MACLEAN,
J.:—This
is
an
appeal
from
the
decision
of
the
Minister
of
National
Revenue
affirming
an
assessment
for
income
tax
levied
under
the
Income
War
Tax
Act,
for
the
1936
taxation
period,
against
the
appellant,
formerly
Chairman
of
the
Trustees
in
whom
was
vested
the
direction
and
control
of
the
Canadian
National
Railways.
The
assessment
here
in
dispute
had
its
origin
in
a
payment
of
$30,000
made
to
the
appellant
by
the
Canadian
National
Railways,
in
October,
1936,
in
the
circumstances
which
TL
shall
relate
presently.
The
result
of
the
inclusion
of
the
said
sum
in
the
income
of
the
appellant
for
the
taxation
period
in
question
was
the
levy
of
an
additional
tax
against
the
appellant,
in
the
sum
of
$9,711.92.
The
appellant
contends
that
the
said
payment
does
not
constitute
"‘income’’
within
the
meaning
of
the
Income
War
Tax
Act.
Before
stating
the
facts
immediately
material
to
the
issue
it
will
be
desirable
first
to
refer
to
certain
legislation
respecting
the
Canadian
National
Railways,
its
management
and
direction.
The
Canadian
National
Railways
Act,
Chap.
172,
R.S.C.,
1927,
provided
for
the
nomination,
by
the
Governor
in
Council,
of
a
Board
of
Directors,
and
their
incorporation
as
a
company
under
the
name
of
"
Canadian
National
Railway
Company/’
to
whom
was
to
be
entrusted
the
management
and
operation
of
the
several
lines
of
railway,
and
other
works
and
properties,
owned
or
controlled
by
the
Government
of
Canada,
and
now
collectively
designated
and
known
as
the
Canadian
National
Railways,
hereafter
to
be
referred
to
as
"‘the
Company.’’
All
the
capital
stock
of
the
Company,
amounting
now,
I
understand,
to
180
million
dollars,
is
vested
in
the
Minister
of
Finance
on
behalf
of
the
Crown.
In
pursuance
of
this
statutory
authorization
a
Board
of
Directors
was
named
and
appointed
by
the
Governor
in
Council
and
in
due
course
the
said
Directors
entered
upon
their
duties.
In
1933
there
was
enacted
The
Canadian
National-Canadian
Pacific
Act,
1933,
Chap.
33
of
the
Statutes
of
Canada,
1932-33,
which
empowered
the
Governor
in
Council
to
vacate
all
nominations
made
to
the
Board
of
Directors
of
the
Company,
pursuant
to
the
Canadian
National
Railways
Act,
and
to
appoint
in
their
place
and
stead
three
Trustees,
one
of
whom
was
to
be
Chairman
of
the
Trustees,
and
who
was
required
to
devote
his
whole
time
to
the
performance
of
the
duties
of
his
office.
The
other
Trustees
were
to
devote
to
the
performance
of
the
duties
of
their
office
their
whole
or
part
time
as
might
be
determined
from
time
to
time
by
the
Governor
in
Council.
The
tenure
of
office
of
the
Chairman
was
to
be
for
the
term
of
five
years
from
the
date
of
his
appointment,
and
his
salary,
and
that
of
the
other
Trustees
as
well,
was
to
be
fixed
by
the
Governor
in
Council.
The
Chairman
of
the
Trustees
apparently
was
prohibited
from
becoming
a
director
of
any
company,
other
than
a
company
comprised
in
the
Canadian
National
Railways.
In
December,
1983,
three
Trustees
were
appointed
by
the
Governor
in
Council
in
succession
to
the
Board
of
Directors,
the
appellant
being
appointed
as
Chairman
for
the
period
of
five
years
from
the
date
of
his
appointment,
at
an
annual
salary
of
$30,000.
The
salary
of
one
of
the
other
Trustees
was
fixed
at
$6,000
per
annum,
the
third
Trustee
agreeing
to
serve
without
salary.
The
Act
provided
that
no
Trustee
should
be
entitled
upon
any
ground
to
any
‘‘recompense
or
emolument,’’
that
is,
in
addition
to
his
salary.
In
June,
1936,
there
was
enacted
The
Canadian
National-
Canadian
Pacific
Act,
1936,
which
repealed
that
part
of
the
Act
of
1933
which
provided
for
the
appointment
of
three
Trustees
in
succession
to
the
Board
of
Directors
and
empowered
the
Governor
in
Council
to
appoint
a
Board
of
Directors
in
the
place
and
stead
of
the
Trustees.
This
power
was
in
due
course
exercised
by
the
Governor
in
Council
with
the
consequence
that
the
Trustees
were
succeeded
by
a
Board
of
Directors,
on
October
1,
1936.
The
Chairman
was
therefore
deprived
of
serving
the
full
tenure
of
his
office
by
more
than
two
years.
It
was
later
agreed
by
the
Company
that
the
Chairman
of
the
Trustees,
the
appellant,
should
be
paid,
and
he
was
paid,
the
sum
of
$30,000,
in
the
circumstances
I
am
about
to
relate.
It
will
be
necessary
now
to
review
at
some
length
certain
of
the
evidence
given
at
the
trial
practically
all
of
which
was
directed
to
showing
the
character
or
quality
of
the
payment
made
to
the
appellant;
that
is,
whether
the
payment
was
received
by
the
appellant
as
an
annual
net
profit
or
gain
or
gratuity
from
his
office
or
employment
as
Chairman
of
the
Trustees,
or
whether
it
was
paid
to
and
received
by
the
appellant
by
way
of
compensation
for
the
cessation
of
his
office.
My
review
of
the
evidence
will
embrace
a
great
deal
that
was
received
subject
to
objection
but
I
propose
to
refer
to
the
same,
leaving
to
a
later
stage
a
discussion
of
the
admissibility
of
that
evidence
received
subject
to
objection.
I
think
this
may
be
done
without
prejudice
to
either
party,
and
at
the
same
time
it
will
clearly
reveal
the
issue
as
to
the
admissibility
of
that
evidence.
When
the
Act
of
1936,
authorizing
the
termination
of
the
services
of
the
Trustees
and
replacing
them
by
a
Board
of
Directors
was
being
enacted
by
Parliament,
questions
were
asked
certain
Ministers
of
the
Crown
as
to
whether
some
allowance
would
be
made
to
the
Chairman
of
the
Trustees.
What
was
there
stated
in
answer
to
such
questions
was
in
substance
restated
by
such
Ministers
at
the
trial,
but
as
the
substance
of
that
oral
evidence
is
to
be
found
in
certain
documentary
evidence,
to
which
I
am
about
to
refer,
I
need
not
pause
to
discuss
it.
The
Minister
of
Railways,
on
June
16,
1936,
wrote
a
letter
to
one
of
his
colleagues,
the
Honourable
Mr.
Dandurand,
which
letter
was,
through
another,
transmitted
to
the
appellant.
The
letter
is
as
follows
:
With
reference
to
our
conversation
about
a
retiring
allowance
for
Judge
Fullerton,
I
feel
disposed
to
recommend
that
he
be
given
one
year’s
salary
in
compensation
for
the
repeal
of
the
Act
under
which
he
is
employed.
This
can
be
paid
to
him
in
cash
on
his
retirement,
over
a
period
of
one
year,
over
a
period
of
two
and
a
half
years,
which
is
the
balance
of
his
term
as
Chairman,
or
at
the
rate
of
$6,000
per
annum
for
five
years.
In
this
connection
I
may
point
out
that
upon
the
date
of
his
retirement
he
becomes
eligible
for
his
retiring
allowance
as
Judge,
which
amounts
to
$6,000
per
annum.
Any
moneys
that
become
payable
to
him
will
be
payable
by
the
Canadian
National
Railways
and
he
must
be
satisfied
with
my
letter
to
the
effect
that
I
will
ask
the
new
Board
of
Directors
of
the
Canadian
National
Railways
to
grant
him
the
allowance
along
the
lines
for
which
he
may
express
preference.
One
June
20
following
Mr.
Fullerton
wrote
the
Minister
of
Railways
as
follows:
In
view
of
your
letter
of
June
16th
addressed
to
Senator
Dandurand
and
the
coming
into
effect
of
the
Canadian
National-Canadian
Pacific
Act,
1936,
you
will
doubtless
wish
to
have
an
expression
of
my
desires
as
to
how
the
compensation
of
$30,000
agreed
to
be
paid
me
should
be
made.
It
would
be
a
great
convenience
to
me
if
this
were
paid
in
cash,
and,
as
I
am
contemplating
taking
a
trip
abroad
around
the
7th
of
October,
I
shall
be
obliged
if
you
will
kindly
facilitate
the
payment
by
the
Canadian
National
Railways
as
soon
as
possible
after
the
directors
take
office.
The
receipt
of
this
letter
was
acknowledged
by
the
Minister
of
Railways
on
September
14,
the
relevant
portion
being
as
follows:
I
have
your
letter
of
September
12th,
and
note
that
you
prefer
to
receive
your
retiring
allowance
in
one
lump
sum.
I
shall
endeavour
to
arrange
accordingly.
On
September
21,
the
Minister
of
Railways
wrote
Mr.
Fullerton
in
the
terms
following:
Referring
to
the
question
of
a
gratuity
of
$30,000,
this
is
to
assure
you
that
upon
the
Directors
assuming
office
I
shall
duly
bring
the
matter
to
their
attention.
The
next
letter
of
importance
is
one
from
the
Minister
of
Railways,
dated
September
28,
written
to
the
appellant,
and
it
is
as
follows:
*
Referring
to
our
conversation
at
your
office
last
week,
our
legal
officers
state
that
it
is
very
necessary
that
the
wording
of
the
resolution
shall
be
definite
in
its
description
of
the
purpose
for
which
any
money
is
paid
to
you.
Our
Legal
Department
also
states
that
there
can
be
no
doubt
that
any
money
paid
to
you
is
in
fact
a
gratuity,
as
no
contractual
relation
exists
beyond
October
1st,
when
amendments
to
the
Canadian
Na-
tional-Canadian
Pacific
Act
become
effective.
I
therefore
see
no
alternative
but
to
follow
the
advice
of
my
Legal
Department
and
ask
the
new
Board
of
Directors
to
pass
a
resolution
in
the
following
form:
"Moved
by
Seconded
by
That
a
gratuity
of
Thirty
Thousand
Dollars
($30,000)
be
paid
to
the
Honourable
C.
P.
Fullerton,
formerly
Chairman
of
the
Trustees
of
the
Canadian
National
Railway
Company.”
In
view
of
the
above,
you
may
wish
to
vary
the
manner
in
which
payments
shall
be
effected.
If
so,
please
advise
me.
The
form
of
the
resolution,
suggested
in
the
above
letter,
it
seems
required
further
consideration
and
the
appellant
was
so
advised
by
the
Minister
of
Railways,
on
October
3.
The
next
step
taken
in
the
matter
was
the
passage
of
an
Order
in
Council
on
October
7,
the
important
terms
of
which
are
as
follows
:
The
Committee
of
the
Privy
Council
have
had
before
them
a
report,
dated
October
5th,
1936,
from
the
Minister
of
Railways
and
Canals,
recommending
approval
of
a
sum
of
$30,000
being
paid
by
the
Canadian
National
Railway
Company
to
the
Honourable
C.
P.
Fullerton,
formerly
Chairman
of
the
Trustee
of
the
said
Company,
in
relation
to
his
services
as
Chairman,
to
be
paid
to
and
accepted
by
him
as
a
remunerative
payment
subject
to
income
tax.
The
Committee
concur
in
the
foregoing
recommendation
and
submit
the
same
for
approval
accordingly.
It
will
be
observed
that
the
Order
in
Council
is
an
approval
of
the
recommendation
of
the
Minister
of
Railways
that
the
sum
of
$30,000
be
paid
Mr.
Fullerton
by
the
Canadian
National
Railways.
On
the
following
day,
October
8,
the
new
Board
of
Directors
passed
a
resolution
in
substantially
the
same
terms
as
the
Order
in
Council,
and
on
October
14,
a
cheque
for
$30,000
was
forwarded
to
the
appellant
accompanied
by
a
voucher
for
his
signature.
The
voucher,
as
signed
by
the
appellant,
contained
the
following
matter:
In
payment
of
an
amount
authorized
to
be
paid
by
the
Board
of
Directors
at
meeting
held
October
8th,
1936,
in
the
following
terms:
"That
a
sum
of
$30,000
be
paid
to
the
Honourable
C.
P.
Fullerton,
formerly
Chairman
of
the
Trustees
of
the
Canadian
National
Railway
Company,
in
relation
to
his
services
as
Chairman,
to
be
paid
to
and
accepted
by
him
as
a
remunerative
payment
subject
to
income
tax.”
and
as
per
Order-in-Council
P.C.
2589,
copy
of
which
is
attached
hereto.
Received
THIRTY
THOUSAND
DOLLARS
($30,000)
under
the
above
terms
which
I
hereby
accept.
C.
P.
Fullerton.
On
receipt
of
the
cheque
Mr.
Fullerton
immediately
wrote
Mr.
Hungerford
of
the
Canadian
National
Railways
as
follows
:
With
reference
to
the
cheque
for
$30,000
which
was
handed
to
me
this
morning
by
Mr.
Hobbs,
I
feel
that
I
should
point
out
that,
while
I
have
signed
the
voucher
in
the
form
in
which
it
was
presented,
it
does
not
set
out
in
clear
terms
the
arrangement
which
was
made
by
the
Minister
of
Railways
regarding
this
payment.
I
recognize
that
your
Directors
are
not
likely
to
alter
the
wording
of
the
voucher
without
the
approval
of
the
Minister
and
I
am,
therefore,
taking
the
matter
up
with
him.
Mr.
Fullerton
on
the
same
day
wrote
the
Minister
of
Railways
and
though
this
letter
is
quite
lengthy
it
should
perhaps
be
fully
quoted.
After
a
reference
to
the
receipt
of
the
cheque
for
$30,000,
and
the
terms
of
the
voucher,
the
letter
proceeds
to
Say
:
As
I
am
satisfied
the
Railway
Board
of
Directors
would
not
vary
the
terms
of
the
voucher
without
prior
approval
from
you,
and
as
you
will
not
be
back
in
Ottawa
until
after
I
have
left
Montreal,
I
have
signed
the
voucher,
rather
than
have
my
refusal
to
do
so
cause
delay
and
perhaps
subject
my
attitude
to
misunderstanding
while
I
am
no
longer
present
in
Canada.
I
have,
however,
to
point
out
that
the
wording
of
the
voucher
while
correct
as
to
amount,
and
because
of
that
enabling
me
to
accept
the
cheque,
does
not
clearly
state
the
arrangement
made
with
me
when
the
matter
of
compensation
was
under
consideration
by
both
of
us.
This
arrangement,
in
my
view,
is
solely
one
of
fact
and
should
present
no
difficulty
in
stating.
There
seems,
however,
to
be
some
concern
lest
the
payment
made
to
me
should
be
free
from
income
tax,
but
personally
I
do
not
share
this
concern.
I
have
always
paid
income
tax
to
the
full
extent
of
my
obligations,
and
I
hope
to
continue
to
do
so.
I
am
not
interested
in
any
‘device
to
avoid
tax
where
it
is
due,
and
if
the
circumstances
of
this
payment
to
me
are
such
that
the
payment
is
subject
to
tax,
the
tax
will
be
promptly
and
cheerfully
paid.
It
seems
to
me
completely
unnecessary
to
invoke
the
machinery
of
the
Privy
Council
to
declare
this,
or
any
other
payment
by
Canadian
National
Railways
to
be
subject
to
tax.
Settlement
of
liability
to
taxation
by
this
method
would
very
quickly
render
our
Courts
of
law
unnecessary
and
leave
the
construction
of
our
taxing
statutes
entirely
a
matter
for
the
Governor
General
in
Council.
I
think,
therefore,
that
questions
of
law
should
be
omitted
from
the
resolution,
the
voucher,
and
the
Order
in
Council,
and
that
if
it
is
considered
necessary
to
detail
the
circumstances
giving
rise
to
the
payment
this
should
be
done
simply
and
in
clear
language
setting
out
the
facts.
If
no
agreement
can
be
reached
as
to
these—and
I
am
unable
to
understand
why—then
nothing
should
be
said,
my
view
being
that
no
information
is
better
than
indefinite
information
which
might
easily
give
rise
to
misunderstanding.
What
then
are
the
facts?
I
think
it
will
be
conceded
that
but
for
the
passing
of
the
Canadian
National-Canadian
Pacific
Act
of
this
year,
no
payment
of
this
nature
would
have
been
made.
If
this
is
so,
then
the
payment
is
made
because
of
the
effect
this
Act
has
had
on
me
and
my
livelihood.
The
payment
obviously
is
not
made
by
virtue
of
the
old
Act
which
expressly
prohibits
interference
with
the
terms
on
which
Trustees
were
appointed,
and
so
it
cannot
be
considered
as
a
bonus
made
in
the
ordinary
course
of
the
Company’s
business.
Further,
it
is
difficult
to
see
its
relationship
to
my
services
as
Chairman
when
the
fixed
emoluments
had
already
been
paid
to
me
for
such
services,
and
at
the
time
of
this
payment
I
was
no
longer
in
the
service
of
the
Railway
Company.
The
best
definition
of
the
reason
for
making
the
payment
is
to
be
found
in
a
letter
by
yourself
to
Senator
Dandurand
and
afterwards
relayed
to
me.
In
this
letter
you
say
that
it
is
"in
compensation
for
the
repeal
of
the
Act
under
which
he
is
employed.”
That
this
was
no
inadvertent
remark
is
clear
from
the
letter
and
also
Senator
Dandurand's
letter
transmitting
your
intention
and
letter
to
Senator
Meighen
in
which
he
uses
the
words
“touching
the
compensation
which
the
Minister
of
Railways
expressed
himself
as
disposed
to
allow
Judge
Fullerton.”
Senator
Meighen
understood
the
payment
to
be
a
compensatory
one
for
in
a
letter
to
me
dated
June
17,
he
refers
to
“the
compensation
to
be
allowed
by
reason
of
the
passage
of
a
measure
abolishing
the
Board
of
Trustees.”
I
submit
very
respectfully
that
where
you
yourself,
Senator
Dandurand,
Senator
Meighen
and
myself
find
ourselves
in
such
complete
unanimity
as
to
the
reason
for
paying
me
$30,000,
there
should
be
no
hesitancy
in
disclosing
it
and
certainly
no
resort
should
be
had
to
words
whose
apparent
meaning
indicates
something
different.
As
you
were
in
the
West
at
the
time
the
Order
in
Council
was
passed,
I
am
strongly
of
the
view
that
your
instructions
have
not
been
strictly
complied
with,
but
I
have
formally
to
request
that
the
Order
in
Council
be
amended
to
show
clearly
the
compensatory
nature
of
the
payment
because
of
the
passage
of
the
Canadian
National-Canadian
Pacific
Act,
1936,
or,
if
for
any
reason
you
do
not
wish
to
do
this,
then,
that
the
payment
be
described
simply
as
a
gratuity
to
me
as
ex-Chair-
man
of
the
Board
of
Directors.
It
is
presently
unnecessary
to
comment
on
the
foregoing
documentary
evidence,
which
is
fairly
plain,
but
I
might
point
out
that
the
proposed
payment
is
therein
variously
described.
It
was
designated
as
"‘compensation
for
the
repeal
of
the
Act
under
which
he
is
employed,''
as
‘‘an
allowance,”
as
"‘compen-
sation,
”
as
‘‘a
retiring
allowance,
”
as
a
11
gratuity,
‘
‘
and
finally,
at
the
time
of
payment,
as
"‘a
remunerative
payment
subject
to
income
tax.”
It
was
contended
on
behalf
of
the
respondent
that
it
is
the
terms
of
the
resolution
passed
by
the
Board
of
Directors
and
embodied
in
the
voucher
signed
by
Mr.
Fullerton,
on
the
day
of
payment,
that
alone
may
be
looked
at
in
order
to
ascertain
the
nature
of
the
payment,
because,
it
was
said,
it
expressed
the
understanding
of
the
payer
and
the
recipient
at
the
time
of
payment;
and
objection
was
taken
to
the
reception
of
any
other
evidence,
particularly
that
portion
of
the
documentary
evidence
to
which
I
have
just
referred
and
which
is
anterior
in
point
to
date
to
the
voucher
and
the
payment.
At
the
trial
I
received
this
evidence
subject
to
objection,
reserving
the
right
to
rule
later
as
to
its
admissibility.
Now,
in
my
opinion,
this
is
hardly
a
case
where
it
is
sought
to
vary
the
terms
of
a
contract
expressed
in
writing.
It
was
agreed
by
counsel
that
there
was
not
at
any
stage
a
contract
to
make
the
payment
in
question,
but
a
payment
was
made,
and
now
the
only
issue
is
as
to
the
true
nature
of
the
payment,
in
order
to
determine
whether
or
not
the
same
was
received
as
"‘income’’
under
the
Income
War
Tax
Act.
The
issue
is
whether
the
payment
was
a
personal
one,
or
whether
it
came
to
the
recipient
by
virtue
of
his
office
or
employment.
The
evidence
received
subject
to
objection
was
introduced
on
the
ground
that
the
true
nature
of
the
payment
was
not
clearly
or
accurately
expressed
in
the
resolution
of
the
Board
of
Directors
and
so
it
was
sought,
on
behalf
of
the
appellant,
to
show
the
reason
for
making
the
payment
at
all,
the
circumstances
leading
up
to
the
decision
to
make
the
payment,
and
what
quality
or
nature
the
parties
concerned
were
attributing
to
the
proposed
payment,
up
to
the
time
of
the
actual
payment.
It
seems
to
me
that
in
all
the
circumstances
of
the
situation
here
such
evidence
is
admissible.
In
reported
cases
of
the
very
kind
now
under
consideration
I
find
that
it
is
usual
to
have
before
the
court
evidence
of
all
the
circumstances
attending
such
payments
for
the
purpose
of
ascertaining
their
true
character,
in
order
to
determine
whether
the
same
.was
received
as
“income,”
or
otherwise.
I
do
not
think
therefore
that
the
evidence
in
question
should
be
excluded.
It
has
been
frequently
remarked
by
the
courts
that
cases
of
this
kind
are
in
their
nature
difficult
because
they
all
turn
upon
nice
questions
of
fact,
because
it
is
difficult
to
draw
a
line
between
questions
of
fact
and
questions
of
law,
and
because
it
is
frequently
difficult
to
fix
upon
any
clearly
defined
line
of
division
between
payments
which
fall
within
the
scope
of
the
taxing
statute,
and
those
which
do
not.
The
leading
authorities
upon
the
point
in
debate
here
are
to
be
found
mentioned
at
one
stage
or
another
in
the
case
of
The
Commissioners
v.
Foster,
Foster
and
Dewhurst
(1932),
16
T.C.
605.
See.
3
of
the
Income
War
Tax
Act
defines
‘‘income’’
as
meaning
‘‘the
annual
net
profit
or
gain
or
gratuity,
whether
ascertained
and
capable
of
computation
as
being
wages,
salary,
or
other
fixed
amount,
or
unascertained
as
being
fees
or
emoluments,
.
.
.
directly
or
indirectly
received
by
a
person
from
any
office
or
employment
or,
.
.
.”
The
English
authorities
to
which
I
was
referred
seem
to
decide
that
if
the
sum
in
question
is
received
by
the
taxpayer
in
virtue
of
his
office,
even
if
the
payment
is
made
voluntarily,
the
same
is
taxable,
but
if
it
is
a
gift,
a
gratuity,
a
payment
personal
to
the
taxpayer
and
not
his
office,
a
payment
in
respect
of
the
cessation
of
his
office,
a
payment
in
the
nature
of
capital
and
non-recurring,
it
is
not
taxable
as
a
profit
or
gain
of
the
office,
because
it
is
not
“income”
re-
ceived
from
the
office.
On
reflection,
the
reason
for
such
a
distinction
will,
I
think,
appear
quite
obvious.
The
test
as
to
whether
payments
of
the
nature
in
question
here
are
taxable
is
frequently
put
in
this
way
:
Was
the
payment
made
to
the
subject
in
virtue
of
his
office?
If
it
were
it
is
taxable,
but
otherwise
it
is
not
taxable
as
"
4
income.
‘
‘
I
do
not
think
there
is
any
substantial
distinction
between
the
English
Income
Tax
Act,
and
the
corresponding
Canadian
Act,
in
respect
of
the
point
falling
for
determination
here.
In
such
a
case
as
this,
it
will
be
agreed,
I
think,
that
it
is
to
the
substance
and
not
the
form
of
matters
pertaining
to
the
payment
that
we
must
look,
in
order
to
ascertain
the
true
facts
of
the
case,
or
the
real
character
of
the
payment,
before
applying
the
law.
It
is
also,
I
think,
immaterial
how
the
payment
was
designated
or
described
by
any
or
all
of
the
parties
concerned
therewith;
it
is
the
true
nature
of
the
payment
that
is
to
be
ascertained;
and
that
is
but
to
inquire
in
this
case
whether
the
payment
was
made
in
respect
of
services
rendered
by
the
Chairman
of
the
Trustees
while
in
office,
or
whether
in
fact
it
was
made
because
of
the
cessation
of
his
office.
In
the
case
of
The
Commissioners
v.
Dewhurst
(1982)
16
Tax
Cas.
640,
Lord
Dunedin
said
that
the
mention
of
the
words
‘‘in
consideration
of
loss
of
office
‘
‘
could
not
be
allowed
to
make
a
change
in
the
true
nature
of
the
payment
which
was
there
in
question,
and
in
the
same
case
Lord
Macmillan
said
that
the
circumstances
that
a
payment
was
described
as
‘‘compensation
for
the
loss
of
office’’
was
immaterial,
and
did
not
relieve
the
taxpayer,
if
the
payment
were
in
truth
made
as
part
of
the
bargain
for
remuneration
on
which
the
services
in
the
office
had
been
rendered.
In
the
case
of
Cooper
v.
Blakiston,
[1907]
2
K.B.
688,
the
payments
in
question
were
described
as
‘‘
personal
non-official
free
will
gift,’’
and
in
his
discussion
of
that
case
Buckley
L.J.
said:
“I
suppose
that
the
object
of
those
words
was
to
suggest
that
the
gift
was
not
to
the
vicar
as
vicar,
but
to
him
personally
;
but
I
do
not
think
that
those
words
represent
the
scheme
which
was
presented
to
those
who
were
asked
to
contribute.’’
In
the
end,
in
eases
of
this
kind.
it
is
always
the
real
nature
of
the
payment
that
is
to
be
ascertained.
Furthermore,
the
character
which
the
payer
attributes
to
the
payment
is
not
to
be
accepted,
and
the
viewpoint
of
the
recipient
ignored.
It
was
stated
by
Collins
M.R.,
in
Herbert
v.
McQuade
(1902),
4
T.C.
489
at
p.
500,
that
the
test
was
whether,
from
the
standpoint
of
the
person
who
received
the
payment,
the
payment
accrued
to
him
in
virtue
of
his
office,
and
Buckley
L.J.,
in
Cooper
v.
Blakiston,
supra,
stated
that
the
question
is
not
what
was
the
motive
of
the
payment
but
what
was
the
character
in
which
the
recipient
received
it?
Was
it
received
by
him
by
reason
of
his
office?
I
should
think
that
in
principle
it
is
safe
to
say
that,
in
cases
of
this
kind,
the
viewpoint
of
him
who
makes
the
payment
is
not
conclusive,
and
he
cannot
determine
the
true
character
of
the
payment
merely
by
his
understanding
of
the
reason
or
ground
for
making
the
payment.
This
case
would
occasion
no
serious
difficulty
were
it
not
that
the
payment
proposed
to
be
made
to
Mr.
Fullerton
was
described
in
the
resolution
of
the
Board
of
Directors
of
the
Company
as
"‘a
remunerative
payment
subject
to
income
tax,’’
and
to
be
paid
4
'in
relation
to
his
services,’’
as
the
former
Chairman
of
the
Trustees;
even
that
perhaps
would
raise
no
serious
difficulty
were
it
not
‘for
the
fact
that
Mr.
Fullerton
signed
a
voucher,
concurrently
with
the
receipt
of
the
payment,
which
in
effect
states
that
he
accepted
the
payment
under
the
terms
of
that
resolution.
The
Minister
of
Railways
in
his
letter
of
September
28,
to
Mr.
Fullerton,
places
emphasis
on
the
fact
that
the
proposed
payment
must
be
treated
as
a
gratuity,
because
no
contractual
relation
would
exist
between
the
Company
and
Mr.
Fullerton
after
October
1,
and
in
that
letter
is
contained
a
form
of
resolution
which
the
Minister
proposed
asking
the
Directors
of
the
Company,
the
successors
to
the
Trustees,
to
pass,
and
therein
the
proposed
payment
to
Mr.
Fullerton
is
described
as
a
"gratuity.”
Then
the
Minister
of
Railways
in
his
letter
of
October
21,
to
Mr.
Fullerton,
after
the
payment
was
made,
explaining
why
a
change
had
been
made
in
the
proposed
resolution,
states
that
some
objection
had
been
raised
to
the
"form”
of
that
draft
of
the
resolution,
and
one
might
fairly
infer
therefrom
that
the
Minister
considered
that
the
departure
from
the
resolution
originally
proposed
was
one
of
‘‘form,’’
and
not
one
of
substance.
I
am
disposed
to
think
that
the
view
of
the
Minister
of
Railways
always
was
that
the
payment
was
being
made
to
Mr.
Fullerton
because
of
the
cessation
of
his
office.
But
the
resolution
is
so
drafted
as
to
make
it
appear
that
the
payment
was
to
be
made
on
account
of
the
former
services
of
Mr.
Fullerton
as
Chairman
of
the
Trustees.
It
seems
to
say:
"We
are
paying
you
$30,000
but
this
payment
is
to
be
accepted
by
you
as
having
been
made
on
account
of
your
former
services
as
Chairman
of
the
Trustees.’’
I
think
it
is
probable
that
the
words
‘‘subject
to
income
tax”
were
used
from
an
abundance
of
caution
in
order
to
amplify
or
clarify
the
words
"a
remunerative
payment,’’
that
is
to
say,
the
words
‘‘subject
to
income
tax”
were
used
with
the
intention
of
making
it
indisputably
clear
that
the
payment
was
to
be
made
as
remuneration
for
services
rendered
while
in
office.
In
fact,
the
words
“remunerative
payment,’’
by
themselves,
would
carry
no
particular
meaning.
The
resolution
must
mean
that
the
payment
was
being
made
for
services
rendered
while
in
office,
and
if
this
were
in
fact
true
the
payment
would,
I
apprehend,
be
treated
as
“income”
under
the
taxing
statute.
It
is
difficult
to
believe
that
the
Directors
of
the
Company,
in
the
use
of
the
words
‘‘subject
to
income
tax,”
would
be
deliberately
concerning
themselves
about
the
imposition
of
the
income
tax.
Whatever
construction
be
placed
upon
the
resolution
the
question
for
decision
is
whether
the
payment
received
by
Mr.
Fullerton
was
“income”
within
the
meaning
of
the
Income
War
Tax
Act.
The
taxing
authorities
are
bound
by
the
provisions
of
that
Act
in
determining
what
is
assessable
income.
The
office
of
Chairman
of
the
Trustees
was
abolished
by
statute
and
it
became
illegal
for
the
Company
to
continue
Mr.
Fullerton
in
that
office,
or
to
pay
him
any
salary,
and
it
became
impossible
for
Mr.
Fullerton
to
exercise
his
office,
or
to
demand
any
compensation
for
the
loss
of
his
office.
Consequently,
on:
September
30,
1936,
he
was
no
longer
entitled
to
be
paid
a
salary
or
remuneration,
on
account
of
his
former
office.
And
s.
5
(2)
of
the
Act
of
1933
setting
up
the
Board
of
Trustees:
provided
that
no
Trustee
was
entitled,
upon
any
ground,
‘‘to
any
recompense
or
emolument,’’
in
addition
to
his
salary.
If
a.
sum
of
money
is
paid
to
an
incumbent
of
an
office,
substantially
in
respect
of
his
services
as
incumbent,
it
is
received
by
him
by
reason
of
his
office,
and
that
probably
would
be
also
true
if
the
payment
were
made
after
he
ceased
to
occupy
his
office
but
in
pursuance
of
a
contract
or
bargain
made
while
he
was
still
in
office,
in
respect
of
remuneration
for
services
to
be
performed.
Now,
it
cannot
be
said,
in
my
opinion,
that
in
point
of
fact
the
payment
was
made
to
Mr.
Fullerton
for
services
rendered
in
his
office,
because
for
such
services
he
had
been
paid
already
the
salary
attaching
to
his
office,
up
to
the
time
when
the
office
ceased
to
exist.
And
there
is
nothing
to
suggest
that
the
payment
was
made
in
pursuance
of
any
contract
or
bargain
made
while
he
was
in
office.
Neither
do
I
think
it
can
be
said
that
the
payment
was
made
in
respect
of
the
office,
because,
just
as
was
said
by
Lord
Dunedin
in
Duncan
v.
Farmer
(1909),
S.C.
1212;
46
Se.
C.L.R.
857;
5
Tax
Cas.
417,
the
only
possible
ground
or
justification
for
the
payment
made
to
Mr.
Fullerton
was
that
he
was
no
longer
in
office,
and
because
his
office
had
ceased
to
exist.
What
then
is
the
true
nature
of
the
payment?
To
that
question
I
have
given
anxious
thought
and
I
find
myself
utterly
unable
to
see
how
it
can
be
said
that
the
payment
was
anything
but
a
gratuity,
personal
to
Mr.
Fuller-
ton,
paid
him
because
he
was
no
longer
in
office,
and
because
of
the
cessation
of
his
office
more
than
two
years
before
the
end
of
the
period
for
which
he
was
appointed.
The
fact
that
the
office
was
one
of
importance
and
responsibility,
that
the
payment
was
made
on
the
termination
of
the
office,
and
that
the
amount
of
the
payment
to
the
former
Chairman
of
the
Trustees
was
very
substantial,
are
strong
indications
that
the
payment
was
personal
to
Mr.
Fullerton
and
not
on
account
of
past
services
rendered
by
him
while
in
office;
another
indication
of
this
might
be
mentioned
and
that
is
the
fact
that
s.
7
of
the
Act
of
1933
provided
that
"‘no
Trustee
shall
be
removed
from
office,
nor
suffer
any
reduction
in
salary,
during
the
term
for
which
he
is
appointed,
unless
for
assigned
cause
and
on
address
of
the
Senate
and
House
of
Commons
of
Canada.”
Notwithstanding
the
terms
of
the
resolution
and
voucher,
it
is
not,
in
my
opinion,
in
accord
with
the
facts
to
say
that
the
payment
was
made
to
Mr.
Fullerton
on
account
of
past
services
rendered
by
him
in
his
office.
I
do
not
think
that
the
taxing
authorities
can
construe
as
"income”
that
which
is
erroneously
described
as
such,
even
by
the
parties
concerned,
if
in
fact
it
is
not
""income”
under
the
terms
of
the
taxing
Act.
The
words
‘‘subject
to
income
tax”
cannot
be
construed
as
giving
a
quality
to
a
payment
or
receipt
of
money,
which
in
point
of
fact
cannot
be
attributed
to
it.
The
appropriate
statute
defines
what
is
""income,”
for
income
tax
purposes,
and
one
cannot
give
to
“‘income’’
a
meaning
contrary
to
that
given
by
the
statute.
It
is
to
the
real
nature
of
the
payment
that
the
taxing
authorities,
and
the
courts,
in
eases
of
this
kind,
must
look.
I
have
earlier
referred
to
highly
regarded
authority
for
the
proposition
that
it
is
always
the
true
nature
of
the
payment
to
which
the
courts
must
look
in
determining
whether
or
not
a
receipt
of
money
is
""income”
derived
from
""any
office
or
employment.’’
The
resolution
of
the
Directors
of
the
Company,
and
the
voucher,
not
being
truly
descriptive
of
the
nature
of
the
payment,
they
fall
and
have
no
meaning
or
place
in
the
controversy
between
the
revenue
authorities
and
Mr.
Fullerton,
and
they
do
not
afford
any
basis
for
the
claim
that
the
receipt
of
the
payment
was
""income”
in
the
sense
of
the
statute.
If
the
voucher
is
to
be
construed
as
an
agreement
to
pay
the
income
tax
on
the
amount
received,
whether
or
not
it
was
exigible
under
the
Income
War
Tax
Act,
then,
it
seems
to
me
that
any
claim
to
the
amount
of
the
tax
is
one
to
be
enforced
like
any
other
contractual
obligation.
My
conclusion
is
that
the
payment
in
question
was
personal
to
Mr.
Fullerton,
and
was
made
because
of
the
cessation
of
his
office,
and
is
not
therefore
taxable
income.
The
appellant
must
therefore
succeed
and
costs
will
follow
the
event.
Judgment
accordingly.
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