DUMOULIN,
J.:—This
is
an
appeal
from
a
decision
of
the
Income
Tax
Appeal
Board,
dated
May
9,
1956
(15
Tax
A.B.C.
73),
in
respect
of
the
income
tax
assessment
of
the
appellant
for
the
year
1951.
It
was
heard
at
Calgary,
Alberta,
on
March
28,
1957.
At
the
turn
of
the
year
1948-1949,
the
appellant,
Robert
B.
Curran,
at
Calgary,
Alberta,
assumed
the
managership
of
Imperial
Oil’s
Producing
Department,
Western
Division,
with
a
yearly
salary
of
$25,000.
An
American
by
birth,
this
man,
for
the
preceding
eighteen
years
had
continued
in
the
employ
of
Imperial
Oil
Limited,
affiliated
with
Standard
Oil
of
New
Jersey.
He
enjoyed
a
reputation
as
a
progressive,
skilled
and
efficient
executive,
or,
so
the
saying
goes,
a
top-notch
oil
man.
Company
assignments
of
still
greater
importance
and
emolument
seemed
a
reasonable
expectation
such
as,
for
instance,
a
lucrative
directorship
in
Imperial
Oil.
The
superannuation
age,
barring
premature
invalidity,
was
sixty-five.
On
the
minimum
basis
of
his
$25,000
annual
remuneration,
appellant
would
become
the
recipient
of
a
$12,500
pension,
but
could
legitimately
anticipate
more,
the
rate
of
one-half
of
the
average
wages
earned
during
a
five-year
period
prior
to
retirement
from
Imperial
Oil’s
staff.
In
the
spring
of
1951,
Curran
and
one
Robert
A.
Brown,
of
Calgary,
initiated
business
talks
that
culminated
in
several
agreements
of
which
more
will
be
heard
as
this
case
unfolds.
Robert
Arthur
Brown,
Jr.,
then
thirty-seven
years
of
age,
had
manifold
interests
in
the
oil
business.
He
apparently
possessed
in
a
high
degree,
the
optimism
of
youth,
which
the
surrounding
mineral
wealth
nowise
abated.
At
the
time,
Mr.
Brown
was
president,
managing
director,
majority
shareholder
of
Federated
Petroleums
Limited,
and
a
most
substantial
albeit
not
a
controlling
one
in
Home
Oil
Limited.
With
his
brother
and
sister
he
also
constituted
one
of
three
participants
"‘in
a
small
private
company’’,
with
a
capital
of
$20,000,
called
Calta
Assets
Ltd.
An
interlocking
pattern
developed
through
which
Calta
Assets
held
a
large
block
of
Federated
Petroleums
shares,
this
latter
concern
also
merging
in
a
sizable
share
ownership
of
Home
Oil
with
the
Brown
group,
i.e.,
Brown
personally,
Calta
Assets
and
United
Oils
Ltd.
It
is
of
record
that
Brown’s
mind
was
set
upon
obtaining
full
control
of
Home
Oil,
in
which
company
he
‘‘represented
the
largest
single
ownership’’.
Certain
difficulties
hampered
the
attainment
of
this
goal,
one
being
Major
Lowery’s
reluctance
to
forsake
the
Home
Oil
chairmanship,
unless
assured
of
a
suitable
successor,
and
there
is
no
evidence
whether
or
not
Major
Lowery
looked
upon
Mr.
Brown
as
an
eligible
candidate.
This
and
possibly
some
ancillary
projects,
all
concerned
with
oil
trade
promotion,
motivated
the
ensuing
business
negotiations
between
these
two
parties,
which
can
best
be
accounted
for
in
Brown’s
own
words.
“A.
I
had
three
purposes.
[In
approaching
Curran]
A.
Firstly,
I
had
worked
out
in
my
mind,
and
I
think,
in
fact,
with
Major
Lowery,
who
was
then
the
president
and
managing-director
of
Home
Oil
Company,
if
I
were
able
to
get
a
suitable
individual,
a
man
of
reputation
in
the
oil
industry,
I
was
quite
confident
that
I
would
be
able
to
get
Major
Lowery
to
resign
from
the
active
management
of
Home
Oil,
of
which
company
I
represented
the
largest
single
ownership,
although
it
was
not
actual
control,
so
that
was
the
first
purpose
in
wanting
to
get
Curran
to
apply,
to
have
him
become
identified
with
the
Home
Oil
Company.
The
second
purpose
was
that
I
was
negotiating
with
the
bank
a
loan
of
some
$9,000,000.00,
as
I
remember,
and
because
of
the
heavy
investment
we
had
in
the
Home
Oil
Company
they
[i.e.,
the
Bank]
were
concerned
about
the
management
of
the
company,
and
a
person
of
Curran’s
calibre
would
have
satisfied
their
worries
insofar
as
they
might
have
affected
my
bank
loan.
The
third
reason
was
that
my
opinion
was
that
in
making
arrangements
with
a
man
of
Curran
’s
standing
in
the
industry
we
would
definitely
be
buying
a
positive
asset
of
experience
in
the
oil
industry,
so
those
were
the
three.”
(Cf.
Transcript
of
Proceedings,
at
pages
61-62-63)
Previously,
throughout
his
evidence,
R.
B.
Curran
repeatedly
assigned
identical
considerations
to
Brown’s
overtures
that
he
sever
his
connections
with
Imperial
Oil
and
enter
the
service
of
either
Federated
Petroleums
or
Home
Oil.
A
few
excerpts
from
the
transcript
clearly
bear
out
this
point.
On
page
33,
the
appellant
says
:
"A.
.
.
.
through
my
resignation
from
Imperial
Oil
thereafter
Mr.
Brown
felt
I
could
be
of
service
to
one
of
his
companies.
.
.
.
For
a
consideration
I
leave
the
service
of
Imperial
Oil,
which
was
number
one;
number
two
was
my
being
employed
by
one
of
Mr.
Brown’s
companies
thereafter.
Q.
[By
counsel
for
Respondent]
There
was
no
doubt
that
Mr.
Brown
was
very
interested
in
acquiring
your
services
for
one
of
these
companies?
{Vide
p.
34)
A.
That
is
correct,
sir.
Q.
And
you
knew
that
Mr.
Brown
considered
that
would
be
of
benefit
to
these
companies?
A.
Yes,
sir.
Q.
It
was
pretty
commonly
known
that
Mr.
Brown
was
interested
in
obtaining
control
of
Home
Oil
Company?
A.
That
was
a
very
much
known
fact,
sir.
Q.
Not
only
you
but
a
good
number
of
other
people
knew
that?
A.
Yes.
Q.
Mr.
Brown
made
no
secret
of
it?
A.
No
sir.
Q.
And
the
one
problem
he
had
was
that
Major
Lowery
was
the
dominant
factor
in
the
company,
you
knew
that
?
A.
Major
Lowery
was
president
of
Home
Oil
at
the
time
you
refer
to.
Q.
And
Mr.
Brown
indicated
to
you,
did
he
not,
that
he
wanted
to
persuade
Major
Lowery
to
step
down?
A.
Well,
Major
Lowery
was
an
elderly
man
and
I
think
that
perhaps
Mr.
Brown
had
in
mind
Major
Lowery
becoming
what
he
did,
chairman
of
the
board.
Q.
Yes,
and
that
someone
else
would
take
Major
Lowery’s
place
as
president
and
general
manager
who
would
be,
let
us
say,
more
sympathetic
to
Mr.
Brown’s
interests?
A.
That
is
possibly
true,
sir.’’
Asking
Curran
to
give
up
the
management
of
Imperial
Oil,
an
undisputed
leader
in
the
industry,
was
one
thing,
but
quite
a
different
one
to
have
him
do
so.
A
twofold
obstacle
barred
the
way
to
compliance.
Firstly,
the
appellant’s
accruing
benefits
after
eighteen
years
with
Imperial,
for
instance
a
retirement
pension
of
no
less
than
$12,500
per
annum;
secondly,
various
alluring
prospects
of
preferment
which,
doubtless,
the
sanguine
Mr.
Curran
dangled
before
Mr.
Brown’s
eyes.
Moreover
the
business
importance
of
Federated
Petroleums
or
Home
Oil,
their
foreseeable
range
of
expansion
could
not
compare
with
Imperial’s
bulk
and
far-reaching
spread.
Hence,
after
some
bargaining,
Brown
finally
accepted
Curran’s
demand
for
$250,000
by
way
of
compensation,
should
he
give
up
his
employ
and
join
forces
with
one
or
another
of
the
former’s
companies.
We
have
now
fingered
the
sore
point,
whence
the
ensuing
complications
flow.
One
all-pervasive
care
visibly
shows
through
the
transactions
entered
into,
that
of
avoiding
the
reach
of
income
tax,
as
will
be
seen
later
on.
On
August
15,
1951,
the
negotiations,
reaching
a
concluding
phase,
materialized
in
the
form
of
two
contracts,
the
first
of
which
duly
recorded
R.
B.
Curran’s
resignation
as
an
executive
officer
of
Imperial
Oil
Limited
(Exhibit
1),
carefully
describing
the
several
advantages
thereby
surrendered
against
an
indemnity
of
$250,000,
purporting
to
be
paid
by
R.
A.
Brown,
Jr.
By
the
second
and
simultaneous
deed,
Federated
Petroleums
Limited
(Exhibit
2)
engaged
Robert
B.
Curran
as
its
general
manager
from
October
1,
1951,
"‘for
a
period
of
five
(5)
years
(art.
2)’’,
with
"‘a
fixed
salary
at
the
rate
of
$25,000
per
year
(art.
4)
”,
but
without
any
reference
to
a
superannuation
fund.
After
completion
of
the
deeds,
R.
A.
Brown
then
and
there
handed
a
personal
cheque
(Exhibit
3),
for
$250,000,
dated
"‘16th
August,
1951’’,
drawn
on
the
Canadian
Bank
of
Commerce,
Calgary
Branch’’,
payable
to
R.
B.
Curran,
who
deposited
it
on
or
about
August
22.
A
better
understanding
of
the
matter
warrants
the
insertion,
according
to
their
textual
wording,
of
the
most
revealing
stipulations
in
both
contracts.
The
heading
of
Exhibit
1
reads
:"R.A.
Brown
Jr.,
of
Calgary,
Alberta
(hereinafter
called
‘the
grantor’)
of
the
First
Part
—and—Robert
B.
Curran
(hereinafter
called
‘the
grantee’)
of
the
Second
Part’’.
It
continues
thus,
after
mentioning
Curran’s
connection
with
Imperial
Oil
:
“And
whereas
the
grantee
has
acquired
the
right
to
a
pension
on
retirement
from
Imperial
Oil
Limited
or
any
of
its
affiliates,
which
if
the
present
salary
scale
remains
the
same
until
his
retirement
will
yield
to
him
the
sum
of
$12,500
per
year,
and
the
probabilities
are
that
if
he
remains
with
his
present
employers
his
salary
will
increase
substantially
over
the
years
with
corresponding
increases
in
the
pension
payable
to
him.”
“And
whereas
his
pension
rights
will
cease
entirely
if
he
voluntarily
severs
his
connection
with
the
said
Company
and
its
affiliates.’’
Page
(2)
‘‘And
whereas
Federated
Petroleums
Limited,
a
comparatively
small
oil
company
.
.
.
has
recently
intimated
its
willingness
to
offer
the
grantee
a
position
as
manager
at
a
salary
equivalent
to
that
which
he
draws
from
Imperial
Oil
Limited,
which
proposed
offer
the
grantee
has
intimated
that
he
would
refuse
solely
by
reason
of
the
fact
that
he
would
be
obliged
to
give
up
his
chances
of
advancement
with
his
present
employers
and
their
affiliates.
.
.
.
and
would
lose
all
accumulated
and
future
rights
to
pension.”
“And
whereas
the
grantor
holds
a
substantial
interest
in
Federated
Petroleums
Limited,
is
of
the
opinion
that
the
grantee’s
experience,
capabilities
and
connections
would
be
valuable
to
that
Company,
and
is
very
desirous
of
persuading
the
grantee
to
resign
from
his
present
position
in
order
that
he
may
then
be
free
to
accept
an
offer
of
employment
from
Federated
Petroleums
Limited”.
And
then,
on
page
3,
the
two
last
paragraphs:
"Now
Therefore
This
Indenture
Witnesseth
1.
The
grantor
hereby
agrees
to
pay
to
the
grantee
the
sum
of
$250,000.00
in
consideration
of
the
loss
of
pension
rights,
chances
for
advancement,
and
opportunities
for
re-employment
in
the
oil
industry,
consequently
upon
the
resignation
of
the
grantee
from
his
present
position
with
Imperial
Oil
Limited,
the
said
sum
to
be
paid
forthwith
upon
the
grantee
informing
his
present
employers
that
he
is
leaving
their
employ
and
whether
or
not
employment
has
been
offered
to
him
by
Federated
Petroleums
Limited
or
accepted
by
him,
prior
to
that
time.
2.
In
consideration
of
the
agreement
of
the
grantor
to
pay
the
said
sum,
the
grantee
hereby
agrees
to
resign
his
position
with
Imperial
Oil
Limited,
such
resignation
to
take
effect
not
later
than
the
15th
day
of
September,
A.D.
1951."
The
first
signature
on
this
contract
is
that
of
R.
A.
Brown,
Jr.
Also
dated
August
15,
1951,
the
other
indenture
(Exhibit
2)
is
between:
‘‘Federated
Petroleums
Limited
(hereinafter
called
‘the
Company’)—and—Robert
B.
Curran
(hereinafter
called
‘the
Manager’).
It
partially
reads:
“1.
Employment
:
The
Company
shall
employ
the
Manager
as
General
Manager
of
the
Company
at
and
upon
and
subject
to
the
terms
and
conditions
following.
’
’
We
are
acquainted
with
the
stipulations
concerning
duration
and
salary,
respectively
five
years
at
$25,000
per
year.
The
only
noteworthy
provision
and
which
received
an
immediate
application
was
clause
8
:
"
The
Manager
shall
as
the
directors
may
determine
from
time
to
time,
serve
as
Manager
of
any
other
company
or
companies
in
which
the
Company
has
a
financial
interest,
either
in
addition
to
or
in
lieu
of
serving
as
Manager
of
the
Company
and
if
he
is
paid
a
salary
by
such
other
company
or
companies
any
such
salary
when
received
shall
to
the
extent
thereof
be
deemed
satisfaction
of
the
salary
which
under
the
terms
hereof
the
Company
is
obligated
to
pay.’’
This
covenant
bears
the
signature
of
Federated
Petroleums
Limited,
per
R.
A.
Brown,
Jr.
(the
company’s
president),
Robert
B.
Curran
and
that
of
J.
L.
Moyer,
an
officer
of
Federated.
Pursuant
to
article
8
of
the
‘‘employment’’
contract,
appellant,
on
or
about
October
1,
1951,
became
president
and
general
man-
ager
of
Home
Oil
Limited,
and
never
held
any
office
whatever
with
Federated
Petroleums.
It
goes
without
saying
that
Home
Oil
also
attended
to
paying
the
agreed
salary.
No
written
document
evidences
Curran’s
period
of
service
with
this
latter
company.
Conflicting
opinions
soon
arose
and
since
the
gap
kept
ever
widening,
the
parties
resolved
to
end
their
erstwhile
covenant,
(Exhibit
2),
and
achieved
this
by
means
of
a
"‘release'',
on
December
1,
1952
(Exhibit
“B”).
Again
the
signatories
to
this
parting
indenture
were
identically
those
who
had
signed
the
"‘employment''
covenant
(Exhibit
2)
some
fourteen
months
previously,
namely
:
"
‘
Federated
Petroleums
Limited,
per
R.
A.
Brown”
and
"‘R.
B.
Curran”,
who
remained
in
undisturbed
ownership
of
the
""compensation
incentive”
paid
him
a
year
before.
We
already
know
:
why,
by
whom,
to
what
purpose
the
$250,000
were
paid;
it
now
remains
to
trace
their
actual
source.
To
that
end
reference
must
be
had
to
the
record
of
proceedings
at
pages
66,
67
and
68.
Mr.
Milvain,
Q.C.,
one
of
appellant’s
counsel,
is
questioning
Mr.
Brown.
Page
66—
"‘Q.
Were
the
moneys
that
were
paid
to
Mr.
Curran
your
own
personal
moneys
?
A.
N
o,
sir.
Q.
Just
what
was
the
arrangement
there?
A.
Calta
Assets
had
approximately,
as
I
remember
it,
$100,-
000.00
in
the
bank
and
in
order
to
have
the
$250,000.00
available,
it
was
necessary
to
borrow
an
additional
$150,000.00.
.
.
.
The
Bank
of
Nova
Scotia
would
not
loan
Calta
$150,000.00.
I
was
able
to
borrow
$150,000.00
at
the
Royal
Bank
personally.
Calta
[the
Brown
family’s
private
company]
was
not
able
to
borrow
the
money
at
the
Royal
Bank
as
a
company
so
I
had
to
borrow
it
personally.
Subsequently,
Calta
was
responsible
for
the
full
payment
of
$250,000.00.”
Page
67—
"‘Q.
And
eventually
the
whole
debt
was
brought
over
to
Calta
?
A.
No.
Calta,
as
I
remember
it,
loaned
[me]
from
the
security
which
I
used
as
collateral
to
borrow
the
money
at
the
Royal
Bank.
When
Calta
liquidated
enough
shares
to
pay
off
the
$150,000.00
either
they
paid
the
money
to
me
and
I
paid
it
out
to
the
Royal
Bank
or
they
may
have
paid
it
directly.
.
.
.
but
they
were
responsible
for
paying
the
loan
off.
Q.
...
So
that
to
summarize
the
situation,
the
actual
$250,000.00
represented
by
a
cheque
with
your
signature
on
it
dealt
with
Calta
Assets’
moneys?
A.
Yes.
Q.
And
it
was
Calta
Assets
that
actually
paid
the
$250,-
000.00?
A.
Through
me
as
their
agent.”
Page
68—
"Q.
Now,
was
the
$250,000.00
paid
to
Curran
by
Calta
through
the
medium
of
your
cheque
ever
repaid
to
Calta
by
either
Home
or
Federated?
A.
N
o,
sir.
Q.
Or
by
anyone
else?
A.
By
no
one.
Q.
.
.
.
Now,
how
was
the
$250,000.00
expenditure
treated
by
Calta
Assets?
A.
As
a
capital
expenditure.
Q.
You
might
tell
the
Court,
Mr.
Brown,
whether
or
not
Mr.
Curran
ever
became
an
employee
of
Calta
Assets?
A.
No,
never.
Mr.
Curran
became
employed
only
by
Home
Oil
Company.
Page
69—
Q.
Never
by
you
personally?
A.
No,
sir.
Q.
And
you
say
never
by
Federated?
A.
No,
sir.”
This
last
negative
reply
is,
I
believe,
a
misconstruction
of
the
facts,
but
of
no
bearing
on
the
issue.
Appellant,
although
chief
executive
of
Home
Oil,
was
detailed
to
such
office
by
Federated
Petroleums,
in
virtue
of
the
"‘employment’’
contract,
paragraph
8
(of.
Exhibit
2).
When
conflicting
policies
came
to
a
head,
the
""release”
(Exhibit
B)
originated
solely
from
Federated
Petroleums
as
"‘Party
of
the
First
Part”.
The
record
continues
with
Mr.
Brown’s
testimony.
Page
71—
"‘Q.
.
.
.
did
you
at
any
time
discuss
with
the
directors
of
Home
or
Federated
as
to
whether
either
of
those
companies
repay
that
sum
of
money?
[i.e.,
the
$250,000]
A.
I
certainly
suggested
it
to
the
directors
of
Federated.
Q.
With
what
result?
A.
Negative
result,
they
weren’t
interested,
they
wouldn’t
pay
it.”
Page
72—
"‘Q.
Do
you
know
if
any
approach
was
made
to
Home
in
order
to
have
them
pay
it?
A.
I
am
quite
sure
there
wasn’t.
Q.
So
that
the
decision
of
paying
$250,000.00
was
made
by
whom?
A.
I
should
think
it
was
made
by
me.
Q.
Was
that
decision
made
by
you
on
the
basis
that
you
were
employing
Mr.
Curran?
A.
No,
not
at
all.
The
decision,
when
I
said
‘made
by
me’,
that
was
made
by
Calta
Assets
because
I
consulted
both
with
my
brother
and
sister
to
get
their
consent
that
the
deal
would
be
entered
into.”
Despite
an
exhaustive
cross-examination,
Mr.
Brown’s
evidence
remained
unshaken,
and
no
attempt
made
at
otherwise
refuting
it.
So
then,
the
basic,
recorded,
set
of
facts
show
that
(a)
Calta
Assets
Limited,
“through
Brown
as
its
agent”
paid
the
incentive
sum
of
$250,000,
which
it
never
recuperated;
(b)
Curran
was
at
no
time
employed
by
Calta
Ltd.
or
Brown
personally
;
(c)
the
original
and
paramount
employer
remained
throughout
Federated
Petroleums
which,
implementing
a
mandatory
prerogative
provided
for
in
article
8
of
Exhibit
2,
assigned
R.
B.
Curran
to
Home
Oil;
((1)
the
parting
release
“from
all
covenants
.
.
.
and
agreements”,
dated
December
1,
1952,
isued
from
Federated
Petroleums
on
the
employer’s
behalf.
Let
us
now
examine
the
respective
legal
interpretations
adopted
by
litigants.
The
appellant’s
submission,
concisely
stated
by
Mr.
Stikeman,
Q.C.,
in
his
opening
remarks,
is
as
follows:
"We
assert
that
the
payment
was
personally
to
Mr.
Curran,
that
it
was
paid
to
him
to
terminate
an
employment
which
had
no
relationship
to
the
payer
of
the
cheque,
and
that
the
maker
of
the
cheque,
Mr.
Brown,
or
his
principal,
Calta
Assets,
never
were
or
became
the
employers
of
Mr.
Curran.”
This
impresses
me
as
a
rather
cursory
view
of
the
case,
one
that
leaves
a
great
deal
unsaid.
Respondent,
on
the
other
hand,
initially
contends
that
:
(cf.
Reply
to
Notice
Of
Appeal,
para.
10)
"The
payment
of
$250,000.00,
.
.
.
was
a
benefit
received
by
the
Appellant
in
the
year
1951
in
respect
of,
or
by
virtue
of,
his
position
in
the
service
of
an
oil
company
and
was
therefore
income
.
.
.
for
the
purposes
of
Part
I
of
the
Income
Tax
Act
by
virtue
of
sections
3
and
5
of
the
said
Act.”
Recourse
is
then
had
to
three
subsidiary
submissions
which
I
quote
:
“Alternatively,
the
said
$250,000.00
was
paid
to
the
Appellant
as
part
of
his
remuneration
for
services
to
be
rendered
by
him
as
an
employee
of
an
oil
company
and
was
therefore
income
of.
the
Appellant
for
the
taxation
year
1951
for
the
purposes
of
Part
I
of
the
Income
Tax
Act
by
virtue
of
sections
3
and
5
of
the
said
Act.
Alternatively,
the
said
$250,000.00
was
an
amount
received
by
the
Appellant
from
a
person
in
satisfaction
of
an
obligation
arising
out
of
an
agreement
made
by
that
person
with
the
Appellant
immediately
prior
to
a
period
that
the
Appellant
was
in
the
employment
of
such
person
and
it
is
therefore
deemed
to
be
remuneration
for
the
Appellant’s
services
rendered
during
the
period
of
employment,
by
virtue
of
section
24A
of
the
said
Act.
Alternatively,
the
said
$250,000.00
was
received
by
the
Appellant
as
a
benefit
as
a
result
of
a
transaction
or
transactions
and
as
such
amounts
to
a
payment
of
income
for
the
purposes
of
Part
I
by
virtue
of
section
125
of
the
said
Act.”
The
problem
easily
enough
stated
but
by
no
means
easy
to
solve,
can
be
thus
set
forth
:
Was
the
profit
or
gain
under
review,
truly
of
an
income
nature
as
contemplated
by
Sections
2(1),
3,
5,
24A,
125(2),
(3),
127(1)
of
The
1948
Income
Tax
Act,
c.
52,
on
which
both
parties
rely?
Section
2(1)
provides
that
any
resident
of
Canada
will
pay
income
tax
upon
his
taxable
income
for
each
taxation
year.
Section
3
gives
the
first
general
rule,
reading:
"3.
The
income
of
a
taxpayer
for
a
taxation
year
for
the
purposes
of
this
Part
[Computation
of
Income]
is
his
income
for
the
year
from
all
sources
.
.
.
and
without
restricting
the
generality
of
the
foregoing,
includes
income
for
the
year
from
all
(a)
businesses,
(b)
property,
and
(0)
offices
and
employments.
‘
‘
Section
5
deals
further
with
‘
income
‘
‘
:
"Income
for
a
taxation
year
from
an
office
or
employment
is
the
salary,
wages
and
other
remuneration,
including
gratuities,
received
by
the
taxpayer
in
the
year
.
.
.”
The
specific
point
of
payments
by
"
employer
to
employee”
is
disposed
of
in
Section
24A
:
"An
amount
received
by
one
person
from
another,
(a)
during
a
period
while
the
payee
was
an
officer
of,
or
in
the
employment
of,
the
payer,
or
(b)
on
account
or
in
lieu
of
payment
of,
or
in
satisfaction
of,
an
obligation
arising
out
of
an
agreement
made
by
the
payer
with
the
payee
immediately
prior
to,
during
or
immediately
after
a
period
that
the
payee
was
an
officer
of,
or
in
the
employment
of,
the
payer,
shall
be
deemed,
for
the
purpose
of
section
5,
to
be
remuneration
for
the
payee’s
services
rendered
as
an
officer
or
during
the
period
of
employment,
unless
it
is
established
that,
irrespective
of
when
the
agreement,
if
any,
under
which
the
amount
was
received,
was
made,
or
the
form
or
legal
effect
thereof,
it
cannot
reasonably
be
regarded
as
having
been
received
(i)
as
consideration
or
partial
consideration
for
accepting
the
office
or
entering
into
the
contract
of
employment,
»
»
Section
125,
the
opening
one
of
Part
V.—Tax
Evasion,
in
its
subsections
(2)
and
(3)
rules
that:
"(2)
Where
the
result
of
one
or
more
sales,
exchanges,
declarations
of
trust,
or
other
transactions
of
any
kind
whatsoever
is
that
a
person
confers
a
benefit
on
a
taxpayer,
that
person
shall
be
deemed
to
have
made
a
payment
to
the
taxpayer
equal
to
the
amount
of
the
benefit
conferred
notwithstanding
the
form
or
legal
effect
of
the
transactions
.
.
.
the
payment
shall,
depending
upon
the
circumstances,
be
(a)
included
in
computing
the
taxpayer’s
income
for
the
purpose
of
Part
1,
»3
Subsection
(3)
says
that
no
benefit
exists
when
the
parties
deal
at
arm’s
length,
bona
fide,
and
not
pursuant
to
any
other
transaction
and
are
not
effecting
payment
"‘in
whole
or
in
part,
of
an
existing
or
future
obligation,”.
According
to
Exhibit
1,
appellant
contends
that
Brown
personally
paid
him
$250,000
and
was
at
no
time
his
employer,
in
an
obvious
attempt
to
escape
the
reach
of
Section
24A,
and
to
forestall
respondent’s
allegation
that
this
payment
‘was
a
benefit
received
by
the
Appellant
in
the
year
1951
in
respect
of,
or
by
virtue
of
his
position
in
the
service
of
an
oil
company
.
.
.”
I
would
insofar
agree
with
appellant
and
therefore
insofar
also
disagree
with
respondent.
This
amount
never
was
disbursed
by
either
of
the
three
companies
with
which
Curran
had
business
connections
during
1951.
Imperial
Oil
paid
him
until
October
1,
when,
as
an
employee
of
Federated
Petroleums,
he
was
assigned
to
Home
Oil,
this
latter
company
continuing
his
annual
salary
of
$25,000
for
the
last
three
months.
Moreover,
Curran’s
“salary
or
wages”
for
1951
were
not
$275,000.
The
answer
must
be
found
elsewhere.
What
can
be
the
real
nature,
the
most
plausible
meaning
of
the
bargain
entered
into
by
those
two
businessmen
whose
names
so
frequently
reappear?
The
expressions
used
in
the
written
document,
Exhibit
1,
reveal
merely
one
aspect
of
the
bargain.
In
the
“resignation
contract”
Brown
adduces
a
twofold
explanation
identical
with
Curran’s
own
views:
(a)
that
he
agrees
to
pay
the
grantee
$250,000
in
consideration
of
the
loss
of
pension
rights
and
the
chances
for
advancement;
(b)
that
he,
the
grantor
“holds
a
substantial
interest
in
Federated
Petroleums
Limited,
is
of
the
opinion
that
the
grantee’s
experience,
capabilities
and
connections
would
be
valuable
to
that
company,
and
is
very
desirous
of
persuading
the
grantee
to
resign
from
his
present
position
in
order
that
he
may
then
be
free
to
accept
an
offer
of
employment
from
Federated
Petroleums
Limited.’’
So
then
two
objects
are
stated
for
which
payment
was
had.
Both
considerations
put
forward
by
Curran
were
of
no
particular
concern
to
Brown,
who
would
as
readily
have
satisfied
any
of
the
latter’s
demands
such
as,
for
instance,
purchasing
his
house
in
another
city
and
providing
him
with
a
residence
in
Calgary.
Brown’s
only
object
was
the
enlistment
for
his
companies
of
Curran’s
reputed
experience,
capabilities
and
connections.
What
one
wished
to
obtain
exactly
corresponded
to
that
which
the
other
delivered:
the
normal
business
expectations
of
experience,
capabilities
and
connections.
In
his
capacity
of
controlling
shareholder
of
Federated
Petroleums
and
largest
single
owner
of
Home
Oil
shares,
Brown
stood
at
the
apex
of
the
receiving
line
if
eventually
the
hoped-for
"‘experience,
capabilities
and
connections’’
occasioned
an
increased
yield
in
company
gains.
Brown
furthermore
eagerly
sought
to
achieve
paramount
influence
over
Home
Oil
and,
as
expected
of
him,
Curran
greatly
facilitated
the
fruition
of
the
scheme.
A
man’s
experience,
capabilities
and
connections
are
intangible
assets
of
a
capital
nature;
but
the
effects
accruing
from
their
fruitful
use
should
be
viewed
in
the
light
of
income.
Regarding
those
properly
called
"‘chances''
which
the
appellant
voluntarily
surrendered,
quite
likely
some
would
in
time
materialize,
still
they
might
not,
through
an
unfortunate
twist
of
fortune:
sickness,
disability,
untimely
death.
At
all
events,
I
feel
that
such
a
consideration
never
was
the
immediate
cause
or
causa
causans
of
the
agreement.
This
brings
the
matter
to
the
pension
rights
angle;
again
it
must
be
said
that
it
is
completely
foreign
to
our
problem,
res
inter
alios
acta,
a
matter
to
be
liquidated
by
the
parties
concerned,
Curran
and
Imperial
Oil.
A
glance
at
page
8
of
the
transcript
reveals
that
Curran
and
Imperial
Oil
effectively
settled
it
between
themselves,
I
quote:
"‘Q.
[by
Mr.
Milvain,
Q.C.,
to
Curran]
Now,
in
the
event
of
the
employee
voluntarily
terminating
the
employment,
what
was
the
position
with
respect
to
that
superannuation
or
pension
plan?
A.
He
would
have
an
option
of
doing
one
of
two
things,
either
he
might
take
what
is
termed
a
deferred
annuity
[maturing
at
the
age
of
65],
or
he
could
take
entirely
cash
and
he
would
receive
mainly
the
money
that
he
had
put
into
the
plan
himself
at
that
time.
Q.
Insofar
as
the
contributions
made
by
the
employer,
.
.
.
Imperial,
would
the
employee
get
that
part
of
the
contribution
?
A.
Not
entirely,
he
would
get
a
small
part
of
that
employer’s
contribution.
.
.
.”
The
appellant
predicated
his
first
line
of
attack
on
a
total
lack
of
employer-employee
connection
between
himself
and
Brown.
It
should
be
borne
in
mind
that
pension
rights,
superannuation
funds,
especially
in
cases
of
a
single
payment,
become
taxable
in
Virtue
of
Section
34
of
the
Act.
Here,
a
dilemma
confronts
the
appellant
with
equally
unfavourable
alternatives.
If
Curran
obtained
payment
as
a
consideration
of
surrendered
pension
rights,
then
Section
34
arises
with
its
necessary
implications
of
employer-employee
relationships,
paving
the
way,
at
the
minister’s
option,
to
Section
24A.
On
the
contrary,
objecting
to
Section
34
is
tantamount
to
asserting
the
inexistanee
of
a
valid
or
regular
pension
plan
and
of
all
employment
dependence
between
Curran
and
Brown.
Then,
should
we
conclude
that
no
employment
ties,
no
superannuation
fund,
can
be
traced,
it
irresistibly
follows
that
the
pension
argument
loses
its
arguable
value.
In
his
written
engagements,
throughout
his
examination
and
Brown’s,
appellant
took
a
precarious
and
contradictory
position.
In
effect,
he
argued
that
:
(a)
Brown
never
employed
Curran;
(b)
Curran
received
$250,000
from
Brown
for
two
considerations,
one
of
Which
was
the
surrender
of
pension
rights
with
Imperial
Oil.
Now,
this
second
claim
is
admissible
only
if
an
assessment
under
Section
34
be
equally
justified,
a
consequence
giving
rise
to
legal
implications
destructive
of
appellant’s
essential
argument
(a).
The
test
seems
rather
self-evident
:
Had
the
respondent
assessed
appellant
in
virtue
of
Section
34,
hereunder
partially
reproduced,
could
he
then
successfully
prosecute
a
claim
for
recovery
?
"34.(1)
In
the
case
of
(a)
a
single
payment
(i)
out
of
or
pursuant
to
a
superannuation
or
pension
fund
or
plan
upon
the
death,
withdrawal
or
retirement
from
employment
of
an
employee
or
former
employee
or
upon
the
winding-up
of
the
fund
or
plan
in
full
satisfaction
of
all
rights
of
the
payee
in
or
under
the
fund
or
plan,
or
the
payment
or
payments
made
in
a
taxation
year
may,
at
the
option
of
the
taxpayer
by
whom
it
is
or
they
are
received,
be
deemed
not
to
be
income
of
the
taxpayer
for
the
purpose
of
this
Part,
in
which
case
the
taxpayer
shall
pay,
in
addition
to
any
other
tax
payable
for
the
year,
a
tax
on
the
payment
or
aggregate
of
the
payments
equal
to
the
proportion
thereof
that
The
present
appellant
could,
and
no
doubt
would
counter,
that
between
Brown
and
himself
as
payer
and
payee
no
such
legal
superannuation
fund
or
pension
plan
existed.
He
would
object,
and
properly
so,
that
the
$250,000
were
not
granted
to
him
"‘upon
withdrawal
or
retirement
from
employment
[as
an]
employee
or
former
employee
.
.
.”
Possibly
one
might
concede
that
the
compensation
story
subjectively
envisaged,
i.e.,
in
appellant’s
light
is
true
to
a
degree
but,
as
a
matter
of
fact
in
the
ruling
purview
of
the
Act,
i.e.,
objectively,
it
is
untenable.
The
amount
paid
is
closely
akin
to
a
tangible
appraisal,
a
material
appreciation
of
the
beneficial
effects
consequent
upon
“experience,
capabilities
and
connections”
as
well
as
a
pecuniary
recognition
for
future
assistance,
outside
the
employment
field,
rendered
to
or
anticipated
by
R.
A.
Brown
personally.
For
reasons
somewhat
differing
from
those
propounded
by
respondent,
I
agree
that
the
sum
of
$250,000
constitutes
income.
Audette,
J.,
in
Morrison
v.
M.N.R.,
[1917-27]
C.T.C.
343
at
p.
300,
spoke
thus
:
“Now
the
controlling
and
paramount
enactment
of
sec.
3
defining
the
income
is
‘the
annual
net
profit
or
gain
or
gratuity.’
Having
said
so
much
the
statute
proceeding
by
way
of
illustration,
but
not
by
way
of
limiting
the
foregoing
words,
mentions
seven
different
classes
of
subjects
which
cannot
be
taken
as
exhaustive
since
it
provides,
by
what
has
been
called
the
omnibus
clause,
a
very
material
addition
reading
‘and
also
the
annual
profit
or
gain
from
any
other
sources.’
The
words
‘and
also’
and
‘other
sources’
make
the
above
illustra-
tion
absolutely
refractory
to
any
possibility
of
applying
the
doctrine
of
ejusdem
generis
set
up
at
the
hearing.
The
balance
of
the
paragraph
is
added
only
ex
majori
cautelâ.
.
.
.
The
net
is
thrown
with
all
conceivable
wideness
to
include
all
bona
fide
profits
or
gain
made
by
the
subject.’’
Despite
a
lapse
of
years,
this
interpretation
of
Section
3
is
still
true
of
the
amended
text
as
it
read
in
1951.
In
very
wide
terms,
Section
3
renders
taxable
"‘income
for
the
year
from
all
sources
and
without
restricting
the
generality
of
the
foregoing
.
.
.”
Therefore,
this
controversial
payment
meets,
I
believe,
the
statutory
meaning
of
income
for
the
year
from
a
source
other
than
those
particularized
by
subsections
(a),
(b)
and
(e)
and
Was
properly
assessed
as
such.
Lord
Halsbury,
L.C.,
in
Alexander
Tennant
v.
Robert
Sinclair
Smith,
[1892]
A.C.
150
at
154,
wrote
that:
“.
.
.
This
is
an
Income
Tax
Act,
and
what
is
intended
to
be
taxed
is
income.
And
when
I
say
‘what
is
intended
to
be
taxed’,
I
mean
what
is
the
intention
of
the
Act
as
expressed
in
its
provisions,
because
in
a
taxing
Act
it
is
impossible,
I
believe,
to
assume
any
intention,
any
governing
purpose
in
the
Act,
to
do
more
than
take
such
tax
as
the
statute
imposes.
In
various
cases
the
principle
of.
construction
of
a
taxing
Act
has
been
referred
to
in
various
forms,
but
I
believe
they
may
be
all
reduced
to
this,
that
inasmuch
as
you
have
no
right
to
assume
that
there
is
any
governing
object
which
a
taxing
Act
is
intended
to
attain
other
than
that
which
it
has
expressed
by
making
such
and
such
objects
the
intended
subject
for
taxation,
you
must
see
whether
a
tax
is
expressly
imposed.
Cases,
therefore,
under
the
Taxing
Acts
always
resolve
themselves
into
a
question
whether
or
not
the
words
of
the
Act
have
reached
the
alleged
subject
of
taxation.
Lord
Wensleydale
said,
in
In
re
Micldethwait,
11
Ex.
(U.K.)
at
p.
456,
“It
is
a
well-established
rule,
that
the
subject
is
not
to
be
taxed
without
clear
words
for
that
purpose;
and
also,
that
every
Act
of
Parliament
must
be
read
according
to
the
natural
construction
of
its
words.’
”
As
just
said
above,
I
would
hold
that
"‘the
words
of
the
Act—
in
the
appropriate
part
of
Section
3
(R.S.C.
1948,
c.
52)—have
reached
the
alleged
subject
of
taxation”.
The
assessment
claimed
from
appellant
as
income
for
taxation
year,
1951,
was
in
accordance
with
the
Act
and
the
appeal
must
be
dismissed
with
costs.
Judgment
accordingly.
Email this Content