AUDETTE,
J.:—This
is
an
appeal,
under
the
provisions
of
The
Income
War
Tax
Act,
1917,
and
amendments
thereto,
from
the
appellant’s
assessment,
for
the
year
ending
3lst
December,
1926.
This
assessment.
was
made
in
respect
of
a
payment
of
I
$10,127.95
during
the
taxation
period
of
1926,
coming
to
him
as
a
shareholder
of
The
Hamilton
Provident
and
Loan
Corporation,
out
of
the
distribution
of
the
proceeds
of
the
sale
of
its
property
and
assets
in
the
form
of
a
"‘dividend’’
to
the
extent
that
the
Company
had
on
hand
undistributed
income
or
profits
as
set
forth
in
exhibit
No.
3—14-15
Geo.
V,
c.
46,
sec.
5,
subsec.
9.
This
sum
of
$10,127.95
so
paid
to
the
appellant
represents
an
accumulation
of
undistributed
profits
and
gains
from
1917
to
1926,
and
of
which
$6,669.25
would
be
an
accumulation
of
profits
from
1917
to
1920,
but
distributed
as
part
of
the
$10,127.95
on
the
15th
July,
1926.
This
Reserve
Fund,
under
the
powers
given
the
directors
by
by-law
38,
consists
of
profits
accumulated
for
the
exclusive
benefit
of
the
holders
of
permanent
shares,
to
be
from
time
to
time
divided
and
paid
to
such
holders
of
permanent
shares
in
proportion
to
the
amount
of
their
shares—in
other
words
to
pay
a
dividend
out
of
this
fund
of
accumulated
profits.
This
fund
composed
of
accumulated
profits
is
therefore
quite
distinct
from
the
permanent
shares
of
the
company
which
the
appellant
still
holds;
and
in
this
sale
between
the
two
companies,
the
shareholder
gets
the
value
of
his
shares
plus
the
value
of
this
reserve
fund
made
up
of
profits.
The
moneys
of
the
shares
are
alone
capital,
and
under
the
agreement
the
moneys
representing
the
reserve
are
segregated
from
the
capital,
and
finally
paid
only
after
all
debts
and
liabilities
are
discharged.
Sec.
5,
subsec..
9
(14-15
Geo.
V,
c.
46),
by
sec.
8
of
the
same
Act
was
"
"
deemed
to
be
applicable
to
the
income
for
the
taxation
period
1921
and
subsequent
periods.”
and
the
appellant
contends
that
the
part
of
the
accumulated
profits
earned
before
that
date
is
not
subject
to
such
taxation,
and
moreover
contends,
in
the
alternative
that
the
whole
of
that
sum
is
capital
and
not
subject
to
taxation.
By
the
agreement
of
the
15th
July,
1926,
exhibit
No.
3,
above
referred
to,
the
Hamilton
Provident
and
Loan
Corporation,
sold
to
the
Huron
and
Erie
Mortgage
Corporation
its
entire
assets
which
are
composed
of
shares
and
the
‘‘reserve
fund’’
in
question,
and
by
agreement
the
measure
of
payment
is
determined.
Sec.
2
of
the
agreement,
it
is
true,
provides
that
"‘for
the
purpose
of
this
agreement’’
the
value
of
the
shares
is
fixed
at
$227
;
and
that
is
what
gives
rise
to
the
appellant’s
contention
that
all
of
the
payment
of
$10,127.95
is
capital
and
part
of
the
value
of
the
share.
But
in
face
of
the
actual
facts
this
conten-
tion
falls
to
the
ground
since
it
is
common
ground
that
besides
the
shares
there
was
this
reserve
fund
made
up
of
accumulated
profits
and
gain
of
the
company
since
1917
under
by-law
38.
Moreover,
by
sub-par.
(b)
of
the
2nd
clause
the
purchaser
pays
$100
a
share
and
the
reserve
is
paid
in
the
manner
provided
further
on
in
the
agreement.
The
purchase
price
of
the
segregated
assets
amounts
to
the
adjusted
figure
of
$227,
but
does
not
make
the
assets
capital
to
that
extent,
in
view
of
the
facts
of
the
case
more
especially
set
forth
in
the
agreement.
By
the
mere
setting
of
these
figures
of
$227
the
company
cannot
change
the
fact
of
the
existence
of
the
fund
which
could
and
would
under
by-law
38,
have
been
distributed
as
dividend.
The
company
cannot
by
winding
up
and
discontinuing
business,
avoid
paying
tax
on
this
distribution
of
profits.
Verba
fortius
accipiuntur
contra
proferentem.
The
shareholders
are
not
parties
to
this
agreement
between
the
two
companies.
They
remain
shareholders
for
five
years
from
the
date
of
the
agreement
or
until
the
reserve
fund
is
adjusted
and
final
payments
made,
and
they
receive
this
payment
out
of
these
accumulated
profits
forming
the
Reserve,
by
way
of
dividend,
besides
the
payment
of
their
shares,
but
according
to
the
number
of
their
shares;
the
whole
coming
from
the
sale
of
the
assets
of
the
company.
It
was
the
capital
of
these
shares
that
earned
by
way
of
profits
and
gain
the
accumulated
moneys
in
the
Reserve
now
being
paid
out
by
way
of
dividend
and
measured
by
the
number
of
shares.
This
exhibit
No.
3
is
nothing
but
an
agreement
to
sell
the
assets
of
the
company,
confirmed
as
such
by
the
Attorney
General
of
the
Province.
The
vendors
sold
the
shares
and
the
Reserve,
but
the
transfer
of
the
Shares
is
not
to
be
made
until
full
pay
ment
of
the
Reserve
has
been
made.
In
the
Annual
Reports
of
the
company,
exhibit
No.
2,
the
Reserve
Fund
is
always
entered
as
a
liability
to
the
shareholders
and
distinguished
from
the
shares
themselves.
It
is
true
that
sec.
5,
subsec,
9
(14-
15
Geo.
V,
c.
46)
reads
as
follows
:—
"
"
5.
On
the
winding
up,’
discontinuance
or
reorganization
of
the
business
of
any
incorporated
company
the
distribution
in
any
form
of
the
property
of
the
company
shall
be
deemed
to
be
a
payment
of
a
dividend
to
the
extent
that
the
company
has
on
hand
undistributed
income.’
and
that
this
section
came
into
force
for
the
taxing
period
of
1921;
but
it
is
found
that
it
is
the
time
of
payment
of
such
dividend
that
must
govern.
That
is
to
say,
without
any
further
qualification
any
such
dividend
paid
in
the
ordinary
course
after
that
date
will
fall
within
the
ambit
of
the
section.
It
is
a
dividend
paid
in
1926
and
which
must
be
paid
according
to
the
law
in
force
at
that
date,
which
does
not
require
an
investigation
as
to
how
the
company
came
to
pay
the
dividend.
By
sec.
4,
subsee.
5
(9-10
Geo.
V,
c.
55)'1919,
it
is
further
provided
that
:
‘‘
Dividends
or
shareholders’
bonuses
paid
or
credited
to
its
shareholders
by
a
corporation
on
or
after
the
1st
day
of
January,
1917,
shall
be
taxable
as
income
of
the
shareholders.
in
the
year
in
which
the
same
are
received
or
credited
unless
paid
exclusively
out
of
a
surplus
or
accumulated
profits
on
hand
prior
to
Ist
January,
1917.’’
This
section
was
in
force
in
1919
and.
is
applicable
to
the
present
case
and
it
would
result
therefrom
that
the
words
accumulated
profits
on
hand
mean
those
which
arose
since
the
passing,
in
1917,
of
The
Income
War
Act.
Dealing
with
internal
Revenue,
it
was
held
in
the
case
of
St
off
reg
en
v.
Moore
(1920)
264
Fed.
KR.
2382
that
"‘the
‘income’
of
a
stockholder
of
a
corporation
includes
dividends
received
by
him
during
a
tax
year,
although
declared
and
paid
in
whole
or
in
part
from
the
accumulated
surplus
of
prior
years.’’
See
also
Lynch
v.
Hornby
(1918)
247
U.S.R.
339.
Then
in
1920,
by
10-11
Geo.
V,
e.
49,
see.
3,
it
was
enacted
that
:
“Dividends
declared
or
shareholders’
bonuses
voted
after
the
31st
December,
1919,
shall
be
taxable
income
of
the
taxpayer
in
the
year
in
which
they
are
paid
or
distributed.
See
Gagné
v.
Minister
of
Finance
[1925]
Ex.
C.R.
19,
at
p.
22;
Smith
v.
Attorney
General
of
Canada
[1924]
Ex.
C.R.
193,
at
p.
195;
Plaxton
and
Varcoe,
Dominion
Income
Tax,
166.
See
also
see.
8
(8),
(9),
(10),
(11)
and
(12)
of
the
Act
of
1926.
The
plain
intention
of
this
see.
5,
subsee.
9
(14-15
Geo.
V,
¢.
46)
is
that
dividends
made
up
of
undistributed
profits
and
paid
or
payable
after
1921
as
under
the
circumstances
of
the
case,
are
liable
to
tax.
The
Act
primarily
imposes
a
tax
upon
all
incomes
made
up
of
profits
and
gain
and
that
is
intended
to
be
taxed
in
this
case.
And
failing
to
come
within
any
of
the
statutory
exemptions,
the
appellant
must
pay.
The
wording
of
subsec.
9
of
sec.
5
is
clear
and
unambiguous
in
its
grammatical
meaning
and
that
should
be
adhered
to.
Clear
language
would
have
to
be
found
to
support
the
contention
that—notwithstanding
the
dividend
is
paid
in
1926
when
the
section
is
in
full
force
and
effect—the
section
would
not
apply
because
some
of
the
moneys
forming
part
of
that
dividend
were
earned
before
that
date
and
should
be
exempted.
In
so
finding
one
would
have
to
add
or
to
distort
the
plain
meaning
of
the
section.
There
is
no
reason
and
no
right
to
assume
that
there
is
any
governing
object
which
the
taxing
Act
is
intended
to
attain
other
than
that
which
it
has
expressed.
Zennant
v.
Smith
[1892]
A.C.
150,
at
p.
194.
We
have
a
clear
and
unambiguous
section
in
the
Act
summarizing
all
the
exemptions
and
it
does
not
cover
the
present
case
or
the
appellant’s
contention,
while
the
respondent
brings
the
appellant
within
the
letter
of
the
law.
This
finding
is
moreover
supported
by
see.
4,
subsec.
5
(9-10
Geo.
V,
€.
55)
passed
in
1919
and
hereabove
recited,
declaring
that
dividends
are
taxable
as
income
of
shareholders
in
the
year
in
which
the
same
are
received
or
credited.
Furthermore
sec.
3
of
10-11
Geo.
V,
e.
49,
enacts
that
dividends
declared
after
the
3lst
December,
1919;
shall
be
taxable
in
the
year
in
which
they
are
paid
or
distributed.
Sec.
8,
subsees.
(8),
(9),
(10),
(11)
and
(12)
of
the
Act
of
1926
go
also
to
support
and
bear
that
meaning
and
contention.
A
Taxing
Act
must
be
read
as
a
whole,
and
any
particular
section
must
be
read
in
conjunction
with
the
meaning
of
the
11
0r(1s
used
in
the
context.
On
the
whole
I
fail
to
see
any
ground
upon
which
the
appellant
should
be
treated
in
any
more
favourable
way
than
.the
other
citizens
or
public
of
Canada
in
relation
to
liability
for
a
tax
of
the
nature
here
in
question.
See
Hollinshead
v.
Hazelton
[1916]
1
A.C.
428
at
436
and
461.
Moreover,
I
must
find
that
this
amendment
of
the
Act
in
1924
(see.
5,
subsec.
9)
was
enacted
for
the
purpose
of
removing
any
possible
doubt
or
contention—ex
majori
cautelâ—because
the
reserve
fund
in
question
in
this
case,
made
up
of
gain
and
profits,
would,
prior
to
such
amendment,
under
sees.
3
and
4
of
the
Act,
be
treated
as
a
dividend
made
up
of
profits
and
gains
and
thereby
become
liable.
The
amendment
is
of
the
same
nature
as
the
one
made
with
respect
to
the
Judges’
salaries.
See
In
re
Judges’
Salaries
[1924]
Ex.
C.R.
157,
confirmed
on
appeal
to
the
Supreme
Court
of
Canada.
Indeed,
by
The
Interpretation
Act.
c.
1,
R.S.C.
1927,
see.
21,
it
is
provided
that
the
amendment
of
an
Act
shall
not
be
deemed
to
be
or
to
involve
any
declaration
whatsoever
as
to
the
previous
state
of
the
law,
and
it
shall
not
be
deemed
to
be
or
to
involve
a
declaration
that
the
law
under
such
Act
was,
or
was
considered
by
Parliament,
to
have
been
different
from
the
law
as
it
has
become
under
such
Act
as
so
amended.
For
the
reasons
above
mentioned
I
feel
myself
unable
to
follow
the
decision
In
re
Anderson
[1925]
4
D.L.R.
116,
with
respect
to
the
tax
as
between
a
life
tenant
of
share
and
remainderman,
and
moreover
because
of
by-law
38
of
the
company
which
qualifies
and
determines
the
fund
in
question
in
this
case.
.
A
number
of
English
cases
were
cited
at
trial
;
but
I
find
that
the
laws
in
England
with
respect
to
winding
up
and
the
circumstances
of
this.
ease
are
entirely
different
from
our
Canadian
Taxing
Act.
There
will
be
judgment
dismissing
the
appeal
with
costs.
Judgment
accordingly.
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