THORSON,
P.:
The
issue
in
this
appeal
under
the
Income
War
Tax
Act,
R.S.C.
1927,
ce.
97,
is
whether
a
member
of
the
legal
profession
employed
as
such
on
a
salary
of
a
fixed
amount
may,
for
the
purpose
of
determining
his
taxable
income,
deduct
from
such
fixed
amount
the
amount
of
the
Law
Society
annual
practising
fees
which
he
must
pay
to
entitle
him
to
practise
in
the
year
in
which
such
fees
are
payable.
The
appellant
is
qualified
is
a
legal
practitioner
in
the
Prov-
ince
of
Manitoba
in
both
branches
of
the
profession,
having
been
admitted
to
the
rolls
as
an
attorney-at-law
and
solicitor
im
October,
1919,
and
called
to
the
bar
as
a
barrister
in
March,
1920.
Sinee
his
admission
and
call
he
has
been
a
member
in
good
standing
of
the
Law
Society
of
Manitoba,
the
governing
body
of
the
legal
profession
in
that
province.
Membership
in
good
standing
in
the
Society,
which
is
governed
by
the
Law
Society
Act,
R.S.M.
1940,
c.
115,
as
amended,
is
a
prerequisite
of
the
lawful
practice
of
the
profession
in
the
province.
Sec.
38
empowers
the
benchers
of
the
Society
to
make
rules
and
by-laws
for
fixing
the
fees
payable
annually
by
each
barrister
and
attorney
and
for
striking
off
the
rolls
and
suspending
from
practice
any
barrister
or
attorney
for
nonpayment
of
such
fees.
By
Rule
74
of
the
Rules,
By-laws
and
Regulations
of
the
Society,
dated
September
28,
1939,
every
barrister,
solicitor,
or
barrister
and
solicitor
is
required
to
take
out
an
annual
certificate
in
order
to
be
entitled
to
practise
in
that
year,
the
fee
for
which
is
fixed
at
$20,
and
it
is
provided
that
if
such
annual
fee
is
not
paid
by
a
specified
date
he
shall
ipso
facto
stand
suspended
from
practising
his
profession
unless
and
until
he
shall
have
taken
out
his
certificate
and
that
if
he
does
not
do
so
by
a
further
specified
date
he
shall
ipso
facto
be
struck
off
the
rolls.
Then
Sec.
38A(1),
added
by
an
amending
Act
in
1943,
Statutes
of
Manitoba,
1943,
ce.
29,
Sec.
2,
empowered
the
benchers
to
create
a
special
fund,
later
called
the
reimbursement
fund,
by
the
levy
of
an
annual
assessment
on
the
members
of
the
Society
and
by
By-law
59,
dated
April
22,
1943,
the
benchers
fixed
an
assessment
of
$5
for
the
balance
of
the
year
1943
and
attached
the
same
consequences
of
suspension
from
practice
and
striking
off
the
rolls
for
nonpayment
of
such
assessment
as
for
nonpayment
of
the
annual
fees.
The
unauthorized
practice
of
law
is
prohibited
by
Sec.
93,
as
enacted
by
See.
3
of
the
amending
Act
of
1943,
and
serious
consequences
are
attached
to
such
unauthorized
practice.
See.
53(1)
provides
in
part
as
follows:
"53.(1)
No
person
shall
in
the
Province
of
Manitoba
(a)
carry
on
the
practice
or
profession
of
barrister
or
attorney-at-law
or
solicitor,
(b)
act
as
a
barrister
or
attorney-at-law
or
solicitor
in
any
superior
or
inferior
court
of
civil
or
criminal
jurisdiction
or
before
any
justice
of
the
peace,
(d)
hold
himself
out
as
or
represent
himself
to
be
or
practise
as
a
barrister
or
attorney-at-law
or
solicitor
or
for
gain
or
reward
act
as
a
barrister
or
attorney-at-law
or
solicitor,
unless
he
has
been
duly
called
or
admitted
.
.
.
,
or
while
he
is
disbarred
or
struck
off
the
rolls
as
a
barrister
or
attorney-at-law
or
solicitor,
or
while
he
is
suspended
from
practice.’’
Sec.
03(7)
provides
that
violation
of
Sec.
53
shall
be
an
offence
for
which
penalties
of
fine
or
imprisonment
are
provided
and,
in
addition,
See.
53(10)
authorizes
an
injunction
at
the
instance
of
the
Society
against
the
offending
party.
The
payment
of
the
annual
fee
is,
therefore,
necessary
to
the
lawful
and
continuous
practice
of
the
profession
in
the
year
in
which
it
is
payable.
The
appellant
is
employed
as
counsel
to
the
Corporation
of
the
City
of
Winnipeg
having
been
appointed
as
such
by
By-law
No.
15489
of
the
City,
dated
August
31,
1942.
By
such
by-law
he
is
required
to
devote
his
whole
time
to
the
duties
of
his
office
and
to
perform
such
duties
in
respect
of
such
office
as
may
be
prescribed
by
by-law.
Prior
to
his
appointment
there
was
only
one
chief
law
officer
of
the
City,
known
as
the
City
solicitor,
but
on
his
retirement
the
duties
of
his
office
were
divided
between
the
appellant
as
counsel
to
the
City
and
another
member
of
the
legal
profession
as
City
solicitor.
The
duties
of
the
City
solicitor
prior
to
this
division
of
duties
are
set
out
in
See.
119
of
By-law
No.
15330
of
the
City,
dated
June
10,
1941.
It
will
be
seen
that
they
include
functions
that
only
a
barrister
can
perform
as
well
as
those
that
are
ordinarily
done
by
a
solicitor.
The
appellant
had
charge
of
and
took
responsibility
for
all
litigation
in
which
the
City
was
interested,
although
process
was
issued
in
the
name
of
the
City
solicitor
;
he
prepared
the
pleadings,
did
all
the
work
of
preparation
and
conducted
the
proceedings
in
the
courts.
It
was
also
his
duty
to
investigate
claims
against
the
City,
to
advise
whether
they
should
be
resisted
or
settled,
and
to
negotiate
settlements.
He
represented
the
City
on
tax
appeals
before
the
assessment.
appeal
boards
and
the
courts.
He
was
called
upon
for
legal
opinions,
both
verbal
and
written,
when
required
by
the
City
Couneil
or
its
committees.
In
addition
to
these
duties
he
also
did
solicitor’s
work,
such
as
dealing
with
tax
sale
applications
and
passing
on
documents
affecting
real
estate
or
personal
property.
His
functions
and
duties
were
thus
those
of
a
solicitor
as
well
as
those
of
a
barrister.
The
appellant
paid
the
annual
fees
of
$20
and
the
assessment
for
the
reimbursement
fund
of
$5
for
the
year
1943
and
on
his
income
tax
return
for
that
year
claimed
the
sum
of
$25
as
a
deduction.
On
his
assessment
this
deduction
was
disallowed
and
its
amount
added
as
taxable
income
to
the
amount
shown
on
his
return:
From
this
assessment
he
appealed
to
the
Minister,
who
affirmed
the
assessment.
Being
dissatisfied
with
the
Minister’s
decision
he
now
brings
his
appeal
to
this
Court.
The
Minister’s
decision
reads:
“The
Honourable
the
Minister
of
National
Revenue
having
duly
considered
the
facts
as
set
forth
in
the
Notice
of
Appeal
and
matters
thereto
relating
hereby
affirms
the
said
Assessment
on
the
ground
that
the
taxpayer
has
been
correctly
assessed
and
that
the
deductions
claimed
are
not
permissible
under
the
provisions
of
the
Act.
Therefore
on
these
and
related
grounds
and
by
reason
of
other
provisions
of
the
Income
War
Tax
Act
the
said
Assessment
is
affirmed.’’
The
ground
thus
assigned
for
affirming
the
assessment
does
not
disclose
any
specific
reasons
at
all.
But
the
validity
or
otherwise
of
an
assessment
does
not
depend
upon
the
soundness
or
unsoundness
of
the
reasons
given
by
the
Minister
for
his
decision
on
the
appeal
to
him
under
Sec.
58
of
the
Act
or
whether
reasons
are
given
or
not.
The
appeal
to
the
Court
provided
by
the
Act
is
an
appeal
from
the
assessment,
not
from
the
Minister’s
decision
or
the
reasons
or
lack
of
reasons
for
it
:
Nicholson
Limited
v.
Minister
of
National
Revenue
[1945]
C.T.C.
263;
Ex.
C.R.
191
at
p.
200.
Two
lines
of
argument
were
laid
out
by
counsel
for
the
respondent
in
support:
of
the
disallowance
of
the
deduction.
One
was
that
it
was
excluded
under
Sec.
6(a)
of
the
Income
War
Tax
Act
which
provides
:
“6.
In
computing
the
amount
of
the
profits
or
gains
to.
be
assessed,
a
deduction
shall
not
be
allowed
in
respect
of.
.—
(a)
disbursements
or
expenses
not
wholly,
exclusively
and
necessarily
laid
out
or
expended
for
the
purpose
of
earning
the
income.
’’
Counsel
admitted
frankly
that
the
appellant
could
not
continue
to
be
counsel
for
the
City
of
Winnipeg
without
continuing
to
be
a
member
of
the
Law
Society
of
Manitoba
and
had
to
pay
the
annual
fees
and
special
assessment
sought
to
be
deducted
in
order
to
retain
such
membership
but
contended,
nevertheless,
this
this
disbursement
was
not
wholly,
exclusively
and
necessarily
laid
out
by
the
appellant
for
the
purpose
of
earning
the
income
in
that
it
was
made
only
for
the
purpose
of
retainmg
his
professional
qualification
so
that
he
could
earn
the
income
but
was
not
made
for
the
purpose
of
earning
it.
The
disbursement
was
said
to
be
related
to
the
maintenance
of
the
professional
qualification
but
not
to
the
earning
of
the
income.
It
was
admitted
by
counsel
that
while
the
taxing
authority
has
not
allowed
the
deduction
of
Law
Society
annual
fees
in
the
case
of
practising
lawyers
in
receipt
of
a
salary
of
a
fixed
amount
it
has
allowed
such
deduction
in
the
case
of
those
whose
remuneration
is
by
way
of
fees.
It
is
obvious,
of
course,
that
if
the
contention
put
forward
by
counsel
is
sound
then
the
deduction
is
no
more
justifiable
in
the
one
case
than
in
the
other,
for
the
same
argument
would
apply
to
both
;
the
deduction
is
permissible
either
in
both
cases
or
in
neither.
Moreover,
in
as
much
as
the
fees
paid
by
the
appellant
were
annual
practising
fees,
it
would
also
seem
to
follow
that
all
similar
fees,
such
as
annual
license
fees,
would
have
to
be
disallowed
as
deductions
on
the
ground
that
they
were
paid
to
entitle
the
taxpayer
to
do
business
but
not
for
the
purpose
of
earning
the
income.
In
support
of
his
contention
counsel
relied
upon
Simpson
v.
Tate
[1925]
2
K.B.
214.
There
a
county
medical
health
officer
joined
certain
medical
and
scientific
societies
in
order
that
by
means
of
their
meetings
and
published
transactions
he
might
be
aware
of
all
recent
advances
in
sanitary
science
and
keep
himself
up
to
date
on
all
medical
questions
affecting
public
health
and
sought
to
deduct
from
the
amount
of
his
emoluments
of
office
the
subscriptions
paid
by
him
to
these
societies.
The
deductions
were
claimed
under
the
United
Kingdom
Income
Tax
Act.
1918,
Schedule
E,
Rule
9,
which
reads:
‘
"
9.
If
the
holder
of
an
office
or
employment
of
profit
is
necessarily
obliged
to
incur
and
derfray
out
of
the
emoluments
thereof
the
expenses
of
travelling
in
the
performance
of
the
duties
of
the
office
or
employment,
or
of
keeping
and
maintaining
a.
horse
to
enable
him
to
perform
the
same,
or
other-
wise
to
expend
money
wholly,
exclusively,
and
necessarily
in
the
performance
of
the
said
duties,
there
may
be
deducted
from
the
emoluments
to
be
assessed
the
expenses
so
necessarily
in-
.
curred
and
defrayed.”
It
was
held
that
the
subseriptions
were
not
moneys
expended
"‘in
the
performance
of
his
official
duties’’,
and
the
deduction
was
disallowed.
Counsel
also
cited
Wales
v.
Graham
(1941)
24
T.C.
75.
There
a
county
divisional
engineer
sought
to
deduct
an
annual
subscription
paid
to
the
Institution
of
Civil
Engineers.
Candidates
for
the
appointment
had
to
be
members
of
the
Institution
or
hold
other
approved
qualifications
and
while
it
was
not
specifically
required
that
membership
of
the
Institution
should
be
continued
after
the
appointment
there
was
evidence
that
relinquishment
of
membership
would
render
impossible
the
continued
efficient
discharge
of
the
full
duties
of
the
office.
Retention
of
membership
depended
upon
payment
of
an
annual
subscription.
The
dededuction
was
claimed
under
Schedule
E,
Rule
9,
but
was
disallowed
with
no
reasons
given.
In
my
view
neither
of
the
cases
cited
has
any
application
to
the
question
under
review.
Even
on
the
facts
the
present
case
is
distinguishable.
In
neither
case
was
payment
of
the
subscriptions
sought
to
be
deducted
a
necessary
prerequisite
of
lawful
and
continuous
practice,
whereas
in
the
present
case
the
appellant
had
to
pay
the
law
society
fees.
They
were
annual
practising
fees
and
if
.
they
were
not
paid
the
appellant’s
attempt
to
carry
out
his
duties,
and
to
earn
the
income,
would
constitute
unlawful
practice
and
subject
him
not
only
to
penalty
but
also
to
injunction.
But
there
is
even
a
stronger
reason
for
not
applying
them.
Both
were
decided
under
Schedule
E,
Rule
9,
of
the
Income
Tax
Act,
1918,
of
the
United
Kingdom,
which
differs
radically
from
See.
6(a)
of
the
Income
War
Tax
Act.
Similar
remarks
would
apply
to
other
English
cases
decided
under
Schedule
E,
Rule
9,
or
similar
prior
legislation,
such
as
Cook
v.
Knott
(1887)
2
T.C.
246;
Revell
v.
Directors
of
Elworthy
Bros.
1’;
Co.
(1890)
3
T.C.
12;
Friedson
v.
Glyn-Thomas
(1922)
8
T.C.
302;
Andrews
v.
Astley
(1924)
8
T.C.
589;
Ricketts
v.
Colquhoun
[1926]
A.C.
1;
Folder
v.
Walters
(1930)
15
T.C.
380;
Blackwell
v.
Mills
[1945]
2
All
E.R.
655.
These
show
that
in
the
eases
under
Schedule
E
the
deduction
of
expenditures
from
the
amounts
of
the
emoluments
assessed
under
the
schedule
is
permitted
only
to
the
extent
that
they
fall
within
the
express
terms
of
Rule
9,
which
are
rigidly
applied.
The
deduction
is
limited
to
expenditures
"‘in
the
performance’’
of
the
duties
of
the
office;
if
they
are
made
otherwise
than
‘‘in
thé
performance”
of
the
duties
they
are
not
deductible.
If
there
were
any
provision
in
the
Income
War
Tax
Act
similar
to
Rule
9
of
Schedule
E
it
might
be
argued
that
the
moneys
paid
by
the
appellant
to
the
Law
Society
of
Manitoba
were
not
deductible
in
that
they
were
not
paid
in
the
performance
of
his
duties
as
a
lawyer,
but
there
is
no
such
provision.
Sec.
6(a)
is
quite
different.
In
interpreting
the
terms
of
a
statute
it
is
always
dangerous
to
apply
decisions
in
other
jurisdictions
upon
other
statutes
that
are
not
in
pari
materia;
and
nowhere
is
it
more
dangerous
than
in
the
case
of
such
an
Act
as
the
I
n-come
War
Tax
Act.
In
my
view,
cases
decided
in
the
United
Kingdom
under
Schedule
E,
Rule
9,
of
the
I
ncome
Tax
Act,
1918,
have
no
application
to
the
proper
interpretation
of
See.
6(a)
of
the
Income
War
Tax
Act,
or
to
the
determination
of
what
disbursements
or
expenses
are
deductible
under
such
Act.
If
aid
is
to
be
obtained
from
decisions
under
the
United
Kingdom
Act,
such
aid
should
be
sought
from
decisions
rendered,
not
under
Schedule
E,
Rule
9,
but
under
Schedule
D,
Case
I
and
II,
Rule
3(a),
which
reads
as
follows:
"3.
In
computing
the
amount
of
the
profits
or
gains
to
be
charged,
no
sum
shall
be
deducted
in
respect
of—
(a)
any
disbursements
or.
expenses,
not
being
money
wholly
and
exclusively
laid
out
or
expended
for
the
purposes
of
the
trade,
profession,
employment
or
vocation.
‘
‘
And
even
then
such
decisions
should
be
read
with
care
in
interpreting
Sec.
6(a)
of
the
Canadian
Act,
as
indicated
in
Siscoe
Gold
Mines
Ltd.
v.
Minister
of
National
Revenue,
[1945],
C.T.C.
397,
Ex.
C.R.
257
at
262.
In
Strong
&
Co.
Limited
v.
Woodifield
[1906]
A.C.
448
the
House
of
Lords
dealt
with
the
corresponding
rule
under
the
Income
Tax
Act,
1842.
At
page
453,
Lord
Davey
said
of
the
words
"‘for
the
purposes
of
the
trade’’,
‘‘These
words
are
used
in
other
rules,
and
appear
to
me
to
mean
for
the
purpose
of
enabling
a
person
to
carry
on
and
earn
profits
in
the
trade,
&e.
I
think
the
disbursements
permitted
are
such
as
are
made
for
that
purpose.
It
is
not
enough
that
the
disbursement
is
made
in
the
course
of,
or
arises
out
of,
or
is
connected
with,
the
trade,
or
is
made
out
of
the
profits
of
the
trade.
It
must
be
made
for
the
purpose
of
earning
the
profits.
‘
‘
And
in
Robert
Addie
d
Sons’
Collieries
v.
Inland
Revenue
[1924]
S.C.
231
at
235
the
Lord
President
(Clyde)
of
the
Scottish
Court
of
Session
laid
down
the
following
test
:
"‘What
is
‘money
wholly
and
exclusively
laid
out
for
the
purposes
of
the
trade’
is
a
question
which
must
be
determined
upon
the
principles
of
ordinary
commercial
trading.
It
is
necessary,
accordingly,
to
attend
to
the
true
nature
of
the
expenditure,
and
to
ask
oneself
the
question,
It
is
a
part
of
the
Company’s
working
expenses;
is
it
expenditure
laid
out
as
part
of
the
process
of
profit
earning
;’’
and
this
test
was
approved
by
the
Judicial
Committee
of
the
Privy
Couneil
in
Tata
Hydro-Electric
Agencies,
Bombay
v.
Income
Tax
Commissioner,
Bombay
Presidency
and
Aden
[1937]
A.C.
685
at
696.
In
See.
6(a)
of
the
Income
War
Tax
Act,
the
words
‘‘for
the
purpose
of
earning
the
income
’
’
take
the
place
of
the
words
‘‘for
the
purposes
of
the
trade,
etc.,”
in
the
corresponding
English
rule
under
Schedule
D,
but
their
effect
is,
I
think,
the
same.
It
was
so
held
by
the
Supreme
Court
of
Canada
in
Minister
of
National
Revenue
v.
Dominion
Natural
Gas
Co.
[1940-41]
C.T.C.
155,
where
the
test
laid
down
in
the
Addie
case
(supra)
for
the
English
rule
was
expressly
adopted
as
applicable
to
See.
6(a).
In
the
Addie
case
(supra)
Lord
Clyde
approved
the
statement
of
Lord
Davey
in
Strong
&
Co.,
Limited
v.
Woodifield
(supra).
The
two
eases
should,
I
think,
be
read
together
and
the
words
“for
the
purpose
of
earning
the
income”
in
Sec.
6(a)
dealt
with
in
the
same
way
as
Lord
Davey
dealt
with
the
words
‘‘for
the
purposes
of
the
trade’’.
It
is
obvious
that
the
making
of
an
expenditure
cannot
by
itself
serve
the
purpose
of
earning
the
income
but
it
may
enable
the
maker
of
it
to
earn
it,
and
thus
be
a
working
expense
and
part
of
the
process
of
earning
the
income,
and,
therefore,
be
made
for
the
purpose
of
earning
it.
Sec.
6(a)
is
an
excluding
section.
It
prohibits
the
deduction
of
disbursements
or
expenses
‘‘not
wholly,
exclusively
and
necessarily
laid
out
or
expended
for
the
purpose
of
earning
the
income
’
Can
it
reasonably
be
said
that
the
amount.
paid
by
the
appellant
to
the
Law
Society
falls
within
the
exelusions
of
the
section
?
I
do
not
think
so.
The
appellant
had
to
pay
this
amount
in
1943
in
order
to
be
entitled
to
practise
law
in
that
year.
It
was
an
annual
practising
fee,
If
he
did
not
pay
it
he
would
be
suspended
and
then
struck
off
the
rolls..
Any
attempt
on
his
part
thereafter
to
perform
his
duties
would
be
contrary
to
law
and
constitute
an
offence
for
which
he
would
be
subject
to
a
penalty
and
also
to
an
injunction
preventing
him
from
continuing
his
attempt
at
practice.
The
payment
of
the
amount
was,
therefore,
necessary
to
the
lawful
and
continuous
performance
of
his
duties
and
the
earning
of
the
Income.
Moreover,
I
think
it
was
inherent
in
the
contractual
relationship
between
the
appellant
and
the
City
of
Winnipeg
that
he
should
continue
to
be
a
lawyer
in
good
standing
since
his
duties
could
not
be
performed
without
such
standing.
The
maintenance
of
good
standing
was
essential
to
the
valid
performance
of
his
contract
without
which
he
could
not
earn
the
income.
In
my
view,
he
had
to
pay
the
fees
to
earn
the
income
and
could
not
do
so
without
paying
them.
The
expenditure
was
an
annual
one
which
he
could
not
escape
but
had
to
make.
It
constituted
a
working
expense
as
part
of
the
process
of
earning
the
income.
Likewise,
it
was
clearly
made
for
the
purpose
of
enabling
him
to
carry
on
his
duties
and
earn
the
income.
That
it
was
necessarily
made
for
such
purpose
is
quite
clear,
and
there
is
nothing
to
indicate
that
it
was
made
otherwise
than
wholly
and
exclusively
for
such
purpose.
In
my
view,
the
payment
by
a
practising
lawyer
to
his
law
society
of
his
annual
practising
fees
or
an
obligatory
annual
assessment
is
not
a
disbursement
or
expense
"‘not
wholly,
exclusively
and
necessarily
laid
out
or
expended
for
the
purpose
of
earning
the
income
‘
‘
and
is
not
excluded
as
a
deduction
from
his
remuneration
by
Sec.
6
(a)
of
the
Act.
Moreover,
it
meets
the
test
of
deductibility
of
expense
laid
down
in
the
cases
referred
to.
The
appellant
is,
therefore,
entitled
to
a
deduction
of
the
amount
claimed
by
him
unless
he
is
excluded
therefrom
for
some
other
reason
such
as
the
one
advanced
by
counsel
for
the
appellant.
It
was
contended
that
since
the
appellant
had
a
salary
of
a
fixed
amount
there
could
be
no
deduction
of
any
expenses
from
it,
and
that
the
amount
of
the
income
being
fixed
it
was
of
itself
"‘net”
income
and,
therefore,
taxable
income.
I
have
already
referred
to
the
admission
made
by
counsel
that
the
department
has
allowed
the
deduction
of
the
annual
fees
paid
by
practising
lawyers
to
their
law
societies
where
their
remuneration
is
by
way
of
fees,
but
has
not
allowed
any
such
deduction
where
it
is
by
way
of
fixed
salary.
I
am
unable
to
see
any
justification
in
principle
for
any
such
discrimination
of
treatment,
and
it
ought
not
to
be
approved
by
the
Court
unless
the
law
clearly
so
demands.
In
disallowing
the
deduction
in
the
case
of
the
lawyer
in
receipt
of
a
fixed
salary
the
department
has
consistently
relied
upon
a
dictum
of
Audette
J.
in
the
case
of
In
re
Salary
of
Lieutenant-Governors
[1931]
Ex.
C.R.
232.
In
that
case
the
appellant
sought
to
deduct
from
the
amount
of
his
salary
the
amounts
of
the
sums
expended
by
him
as
Lieutenant-
Governor
for
social
entertainments.
Audette
J.
held
against
him
and
it
is
clear
that
the
ratio
decidendi
of
the
judgment
was
that
the
appellant
was
under
no
legal
obligation,
contractual
or
otherwise,
to
make
the
expenditures
sought
to
be
deducted
and
they
were,
therefore,
"‘not
disbursements
or
expenses
wholly,
exclusively
and
necessarily
laid
out
or
expended
for
the
purpose
of
earning
the
income’’,
within
the
meaning
of
See.
3(8),
now
See.
6(a),
of
the
Income
War
Tax
Act.
Further
than
this
it
was
not
necessary
for
the
Court
to
go.
The
dictum
upon
which
the
department
relies
appears
on
page
235,
where
Audette
J.
says
of
See.
3(8)
:
“
"
It
is
quite
obvious
that
this
section
does
not
apply
to
a
ease
of
this
kind.
The
disbursements
that
must
be
made
to
earn
profit
are
those
in
connection
with
unascertained
incomes,
unlike
a
case
of
salary,
where
disbursements
are
made
at
the
discretion
and
the
will
of
the
taxpayer,—and
after
all
are
not
these
disbursements
measured
by
the
hospitable
disposition
of
each
Lieutenant-Governor,
and
are
they
not
freely
and
voluntarily
incurred
and
so
not
enforceable
by
law.’’
“
"
What
that
section
means
is
that
in
"
a
trade
or
commercial
or
financial
or
other
business
or
calling
before
the
amount
upon
which
the
tax
is
to
be
levied
is
ascertained,
the
amounts
expended
to
earn
the
same
must
be
deducted
‘
‘
;
and
then
the
dictum
follows:
"‘But
it
is
otherwise
in
the
case
where
a
person
received
an
annual
salary
from
any
office
or
employment—an
amount
which
is
duly
ascertained
and
capable
of
computation,
and
which
constitutes
of
itself
a
net
income’’
In
Samson
v.
Minister
of
National
Revenue
[1943]
C.T.C.
47,
I
expressed
the
opinion
that
the
dictum
of
Audette
J.
in
the
Lieutenant-Governor
9
s
case
(supra),
namely,
that
an
annual
salary
from
any
office
or
employment,
being
an
amount
which
is
duly
ascertained
and
capable
of
computation,
is,
therefore,
‘‘of
itself
”
a
“
net
‘
‘
income,
was
not
necessary
to
the
determination
of
the
issue
before
the
Court;
that
it
went
belond
the
ratio
decidendi
of
the
judgment,
namely
that
there
was
no
legal
obligation
of
any
kind
on
the
part
of
the
Lieutenant-Governor
to
incur
the
expenses
for
social
entertainments;
and
that
it
was,
as
a
matter
of
law,
obiter;
and
I
held
that
the
decision
is
not
authority
for
the
view
that
sums
of
money
received
by
a
taxpayer,
‘‘as
being
wages,
salary,
or
other
fixed
amount’’,
are
necessarily
‘
‘
net
’
’
or
taxable
income.
Notwithstanding
this
statement,
the
department
has
continued
its
practice
of
disallowing
the
deduction
of
the
annual
practising
fees
in
the
case
of
lawyers
receiving
a
salary
of
a
fixed
amount
on
the
ground
that
it
was
settled
law
by
the
Lieutenant
Governor's
case
{supra}
that
such
salary,
being
duly
ascertained
and
capable
of
computation,
is
of
itself
net
income.
The
law
is
not
so
settled;
not
only
is
the
dictum
referred
to
obiter,
but
it
is
also,
in
my
opinion,
at
variance
with
the
definition
of
"income’‘
in
Sec.
3
of
the
Act,
and
it
ought
not
to
be
followed.
Sec.
3
reads
in
part
as
follows:
"3.
For
the
purposes
of
this
Act,
'income’
means
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,
or
as
being
profits
from
a
trade
or
commercial
or
financial
or
other
business
or
calling,
directly
or
indirectly
received
by
a
person
from
any
office
or
employment,
or
from
any
profession
or
calling,
or
from
any
trade,
manufacture
or
business
.
.
.”
On
the
hearing
before
me
counsel
for
the
respondent
relied
upon
the
dictum,
and
contended
that
under
the
definition
"wages,
salary
or
other
fixed
amount’’,
being
ascertained
and
capable
of
computation,
was
net
income.
I
do
not
agree.
In
the
Samson
case
(supra),
at
page
58,
the
following
appears:
“The
term
‘net’
is
an
integral
part
of
the
statutory
definition
of
taxable
income.
It
is
the
annual
‘net’
profit
or
gain
that
is
‘income’
for
the
purposes
of
the
taxing
statute.
The
statement
made
by
Audette
J.
in
the
Lieutenant-Governor’s
case
to
the
effect
that
an
income,
such
as
an
annual
salary,
which
is
duly
ascertained
and
capable
of
computation,
constitutes
‘of
itself’
a
‘net’
income,
is
in
my
opinion
at
variance
with
the
statutory
definition
in
that
it
does
not
give
proper
effect
to
the
relationship
of
the
word
‘net’
in
the
statutory
definition
to
the
words
that
follow.
The
statement
assumes
that
it
is
only
with
respect
to
‘unascertained’
income
that
there
is
any
necessity
to
consider
deductions
in
order
to
arrive
at
the
amount
of
the
annual
‘net’
profit
or
gain
or
gratuity
that
is
taxable
income.
The
statute,
in
my
opinion,
shows
clearly
that
it
is
the
‘net’
profit
or
gain
or
gratuity
that
is
taxable
income
whether
the
profit
or
gain
or
gratuity,
of
which
only
the
‘net’
is
taxable
income,
is
ascertained
or
unascertained.
The
test
of
taxability
of
an
annual
gain
or
profit
or
gratuity
is
not
whether
it
is
‘ascertained’
or
‘unascertained’,
but
whether
it
is
‘net’.
The
word
‘net’
in
the
statutory
definition
of
taxable
income
is
just
as
referable
to
what
is
ascertained
as
it
is
to
what
is
unascertained.
’
’
I
see
no
reason
for
departing
from
the
views
thus
expressed.
Moreover,
the
words
ascertained
’
and
'
unascertained
’
appear
in
a
parallel
construction,
namely,
"‘whether
ascertained
and
capable
of
computation
as
being
.
.
.
,
or
unascertained
as
being
.
.
.
’’;
and
both
equally
relate
to
what
precedes
them.
The
adoption
of
the
dictum
would
mean
that
"‘ascertained’’
would
relate
to
‘‘net
profit
or
gain
or
gratuity’’
and
be
synonymous
with
it,
whereas
“unascertained”
would
relate
only
to
‘‘profit
or
gain
or
gratuity’’
or,
in
other
words,
that
while
“ascertained”
would
relate
to
‘‘net’’
profit
or
gain
or
gratuity,
“unascertained”
would
relate
to
‘‘gross’’
profit
or
gain
or
gratuity.
Such
a
construction
would
be
a
distortion
of
plain
language;
both
words
relate
to
the
same
thing.
There
is
no
grammatical
justification
for
differentiating
between
them
and
no
ground
of
principle
for
doing
so.
In
my
view,
it
is
clear
that
what
is
to
be
taxed
is
the
annual
i
net
‘
‘
profit
or
gain
or
gratuity,
regardless
of
whether
the
profit
or
gain
or
gratuity
is
“ascertained”
as
being
one
kind
of
income
or
‘‘unascertained’’
as
being
a
different
kind.
Such
an
interpretation
is
a
sound
grammatical
one;
it
also
removes
the
unfair
discrimination
of
the
present
departmental
practice.
In
my
judgment,
an
income
is
not
necessarily
net
annual
profit
or
gain
or
gratuity
and,
therefore,
taxable
income
merely
because
it
is
a
salary
of
a
fixed
amount,
and
there
is
nothing
in
the
Income
War
Tax
Act
that
excludes
the
deduction
of
proper
disbursements
or
expenses
from
such
fixed
amount
in
order
to
determine
the
amount
thereof
that
is
taxable.
That
being
so
and
the
amount
claimed
by
the
appelant
not
being
excluded
from
deduction
by
Sec.
6(a),
I
am
of
the
opinion
that
the
appellant
is
entitled
to
deduct
it.
His
right
to
do
so
is
not
affected
by
the
fact
that
his
remuneration
is
by
way
of
a
fixed
salary
instead
of
by
way
of
fees.
The
appeal
will,
therefore,
be
allowed
with
costs.
Appeal
allowed.
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