KERWIN,
J.
(concurred
in
by
Rinfret,
Hudson
and
Taschereau,
JJ.)
:—The
respondent,
who
is
domiciled
and
resident
in
Ontario,
duly
filed
an
income
tax
return
for
the
year
ending
December
31st,
1937,
and
remitted
the
tax
payable
on
the
basis
of
that
return.
The
Department
of
National
Revenue
added
to
the
respondent’s
income,
as
reported,
the
sum
of
$10,192.60
and
levied
an
assessment
for
additional
income
tax
thereon
together
with
interest.
The
respondent
objected
to
this
assessment
and
ultimately
the
matter
came
before
the
President
of
the
Exchequer
Court
who
allowed
the
respondent’s
appeal
from
the
decision
of
the
Minister
affirming
the
assessment,
and
the
latter
now
appeals
to
this
Court.
The
respondent
was
the
owner
of
shares
of
the
capital
stock
of
The
Security
Loan
&
Savings
Company.
In
the
year
1937
an
agreement
was
entered
into
between
that
company
and
The
Premier
Trust
Company,
in
pursuance
of
which
the
respondent
received
a
certain
sum
of
money
and
a
number
of
shares
of
the
capital
stock
of
the
Trust
Company
in
exchange
for
the
delivery
of
her
shares
in
the
Loan
Company.
It
is
admitted
that
the
Loan
Company
had
on
hand,
at
the
time,
undistributed
income
which
had
been
earned
prior
to
the
year
1935
and
that
the
respondent’s
proportion
of
that
income
is
the
sum
of
$10,192.60
mentioned
above.
The
two
specially
relevant
statutory
provisions
are
section
11
(which
enacted
section
19
of
the
Income
War
Tax
Act)
and
section
22,
of
chapter
38
of
the
1936
statutes.
These
sections
are
as
follows
:
Section
11
of
chapter
38
of
the
1936
statutes
:—
(11.
Section
nineteen
of
the
said
Act,
as
amended
by
section
four
of
chapter
twenty-four
of
the
statutes
of
1930,
by
section
eleven
of
chapter
forty-one
of
the
statutes
of
1932-33
and
by
section
ten
of
chapter
fifty-five
of
the
statutes
of
1934,
is
repealed
and
the
following
substituted
therefor
:—
19.
(1)
On
the
winding
up,
discontinuance
or
reorganization
of
the
business
of
any
incorporated
company,
the
distribution
in
any
form
of
the
property
of
the
company
shall
be
deemed
to
be
the
payment
of
a
dividend
to
the
extent
that
the
company
has
on
hand
undistributed
income.
(2)
Where
a
dividend
is
deemed
to
be
received
under
subsection
one
of
this
section
by
a
company
incorporated
or
carrying
on
business
in
Canada,
such
dividend
shall
be
taxable
income
of
such
incorporated
company,
and
where
such
a
dividend
is
paid
to
a
company
incorporated
outside
of
Canada
and
not
carrying
on
business
in
Canada,
the
company
which
is
being
wound-up,
discontinued
or
reorganized
(excepting
companies
specified
in
section
two,
paragraph
(p)
and
section
four,
paragraph
(k)
)
shall
deduct
from
such
dividend
a
tax
at
the
rate
in
force
for
corporations
in
the
year
in
which
such
dividend
is
paid
and
shall
pay
the
same
to
the
Receiver
General
of
Canada.’’
Section
22
of
chapter
38
of
the
1936
statutes:—
‘‘Sections
one,
two,
three,
four,
six,
seven,
eight,
nine,
ten,
eleven,
twelve,
thirteen
and
sixteen
of
this
Act
shall
be
applicable
to
the
income
of
the
year
1935
and
fiscal
periods
ending
therein
and
of
all
subsequent
periods/’
It
was
first
contended
on
behalf
of
the
respondent
“that,
within
the
meaning
of
subsection
1
of
section
19
of
the
Income
War
Tax
Act
as
above
enacted,
there
was
no
distribution
of
the
property
of
the
Loan
Company
and
no
winding
up,
discontinuance
or
reorganization
of
its
business.
The
learned
President
decided
against
this
contention
and
on
that
point
I
agree
with
his
statement
of
the
facts
and
with
his
conclusions
and
have
nothing
to
add.
The
respondent
also
argued
that
the
‘‘undistributed
income”
referred
to
in
subsection
1
of
section
19
of
the
Income
War
Tax
Act
is
confined
to
income
of
the
Loan
Company
earned
in
the
year
1935
or
later,
and
that
therefore
the
$10,192.60
payment
could
not
be
deemed
to
be
the
payment
of
a
dividend.
In
other
words,
the
respondent
contended
that
the
‘
"
income
’
’
in
section
22
of
chapter
38
of
the
Statutes
of
1936
refers
to
the
"‘undistributed
income’’
in
subsection
1
of
section
19
of
the
Income
War
Tax
Act.
The
trial
judge
determined
that
that
contention
was
well-
founded
but,
with
respect,
I
am
unable
to
agree.
Section
19
is
part
of
the
Income
War
Tax
Act.
By
virtue
of
section
9
of
that
Act,
the
respondent
was
subject
to
income
tax
upon
her
income
during
the
year
1937.
By
section
3
"‘income''
includes
the
dividends
or
profits
directly
or
indirectly
received
from
stocks.
A
winding
up,
discontinuance
or
reorganization
of
the
Loan
Company’s
business
and
a
distribution
of
its
property
occurred
in
1937
and,
therefore,
under
subsection
1
of
section
19
of
the
Income
War
Tax
Act
as
enacted
in
1936,
the
sum
of
$10,192.60
is
to
be
deemed
the
payment
of
a
dividend
to
the
respondent.
So
far,
I
assume
that,
the
first
contention
of
the
respondent
being
decided
adversely
to
her,
no
question
could
really
be
raised
as
to
the
liability
of
the
respondent
to
be
taxed
on
such
amount.
The
learned
President,
however,
experienced
difficulty
in
construing
section
22
of
the
1936
Act.
It
is
advisable
to
set
out
once
more
the
provisions
of
that
enactment:
^22.
Sections
one,
two,
three,
four,
six,
seven,
eight,
nine,
ten,
eleven,
twelve,
thirteen
and
sixteen
of
this
Act
shall
be
applicable
to
the
income
of
the
year
1935
and
fiscal
periods
ending
therein
and
of
all
subsequent
periods.??
Of
the
various
sections
referred
to,
eleven
is
the
one
which
enacts
section
19
of
the
principal
Act.
Mr.
Stapells
urged
that
prior
to
1940,
in
which
year
a
definition
of
"‘fiscal
period”
appeared
in
the
Income
War
Tax
Act,
individuals
were
subject
to
assessment
to
tax
on
income
in
a
calendar
year
only,
and
not
on
income
in
a
fiscal
period;
and
that,
therefore,
the
insertion
of
the
words
"‘fiscal
periods’’
in
section
22
indicated
that
Parliament
had
in
mind
the
^undistributed
income”
of
an
incorporated
company.
This
argument
overlooks
the
provisions
of
subsection
2
of
section
19
(as
enacted
by
section
eleven
of
the
1986
Act)
under
the
terms
of
which
"‘where
a
dividend
is
deemed
to
be
received
under
subsection
1
of
this
section
by
a
company
incorporated
or
carrying
on
business
in
Canada
such
dividend
shall
be
taxable
income
of
such
incorporated
company.”
Both
subsections
of
section
19
must
be
looked
at
to
visualize
what
Parliament
was
there
dealing
with.
Furthermore,
section
22
does
not
state
that
part
only
of
section
eleven
shall
be
applicable
to
the
income
for
the
year
1935
and
fiscal
periods
ending
therein
and
of
all
subsequent
periods.
It
provides,
so
far
as
relevant,
that
the
whole
of
section
eleven
shall
be
so
applicable.
And
section
eleven,
after
repealing
earlier
provisions,
enacts
two
subsections
of
section
19
of
the
principal
Act,
and
it
is
to
both
of
those
subsections
that
we
must
direct
our
attention.
The
other
sections
of
the
1936
Act
referred
to
in
section
22
thereof
are
concerned
with
matters
of
an
entirely
different
nature
but
reading
section
22
of
the
1936
Act
in
connection
with
the
whole
of
section
19
of
the
Income
War
Tax
Act
as
enacted
in
1936
and
with
the
other
provisions
of
the
Income
War
Tax
Act,
I
conclude
that
the
‘‘income’’
mentioned
in
section
22
refers
(as
applicable
to
section
11)
to
the
income
of
the
taxpayer.
The
trial
Judge
derived
assistance
in
coming
to
his
conclusion
from
an
examination
of
the
history
of
the
relevant
provisions
of
the
Income
War
Tax
Act.
That
history
is
rather
involved
but
I
must
state
at
once
that
my
review
of
it
has
strengthened
the
opinion
I
have
already
expressed.
In
view
of
this
difference
of
opinion
as
to
the
deductions
to
be
drawn
from
this
legislative
history,
it
is
necessary
to
refer
to
the
matter
in
some
detail.
The
Income
War
Tax
Act
was
first
enacted
in
1917.
By
section
5
of
chapter
46
of
the
1924
statutes,
what
is
now
subsection
1
of
section
19
was
enacted
as
subsection
9
of
section
3
in
the
following
words
:—
"(9)
On
the
winding
up,
discontinuance
or
reorganization
of
the
business
of
any
incorporated
company,
the
distribution
in
any
form
of
the
property
of
the
company
shall
be
deemed
to
be
the
payment
of
a
dividend
to
the
extent
that
the
company
has
on
hand
undistributed
income.”
Section
8
of
the
1924
Act
provided:—
‘
(
1
)
Sections
one,
two
and
three
hereof
shall
be
deemed
to
be
applicable
to
the
income
for
the
taxation
period
1923
and
subsequent
periods.
(2)
Sections
four,
five
and
six
hereof
shall
be
deemed
to
be
applicable
to
the
income
for
the
taxation
period
1921
and
subsequent
periods.”
As
to
subsection
2
of
section
8,
the
President
considered
that
the
word
^income”
therein
must
have
been
intended
to
relate
to
the
‘‘undistributed
income”
mentioned
in
section
5.
It
is
unnecessary
to
express
any
opinion
upon
the
question
because,
whatever
one
might
think,
it
appears
to
me
to
be
beside
the
point
in
view
of
the
subsequent
history.
Subsection
9
of
section
3
of
the
Income
War
Tax
Act
as
enacted
in
1924
appeared
as
section
19
of
chapter
97
of
the
Revised
Statutes
of
Canada,
1927.
It
was
pointed
out
by
Mr.
Stapells
that
according
to
Appendix
I
to
the
Revised
Statutes
of
1927,
section
8
of
the
1924
Act
was
not
repealed
nor
consolidated.
Whatever
the
effect
of
this
may
be,
it
has,
I
think,
no
bearing
upon
the
matter
under
review.
By
section
4
of
chapter
24
of
the
1930
Statutes,
section
19
of
chapter
97
of
the
Revised
Statutes
was
repealed
and
two
subsections
substituted
therefor.
Section
4
read:—
"4.
Section
19
of
the
said
Act
is
repealed
and
the
following
is
substituted
therefor
:—
"19.
(1)
On
the
winding
up,
discontinuance
or
reorganization
of
the
business
of
any
incorporated
company,
the
distribution
in
any
form
of
the
property
of
the
company
shall
be
deemed
to
be
the
payment
of
a
dividend
to
the
extent
that
the
company
has
on
hand
undistributed
income
earned
in
the
taxation
period
1930
and
subsequent
periods.
(2)
Notwithstanding
anything
in
the
Act
contained,
where
a
dividend
is
deemed
to
be
received
under
subsection
one
by
a
company
incorporated
or
carrying
on
business
in
Canada,
such
dividend
shall
be
taxable
income
of
such
incorporated
company,
and
where
such
a
dividend
is
paid
to
a
company
incorporated
outside
of
Canada
and
not
carrying
on
business
in
Canada,
the.
company
which
is
being
wound-up,
discontinued
or
reorganized
shall
deduct
from
such
dividend
a
tax
at
the
rate
in
force
for
corporations
in
the
year
in
which
such
dividend
is
paid
and
shall
pay
the
same
to
the
Receiver
General
of
Canada.”
It
will
be
observed
that
the
new
subsection
1
of
section
19
is
the
same
as
the
previous
section
19
except
for
the
words
at
the
end
‘‘earned
in
the
taxation
period
1930
and
subsequent
periods.’’
Section
7
of
the
1930
Act
provided:—
"7.
This
Act
shall
be
deemed
to
have
come
into
force
at
the
commencement
of
the
1929
taxation
period
and
to
be
applicable
thereto
and
to
fiscal
periods
ending
therein
and
to
subsequent
periods,
except
section
4
hereof,
which
shall
be
deemed
to
have
come
into
force
at
the
commencement
of
the
1930
taxation
period
and
to
be
applicable
thereto
and
to
fiscal
periods
ending
therein
and
to
all
subsequent
periods.”
The
learned
President,
in
his
judgment,
referred
only
to
the
first
limb
of
this
section
and
for
that
reason
found
a
conflict
between
it
and
subsection
1
of
section
19
as
enacted
in
section
4.
It
is,
of
course,
the
latter
part
of
section
7
that
applies
to
section
4
and
the
conflict
mentioned
by
the
President
does
not
exist.
<A
difficulty
different
from
that
envisaged
by
him
might
have
occurred
in
view
of
the
legislation
in
force
(R.S.C.
1927)
prior
to
the
enactment
of
the
1930
Act
but,
as
the
events
with
which
we
are
concerned
did
not
occur
in
that
period,
I
do
not
pause
to
elaborate.
A
proviso
was
added
to
subsection
1
of
section
19
in
the
Statutes
of
1932-33
but
this
amendment
is
not
relevant.
In
1934,
the
Act
was
further
amended
by
chapter
55,
section
10
whereof
provided
:
"10.
Subsection
one
of
section
nineteen
of
the
said
Act,
as
enacted
by
section
four
of
chapter
twenty-four
of
the
statutes
of
1930
and
amended
by
section
eleven
of
chapter
forty-one
of
the
statutes
of
1932-33,
is
repealed
and
the
following
is
substituted
therefor
:—
^19.
(1)
On
the
winding
up,
discontinuance
or
reorganization
of
the
business
of
any
incorporated
company,
the
distribution
in
any
form
of
the
property
of
the
company
shall
be
deemed
to
be
the
payment
of
a
dividend
to
the
extent
that
the
company
has
on
hand
undistributed
income.
^Provided,
however,
that
this
subsection
shall
not
apply
to
the
distribution
of
the
property
of
a
private
investment
holding
company
to
the
extent
that
its
undistributed
income
is
made
up
of
income
from
British
and
foreign
securities
and
interest
bearing
securities
of
Canadian
debtors
when
the
business
of
such
holding
company
is
and
has
been
carried
on
in
Canada,
and
all
of
its
shares
(less
directors’
qualifying
shares)
are
and
have
been
beneficially
owned
since
its
incorporation
by
a
non-resident
individual,
or
by
such
an
individual
and
his
wife
or
any
member
of
his
family,
or
by
any
combination
of
them.
In
determining
the
extent
to
which
the
undistributed
income
of
any
such
private
investment
holding
company
on
hand
at
the
date
of
winding
up
is
made
up
of
income
received
by
way
of
dividends
from
Canadian
companies,
all
dividends
or
disbursements
of
such
holding
company
which
have
been
paid
or
made
prior
to
the
date
of
winding
up
shall
be
deemed
to
have
been
paid
out
of
income
received
from
British
and
foreign
securities
and
interest
bearing
securities
of
Canadian
debtors.
‘
‘
It
will
be
observed
that
this
1934
amendment
removed
from
subsection
1
of
section
19
the
words
at
the
end
thereof
that
had
been
included
for
the
first
and
only
time
in
1930,
"‘earned
in
the
taxation
period
1930
and
subsequent
periods’’.
Then,
in
1936,
came
sections
11
and
22
of
chapter
38,
which
have
already
been
transcribed.
In
view
of
this
history
of
the
legislation,
it
appears
to
me
that
the
proper
conclusion
to
be
drawn
from
the
fact
that
the
words
"‘earned
in
the
taxation
period
1930
and
subsequent
periods”
were
dropped
in
1934
is
that
Parliament
intended
to
alter
the
law
as
it
existed
under
the
1930
legislation.
The
respondent
must
therefore
account
for
her
proportionate
part
of
the
undistributed
income
of
The
Security
Loan
&
Savings
Company
which
that
company
had
on
hand.
In
my
view
that
conclusion
follows
from
a
consideration
of
the
two
relevant
sections
as
well
as
from
a
consideration
of
the
history
of
the
Income
War
Tax
Act.
It
appears
to
me
to
be
not
only
in
accord
with
the
letter
but
also
the
spirit
of
that
Act.
The
appeal
should
be
allowed,
the
judgment
of
the
Exchequer
Court
set
aside
and
the
assessment
made
by
the
Minister
affirmed,
with
costs
throughout.
MASTEN,
J.
(dissenting)
:—This
is
an
appeal
by
the
Minister
of
National
Revenue
from
the
judgment
of
the
Honourable
Mr.
Justice
Maclean
dated
the
19th
March,
A.D.
1941,
whereby
he
allowed
the
appeal
of
the
respondent
from
the
certificate
of
the
Minister
disallowing
an
appeal
by
the
respondent
(under
the
provisions
of
sec.
58
of
The
Income
Tax
Act)
from
her
assessment
by
the
Commissioner
of
Taxation.
There
is
no
conflict
in
the
evidence;
the
facts
are
not
in
dispute;
and
they
are
so
lucidly
and
adequately
detailed
in
the
reasons
of
judgment
of
the
learned
President
of
the
Exchequer
Court
that
I
refrain
from
repeating
them
at
length.
Accordingly,
I
mention
only
such
outstanding
matters
as
appear
essential
to
an
understanding
of
this
judgment.
(1)
The
transaction
out
of
which
arises
the
present
claim
for
income
tax
was
a
sale
by
The
Security
Loan
and
Savings
Company
(hereinafter
called
the
Security
Company)
to
the
Premier
Trust
Company
(hereinafter
called
the
Trust
Company)
of
all
its
assets
and
undertaking
as
a
going
concern.
(2)
Under
the
Loan
and
Trust
Corporations
Act,
R.S.O.
1927,
e.
233
(hereinafter
more
fully
referred
to),
the
initial
proceeding
toward
a
transfer
of
assets
between
companies
like
the
present,
consists
in
the
execution
of
a
provisional
agreement
of
sale
containing
the
proposed
terms
and
conditions
of
the
transfer.
Such
an
agreement
was
signed
on
the
24th
day
of
March,
1937.
The
parties
to
it
were
the
two
companies
above
mentioned.
No
shareholder
in
either
company
was
a
party
to
the
agreement.
It
contains,
among
other,
the
following
provisions
which
appear
to
be
relevant
to
the
two
questions
arising
on
the
present
appeal.
"4.
Provided,
however,
that,
notwithstanding
anything
herein
contained,
the
Vendor
and
the
Purchaser,
until
this
Agreement
shall
become
effective
are
each
to
be
at
liberty
to
and
shall
carry
on
business
in
the
same
manner
as
heretofore
so
as
to
maintain
each
as
a
going
concern
and
for
the
purpose
of
carrying
on
as
aforesaid
each
may
sell,
assign,
exchange,
convey,
appropriate,
lease,
surrender,
charge,
mortgage,
pay
out
or
otherwise
deal
with
its
property
and
enter
into
contracts
or
engagements
in
the
usual
and
ordinary
course
of
its
business
in
such
manner
as
to
each
may
seem
best,
but
from
and
after
the
date
of
this
Agreement
the
Vendor
shall
not
accept
subscriptions
for,
allot
or
issue
any
shares
of
its
capital
stock
nor
issue
any
debentures
nor
declare
any
dividend
except
with
the
consent
of
the
Purchaser
.
.
.
.’’
"‘5.
The
consideration
for
the
assets
and
property
hereby
agreed
to
be
sold
and
purchased
will
be
as
follows
:—
(a)
The
Purchaser
shall
within
thirty
(30)
days
after
the
date
when
this
Agreement
shall
become
effective
allot
and
issue
and/or
pay
to
each
shareholder
of
the
Vendor
of
record
as
of
the
close
of
business
on
such
date
or
his
respective
nominee
:
(i)
Fully
paid
shares
of
the
par
value
of
$100
each
of
the
capital
stock
of
the
Purchaser
at
the
rate
of
one
and
a
half
such
shares
for
each
fully
paid
share
of
the
capital
stock
of
the
Vendor
held
by
such
shareholder:
fractions
of
shares
of
the
Purchaser
resulting
therefrom
to
be
adjusted
by
payment
in
cash
at
the
rate
of
$102
per
full
share,
or
(ii)
at
the
option
of
such
shareholder
of
the
Vendor,
exercisable
by
written
notice
delivered
to
the
Purchaser
within
such
period
of
thirty
(30)
days,
cash
and
fully
paid
shares
of
the
capital
stock
of
the
Purchaser
at
the
rate
of
$102
cash
and
one-
half
share
for
each
fully
paid
share
of
the
capital
stock
of
the
Vendor
held
by
such
shareholder;
any
fractions
of
shares
of
the
Purchaser
resulting
therefrom
to
be
adjusted
by
the
issue
in
respect
of
each
fraction
of
one
fully
paid
share
and
the
proportionate
reduction
(at
the
rate
of
$102
per
full
share)
of
the
said
cash
payment.”
The
second
option
as
quoted
above
was
accepted
by
the
respondent
on
September
14th,
1937.
(3)
The
provisional
agreement
of
sale
appears
to
have
been
duly
confirmed
by
the
shareholders
in
accordance
with
the
provisions
prescribed
by
sections
55
to
64
of
The
Loan
and
Tryst
Corporations
Act,
R.S.O.
1927,
ce.
223,
by
which
the
procedure
and
ensuing
rights
of
the
parties
are
governed.
Section
60
of
that
Act
provides
that
after
its
approval
by
the
shareholders
the
agreement
shall
be
submitted
to
the
Lieutenant-
Governor-in-Council
for
his
assent,
and
subsection
3
of
section
60
reads
as
follows:
"‘(3)
After
the
assent
of
the
Lieutenant-Governor-in-Council
thereto
the
agreement
or
offer
shall
be
deemed
to
be
the
agreement
and
act
of
union,
amalgamation
and
consolidation
of
the
corporations,
or
the
agreement
and
deed
of
purchase
and
acquisition
of
the
assets
of
the
selling
corporation
by
the
purchasing
corporation.”
Section
63
provides,
in
part,
as
follows:
‘(1)
In
the
case
of
a
purchase
and
sale
of
assets
so
assented
to
the
assets
of
the
selling
corporation
shall
become
absolutely
vested
in
the
purchasing
corporation
on
and
from
the
date
of
such
assent
without
any
further
conveyance
and
the
purchasing
corporation
shall
thereupon
become
and
be
responsible
for
the
liabilities
of
the
selling
corporation.”
"‘(5)
Where
the
Lieutenant-Governor-in-Council
assents
to
an
agreement
for
the
sale
of
the
assets
of
a
corporation,
or
to
an
agreement
for
the
amalgamation
of
two
or
more
corporations,
the
selling
corporation,
or
the
several
corporations
amalgamated,
as
the
case
may
be,
shall,
from
the
date
of
such
assent,
be
dissolved
except
so
far
as
is
necessary
to
give
full
effect
to
the
agreement.
‘
‘
(4)
The
Order-in-Council
providing
for
the
assent
of
the
Lieutenant-Governor
to
the
agreement
was
passed
on
the
23rd
day
of
June,
1937,
and
it
would
consequently
appear
that
on
that
date
all
the
assets
and
undertaking
of
the
Security
Company
passed
to
the
Premier
Trust
as
more
fully
appears
from
the
certificate
of
the
Attorney-General,
which
reads
as
follows:
“DEPARTMENT
OF
INSURANCE
PROVINCE
OF
ONTARIO
IN
THE
MATTER
Of
the
Loan
and
Trust
Corporations
Act
and
in
the
matter
of
the
sale
under
the
said
Act
of
the
assets
of
the
Security
Loan
and
Savings
Company,
St.
Catharines,
to
The
Premier
Trust
Company.
The
ACTING
ATTORNEY-GENERAL
FOR
THE
Province
OF
Ontario,
being
the
Minister
under
whose
direction
the
Loan
and
Trust
Corporations
Act
of
the
said
Province
is
administered,
HEREBY
CERTIFIES
THAT,
Pursuant
to
the
said
Act
an
agreement
for
the
sale
of
the
assets
of
the
Loan
Corporation
known
as
The
Security
Loan
and
Savings
Company,
St.
Catharines,
to
the
Trust
Company,
known
as
The
Premier
Trust
Company
bearing
date
the
24th
day
of
March,
1937,
and
duly
executed
by
the
Directors
of
The
Security
Loan
and
Savings
Company,
St.
Catharines,
and
ratified
and
confirmed
by
the
shareholders
thereof
on
the
15th
day
of
May,
1937,
also
duly
executed
by
the
Directors
of
The
Premier
Trust
Company
and
ratified
by
the
shareholders
on
the
15th
day
of
May,
1937,
was
by
Order-in-
Council
approved
on
the
28rd
day
of
June,
1937,
by
His
Honour
the
Lieutenant-Governor
in
Council,
and
that
on,
from
and
after
the
15th
day
of
May,
1937,
the
said
agreement
took
effect
as
the
sale,
transfer
and
conveyance
to
the
said
The
Premier
Trust
Company
to
its
own
use
of
all
the
assets,
business,
rights,
property
and
good
will
of
the
said
The
Security
Loan
and
Savings
Company,
St.
Catharines,
as
in
the
said
agreement
more
fully
set
out;
and
that
on,
from
and
after
the
said
15th
day
of
May,
1937,
all
terms,
provisions,
and
conditions
of
the
said
agreement
and
of
the
said
The
Loan
and
Trust
Corporations
Act
relating
thereto
went
into
full
force
and
effect.
A
copy
of
the
said
agreement
is
annexed
hereto
and
forms
part
of
this
certificate.
THIS
CERTIFICATE
is
given
under
Section
61
of
the
said
The
Loan
and
Trust
Corporation
Act,
being
Chapter
223
of
the
Revised
Statutes
of
Ontario,
1927.
GIVEN
in
triplicate
under
my
hand
and
seal
of
office
this
6th
day
of
July,
1937.
H.
C.
NIXON,
‘seal’
Acting
Attorney-General.‘‘
(5)
Among
the
assets
sold
and
transferred
to
The
Premier
Trust
Company
was
a
sum
of
$212,431.41
accumulated
and
undistributed
income
of
the
Security
Company,
no
part
of
which
accrued
during
1935
or
in
any
subsequent
year
as
is
admitted
by
the
appellant.
(6)
The
proportionate
share
of
this
accumulated
income
to
which
the
respondent
would
have
been
entitled
on
its
distribution
by
the
Security
Company
was
$10,192.60
no
part
of
which
accrued
in
1935
or
later.
(7)
This
sum
of
$10,192.60
was
paid
by
The
Premier
Trust
Company
to
the
respondent
on
October
5th,
1937,
as
a
portion
of
its
cheque
of
that
date
for
$26,690.75
made
in
favour
of
the
trustees
of
the
respondent.
(8)
The
Minister
of
National
Revenue
claims
in
this
proceeding
the
sum
of
$3,454.80
as
income
tax
on
the
said
sum
of
$10,192.60.
(9)
His
claim
is
based
on
section
19(1)
of
The
Income
War
Tax
Act
as
enacted
by
section
11
of
chapter
38
of
the
Statutes
of
Canada
for
the
year
1936.
That
section
provides
that
:
"‘(1
)
On
the
winding
up,
discontinuance
or
reorganization
of
the
business
of
any
incorporated
company,
the
distribution
in
any
form
of
the
property
of
the
company
shall
be
deemed
to
be
the
payment
of
a
dividend
to
the
extent
that
the
company
has
on
hand
undistributed
income.
Along
with
sec.
11
of
c.
36,
1
Edward
VIII,
is
to
be
read
see.
22
of
that
Act,
as
follows
:
"‘22
.
Sections
one,
two,
three,
four,
six,
seven,
eight,
nine,
ten,
eleven,
twelve,
thirteen
and
sixteen
of
this
Act
shall
be
applicable
to
the
income
of
the
year
1935
and
fiscal
periods
ending
therein
and
of
all
subsequent
periods.
‘
’
CONTENTION
OF
THE
RESPONDENT.
The
contention
of
the
respondent
in
answer
to
the
claim
of
the
Minister
is
twofold:
First
:
that
by
section
22
of
the
Statute
of
1936,
the
operative
scope
of
section
19(1)
is
limited
to
income
accumulated
during
the
year
1935,
or
during
any
subsequent
year:
Secondly:
that
the
transaction
in
question,
so
far
as
it
relates
to
the
respondent
and
to
the
shares
in
question,
does
not
fall
within
the
provisions
of
section
19(1)
quoted
above,
as
a
distribution
resulting
from
the
winding-up,
discontinuance
or
re-organization
of
the
business
of
the
Security
Company,
but
was
a
separate
and
independent
transaction
between
the
Trust
Company
and
the
respondent
by
which
the
Trust
Company
purchased
from
the
respondent
the
shares
in
question
and
paid
for
them
with
its
own
money
and
not
as
a
distribution
of
the
assets
of
the
Security
Company.
The
learned
President
of
the
Exchequer
Court
agreed
with
the
first
mentioned
contention
of
the
respondent
and
dismissed
the
claim
of
the
Minister,
but
at
the
same
time
he
expressed
the
view
that
the
second
ground
of
defence
failed.
I
agree
with
both
of
the
opinions
so
expressed
by
the
learned
President,
and
also
with
the
grounds
stated
by
him,
but
I
desire
to
add
certain
further
observations.
The
grounds
of
appeal
as
set
forth
by
the
appellant
are
as
follows
:—
"1.
The
Appellant
respectfully
submits
that
the
learned
trial
Judge
was
correct
in
holding
that
the
shares
and
cash
received
by
the
Respondent
constituted
a
distribution
on
the
winding
up,
discontinuance
or
reorganization
of
the
Security
Loan
&
Savings
Company
within
the
meaning
of
section
19(1)
of
The
Income
War
Tax
Act,
but
contends
that
he
was
in
error
in
holding
that
section
22
of
chapter
38
of
the
statutes
of
1936
had
the
effect
of
limiting
the
deemed
dividend
to
undistributed
income
earned
in
1935
and
subsequent
years.
"2.
The
sole
point
at
issue
is,
therefore,
whether
income
of
Security
Loan
&
Savings
Company
earned
prior
to
1935
and
on
hand
and
undistributed
in
1937
was
subject
to
taxation
in
the
hands
of
the
respondent
upon
a
distribution
within
the
meaning
of
section
19(1)
of
The
Income
War
Tax
Act.”
On
the
argument
in
this
Court
counsel
for
the
respondent
sought
to
maintain
both
of
the
grounds
of
defence
above
mentioned,
and
I
proceed
first
to
consider
the
respondent’s
claim
that
section
19(1)
deals
exclusively
with
income
accumulated
during
and
after
1935.
In
his
reasons
for
judgment
the
learned
trial
Judge
traces
from.
the
year
1920
down
to
1936
the
history
of
income
tax
legislation
so
far
as
it
culminated
in
section
19
of
the
statute
of
that
year.
He
finds
himself
thereby
assisted
toward
a
construction
of
the
statute
limiting
its
operation
to
1935
and
succeeding
years.
The
result
of
his
historical
review
may
not
be
legally
conclusive,
though
it
may
be
morally
persuasive,
and
is
not
to
be
disregarded
in
seeking
to
ascertain
the
intention
of
Parliament
in
a
doubtful
case.
The
right
to
examine
the
pre-existing
law
in
order
to
clear
up
any
doubt
as
to
the
meaning
of
an
Act
is
supported
by
the
highest
authority,
and
is
generally
recognized
as
a
proper
method
of
assisting
in
ascertaining
the
true
intent
of
the
legislature.
I
refer
to
Craies
on
Statute
Law,
4th
Ed.
p.
94,
where
the
general
rule
is
stated
and
the
cases
in
its
support
are
cited.
Limitations
on
this
general
rule
appear
to
be
indicated
in
recent
judgments
of
the
House
of
Lords
and
of
the
Privy
Council.
I
refer
to
the
observation
of
Lord
Chancellor
Simon
in
Barnard
v.
Gorman,
[1941]
A.C.
378,
at
page
384;
to
that
of
Lord
Atkin
in
Windsor
v.
Ford
Motor,
[1941]
A.C.
453,
at
page
461,
and
to
that
of
Lord
Chancellor
Simon
in
Boani
etc.
v.
Acton
District,
etc.,
[1941]
A.C.
308,
at
page
322.
I
have
carefully
considered
these
recent
observations
with
the
result
that
while
I
think
that
in
the
present
case
we
are
warranted
in
examining
the
legislative
history
of
section
19
for
the
purpose
of
securing,
if
possible,
a
side-light
on
the
intention
of
Parliament,
yet
I
am
firmly
of
the
opinion
that
the
rights
of
the
parties
must
in
the
end
be
determined
by
reading
together
and
construing
sections
11
and
22
of
ce.
38
of
the
Statutes
of
1936.
The
history
of
section
19,
so
far
as
relevant,
appears
to
be
that
the
statute
of
1930
changed
the
former
law
and
placed
a
limitation
on
the
period
of
accumulation.
That
law
remained
in
force
until
1934
when
the
law
was
again
changed
and
the
unlimited
period
of
accumulation
was
restored.
The
statute
of
1934
making
the
period
of
accumulation
unlimited,
remained
in
force
and
unrepealed
until
the
statute
of
1936
came
into
force,
and
simultaneously
with
its
repeal
sections
11
and
22
came
into
force,
prescribing
once
more
in
my
view
a
limited
period
for
accumulation.
These
oscillations
in
the
course
of
legislation
afford
little
assistance
in
construing
the
statute
which
governs
the
transaction
in
question.
They
do,
however,
establish
that
at
times
Parliament
recognized
that
undistributed
income
or
profits
accumulated
during
earlier
years
might
subsequently,
during
years
of
depression,
become
dissipated
and
lost
and
so
undis-
tributable,
while
at
other
times
this
point
of
view
was
either
overlooked
or
negatived.
It
may
perhaps
be
suggested
that
these
alternating
legislative
acts
indicate
a
readiness
to
change
the
unlimited
provision
of
1934
to
a
limited
provision
in
1936.
That
seems
to
be
about
all
that
can
be
derived
from
the
historical
process.
Turning
then
to
a
consideration
of
sections
11
and
22.
I
quite
agree
with
brother
Kerwin
that
section
22
applies
equally
to
both
subsections
of
section
19.
If
it
had
been
intended
to
apply
solely
to
one
or
the
other
subsection,
section
22
would
have
specified
to
which
of
them
it
was
applicable,
but
as
it
stands,
section
22
applies
to
both
subsections
of
section
19
as
enacted
by
section
11
of
chap.
38.
The
question
then
is,
are
we
warranted
in
saying
that
notwithstanding
that
section
22
purports
to
apply
to
the
whole
of
section
11,
nevertheless,
the
intention
of
Parliament
was
to
confine
its
operations
to
subsection
(2)?
If
not,
then
I
think
that
assistance
in
ascertaining
the
intention
of
Parliament
may
be
gained
by
a
consideration
of
the
new
law
enacted
in
1936
contemporaneously
with
the
repeal
of
the
prior
law.
Reading
the
substance
of
section
22
in
immediate
juxtaposition
to
section
19
s.s.
1,
the
enactment
would
run
as
follows
:—
On
the
winding
up,
discontinuance,
or
reorganization
of
the
business
of
any
incorporated
company,
the
distribution
in
any
form
of
the
property
of
the
company
shall
be
deemed
to
be
the
payment
of
a
dividend
to
the
extent
that
the
company
has
on
hand
undistributed
income;
and
this
provision
shall
be
applicable
to
the
income
for
the
year
1935
and
fiscal
periods
ending
therein
and
all
subsequent
periods.
It
seems
to
me
that
so
read
the
words
are
strongly
indicative
of
an
intention
to
limit
the
period
of
accumulation
of
income
to
1935
and
succeeding
years.
Mentio
unius
exclusio
alterius.
In
other
words
the
specific
mention
of
the
period
"1935
and
succeeding
years’’
to
which
section
19,
s.s.
1
is
to
apply,
excludes
an
unlimited
period
of
accumulation.
In
Young
v.
Mayor
of
Leamington
(1883),
8
A.C.
517
at
520,
Lord
Blackburn
said
that
the
Courts
"‘ought
in
general
in
construing
an
Act
of
Parliament
to
assume
that
the
Legislature
knows
the
existing
state
of
the
law.”
Much
more,
therefore,
must
it
be
taken
that
the
Legislature
carried
in
mind
the
wide
general
provision
of
section
19(1)
as
set
forth
in
section
11
of
the
Act
of
1936
when
it
enacted
the
succeeding
section
22,
and
must
be
assumed
to
have
intended
a
limited
on
its
generality.
Standing
by
itself,
section
19(1)
covered
all
income
accumulated
either
before
or
after
1935.
Hence
in
making
section
22
applicable
to
section
11
it
must
be
assumed
that
the
Legislature
intended
to
do
something,
viz.,
to
modify
the
generality
of
section
19(1)
by
providing
that
its
ambit
should
be
limited
to
the
period
specified
in
section
22,
for
if
not
then
section
22
so
far
as
the
action
of
Parliament
in
passing
it
relates
to
section
19(1)
was
futile
and
wholly
ineffective.
Supplementing
the
foregoing,
which
I
take
to
be
the
principal
argument
of
the
appellant,
I
note,
at
page
9
of
the
factum,
the
following
paragraphs:
"‘It
is,
therefore,
submitted
that
section
22
of
chapter
38
of
the
statutes
of
1936
was
merely
an
enabling
section,
and
Parliament
did
not
intend
that
the
words
of
this
section
22
be
read
as
a
proviso
to
section
19.
Section
22
was
for
the
purpose
of
making
the
amendment
retroactive
to
the
taxation
year
1935;
otherwise
it
would
have
become
effective
on
the
date
the
Act
received
Royal
Assent,
on
June
23rd,
1936.
Therefore,
as
the
distribution
in
connection
with
the
sale
of
the
Security
Loan
&
Savings
Company
did
not
take
place
until
1937,
section
22
of
the
Act
of
1936
should
be
disregarded
for
the
purposes
of
this
appeal.
"‘In
any
event,
it
is
submitted
that
section
12
makes
it
quite
clear
that
dividends
shall
be
taxable
income
for
the
year
in
which
they
are
paid
or
distributed,
and,
as
this
undistributed
income
was
paid
in
1937,
it
is,
by
section
19(1),
deemed
to
be
a
dividend
in
that
year,
and
is
income
of
the
year
1937,
and
hence
does
not
offend
against
section
22.”
With
reference
to
the
argument
that
as
section
22
was
enacted
for
the
sole
purpose
of
making
the
amendment
retroactive
to
the
taxation
year
of
1935
since
otherwise
it
would
have
become
effective
only
on
the
date
when
the
Act
received
the
Royal
Assent,
it
is
sufficient
to
point
out
that
there
is
no
indication
of
any
such
limited
application
contained
in
the
words
of
section
22.
To
repeat
it
once
more,
"‘section
11
of
this
Act
shall
be
applicable
to
the
income
for
the
year
1935
and
fiscal
periods
ending
therein
and
all
subsequent
periods.
‘‘
These
words
are
general.
There
is
nothing
in
them
to
indicate
that
they
came
to
an
end
as
soon
as
the
year
1935
was
over,
nor
are
they
limited
to
subsection
2
of
section
19.
They
apply
equally
to
subsection
1
of
section
19,
and
create
the
law
governing
the
present
transaction.
With
reference
to
the
appellant’s
contention
that
in
any
event
the
$10,192.60
received
by
the
respondent
in
1937
was
a
dividend
and
became
taxable
under
section
12
when
it
was
paid,
it
suffices
to
point
out
that
prior
to
the
discontinuance
or
re-organization
of
the
Security
Company
this
sum
was
capital
available
to
the
Security
Company
for
any
of
its
operations.
Moreover
it
could
not
be
transformed
into
dividend
available
to
a
shareholder
except
by
a
declaration
to
that
effect
by
the
directors
of
the
Security
Company
and
no
such
declaration
was
ever
made.
As
between
the
Security
Company
and
the
respondent,
it
passed
to
her
as
part
of
her
proportionate
share
of
the
net
assets
of
the
Security
Company,
that
is
to
say,
as
capital,
while
as
between
the
respondent
and
the
Minister
of
National
Revenue
for
purposes
of
taxation
only
this
sum
of
$10,192.60
is
to
be
treated
as
if
it
were
a
dividend;
but
solely
by
force
of
section
19.
Hence
it
follows
that
the
Minister’s
claim
arises
solely
under
section
19,
and
if,
by
virtue
of
section
22
of
chapter
38
of
the
1936
statutes,
section
19
does
not
apply,
then
the
appellant’s
claim
must
fail
for
the
sum
in
question
never
became
a
dividend
and
section
12
has
no
application.
Any
suggestion
that
the
limitation
period
((1935
and
succeeding
years’’
prescribed
by
section
22
has
reference
to
the
date
when
the
winding-up,
discontinuance
or
reorganization
might
occur
and
not
to
the
period
during
which
the
income
in
question
is
accumulated,
seems
to
me
to
be
met
by
the
very
words
of
section
22
which
on
their
face
relate
to
the
income
of
1935
and
succeeding
years,
and
not
to
its
distribution.
But
if
not
conclusive,
the
statute
is
at
least
doubtful
and
ambiguous,
and
according
to
the
rule
well-established
by
the
decisions
cited
by
the
respondent
it
is
ineffective
to
warrant
the
imposition
of
the
tax
in
question
on
the
respondent.
It
remains
to
consider
the
second
defence
raised
by
the
respondent.
The
provisional
agreement
here
in
question
involved
two
main
objectives
(the
other
provisions
being
collateral
and
subsidiary).
First,
the
transfer
to
the
Trust
Company
of
the
assets
and
undertaking
of
the
Security
Company.
Second,
the
distribution
to
the
shareholders
of
the
Security
Company
of
the
consideration
for
the
sale.
A
consideration
of
those
provisions
of
the
Trust
and
Loan
Corporations
Act
and
of
the
provisional
agreement
as
hereinbefore
quoted
leads
me
to
the
conclusion
that
when
on
the
23rd.
day
of
June,
1937,
the
Lieutenant-Governor
by
Order-in-
Council
sanctioned
the
provisional
agreement
of
sale,
all
the
assets
and
undertaking
of
the
Security
Company
passed
absolutely
to
the
Trust
Company.
What
remained
to
be
done
under
the
provisional
agreement
was
to
distribute
the
consideration
among
the
parties
entitled.
Not
only
did
its
assets
and
undertaking
pass
from
the
Security
Company
but
under
section
63
of
the
statute
the
Security
Company
became
emasculated
of
all
its
corporate
rights
and
powers
‘‘except
so
far
as
is
necessary
to
give
full
effect
to
the
agreements
What
remained
to
be
done
was
the
distribution
of
the
consideration
to
the
parties
entitled.
The
Security
Company
continued
its
corporate
existence
emptied
of
all
assets
and
deprived
of
all
corporate
rights
and
powers
save
only
the
right
to
distribute
among
its
shareholders
the
consideration
for
the
sale.
The
shareholders
themselves
held
no
contractual
rights
against
the
Trust
Company.
They
were
not
parties
to
the
provisional
agreement,
but
the
Security
Company
though
deprived
of
everything
else,
still
retained
its
corporate
existence
and
the
right
and
duty
to
see
that
each
of
its
shareholders
received
his
proportionate
share
of
the
consideration.
Its
duty
was
similar
to
that
of
a
liquidator
in
a
voluntary
winding-up.
Had
the
consideration
consisted
wholly
of
cash,
the
normal
method
would
have
been
for
the
Trust
Company
to
pay
over
the
purchase
price
to
the
Security
Company
leaving
it
to
make
the
distribution.
Owing
to
the
alternate
options
which
the
agreement
gave
to
shareholders,
this
course
was
not
practicably
convenient.
Never-
theless,
the
consideration
payable
by
the
Trust
Company
was
the
property
of
the
Security
Company
and
was
not
the
property
of
its
shareholders.
The
directors
of
the
Security
Company
would
plainly
have
been
guilty
of
a
breach
of
trust
if
they
had
agreed
to
give
away
the
assets
of
their
solvent
company
for
nothing.
The
provisional
agreement
as
drawn
is
elliptical
and
confusing.
The
draftsman
might
have
met
the
difficulty
by
a
clause
declaring
that
from
and
after
the
passing
of
the
order-in-
council
approving
the
agreement
the
Trust
Company
held
the
stipulated
consideration
as
trustee
for
the
Security
Company
and
as
its
agent
for
distribution
of
that
consideration
to
the
shareholders
of
the
Security
Company.
I
think
that
is
what
both
parties
did
in
fact
agree,
and,
in
effect,
it
is
what
they
carried
out;
also
I
think
that
to
this
elliptical
agreement
such
a
construction
can
be
given
without
undue
straining
of
the
words
used.
The
result
is
that
the
sum
of
$10,192.60
here
in
question
was
received
by
the
respondent
from
the
Security
Company
as
a
distribution
of
its
property
on
a
re-organization
or
discontinuance
of
its
business,
but
as
it
consisted
of
income
wholly
accumulated
prior
to
1935,
it
is
not
taxable.
I
ought,
perhaps,
to
add
a
word
respecting
the
suggested
sale
of
shares
by
the
respondent
to
the
Trust
Company.
The
handing
over
of
the
share
certificate
to
the
Trust
Company
appears
to
me
to
have
been
an
idle
ceremony.
No
power-of-attorney
to
transfer
was
given,
and
no
transfer
in
the
share
register
of
the
Security
Company
ever
took
place.
When
the
last
of
the
security
shareholders
received
his
proportion
of
the
consideration,
the
provisional
agreement
was
completely
executed
and
the
Security
Company
was,
in
the
words
of
section
63
"‘dissolved’’
and
with
it
the
shares
in
question
perished.
The
foregoing
reasons
were
prepared
on
the
assumption
that
"‘income’’
in
section
19
is
identical
in
its
meaning
and
content
with
"‘income’’,
in
section
22,
and
that
in
both
sections
this
term
(income)
meant
a
surplus
over
and
above
the
original
capital;
which
surplus
accrued
to
the
Security
Company
as
earnings
or
profits
arising
from
its
operations,
and
in
the
present
case
amounted
to
$212,431.41;
I
also
assumed
that
this
was
not
in
controversy,
but
I
now
realize
that
my
assumptions
were
incorrect
and
that
appellant
‘s
suggestion
is
that
while
‘
"
income
‘
‘
in
section
19
(1)
relates
to
surplus
earnings,
profits
or
accretions
to
the
capital
assets
of
the
company,
‘‘income’’
in
section
22
relates
to
income
to
shareholders
by
way
of
dividends,
and
that
this
income
accrued
to
the
respondent
in
1937
within
the
period
prescribed
by
section
22.
I
understand
also
that
it
is
now
suggested
on
behalf
of
the
appellant
that
section
19
makes
the
sum
of
$10,192.60
here
in
question
a
dividend
for
all
purposes
and
not
merely
a
sum
subject
to
income
tax
as
if
it
were
a
dividend.
After
most
respectful
consideration
of
the
above
suggestions
I
find
myself
unable
to
agree.
Apart
from
the
inherent
difficulty
of
ascribing
to
the
term
"‘income’’
occurring
in
two
co-related
sections
of
the
same
Act,
such
widely
different
meanings,
it
seems
to
me
that
section
22
must
relate
to
the
income
of
the
company,
not
to
the
income
of
the
respondent
shareholder,
for
an
individual
shareholder
does
not
have
fiscal
periods
such
as
are
mentioned
in
section
22.
With
respect
to
the
$10,192.60
received
by
the
respondent
as
portion
of
the
cheque
for
$26,690.75,
I
think
it
was
not
originally
income
or
dividend
and
never
became
such.
It
could
be
created
a
dividend
only
by
a
resolution
of
the
directors
of
the
Security
Company.
The
Parliament
of
Canada
when
enacting
an
income
tax
act
cannot
make
that
a
dividend
which
is
not
dividend
any
more
than
it
can
make
a
woman
a
man.
What
it
can
do
is
to
impose
a
liability
for
income
tax
on
the
shareholder
in
respect
of
the
whole
or
any
portion
of
the
$26,690.75
received
by
her,
but
it
cannot
make
that
sum
or
any
part
of
it
a
dividend,
because
that
sum
plus
the
shares
in
the
Trust
Company
received
by
the
respondent
was
and
remains
her
proportionate
share
of
the
purchase
price
received
by
the
Security
Company
from
the
Trust
Company.
This
will
more
clearly
appear
from
a
consideration
of
the
procedure
under
which
the
transaction
in
question
was
carried
on.
When
the
provisional
agreement
of
March
1937
was
executed
the
undistributed
surplus
of
$212,431.41
was
an
asset
of
the
Security
Company
owned
by
it
as
a
corporate
entity.
No
shareholder
had
any
property
in
it.
The
Security
Company
sold
it
to
the
Trust
Company
and
it
passed
to
the
Trust
Company
along
with
and
as
part
of
the
undertaking
of
the
Security
Company,
and
the
Security
Company
received
as
consideration
the
obligation
of
the
Trust
Company
already
described.
Then
in
pursuance
of
that
obligation
the
Trust
Company
transferred
to
the
respondent
her
proportionate
share
of
the
purchase
price
due
by
it
to
the
Security
Company.
It
is
quite
true
that
the
respondent
received
the
benefit
of
her
proportion
of
the
undistributed
surplus,
but
she
did
not
get
it
as
income
or
as
dividend.
She
got
her
proportionate
share
of
the
purchase
price,
on
a
portion
of
which
if
it
had
accrued
in
1935
or
subsequently
section
19
imposed
an
income
tax
for
which
purpose
(and
for
that
alone)
it
is
‘‘deemed
to
be
a
dividend’’.
But
the
statute
does
not
purport
to
do
the
impossible
and
make
that
a
dividend
which
is
in
fact
a
part
of
the
purchase
price.
For
these
reasons
I
am
of
opinion
that
"income”
means
the
same
in
sections
19
and
22;
that
the
sum
of
$10,192.60
never
became
income
or
dividend;
that
sections
3,
9
and
12
of
the
Act
have
no
application
and
that
this
appeal
should
be
dismissed
with
costs.
Appeal
allowed
with
costs.
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