ANGERS,
J.:—This
is
an
appeal
from
the
decision
of
the
Minister
of
National
Revenue
affirming
an
assessment
made
by
the
Commissioner
of
Income
Tax
for
the
taxation
year
1931,
notice
of
which
assessment
was
given
to
the
taxpayer
on
September
29,
1934.
The
appeal
is
taken
under
sections
58
and
following
of
the
Income
War
Tax
Act.
The
appellant,
Western
Vinegars
Ltd.,
is
a
corporation
organized
under
the
laws
of
the
Province
of
Manitoba
in
1928.
On
April
1,
1931,
the
appellant
acquired
all
the
issued
capital
stock
of
Reynolds,
Moore
&
Co.,
a
corporation
carrying
on
the
same
class
of
business
at
the
appellant.
On
December
4,
1931,
Riddell,
Stead,
Graham
&
Hutchison,
chartered
accountants,
auditors
of
the
appellant
company,
wrote
to
the
inspector
of
income
tax
at
Winnipeg
the
following
letter:
"‘On
Ist
April,
1931,
our
clients,
Western
Vinegars
Limited,
Winnipeg,
acquired
all
the
capital
stock
of
Reynolds,
Moore
&
Co.
Ltd.,
Winnipeg.
It
is
the
intention
of
Western
Vinegars
Limited
to
prepare
a
consolidated
income
tax
return
of
the
two
companies
for
1931.
The
last
fiscal
period
of
Reynolds,
Moore
&
Co.
Ltd.
ended
31st
March,
1931,
and
they
will
again
close
their
books
on
30th
November,
1931,
so
that
in
future
their
year-end
may
coincide
with
that
of
Western
Vinegars
Limited.
"Will
you
please
advise
us
if
the
Department
will
permit
the
changing
of
the
fiscal
period
as
aforementioned
?‘
‘
On
December
5,
1931,
the
inspector
of
income
tax
acknowledged
receipt
of
the
aforesaid
letter,
adding
:
"‘I
have
forwarded
a
copy
of
your
letter
to
the
Commissioner
of
Income
Tax,
at
Ottawa,
for
his
consideration
and
decision,
and
shall
advise
you
in
regard
thereto
as
soon
as
possible.
‘
‘
On
December
16,
1931,
the
Commissioner
of
Income
Tax
wrote
to
the
inspector
at
Winnipeg
stating
{inter
alia)
:
"
‘It
would
appear
from
your
letter
of
the
5th
instant
and
stated
enclosure
that
it
will
be
in
order
to
accept
a
consolidated
return
for
1931
covering
the
operations
of
Western
Vinegars,
Ltd.
for
twelve
months
ended
30th
November,
1931,
and
of
Reynolds,
Moore
&
Co.
Ldt.,
for
the
eight
months
ended
30th
November,
1931.
However,
before
final
decision
is
given
you
will
please
advise
how
the
capital
stock
of
the
subsidiaries
was
paid
for.’
On
December
23,
1931,
the
inspector
wrote
to
the
appellant’s
auditors
:
"I
submitted
a
copy
of
your
letter
to
me
of
the
4th
instant
to
the
Commissioner
of
Income
Tax
for
his
decision.
He
advises
me
that
he
requires
information
regarding
the
date
of
acquirement
of
the
capital
stock
of
Reynolds,
Moore
&
Co.
Ltd.
by
Western
Vinegars,
Ltd.,
together
with
particulars
of
the
manner
in
which
the
capital
stock
was
paid
for.
"‘Will
you
kindly
let
me
have
this
information.”
On
December
29,
1931,
the
auditors
replied
to
the
inspector
as
follows:
"Further
to
our
letter
of
the
4th
December
and
in
reply
to
yours
of
the
23rd
December,
we
have
to
inform
you
that
the
capital
stock
of
Reynolds,
Moore
&
Company
Limited
was
acquired
by
Western
Vinegars
Limited,
as
at
1st
April,
1931.
""
Payment
was
made
partly
by
cash
and
partly
by
issue
of
preferred
stock
of
the
purchasing
company.
‘
‘
On
or
about
April
29,
1932,
the
appellant
filed
with
the
Com-
missioner
consolidated
returns
for
the
taxing
period
ending
November
30,
1931,
for
itself
and
its
subsidiary,
Reynolds,
Moore
&
Co.,
and
on
the
same
day
sent
to
the
Commissioner
a
cheque
for
$946.50
to
the
order
of
the
Receiver
General
of
Canada,
purporting
to
be
in
full
settlement
of
the
income
tax
due
by
the
appellant
for
the
said
taxing
period.
This
cheque,
which
was
filed
as
exhibit
9,
was
deposited
to
the
credit
of
the
Receiver
General
of
Canada
and
duly
paid.
The
appellant
submits
that
the
payment
of
$946.50
satisfied
all
liability
for
income
tax
for
the
period
ending
November
30,
1931.
The
appellant
contends,
in
the
alternative,
that,
in
view
of
the
acceptance
by
the
respondent
of
the
consolidated
returns
and
of
the
sum
of
$946.50,
the
latter
is
estopped
from
claiming
further
income
tax
from
the
appellant
for
the
said
taxing
period.
It
seems
to
me
convenient
to
dispose
of
this
contention
before
dealing
with
the
intrinsic
validity
of
the
assessment.
The
doctrine
of
estoppel
does
not
apply
against
the
Crown:
Chitty’s
Prerogatives
of
the
Crown,
381
;
Robertson,
The
Law
&
Practice
of
Civil
Proceedings
by
and
against
the
Crown,
576;
The
King
v.
Tessier
(1921)
21
Ex.
C.R.
150
at
158;
Humphrey
v.
The
Queen
(1891)
2
Ex.
C.R.
386
at
390;
(1892)
20
S.C.R.
591.
Lâches
cannot
be
imputed
to
the
Crown;
it
is
a
privilege
of
the
King
not
to
be
bound
by
the
mistakes,
omissions
or
neglects
of
his
officers
or
servants:
Robertson
(op.
cit.),
577;
Chitty’s
Prerogatives
of
the
Crown,
379
;
Bacon’s
Abridgment
of
the
Law,
vol.
8,
95;
Giles
v.
Grover
(1832)
9
Bing.
128
at
156;
Liberty
c
Company
Limited
v.
Commissioners
of
Inland
Revenue
(1924)
12
Tax
Cases
630
at
639
;
Anderton
and
Halstead
Ltd.
v.
Birrell
(1931)
16
Tax
Cases
200
at
207;
The
Queen
v.
Bank
of
Nova
Scotia
(1885)
11
S.C.R.
1
at
10;
Gunn
&
Company
Ltd.
v.
The
King
(1906)
10
Ex.
C.R.
343
at
346.
In
the
circumstances
disclosed
by
the
evidence
I
think
that
the
Commissioner
had
the
right
to
make
an
assessment
in
1934,
as
he
did,
for
the
fiscal
year
ending
November
30,
1931.
Let
us
now
consider
the
merits
of
this
assessment.
There
are
three
points
arising
for
determination
:
1.
Had
the
appellant
the
right
to
file
for
the
taxation
period
ending
November
30,
1931,
a
return
consolidating
its
profits
and
the
loss
incurred
by
its
subsidiary,
Reynolds,
Moore
&
Co.
?
2.
Was
the
appellant
entitled
to
deduct
from
its
revenue
the.
profit
charged
on
the
containers
(barrels
and
kegs),
in
which
it
sold
its
products,
returned
by
its
customers,
it
being
a
condition
of
the
sale
that
the
containers
could
be
returned
to
the
appellant
and
that,
in
the
event
of
such
return,
the
amount
charged
for
the
same
would
be
credited
?
3.
Is
interest
on
the
difference
between
the
amount
of
the
tax
recoverable
and
the
sum
paid
by
the
appellant
($946.50)
exigible
and,
if
so,
from
what
date?
In
my
opinion,
the
first
question
must
be
answered
in
the
negative.
Prior
to
the
amendment
made
by
sec.
35
of
the
Income
War
Tax
Act
by
23-24
Geo.
V,
ec.
41,
sec.
13,
by
the
addition
thereto
of
subsee.
(3),
there
was
no
provision
in
the
Act
permitting
a
company
to
file
a
return
consolidating
its
profit
or
loss
with
that
of
a
subsidiary.
Subsec.
(3)
of
sec.
35,
which
is
the
only
stipulation
in
the
Act
concerning
consolidated
returns,
reads
thus
:
"13.
A
company
which
owns
or
controls
all
of
the
capital
stock
(less
directors’
qualifying
shares)
of
subsidiary
companies
which
carry
on
the
same
general
class
of
business
and
have
fiscal
periods
substantially
coincident
with
the
owning
or
controlling
company
may,
in
respect
of
all
such
companies
which
carry
on
business
in
Canada,
elect,
before
the
commencement
of
the
earliest
fiscal
period
of
any
of
the
constituent
companies
in
respect
of
which
consolidation
is
desired
and
in
such
manner
as
may
be
prescribed
by
regulations
hereunder,
to
file
a
return
in
which
its
profit
or
loss
is
consolidated
with
that
of
all
of
its
subsidiary
companies
carrying
on
business
in
Canada,
in
which
case
the
rate
of
tax
provided
by
paragraph
D
of
the
First
Schedule
of
this
Act
shall
apply.”
By
see.
18
of
c.
41
of
23-24
Geo.
V,
sec.
13
of
the
same
statute
is
made
applicable
to
income
of
the
1932
taxation
period.
The
retroactivity
of
subsec.
(3)
of
sec.
35
does
not
go
beyond
1932.
As
a
general
rule
a
statute
is
not
retrospective
unless
the
intention
of
the
legislature
that
it
should
be
is
clearly
expressed
:
Halsbury’s
Laws
of
England,
vol.
27,
p.
159;
Maxwell
on
the
Interpretation
of
Statutes,
7th
ed.,
pp.
5
and
186;
McQueen
v.
The
Queen
(1886)
16
S.C.R.
1
at
114;
The
Queen
v.
Martin
(1891)
20
S.C.R.
240;
Winter
et
al
v.
Trans-Canada
Insurance
Company
(1934)
1
Ins.
L.R.
326;
Young
v.
Adams
[1898]
A.C.
469.
Before
the
amendment
in
question
to
sec.
35,
the
Minister
had
no
power
to
allow
the
filing
of
consolidated
returns;
as
a
matter
of
fact
I
do
not
think
that
he
allowed
it
in
the
present
instance.
After
careful
consideration
of
the
facts
and
of
the
law,
I
have
arrived
at
the
conclusion
that
the
second
question
must
be
answered
in
the
affirmative.
The
evidence
discloses
that
the
appellant
sold
its
products
in
barrels
and
kegs.
These
containers
were
charged
to
the
customers
in
addition
to
the
price
of
the
goods.
The
charge
included
the
cost
price
of
the
containers
and
an
approximate
profit
of
40%.
The
customers
were
at
liberty
to
return
the
containers,
the
agreement
being
that,
if
they
were
returned
in
good
condition,
the
amount
charged
for
them
was
to
be
credited.
I
may
perhaps
cite
an
extract
from
the
deposition
of
Edwin
W.
Isard,
the
manager
of
Western
Vinegars
Ltd.,
regarding
these
containers.
"‘Q.
You
understand
that
in
submitting
your
income
tax
returns
for
1928,
1929,
1931
and
1932
you
set
up
estimated
liabilities
of
the
following
amounts:
$1928,
$3,000;
1929,
$1,000;
1931,
$4,000;
1932,
$2,000;
Now
will
you
tell
his
lordship
what
your
practice
was
in
those
years
regarding
the
containers?
First,
tell
his
lordship
what
goods
you
deal
in
and
how
you
ship
them.
"‘A.
We
deal
in
the
manufacture
and
sale
of
vinegar
and
these
goods
are
sold,
the
largest
quantities,
in
containers,
which
are
returnable
at
the
prices
charged.
The
books
of
the
company
and
the
ledgers
shew
sales
of
these
containers
and
shew
returns
from
the
customers
at
the
time
we
receive
them
back.
"‘Q.
What
do
your
containers
consist
of?
"‘A.
Wooden
barrels
and
kegs.
"‘Q.
Do
you
invoice
those
barrels
and
kegs
at
a
profit?
"‘A.
Yes.
"‘Q.
Approximately
how
much?
"A.
About
40%.”’
And
further
on
:
"‘Q.
So
that
the
container
was
sent
out
at
an
estimated
profit
of
40%,
and
what
happended
to
that
profit
when
the
container
came
back?
"‘A.
Of
course,
it
was
entirely
wiped
out.
It
goes
back
into
stock
at
inventory
prices.
‘
‘
The
witness
said
that
the
quantity
of
containers
returned
was
between
75%
and
85%.
Asked
if
it
would
be
possible
to
keep
the
books
of
the
company
in
such
a
way
as
to
show
exactly,
at
any
time,
the
loss
of
profit
arising
from
the
return
of
containers,
the
witness
replied
:
"‘A.
We
have
tried.
We
have
learned
from
general
practice
in
our
business
over
a
period
years,
even
prior
to
the
formation
of
Western
Vinegars,
that
this
has
been
found
impossible.
We
have
had
different
firms
of
auditors
on
our
books
and
they
have
not
been
able
to
find
a
method
of
shewing
exactly
what
is
out
in
our
customers’
hands.”
Later,
dealing
with
the
entries
in
the
books
relating
to
containers,
Isard
testified
as
follows
:
‘Q.
Have
you
set
up
a
reserve
for
containers,
actually
?
"A.
No.
"‘Q.
You
have
endeavoured
year
by
year
to
estimate
the
profit
you
have
lost
when
containers
come
back?
“A.
That
is
correct.
"‘Q.
In
your
ledger
you
have
shewn
containers
at
a
profit?
"‘A.
That
is
correct.
"‘Q.
And
when
those
containers
come
back
you
lose
the
profit
that
has
been
charged
up
?
"‘A.
Yes.”
James
G.
Mundy,
resident
partner
for
Winnipeg
of
the
firm
of
Riddell,
Stead,
Graham
&
Hutchinson,
called
as
witness
on
behalf
of
appellant,
speaking
of
the
containers,
said:
"The
Western
Vinegars
shipped
their
vinegar
to
customers
in
containers
and
the
containers
are
charged
against
the
customers.
The
customers
have
the
privilege
of
returning
the
containers
and
when
they
are
returned
they
are
allowed
the
full
amount
which
is
paid
for
them.
This
return
may
take
place
at
any
time
they
choose.
The
Western
Vinegars
claim
that
from
previous
experience
they
know
that
a
certain
amount
of
those
containers
will
be
returned,
sales
of
which
had
been
included
in
the
profit
and
loss
account,
and,
therefore,
they
set
aside
as
unearned
profits
an
estimated
amount,
which
in
the
year
1928
is
represented
by
this
$3,000.”’
It
was
submitted
on
behalf
of
respondent
that
the
profits
on
the
containers
constitute
a
reserve
and
that
amounts
credited
to
a
reserve
cannot
be
deducted
in
computing
the
profits
or
gains
assessable,
in
virtue
of
para.
(d)of
subsec.
1
of
sec.
6
of
the
Act
:
^6.
In
computing
the
amount
of
the
profits
or
gains
to
be
assessed,
a
deduction
shall
not
be
allowed
in
respect
of
(d)
amounts
transferred
or
credited
to
a
reserve,
contingent
account
or
sinking
fund,
except
such
an
amount
for
bad
debts
as
the
Minister
may
allow
and
except
as
otherwise
provided
in
this
Act;’’
In
support
of
his
contention
counsel
for
respondent
cited:
Edward
Collins
&
Sons
Ltd.
v.
Commissioners
of
Inland
Revenue
(1924)
12
Tax
Cases
773
at
780;
Commissioners
of
Inland
Revenue
v.
The
Anglo
Brewing
Co.
Ltd.
(1925)
12
Tax
Cases
803
at
813;
H.
Ford
&
Co.
Ltd.
V.
Commissioners
of
Inland
Revenue
(1926)
12
Tax
Cases
997
at
1005;
Naval
Colliery
Co.
Ltd.
v.
Commissioners
of
Inland
Revenue
(1928)
12
Tax
Cases
1017
at
1046.
In
my
opinion,
these
decisions
have
no
bearing
upon
the
present
case.
The
profits
on
the
containers
are
not,
as
I
conceive,
a
reserve
properly
called
;
and
the
loss
of
these
profits,
on
the
returns
of
the
containers,
is
not
merely
a
contingency
but
a
certainty.
The
only
thing
uncertain
is
the
quantity
of
the
containers
which
will
be
returned
and
the
time
at
which
the
return
will
be
effected.
I
believe
that
an
allowance
should
be
made
for
the
containers
that
are
returned.
If
no
allowance
were
made,
it
would
mean
that
the
appellant
would
have
to
pay
tax
on
profits
which
it
has
not
reaped.
I
do
not
think
that
this
was
the
intention
of
the
legislature
in
enacting
the
provision
contained
in
para.
(d)
of
subsee.
1
of
see.
6.
The
proof,
however,
is
vague
and
uncertain
and
I
am
not
in
a
position
to
determine
definitely
what
proportion
of
the
assessment
appealed
from
was
for
the
profits
on
the
containers
which
were
returned.
I
assume
that
the
parties
will
be
able
to
come
to
some
understanding
in
this
respect;
if
not,
they
will
be
at
liberty
to
refer
the
matter
to
me
and
to
adduce,
if
possible,
further
and
more
positive
evidence
on
the
point.
There
remains
the
question
of
interest.
Secs.
48
and
54
of
the
Act
apply
;
at
the
time
material
herein
they
read
as
follows
:
4
‘48.
Every
person
liable
to
pay
any
tax
under
this
Act
shall
send
with
the
return
of
the
income
upon
which
such
tax
is
payable
not
less
than
one-quarter
of
the
amount
of
such
tax,
and
may
pay
the
balance,
if
any,
of
such
tax,
in
not
more
than
three
equal
bi-monthly
instalments
thereafter,
together
with
interest
at
the
rate
of
six
per
centum
per
annum
upon
each
instalment
from
the
last
day
prescribed
for
making
such
return
to
the
time
payment
is
made.
"
"
54.
After
examination
of
the
taxpayer
‘s
return
the
Minister
shall
send
a
notice
of
assessment
to
the
taxpayer
verifying
or
altering
the
amount
of
the
tax
as
estimated
by
him
in
his
return.
“2.
Any
additional
tax
found
due
over
the
estimated
amount
shall
be
paid
within
one
month
from
the
date
of
the
mailing
of
the
notice
of
assessment.
"‘3.
If
the
taxpayer
fails
to
pay
such
additional
tax
within
one
month
from
the
date
of
the
mailing
of
the
notice
of
assessment
aforesaid,
he
shall
pay,
in
addition
to
the
interest
provided
for
by
section
forty-eight,
interest
at
the
rate
of
four
per
centum
per
annum,
upon
the
said
additional
tax,
from
the
expiry
of
the
period
of
one
month
from
the
date
of
the
maling
of
the
said
notice
to
the
date
of
payment.”
The
appellant
was
obliged
to
pay
at
least
one-quarter
of
the
tax
owing
not
later
than
the
380th
of
April,
1932,
and
the
balance
in
three
equal
bi-monthly
payments
thereafter,
with
interest
at
6%
upon
each
instalment
from
April
30,
1932,
to
the
date
of
payment.
The
appellant
paid
$946.50
and
in
so
doing
purposed
to
pay
the
full
amount
of
the
tax
it
owed.
The
Minister
found
the
amount
insufficient
and
on
September
29,
1934,
sent
to
the
appellant
the
notice
of
assessment
filed
as
exhibit
6.
The
appellant
had
one
month
from
the
mailing
of
the
notice
of
assessment
within
which
to
pay
the
additional
tax;
on
its
failure
to
pay
this
additional
tax
or
at
least
the
portion
thereof
legally
exigible,
the
appellant
became
subject
to
pay,
in
addition
to
the
interest
provided
for
by
sec.
48,
interest
at
the
rate
of
4%
from
the
expiry
of
the
period
of
one
month
from
the
date
of
mailing
of
the
notice
of
assessment,
to
wit
from
the
29th
of
October,
1934.
The
appellant
will
accordingly
have
to
pay
interest
on
the
additional
tax
exigible,
as
provided
for
by
secs.
48
and
54
of
the
Act.
The
assessments
pertaining
to
the
containers
are
set.
aside;
the
profit
on
the
containers
returned
ought
to
be
deducted
from
the
appellant’s
income
for
taxation
purposes.
The
appellant
will
be
entitled
to
its
costs
against
the
respondent,
which
costs
are
hereby
fixed
at
the
sum
of
$250,
disbursements
included.
Judgment
accordingly.
Email this Content