THURLOW,
J.:—This
is
an
appeal
from
the
judgment
of
the
Income
Tax
Appeal
Board,
dismissing
the
appellant’s
appeal
from
its
income
tax
assessment
for
the
year
1951,
Whereby
income
tax
was
assessed
upon
a
sum
of
$140,084.89
in
addition
to
the
amount
reported
by
the
appellant
as
its
income
for
that
year.
The
sum
in
question
was
a
profit
realized
by
the
appellant
in
1951
upon
a
sale
of
petroleum
and
natural
gas
leases
held
by
it.
The
appellant
contends
that
this
was
a
capital
profit
realized
on
the
sale
of
an
investment,
while
the
respondent
contends
that
it
was
income
assessable
to
tax
under
Sections
3
and
4
of
The
1948
Income
Tax
Act,
11-12
George
VI
(1948),
c.
52,
as
the
profit
of
a
business
carried
on
by
the
appellant
in
the
year
in
question.
These
sections
are
as
follows:
"‘3.
The
income
of
a
taxpayer
for
a
taxation
year
for
the
purposes
of
this
Part
is
his
income
for
the
year
from
all
sources
inside
or
outside
Canada
and,
without
restricting
the
generality
of
the
foregoing,
includes
income
for
the
year
from
all
(a)
businesses,
(b)
property,
and
(c)
offices
and
employments.
4.
Subject
to
the
other
provisions
of
this
Part,
income
for
a
taxation
year
from
a
business
or
property
is
the
profit
therefrom
for
the
year.”
Section
127(1)
also
provides:
"127.
(1)
In
this
Act,
(e)
‘business’
includes
a
profession,
calling,
trade,
manufacture
or
undertaking
of
any
kind
whatsoever
and
includes
an
adventure
or
concern
in
the
nature
of
trade
but
does
not
include
an
office
or
employment
;
’
’
The
issue
is
one
of
fact.
In
Californian
Copper
Syndicate
v.
Harris
(1904),
5
T.C.
159,
the
test
for
determining
it
is
expressed
thus:
“It
is
quite
a
well
settled
principle
in
dealing
with
questions
of
assessment
of
Income
Tax,
that
where
the
owner
of
an
ordinary
investment
chooses
to
realize
it,
and
obtains
a
greater
price
for
it
than
he
originally
acquired
it
at,
the
enhanced
price
is
not
profit
in
the
sense
of
Schedule
D
of
the
Income
Tax
Act
of
1842
assessable
to
Income
Tax.
But
it
is
equally
well
established
that
enhanced
values
obtained
from
realization
or
conversion
of
securities
may
be
so
assessable,
where
what
is
done
is
not
merely
a
realization
or
change
of
investment,
but
an
Act
done
in
what
is
truly
the
carrying
on,
or
carrying
out,
of
a
business
.
.
.
What
is
the
line
which
separates
the
two
classes
of
cases
may
be
difficult
to
define,
and
each
case
must
be
considered
according
to
its
facts;
the
question
to
be
determined
being—Is
the
sum
of
gain
that
has
been
made
a
mere
enhancement
of
value
by
realizing
a
security,
or
is
it
a
gain
made
in
an
operation
of
business
in
carrying
out
a
scheme
for
profit-making
?"‘
In
the
main,
the
facts
are
not
in
dispute,
and
the
real
problem
lies
in
determining
the
proper
inferences
to
be
drawn
from
them
and
applying
the
test
to
them.
To
appreciate
the
problem
it
is
necessary
to
keep
in
mind
the
difference
between
freehold
mineral
rights
in
land
on
the
one
hand
and
leases
to
prospect
for
and
remove
minerals
from
the
land
on
the
other.
In
the
year
1949,
there
were
in
the
province
of
Saskatchewan
many
farmers
and
other
persons
who
owned
the
minerals,
including
oil
and
natural
gas,
which
might
be
found
in
their
lands.
Many
of
these
owners,
particularly
those
in
the
vicinity
of
the
city
of
Regina,
had
granted
leases
of
their
petroleum
and
natural
gas
rights
to
oil
companies
or
other
individuals,
but
there
were
some
owners
who
had
not
done
so.
The
leases
were
of
a
standard
form,
giving
the
lessee
the
right
for
ten
years
to
prospect
for
and
take
oil
and
natural
gas
from
the
land
and
providing
for
payment
to
the
owner
of
an
annual
rental
of
ten
cents
per
acre
until
prospecting
operations
were
undertaken
on
the
property,
and
for
royalty
payments
amounting
to
one-eighth
of
the
value
of
any
oil
or
gas
that
might
be
produced.
On
December
1,
1949,
a
company
named
Farmers
Mutual
Petroleums
Ltd.
was
incorporated
under
The
Companies
Act
of
the
province
of
Saskatchewan,
the
purpose
of
which
was
to
acquire
freehold
mineral
rights
from
as
many
owners
as
possible
and,
by
thus
creating
a
"‘pool’’
of
mineral
rights,
to
enable
the
several
owners
to
share
in
the
royalties
from
minerals
that
might
be
produced
from
any
of
the
properties
transferred
to
it.
The
company
was
organized
and
promoted
by
William
Harrison
Riddle,
a
man
of
experience
as
a
promoter
in
some
branches
of
the
oil
business.
By
an
agreement
dated
December
13,
1949,
the
company
appointed
Mr.
Riddle,
who
is
described
as
an
"‘oil
operator’’,
to
be
its
promoter
and
organizer
for
five
years,
with
the
exclusive
right
to
solicit
membership
in
the
company
on
the
basis
of
its
prospectus.
The
prospectus
provided
that
membership
in
the
company
should
be
based
on
an
exchange
of
freehold
mineral
rights
for
stock
in
the
company,
the
company
issuing
one
ordinary
share
without
nominal
or
par
value
for
each
acre
of
mineral
rights
transferred
to
the
company
and
further
undertaking
to
reserve
and
hold
an
undivided
one-fifth
interest
in
all
mineral
rights
transferred
to
it
in
trust
for
the
member
transferring
the
same.
By
the
agreement
above
mentioned,
Mr.
Riddle
agreed
to
pay
the
costs
and
expenses
of
incorporating
and
organizing
the
company
and
the
entire
cost
of
obtaining
subscriptions
and
acquiring
the
mineral
rights,
to
act
as
the
organizer
and
promoter
of
the
company
for
five
years,
to
employ
and
pay
all
necessary
agents
and
employees
and
generally
to
pay
all
the
operating
expenses
of
the
company
for
the
five-year
term.
In
return
for
his
services
and
to
reimburse
him
for
money
expended,
the
company
agreed
to
hold
in
trust
for
him
one-fifth
of
all
the
mineral
rights
acquired
by
it.
Pursuant
to
this
agreement
Mr.
Riddle,
and
later
the
appellant
company,
which
on
June
1,
1950,
assumed
his
obligations
and
acquired
his
rights
thereunder,
secured
transfers
from
the
owners
to
Farmers
Mutual
Petroleums
Ltd.
of
the
mineral
rights
in
some
750,000
acres
of
land.
The
company
then
held
an
undivided
three-fifths
of
these
mineral
rights
in
its
own
right,
an-
undivided
one-fifth
of
them
in
trust
for
the
owner
who
had
transferred
them
and
an
undivided
one-fifth
of
them
in
trust
for
the
appellant
company.
When
acquiring
the
mineral
rights,
Mr.
Riddle
and
the
appellant
in
each
case
also
obtained
for
Farmers
Mutual
Petroleums
Ltd.
an
assignment
of
the
owner-lessor’s
rights
under
the
petroleum
and
natural
gas
lease.
The
company
thus
became
entitled
to
the
rents
and
royalties
payable
under
the
leases
and
held
these
rights,
as
well,
for
itself,
the
former
owner
and
the
appellant
company
in
the
same
proportions.
Through
this
arrangement
any
owner
who
had
transferred
his
mineral
rights
to
the
company
became
entitled
to
share
as
a
member
of
the
company
in
three-fifths
of
the
royalty
from
any
minerals
that
might
be
produced
from
lands
the
minerals
of
which
were
thus
vested
in
the
company.
If
the
land
from
which
minerals
were
produced
happened
to
be
his
own,
that
owner
would
be
entitled
in
addition
to
one-fifth
of
the
royalty
from
the
minerals
so
produced,
and
in
every
case
the
appellant
company
would
be
entitled
to
onefifth
of
the
royalty.
As
the
rentals
from
rights
under
lease
served
to
provide
a
revenue
to
Farmers
Mutual
Petroleums
Ltd.
from
which
to
pay
taxes
on
its
rights,
and
as
there
was
no
practical
chance
of
prospecting
being
carried
out
on
properties
not
under
lease
to
an
oil
company,
it
was
necessary
in
order
that
the
scheme
should
be
equitable
to
all
the
members
that
all
the
mineral
rights
taken
should
be
in
a
position
to
provide
the
same
rental
revenue
to
the
company
and
have
a
like
chance
as
well
of
having
oil
or
gas
produced
from
them.
It,
therefore,
was
made
a
requirement
of
Farmers
Mutual
Petroleums
Ltd.
that
the
mineral
rights
should
be
under
lease
before
the
company
would
accept
the
transfer.
This
presented
no
difficulty
at
the
outset
of
the
operation,
as
the
mineral
rights
in
the
lands
in
the
neighbourhood
of
Avonhurst
near
Regina,
where
the
canvass
was
commenced,
were
all
under
lease,
but
as
the
agents’
work
took
them
further
afield
they
encountered
cases
where
there
was
no
lease
in
existence.
Mr.
Riddle
had
been
engaged
in
acquiring
leases
for
himself
and
other
parties
some
time
prior
to
the
commencement
of
this
operation,
and
when
the
operation
was
begun
he
was
under
the
impression
that
there
was
not
a
lease
to
be
had,
believing
that
all
the
mineral
rights
were
under
lease
to
one
oil
company
or
another.
When,
in
the
course
of
soliciting
owners
on
behalf
of
Farmers
Mutual
Petroleums
Ltd.
for
transfers
to
that
company
of
their
mineral
rights,
he
or
his
agents
found
that
the
rights
were
not
under
lease,
he
himself
proceeded
to
take
a
lease,
at
first
in
his
own
name,
and
after
June
1,
1950,
in
the
name
of
the
appellant
company.
The
leases
obtained
by
Mr.
Riddle
in
his
own
name
prior
to
June
1,
1950,
were
transferred
to
the
appellant
at
that
time
and
these,
together
with
the
leases
taken
by
the
appellant
after
June
1,
1950,
covered
a
total
of
81,000
acres
of
mineral
rights.
On
or
about
May
5,
1951,
the
appellant
company
in
a
single
transaction
sold
to
Amigo
Petroleums
Ltd.
all
of
these
leases
(with
the
exception
of
a
few
which
were
rejected
because
the
title
was
unsatisfactory)
at
the
rate
of
$2
per
acre
and
thereby
realized
the
profit
of
$140,084.89
which
is
the
subject
of
this
appeal.
The
position
taken
by
the
appellant
is
that
the
whole
purpose
of
the
appellant
company
was
to
carry
out
Mr.
Riddle’s
contract
of
December
13,
1949,
with
Farmers
Mutual
Petroleums
Ltd.
and
by
so
doing
to
acquire
for
itself
a
one-fifth
share
of
the
mineral
rights,
rents
and
royalties
transferred
by
the
owners
to
Farmers
Mutual
Petroleums
Ltd.,
that
when
in
the
course
of
carrying
out
this
purpose
the
appellant
encountered
an
owner
whose
mineral
rights
were
not
under
lease
it
would
have
preferred
that
the
owner
grant
a
lease
to
some
oil
company,
but
that
to
require
the
owner
to
negotiate
a
lease
on
his
own
involved
delays
and
the
probable
loss
of
the
opportunity
to
get
the
transfer
of
mineral
rights
through
the
owner
changing
his
mind
in
the
meantime,
and
that,
in
these
circumstances,
the
appellant
took
the
lease
not
as
a
business
venture
in
itself
but
simply
as
an
accommodation
to
the
mineral
owner
and
as
a
practical
expedient
to
clear
the
way
for
the
owner
to
transfer
his
mineral
rights
to
Farmers
Mutual
Petroleums
Ltd.
From
this
position
it
is
argued
that
the
moneys
expended
in
acquiring
the
leases
were
an
investment
of
capital
outside
the
scope
of
appellant’s
business
and
not
made
for
the
purpose
of
making
a
profit
and
that
the
sale
of
the
leases,
made
as
it
was
in
a
single
transaction
involving
all
the
leases
held
by
the
appellant,
was
simply
a
realization
of
the
investment.
A
number
of
cases
were
cited
in
support
of
this
submission,
but
all
of
them
turn
on
their
own
facts,
and
they
are
helpful
only
as
illustrations
of
the
application
to
particular
situations
of
the
test
already
mentioned.
The
true
nature
of
the
transaction
giving
rise
to
the
profit
is
to
be
determined
on
the
facts
of
each
particular
case.
In
the
case
at
bar
this
involves
consideration
of
the
objects
for
which
the
appellant
company
was
organized
and
what
its
business
and
undertakings
were.
The
appellant
company
was
incorporated
under
The
Companies
Act
of
the
Province
of
Saskatchewan
on
May
30,
1950,
with
a
nominal
capital
of
$20,000,
and
throughout
the
material
period
Mr.
Riddle
was
in
complete
control
of
it.
Paragraph
3
of
its
memorandum
of
association
is
as
follows:
"3.
The
objects
for
which
the
Company
is
established
are
the
prospecting
for,
locating,
acquiring,
managing,
developing,
working
and
selling,
mineral
claims
and
mining
properties,
and
the
winning,
getting,
treating,
refining
and
marketing
of
minerals
therefrom,
and
the
exercise
of
such
powers
as
are
incidental
to
or
conducive
to
the
attaining
of
the
above
objects,
that
is
to
say:
(a)
To
search
for,
recover
and
win
from
the
earth
natural
sas,
petroleum,
salt,
metals,
minerals,
and
mineral
substances
of
all
kinds,
and
to
that
end
to
explore,
prospect,
mine,
quarry,
bore,
sink
wells,
construct
works
or
otherwise
proceed
as
may
be
necessary
to
produce,
manufacture,
purchase,
acquire,
refine,
smelt,
store,
distribute,
sell,
dispose
of
and
deal
in
petroleum,
natural
gas,
oil,
salt,
chemicals,
metals,
minerals,
and
mineral
substances
of
all
kinds,
and
all
products
of
any
of
the
same,
to
trade
in,
deal
in
and
contract
with
reference
to
lands
and
products
thereof,
or
interests
in
land,
mines,
quarries,
wells,
leases,
privileges,
licences,
concessions,
and
rights
of
all
kinds,
covering,
relating
to
or
containing
or
believed
to
cover,
relate
to
or
contain,
petroleum,
natural
gas,
or
oil,
salt,
chemicals,
metals,
minerals
or
mineral
substances
of
any
kind.
(b)
To
carry
on
the
business
of
a
manufacturer
and
refiner
of
natural
gas,
oils,
grease,
petroleum
and
all
products
thereof,
to
deal
in,
import
and
export,
prospect
for,
open
development
on,
work,
improve,
maintain
and
manage,
acquire
by
purchase,
lease
or
otherwise
and
sell,
lease
or
otherwise
dispose
of,
natural
gas,
petroleum,
oil
lands,
oil,
grease
chemicals
or
rights
or
interests
therein,
and
to
purchase,
buy,
sell
and
deal
in
natural
gas,
crude
petroleum
oil
and
other
oils,
grease
and
other
products
thereof
;
to
sink
oil
wells,
natural
gas
wells,
to
erect,
acquire,
buy,
purchase,
lease
or
otherwise
maintain
and
operate
all
refineries
or
plants,
to
work
the
same;
to
store,
tank,
warehouse,
refine,
crude
petroleum
oil
or
other
oils,
grease
and
chemicals;
to
construct
and
operate
pipelines
for
transportation
of
natural
gas
and
oil;
to
construct
and
maintain
gas
and
oil
works
on
the
property
of
the
Company,
to
do
all
acts,
matters
and
things
as
are
incidental
or
necessary
to
the
due
settlement
of
the
above
objects
or
any
of
them,
to
carry
on
the
business
of
bonded
warehouses,
customs
brokers,
and
storage
warehouses.
(c)
To
manufacture,
import,
export,
buy,
sell,
and
deal
in
goods,
wares
and
merchandise
of
all
kinds,
and
without
limiting
the
generality
of
the
foregoing
to
manufacture,
compound,
refine
and
purchase
and
sell
chemicals,
dye
stuffs,
cements,
minerals,
superphosphates,
soap,
fertilizers,
paints,
varnishes,
pigments,
polishes,
stains,
oils,
acids,
alcohols,
coal,
coke,
coal
tar
products
and
derivatives,
peat,
peat
products,
rubber,
rubber
goods
and
products,
medicines,
pharmaceutical
supplies,
chemical
and
medicinal
preparations,
articles
and
compounds,
separately
or
in
combination
and
under
all
conditions
and
at
all
stages
of
preparation,
and
manufacture
of
all
plastics
and
plastic
materials,
supplies
and
manufactured
articles
of
every
kind
whatsoever
and
related
products
and
byproducts.
(d)
To
buy,
sell
and
deal
in,
plant,
machinery,
implements,
equipment,
conveniences,
provisions
and
other
things
capable
of
being
used
in
connection
with
operations
respecting
petroleum
or
natural
gas,
or
other
minerals,
and
natural
products,
required
by
the
Company
and
its
workmen,
and
others
employed
by
the
Company,
including
its
patrons
and
customers.”
I
have
underlined
certain
expressions
Which
I
think
contemplate
activities
of
the
kind
carried
on
by
the
appellant,
at
least
insofar
as
the
mineral
leases
in
question
are
concerned.
Removed
from
the
remaining
expressions,
the
underlined
portions
read
thus:
"‘The
objects
for
which
the
Company
is
established
are
the
acquiring,
managing,
and
selling
mineral
claims
and
the
exercise
of
such
powers
as
are
incidental
to
or
conducive
to
the
attaining
of
the
above
objects
;
that
is
to
say
:
(a)
to
trade
in,
deal
in,
and
contract
with
reference
to
lands
or
interests
in
land,
leases,
and
rights
of
all
kinds
covering,
relating
to,
or
containing
or
believed
to
cover,
relate
to,
or
contain
petroleum,
natural
gas,
or
oil,
or
mineral
substances
of
any
kind
;
(b)
to
deal
in,
acquire
by
purchase,
lease,
or
otherwise,
and
sell,
lease
or
otherwise
dispose
of
oil
lands
or
rights
or
interests
therein.
‘
‘
Prima
facie
activities
of
the
company
falling
within
these
objects
are
the
business
of
the
company
or
a
part
of
it,
and
the
profits
from
such
activities
are
income
liable
to
tax.
Anderson
Logging
Company
v.
The
King,
[1925]
S.C.R.
45;
[1917-27]
C.T.C.
198;
Gairdner
Securities
Limited
v.
M.N.R.,
[1952]
Ex.
C.R.
448;
[1952]
C.T.C.
371;
[1954]
C.T.C.
24.
The
burden
of
displacing
this
presumption
and
of
proving
that
the
profit
did
not
arise
in
the
course
of
carrying
out
the
profit-making
operations
of
the
company
is
on
the
appellant.
It
was
not
suggested,
and
I
do
not
think
it
could
be
successfully
argued,
that
this
company
was
anything
other
than
a
company
organized
for
the
purpose
of
engaging
in
operations
with
a
view
to
making
a
profit.
On
June
1,
1950,
the
day
following
its
incorporation,
the
company
purchased
from
Mr.
Riddle,
described
in
the
agreement
as
the
vendor,
for
$10,000,
payable
on
or
before
December
1,
1950,
the
following:
‘
‘
Firstly—the
business
of
the
Vendor
and
the
goodwill
thereof
as
promoter
and
organizer
of
Farmers
Mutual
Petroleums
Ltd.,
as
now
carried
on
by
the
Vendor
at
the
said
City
of
Regina.
Secondly—all
furniture,
fixtures,
equipment,
and
office
machines
to
which
the
Vendor
is
entitled
in
connection
with
the
said
business
as
set
forth
in
Schedule
‘B‘
hereof,
and
signed
by
the
Parties
for
identification,
Thirdly—all
stocks
of
stationery,
forms
and
office
supplies
of
the
said
business,
Fourthly—the
full
benefit
of
all
pending
contracts
and
engagements
to
which
the
Vendor
is
entitled
in
connection
with
the
said
business,
Fifthly—all
the
right,
title
and
interest
of
the
Vendor
in
and
to
the
said
Agreement
made
between
the
Vendor
and
the
said
Farmers
Mutual
Petroleums
Ltd.,
dated
the
13th
day
of
December,
A.D.
1949,
or
in
any
way
connected
therewith
or
arising
therefrom,
including
all
mineral
rights
and
interests
in
mineral
rights
and
land
heretofore
or
hereafter
acquired
by
the
Vendor
pursuant
to
the
said
Agreement,
which
said
Agreement
has
been
assigned
by
the
Vendor
to
the
Purchaser,
a
copy
of
which
said
Assignment
is
hereunto
annexed
as
Schedule
‘C‘
to
this
Agreement.
Sixthly—the
residue
of
the
term
of
the
lease
now
unexpired
on
the
premises
in
which
the
said
business
is
now
carried
on,
and
the
Vendor
hereby
assigns
to
the
Purchaser
the
residue
of
the
said
term.
Seventhly—all
other
property
to
which
the
Vendor
is
entitled
in
connection
with
the
said
business.”
The
appellant
accordingly
acquired
and
had
a
business
or
undertaking
to
carry
on
practically
from
the
time
of
its
incorporation.
It
was
a
business
or
venture
in
which,
by
expending
certain
moneys
and
performing
certain
services,
the
appellant
was.
to
become
entitled
to
certain
rights,
and
I
think
it
was
accurately
described
as
a
business.
After
acquiring
this
business,
the
appellant
company
became
the
employer
of
the
agents
who
were
soliciting
transfers
of
mineral
rights
to
Farmers
Mutual
Petroleums
Ltd.,
it
carried
out
Mr.
Riddle’s
contract
with
that
company,
and,
as
above
mentioned,
it
also
took
leases
on
mineral
rights
in
the
course
of
these
operations
and
ultimately
sold
them.
It
does
not
appear
to
have
engaged
in
any
other
operations
or
activities
throughout
the
period
from
the
time
of
its
incorpora-
tion
to
the
time
of
making
the
sale
of
the
leases.
>
What
then
is
the
nature
of
the
activities
by
which
the
appellant
acquired
and
sold
the
leases?
Were
these
activities
a
part
of
the
profit-making
operations
of
the
company,
or
were
they
an
ordinary
investment
and
subsequent
realization
of
capital
?
‘
The
evidence
does
not
show
how
many
of
the
750,000
acres
of
mineral
rights
acquired
for
Farmers
Mutual
Petroleums
Ltd.
were
obtained
before
or
how
many
were
obtained
after
the
appellant
assumed
the
undertaking,
nor
does
it
show
how
many
of
the
81,000
acres
on
which
the
appellant
ultimately
held
leases
were
taken
on
lease
after
it
commenced
operations.
It.
does
appear,
however,
that
the
81,000
acres
were
comprised
in
some
303
leases.
A
list
of
these
leases
;
is
attached
as
a
schedule
to
the
formal
offer
of
sale
made
by
the
appellant
to
Amigo
Petroleums
Ltd.
(ex.
7),
and
this
list
gives,
in
the
case
of
each
lease,
a
date
which
is
called
the
anniversary
date
of
the
lease.
The
dates
SO
given
range
over
a
period
of
slightly
more
than
a
year,
the
earliest
date
being
January
13,
1950,
and
the
latest
January
20,
1951.
There
are
eight
leases
for
which
the
anniversary.
date
given
is
later
than
December
13,
1950,
six
of
them
in
December,
1950,
and
two
in
January,
1951.
In
the
case
of
each
of
these
eight
leases,
if
what
is
given
in
the
schedule
as
the
anniversary
date
is
not
the
actual
date
of
the
lease,
the
date
of
the
lease
itself
could
conceivably
be
one
year
earlier
and
still
follow
the
making
of
the
agreement
of
December
13,
1949,
between
Mr.
Riddle
and
Farmers
Mutual
Petroleums
Ltd.
But
as
to
the
remaining
297
leases,
it
is
impossible,
consistently
with
the
evidence
as
to
when
and
how
they
were
acquired,
that
the
date
of
any
of
them
could
be
earlier
by
a
year
than
the
date
given
as
the
anniversary
date
on
this
exhibit,
as
in
such
case
the
lease
would
antedate
the
making
of
the
agreement
between
Mr.
Riddle
and
Farmers
Mutual
Petroleums
Ltd.
In
my
opinion,
it
follows
that,
in
the
case
of
each
of
these
297
leases,
the
date
given
in
the
schedule
as
the
anniversary
date
is,
in
fact,
the
date
of
the
lease
itself.
Of
these
297
leases,
four
are
dated
in
January,
1950,
one
in
April,
1950,
and
ten
in
the
last
few
days
of
May,
1950,
making
a
total
of
fifteen
leases
taken
prior
to
the
time
when
the
appellant
company
took
over
the
operation.
From
this,
I
conclude
that,
in
the
course
of
its
operations
between
June
1,
1950,
and
January
20,
1951,
a
period
of
less
than
seven
months,
the
appellant
negotiated
and
entered
into
some
282
separate
leases
of
petroleum
and
natural
gas
rights.
Apparently
for
convenience
in
carrying
out
this
part
of
its
activities,
the
appellant
had
obtained
a
supply
of
printed
lease
forms.
The
terms
of
these
leases
follow
those
of
the
form
used
by
Mr.
Riddle
himself
but
have
the
appellant’s
name
printed
in
them
in
several
places,
as
well
as
the
address
of
its
solicitors
as
the
place
at
which
notices
may
be
given
to
it.
The
funds
required
to
finance
the
activities
of
the
appellant
were
provided
by
advances
made
to
it
by
two
oil
companies
who
advanced
a
total
of
$147,500.
There
is
no
evidence
as
to
what
portion,
if
any,
of
the
$10,000
consideration
money
payable
by
the
appellant
to
Mr.
Riddle
under
the
contract
dated
June
1,
1950,
already
referred
to,
was
to
represent
the
value,
if
any,
of
the
leases
which
he
then
transferred
to
the
company,
but
of
the
advances
received
by
the
appellant
$26,349.11
was
charged
in
its
accounts
as
expended
in
acquiring
the
leases
which
it
obtained.
The
agents
were
paid
a
commission
on
the
transfers
of
mineral
rights
which
they
obtained,
but
the
evidence
does
not
show
whether
or
not
any
commission
was
paid
to
them
for
obtaining
the
leases.
There
is
no
evidence
as
to
whether
or
not
the
question
of
taking
these
leases
was
ever
considered
at
any
meeting
of
the
directors
of
the
appellant
company,
nor
was
any
evidence
offered
of
any
directors’
minute
relating
to
them
or
to
the
intention
or
purpose
of
the
company
in
taking
them.
Evidence
was,
however,
given
by
Mr.
Riddle
on
commission
in
the
United
States.
He
stated
that
his
purpose
in
promoting
Farmers
Mutual
Petroleums
Ltd.
was
to
acquire
for
himself
a
one-fifth
interest
in
the
mineral
rights,
that
in
carrying
out
this
purpose
he
did
not
take
the
leases
with
the
purpose
of
selling
them
but
rather
as
an
accommodation
to
the
owners,
and
that
the
purpose
for
which
the
appellant
company
was
formed
was
‘‘to
give
perpetuity
to
the
operations’’
that
he
personally
had
with
Farmers
Mutual
Petroleums
Ltd.
Speaking
of
his
intention
as
to
the
leases,
he
said
in
examination
in
chief
:
"‘Q.
What
did
you
intend
to
do
with
the
leases
you
took
to
accommodate
these
farmers
and
get
them
in
this
Farmers
Mutual?
A.
Well,
we
didn’t
know,
I
tried
to
get
McQueen
and
Mew-
burn
to
take
those
leases
and
they
didn
t
want
the
leases.
Q.
This
was
prior
to
incorporation
?
A.
No,
I
don’t
remember
just
when;
we
talked
about
those
leases
several
times,
what
we
would
do
with
them.
We
could
not
make
up
our
mind
but
we
knew
we
had
to
pay
if
we
kept
them
long
enough."
In
cross-examination,
he
said
:
"‘Q.
So
that
you
had
annually
an
obligation
if
you
wanted
to
retain
that
lease,
you
had
the
obligation
to
pay
that
annual
rental
under
the
lease,
is
that
right?
A.
Yes.
Q.
Now,
then,
I
am
correct
in
this,
this
was
done
as
a
systematic
method
of
by-passing
delays
in
connection
with
negotiation,
or
the
giving
by
the
farmer
of
the
petroleum
and
natural
gas
lease
to
some
major
oil
company
?
A.
No.
I
didn’t
say
it
was
our
intention
to
give
it
to
the
major
oil
companies,
we
had
no
intention
of
doing
that,
in
fact,
it
was
Just
a
stepchild
and
I
didn’t
know
what
I
was
going
to
do,
frankly.’’
Messrs.
McQueen
and
Mewburn
were
associated
with
and
in
control
of
the
oil
companies
which
advanced
the
funds
to
finance
the
operations
of
the
appellant
company,
and
Mr.
Riddle
had
previously
been
engaged
in
obtaining
petroleum
and
natural
gas
leases
on
his
own
and
their
behalf.
It
also
appears
from
Mr.
Riddle’s
evidence
that
another
oil
company
showed
some
interest
in
obtaining
the
leases
in
question
and
in
obtaining
other
petroleum
and
natural
gas
leases
as
well
and
that
Amigo
Petroleums
Ltd.,
who
ultimately
bought
the
leases,
before
doing
so
offered
as
much
as
five
dollars
per
acre
for
some
of
them.
The
following
also
appears
in
Mr.
Riddle’s
cross-examination
:
“Q.
And
after
talking
back
and
forth
you
eventually
arrived
at
a
sale
agreement
with
Amigo
whereby
they
took
your
leases,
lock,
stock
and
barrel,
at
$2
an
acre
regardless
of
the
area?
A.
Yes,
I
tried
my
best
to
get
rid
of
him
and
so
I
said,
‘If
you
take
all
of
them
at
$2,
all
right,’
and
I
had
no
idea
he
would
take
them.
Q.
You
thought
it
was
a
pretty
good
price?
A.
Yes,
I
made
a
wild
statement
and
I
had
no
idea
that
he
would
buy
those
leases.
Of
course,
I
thought
I
was
crazy
and
Neil
McQueen
thought
I
was,
too.
Q.
Mr.
McQueen
thought
you
were
selling
too
cheap
?
A
.
No,
but
he
didn’t
want
to
sell
the
leases.
He
don’t
sell
leases,
does
he?
Q.
I
don’t
know
Mr.
McQueen,
except
I
met
him
once
and
I
thought
he
was
a
very
nice
man.
A.
No,
they
buy
leases
all
the
time,
they
never
sell
them.
Q.
He
would
have
preferred
to
keep
them,
retain
them
?
A.
Just
for
the
gamble,
yes.
Q.
Now,
a
considerable
amount
of
money
was
advanced
to
Minerals
Limited
by
Mr.
McQueen’s
companies
to
pay
the
cost
of
acquiring
these
minerals
from
Farmers
Mutual?
A.
Yes.”
In
the
foregoing
quotations,
the
witness
is
obviously
referring
to
his
intention
not
so
much
at
the
time
when
the
leases
were
taken
as
at
later
stages.
He
did,
however,
say
at
one
point
in
his
evidence:
"‘Q.
Well,
now,
was
membership
in
the
Farmers
Mutual
open
to
any
person
who
held
mineral
rights
?
A.
No,
the
Farmers
Mutual,
you
could
take
the
by-laws
or
the
prospectus,
I
have
forgotten
now—it
has
been
a
long
time
ago,
but
at
its
inception
we
intended
to
and
we
did
take
minerals
from
farmers
who
had
leased
to
major
oil
companies
or
another
company
or
even
individuals
for
that
matter
because
we
figured
the
individuals
would
transfer
their
leases
to
major
companies,
in
fact,
we
weren’t
so
much
interested
in
that,
we
were
interested
in
the
oneeighth
retained
by
the
farmer
or
the
landholder
on
mineral
rights.
’
’
I
think
the
proper
inference
from
this
and
the
other
evidence
is
that
there
was
a
market
for
petroleum
and
natural
gas
leases,
the
major
oil
companies
being
willing
to
take
them,
and
that
the
leases
taken
by
Mr.
Riddle
and
later
by
the
appellant
company
were
taken
with
a
view
to
selling
or
otherwise
dealing
in
them
with
a
view
to
making
a
profit.
It
may
be
that,
by
taking
the
leases,
the
appellant
cleared
the
way
for
transfers
of
the
mineral
rights
in
these
properties
to
Farmers
Mutual
Petroleums
Ltd.,
which
resulted
in
the
appellant
becoming
entitled
to
an
undivided
one-fifth
share
of
the
minerals
themselves,
but
I
do
not
think
that
obtaining
the
onefifth
interest
was
the
sole
motive
or
that
clearing
the
way
for
the
transfer
was
the
sole
purpose
of
Mr.
Riddle
or
the
appellant
in
taking
the
leases.
The
appellant
was
not
required
by.
its
contract
with
Farmers
Mutual
Petroleums
Ltd.
to
take
any
leases.
It
nevertheless
did
so
and
expended
$26,349.11
of
borrowed
moneys
in
acquiring
some
282
or
more
of
them.
Mr.
Riddle
was
a
man
of
experience
in
acquiring
and
selling
leases
and,
when
taking
them,
must
have
known
the
courses
that
would
be
open
with
respect
to
them.
Obviously,
neither
Mr.
Riddle
nor
the
appellant
company
had
any
intention
of
prospecting
for
oil
or
gas
on
the
properties.
The
leases
could
be
held
for
ten
years,
but
at
an
annual
cost
of
$8,100.
At
the
end
of
that
period
they
would
terminate
if
minerals
were
not
being
produced
from
the
properties.
Or,
they
could
be
allowed
to
lapse
at
the
end
of
the
first
or
any
subsequent
year,
but
this
course
involved
the
loss
of
the
money
expended
in
acquiring
them
and
any
additional
annual
rentals
that
might
have
been
paid.
It
would
also
have
disturbed
the
workings
of
the
scheme
of
Farmers
Mutual
Petroleums
Ltd.,
as
upon
the
leases
lapsing
there
would
be
no
revenue
from
them
with
which
to
pay
the
mineral
taxes.
I
think
it
is
improbable
that
Mr.
Riddle
or
the
appellant,
when
taking
the
leases,
intended
to
follow
either
of
these
courses.
They
were,
of
course,
possible
courses
for
him
or
the
appellant
to
follow,
and
there
was
no
necessity
at
the
time
to
decide
definitely
whether
to
follow
either
of
them
or
not,
but
they
were
expensive
and
undesirable
courses.
I
do
not
think
the
leases
would
have
been
taken
at
all
if
Mr.
Riddle
had
been
of
the
opinion
that
either
of
these
courses
would
have
to
be
followed.
The
only
other
practical
course
was
to
turn
the
leases
to
account
by
selling
or
otherwise
dealing
in
them,
and
in
my
opinion
that
was
the
intention
and
purpose
of
Mr.
Riddle
and
the
appellant
in
taking
them.
That
is
what
was
done
with
them
in
the
end.
I
think
that
it
is
what
was
intended
when
they
were
taken.
I
find
that
the
acquiring
of
the
leases
was
not
an
ordinary
investment
of
the
company’s
funds
but
was
an
activity
of
the
appellant
company,
€
engaged
in
as
part
of
its
profit-making
operations
and
with
a
view
to
making
a
profit
by
selling
or
otherwise
dealing
in
them
when
a
favourable
opportunity
to
do
so
arose.
The
appellant
company
was
one
formed
for
the
purpose
of
making
a
profit.
Its
profits
were
to
be
made
by
carrying
out
operations
of
the
kind
mentioned
in
its
memorandum
of
association.
One
of
the
classes
of
activities
there
mentioned
was
that
of
trading
and
dealing
in
mineral
leases.
On
the
day
following
its
incorporation,
the
company
took
over
a
business
which
included
a
subordinate
but
closely
related
operation
of
taking
mineral
leases
to
advance
the
main
operation,
but
at
the
same
time
with
a
view
to
making
a
profit
by
selling
or
otherwise
dealing
in
them.
The
company
carried
on
that
business
with
the
same
object
in
view,
it
acquired
many
more
leases,
and
ultimately,
by
selling
them,
made
the
profit
in
question.
In
my
opinion,
this
profit
is
not
a
capital
profit,
made
on
realizing
an
investment,
but
a
gain
made
in
an
operation
of
business
in
carrying
out
a
scheme
for
profit-making.
It
was
accordingly
income
and
was
properly
assessed.
The
appeal
will
be
dismissed
with
costs.
Judgment
accordingly.
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