CAMERON,
J.:—By
its
decision
dated
February
5,
1952,
the
Income
Tax
Appeal
Board
disallowed
the
appellant’s
appeal
from
assessments
to
income
tax
for
the
years
1946,
1947
and
1948
(5
T.A.B.C.
375).
From
that
decision
an
appeal
is
now
taken
to
this
Court.
As
both
appeals
were
heard
in
camera,
the
name
of
all
parties
concerned
will
be
omitted.
No
oral
evidence
was
given
on
this
appeal,
it
being
agreed
that
that
given
before
the
Tax
Appeal
Board
should
be
the
evidence
before
me.
There
is
no
dispute
as
to
the
facts,
the
sole
matter
in
issue
being
the
application
of
partnership
law
to
the
provisions
of
the
Income
War
Tax
Act,
and
the
same
principles
apply
to
each
of
the
taxation
years
in
question.
The
appellant
is
a
barrister,
solicitor
and
a
patent
attorney
and
will
hereinafter
be
referred
to
as
“W”;
for
the
three
years
he
was
a
member
of
a
legal
firm,
which
I
shall
call
“X
and
Y”,
and
also
of
a
firm
of
patent
attorneys
which
I
shall
refer
to
as
‘‘Q
and
Co.’’
The
basic
documents
and
agreements
on
which
the
appeal
is
founded
are
contained
in
Ex.
A-2
and
will
be
individually
referred
to
by
their
tab
numbers.
The
legal
firm
of
“X
and
Y’’
was
founded
in
1926
by
Mr.
“X”
and
Mr.
“Y”
(Tab
4),
and
until
January
1,
1940,
when
“W”
became
a
partner
(Tab
6),
they
were
the
only
members.
For
many
years
“X”
had
an
interest
in
“Q
and
Co.’’
which
had
branches
in
Canada
and
the
United
States,
and
by
his
agreement
with
“Y”,
the
net
income
which
“X”
derived
from
‘‘Q
and
Co.’’
was
added
to
the
income
of
the
legal
firm
of
‘‘X
and
Y’’
and
divided
in
certain
agreed
proportions
between
“X”
and
“Y”,
and
after
‘‘W’’
became
a
partner
of
‘‘X
and
Y’’,
between
“X”,
4<
Y”
and
‘‘W’’.
As
a
result
of
certain
proceedings,
“X”
became
the
sole
member
of
the
firm
of
‘‘Q
and
Co.’’
in
September,
1940.
Subsequently,
the
agreements
be-
tween
“X”,
“Y”
and
“W”
were
modified
by
an
agreement
dated
November
18,
1948
(Tab
7).
Thereby,
the
three
partners
agreed
to
carry
on
separately
the
two
businesses
formerly
carried
on
by
“X”
as
“Q
and
Co.,’’
and
by
“X”,
“Y”
and
“W”
as
“X
and
Y”,
the
respective
interests
of
the
three
parties
being
identical
in
each
of
the
two
firms.
It
provided
that
all
interest
of
a
partner
in
the
assets
and
goodwill
of
each
firm
should
cease
and
determine
upon
his
death;
and
that
the
provisions
of
all
prior
agreements
relating
to
the
interest
of
a
deceased
partner
and
to
the
benefits
to
the
enjoyed
by
his
widow
and/or
daughter,
or
daughters,
were
cancelled.
The
following
special
provisions
related
solely
to
the
firm
of
“Q
and
Co.’’
and
these
are
of
particular
importance
inasmuch
as
the
appeals
herein
relate
entirely
to
the
income
derived
from
that
firm.
“3.
Upon
the
death
of
any
partner
of
the
firm
of
‘Q
and
Co.’
the
surviving
partners
will
admit
the
present
wife
of
the
deceased
partner
as
a
partner
in
the
said
firm
if
she
so
desires
and
then
survives.
4.
The
share
in
the
firm
of
‘Q
and
Co.’
to
which
the
widow
of
either
‘X’
or
‘Y’
shall
be
entitled
while
she
continues
to
survive
shall
be
the
proportion
which
$8,000.00
bears
to
the
total
income
of
the
firm
in
any
year
provided
that
the
profits
at
least
equal
$12,000.00
and
shall
abate
proportionately
to
the
amount
by
which
the
said
profits
fall
below
that
sum.
5.
The
interest
of
the
widow
of
‘W’
shall
be
the
proportion
which
$1,500.00
bears
to
the
total
income
of
the
firm
in
any
year
provided
that
the
profits
at
least
equal
$12,000.00
and
shall
abate
proportionately
to
the
amount
by
which
the
said
profits
fall
below
that
sum.
6.
In
no
circumstances
shall
the
total
interests
of
all
the
widows
admitted
to
the
partnership
hereunder
exceed
66-⅔
per
cent.
of
the
total
income
of
the
firm
in
any
year
and
if
in
any
year
66-⅔
per
cent.
of
the
income
is
insufficient
to
provide
the
amounts
hereinbefore
specified
in
full
the
interests
of
each
of
the
several
widows
shall
abate
proportionately
to
the
deficiency.
7.
In
addition,
but
only
when
and
to
the
extent
that
the
interests
of
any
widow
or
widows
who
become
partners
in
the
firm
by
virtue
of
this
agreement
are
together
less
than
66-2/3%
of
the
profits
of
the
business
in
any
year,
the
adult
daughters
of
any
of
the
parties
hereto
who
desire
to
do
so
shall
be
admitted
as
partners
in
the
firm
of
‘Q
and
Co,’
and
while
they
respectively
survive
their
respective
interests
shall
be
the
proportion
which
$1,200.00
bears
to
the
total
profits
of
the
business
in
any
year
and
shall
abate
proportionately
to
any
deficiency
below
66-2/3%
of
the
said
profits
after
the
interests
of
all
widows
have
been
satisfied.
8.
Forthwith
upon
the
death
of
any
widow
or
daughter
who
becomes
a
partner
in
the
firm
of
‘Q
and
Co.’
pursuant
to
this
agreement,
her
interest
in
the
assets
and
goodwill
of
the
firm
shall
cease
and
determine.’’
Then
Clause
9
provided
that
the
figures
of
$8,000.00,
$1,500.00
and
$1,200.00
should
be
varied
from
time
to
time
by
reference
to
the
variations
of
the
monthly
index
figure
of
wholesale
prices
published
annually
by
the
Bureau
of
Statistics,
the
index
figure
of
December,
1941,
being
taken
as
the
base,
certain
other
details
thereof
also
being
provided
but
which
are
not
here
of
importance.
“X”
died
May
18,
1944,
at
the
age
of
fifty-eight
years.
His
widow
declared
her
willingness
to
become
a
partner
in
‘‘Q
and
Co.’’
and
by
an
agreement
dated
October
2,
1944
(Tab
8),
executed
by
her
and
by
‘‘W”’
and
“Y”,
it
was
agreed
that
the
said
business
should
thereafter
be
carried
on
by
these
three
parties
as
partners.
Thereby
it
was
agreed
that
the
net
income
—as
therein
defined—should
be
divided
as
follows:
(a)
To
the
widow
of
“X”—$8,475.00,
such
amount
being
subject
to
certain
stated
variations
and
to
the
condition
that
her
share
should
not
exceed
two-thirds
of
such
profits;
(b)
To
‘‘W’’
and
“Y”
one-
half
each
of
the
balance.
It
was
further
provided
:
‘4,
“Y?
and
‘W’
or
the
survivor
of
them
shall
be
exclusively
entitled
to
the
management
and
control
of
the
business
of
the
firm
and
may
admit
such
other
partners
in
the
said
firm
and
business
as
they
shall
see
fit
or
exclude
any
partners
so
admitted.
5.
The
share
of
the
profits
receivable
by
Mrs.
‘X’
shall
not
be
reduced
by
the
admission
of
any
additional
partner
other
than
the
present
wives
of
‘Y’
and
‘W’
who
may
be
severally
admitted
as
partners
after
the
death
of
their
respective
present
husbands.
on
the
same
footing
as
Mrs.
‘X’,
in
which
event
the
sums
payable
to
Mrs.
‘X’
and
to
the
wife
or
wives
so
admitted
shall
not
together
exceed
two-thirds
of
the
profits.
6.
‘Y’
and
‘W’
or
the
survivor
of
them
shall
have
the
right
to
designate
which
of
the
persons
who
at
the
time
of
such
designation
are
partners
in
the
firm
shall
after
the
death
of
the
survivor
of
‘Y’
and
‘W’
be
exclusively
entitled
to
the
management
and
control
of
the
business
of
the
firm,
and
the
pariner
or
partners
so
designated
shall
be
entitled
to
such
management
and
control
accordingly
shall
have
the
same
power
as
hereby
given
to
‘Y’
and
‘W’
to
designate
their
successors
to
manage
and
control
the
firm.
8.
Mrs.
‘X’
may
give
three
months’
notice
at
any
time
to
determine
her
interest
in
the
partnership
and
shall
not
be
responsible
for
the
liabilities
thereof
incurred
after
the
date
upon
which
the
notice
takes
effect.
10.
All
interest
of
any
partner
in
the
firm
or
its
then
assets
shall
determine
forthwith
upon
his
or
her
death,
and
the
personal
representative
of
any
deceased
partner
shall
not
have
any
claim
against
the
surviving
partners
in
respect
of
the
goodwill
or
any
other
asset
of
the
firm
existing
at
the
date
of
the
death
of
such
partner.”
The
agreement
was
to
have
effect
from
May
19,
1944,
the
day
following
the
death
of
“X”.
By
a
further
agreement,
also
dated
October
2,
1944
(Tab
9),
the
three
daughters
of
“
X
”
were
taken
into
the
firm
of
‘‘Q
and
Co.’’
and
it
was
agreed
that
the
business
should
thereafter
be
carried
on
by
“W”,
“Y”,
Mrs.
“X”
and
the
said
three
daughters
(who
were
called
the
parties
of
the
second
part).
Then
Clauses
2
and
3
provided:
“2.
Each
of
the
parties
of
the
second
part
shall
be
entitled
to
receive
$1,271.00
yearly
out
of
the
profits
of
the
said
business
ascertained
as
set
out
in
the
principal
agreement
subject
to
variation
upwards
or
downwards
as
set
out
in
the
schedule
hereto
and
subject
to
the
conditions
that
there
remains
of
the
said
profits
for
distribution
under
the
principal
agreement
between
the
partners
other
than
Mrs.
‘X’
and
the
present
wives
of
the
said
‘Y’
and
‘W’
(if
either
or
both
the
said
wives
is
or
are
admitted
to
the
partnership
under
the
terms
of
the
principal
agreement)
an
amount
at
least
equal
to
one-
third
of
the
profits
ascertained
as
aforesaid,
and
that
if
such
remainder
is
insufficient
to
pay
the
parties
of
the
second
part
in
full,
the
sums
payable
to
them
shall
be
reduced
equally
and
proportionately.
3.
The
amounts
payable
to
the
parties
of
the
second
part
shall
be
subject
to
further
reduction
if
after
the
death
of
‘Y’
and/or
‘W’
any
daughter
of
either
is
admitted
to
the
partnership
on
the
same
footing
as
the
parties
of
the
second
part,
in
which
event
that
part
of
the
profits,
if
any,
out
of
which
the
shares
of
the
said
parties
of
the
second
part
are
payable
shall,
if
insufficient
to
provide
for
payment
in
full
to
each
of
the
parties
of
the
second
part
to
each
of
the
daughters
so
admitted,
be
distributable
equally
among
the
said
parties
of
the
second
part
and
the
said
daughters.”
On
January
1,
1945,
Mr.
‘‘T’’,
a
lawyer
and
patent
attorney,
became
a
member
of
the
legal
firm
of
‘‘X
and
Y”
and
also
of
“Q
and
Co.,’’
the
agreement
in
regard
to
the
latter
firm
being
reduced
to
writing
on
August
8,
1947
(Tab
10).
By
that
agreement,
certain
provisions
of
the
first
agreement
of
October
2,
1944
(Tab
8),
were
incorporated
therein,
and
it
was
provided
that
upon
the
death
of
*‘
Y
”
and
“W”,
“
T
”,
if
then
a
partner,
should
be
exclusively
entitled
to
the
management
and
control
of
‘‘Q
and
Co.’’
Similar
provisions
were
made
for
the
admission
as
partners
of
“T’s”
wife
and
daughters
upon
his
death
and
the
payment
of
specified
shares
of
the
income
to
them,
that
of
the
wife
being
limited
to
$4,200.00
and
that
of
any
daughter
to
$1,200.00,
subject
to
certain
variations.
“Y”
died
on
September
4,
1948.
Thereafter,
and
pursuant
to
the
terms
of
the
agreement
of
November
18,
1943,
his
widow
and
unmarried
daughter
declared
their
willingness
to
become
partners
in
the
firm
of
“Q
and
Co.,’’
and
while
no
written
agreement
was
filed,
the
evidence
establishes
that
similar
arrangements
were
entered
into
with
them
as
had
been
made
with
Mrs.
“X”
and
the
three
daughters
of
“X”
respectively,
such
arrangements
being
effective
September
5,
1948.
From
January
1,
1946,
to
September
4,
1948,
the
net
income
of
“Q
and
Co.’’
was
divided
in
accordance
with
these
arrangements
between
‘‘Y’’,
“W”,
“T”,
Mrs.
“X”
and
the
three
daughters
of
“X”.
From
September
5,
1948,
to
December
31,
1948,
it
was
so
divided
between
those
persons
(except
‘‘Y’’)
and
Mrs.
‘‘Y’’
and
Miss
‘‘Y’’.
The
amounts
received
by
all
except
“Y”,
“W”
and
“T”
are
shown
in
para.
28
of
the
Statement
of
Claim.
Para.
10
shows
the
proportions
thereof
received
respectively
by
“Y”,
“W”
and
“T”
in
each
year,
their
shares
being
paid
into
the
firm
of
<4
X
and
Y”,
and
thereafter
their
shares
in
the
two
firms
were
payable
to
them
individually,
those
of
the
appellant
being
shown
in
para.
17
of
the
Statement
of
Claim.
Income
tax
is
not
levied
against
the
income
of
a
partnership
as
such.
In
this
case,
the
income
of
‘‘Q
and
Co.’’
was
divided
between
the
various
persons
who
were
considered
to
be
partners,
and
in
the
proportions
agreed
upon
by
them.
The
full
amount
received
by
the
appellant
in
each
case
was
included
in
his
annual
returns
and
there
is
evidence
that
some,
if
not
all,
of
the
others
(including
Mrs.
“X”)
completed
their
individual
returns
and
were
taxed
accordingly.
The
Minister
being
of
the
opinion
that
only
“Y”,
“W”
and
‘‘T’’
were
partners
in
the
firm
from
January
1,
1946,
to
September
4,
1948,
and
only
‘‘W”’
and
“T”
from
September
5,
1948,
to
December
31,
1948,
declined
to
permit
the
deduction
of
any
payments
made
to
the
wives
and
daughters
of
“X”
and
“Y”
and
apportioned
the
whole
of
the
income
from
January
1,
1946,
to
September
4,
1948,
between
“Y”,
“W”
and
“T”,
and
from
September
5,
1948,
to
December
31,
1948,
between
“W”
and
“T”,
in
the
same
proportion
as
they
were
respectively
entitled
to
in
each
of
the
said
years,
and
assessed
the
appellant
accordingly.
As
I
have
stated,
the
Income
Tax
Appeal
Board
affirmed
the
assessments
made
upon
the
appellant.
The
appellant
relies
upon
Section
30
of
the
Income
War
Tax
Act,
which
is
as
follows
:
“30.
Where
two
or
more
persons
are
carrying
on
business
in
partnership,
the
partnership
as
such
shall
not
be
liable
to
taxation
but
the
shares
of
the
partners
in
the
income
of
the
partnership,
whether
withdrawn
or
not
during
the
taxation
year
shall,
in
addition
to
all
other
income,
be
income
of
the
partners
and
taxed
accordingly.’’
The
appellant
submits
that
the
wives
and
daughters
of
“X”
and
“Y”
were,
in
fact,
partners
in
‘‘Q
and
Co.’’
for
the
respective
periods
mentioned
and
that
the
payments
received
by
them
were
received
as
partners
and
not
otherwise.
‘‘Partnership’’
is
not
defined
in
the
Act
and
I
am
therefore
in
agreement
with
the
submission
of
appellant’s
counsel
that
the
question
as
to
whether
the
wives
and
daughters
were
or
were
not
partners
must
be
determined
under
the
general
law.
As
far
as
I
am
aware,
the
Income
War
Tax
Act
contains
only
two
provisions
relating
to
partnership,
other
than
Section
30.
By
Section
2(1)(m),
the
income
of
a
partner
actively
engaged
in
the
conduct
of
the
business
of
a
partnership
is
declared
to
be
‘‘earned
income,’’
and
it
would
follow
from
Section
2(1)(n)
that
the
income
of
a
partner
not
actively
engaged
in
the
conduct
of
such
business
would
be
“investment
income.’’
This,
it
seems
to
me,
is
a
clear
recognition
that
even
under
the
Act
a
person
can
be
a
partnér
in
a
partnership
although
not
actively
engaged
in
the
conduct
thereof.
Then
by
Section
31(1),
the
Minister
is
given
a
discretion
in
allocating
the
total
income
of
a
partnership
to
either
husband
or
wife,
where
they
are
in
partnership;
but
neither
that
subsection
nor
the
remaining
portions
of
Section
31
have
here
any
application.
It
is
common
ground
that
the
wives
and
daughters
of
“X”
and
“Y”
were
neither
barristers,
solicitors
or
patent
attorneys;
that
none
of
them
had
any
experience
or
training
in
any
of
these
professions;
that
none
of
them
participated
to
the
slightest
degree
in
the
conduct
of
the
business
of
‘‘Q
and
Co.”
at
any
time
or
did
anything
whatever
in
relation
thereto
after
they
became
“partners,”
except
to
receive
their
regular
proportions
of
the
income
therefrom.
Mrs.
‘‘X’’
has
re-married
and
the
three
daughters
of
“X”
have
married,
one
or
more
of
them
now
residing
out
of
Canada.
Further,
I
find
that
as
each
entered
into
the
‘‘partnership’’
agreement
she
brought
nothing
into
the
firm
by
way
of
capital
or
otherwise.
Upon
the
death
of
“X”
and
“Y”,
their
respective
interests
in
the
assets
and
goodwill
of
the
firm
ceased
forthwith.
What
the
rights
of
the
wives
and
daughters
would
have
been
had
they
been
refused
entry
into
the
firm,
or
what
they
would
have
taken
out
in
the
event
of
a
dissolution
is
here
of
no
importance
and
need
not
be
considered.
The
assets
of
the
firm
were
not
enhanced
in
any
way
when
they
respectively
became
members
and
there
is
no
evidence
that
any
of
them
at
any
later
period
brought
in
any
capital.
No
change
was
made
in
the
firm
name
which
has
always
been
known
as
“Q
and
Co.’’,
and
there
was
no
change
in
the
conduct
of
the
business
after
the
wives
and
daughters
became
“partners”.
Partnership,
though
often
referred
to
as
a
contract,
is
a
relation
resulting
from
a
contract.
By
the
Partnership
Act
of
Ontario
(in
which
province
the
head
office
of
‘‘Q
and
Co.’’
was
located)
now
found
in
R.S.O.
1950,
c.
270,
it
is
defined
by
Section
2
:
“2.
Partnership
is
the
relation
which
subsists
between
persons
carrying
on
a
business
with
a
view
of
profit.
.
.”
Then
by
Section
3
thereof
there
shall
be
taken
into
consideration,
in
determining
whether
a
partnership
does
or
does
not
exist,
certain
rules,
including
3(3).
“3.
(3)
The
receipt
by
a
person
of
a
share
of
the
profits
of
a
business
is
prima
facie
evidence
that
he
is
a
partner
in
the
business,
but
the
receipt
of
such
a
share
or
payment,
contingent
on
or
varying
with
the
profits
of
a
business,
does
not
of
itself
make
him
a
partner
in
the
business,
and
in
particular,’’
The
interpretation
to
be
placed
on
the
latter
provision
is
stated
in
Lindlay
on
Partnership,
11th
Ed.,
at
p.
44
as
follows:
“The
effect
of
sharing
profits
as
prima
facie
evidence
of
partnership
was
considered
by
the
Court
of
Appeal
in
the
case
of
Badeley
v.
Consolidated
Bank,
38
Ch.D.
238,
pp.
250-258,
and
was
there
explained
to
be
that
if
all
that
is
known
is
that
two
persons
are
participating
in
the
profits
of
a
business,
this,
unless
explained,
leads
to
the
conclusion
that
the
business
is
the
joint
business
of
the
two
and
that
they
are
partners.
But
if
the
participation
in
profits
is
only
one
among
other
circumstances
to
be
considered,
it
is
wrong
then
to
say
that
the
participation
in
profits
raises
a
presumption
of
partnership
which
has
to
be
rebutted
by
something
else;
in
such
a
case
all
the
circumstances
must
be
considered
in
order
to
ascertain
the
real
intention
of
the
parties
before
any
conclusion
is
drawn.’’
In
this
case
there
are
circumstances
other
than
the
mere
participation
in
profits
and
therefore
it
is
necessary
to
consider
all
the
circumstances
in
order
to
ascertain
the
real
intention
of
the
parties
before
reaching
my
conclusion.
One
of
such
circumstances,
and
I
think
a
very
important
one
(although
not
by
itself
conclusive),
is
the
fact
that
in
the
agreement
of
November
18,
1943,
and
in
all
the
subsequent
agreements,
the
word
“partners”
is
used
not
only
in
regard
to
‘‘X’’,
“
Y”,
“W”
and
“T”,
but
also
in
regard
to
their
respective
wives
and
daughters.
The
agreements
were
prepared
by
counsel
of
very
great
experience
and
it
must
be
assumed
that
in
using
that
term
they
understood
the
full
legal
effect
of
designating
their
wives
and
daughters
as
‘‘partners’’,
and
the
liabilities
which,
as
partners,
they
would
incur
for
partnership
debts
under
R.S.O.
1937,
e.
187,
Section
10.
In
the
agreement
of
October
2,
1944,
by
which
Mrs.
“X”
entered
the
firm,
there
is
a
recital
in
which
she
stated
her
willingness
to
become
a
partner
‘‘and
render
herself
responsible
for
the
liabilities
(of
the
firm)
in
consideration
of
a
share
in
the
profits
thereof’’.
Then,
by
Section
8
thereof,
she
could
determine
her
interest
in
the
partnership
by
three
months’
notice,
‘‘and
shall
not
be
responsible
for
the
liabilities
thereof
incurred
after
the
date
upon
which
the
notice
takes
effect’’.
Similar
provisions
are
found
in
the
other
agreement
of
October
2,
1944,
by
which
the
daughters
of
“X”
entered
the
firm,
and
while
in
neither
agreement
is
there
any
express
covenant
by
Mrs.
“X”
or
the
daughters
of
“X”
to
be
liable
for
such
liability,
I
have
no
doubt
that
if
losses
did
occur
they
would
be
liable
therefor
as
partners
and
in
view
of
the
recitals
I
have
mentioned.
It
follows,
therefore,
that
not
only
are
the
wives
and
daughters
of
‘‘X’’
and
“Y”
entitled
to
share
in
the
profits,
but
they
are
also
liable
for
the
losses
incurred
in
the
operation
of
the
business.
It
is
of
no
consequence
to
suggest
that
in
this
type
of
business
losses
are
not
likely
to
occur;
they
might
occur
and
if
they
did,
the
wives
and
daughters
would
be
liable
therefor.
One
of
the
points
urged
on
me
for
the
respondent
is
that
you
do
not
as
a
rule
constitute
or
create
or
prove
a
partnership
by
saying
that
there
is
one,
or
merely
by
production
of
a
document
called
a
partnership
agreement
and
in
which
the
parties
are
referred
to
as
partners,
and
with
that
submission
I
am
in
general
agreement
(C.I.R.
v.
Williamson
(1928),
14
T.C.
335
at
340
;
Dickinson
v.
Gross
(1927),
11
T.C.
614).
Then
it
is
said
that
the
wives
and
daughters
were
not
persons
carrying
on
the
business
of
“Q
and
Co.’’
and
were
therefore
not
partners.
Counsel
for
the
respondent
stresses
the
fact
that
they
contributed
nothing
in
the
way
of
services
or
capital
and
that
by
the
agreements,
the
management
and
control
of
the
business
of
the
firm
and
the
sole
right
to
admit
or
to
exclude
other
partners
in
the
firm
is
reserved
to
the
active
partners,
“X”,
“Y”,
‘““W’’
and
“T”.
It
must
be
conceded,
I
think,
that
one
who
contributes
services
but
no
capital,
and
one
who
contributes
capital
but
renders
no
services,
may
be
partners
in
a
firm.
In
general,
a
partner
does
contribute
something,
either
skill
or
property,
but
that
is
not
necessarily
so,
and
on
the
authorities
which
I
shall
mention,
it
appears
that
one
may
be
a
partner
in
fact
without
contributing
anything.
In
Halsbury’s
Laws
of
England,
2nd
Ed.,
Vol.
24,
p.
396,
it
is
stated:
“774.
The
above
definition
(i.e.,
the
definition
of
partnership
which
is
the
same
as
found
in
the
Partnership
Act
of
Ontario,
supra)
involves
a
contract
between
the
partners
to
engage
in
a
commercial
business
with
a
view
to
profit.
As
a
rule
each
partner
contributes
either
property,
skill
or
labour,
but
this
is
not
essential.
A
person
who
contributes
property
without
labour,
and
has
the
rights
of
a
partner,
is
usually
termed
a
sleeping
or
dormant
partner.
A
sleeping
partner
may,
however,
contribute
nothing.’’
As
authority
he
cites
Pooley
v.
Driver
(1877),
5
Ch.
D.
458.
The
following
extracts
are
taken
from
the
judgment
of
Jessel,
M.R.
:
p.
472—“.
.
..
There
could
not
be
a
partnership
without
there
was
a
commercial
business,
to
be
carried
on
with
a
view
to
profit
and
for
division
of
profits;
and
as
a
general
rule,
I
take
it,
if
it
fulfils
that
definition,
it
is
a
partnership.
I
say,
as
a
general
rule,
that
simple
definition
appears,
so
far
as
it
goes,
to
be
an
accurate
definition.
Then
whether
or
not
the
association
requires
that
one
or
more
of
the
partners
shall
contribute
labour
or
skill,
or
what
they
shall
contribute,
is
a
question
which
may
be
considered
as
subsidiary;
but
I
take
it
that
the
ordinary
meaning
of
the
word
‘partnership’
is
that,
no
doubt
as
a
rule,
each
partner
does
contribute
something
either
in
the
shape
of
property
or
skill.
But
it
is
not
a
universal
rule,
and
therefore
the
definition
of
Chancellor
Kent,
which
is
given
in
the
same
page,
is
not
quite
correct.
He
says
‘Partnership’
is
a
contract
of
two
or
more
competent
persons
to
place
their
money,
effects,
labour,
and
skill,
or
some
or
all
of
them,
in
lawful
commerce
or
business
.
.
.”
p.
473.—“You
can
have,
undoubtedly,
according
to
English
law,
a
dormant
partner
who
puts
nothing
in—neither
capital,
nor
skill,
nor
anything
else.
In
fact,
those
who
are
familiar
with
partnerships
know
it
is
by
no
means
uncommon
to
give
a
share
to
the
widow
or
relative
of
some
former
partner
who
contributes
nothing
at
all,
neither
name,
nor
skill,
nor
anything
else.
Therefore
it
is
not
quite
accurate,
as
Chancellor
Kent
puts
it,
that
they
must
contribute
labour,
skill,
or
money,
or
some
or
all
of
them
.
.
.”
Then
Potheir
says
they
must
have
‘something
in
common
(en
commun
quelque
chose),’
but,
as
I
said
before,
that
is
not
necessary
according
to
the
English
notion
of
partnership.
The
dormant
partner
may
put
in
nothing
whatever,
as
in
the
case
of
the
widow
or
child
of
a
deceased
partner;
therefore
that
shows
again
the
enormous
difficulty
of
giving
a
definition
which
shall
be
applicable
to
all
cases
.
.
.’’
p.
475-6.—(After
quoting
passage
on
pp.
306-7
from
Lord
Cranworth
in
Cox
v.
Hickman.)
“Now
what
Lord
Cranworth
means
there
is
quite
plain.
He
says
in
fact
that
the
participating
in
the
profits
is
sufficient
proof
of
partnership
if
there
is
nothing
to
get
rid
of
it.
If
you
find
an
association,
and
a
contract
made
by
the
members
of
the
association
that
the
trade
is
to
be
carried
on,
and
that
they
are
to
share
the
profits
in
certain
proportions,
then
that
makes
a
partnership,
unless
you
can
show
from
the
surrounding
circumstances
some
other
relation.
It
is
not
impossible
to
show
some
other
relation,
but,
as
he
says,
it
is
very
difficult
to
do
so.
It
is
often
conclusive
by
itself—not
always.”
p.
476-7.—“The
question
of
course
is
whether
a
man
is
liable
as
a
dormant
partner.
Now
a
dormant
partner
means
a
person
who
does
not
take
an
active
part
in
the
conduct
of
the
business,
and
who
may
be,
and
often
is,
prohibited
from
taking
such
active
part.
Therefore,
when
the
inquiry
is
whether
a
man
is
a
dormant
partner,
it
does
not
appear
to
me
to
aid
that
inquiry
by
saying
that
there
are
provisions
preventing
his
taking
an
active
part
in
the
conduct
of
the
business,
or
that
there
are
provisions
which
make
it
optional
for
him
to
take
an
active
part
in
the
business
or
not.
It
only
shows
he
is
not
an
active
partner.
Upon
that
there
is
an
observation
of
Lord
Cranworth’s
(8
H.L.C.
309):
‘I
can
find
no
case
in
which
a
person
has
been
made
liable
as
a
dormant
or
sleeping
partner,
where
the
trade
might
not
fairly
be
said
to
have
been
carried
on
for
him,
together
with
those
ostensibly
conducting
it,
and
when,
therefore,
he
would
stand
in
the
position
of
principal
towards
the
ostensible
members
of
the
firm
as
his
agents.’
”
It
is
perfectly
competent
for
parties
to
agree
that
the
management
of
the
partnership
affairs
shall
be
confided
to
one
or
more
of
their
members
exclusively
of
the
others.
(See
Lindley,
11th
Ed.,
p.
387;
R.S.O.
1950,
c.
270,
s.
24(5).)
Similarly,
it
is
competent
for
partners
to
agree
that
the
right
to
admit
or
exclude
partners
may
be
vested
in
one
or
more
of
their
members
(Sections
24,
25
of
the
Partnership
Act
of
Ontario;
Lindley
on
Partnership,
p.
450;
Lovegrove
v.
Nelson
&
Cox
(1834),
3
M.
&
K.
1;
Byrne
v.
Reid,
[1902]
2
Ch.
735.
It
is
further
submitted
for
the
respondent
that
while
there
was
an
agreement
which
might
be
called
a
partnership
agreement,
so
far
as
the
wives
and
daughters
were
concerned
it
had
never
governed
the
relations
of
the
parties,
that
it
was
put
aside
and
disregarded,
and
that
the
business
continued
exactly
as
it
had
previously
been.
I
was
referred
to
Dickinson
v.
Gross
(
Inspector
of
Taxes)
(1927),
11
T.C.
614,
the
headnote
to
which
is
as
follows:
“The
Appellant,
a
farmer,
had
entered
into
a
Deed
of
Partnership
with
his
three
sons
with
the
admitted
intention
of
reducing
the
Income
Tax
liability
in
respect
of
the
profits.
The
deed
provided
inter
alia
that
two
farms
owned
by
the
Appellant
should
be
let
to
the
Appellant
and
his
sons
at
stated
rentals,
that
accounts
should
be
made
up
annually,
that
the
net
profits
should
be
divided
equally
between
the
partners,
and
that
each
of
the
partners
should
have
the
right
to
sign
and
endorse
cheques
on
behalf
of
the
firm.
It
was
shown
in
fact
that
no
rent
had
been
paid,
that
no
accounts
or
books
had
been
kept,
or
any
distribution
of
profits
made,
that
cheques
had
been
signed
only
by
the
Appellant,
and
that
business
receipts
had
been
paid
indiscriminately
into
the
Appellant’s
private
bank
account
and
into
the
firm’s
account.
The
General
Commissioners
decided
that
there
had
been
no
partnership
in
fact,
and
accordingly
that
there
was
no
partnership
for
Income
Tax
purposes.
Held,
that
as
a
partnership
did
not
exist
in
fact,
there
was
no
partnership
for
the
special
purposes
of
the
Income
Tax
Act.’’
Rowlatt,
J.,
in
holding
that
the
partnership
was
non-existent,
stated
at
p.
620
:
“The
partnership
deed
here,
of
course,
was
a
deed
perfectly
good
according
to
its
tenor;
and
if
it
had
been
what
really
governed
the
relations
of
the
parties
it
would
have
effected
the
object
of
those
who
entered
into
it
or
purported
to
enter
into
it,
because
it
would
have
produced
another
legal
position
to
which
a
tax
attached
differently
from
the
legal
position
which
existed
before.
As
I
pointed
out
in
the
case
Mr.
Bremner
cited
to
me—and
as
has
been
often
pointed
out
before—people
can
arrange
their
affairs,
if
they
do
really
arrange
them,
so
as
to
produce
a
state
of
facts
in
which
the
taxation
is
different,
and
it
is
no
answer—it
is
perfectly
immaterial—to
say
that
they
have
done
it
for
that
purpose.
But
in
this
case
the
facts
show
that
in
very
many
ways
the
deed
was
simply
set
on
one
side
and
disregarded,
and
when
you
find
the
deed
is
disregarded,
and
also
that
it
was
entered
into
for
the
purpose
of
obtaining
relief
from
taxation
one
is
apt,
perhaps
naturally
and
quite
properly
upon
the
question
of
fact,
to
pay
a
little
more
attention
to
those
circumstances
and
those
points
in
which
it
was
disregarded.
Now
Mr.
Bremner,
I
think,
has
very
truly
said
that
if
these
young
men
had
come
forward
and
pointed
to
this
deed
and
said:
‘Here,
Father,
you
have
signed
this
deed;
kindly
carry
it
out’,
he
would
have
been
in
a
very
great
difficulty,
as
King
Lear
was,
in
getting
out
of
it,
and
they
probably
would
have
held
him
to
it;
and
if
they
had
held
him
to
it
the
Commissioners
would
have
had
no
justification
for
finding
as
they
have.
But
they
did
not.
On
the
contrary
they
let
the
deed
slide
and
proceeded
in
the
ordinary
patriarchal
way
which
everybody
who
is
the
least
familiar
with
the
habits
of
the
countryside,
as
I
have
no
doubt
these
three
Commissioners
were,
knows
very
well.
Now
what
the
Commissioners
have
done
is
that
they
have
found
that
there
was
no
partnership
in
fact.
Mr.
Bremner
says
that
looks
as
if
they
were
splitting
some
hair
and
saying
there
was
no
partnership
in
fact,
although
there
was
a
partnership
in
law.
I
do
not
think
that
is
the
way
to
look
at
the
finding
at
all.
A
partnership,
of
course,
is
a
legal
position
and
a
legal
result,
but
like
every
other
legal
position
it
depends
on
facts,
and
what
the
Commissioners
are
saying
here
is
:
‘
The
facts
are
not
those
from
which
a
legal
partnership
results,
because
although
there
was
the
deed
they
are
not
acting
on
it
;
it
is
not
governing
their
transactions;
they
are
not
paying
the
slightest
attention
to
it.
They
are
going
on
just
as
before.’
They
have
not
used
the
word
‘fictitious’,
and
they
have
not
used
the
word
‘sham’,
but
I
think
they
have
put
it
even
more
clearly.
They
say:
‘The
facts
here
were
not
a
partnership
although
there
was
a
bit
of
paper
in
the
drawer,
which
if
the
facts
had
been
according
to
it,
would
have
shown
there
was
a
‘partnership’.”
The
only
general
principle
which
can
be
deduced
from
that
decision
is
that
a
deed
of
partnership
does
not
necessarily
of
itself
constitute
a
partnership
for
income
tax
purposes
but
that
regard
may
be
had
to
what
was
done
thereunder
to
ascertain
whether
there
was
a
partnership,
in
fact.
In
that
case
it
was
found
that
the
terms
of
the
partnership
were
never
carried
out
but
were
completely
disregarded
even
to
the
extent
that
no
distribution
of
profits
was
made.
The
facts
in
the
instant
case
are
quite
different;
it
is
not
shown
that
any
parts
of
the
several
agreements
were
disregarded
and
it
is
apparent
that
the
books
of
the
firm
were
set
up
on
the
basis
that
the
inactive
as
well
as
the
active
partners
were
‘‘partners’’,
and
regular
monthly
distribution
of
the
profits
was
made
to
all
in
accordance
with
the
agreements.
The
partnership
agreements
governed
the
relations
of
the
parties
thereto
throughout
the
three
years
in
question.
Further,
it
is
submitted
that
as
the
wives
and
daughters
of
“X”
and
“Y”
were
paid
fixed
amounts
(subject
to
minor
variations),
such
amounts
did
not
represent
a
share
in
the
profits
in
the
sense
that
‘‘share’’
usually
means
a
proportion
or
percentage
of
the
profits.
The
point
was
considered
in
Re
Young
ex
parte
Jones,
[1896]
2
Q.B.
484,
where
Vaughan
Williams,
J.,
stated
at
p.
490:
“It
was
suggested
that
a
person
did
not
receive
a
share
of
the
profits
unless
he
obtained
a
right
to
a
certain
rate
of
profits
out
of
the
whole
of
the
profits
earned.
I
do
not
see
why
I
should
so
hold.
The
fund
is
distinctly
fixed
out
of
which
the
weekly
payments
were
to
come.
It
seems
to
me,
therefore,
that
an
agreement
for
the
receipt
of
a
sum
out
of
the
profits
is
an
agreement
for
the
receipt
of
a
share
of
the
profits.”
Reference
may
also
be
made
to
Lindley
on
Partnership,
11th
Ed.,
p.
65.
It
is
also
submitted
that
the
provisions
made
by
the
agreements
for
the
wives
and
daughters,
notwithstanding
the
fact
that
they
are
called
‘‘partners’’,
amounted
to
nothing
more
than
the
provision
of
fixed
annuities
for
them,
and
again
stress
is
laid
on
the
fact
that
they
were
not
required
to
and
did
not
perform
any
duties,
but
merely
had
the
right
to
receive
payment
of
their
fixed
shares
in
the
income.
That
submission
was
upheld
by
the
Income
Tax
Appeal
Board.
It
was
pointed
out
that
by
the
agreement
of
November
18,
1943
(Tab
7),
the
widows
of
“X”
and
“Y”
were
entitled
to
benefit
while
they
lived,
and
not
merely
while
they
remained
partners.
That
provision,
however,
does
not
appear
in
the
actual
partnership
agreements
of
October
2,
1944.
It
is
in
evidence
that
prior
to
the
agreement
of
November
18,
1943,
between
‘‘X’’,
‘‘Y’’
and
“W”,
provision
had
been
made
by
which
the
ascertained
interest
of
a
deceased
partner
in
the
firm
of
‘‘X
and
Y’’
would
be
discharged
by
the
payment
to
his
widow
and,
in
certain
events
also,
to
his
daughters,
of
life
annuities
payable
by
the
surviving
partner
or
partners,
out
of
and
to
be
a
charge
upon
the
profits
of
the
firm
of
‘‘X
and
Y”.
Insofar
as
“X”
and
‘‘Y’’
were
concerned,
somewhat
similar
provisions
had
existed
since
their
original
agreement
of
November
11,
1926
(Tab
4).
In
the
meantime,
however,
“X”
had
become
the
sole
proprietor
of
‘‘Q
and
Co.’’,
and
as
stated
in
the
agreement
of
November
18,
1943,
‘‘It
is
now
possible
to
modify
the
principal
agreement
and
the
“W”
agreement
so
as
to
simplify
their
operations
and
more
effectively
to
carry
out
the
intentions
of
the
party.”
By
Clause
2
thereof,
the
provisions
of
the
said
agreements
in
regard
to
the
interest
of
a
deceased
partner
and
in
regard
to
the
benefits
to
be
enjoyed
by
his
widow
and/or
daughter
or
daughters
were
cancelled
‘‘and
all
interest
in
the
assets
and
goodwill
of
each
of
the
firms
of
any
deceased
partner
shall
cease
and
determine
forthwith
upon
his
death.’’
Then
follows
the
provision
regarding
the
admission
of
the
wives
and
daughters
of
a
deceased
partner
as
‘‘partners’’
in
“Q
and
Co.’’
and
the
payment
of
fixed
sums
to
them
out
of
the
profits,
as
I
have
mentioned
above.
It
is
manifest
that
had
the
wives
and
daughters
of
“X”
and
“Y”
been
the
recipients
of
the
payments
under
the
agreements
existing
prior
to
November
28,
1943,
such
payments
would
have
been
annuities
and
the
then
partners
in
“X”
and
‘‘Y’’
would
not
have
been
entitled
to
deduct
any
portion
thereof,
before
ascertaining
their
own
shares
of
the
income
liable
to
taxation.
But
it
is
not
under
those
agreements
that
the
appellant
is
now
claiming,
but
rather
under
the
agreements
of
October
2,
1944,
and
upon
similar
arrangements
entered
into
with
Mrs.
‘‘Y’’
and
Miss
“Y”
in
1948.
It
was
perfectly
open
to
the
active
partners
to
arrange
their
affairs
in
such
a
manner
as
to
escape
tax
burdens,
provided
they
did
it
legally.
I
have
already
cited
the
opinion
of
Rowlatt,
J.,
in
Dickinson
v.
Gross
on
that
point
and
reference
may
also
be
made
to
Hawker
v.
Compton
(1922),
8
T.C.
306,
where
at
p.
313
Sankey,
J.,
said
:
“I
quite
agree
with
what
the
learned
Attorney
General
said,
which
is
this—I
have
said
it
already
twice
this
morning—that
it
is
perfectly
open
for
persons
to
evade
this
particular
tax
if
they
can
do
so
legally.
I
again
say
I
do
not
use
the
word
‘evade’
with
any
dishonourable
suggestion
about
it.
If
certain
documents
are
drawn
up,
and
the
result
of
those
documents
is
that
persons
are
not
liable
to
a
particular
duty,
so
much
the
better
for
them.’’
Reference
may
also
be
made
to
Ayrshire
Pullman
Motor
Services
V.
The
Commissioners
of
Inland
Revenue
(1929),
14
T.C.
704
at
763,
and
to
Commissioners
of
Inland
Revenue
v.
Fisher’s
Executors,
[1926]
A.C.
395
at
412.
Now
there
is
no
direct
evidence
as
to
why
the
previous
arrangements
for
valuing
the
interest
of
a
deceased
partner
and
the
discharge
thereof
by
the
payment
of
annuities
to
his
wife
and
daughters
were
changed
to
new
provisions
under
which
all
the
interest
of
such
deceased
partner
in
the
assets
and
goodwill
of
the
firm
should
terminate
upon
his
death,
and
the
widow
and
daughters
should
then
have
the
right
to
become
partners.
One
of
the
reasons
recited
is
‘‘to
more
effectively
carry
out
the
intention
of
the
parties.”
The
active
partners
probably
had
in
mind
the
benefits
to
be
gained
by
making
the
wives
and
daughters
‘‘partners’’
rather
than
annuitants
and
the
possible
saving
in
succession
duty
and
the
undoubted
saving
in
income
tax
under
the
provisions
of
Section
30.
I
can
see
nothing
illegal
in
their
attempting
to
do
so.
Supposing
for
the
moment
that
on
the
death
of
“X”
he
had
left
his
wife
destitute
and
there
was
no
agreement
by
which
she
had
the
right
to
become
a
partner;
but
that
the
surviving
partners
out
of
a
sense
of
moral
obligation
had
agreed
to
take
in
Mrs.
‘‘X’’
as
a
partner;
that
she
was
brought
in
on
terms
which
required
her
to
render
purely
nominal
Services
or
provide
a
very
small
amount
of
capital,
or
even
perform
no
services
and
bring
in
no
capital.
In
any
such
case,
and
under
the
existing
law,
I
do
not
think
it
could
be
said
that
she
was
not
a
partner
in
the
firm
or
that
the
active
partners
would
have
to
pay
income
tax
on
that
part
of
the
firm’s
income
to
which
under
their
agreement
she
was
entitled.
If
that
is
so,
I
see
no
reason
why
the
situation
should
be
different
in
this
case,
merely
because
she
came
in
as
a
partner
under
the
terms
of
the
pre-existing
agreement
which
entitled
her
to
do
so,
or
because
under
prior
agreements
which
had
been
cancelled,
she
was
to
be
provided
with
an
annuity.
It
is
my
opinion
that
in
the
absence
of
any
provisions
in
the
Income
War
Tax
Act
restricting
the
ordinary
meaning
of
the
words
‘‘partner’’
and
‘‘partnership’’,
or
conferring
on
the
Minister
the
right
to
allocate
the
income
of
the
partnership
in
any
special
way
between
the
partners
(as
for
example
between
“husband
and
wife’’
partnerships
as
in
Section
31),
the
partners
thereunder
have
the
right
to
determine
who
will
be
their
partners
and
the
share
to
which
each
is
entitled
in
the
income
therefrom;
and
if,
under
all
the
circumstances
of
the
case,
they
are
shown
to
be
partners
in
fact,
the
members
of
the
partnership
are
entitled
to
the
benefit
of
Section
30
and
to
pay
tax
only
on
their
individual
shares
in
the
partnership
income.
As
I
have
stated
above,
the
wives
and
daughters
by
the
terms
of
the
agreement
not
only
shared
in
the
income,
but
were
liable
for
losses
incurred.
That
finding,
together
with
the
other
circumstances,
is
sufficient
in
my
opinion
to
constitute
them
partners,
in
fact.
In
Lindley
on
Partnership,
11th
Ed.,
p.
47,
it
is
stated:
‘
‘
An
agreement
to
share
profits
and
losses,
in
the
sense
of
making
good
the
losses
if
any
are
sustained,
may
be
said
to
be
the
type
of
a
partnership
contract.
Whatever
difference
of
opinion
there
may
be
as
to
other
matters,
persons
engaged
in
any
trade,
business,
or
adventure
upon
the
terms
of
sharing
the
profits
and
making
good
all
losses
arising
therefrom,
are
necessarily
to
some
extent
partners
in
that
trade,
business
or
adventure;
nor
is
the
writer
aware
of
any
case
(unless
it
be
Re
Jane)
in
which
persons
who
have
agreed
to
share
profits
and
losses
in
this
sense
have
been
held
not
to
be
partners
.
..
But
it
does
not
follow
that
each
of
several
persons
who
share
profits
and
losses
has
all
the
rights
which
partners
usually
have.
For
example,
a
person
may
share
profits
and
losses
and
yet
have
no
right
actively
to
interfere
with
the
management
of
the
business;
or
he
may
have
no
such
right
to
dissolve
as
an
ordinary
partner
has;
or
he
may
have
no
right
to
share
the
goodwill
of
the
business
on
a
dissolution
;
and
other
instances
of
restricted
rights
may
be
suggested.
What
in
any
given
case
the
rights
of
a
particular
partner
are
depends
on
the
agreement
into
which
he
has
entered;
but
unless
the
word
partner
is
to
be
deprived
of
all
definite
meaning
its
proper
application
to
persons
who
share
profits
and
losses
in
the
sense
referred
to
can
hardly
be
questioned.’’
The
obvious
intention
of
the
agreement
was
to
make
the
wives
and
daughters
partners,
in
fact,
and
to
avoid
conferring
annuities
upon
them.
That
was
done
very
deliberately
and
no
doubt
with
the
tax
position
in
mind.
While
the
agreements
are
substantially
different
from
the
usual
partnership
agreements,
such
differences
in
my
opinion
are
not
either
severally
or
collectively
sufficient
to
prevent
their
being
agreements
of
partnership
in
fact.
Moreover,
in
the
year
in
question,
it
was
not
illegal
for
a
firm
of
patent
agents
to
have
in
its
firm
partners
who
were
not
qualified
patent
agents.
Even
under
the
Register
of
Patent
Agent
Rules,
1948,
enacted
pursuant
to
Section
15
of
the
Patent
Act,
1935,
as
amended,
any
firm
could
be
registered
if
at
least
one
member
was
qualified
and
entered
on
the
Register.
There
remains
one
further
contention
made
on
behalf
of
the
respondent.
It
is
submitted
that
a
distinction
must
be
drawn
between
a
trading
partnership
in
which
the
income
is
earned
by
the
entering
into
of
a
series
of
contracts
such
as
buying
and
selling,
and
a
partnership
of
professional
men,
the
income
of
which
is
earned
by
the
services
rendered
by
the
individual
partners.
It
is
contended
that
under
Section
3
of
the
Income
War
Tax
Act,
the
income
earned
by
a
professional
man
is
in
fact
his
income
and
taxable
as
such.
It
is
pointed
out
that
in
this
case
the
whole
income
of
‘‘Q
and
Co.
’
’
was
earned
by
the
active
partners
and
it
is
submitted,
therefore,
that
the
assessments
as
made
were
correct.
I
think
that
the
answer
to
that
submission
is
found
in
Section
30
(supra).
No
distinction
whatever
is
drawn
between
a
trading
partnership
and
a
partnership
of
professional
men.
The
sole
requirement
is
that
‘‘two
or
more
persons
are
carrying
on
business
in
partnership’’
and
if
that
requirement
is
met,
then
it
is
provided
that
the
respective
shares
in
the
income
of
the
partnership—not,
be
it
noted,
the
shares
which
each
partner
has
earned—shall
be
the
taxable
income
of
the
partners.
It
would
be
indeed
a
difficult
matter
in
the
case
of
a
partnership
to
endeavour
to
apportion
the
total
income
between
active
and
dormant
partners,
between
those
who
contributed
services
or
skill
in
varying
degrees,
and
between
those
who
contributed
services
and
those
who
contributed
capital,
except
on
the
basis
of
distribution
as
agreed
on
by
the
parties
themselves;
and
I
think
that
was
the
method
intended
by
Section
30,
except
in
cases
such
as
those
included
in
Section
31(1),
which
is
as
follows:
“31(1).
Where
a
husband
and
wife
are
partners
in
any
business
the
total
income
from
the
business
may
in
the
discretion
of
the
Minister
be
treated
as
the
income
of
the
husband
or
wife
and
taxed
accordingly.
”
It
seems
to
me
that
that
subsection
was
enacted
as
an
exception
to
the
general
provisions
of
Section
30
relating
to
the
taxation
of
partnership
income,
and
as
a
means
of
preventing
the
avoidance
of
tax
by
a
person
who
brought
his
wife
into
a
business
as
a
partner,
although
such
wife
did
not
contribute
anything
to
the
partnership,
or,
at
most,
nominal
capital
or
services
only.
The
power
conferred
on
the
Minister
to
treat
the
whole
of
the
income
as
that
of
the
husband
or
wife
is
discretionary
and
no
doubt
in
exercising
that
discretion
he
would
take
into
consideration
the
contributions
made
in
services
and
capital
by
the
partners.
The
subsection
appears
to
recognize
the
fact
that
there
may
be
partners
carrying
on
business
in
partnership
who
contribute
little
or
nothing
to
the
earning
of
the
income,
as
in
the
present
case,
but
inasmuch
as
its
provisions
extend
only
to
partnerships
comprised
of
husband
and
wife,
it
cannot
directly
or
by
implication
reach
the
appellant.
For
these
reasons,
I
have
reached
the
conclusion
that
the
appellant
is
entitled
to
succeed.
I
think
it
was
agreed
that
there
was
no
substantial
difference
between
the
written
agreements
in
relation
to
the
wife
and
daughters
of
“X”
and
the
somewhat
informal
agreements
made
with
the
wife
and
daughter
of
‘‘Y’’,
and
my
decision,
therefore,
will
be
applicable
throughout
the
three
years
in
question.
I
find
that
the
wives
and
daughters
of
‘‘X’’
and
“Y”
were
in
fact
partners
with
the
active
partners
in
carrying
on
the
business
of
the
firm
of
“Q
and
Co.’’
for
the
several
periods
mentioned
above,
and
that
the
appellant
in
respect
of
his
income
derived
from
that
firm
was
liable
to
income
tax
only
to
the
extent
of
his
share
therein
as
agreed
upon
by
all
the
partners.
My
recollection
is
that
it
was
agreed
that
the
returns
made
by
the
appellant
were
accurately
made
on
that
basis,
but
if
there
is
any
difficulty
in
the
matter
it
may
be
spoken
to.
My
opinion
has
not
been
reached
without
considerable
hesitation,
particularly
because
the
precise
point
has
not
previously
been
raised
in
Canada.
I
am
not
unaware
of
the
difficulties
which
may
follow
in
other
cases
and
for
that
reason
I
desire
to
emphasize
the
fact
that
my
opinion
was
arrived
at
because
of
the
particular
facts
of
this
case
and
inasmuch
as
the
good
faith
of
the
appellant
was
not
in
any
way
challenged.
The
appeal,
therefore,
will
be
allowed,
the
decision
of
the
Board
and
the
assessments
made
upon
the
appellant
for
the
years
1946,
1947
and
1948
will
be
set
aside
and
the
matter
referred
back
to
the
Minister
to
re-assess
the
appellant
upon
the
basis
of
this
decision.
The
appellant
will
be
entitled
to
his
costs
after
taxation.
Judgment
accordingly.
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