AUDETTE,
J.:—This
is
an
appeal
under
the
provisions
of
secs.
15
et
seq
of
The
Income
War
Tax
Act,
1917,
and
amendments
thereto,
from
the
assessment
for
the
appellant
company’s
fiscal
year
ending
3lst
December,
1923.
The
appellant
company
«(hereinafter
named
the
company)
was
incorporated
on
the
18th
June,
1913,
under
the
provisions
of
(1911)
1
Geo.
V,
c.
2,
B.C.
the
"Agricultural
Associer
tion
Act,
1911’’,
and
more
especially
under
Part
II
of
that
Act
which
deals
with
‘‘
Associations
with
share
capital’’.
The
company
has
a
duly
paid
up
capital
(sec.
39)
for
which
it
issues
shares
(secs.
39
and
40)
in
the
form
of
exhibit
No.
1,
the
shareholder’s
liability
being
limited
to
the
amount
of
his
Shares.
Provision
is
made,
by
sec.
43,
seeuring
to
all
producers,
who
are
members
of
the
company,
a
a
share
in
the
profits
in
proportion'
to
the
value
of
the
product
supplied
by
them,
after
payment
of
a
dividend
upon
the
capital
stock
now
not
exceeding
8
per
cent
per
annum.
The
company,
after
being
duly
constituted,
is
supposed
to
deal
exclusively
with
producers
who
are
shareholders
(with
a
few
exceptions
mentioned
at
trial)
and
enters
into
a
contract
with
them
in
the
form
of
exhibit
No.
2,
whereby
it
is,
among
other
things,
provided,
viz
:—
"
"(c)
For
the
purpose
of
paying
a
cash
dividend
on
the
paid-up
shares
in
the
capital
stock
of
the
Association
at
such
rate
as
may
be
fixed
by
the
said
Association
in
annual
gen-
neral
meeting,
such
dividend
not
to
exceed
8%
per
annum.”
Moreover,
the
contract
(exhibit
No.
2)
further
provides
that
:—
‘‘(e)
Any
balance
remaining
over
shall
be
dispossed
of
in
such
manner
as
shall
be
decided
by
the
members
of
the
Association
in
Annual
General
Meeting,
and
the
Producer
hereby
agrees
to
be
bound
by
the
decision
of
such
meeting,
whether
he
be
present
or.not.’’
The
dividend
in
question.
was.
part
of
the
auditor’s
report
which
was
approved
of
at
a
general
meeting,
as
testified
to
by
witness
Hillar.
In
other
words
the
profits
earned
and
on
hand
at
the
end
of
the
year
are
distributed
to
the
shareholders,
members
and
shippers,
both
in
the
form
of
a
dividend
of
8
per
cent
and
the
balance
on
a
percentage
basis;
that
is
the
shareholder-shipper
receives
his
portion
in
proportion
to
the
quantity
of
milk
supplied,
and
not
controlled
by
the
shares—according
to
his
contract
with
the
company—exhibit
No.
2.
The
By-laws
(exhibit
No.
3),
speak
of
that
dividend
in
Article
IV
as
interest,
but
Article
34
as
dividend.
The
statute,
whieh
is
paramount,
calls
it
dividend.
The
company
has
a
capital,
like
other
companies
;
it
owns
real
estate
and
pays
an
annual
dividend
on
the
capital,
which
however,
the
appellant
calls
a
disbursement
on
the
capital
in
the
hands
of
the
company
as
trust
moneys—the
company
acting
as
a
factor.
With
this
contention
I
am
unable
to
agree.
The
company
is
but
a
combination
of
a
number
of
persons
organized
for
the
purpose
of
carrying
on
a
business
with
a
view
to
the
economic
distribution
of
milk,
and
with
the
object
of
saving
for
the
benefit
of
shareholders,
the
whole
body
of
producers,
that
which:
otherwise
would
become
the
profits
of
the
individual.
The
object
of
the
company
is
to
realize
profits
and
to
distribute
them
to
its
shareholders
in
the
same
manner
as
any
other
company.
It
is
a
very
commendable
action
for
the
producers
of
milk
to
combine
and
form
an
association,
a
company,
with
the
object
of
reducing
the
cost
of
collection
and
distribution,
thereby
realizing
better
and
larger
profits
or
dividends;
but
that
does
not
entitle.such
company
or
association
to
discriminate
as
against
the
public,
the
taxpayers,
and
place
it.in
a
position
whereby
it
would
become
exempt
from
paying
the
income
tax.
The
company
-has
been
able
by
combination
to
secure
an
advantage
measured
in
money
which
it
could
not
have
enjoyed
but
for
such
combination.
The
company
is,
under
the
Act,
a
person
liable
to
pay
income
(sees.
1
and
3)
and
it
does
not
come
within
any
of
the
exemptions
mentioned
in
sec.
5
of
the
said
Act.
The
dividend
paid,
notwithstanding
any
ingenious
or
plausible
argument
to
the
contrary,
is
a
dividend
upon
the
capital
of
the
company,
and
the
appellant
cannot
and
should
not
be
treated
in
any
other
manner
than
any
other
company
doing
a
similar
business
and
yet
paying
the
income
tax
as
required
by
law.
In
the
case
of
Commissioners
of
I
nland
Revenue
v.
Sparkford
Vale
Co-operative
Society
Ltd.
(1925)
12
Tax
Cases
891,
a
case
dealing
with
a
co-
operative
society
dealing
in
milk,
it
was
clearly
held
that
the
company’s
profits
arose
from
selling
to
the
publie
and
not
from
buying
from
its
members,
and
that
it
was
accordingly
not
entitled
to
the
exemption
from
the
tax.
In
the
case
of
Liverpool
Corn
Trade
Ass’n
Ltd.
v.
Monks
(1926)
10
Tax
Cases
442,
it
was
held
that
any
profits
arising
from
the
association’s
transactions
with
members
were
assessable
to
income
tax
as
part
of
the
profits
of
its
business.
See
also
Commissioners
of
Inland
Revenue
v.
Cornish
Mutual
Ass’ce
Co.
(1926)
12
Tax
Cases
841
;
See
Mersey
Docks
and
H
arb
our
Board
v.
Lucas
(1883)
2
Tax
Cases
25,
at
p.
29;
Nizam
9
s
Guaranteed
State
Ry
Co.
v.
Wyatt
(1890)
2
Tax
Cases
584;
Last
x.
London
Ass
9
ce
Corp.
(1884)
2
Tax
Cases
100;
Equitable
Life
Ass’ce
Society
of
U.S.
v.
Bishop
(1889)
4
Tax
Cases
147;
[1900]
1
Q.B.
177.
There
is
specific
legislation
in
England
with
respect
to
cooperative
societies—or
a
society
registered
under
the
Industrial
and
Provident
Societies
Act,
1893
;
but
the
Canadian
Income
Tax
Act
is
silent
in
that
respect
and
a
co-operative
company
is
not
distinguished
from
any
other
company
and
is
therefore
liable
to
taxation.
Dowell’s
Income
Tax
Laws—9th
ed.,
90;
15-
16
Vict.,
c.
31
Imp.
(1852),
sec.
8;
56
and
57
Vict.,
e.
39
(1893)
Imp.,
sec.
24,
etc.
.
.
.
This
Imperial
legislation
by
way
of
exemption,
as
is
well
known,
has
roused
quite
an
amount
of
feeling
in
England
on
the
part
of
the
ordinary
traders
whose
idea
is
that
such
companies
enjoy
an
unfair
advantage
over
them.
The
company
must
be
considered
as
a
commercial
company,
notwithstanding
contention
to
the
contrary,
and
its
dividends
must
be
treated
as
profits
and
gains
which
become
liable
to
assessment
as
income.
The
goods
handled
by
the
company
are
sold
to
the
public
and
paid
for
by
the
public.
It
is
true
that
most
of
the
goods
were
obtained
by
the
company
from
its
shareholders,
but
that
does
not
alter
matters.
Liverpool
Corn
Trader
Ass
9
n
v.
Monks
(supra).
The
dividends
were
paid
by
the
company
from
the
profits
or
gain
resulting
from
their
business
as
representing
a
percentage
on
the
capital
invested
by
the
shareholders.
The
sums
acquired
by
the
company
and
distributed
as
dividend,
or
otherwise
dealt
with,
are
in
their
nature
indistinguishable
from
the
profits
and
gains
of
ordinary
traders
and
are
therefore
a
fit
subject
for
taxation.
The
company
is
an
independent
entity
in
itself
and
has
realized
excess
profits
over
expenditures
which
are
identical
with
all
other
traders’
profits.
The
profit
distributed
is
the
difference
between
the
cost
of
production
and
the
price
realized.
Therefore,
in
view
of
the
consideration
to
which
I
have
just
adverted,
I
find
that,
in
Canada,
under
the
Income
War
Tax
Act,
1917,
the
appellant,
a
co-operative
company,
is
not
exempt
from
the
liability
of
paying
income
tax.
The
appeal
is
dismissed
with
costs.
Judgment
accordingly.
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