MACLEAN
J.:—This
is
an
appeal
from
the
decision
of
the
Minister
of
National
Revenue,
affirming
an
assessment
for
income
tax
levied
against
W.
R.
Wilson,
the
appellant,
for
the
1932
taxation
period.
The
appellant
died
in
1987
and
the
appeal
is
carried
on
by
the
executors
of
his
will.
The
appellant
was
assessed
for
the
tax
in
respect
of
the
income
of
Wilson
Mining
&
Investment
Company
Ltd.,
which
company,
it
was
agreed
by
counsel,
is
a
‘‘personal
corporation”
within
the
meaning
of
the
Income
War
Tax
Act.
Sec.
21
of
the
Act
provides
that
the
income
of
a
“personal
corporation,’’
whether
actually
distributed
or
not,
shall
be
deemed
to
be
distributed
each
year
as
a
dividend
to
the
shareholders.
Prior
to
the
date
of
his
death
Wilson
was
the
principal
shareholder
in
Wilson
Mining
&
Investment
Company
Ltd.
(referred
to
hereafter
as
‘‘the
Wilson
Company’’)
which
had
its
head
office
at
Vancouver,
B.C.
See.
l(i)
of
the
Act
defines
a
‘‘personal
corporation”
as
follows
:
“
(i)
‘personal
corporation’
means
a
corporation
or
joint
stock
company
irrespective
of
when
or
where
created,
whether
in
Canada
or
elsewhere,
and
irrespective
of
where
it
carries
on
its
business
or
where
its
assets
are
situate,
controlled,
directly
or
indirectly,
by
one
individual
who
resides
in
Canada,
or
by
one
such
individual
and
his
wife
or
any
member
of
his
family,
or
by
any
combination
of
them
or
by
any
other
person
or
corporation
or
any
combination
of
them
on
his
or
their
behalf,
and
whether
through
holding
a
majority
of
the
stock
of
such
corporation
or
in
any
other
manner
whatsoever,
the
gross
revenue
of
which
is
to
the
extent
of
one-quarter
or
more
derived
from
one
or
more
of
the
following
sources,
namely
(1)
From
the
ownership
of
or
the
trading
or
dealing
in
bonds,
stocks,
shares,
debentures,
mortgages,
hypothees,
bills,
notes
or
other
similar
property,
(ii)
From
the
lending
of
money
with
or
without
security,
or
by
way
of
rent,
annuity,
royalty,
interest
or
dividend,
or
(iii)
From
or
by
virtue
of
any
right,
title
or
interest
in
or
to
any
estate
or
trust.
‛
It
will
be
seen
that
a
“personal
corporation’’
is
one
controlled,
directly
or
indirectly,
by
a
single
individual,
or
by
such
individual
and
members
of
his
family,
the
gross
revenue
of
which
is
to
the
extent
of
twenty-five
per
cent
derived
from
the
sources
mentioned
in
sub-clauses
(1),
(ii)
and
(iii).
Sec.
2(e)
defines
"‘gross
revenue,’’
where
a
personal
corporation
has
revenue
from
more
than
one
source,
as
the
sum
of
the
net
profits
from
each
source.
Sec.
21
comprises
several
provisions
in
respect
of
‘‘personal
corporations’’
and
subs.
1,
2
and
3
are
as
follows:
"
"
21.
The
income
of
a
personal
corporation,
whether
the
same
is
actually
distributed
or
not,
shall
be
deemed
to
be
distributed
on
the
last
day
of
each
year
as
a
dividend
to
the
shareholders,
and
the
said
shareholders
shall
be
taxable
each
year
as
if
the
same
had
been
distributed
in
the
proportions
hereinafter
mentioned.
2.
Each
shareholder’s
taxable
portion
of
the
income
of
the
corporation
deemed
to
be
distributed
to
him
as
above
provided
for,
shall
be
such
percentage
of
the
income
of
the
corporation,
as
the
value
of
all
property
transferred
or
loaned
by
such
shareholder
or
his
predecessor
in
title
to
the
corporation
is
of
the
total
value
of
all
property
of
the
corporation
acquired
from
the
shareholders.
3.
The
value
of
the
property
transferred
by
each
shareholder
or
his
predecessor
in
title
shall
be
the
fair
value
as
at
the
date
of
the
transfer
of
such
property
to
the
corporation,
and
the
total
value
of
the
property
of
the
corporation,
acquired
from
its
shareholders
shall,
for
the
purpose
of
determining
the
percentage
referred
to
in
the
last
preceding
subsection,
be
taken
as
at
the
date
of
acquisition
thereof
by
the
corporation;
and
in
ascertaining
values
under
this
subsection,
regard
shall
be
had
to
all
the
facts
and
circumstances,
and
the
decision
of
the
Minister
in
that
respect
shall
be
final
and
conclusive.
’
It
may
be
assumed
that
the
intended
purpose
of
the
provisions
of
the
Act
regarding
‘‘personal
corporations”
was
to
overcome
the
effect
of
the
decisions
in
cases
such
as
Salomon
v.
Salomon
[1897]
A.C.
22,
and
to
preserve
the
personal
liability,
for
the
income
tax,
of
the
taxpayer
who
has
transferred,
wholly
or
partially,
his
assets
to
a
corporation
which
he
intends
to
control.
S.
21
provides
that
the
income
of
a
personal
corporation
shall
be
deemed
to
be
a
dividend
to
the
shareholders,
whether
the
same
has
been
distributed
or
not,
and
subsections
2
and
3
define
how
each
shareholder’s
taxable
portion
of
the
income
of
the
corporation
is
to
be
determined.
In
this
way
the
liability
of
the
owner
of
assets
transferred
to
a
“personal
corporation,’’
and
the
value
of
the
assets
as
of
the
date
of
transfer,
are
preserved
for
the
purposes
of
the
income
tax,
even
though
the
owner’s
title
of
the
assets
has
passed
to
the
corporation,
and
thereafter
his
interest
therein
is
represented
by
shares
in
the
personal
corporation.
What
the
provisions
of
the
Act
respecting
personal
corporations’’
seek
to
accomplish
seems
to
be
quite
plain.
The
Wilson
Company
was
incorporated
in
1929
for
various
purposes
and
objects,
among
them
being:
(a)
To
acquire
the
interest
of
William
Ritson
Wilson,
of
the
members
of
his
family
and
others,
in
mines,
mining
lands,
mining
companies
and
mining
ventures,
and
investments
generally
as
well
in
Canada
as
in
foreign
countries.
(6)
1.
To
carry
on
the
business
of
a
mining
and
investment
company
in
all
its
branches,
to
acquire
by.
purchase,
lease,
hire,
discovery,
location
or
otherwise,
and
to
hold,
work
and
develop
mines,
mineral
claims,
mineral
leases,
mining
lands,
prospects,
licences
and
mining
rights
of
every
description,
and
to
render
the
products
thereof
merchantable,
and
to
buy,
sell
and
deal
in
the
same
or
any
product
thereof.’’
The
Wilson
Company
was
also
empowered
to
acquire
and
operate
timberlands,
to
acquire
water
rights
and
privileges,
patents,
patent
rights
and
concessions,
to
establish
and
operate
stores
and
hotels
and
to
carry
on
a
general
mercantile
business,
to
acquire
and
operate
boats,
ships
and
other
vessels,
to
manufacture
fire
and
building
bricks,
to
take
contracts
for
mining
work
of
all
kinds
and
to
accept
as
the
consideration
shares,
stocks
or
other
securities
of
any
company,
to
acquire
and
operate
farming
lands,
and
to
acquire,
hold,
sell
and
dispose
of
any
securities
or
investments
of
all
classes
and
description
of
any
company,
corporation
or
trust.
In
the
taxation
period
in
question
the
Wilson
Company
returned
as
investments
Dominion
of
Canada
Bonds,
Great
Northern
Railway
Equipment
Bonds,
Grand
Trunk
Pacific
Railway
Bonds,
and
Province
of
Saskatchewan
Bonds,
all
of
the
value
of
$139,972.40;
shares
in
the
Premier
Gold
Mining
Company
of
the
value
of
$114,769.50,
shares
in
Pleasant
Valley
Mining
Company
Ld.,
a
coal
mining
company,
of
the
value
of
$409,526,
and
shares
in
other
mining
companies;
and
certain
real
estate,
and
mining
prospects
or
equities
therein.
The
total
value
of
all
such
investments
is
shown
in
the
return
as
being
$980,929.56.
These
investments
were
assigned
and
transferred
by
the
appellant
Wilson
to
the
Wilson
Company
by
agreement
dated
September
8,
1931,
the
consideration
therefor
being
the
allotment
to
Wilson
of
45,000
fully
paid
shares
in
the
Wilson
Company.
For
the
same
period
the
total
income
returned
by
the
Wilson
Company
was
$65,214.98,
of
which
$11,265.73
was
derived
from
the
Bonds
which
I
have
already
described,
$45,803.75
as
dividends
from
Premier
Gold
Mining
Company,
and
$5,675.76
from
premiums
upon
dividends
paid
by
Premier
Gold
Mining
Company
in
United
States
funds.
The
head
office
of
the
Premier
Gold
Mining
Company
is
in
New
York.
The
balance
of
the
income
was
$315.98
received
as
interest
upon
moneys
deposited
in
some
bank
on
savings
account,
and
$2,653.71
being
the
profit
on
the
sale
of
shares
in
the
McDonnell
Coal
Mining
Company.
Whether
the
latter
was
in
the
end
treated
as
an
accretion
of
capital
or
as
income,
is
not
clear.
The
amount
and
source
of
the
income
is
therefore
definitely
ascertained.
The
expenses
for
carrying
on
the
business
of
the
Wilson
Company
were
returned
at
$19,396.02,
most
of
which
were
apparently
incurred
in
connection
with
location,
survey,
exploration,
prospecting
and
assessment
work,
carried
out
on
mining
claims
or
properties.
The
net
earnings
were
returned
at
$45,818.91.
There
were
originally
four
grounds
of
appeal
but
one
having
to
do
with
a
farming
ranch
owned
by
the
Wilson
Company,
or
the
appellant,
has
since
been
adjusted
between
the
parties,
so
there
remain
three
grounds
of
appeal
to
consider.
These
are
(1)
the
disallowance
of
an
operating
loss
sustained
in
the
taxation
period
in
question
by
Pleasant
Valley
Mining
Company,
the
appellant
claiming
that
the
Wilson
Company
having
elected
to
file
a
return
for
that
period
in
which
its
profit
and
loss
account
was
consolidated
with
that
of
Pleasant
Valley
Mining
Company,
the
loss
of
the
latter
should
be
allowed
as
a
deduction
in
computing
the
net
income
of
the
Wilson
Company;
(2)
disallowance
of
the
sum
of
$18,303.82
claimed
as
expenses
incurred
by
the
Wilson
Company
in
exploration,
prospecting
and
development
work,
carried
on
in
connection
with
various
mining
properties,
claims
or
prospects,
which
expenses
were
returned
as
a
deduction
from
the
income
of
the
Wilson
Company,
and
which
it
is
claimed
by
the
respondent
is
not
properly
allowable
as
expenses;
and
(3)
the
inclusion
for
taxation
purposes
of
the
sum
of
$5,675.76,
being
premiums
received
on
dividends
paid
by
Premier
Gold
Mining
Company
to
the
Wilson
Company
in
United
States
funds,
the
point
in
issue
being
whether
the
appellant,
in
respect
of
such
premium
income,
is
entitled
to
the
exemption
or
deduction
for
depreciation
authorized
in
the
case
of
income
derived
from
mining
by
s.
5(a)
of
the
Act.
I
propose
first
to
discuss
the
issue
relating
to
the
receipt
of
premiums
derived
from
the
exchange
of
United
States
currency
into
Canadian
curreney
in
connection
with
the
dividends
paid
by
Premier
Gold
Mining
Company
to
the
Wilson
Company.
Sec.
5(a)
of
the
Act
enacts
that
income
derived
from
mining
shall
be
subject
to
exemptions
and
deductions
in
such
reasonable
amount
as
the
Minister,
in
his
discretion
may
allow
for
depreciation,
and
he
may
make
such
an
allowance
for
the
exhaustion
of
the
mine
as
he
may
deem
just
and
fair.
No
deduction
was
allowed
for
depreciation
or
exhaustion
in
respect
of
the
amount
of
such
premiums
but
a
deduction
on
such
account
was
allowed
in
respect
of
the
face
value
of
the
dividend
cheques
received
from
Premier
Gold
Mining
Company
by
the
Wilson
Company.
The
Wilson
Company
was
not
a
dealer
in
exchange
and
neither
was
Wilson.
The
question
is
whether
the
premiums
received
from
the
conversion
of
United
States
currency
into
Canadian
currency
is
subject
to
the
tax
without
deduction,
or
whether
an
allowance
for
depreciation
should
be
made
thereon,
just
as
on
the
face
value
of
the
dividends
remitted
from
New
York,
and
that
is
the
whole
point
in
issue.
The
claim
made
on
behalf
of
the
Minister
is
that
the
cashing
of
a
dividend
cheque
is
a
monetary
transaction
in
respect
of
which
depreciation
or
depletion
does
not
enter.
It
appears
that
at
one
time,
in
such
cases,
depreciation
was
allowed
but
later
that
practice
was
departed
from.
There
is
no
statutory
provision,
or
regulation,
directed
to
the
controversy,
and
there
is
no
decided
authority
upon
such
a
point
to
assist
one,
at
least
my
attention
was
not
directed
to
any
such
authority.
I
was
referred
to
the
Australian
case
of
Payne
v.
Deputy
Federal
Commissioner
of
Taxation
[1936]
A.C.
479,
but
that
case
is
authority
only
for
the
proposition
that
income
received
as
premiums
on
exchange
should
be
included
as
income
in
the
return
of
the
taxpayer,
and
does
not
touch
the
question
at
issue
here,
namely,
whether
a
deduction
for
depreciation
should
be
allowed
upon
income
derived
from
premiums
on
exchange
on
account
of
dividends,
paid
by
a
mining
company.
The
premium
income
here
in
question
constitutes,
I
think,
"‘income
derived
from
mining’’;
its
source
was
dividend
cheques
issued
to
a
shareholder
by
a
mining
company,
and
should,
I
think,
be
treated
as
part
of
the
dividends.
There
is
something,
of
course,
to
be
said
for
the
respondent’s
view,
but
the
reasons
advanced
therefor
do
not
weigh
so
heavily
with
me
as
those
advanced
for
the
appellant’s
contention.
If
United
States
funds,
in
terms
of
Canadian
currency,
had
been
at
a
discount
the
Wilson
Company
would
not
be
taxed
on
the
discount,
and
the
net
proceeds
of
the
dividend
cheques
or
warrants
would
be
the
dividend
income
received.
To
separate
the
premium
received
upon
the
amount
of
a
dividend
cheque
and
give
it
one
name,
and
to
call
the
balance
"‘the
dividend,’’
seems
to
me
to
be
a
rather
arbitrary
distinction.
The
Premier
Gold
Mining
Company
might
have
saved
the
premiums
for
its
treasury
by
remitting
the
dividends
in
Canadian
funds
but
it
passed
this
advantage
over
to
its
Canadian
shareholders
by
remitting
the
same
in
United
States
funds.
In
such
a
ease
as
this
the
shareholder
would,
I
think,
describe
the
entire
proceeds
of
each
dividend
cheque
as
a
"‘dividend,’’
in
his
books
containing
the
investment
account,
and
in
which
account
such
proceeds
would
appear
as
a
credit.
On
the
whole,
it
seems
to
me
that
the
premiums
in
question
should
be
treated
as
part
of
the
income
derived
from
mining,
and
therefore
entitled
to
the
depreciation
allowance
usual
in
such
cases.
I
turn
now
to
the
appeal
from
the
disallowance
of
the
sum
of
$18,303.32,
as
a
deduction,
the
same
being
expenses
incurred
by
the
Wilson
Company
in
connection
with
prospecting,
exploration
and
assessment
work,
carried
out
upon
mining
properties,
and
which
properties
were,
of
course.
not
revenue
yielding.
These
expenses
were
disallowed
on
the
ground
that
they
were
""
disbursements
or
expenses
not
wholly,
exclusively
and
necessarily
laid
out
or
expended
for
the
purpose
of
earning
the
income,’’
as
provided
by
s.
6(a)
of
the
Act,
and
which
are
not
allowable
"
‘
in
computing
the
amount
of
the
profits
or
gains
to
be
assessed.
‘
‘
The
revenue
of
the
Wilson
Company
came
almost
entirely
from
two
sources,
the
Bond
Investments
and
Premier
Gold
Mining
Company.
No
revenue
was
expected
to
be
earned
by
reason
of
the
expenditures
in
question,
in
the
1932
taxation
period;
they
were
in
the
nature
of
capital
expenditures,
and
not
related
in
any
way
to
the
earning
of
the
income
of
the
Wilson
Company.
If
the
mining
properties
upon
which
these
expenditures
were
made
were
later
sold
the
proceeds
would,
I
apprehend,
be
treated
as
a
return
of
capital,
and
would
not
be
taxed
as
income.
Had
these
expenses
been
incurred
by
W.
R.
Wilson,
prior
to
the
organization
of
the
Wilson
Company,
they
would
not,
I
think,
have
been
allowed
as
a
deduction
in
computing
the
amount
of
his
profits
or
gains
to
be
assessed.
If
the
appellant’s
contention
be
correct
then
‘‘personal
corporations’’
would
be
accorded
deductions
not
allowed
other
corporations
or
individuals,
and
this,
I
think,
is
something
the
Act
does
not
contemplate.
A
‘‘personal
corporation’’
is
relieved
of
the
corporation
income
tax
and
its
income
is
to
be
deemed
as
a
dividend
distributed
to
the
shareholder,
to
him
who
transferred
assets
to
the
corporation,
and
the
distribution
is
not
determined
on
the
basis
of
the
number
or
value
of
the
shares
held
by
the
transferor
in
the
corporation,
but
on
such
percentage
of
the
income
of
the
corporation
as
the
value
of
the
property
transferred
is
of
the
total
value
of
all
property
of
the
corporation
acquired
from
the
shareholders.
That
is
what
distinguishes
a
"‘personal
corporation’’
from
other
corporations.
Now
I
do
not
understand
the
Act
to
mean
that
a
‘‘personal
corporation,’’
or
a
shareholder
in
a
"personal
corporation,
‘
‘
is
to
be
treated
differently
from
other
taxpayers
as
to
the
manner
of
computing
the
amount
of
the
profits
or
gains
to
be
assessed.
If
a
personal
corporation
incurs
expenses
not
wholly,
exclusively
and
necessarily
laid
out
for
the
purpose
of
earning
the
income,
I
think
that
s.
6(a)
applies
to
it
as
well
as
to
any
other
corporation
or
individual
taxpayer.
There
is
nothing
in
the
Act,
so
far
as
I.
can
see,
which
suggests
that
this
provision
of
the
Act
is
suspended
or
becomes
inoperative
in
respect
of
personal
corporations,
and
I
am
therefore
of
the
opinion
that
the
‘‘expenses’’
involved
in
this
ground
of
appeal
are
to
be
treated
as
not
having
been
incurred
for
the
purpose
of
earning
the
income
here,
and
for
that
reason
the
appellant
must
fail.
I
come
now
to
the
last
question
for
decision
and
that
is
whether
the
Wilson
Company
is
to
be
permitted
to
file
a
return
in
which
its
profit
and
loss
account
is
consolidated
with
that
of
Pleasant
Valley
Mining
Company.
The
relevant
provision
of
the
Act
is
s.
35(3)
and
which,
at
the
material
time,
read
as
follows:
4
"
3.
A
company
which
owns
or
controls
all
of
the
capital
stock
(less
directors’
qualifying
shares)
of
subsidiary
companies
which
carry
on
the
same
class
of
business,
may
elect
within
the
time
and
in
the
manner
prescribed
by
regulations,
to
file
a
return
in
which
its
profit
or
loss
is
consolidated
with
that
of
its
subsidiaries,
in
which
case
the
tax
provided
by
paragraph
D
of
the
First
Schedule
of
this
Act
shall
apply.”
If
‘‘company’’
in
this
section
includes
a
“‘
personal
corporation,”
and
if
Pleasant
Valley
Company
is
a
subsidiary
of
the
Wilson
Company—neither
of
which
point
the
respondent
contested,—
and
if
the
Wilson
Company
and
Pleasant
Valley
Mining
Company
carried
on
the
same
class
of
business,
then,
I.
think,
it
was
permissible
for
the
Wilson
Company
to
elect
to
file
a
consolidated
profit
and
loss
statement.
The
statute
enacting
sec.
35(3),
Chap.
41,
of
the
Statutes
of
Canada,
1932-33,
provided
that
this
section
was
to
apply
‘‘to
income
of
the
1932
taxation
period.’’
No
regulation
was
ever
enacted,
as
authorized
by
that
section,
prescribing
the
time
and
manner
in
which
the
consolidated
profit
and
loss
statement
should
be
filed,
in
fact
it
was
virtually
conceded
by
Mr.
Donaghy
that
no
regulation
had
been
enacted.
At
least
there
was
no
pretense
of
showing
that
one
was
ever
enacted.
However,
a
consolidated
statement
was
filed
in
respect
of
the
period
in
question.
In
any
event,
no
valid
regulation
could
be
enacted
that
would
prevent
the
Wilson
Company
from
filing
a
consolidated
profit
and
loss
statement
for
the
1932
taxation
period,
because
the
statute
plainly
states
that
this
might
be
done.
Therefore,
the
filing
of
such
a
statement
was
quite
within
the
terms
of
the
Act
and
the
taxpayer
cannot
be
deprived
of
the
right
of
doing
so,
or
be
deprived
of
any
advantage
resulting
therefrom,
by
reason
of
the
failure
to
enact
any
such
regulation
as
was
authorized
by
sec.
35(3),
as
was
decided
in
the
Carling
case
[Carling
Export
Brewing
&
Malting
Co.
v.
The
King
[1931]
A.C.
485].
Therefore,
in
respect
of
this
point,
I
would
decide
that
the
consolidated
profit
and
loss
statement
must
be
considered
in
determining
the
assessable
income
of
the
Wilson
Company
unless
it
be
that
the
Wilson
Company
and
Pleasant
Valley
Mining
Company
did
not,
as
required
by
the
Act,
"‘carry
on
the
same
class
of
business,’’
in
the
period
in
question.
Upon
this
point
the
parties
are
in
conflict.
The
Income
War
Tax
Act
does
not
in
terms
define
a
"‘subsidiary
company’’
but
for
the
purposes
of
s.
35(3)
it
may
be
said
to
mean
a
corporation
the
capital
stock
of
which
is
owned
or
controlled
by
another
company,
usually
called
a
holding
company,
the
business
of
the
holding
company
and
the
subsidiary
company
being
of
the
same
class.
Sec.
115
of
the
Dominion
Companies
Act,
1934,
defines
a
"‘subsidiary
company”
but
with
special
reference
to
the
accounting
and
auditing
of
ho!ding
companies.
Ordinarily,
a
holding
company
is
one
which
acquires
the
whole
or
a
controlling
interest
in
the
share
capital
of
one
or
more
distinct
businesses,
thereby
for
practical
purposes
effectively
amalgamating
them
and
consolidating
their
interests.
The
types
of
business
carried
on
by
a
holding
company
and
its
subsidiaries
may
vary
greatly,
and
it
is
not
necessary
that
they
be
of
the
same
class.
The
advantages
of
the
summarized
picture
presented
by
a
consolidated
statement
of
affiliated
groups
of
companies
have
become
well
recognized
throughout
the
financial
community.
Consolidated
statements
are
needed
for
certain
audit
purposes,
for
certain
prescribed
statutory
purposes,
and
are
frequently
required
by
banks
and
stock
exchanges.
If
the
type
of
business
done
by
a
subsidiary
company
so
differs
from
that
carried
on
as
a
whole
by
the
holding
company,
or
if
there
is
little
or
no
intercompany
business,
the
consolidation
of
the
figures
of
the
holding
and
subsidiary
companies
would
lead
only
to
confusion.
Consolidated
statements
in
such
a
case
would
not
likely
be
expected
or
required,
except
perhaps
for
some
special
purposes.
The
taxing
statute
here
recognizes
the
consolidated
statement
of
a
holding
company
and
its
subsidiary
only
when
each
carries
on
the
same
class
of
business.
The
reason
for
that
is
quite
obvious.
So
that
the
usual
consolidated
statement
of
holding
and
subsidiary
companies
might
mean
one
thing,
and
the
consolidated
statement
which
s.
35(3)
has
reference
to
would
mean
another
thing.
Here,
the
Wilson
Company
owned
all
the
capital
stock
(less
directors’
qualifying
shares)
of
Pleasant
Valley
Mining
Company.
Therefore
one
of
the
conditions
precedent
to
the
application
of
s.
35(3)
in
this
ease
is
established.
But
did
each
company
carry
on
the
same
class
of
business?
That
is
the
vital
and
difficult
question
for
decision
in
connection
with
this
branch
of
the
appeal.
In
the
1932
taxation
period
Pleasant
Valley
Mining
Company
carried
on
the
business
of
mining
coal,
and
nothing
else.
The
Wilson
Company
did
not
engage
in
this
class
of
business
though
it
appears
it
owned
or
controlled
a
coal
area,
called
the
‘‘Blue
Flame,’’
upon
which
it
did
exploration
and
development
work
for
the
purpose
of
making
it
saleable,
but
in
the
practical
sense
it
was
not
a
producing
coal
mine,
and
in
fact
the
witness,
B.
A.
Wilson,
testified
it
was
never
“a
coal
mine.”
The
business
activities
of
the
Wilson
Company
seem
to
have
been
directed
to
the
oversight
of
its
revenue
bearing
investments,
which
I
have
already
described,
and
to
investigating,
prospecting
and
exploring
undeveloped
mining
properties,
all,
I
think,
being
gold
mining
properties.
In
any
event,
I
do
not
think
it
can
be
said
that
the
business
of
mining
coal
was
of
the
same
class
as
any
business
carried
on
by
the
Wilson
Company,
however
the
latter
might
be
described,
and
as
contemplated
by
sec.
35(3).
The
statute
here
uses
the
words
“carry
on
the
same
class
of
business’’
for
a
special
purpose.
It
means
that
before
a
consolidated
statement
might
be
filed,
the
subsidiary
company
must
be
owned
by
the
ho'ding
company,
and
that
the
business
of
each
company
be
of
the
same
class,
in
the
practical
sense
of
course,
in
which
event
the
profit
and
loss
account
of
each
might,
on
sound
business
grounds,
or
as
a
matter
of
fair
accounting,
be
consolidated,
that
is
to
say,
in
the
practical
sense
their
business
operations
were
of
such
a
similar
character
that
they
might
be
regarded
as
the
one
business
concern.
That
such
similarity
in
the
two
businesses
should
exist
before
it
might
be
expected
that,
for
taxation
purposes,
a
consolidated
profit
and
loss
statement
would
be
allowed
would
seem
reasonable
and
just
what
one
would
expect,
and
therefore
the
words
“carry
on
the
same
class
of
business’’
must
be
narrowly
construed.
Anything
else
would
not
seem
reasonable
in
determining
net
income
for
taxation
purposes.
The
words
of
s.
35(3)
which
I
am
discussing
were
designedly
used
to
express
the
idea
that
before
the
profit
or
loss
account
of
a
holding
company
and
a
subsidiary
company
might
be
consolidated,
it
was
necessary
that
they
be,
in
a
very
strict
sense,
carrying
on
the
same
class
of
business.
Therefore,
it
seems
to
me,
and
I
so
hold,
that
the
two
companies
here
were
not
carrying
on
the
same
class
of
business
within
the
meaning
of
s.
35(3)
of
the
Act,
and
that
this
provision
of
the
Act
was
not
available
to
the
Wilson
Company
in
computing
the
amount
of
its
income,
though
for
its
own
or
other
purposes
this
of
course
might
be
done.
This
ground
of
appeal
therefore,
in
my
view,
cannot
succeed.
It
is
arguable
that
the
word
‘‘company’’
in
s.
35(3)
does
not
include
a
‘‘personal
corporation,’’
and
that
it
was
not
intended
that
this
provision
of
the
Act
should
apply
to
‘‘personal
corporations”;
I
should
think
it
possible
that
difficulty
might
be
encountered
in
applying
s.
35(3)
to
a
‘“personal
corporation,’’
in
view
of
the
provisions
of
s.
21.
However,
that
point
was
not
raised
before
me,
and
I
pronounce
no
definite
opinion
upon
it,
and
in
my
view
of
the
ease
it
is
not
necessary
to
do
so.
I
reserve
the
matter
of
costs
until
the
settlement
of
the
minutes.
Judgment
accordingly.
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