
includes
any
‘person’
whether
or
not
liable
to
pay
tax.”
Having
decided
that
the
respondent
was
a
body
corporate,
a
legal
entity,
it
follows
that
it
fell
within
the
ambit
of
the
definition
of
‘‘person’’
and
was
a
“taxpayer”.
Section
3
of
the
Act,
as
amended,
defines
“Taxable
income’’
in
the
following
words
:
“3.
Income—(1)
For
the
purposes
of
this
Act
‘income’
means
the
annual
net
profit
or
gain
or
gratuity,
whether
ascer-
tained
and
capable
of
computation
as
being
wages,
salary
or
other
fixed
amount,
or
unascertained
as
being
fees
or
emoluments,
or
as
being
profits
from
a
trade
or
commercial
or
financial
or
other
business
or
calling,
directly
or
indirectly
received
by
a
person
from
any
office
or
employment,
or
from
any
profession
or
calling,
or
from
any
trade,
manufacture
or
business,
as
the
case
may
be
whether
derived
from
sources
within
Canada
or
elsewhere,
and
shall
include
the
interest,
dividends
or
profits
directly
or
indirectly
received
from
money
at
interest
upon
any
security
or
without
security,
or
from
stocks,
or
from
any
other
investment,
and
whether
such
gains
or
profits
are
divided
or
distributed
or
not,
and
also
the
annual
profit
or
gain
from
any
other
source.??
The
evidence
adduced
clearly
indicates
that
the
respondent
during
its
taxation
years
1947
and
1948
received
net
profits
or
gains
derived
from
its
business,
but
it
is
established
that
though
it
was
a
corporation
it
was
incorporated
as
a
Co-operative
Association.
As
such
it
could
claim
the
benefits
of
the
provisions
of
the
Act
relating
to
co-operative
companies
or
associations.
I
expressed
the
view
that
it
did
not
meet
the
conditions
laid
down
in
Section
4,
paragraph
(p),
and
could
not
claim
the
relief
provided
for
in
that
section.
Having
so
found,
it
follows
that
the
respondent
would
be
liable
for
income
tax
as
any
other
corporation,
at
the
corporate
rate,
on
its
income
in
each
of
the
two
taxation
years,
because
its
profits
in
each
of
these
years
were
in
excess
of
$30,000,
were
it
not
for
certain
provisions
of
Section
5
of
the
Income
War
Tax
Act.
Under
the
heading
‘‘Deductions
and
Exemptions
Allowed”,
Section
5
provides
that
deductions
may
be
made
to
the
taxpayer’s
income
when
payments
are
made
to
members
or
customers
within
a
taxation
year,
pursuant
to
allocations
in
proportion
to
patronage.
Section
5,
subsection
(8),
reads
as
follows:
‘‘o.
(8)
Deductions
allowable.—There
may
be
deducted
from
a
taxpayer’s
income
as
hereinafter
defined,
the
aggregate
of
the
payments
made
by
him
(a)
within
the
taxation
year
or
within
twelve
months
thereafter
to
his
customers
of
the
taxation
year,
and
(b)
within
the
taxation
year
to
his
customers
of
a
previous
taxation
year,
the
deduction
of
which
from
income
of
a
previous
taxation
year
was
not
permitted
under
paragraph
(a)
of
this
subsection
.
.
.
pursuant
to
allocations
in
proportion
to
patronage
in
respect
of
all
his
customers
of
the
taxation
year
at
the
same
rate,
with
appropriate
different
types
of
classes
of
goods,
products
or
services,
or
classes
or
grades
or
qualities
thereof,
the
amount
that
may
be
deducted
from
his
income
shall
be
(c)
the
aggregate
of
the
payments
previously
mentioned
in
this
subsection
or
(d)
an
amount
equal
to
the
aggregate
of
(i)
the
amount
of
income
of
the
taxpayer
of
the
taxation
year
attributable
to
business
done
with
members
of
the
taxpayer
and
(ii)
the
amount
of
allocations
in
proportion
to
patronage
to
customers
of
the
taxpayer
of
the
taxation
year
other
than
members
of
the
taxpayer
whichever
is
less.
’
’
I
am
convinced
that
the
respondent
gave
consideration
to
this
subsection
of
the
Act
when
preparing
its
balance
sheet
and
income
tax
return,
but
seems
to
have
neglected
to
pay
close
attention
to
the
following
subsection
(9)
of
Section
5
which
is
correlative
to
the
previous
subsection.
It
reads
:
“5.
(9)
Notwithstanding
anything
contained
in
subsection
(8)
of
this
section,
if
the
amount
that
may
be
deducted
thereunder
would
leave
the
taxpayer
with
an
income
tax
subject
to
tax
under
this
Act
less
than
an
amount
determined
by
deducting
from
three
per
cent
of
the
capital
employed
in
the
business
at
the
commencement
of
the
taxation
year,
the
interest,
if
any,
paid
during
the
taxation
year
by
the
taxpayer
on
borrowed
moneys
(other
than
moneys
borrowed
from
a
bank
incorporated
or
association
incorporated
or
organized
as
a
credit-union
as
described
in
paragraph
(q)
of
section
4
of
this
Act
and’’.
This
provision
of
the
Act,
in
my
opinion,
is
applicable
to
this
litigation,
but
it
seems
that
the
respondent
or
its
officials
overlooked
it.
When
the
income
tax
returns
were
sent
to
the
Department
they
showed
‘‘no
income
taxable”
for
the
years
under
discussion.
The
respondent
took
the
stand
that
the
business
operated
by
it
was
not
one
in
which
it
purchased
or
produced
merchandise
for
its
own
account,
but
that
it
being
a
consumer
co-operative
was
purchasing
agent
for
its
members
and
customers.
Well,
I
cannot
agree
with
this
statement
and
it
does
not
agree
with
the
facts
of
the
case
nor
with
the
law
governing
taxation
on
income.
On
the
one
hand,
the
respondent
admits
being
a
duly
incorporated
body
with
objects,
purposes
and
powers.
It
is
in
business
as
any
other
corporation
or
person
and
conducts
its
affairs
in
like
manner.
It
has
earned
surpluses
as
any
other
business,
and
though
it
calls
these
surpluses
‘‘overages’’,
it
does
not
change
the
facts.
Furthermore,
there
is
no
contract
between
the
respondent
and
its
members
and
customers
to
the
effect
that
it
make
no
profit
or
income.
It
is
a
recognized
rule
in
income
tax
matters
that
profits
from
the
operation
of
a
trade
or
business
are
taxable.
This
principle
was
expressed
by
the
Supreme
Court
of
Canada
in
the
case
of
M.N.K.
v.
The
Saskatchewan
Co-operative
Wheat
Producers,
[1930]
S.C.R.
402;
[1928-34]
C.T.C.
47,
in
the
following
words:
‘
*
The
basis
of
chargeability
to
income
tax
is
the
operation
of
a
trade
or
business
giving
rise
to
a
profit.’’
The
respondent
in
this
case
undoubtedly
carried
on
a
business
for
its
own
purposes
which
certainly
made
profits
which,
in
my
mind,
were
subject
to
income
tax.
The
respondent
took
advantage
of
subsection
(8)
of
Section
5
of
the
Act
in
the
preparation
of
its
income
tax
returns
of
the
years
in
question
and
deducted
the
amounts
paid
out
in
patronage
dividends
during
these
years.
The
sums
thus
deducted
left
it
with
an
income
subject
to
tax
under
the
Act
(Section
5(9))
less
than
3
per
cent
of
the
capital
employed
in
the
business
at
the
commencement
of
both
taxation
years.
I
am
satisfied
that
the
capital
employed
in
the
business
at
the
beginning
of
1947,
less
a
small
amount
added
through
an
error,
was
$93,864.93,
and
1948,
$101,095.07.
As
the
returns
show
that
the
respondent’s
profits
in
the
years
1947
and
1948
were
in
excess
of
$30,000,
which
is
far
in
excess
of
3
per
cent
of
the
capital
employed,
and
that
the
income
subject
to
tax
being
3
per
cent
of
the
capital
employed
in
the
relative
taxation
years,
less
any
allowable
deduction
for
interest
paid
during
the
taxation
year
by
the
taxpayer
on
borrowed
moneys
other
than
moneys
borrowed
from
a
bank
or
credit
union
and
deductible
as
an
expense
in
computing
the
taxpayer’s
income
as
provided
in
subsection
(9)
of
Section
5.
It
is
necessary
to
consider
Section
5(1)
(b).
It
reads:
“5.
(l)(b)
Interest
on
borrowed
capital.—Such
reasonable
rate
of
interest
on
borrowed
capital
used
in
the
business
to
earn
the
income
as
the
Minister
in
his
discretion
may
allow
notwithstanding
the
rate
of
interest
payable
by
the
taxpayer,
but
to
the
extent
that
the
interest
payable
by
the
taxpayer
is
in
excess
of
the
amount
allowed
by
the
Minister
hereunder,
it
shall
not
be
allowed
as
a
deduction
and
the
rate
of
interest
allowed
shall
not
in
any
case
exceed
the
rate
stipulated
for
in
the
bond,
the
debenture,
mortgage,
note,
agreement
or
other
similar
document,
whether
with
or
without
security,
by
virtue
of
which
the
interest
is
payable;”
In
my
opinion,
clause
(b)
above
means
that
the
only
interest
on
borrowed
capital
used
in
the
business
which
is
deductible
as
an
expense
is
interest
on
moneys
borrowed
to
earn
income.
I
do
not
believe
that
the
evidence
before
the
Court
is
to
the
effect
that
the
amounts
on
which
interest
is
being
paid
in
the
present
instance
were
used
to
earn
income.
The
members
not
withdrawing
their
patronage
dividends
or
making
deposits
with
the
respondent
were
paid
interest
on
the
sums
left
in
their
account
and
the
interest
on
the
surplus
and
emergency
benefit
funds
was
automatically
credited
to
the
amount
of
these
funds.
But,
even
if
these
moneys
were
used
to
earn
income
and
the
rate
stipulated
in
a
contract,
the
only
amount
deductible
as
an
expense
is
the
amount
that
the
Minister
in
his
discretion
may
allow.
In
the
present
instance,
I
repeat
the
respondent
failed
to
establish
that
the
moneys
on
which
interest
was
paid
were
used
to
earn
income
or
that
the
interest
was
paid
in
virtue
of
a
written
document
or
that
the
Minister
allowed
the
interest
to
be
paid
at
the
rate
at
which
it
was
paid.
The
Minister
used
his
discretion
in
disallowing
the
interest
paid
or
part
of
that
interest
so
that
the
provisions
of
Section
5
could
be
met,
that
is
to
say
that
the
income
subject
to
tax
would
not
be
less
than
the
amount
determined
by
deducting
from
3
per
cent
of
the
capital
employed
in
the
business
at
the
beginning
of
the
taxation
years,
the
interest
paid
in
accordance
with
the
conditions
stated
in
Section
5(1)
(b)
above
cited.
It
is
with
these
facts
and
the
above
provisions
of
the
Act
in
mind
that
the
appellant
proceeded
to
assess
the
respondent’s
income.
The
reports
of
the
respondent’s
auditors
were
used
as
the
basis
of
the
assessments.
As
it
appears
in
the
respondent’s
reply
to
the
Minister’s
appeal
that
the
dispute
between
the
parties
concerns
the
deductions
made
by
the
respondent
for
interest
paid
on
moneys
borrowed
from
the
members’
deposits
and
from
the
Patrons’
Emergency
Fund,
the
payments
made
to
the
Patrons’
Emergency
Benefit
Fund,
the
capital
employed
by
the
respondent
for
its
operations
and
depreciation,
I
think
it
useful
to
consider
the
items
of
the
1947
assessment
as
an
illustration.
The
proceeds
from
the
sale
of
goods
by
the
respondent
amounted
to
$477,632.33
and
the
cost
to
produce
or
purchase
these
goods
was
$442,215.92.
Wholesale
cost
of
goods
|
$386,948.67
|
Management
salaries
|
7,895.00
|
Director’s
fees
|
621.40
|
Audit
|
250.00
|
Wages
|
29,417.98
|
Fuel,
light
and
power
|
1,652.00
|
Taxes,
insurance
and
license
|
4,557.75
|
Interest
and
discount
|
3,424.43
|
Telegraph
and
telephone
|
602.45
|
Travel
|
195.07
|
Postage,
stationery
and
adv.
|
1,785.69
|
Repairs
|
419.45
|
Delivery
|
3,931.71
|
Unemployment
Insurance
|
58.61
|
Siding
rental
|
150.48
|
Miscellaneous
|
309.23
|
Total
|
$442,215.92
|
The
amount
of
profit
from
the
sale
of
the
goods
sold
was
the
difference
between
the
proceeds
from
the
sales,
amounting
to
$477,362.35,
and
the
above
detailed
costs
of
producing
or
purchasing
and
selling
the
goods
sold
amounted
to
$442,215.92,
or
an
amount
of
$35,146.41.
The
respondent,
in
addition
to
this
amount
of
profit,
had
income
from
other
sources
amounting
to
$1,884.87.
These
two
amounts
make
a
total
income
of
$37,031.28
before
deductions.
The
deductions
which
were
assessed
comprised
charitable
donations,
$140,
allowance
for
bad
debts,
$1,000,
and
allowance
for
depreciation,
$2,144.01,
making
a
total
of
$3,284.01.
After
these
deductions
the
respondent’s
net
income
was
$33,747.27.
The
capital
employed
in
the
respondent’s
business
at
the
commencement
of
the
taxation
year
1947
amounted
to
$93,864.98,
less
a
small
amount
added
through
error,
as
I
have
hereinabove
mentioned.
The
amount
determined
by
deducting
from
3
per
cent
of
the
capital
employed
in
the
respondent’s
business
at
the
commencement
of
the
said
year
by
the
respondent
interest
on
borrowed
moneys
and
that
was
deductible
as
an
expense
in
computing
its
income
under
the
Income
War
Tax
Act
was
$2,815.95.
On
this
basis,
the
respondent’s
income
subject
to
tax
for
its
1947
taxation
year
was
assessed
at
the
sum
of
$2,815.95
and
for
its
1948
taxation
year
at
the
sum
of
$3,032.85.
Before
arriving
at
the
above
findings,
I
had
carefully
considered
the
decisions
on
the
subject
of
mutual
organizations
which
were
referred
to
by
the
parties,
because
the
respondent
took
the
stand
that
it
was
a
consumer’s
co-operative
with
no
income
or
profit.
It
contended
that
it
was
an
association
of
the
nature
of
a
mutual
company
and
that
the
principles
governing
mutual
companies
with
regard
to
taxation
should
be
applied
to
its
operations
and
that
it
could
not
be
held
that
there
was
any
profit
or
gain
within
the
ambit
of
the
taxation
Act.
In
all
the
decisions
considered,
it
seems
to
have
been
established
that
the
contributors
or
members
were
also
the
owners
of
the
surplus
or
reserve
funds
set
up
for
protection
against
future
claims
or
liabilities
and
that
a
real
mutuality
existed
because
there
was
absolute
identity
between
the
contributory
members
and
the
participators.
In
support
of
its
contention,
it
seemed
to
rely
on
the
principles
laid
down
in
the
following
cases.
Jones
v.
South
West
Lancashire
Coal
Owners
Association,
[1927]
A.C.
827,
at
830.
At
page
830
Viscount
Cave,
L.C.,
said,
quoting
from
Lord
Watson
in
the
Styles
case
(1889),
14
App.
Cas.
381,
at
394:
‘When
a
number
of
individuals
agree
to
contribute
funds
for
a
common
purpose,
such
as
the
payment
of
annuities,
or
of
capital
sums,
to
some
or
all
of
them,
on
the
occurrence
of
events
certain
or
uncertain,
and
stipulate
that
their
contributions,
so
far
as
not
required
for
that
purpose,
shall
be
repaid
to
them,
I
cannot
conceive
why
they
should
be
regarded
as
traders,
or
why
contributions
returned
to
them
should
be
regarded
as
profits.
That
consideration
appears
to
me
to
dispose
of
the
present
case.
In
my
opinion,
a
member
of
the
appellant
company,
when
he
pays
a
premium,
makes
a
rateable
contribution
to
a
common
fund,
in
which
he
and
his
co-partners
are
jointly
interested,
and
which
is
divisible
among
them,
at
the
times
and
under
the
conditions
specified
in
their
policies.
He
pays
according
to
an
estimate
of
the
amount
which
will
be
required
for
the
common
benefit
;
if
his
contribution
proves
to
be
insufficient
he
must
make
good
the
deficiency;
if
it
exceeds
what
is
ultimately
found
to
be
requisite,
the
excess
is
returned
to
him
.
.
.”
In
Municipal
Mutual
Insurance
Limited
v.
Hill
(1932),
147
L.T.R.
62,
Lord
Warrington
at
page
65
said
:
“Mutual
Insurance
business
is
now
perfectly
well
known.
It
consists
essentially
in
the
association
of
a
number
of
persons
who
insure
each
other
against
certain
risks
by
contributing
by
way
of
premiums
to
a
common
fund
to
be
used,
together
with
further
contributions
if
necessary,
for
the
purpose
of
indemnifying
any
member
or
members
who
may
have
suffered
injury
in
consequence
of
a
risk
insured
against,
any
surplus
being
either
carried
forward
or
used
to
reduce
future
premiums
as
the
members
may
determine.”
In
The
New
York
Life
Insurance
Company
v.
Styles
(1889),
14
App.
Cas.
381,
at
page
412
(in
fine)
Lord
Macnaghten
said
:
.
I
do
not
think
that
that
decision
compels
your
Lordships
to
hold
in
a
ease
like
the
present,
where
the
business
is
a
mutual
undertaking
pure
and
simple,
that
persons
who
contribute
in
the
first
instance
more
than
is
wanted,
and
then
get
back
the
difference,
are
earning
gains
or
profits,
and
so
liable
to
income
tax.
’
’
In
mutual
insurances
persons
join
together
to
protect
themselves
and
each
other
against
certain
risks,
each
contributing
to
a
fund
deemed
sufficient
to
cover
the
risks
insured.
This
fund
is
used
to
pay
the
losses
that
occur.
The
amount
remaining
in
the
fund
at
the
expiration
of
a
fixed
period
is
paid
over
or
credited
to
the
account
of
each
contributor
on
a
pro
rata
basis
and
applied
on
future
contributions.
A
contract
exists
between
the
members
by
which
each
member
has
a
right
to
get
back
that
portion
of
contribution
he
made
and
was
not
necessary
to
be
used
to
pay
the
losses
to
be
compensated
under
the
mutual
insurance
contract.
He
is
entitled
by
contract
to
the
return
of
that
part
of
his
contribution
which
is
not
required.
It
is
easily
understood
that
in
these
cases
no
profit
can
be
made
out
of
the
contributions
of
the
members.
On
the
other
hand,
were
the
company
to
do
business
which
was
not
purely
mutual
and
made
profits,
even
if
distributed
to
its
members,
they
would
be
subject
to
income.
This
rule
was
applied
in
The
Cornish
Mutual
Assurance
Company
v.
C.I.R.,
[1926]
A.C.
281.
At
page
286,
Viscount
Cave
said
:
“It
is
true
that
it
only
carries
on
that
business
with
its
own
members;
but,
as
every
person
who
chooses
to
effect
a
policy
with
the
Company
ipso
facto
becomes
a
member,
the
restriction
does
not
appear
to
me
to
prevent
the
transactions
of
the
Company
from
being
business
transactions.”
The
above
decisions,
except
the
last
one
cited,
are
certainly
distinguishable
from
the
present
case
inasmuch
as
the
respondent
is
not
bound
by
a
contract
with
its
members
to
allocate
or
divide
or
return
all
or
any
part
of
its
surpluses
to
the
individual
members.
There
is
no
evidence
before
the
Court
that
there
exists
any
agency
contract
between
the
respondent
and
its
individual
members
to
act
as
their
purchasing
agent.
Furthermore,
the
respondent
is
not
the
agent
of
a
number
of
persons
who
have
joined
together
to
further
a
common
purpose
of
protection
and
have
contributed
to
a
common
fund
to
that
end.
It
has
dealings
with
the
public
at
large
and
the
evidence
shows
that
a
member
is
a
person
who
obtains
his
supplies
or
part
thereof
through
the
association,
that
is
to
say
that
any
person
who
makes
a
purchase
from
the
respondent
may/or
becomes
a
member
of
the
association.
To
my
mind,
none
of
the
essential
elements
to
constitute
a
mutual
organization
exist
in
the
respondent
association.
I
am
of
the
view
that
the
Davidson
Co-operative
Association
Limited
has
all
the
characteristics
of
an
ordinary
incorporated
company.
Its
members
in
meeting
assembled
elect
the
directors
and
control
the
operations
of
the
company
and
of
its
directors
by
majority
vote.
The
company
employs
personnel
to
carry
on
its
operations
of
producing
or
purchasing
and
selling
goods
to
their
members
and
all
comers
at
prices
comparable
to
the
prices
charged
for
similar
goods
in
the
local
stores.
The
difference
between
the
cost
of
the
goods,
overhead
and
other
expenses
and
the
amount
received
from
the
sale
of
the
same
goods
is
called
by
the
witness
1
‘overages”
but
in
business,
trade
and
ordinary
parlance
it
is
called
“profit”
or
‘‘gain’’.
In
my
opinion,
the
surpluses
or
profits
earned
in
the
taxation
year
fall
within
the
terms
of
the
definition
of
taxable
income
of
Section
3(1)
of
the
Act.
What
becomes
of
the
net
profits
or
income
is
shown
in
the
respondent’s
balance
sheets
and
income
tax
returns
and
nowhere
else.
The
Minister’s
assessments
are
based
on
these
documents.
The
association
allocates
a
certain
amount
for
depreciation:
appropriates
funds
to
the
Patrons
Emergency
Benefit
Fund
for
the
purpose
of
making
grants
and
deducts
a
substantial
reserve
for
uncollectable
accounts
receivable.
These
operations
are
held
to
be
similar
to
those
made
by
any
trading
company.
It
was
held
by
the
Privy
Council
in
the
case
of
English
and
Scottish
Joint
Co-operative
Wholesale
Society
Limited
v.
Commissioner
of
Agricultural
Income
Tax,
Assam,
[1948]
A.C.
405,
at
414:
“that
certain
of
the
applications
of
net
profits
which
might
be
made
under
the
rules
of
the
Society
were
essentially
not
different
from
the
application
of
net
profits
which
might
be
made
by
any
trading
company,
being:
allowance
for
depreciation;
appropriation
to
a
special
fund
for
making
grants;
appropriation
to
a
reserve
fund.’’
In
the
above
case
the
appellant
was
liable
to
income
tax.
In
the
present
case,
it
may
also
be
noted
that
the
respondent
has
an
item
of
accounts
receivable
and
an
item
of
goods
on
hand
at
the
end
of
the
years,
which
show
that
the
relationship
between
the
association
and
its
members
was
not
simply
the
relationship
of
principal
and
agent
and
that
the
association
carried
on
a
business
for
gain.
The
fact
that
part
of
the
gains
was
divided
amongst
its
patrons
is
clearly
evidence
that
it
did
make
a
profit.
The
distribution
to
its
members
of
these
profits,
in
part
or
in
whole,
does
not
alter
the
fact
that
these
profits
were
income
subject
to
tax.
The
Minister,
not
being
bound
by
the
income
tax
returns
made
by
the
respondent,
proceeded
to
determine
the
amount
of
tax
to
be
paid
by
the
respondent.
His
authority
to
do
so
is
contained
in
Section
47
of
the
Act,
which
reads
as
follows:
‘
‘47.
The
Minister
shall
not
be
bound
by
any
return
or
information
supplied
or
on
behalf
of
a
taxpayer,
and
notwithstanding
any
such
return
or
information,
or
if
no
return
has
been
made,
the
Minister
may
determine
the
amount
of
the
tax
to
be
paid
by
any
person.”
The
Minister
having
determined
the
amount
of
the
tax
to
be
paid
by
the
respondent
for
the
taxation
years
under
discussion,
his
assessments
were
valid
and
binding
unless
an
appeal
was
taken
and
the
Court
determined
that
such
were
made
on
an
incorrect
basis,
but
the
onus
of
establishing
that
the
assessment
was
incorrect,
either
in
fact
or
in
law,
rested
with
the
respondent
herein
(appellant
before
the
Income
Tax
Appeal
Board).
This
rule
is
now
well
known
and
was
clearly
expressed
in
the
case
of
Johnston
v.
M.N.R.,
[1947]
Ex.
C.R.
483;
[1947]
C.T.C.
258,
wherein
it
was
held:
“That
an
assessment
for
income
tax
is
valid
and
binding
unless
an
appeal
is
taken
from
such
assessment
and
the
Court
determines
that
such
was
made
on
an
incorrect
basis
and
where
an
appellant
has
failed
to
show
that
the
assessment
was
incorrect,
either
in
fact
or
law,
the
appeal
must
be
dismissed.”
On
appeal
to
the
Supreme
Court
of
Canada,
[1948]
S.C.R.
486:
[1948]
C.T.C.
195,
this
decision
was
affirmed.
In
that
appeal
Mr.
Justice
Rand,
speaking
for
the
Court,
said
at
p.
489
[C.T.C.
2
I
:
“.
.
.
the
proceeding
is
an
appeal
from
the
taxation,
and
since
the
taxation
is
on
the
basis
of
certain
facts
and
certain
provisions
of
the
law
either
those
facts
or
the
application
of
the
law
is
challenged,
every
such
fact
found
or
assumed
by
the
assessor
or
the
Minister
must
then
be
accepted
as
it
was
dealt
with
by
the
persons
unless
questioned
by
the
appellant.
If
the
taxpayer
here
intended
to
contest
the
fact
that
he
supported
his
wife
within
the
meaning
of
the
rules
mentioned,
he
should
have
raised
that
issue
in
his
pleading,
and
the
burden
would
have
rested
on
him
as
on
any
appellant
to
show
that
the
conclusion
below
was
not
warranted.
For
that
purpose,
he
might
bring
evidence
before
the
Court
notwithstanding
that
it
had
not
been
placed
before
the
assessor
or
Minister,
but
the
onus
was
his
to
demolish
the
basic
fact
on
which
the
taxation
rested.”
This
rule
applies
in
all
instances,
even
when
the
appellant
has
been
successful
in
an
appeal
before
the
Income
Tax
Appeal
Board
and
the
Minister
appeals
from
the
Board’s
decision
to
the
Exchequer
Court,
the
burden
is
his
to
show
that
the
assessment
was
made
on
an
incorrect
basis
either
in
fact
or
in
law.
In
the
present
case,
I
have
no
hesitation
in
saying
that
the
taxpayer
has
failed
to
demolish
the
facts
on
which
the
taxation
was
made
or
that.
the
assessment
was
incorrect
in
law.
I
find
that
the
basic
facts
on
which
the
assessments
were
made
were
correct,
except
that
for
the
taxation
year
of
1947,
the
Minister
should
have
deducted
in
the
calculation
of
the
capital
employed
the
sum
of
$100
which,
through
error,
added
to
the
amount
of
the
accounts
receivable.
By
allowing
the
item
of
$100
it
would
decrease
the
amount
of
capital
employed
in
the
business
at
the
commencement
of
the
year
to
$93,764.93
instead
of
as
computed
for
the
purposes
of
taxation—$93,864.93,
and
therefore,
the
amount
of
the
assessment
for
the
taxation
year
1947,
instead
of
being
as
assessed
$2,815.95,
should
be
$2,812.95
with
a
corresponding
adjustment
as
to
the
amount
of
the
tax
and
interest
thereon.
F'or
the
above
reasons,
therefore,
I
would
allow
the
appeal
and
confirm
the
Minister’s
assessments
as
set
forth
in
the
assessments,
saving
and
excepting
that
the
assessment
in
respect
of
the
year
1947
should
be
reduced
from
$2,815.95
to
$2,812.95
with
a
corresponding
adjustment
as
to
the
amount
of
interest
thereon.
The
Crown
is
entitled
to
costs,
if
it
insists
upon
same.
Judgment
accordingly.