MACLEAN,
J.:—The
suppliant,
a
company
incorporated
under
the
laws
of
the
state
of
New
Jersey,
a
non-resident
of
Canada,
was,
at
the
time
material
here,
the
owner
of
certain
shares
of
the
capital
stock
of
Crow’s
Nest
Pass
Coal
Company
Ltd.,
a
company
incorporated
under
the
Companies
Act
(Canada)
for
the
chief
object
of
mining,
and
hereafter
to
be
referred
to
as
‘‘the
Company”.
In
the
month
of
September,
and
in
the
month
of
December,
1933,
the
Company
made
distributions
to
its
shareholders
in
the
amount
of
$2
per
share.
Accompanying
each
dividend
forwarded
to
shareholders
was
the
following
covering
letter
:—
‘‘Enclosed
find
cheque
for
$2
per
share
on
the
stock
of
this
company
recorded
in
your
name
at
the
close
of
business
August
1,
1933.
"This
payment
is
made
from
Depreciation
and
Depletion
Reserve
Funds
of
the
Company.”
The
Company
was
not
in
liquidation.
The
distributions
so
made
from
the
depreciation
and
depletion
reserve
funds
of
the
Company,
it
is
claimed,
constituted
part
of
the
capital
of
the
Company,
or,
alternatively,
it
is
claimed,
the
same
was
paid
out
of
assets
or
funds
of
the
Company
which
are
exempt
from
the
payment
of
Income
Tax.
At
the
time
such
distributions
were
made
to
shareholders
the
amount
to
the
credit
of
profit
and
loss
account
had
been
exhausted,
and
there
were
no
net
annual
operating
profits
available
for
dividend
in
the
period
in
question.
The
Commissioner
of
Income
Tax,
in
December,
1933,
demanded
from
the
Company
the
sum
of
$5,711.40,
out
of
the
distributions
made
or
to
be
made
as
aforesaid
to
the
suppliant,
on
the
ground
that
an
income
tax
of
five
per
centum
was
payable
thereon
by
the
suppliant,
under
the
Income
War
Tax
Act,
R.S.C.
1927,
ce.
97,
s.
9B,
s.s.
2(a).
The
Company
pursuant
to
the
demand
of
the
Commissioner
of
Income
Tax,
deducted
the
amount
of
this
tax
from
the
amount
so
payable
to
the
suppliant,
and
it
paid
the
same
to
the
Receiver
General
of
Canada,
under
protest
;
the
suppliant
has
demanded
repayment
of
the
said
sum,
but
the
same
has
been
withheld.
The
suppliant
in
its
petition
alleges
that
no
tax
is
imposed
on
the
suppliant
by
the
Income
War
Tax
Act
in
respect
of
the
distributions
made,
and
prays
that
the
sum
so
paid,
with
interest,
be
refunded.
The
sections
of
the
Income
War
Tax
Act
which
are
particularly
relevant
to
the
controversy
here
are
the
following:
"5.
"Income’
as
hereinbefore
defined
shall
for
the
purposes
of
this
Act
be
subject
to
the
following
exemptions
and
deductions
:—
"(a)
Such
reasonable
amount
as
the
Minister,
in
his
discretion,
may
allow
for
depreciation,
and
the
Minister
in
determining
the
income
derived
from
mining
and
from
oil
and
gas
wells
and
timber
limits
shall
make
such
an
allowance
for
the
exhaustion
of
the
mines,
wells
and
timber
limits
as
he
may
deem
just
and
fair;”’
And
"9B.
In
addition
to
any
other
tax
imposed
by
this
Act
an
income
tax
of
five
per
centum
is
hereby
imposed
on
all
persons
resident
in
Canada,
.
.
.
in
respect
of
all
interest
and
dividends
paid
by
Canadian
debtors,
directly
or
indirectly
to
such
persons,
in
a
currency
which
is
at
a
premium
in
terms
of
Canadian
funds.
"(2)
In
addition
to
any
other
tax
imposed
by
this
Act
an
income
tax
of
five
per
centum
is
hereby
imposed
on
all
persons
who
are
non-residents
of
Canada
in
respect
of
"‘(a)
All
dividends
received
from
Canadian
debtors
irrespective
of
the
currency
in
which
the
payment
is
made,
and
"‘(b)
All
interest
received
from
Canadian
debtors
if
payable
solely
in
Canadian
funds
except
the
interest.
from
all
bonds
of
or
guaranteed
by
the
Dominion
of
Canada?
‘
The
amount
to
the
credit
of
the
depreciation
and
depletion
reserves,
as
I
understand
it,
amounted
to
some
$1,900,000,
in
considerable
part
consisting
of
investments
and
cash,
and,
I
think,
it
is
correct
to
say,
that
a
portion
of
such
reserves
was
in
a
form
not
available
for
distribution.
These
reserve
funds
had
been
built
up
by
amounts
set
apart
from
profits
as
allowances
for
depreciation,
and
for
depletion
of
the
company’s
coal
reserves,
with
the
approval
of
the
Minister,
and
in
the
exercise
of
his
discretion
under
sec.
5(a)
of
the
Act.
Precisely
how
the
allowances
for
depreciation,
and
the
amount
or
amounts,
were
arrived
at
is
not
clear,
but
the
Commissioner
of
Income
Tax
appears
to
have
agreed
that
ten
cents
per
ton
for
each
ton
of
coal
mined,
should
be
allowed
on
account
of
the
depletion
of
the
mine
or
mines
owned
and
operated
by
the
Company.
However,
these
reserves
were
apparently
built
up
with
the
approbation
of
the
Minister.
If
the
Company’s
depreciation
and
depletion
fund
constituted
capital,
and
if
the
distribution
impaired
capital,
this
was
permissible
only
because
the
Company
was
a
mining
company.
There
is
a
statutory
prohibition
against
payment
of
dividends
out
of
capital,
if
it
has
the
effect
of
impairing
capital,
but
there
is
an
exception
in
the
case
of
mining
companies.
The
Companies
Act,
R.S.C.
1927,
c.
27,
s.
98,
reads
as
follows:
"‘98.
No
dividend
shall
be
declared
which
will
impair
the
capital
of
the
company.
"‘2.
Nothing
in
this
Act
shall
prevent
a
company
incorporated
for
the
chief
object
of
mining
from
declaring
or
paying
dividends
out
of
its
funds
derived
from
the
operations
of
the
company,
notwithstanding
that
the
value
of
the
net
assets
of
the
company
may
be
thereby
reduced
to
less
than
the
par
value
of
the
issued
capital
stock
of
the
company,
or
in
the
case
of
companies
having
shares
without
par
value,
to
less
than
the
amount
of
capital
with
which
the
company
shall
carry
on
business
as
prescribed
by
this
Act,
if
such
payment
does
not
reduce
the
value
of
its
remaining
assets
so
that
they
will
be
insufficient
to
meet
all
the
liabilities
of
the
company
then
existing
exclusive
of
its
nominal
paid
up
capital.
‘
‘
This
provision
of
the
Companies
Act
permitted
the
payment
of
a
dividend
to
shareholders
out
of
funds
derived
from
the
operations
of
the
Company,
even
if
it
reduced
the
value
of
the
net
assets
of
the
Company
to
less
than
the
par
value
of
its
issued
capital
stock,
and
I
would
emphasize
the
word
dividend
;
it
18
stated
in
the
Company’s
financial
statement
for
1933
that
the
distributions
in
question
were
made
to
shareholders
under
the
powers
conferred
on
the
Company
by
sec.
98
of
the
Companies
Act,
out
of
the
depreciation
and
depletion
reserves
of
the
Company.
It
is
not
clear
to
me
whether
or
not,
in
fact,
the
distributions
here
made
did
impair
capital
in
the
sense
mentioned
in
this
section.
The
facts
of'the
case
being
stated,
and
the
relevant
provisions
of
the
Income
War
Tax
Act
and
the
Companies
Act
being
stated,
the
point
for
decision
may
be
put
this:
Were
the
sums
distributed
to
the
suppliant
derived
from
income
or
capital
of
the
Company,
or,
out
of
assets
or
funds
of
the
Company
which
were
exempt
from
the
payments
of
this
income
tax.
A
number
of
authorities
were
referred
to
by
counsel,
but
it
will
not
be
necessary
to
discuss
all
of
them.
The
first
to
be
mentioned
is
that
of
Hill
v.
Permanent
Trustee
Company
of
New
South
Wales
Ltd.
[1930]
A.C.
720;
this
was
an
appeal
from
the
Supreme
Court
of
New
South
Wales
to
the
Judicial
Committee.
The
trustee
company,
as
trustee
of
the
will
of
one
Hill,
held
shares
in
Buttabone
Pastoral.Co.
Ltd.,
and
the
latter
paid
to
the
trustee
company
certain
sums
of
money
as.
dividends
out
of
the
proceeds
of
the
sale
of
substantially
the
whole
of
its
lands,
live
stock
and
other
assets,
it
ceasing
thereafter
to
carry
on
business.
The
dividends
were
declared
and
paid
as
"a
distribution
of
capital
assets
in
advance
of
the
winding
up.’’
The
question
was,
as
between
a
life
tenant
and
a
remainderman,
whether
the
dividende
were,
under
the
will
of
Hill,
"net
income
or
profits
to
be
derived
from
such
investment
or
investments,”
or
(i
capital
of
my
said
trust
estate.”
It
was
held
that
the
dividend
should
be
treated
as
income
and
not
capital
of
the
trust
estate.
Their
Lordships
of
the
Judicial
Committee
of
the
Privy
Council,
laid
down
the
following
proposition,
which,
I
think,
is
applicable
here.
"A
limited
company
not
in
liquidation
can
make
no
payment
by
way
of
return
of
capital
to
its
shareholders
except
as
a
step
in
an
authorized
reduction
of
capital.
Any
other
payment
made
by
it
by
means
of
which
it
parts
with
money
to
its
shareholders
can
only
be
made
by
way
of
dividing
profits.
Whether
the
payment
is
called
‘dividend’
or
‘bonus,’
or
any
other
name,
it
still
must
remain
a
payment
on
a.
division
of
profits.”
This
means
that
any
distribution
of
money,
except
on
a
reduction
of
capital,
by
which
assets
are
released
to
the
shareholders,
can
only
be
a
distribution
of
profits,
by
whatever
method
it
is
made.
Their
Lordships
also
stated:
“So
long
as
such
a
company
is
a
going
concern
and
is
not
restricted
as
to
the
profits
out
of
which
it
may
pay
dividends,
it
may
distribute
as
dividends
to
its
shareholders
the
excess
of
its
revenue
receipts
over
expenses
properly
chargeable
to
revenue
account.
.
.
.
On
the
other
hand,
if
the
company
instead
of
distributing
the
same
balance
as
dividends,
resolved
upon
liquidation,
the
shareholder
would
be
repaid
his
share
of
capital
and
in
addition
the
share
of
surplus
assets
in
the
liquidation
attributable
to
his
shares
.
.
.
but
no
part
thereof
would
belong
to
a
tenant
for
life
as
income;
it
would
all
be
corpus
of
the
trust
estate.”
Their
Lordships
referred
to
the
case
of
Bouch
v.
Sprou-le
(1887)
12
App.
Cas.
385
also
cited
before
me;
and
much
consideration
was
given
to
this
case
by
the
Supreme
Court
of
New
South
Wales
in
the
Hill
case.
Discussing
this
case
their
Lordships
said:
“It
is
not
in
their
Lordships’
view,
an
authority
for
the
proposition
that
the
company’s
statement
of
intention
determines
as
between
tenant
for
life
and
remainderman
whether
a
sum
paid
away
by
the
company
to
a
shareholder
who
is
a
trustee
is
income
or
corpus
of
his
trust
estate.
In
Bouch
v.
Sproule
no
moneys,
in
fact,
left
the
company’s
possession
at
all.
It
is
not
an
authority
which
touches
a
case
in
which
a
company
parts
with
moneys
to
its
shareholders.
The
essence
of
the
case
was
that
the
company,
not
by
its
statements,
but
by
its
acts,
showed
that
what
the
shareholders
got
from
the
company
was
not
a
share
of
profits
divided
by
the
company,
but
an
interest
in
moneys
which
had
been
converted
from
divisible
profits
into
moneys
capitalized
and
rendered
for
ever
incapable
of
being
divided
as
profits.’’
In
that
case
it
was
proposed
to
distribute
accumulated
profits
as
a
bonus
dividend,
and
to
allot
new
shares
(partly
paid
up)
to
each
shareholder,
and
to
apply
the
bonus
dividend
in
part
payment
of
the
new
shares,
and
this
was
done;
in
this
way
the
profits
were
permanently
added
to
the
company’s
capital,
and
it
was
held
that
no
sum
was
paid
as
a
dividend.
But
that
is
not
the
case
which
I
have
to
decide.
Then
discussing
a
decision
of
the
High
Court
of
Australia,
in
the
case
of
Knowles
v.
Ballarat
Trustees,
Executors
and
Agency
Co.
(1916-17)
22
C.L.R.
212,
a
case
which
the
Supreme
Court
of
New
South
Wales
followed
in
reaching
their
decision.
in
the
Hill
case,
their
Lordships
make
the
following
pertinent:
observations
:_
"A
careful
consideration
of
the
judgments
delivered
by
the
majority
of
the
High
Court
judges
satisfies
their
Lordships
that
the
decision
is
based
upon
the
view
that
a
company,
when
dividing
among
its
shareholders
a
sum
of
accumulated
profit,
is
entitled
to
dictate
and
determine
whether
the
moneys
so
received
by
the
shareholder
shall,
in
his
hands
be
deemed
corpus
or
income.
Their
Lordships
know
of
no
earlier
authority
justifying
this
view.
It
is
a
matter
with
which
the
company
has
not
the
remotest
concern.
If
payment
to
the
shareholders
is
made
out
of
profits
it
is
income
of
the
shares,
and
no
statement
of
the
company
or
its
directors
can
change
it
from
income
into
corpus.
Their
Lordships
agree
with
and
are
content
to
refer
to,
the
dissenting
judgment
of
Isaacs,
J.
as
a
correct
exposition
of
the
law.’’
In
the
Knowles
case
the
facts
were
that
the
directors
of
a
limited
company,
which
was
not
in
liquidation,
by
resolution
resolved
upon
the
payment
to
the
shareholders
of
(1)
a
dividend
of
6d.
per
share;
(2)
a
bonus
of
6d.
per
share;
and
(3)
"‘dis-
tribution
of
assets
10s.
per
share,’’
which
was
paid
out
of
accumulated
profits.
The
question
for
determination
was
whether
the
10s.
per
share
was
paid
out
of
capital
or
income.
The
High
Court
(Isaacs,
J.
dissenting)
held
that
the
moneys
were
capital
of
the
trust
estate,
because
though
they
were
payments
of
cash
made
out
of
accumulated
profits
the
company
intended
the
moneys
to
be
a
distribution
of
capital
as
distinguished
from
dividends.
Their
Lordships,
it
will
be
seen,
accepted
the
dissenting
judgment
of
Isaacs,
J.
as
the
correct
exposition
of
the
law.
Their
Lordships
of
the
Judicial
Committee
in
the
Hill
case,
adopted
the
reasoning
of
Eve,
J.
in
another
case
cited
before
me,
In
re
Bates
[1928]
Ch.
D.
682.
There,
the
directors
of
a
limited
company,
owning
and
operating
steam
trawlers,
sold
some
of
them
for
sums
exceeding
the
values
at
which
they
stood
in
the
company’s
balance
sheet;
the
proceeds
were
carried
to
a
suspense
account
and
were
subsequently
distributed
as
cash
bonuses
to
shareholders,
accompanied
by
a
covering
letter
stating
that
such
bonuses
were
capital
payments,
and
not
liable
to
income
tax.
While
the
issue
in
this
case
arose
as
between
a
tenant
for
life
and
remainderman,
yet
it
lays
down
a
principle
which,
I
think,
is
applicable
here.
It
was
held
that
the
payments
not
having
been
capitalized
by
the
issuance
of
bonus
shares
increasing
the
total
capital,
the
payments
were
income
receivable
by
the
tenant
for
life,
and
that
the
fund
was
one
which
the
company
could
treat
as
available
for
dividend
and
could
distribute
as
profits.
Eve,
J.
said:
"‘In
this
state
of
affairs
it
was
a
fund
which
the
company
could
treat
as
available
for
dividend
and
could
distribute
as
profits,
or
having
regard
to
its
power
to
increase
capital
could
apply
for
that
purpose
by,
for
example,
increasing
the
capital,
declaring
a
bonus
and
at
the
same
time
allotting
to
each
shareholder
shares
in
the
capital
of
the
company
paid
up
to
an
amount
equivalent
to
his
proportion
of
the
bonus
so
declared.
Unless
and
until
the
fund
was
in
fact
capitalized
it
-retained
its
characteristics
of
a
distributable
property
.
..
no
change
in
the
character
of
the
fund
was
brought
about
by
the
company’s
expressed
intention
to
distribute
it
as
capital.
It
remained
an
uneapitalized
surplus
available
for
distribution,
either
as
dividend
or
bonus
on
the
shares,
or
as
a
special
division
of
an
ascertained
profit
.
.
.
and
in
the
hands
of
those
who
received
it,
it
retained
the
same
characteristics.
’
’
It.
might
be
convenient
here
to
observe
that
the
effect
of
the
notification
of
the
Company
here,
that
the
dividend
paid
came
from
the
depreciation
and
depletion
funds
was
no
doubt
done
with
the
intent
that
it
might
assist
in
protecting
the
recipients
from
liability
to
taxation,
but
as
Eve,
J.
stated
in
the
Bates
case,
the
mere
impressing
of
these
distributions
with
the
appellation
of
‘‘Depreciation
and
Depletion
Reserve
Funds
of
the
Company,’’
cannot
determine
their
true
character.
Nor
can
the
fact
that
the
distributions
made
here
were
described
in
the
covering
letter
as
a
"‘payment,''
and
not
a
li
dividend,”
determine
that
they
were
not
payments
of
dividends.
Finally,
I
shall
refer
to
another
cited
authority,
Lee
v.
Neuchatel
Asphalte
Co.
(1889)
41
Ch.
D.
1,
because
of
a
discussion
there
as
to
reserve
funds
of
a
limited
company,
and
of
the
proposition
that
a
company
is
debtor
to
capital.
That
ease
decided
that,
under
the
English
Companies
Act—and
the
same
would
be
true,
I
think,
of
the
Canadian
Companies
Act
—there
was
nothing
to
prevent
a
company
formed
to
work
a
wasting
property,
for
example
a
mine,
from
distributing
as
dividend,
the
excess
of
the
proceeds
of
working
above
the
expenses
of
working,
nor
did
the
Companies
Act
impose
on
the
company
any
obligation
to
set
apart
a
sinking
fund
to
meet
depreciation
in
the
value
of
a
wasting
property.
If
the
expenses
of
working
exceed
the
receipts,
the
accounts
must
not
be
made
out
so
as
to
show
an
apparent
profit,
and
so
enable
the
company
to
pay
a
dividend
out
of
capital,
but
the
division
of
the
profits
without
providing
a
sinking
fund
is
not
such
a
payment
of
dividends
out
of
capital
as
is
forbidden
by
law.
I
may
quote
Lord
Lindley
:
""In
an
accountant’s
point
of
view,
it
is
quite
right,
in
order
to
see
how
you
stand,
to
put
down
company
debtor
to
eapital.
But
the
company
do
not
owe
the
capital.
What
it
means
is
simply
this
:
that
if
you
want
to
find
out
how
you
stand,
whether
you
have
lost
your
money
or
not,
you
must
bring
your
capital
into
account
somehow
or
other.
But
supposing
at
the
winding-up
of
the
concern
the
capital
is
all
gone,
and
the
creditors
are
paid,
and
there
is
nothing
to
divide,
who
is
the
debtor?
No
one
is
debtor
to
any
one.
If
there
is
any
surplus
to
divide,
then,
and
not
before,
is
the
company
debtor
to
the
shareholders
for
their
aliquot
portions
of
that
surplus.
But
the
notion
that
a
company
is
debtor
to
capital,
although
it
is
a
convenient
notion,
and
does
not
deceive
mercantile
men,
is
apt
to
lead
one
astray.
The
company
is
not
debtor
to
capital;
the
capital
is
not
a
debt
of
the
company.
‘““As
regards
the
mode
of
keeping
accounts,
there
is
no
law
prescribing
how
they
shall
be
kept.
There
is
nothing
in
the
Acts
to
shew
what
is
to
go
to
capital
account
or
what
is
to
go
to
revenue
account.
We
know
perfectly
well
that
business
men
very
often
differ
in
opinion
about
such
things.
It
does
not
matter
to
the
creditor
out
of
what
fund
he
gets
paid,
whether
he
gets
paid
out
of
capital
or
out
of
profit
net
or
oross.
All
he
cares
about
is
that
there
is
money
to
pay
him
with,
and
it
is
a
mere
matter
of
book-keeping
and
internal
arrangement
out
of
what
particular
fund
he
shall
be
paid.
Therefore
you
cannot
say
that
the
question
of
what
ought
to
go
into
capital
or
revenue
account
is
a
matter
that
concerns
the
creditor.
The
Act
does
not
say
what
expenses
are
to
be
charged
to
capital
and
what
to
revenue.
Such
matters
are
left
to
the
shareholders.
They
may
or
may
not
have
a
sinking
fund
or
a
deterioration
fund,
and
the
articles
of
association
may
or
may
not
contain
regulations
on
those
matters.
If
they
do,
the
regulations
must
be
observed;
if
they
do
not,
the
share-
holders
can
do
as
they
like,
so
long
as
they
do
not
misapply
their
capital
and
cheat
their
creditors.
In
this
case
the
articles
say
there
need
be
no
such
fund,
consequently
the
capital
need
not
be
replaced;
nor,
having
regard
to
these
articles,
need
any
loss
of
capital
by
removal
of
bituminous
earth
appear
in
the
profit
and
loss
account/‘
All
this
is,
I
think,
very
pertinent
here.
It
was
not
suggested
that
the
Company
was
required
to
set
up
a
depreciation
or
depletion
fund,
or
to
maintain
the
same
intact
for
the
ultimate
repayment
of
capital.
In
fact,
that
could
not
be
said
because
the
dividends
paid
came
from
such
a
fund,
and
by
virtue
of
the
powers
conferred
on
the
Company
by
sec.
98,
subsec.
2,
of
the
Companies
Act,
the
Company
was
empowered
to
pay
such
-dividends
out
of
any
funds
which
it
possessed,
even
if
it
impaired
capital.
For
the
reasons
to
be
found
in
the
several
foregoing
decided
authorities,
I
think,
the
suppliant
must
fail.
Even
if
the
dividends
paid
out
were
derived
from
capital,
the
same
could
be
lawfully
paid
therefrom
by
virtue
of
sec.
98
of
the
Companies
Act,
which
permits
mining
companies
to
pay
"
"
dividends
out
of
its
funds
derived
from
the
operations
of
the
company,
notwithstanding
that
the
value
of
the
net
assets
of
the
company
may
be
thereby
reduced
to
less
than
the
par
value
of
the
issued
capital
stock
of
the
company
.
.
.”’
But
while
this
provision
of
the
Companies
Act
permitted
the
Company
to
pay
a
4
"dividend,”
even
if
it
impaired
capital,
that
does
not
make
the
payment
of
the
""dividend”
a
distribution
of
capital,
which
might
have
been
done
by
reducing
the
«capital
of
the
Company,
if
the
Company
had
acquired
the
power
to
do
so;
it
permits
that
which
was
done
here,
the
payment
of
"dividends’’
to
shareholders,
from
funds
derived
from
the
mining
operations
of
the
company,
which,
I
think,
must
be
held
to
constitute
income
in
the
hands
of
the
shareholders,
because
it
is
a
dividend
upon
shares
of
the
capital
stock
of
the
Company.
The
exception,
as
to
the
payment
of
dividends,
in
favour
of
mining
companies
where
capital
is
impaired,
does
not
give
a
new
characteristic
to
the
dividend
paid;
it
is
like
any
other
dividend
and
is
not
a
return
of
capital.
It
seems
to
me
that
the
reserve
funds
in
question
here,
built
up
from
profits
earned
from
the
operations
of
the
Company,
could
be
treated
by
the
Company,
and
were
treated
by
the
Company,
as
a
fund
available
for
dividend,
and
they
could
and
did
distribute
the
same,
or
a
portion
thereof,
as
profits
derived
from
the
operations
of
the
Company.
Accordingly,
I
am
of
the
opinion
that
the
divi
dends
here
paid
were
not
distributions
of
capital
but
distributions
of
profits
derived
from
the
operations
of
the
Company
and
therefore
taxable
as
income
received
as
dividends,
under
the
particular
provisions
of
the
statute
here
in
question.
But
I
do
not
think
it
is
necessary
to
rely
upon
decided
authority
to
determine
the
point
at
issue
here.
It
is
sufficient,
I
think,
to
look
at
see.
9B
alone.
What
did
the
legislature
intend
by
enacting
sec.
9B?
Plainly,
I
think,
it
was
to
impose
a
tax
upon
two
classes
of
dividends,
and
also
upon
interest
payments
—excepting
those
made
in
respect
of
bonds
of
the
Dominion
of
Canada—paid
by
Canadian
debtors,
regardless.
of
the
source
from
which
they
came.
It
is
a
tax
quite
distinct
from
the
income
taxes
contemplated
by
sec.
9
of
the
Act,
and
the
other
provisions
of
the
Act
have
no
application
to
see.
9B.
It
is
a
tax
upon
certain
dividend
and
interest
payments
payable
by
the
recipient
thereof.
A
reference
to
the
first
clause
of
9B
will
show
that
the
tax
is
payable
only
on
dividends
received
by
residents
of
Canada
when
the
same
is
payable
in
a
currency
which
is
at
a
premium
in
terms
of
Canadian
funds.
The
purpose
of
this
clause
is
quite
obvious.
Then
dividends
paid
to
non-residents
of
Canada
are
taxable,
with
the
object,
I
assume,
of
placing
all
shareholders
in
Canadian
companies
on
a
parity,
in
respect
of
dividends
paid
by
such
companies.
Then
under
subsec.
5
of
sec.
9B,
the
tax
18
imposed
on
many
of
the
persons,
companies,
associations,
etc.,
that
are
exempt
from
income
tax
under
sec.
4
of
the
Act.
But
for
the
sake
of
convenience
it
seems
to
me
sec.
9B
might
have
been
enacted
as
an
independent
statute,
because
it
only
purports
to
tax
specific
receipts
of
moneys,
when
paid
as
dividends
or
interest,
by
Canadian
debtors,
and
in
respect
of
which
no
deductions
are
allowable.
I
do
not
think
one
is
required
to
go
behind
the
payments
and
enquire
into
anything
antecedent.
Therefore
it
would
seem
to
me
to
be
unnecessary
to
look
beyond
the
four
corners
of
sec.
9B
to
determine
the
question
at
issue
here.
The
tax
here
in
question
is
something
‘‘in
addition
to
any
other
tax
imposed
by
this
Act,’’
and
the
receipt
of
moneys
that
are
taxed
seem
plainly
defined,
and
to
it
there
are
apparently
no
exceptions,
except
that
subsec.
2(b)
exempts
from
the
tax,
interest
paid
upon
bonds
of
the
Dominion
of
Canada,
and
by
9B(5),
the
tax
falls
upon
many
which
are
ordinarily
relieved
of
income
tax
under
see.
4
of
the
Income
Tax
Act.
I
think
therefore
that
it
was
the
intention
of
the
legislature
by
sec.
9B
2(a),
to
tax
any
dividend
payable
to
a
non-resident
shareholder,
by
a
Canadian
debtor,
and
no
other
enquiry
is
necessary
except
whether
the
dividend
was
paid
or
payable.
The
true
construction
of
sec.
9B
2(a)
is,
I
think,
that
dividends
in
the
hands
of
a
non-resident
shareholder
shall
pay
the
tax
no
matter
from
whence
derived,
and
out
of
such
dividends
the
tax
is
to
be
captured.
Accordingly,
it
is
my
opinion
that
the
dividends
paid
the
suppliant
were
taxable,
and
were
not
payments
out
of
capital
or
out
of
funds
free
of
the
tax
in
question.
Even
if
the
dividends
were
derived
from
capital
it
was
nevertheless
a
"‘divi-
dend’’
here.
The
point
at
issue
is
of
considerable
importance
and
I
can
quite
appreciate
how
contrary
views
might
be
held
concerning
it.
In
the
circumstances
there
will
be
no
order
as
to
the
costs
of
the
trial.
Judgment
accordingly^
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