ANGERS,
J.:—This
is
an
appeal
under
see.
53
and
following
of
the
Income
War
Tax
Act
made
applicable
to
matters
arising
under
the
provisions
of
the
Excess
Profits
Tax
Act
in
virtue
of
sec.
14
of
the
latter
which
enacts
:
Without
limiting
any
of
the
provisions
contained
in
this
Act,
sections
forty
to
eighty-seven
both
inclusive
of
the
Income
War
Tax
Act,
excepting
subsection
three
of
the
first
paragraph
of
subsection
five
of
section
forty-eight,
Part
VIIIA
and
section
seventy-six
A
thereof,
shall,
mutatis
mutandis
apply
to
matters
arising
under
the
provisions
of
this
Act
to
the
same
extent
and
as
fully
and
effectively
as
they
apply
under
the
provisions
of
the
Income
War
Tax
Act,
and
notwithstanding
anything
contained
in
that
Act
the
provisions
of
Part
VIII
are
applicable
under
this
Act
in
respect
of
assessments
of
the
nineteen
hundred
and
forty-six
and
subsequent
taxation
years.
‘
‘
The
appellant,
at
a
date
which
is
not
indicated
in
the
copy
of
the
appellant’s
return
for
the
year
ended
December
31,
1940,
forming
part
of
the
record
of
the
Department
of
National
Revenue
produced,
but
at
all
events
sometime
in
1941,
delivered
to
the
Inspector
of
Income
Tax
at
Winnipeg,
province
of
Manitoba,
his
income
tax
return
for
the
year
ended
December
31,
1940,
showing
a
total
income
of
$13,748.47
and
deductions
for
donations
to
charitable
and
patriotic
organizations
amounting
to
$1,190
and
for
an
exemption
of
$1,500,
leaving
a
net
taxable
income
of
$11,058.47
and
showing
a
general
tax
of
$2,827.80,
a
surtax
of
$131.25
and
a
National
Defence
tax
of
$140.48,
making
a
grand
total
of
$3,099.53.
On
June
10,
1941,
the
appellant
transmitted
to
the
said
Inspector
of
Income
Tax
his
excess
profits
tax
return,
showing
a
profit
for
the
fiscal
year
ended
December
31,
1940,
of
$903.94
and
a
tax
at
12%
of
$108.48,
net
taxable
profits
including
the
taxpayer’s
salary
under
the
Income
War
Tax
Act
for
the
fiscal
periods
ending
December
31,
1936,
1937,
1938
and
1939
totalling
$3,564.36
and
‘‘standard
profits’’
for
such
years
divided
by
four,
i.e.,
the
duration
of
said
periods,
amounting
to
$891.09
and
showing
further
a
profit
for
the
year
1940
in
excess
of
the
standard
profits
of
$12.85
and
the
excess
profits
tax
(75%)
payable
thereon,
amounting
to
$9.64.
A
notice
of
assessment
concerning
the
excess
profits
tax
appears
to
have
been
mailed
to
the
appellant
on
August
9,
1943.
It
shows
a
net
taxable
income
in
the
sum
of
$7,366.95,
an
amount
levied
at
12%
amounting
to
$834.03
plus
$29.58
for
interest,
an
amount
paid
on
account
of
capital
of
$633.32,
leaving
a
balance
of
$250.71
on
the
tax
levied
and
an
amount
of
$29.58
for
interest,
making
a
total
of
$280.29,
payable
as
at
September
9,
1943.
A
notice
of
appeal
from
the
notice
of
assessment
in
connection
with
the
excess
profits
tax
was
served
upon
the
Minister
on
or
about
September
7,
1943.
On
March
8,
1944,
the
Minister,
acting
and
represented
by
the
Income
Tax
Commissioner,
affirmed
the
assessment
and
notified
the
appellant
of
his
decision.
On
April
5,
1944,
the
appellant
mailed
to
the
Minister
a
notice
of
dissatis-
faction
accompanied
by
a
statement
of
facts,
in
accordance
with
sec.
60
of
the
Income
War
Tax
Act.
On
May
16,
1944,
the
Minister
replied
to
the
notice
of
dissatisfaction
by
denying
the
allegations
contained
in
the
notice
of
appeal
and
the
notice
of
dissatisfaction
as
far
as
incompatible
with
his
decision
and
affirmed
the
assessment
as
levied.
Pleadings
were
filed
by
consent
of
the
parties.
The
statement
of
claim
alleges
in
substance
:
the
appellant
is
and
was
in
1940
the
manager
of
International
Lioan
Co.,
whose
head
office
is
in
the
city
of
Winnipeg,
province
of
Manitoba,
and
he
resides
in
the
said
city
;
the
appellant
was
also
in
the
said
year
owner
of
certain
real
estate
mortgages
and
agreements
from
which
he
derived
an
income
by
way
of
interest
thereon
;
the
appellant’s
taxable
income
for
1940
amounted
to
$12,666.95,
being
made
up
of
salary
received
from
International
Loan
Co.,
insurance
commissions,
dividends
and
interest
earned
on
his
real
estate
mortgages
and
agreements
;
the
appellant
was
assessed
for
the
year
1940
under
the
Excess
Profits
Tax
Act
according
to
the
following
tabulation
:
net
income
(including
mortgage
interest
|
($6,078.59)
and
dividend
($3800),
|
|
|
totalling
$6,378.59)
|
____$13,856.95
|
|
less
donations
|
|
1,190.00
|
|
taxable
income
|
-
|
$12,666.95
|
|
less
dividend
from
International
Loan
Co.,
|
|
|
not
deemed
to
be
income
from
"‘being
|
|
|
in
business”
|
|
300.00
|
|
$12,366.95
|
|
less
salary
allowed
|
|
9,000.00
|
|
leaving
|
.
|
$
7,366.95
|
subject
to
12%
excess
profits
tax—$884.03;
no
part
of
appellant’s
income
is
derived
from
‘‘being
in
business”
or
from
a
"‘business''
or
‘‘one
or
more
businesses’’
as
defined
in
para.
2(g)
of
the
Excess
Profits
Tax
Act
and
the
appellant
is
not
taxable
under
the
said
Act;
in
the
alternative,
the
appellant’s
net
income
of
$12,666.95
includes
the
sum
of
$6,078.59
which
is
the
amount
of
interest
earned
on
the
appellant’s
real
estate
mortgage
investments
and
agreements
and
such
real
estate
mortgage
investments
are
not
a
"‘business''
or
‘‘one
or
more
businesses’’
as
defined
in
para.
2(g)
of
the
Excess
Profits
Tax
Act
and
consequently
the
said
sum
of
$6,078.59
is
not
taxable
under
the
said
Act;
the
appellant
therefore
claims:
a
declaration
that
no
part
of
his
income
is
taxable
under
the
Excess
Profits
Tax
Act;
in
the
alternative,
a
declaration
that
the
amount
of
his
income
from
personal
mortgage
investments
and
agreements
is
not
taxable
under
the
said
Act
;
costs.
In
his
statement
of
defence
the
respondent
pleads
in
substance
:
he
admits
that
the
appellant
is
and
was
in
1940
the
manager
of
International
Loan
Co.
and
the
owner
of
real
estate
mortgages
and
agreements
from
which
he
derived
an
income
by
way
of
interest
thereon
;
he
admits
that
the
appellant’s
taxable
income
for
1940
amounted
to
$12,666.95
made
up
of
salary
received
from
International
Loan
Co.,
insurance
commissions,
dividends
and
interest
earned
on
real
estate
mortgages
and
agreements
;
he
admits
that
the
appellant
was
assessed
for
the
year
1940
under
the
Excess
Profits
Tax
Act
according
to
the
tabulation
set
forth
in
the
statement
of
claim
;
he
denies
the
other
allegations
of
the
statement
of
claims;
and
adds
:
the
profits
assessed
for
excess
profits
tax
constitute
the
income
derived
by
the
appellant
from
the
carrying
on
of
one
or
more
businesses
within
the
meaning
of
para,
(g)
of
sec.
2
of
the
Excess
Profits
Tax
Act
and
the
appellant
was
properly
assessed
under
the
provisions
of
sec.
3
of
the
said
Act.
The
only
oral
evidence
adduced
was
the
testimony
of
the
appellant,
which
I
believe
appropriate
to
summarize
briefly.
Argue
testified
that
he
is
the
manager
of
International
Loan
Co.,
which
has
its
head
office
in
the
city
of
Winnipeg,
and
that
he
has
a
large
number
of
shares
therein
and
a
considerable
number
of
mortgages
and
agreements.
He
thought
that
the
amount
of
these
mortgages
and
agreements
was
something
over
$100,000
and
said
that
what
is
shown
in
his
income
tax
return
is
correct.
According
to
him
the
largest
number
of
mortgages
were
on
city
homes
but
there
were
some
on
farms.
Asked
if
he
could
state
how
many
mortgages
and
clear
title
agreements
he
had
in
1940,
Argue
replied
that
he
did
not
know
exactly
but
that
the
number
was
between
60
and
70.
He
said
that
these
mortgages
ran
from
five
to
sometimes
ten
and
fifteen
years
but
that
some
of
the
five-year
mortgages
were
not
paid
off
as
the
debtors
were
unable
to
pay.
He
added
that
some
had
been
carried
since
1929.
He
stated
that
he
had
no
short
term
mortgages
and
that
some
of
his
mortgages
had
run
for
some
seventeen
years.
He
declared
that
he
does
not
have
to
look
after
the
interest
and
receipts
on
his
mortgages,
as
he
has
a
secretary
who
does
that
for
him.
Asked
how
much
time
he
devotes
personally
to
his
mortgages,
Argue
gave
the
following
information
(p.
8)
:
"A.I
think
about
half
an
hour
a
day,
and
lots
of
days
I
do
not
devote
any
time.
If
my
secretary
tells
me
everything
is
up
to
date
I
do
not
bother
with
it
at
all,
it
is
only
when
a
mortgage
falls
in
arrears
I
have
to
pay
any
attention
to
it.
"‘Q.
As
a
matter
of
fact,
are
you
in
Winnipeg
all
the
time
or
are
you
away
?
"‘A.
No,
I
have
to
travel
for
the
Company
a
great
deal.
We
have
clients
and
mortgage
loans
as
far
as
Alberta,
and
I
cover
almost
all
these
territories.
"Q.
At
times
you
are
away
for
weeks
and
months?
"‘A.
Yes,
sir,
sometimes
two
months
at
a
time.
"‘Q.
During
that
time
do
you
pay
any
attention
to
your
own
personal
investments?
"‘A.
No,
I
can’t
do
that.
"‘Q.
So
they
are
looked
after
by
your
secretary
?
"‘A.
That
is
correct.’’
Argue
declared
that
the
International
Loan
Co.
operates
only
a
mortgage
loan
business
and
that
total
amount
of
its
loans
at
the
beginning
of
1944
was
about
$1,125,000.
He
stated
that
his
relations
with
the
company
were
covered
by
an
agreement
dated
May
31,
1921,
and
that
he
was
acting
as
manager
under
this
agreement
in
1940.
The
agreement
was
filed
as
exhibit
1.
He
asserted
that
this
agreement
fully
sets
out
all
his
relations
with
the
company.
According
to
him
this
agreement,
which
was
for
a
period
of
twenty
years
and
expired
on
May
31,
1941,
has
since
been
renewed.
Argue
declared
that
he
devotes
all
his
time
to
International
Loan
Co.
and
that
he
has
no
outside
business
whatever.
He
added
that
all
the
business
of
the
company
is
carried
on
and
that
all
the
agreements
are
made
in
its
name
and
that
all
the
mortgages
are
in
its
favour.
He
stated
that
the
funds
of
the
company
are
deposited
in
a
bank
designated
by
the
Board
of
Directors,
that
he
does
not
sign
the
cheques
for
the
company
alone
but
that
there
must
be
two
signatures,
viz.,
that
of
the
secretary-treasurer
and
himself
or,
in
case
of
his
absence,
by
another
director
authorized
to
sign.
He
said
that
International
Loan
Co.
owns
the
furniture,
books,
supplies
and
goodwill
of
the
company
and
that
under
the
agreement
(exhibit
1)
he
pays
the
rent,
telephone
and
salaries.
He
said
that
he
became
agent
for
an
insurance
company
for
the
writing
of
fire
insurance
policies
for
the
reason
that
the
mortgages
and
securities
of
the
company
require
fire
insurance
and,
as
the
company
did
not
wish
to
attend
to
that
itself,
it
appointed
him
as
agent.
He
stated
that
he
does
not
carry
on
any
other
insurance
business
to
any
extent
except
in
cases
where
mortgagors
pay
off
their
mortgages
and
wish
the
company
to
rewrite
the
insurance.
He
asserted
that
the
revenue
from
his
insurance
activities
scarcely
pays
the
operating
expenses.
He
declared
that
the
item
of
$15,182.72
appearing
in
the
financial
statement
as
""
property
account—personal’’,
filed
with
the
Inspector
of
Income
Tax,
for
1940
represents
the
value
of
his
home
at
Winnipeg
and
his
summer
home
at
Matlock
Beach,
both
of
which
he
occupies
himself
and
from
which
he
draws
no
revenue.
Shown
a
financial
statement
as
at
December
31,
1940,
dated
April
21,
1941,
signed
by
David
Cooper
and
Co.,
accountants
and
auditors
of
Winnipeg,
Argue
said
that
it
is
his
auditor’s
report
of
his
affairs
during
the
year
1940.
This
statement
was
filed
as
exhibit
2.
He
stated
that
he
made
five
new
mortgage
loans
in
1940,
seven
in
1939
and
seven
in
1941.
Asked
by
counsel
for
respondent
if
these
five
loans
were
large
or
small,
Argue
mentioned
the
following
:
a
loan
of
$1,777.34
to
W.
J.
Watson,
a
loan
of
$1,000
to
Joseph
O.
Belanger,
part
of
which
was
a
re-loan
as
the
borrower
already
had
a
loan
of
about
$500
which
he
discharged,
a
loan
of
$1,675.90
to
Ethel
E.
Thorogood,
a
loan
of
$750
to
Ida
Higgins,
a
loan
of
$600
to
Walter
S.
McGibbon,
a
loan
of
$835
to
John
Carsone.
Argue
added
that
there
is
a
sale
of
a
house
taken
over
on
a
mortgage
from
George
F.
Poulter,
which
he
had
to
rebuild
at
a
cost
of
$4,500.
He
said
he
had
the
title
to
the
property
and
had
sold
it
to
Poulter
on
the
instalment
plan.
Argue
stated
that
some
of
these
loans
were
re-loans
and
that,
if
he
were
to
give
the
figures
exactly,
he
would
have
to
have
his
secretary.
Counsel
for
respondent
told
Argue
that
he
was
informed
that
there
are
sixteen
loans
which
do
not
appear
in
his
income
tax
return
of
1940.
The
witness
replied
that
he
does
not
know
anything
about
it,
that
the
auditor
makes
his
report
and
that
he
signs
it.
Referring
to
a
loan,
set
forth
in
the
witness’
return
for
1940,
to
one
F.
L.
Young
for
$1,777.34,
counsel
told
Argue
that
this
loan
must
have
been
on
his
books
at
that
time
and
that
it
did
not
appear
in
1939.
Argue
replied
that
if
the
loan
had
been
paid
off
they
would
not
appear
in
the
ledger
at
all.
Counsel
intimated
that
he
could
give
the
witness
the
names
of
sixteen
loans
which
did
not
appear
as
loans
in
1939
but
did
appear
in
1940.
Argue
admitted
that
he
never
checked
this
up,
that
he
just
took
his
secretary’s
statement
and
that
it
may
be
wrong.
He
stated
that
possibly
some
of
these
loans
had
been
paid
off
since
and
that
accordingly
they
would
not
appear
in
the
ledger.
He
repeated
that
there
were
five
loans
placed
in
1940
shown
in
the
ledger.
Argue
declared
that
the
International
Loan
Co.
carries
on
the
business
of
loaning
money
on
mortgages
and
that
besides
it
holds
some
government
bonds.
He
denied
that
he
deals
pretty
much
in
his
personal
capacity
as
the
company
does
in
its
corporate
capacity,
adding
that
all
he
has
consists
of
a
few
savings
put
into
these
securities.
He
pointed
out
that
his
savings
are
not
always
put
into
the
same
securities
on
which
the
company
loans
money
and
that
many
times
he
has
accommodated
clients
of
the
company
with
a
larger
percentage
loan
than
the
one
to
which
the
company
is
limited
by
law,
viz.,
60%.
He
said
he
first
started
to
loan
his
personal
funds
in
this
manner
around
1925
or
1926.
He
added
that
he
kept
money
on
hand
"‘all
through
the
panic’’
and
loaned
to
any
shareholder
whose
shares
were
fully
paid,
who
came
to
the
office
to
borrow
on
his
shares,
as
the
company
was
not
allowed
to
do
this.
He
added
that
he
sometimes
loaned
on
agreements
for
sale,
in
which
case
the
person
making
the
loans
paid
the
inspection
fee
which
was
added
to
the
loan.
He
stated
however
that
the
person
making
the
inspection
is
appointed
by
him
and
is
under
his
supervision.
He
declared
that
he
loans
practically
nothing
on
notes,
that
he
has
a
few
old
notes,
which
are
‘‘secured
by
people’s
shares’’
and
that
this
was
done
just
to
accommodate
clients.
He
admitted
that
he
received
interest
on
them,
but
added
that
they
were
not
the
class
of
investment
that
he
would
be
looking
to
at
all.
He
asserted
that
they
were
only
done
to
accommodate
clients.
He
said
he
did
not
get
a
commission
when
he
secured
or
placed
a
loan
for
the
company.
Asked
by
counsel
if,
supposing
he
came
to
him
to
borrow
$2,000
and
if
the
witness
turned
it
over
to
the
company,
he
would
get
a
commission,
Argue
replied
in
the
negative
and
added
(p.
22):
"A.
.
.
.
if
some
other
agent
brought
their
loan
to
the
Company,
that
agent
would
get
a
commission
of
one
percent,
but
I
do
not
get
a
commission.
"Q.
You
merely
get
a
commission—
“A.
According
to
the
contract.
“Q.
It
is
a
percentage
on
the
amount
earned
by
the
Company
or
something
of
that
kind?
“A.
That
is
right.’’
Argue
admitted
that
most
of
the
mortgages
include
the
following
clause
(p.
22)
:
“And
I
further
agree
forthwith
on
the
happening
of
such
loss
or
damage
by
fire
to
furnish
at
my
expense
all
the
necessary
proofs
and
do
all
the
necessary
acts
to
enable
the
mortgagee
to
obtain
payment
of
the
insurance
moneys.
Provided
always
that
such
insurance
must
be
in
a
company
selected
by
the
mortgagee,
and
that
the
mortgagee
may
effect
same
without
reference
to
the
mortgagor
and
charge
any
moneys
paid
by
him
in
respect
thereof
upon
the
said
lands.’’
He
acknowledged
that
as
a
result,
in
addition
to
the
interest
he
receives
on
the
mortgage,
he
gets
a
commission
on
the
insurance
policies
he
places.
He
stated
that
the
fees
which
he
may
make
out
of
his
insurance
business
is
his
personal
income
and
that
it
has
nothing
to
do
with
the
company.
He
added
that
he
pays
the
expenses
of
attending
to
the
insurance.
He
declared
that
he
pays
his
secretary
himself,
that
he
contributes
a
share
of
the
office
rent
for
the
space
which
she
occupies,
that
he
owns
the
desk
and
all
the
equipment
which
she
uses,
that
he
pays
for
a
telephone
so
that
people
can
call
up
about
insurance
and
not
disturb
the
company.
He
summed
up
by
saying
(p.
24):
"It
is
only
a
matter
to
help
the
company
that
we
do
this.”’
He
admitted
that
sometimes
the
company
is
obliged
to
take
back
certain
properties
on
which
payments
have
not
been
made,
that
he
has
then
a
real
estate
man
to
look
after
the
rental
and
a
man
to
attend
to
the
repairs.
He
said
that
he
does
not
do
that
work
himself.
At
the
request
of
counsel
the
Court
adjourned
at
12.05
p.m.
until
2.15
p.m.
in
order
to
allow
them
and
the
witness
to
look
into
the
question
of
the
sixteen
loans
alluded
to
by
Mr.
Hollands.
After
recess
counsel
continued
the
cross-examination
of
appellant
;
a
brief
recital
of
the
facts
disclosed
is
expedient.
To
the
question
as
to
whether
he
wished
to
make
some
explanation
of
his
evidence
at
the
morning
session,
Argue
replied
affirmatively
and
added
(p.
28)
:
“A.
.
.
.
we
find
that
there
are
fourteen
new
mortgages
instead
of
five.
«‘Q.
That
were
placed
in
1940,
the
year
in
question?
“‘A.
Yes,
the
year
1940.
Do
you
wish
me
to
make
an
explanation.
‘
‘
To
this
question
of
the
witness,
Mr.
Hollands
replied
(p.
28)
:
"‘No,
I
accept
the
witness’s
statement.
I
don’t
think
there
was
any
intention
to
mislead
the
Court.
"‘I
am
satisfied
that
the
witness
was
in
good
faith.
Unfortunately
he
was
almost
totally
unacquainted
with
his
business.”’
Counsel
for
respondent
observed
that
Argue
had
stated
that
there
were
only
60
to
70
mortgages
outstanding
in
1940
and
that
by
checking
his
returns
he
noticed
that
there
were
78.
To
this
observation
Argue
offered
the
following
explanation
(p
.28)
:
"
4
Well,
we
took
off
the
ledger
a
number,
and
evidently
the
ones
in
the
discharged
ledger
were
not
included.’’
Asked
if
it
would
be
correct
to
say
instead
of
60
or
70
there
are
78
mortgages
outstanding
representing
his
personal
funds,
as
set
forth
in
his
return,
Argue
answered
that
he
did
not
know.
Mr.
Thorvaldson
here
interjected
the
remark
that
the
number
of
mortgages
are
in
evidence
by
virtue
of
being
listed
in
a
schedule
included
in
the
statement
exhibit
2.
In
fact
the
number
is
78.
Counsel
for
respondent
suggested
that
it
is
not
exact
to
say
seventy-eight
mortgages,
as
there
are,
besides
mortgages,
agreements
for
sale
and
securities
on
the
advance
of
moneys
whereby
witness
purchased
an
agreement
for
sale
or
possibly
sold
it.
Asked
if
each
one
of
these
investments
‘‘require
a
considerable
amount
of
looking
after’’,
Argue
supplied
the
following
information
(p.
29):
"‘A.
If
I
was
spending
a
lot
of
time
looking
after
them
I
would
have
known
this
morning
this
statement
was
wrong,
the
fact
is
I
don’t
pay
much
attention
to
them
at
all.
"‘Q.
Amongst
other
things
you
have
to
find
out
each
year
is
whether
the
taxes
are
paid
on
each
individual
property
?
"
"
A.
The
secretary
does
that.
"‘Q.
And
she
is
the
secretary,
you
have
already
explained,
that
you
pay
to
look
after
that
part
of
your
affairs?
41
A.
Along
with
the
fire
insurance.’’
The
agreement
entered
into
on
May
31,
1921,
between
International
Loan
Co.
and
the
appellant,
a
duplicate
whereof
was
filed
as
exhibit
1,
stipulated
inter
alia
that:
the
agreement
is
entered
into
for
a
period
of
twenty
years
reckoning
from
June
1,
1921
;
during
the
continuance
of
the
agreement,
the
manager
shall
act
as
general
agent
and
manager
of
the
company;
the
manager
shall
have
the
exclusive
right
of
selling
the
company’s
shares
and
properties
and
of
acting
as
rental
and
insurance
agent
for
the
company
;
the
manager
shall
look
after
the
investment
of
the
company’s
funds,
the
collection
of
all
moneys
owing
to
it
on
shares,
investments,
rentals
or
otherwise,
with
full
power
to
give
receipts,
releases
and
quittances,
provided
that
the
investment
of
the
company’s
funds
shall
be
subject
to
the
control
of
the
Board
of
Directors
;
the
manager
shall,
at
his
own
expense,
provide
adequate
office
accommodation
and
such
clerical
or
other
assistance,
as
shall
be
necessary
to
carry
on
the
company’s
business
;
the
remuneration
payable
by
the
company
to
the
manager
for
selling
its
shares
shall
be
a
commission
of
5%
of
the
price
at
which
the
same
are
sold,
including
premiums,
if
any
(the
agreement
here
sets
forth
the
conditions
of
payment
of
this
commission,
which
have
no
materiality
herein)
;
the
remuneration
to
be
paid
by
the
company
to
the
manager
for
the
selling
of
properties
shall
be
the
usual
commission
paid
to
real
estate
agents
in
Winnipeg
and
the
remuneration
for
acting
as
rental
agent
for
the
company
shall
be
the
usual
commission
charged
by
rental
agents
in
Winnipeg
;
for
all
services
rendered
by
the
manager
other
than
the
sale
of
shares
and
properties
and
acting
as
rental
agent,
the
manager’s
remuneration
shall
be
a
commission
of
214%
per
annum
on
the
amount
of
the
invested
funds
of
the
company
up
to
the
sum
of
$250,000
and
112%
per
annum
on
all
invested
funds
over
and
above
the
said
sum
of
$250,000
(there
follows
a
proviso
which
is
immaterial)
;
in
addition
to
the
remuneration
to
be
paid
to
the
manager
as
hereinabove
provided,
the
company
agrees
to
supply
the
necessary
office
furniture,
stationery
and
advertising
and
to
pay
all
business
taxes
or
assessments,
auditor’s
fees,
legal
fees,
remuneration
to
directors,
commission
to
brokers
or
sub-agents
for
procuring
loans,
the
expense
of
calling
meetings
of
shareholders,
the
cost
of
any
bond
or
bonds
which
the
company
may
require
from
the
manager
or
any
person
employed
by
him
or
by
the
company
in
the
conduct
of
its
business
and
also
any
expense
which
may
be
incurred
by
reason
of
the
company
taking
deposits
under
sec.
65
of
the
Loan
Companies
Act
1914;
all
outlays
and
expenses
in
connection
with
the
carrying
on
of
the
company’s
business,
other
than
those
previously
mentioned,
shall
be
paid
by
the
manager;
all
moneys
received
by
the
manager
on
account
of
saie
of
stock,
investments,
sale
of
properties,
rentals
or
otherwise
shall
be
deposited
to
the
credit
of
the
company
in
a
chartered
bank,
as
provided
by
the
company’s
by-laws,
and
all
sums
owing
by
the
company
to
the
manager
under
this
agreement
shall
be
payable
by
cheque
on
the
company’s
account
on
the
last
day
of
each
month
;
the
manager
covenants
to
faithfully
perform
the
services
required
by
the
contract
and
that
he
will
not,
during
the
currency
thereof,
engage
in
the
promotion
of
any
other
company
doing
business
along
the
same
lines
as
this
company
and
that
he
will
not
engage
in
any
business
of
any
kind:
whatsoever
which
will
conflict
with
the
company’s
business
;
the
company
assumes
responsibility
for
the
payment
of
all
commissions
unpaid
on
the
sale
of
stock
in
International
Loan
Co.
and
covenants
that
it
will
pay
to
the
manager
all
moneys
coming
to
him
for
the
sale
of
such
stock
upon
the
terms
heretofore
agreed
upon
between
the
parties.
It
was
submitted
on
behalf
of
appellant
that
he
is
foremostly
the
manager
of
International
Loan
Co.,
whose
business
is
the
making
of
loans
on
city
and
farm
properties
and
that
he
devotes
substantially
all
his
time
to
the
company’s
business,
that
he
has
a
very
small
insurance
business
operated
largely
in
respect
of
the
company’s
business
and
the
he
has
an
income
which
he
derives
from
investments
in
securities.
The
evidence
discloses
that
the
appellant
practically
gave
all
his
time,
during
the
period
material
herein,
to
the
business
of
International
Loan
Co.,
that
he
carries
on
in
a
small
way
an
insurance
business,
mostly
in
respect
of
the
affairs
of
International
Loan
Co.
and
that
he
drew
an
income
from
shares
of
the
company
but
principally
from
mortgages
and
agreements
for
sale
purchased
as
investments
and
also,
to
a
small
extent,
from
loans
on
notes
to
shareholders
of
the
company
holding
fully
paid
shares
thereof.
Argue
had
a
secretary
who
looked
after
his
insurance
business
and
his
investments;
to
this
part
of
his
work
Argue
devoted
little
time.
On
the
other
hand,
the
proof
shows
that
he
paid
his
secretary’s
salary
himself,
that
he
contributed
a
share
of
the
office
rent,
that
he
owned
the
desk,
the
typewriter
and
the
equipment
used
by
his
secretary
and
that
he
paid
for
the
telephone
so
that,
according
to
his
story,
people
could
inquire
about
insurance
without
disturbing
the
company.
One
must
not
overlook
the
fact
that
this
secretary
not
only
looked
after
the
appellant’s
personal
business
but
spent
a
great
deal
of
her
time
on
the
business
of
the
company.
The
evidence
does
not
reveal
what
portion
of
the
time
of
the
secretary
is
used
on
the
appellant’s
personal
business
but
I
think
it
may
be
inferred
that
it
is
less
considerable
than
that
devoted
to
the
company’s
affairs.
Clause
4
of
the
agreement,
hereinabove
referred
to,
stipulates,
as
we
have
seen,
that
the
manager
shall
look
after
the
investment
of
the
company’s
funds,
the
collection
of
moneys
due
to
the
company
on
shares,
investments,
rentals
or
otherwise,
give
receipts,
releases,
quittances
for
moneys
so
received.
This
work,
according
to
Argue’s
uncontradicted
testimony,
takes
up
all
his
time
and
he
has
very
little
opportunity
to
look
after
his
personal
business.
Can
it
be
said
that
the
appellant
in
investing
his
money
in
mortgages,
agreements
for
sale,
drawing
the
interest
thereon
when
it
became
exigible,
receiving
the
capital
of
his
investments
when
they
came
to
maturity,
reinvesting
his
capital
in
mortgages
or
agreements
for
sale
constitute
a
business?
If
the
appellant’s
activities
were
limited
to
that,
I
would
feel
inclined
to
answer
the
question
negatively.
Where
they
so
limited
?
The
problem
we
have
to
solve
narrows
down
to
this
question,
as
I
think.
It
was
submitted
on
behalf
of
respondent
that
the
appellant
is
liable
to
the
excess
profits
tax
under
para.
(g)
of
subsec.
1
of
sec.
2
of
the
Excess
Profits
Tax
Act
1940,
which
reads
thus:
‘“(g)
‘Profits’
in
the
case
of
a
taxpayer
other
than
a
corporation
or
joint
stock
company,
for
any
taxation
period,
means
the
income
of
the
said
taxpayer
derived
from
carrying
on
one
or
more
businesses,
as
defined
by
section
three
of
the
Income
War
Tax
Act,
and
before
any
deductions
are
made
therefrom
under
any
other
provisions
of
the
said
Income
War
Tax
Actf
f
Counsel
for
respondent
contended
that
Argue
carried
on
the
business
of
(a)
manager
of
a
loan
company,
(b)
an
insurance
agent
and
(c)
an
investor
in
securities
in
general.
We
are
only
concerned
with
the
last
one.
The
evidence
is
unfortunately
limited
to
the
holdings
of
the
appellant
in
1940,
which
is
the
taxation
year
in
question
herein.
It
is
incomplete
and
consequently
unsatisfactory.
Argue
was
generally
ignorant
of
his
personal
affairs.
His
secretary,
who
looked
after
them,
would
likely
have
been
able
to
give
the
Court
more
information
on
the
subject.
Why
she
was
not
.called
as
witness
is
beyond
my
comprehension.
Be
that
at
it
may,
the
evidence
discloses
that
in
1940
eighteen
mortgages
or
agreements
for
sale
having
matured
they
had
to
be
replaced
or
renewed,
in
1939
seven
and
in
1941
seven.
There
is
no
evidence
regarding
the
value
of
the
eighteen
securities
renewed
or
replaced
in
1940.
In
the
circumstances,
we
do
not
know
what
proportion
of
the
amount
of
$102,379.24,
shown
in
the
schedule
of
‘‘clear
title
agreements
and
first
mortgages’’
forming
part
of
the
financial
statement
exhibit
2,
these
eighteen
securities
represent.
The
total
value
of
the
seven
investments
mentioned
by
Argue
in
his
testimony
is
$10,782.26,
according
to
the
figures
contained
in
the
aforesaid
schedule.
This
amount
divided
by
seven
gives
an
average
of
$1,540.32.
Now
if
we
multiply
this
quotient
by
eighteen
we
get
a
total
of
$27,725.76.
This
sum
represents
a
little
more
than
one-fourth
of
the
value
of
the
appellant’s
clear
title
agreements
and
first
mortgages
as
at
December
31,
1940,
which
appears
in
the
said
schedule
to
have
been
$102,379.24.
It
seems
a
strange
coincidence
that
so
high
a
proportion
of
the
appellant’s
securities
should
have
come
to
maturity
in
the
same
year.
Needless
to
say,
if
evidence
had
been
adduced
regarding
the
quantity
and
the
value
of
the
securities
acquired
in
say
the
two
or
three
years
preceding
and
the
two
or
three
years
following
1940,
the
Court
would
have
been
in
a
better
position
to
determine
whether
the
appellant
was
merely
reinvesting
his
capital
as
its
investments
were
naturally
realized
on
their
respective
dates
of
maturity
or
whether
he
was
carrying
on
an
investment
business,
selling
securities
at
a
profit
and
replacing
them
by
others
at
lower
prices
in
the
hope
of
disposing
of
them
later
at
increased
prices
and
drawing
a
benefit
therefrom.
Perhaps
the
figures
for
the
years
immediately
preceding
and
following
1940
were
not
favourable
to
appellant’s
contention;
that
may
be
the
reason
why
no
evidence
was
adduced
in
relation
thereto.
In
the
circumstances,
I
must
rely
on
the
figures
for
the
year
1940
only.
In
practice
it
may
often
be
difficult
to
draw
the
line
between
the
cases
in
which
the
buying
and
selling
of
securities
merely
constitute
a
change
of
investments
or
amount
to
the
carrying
on
of
an
investment
business.
Each
case
must
be
determined
according
to
its
own
facts.
Nevertheless,
the
following
decisions
may
help
in
reaching
a
conclusion.
Smith
v.
Anderson
(1880)
L.R.
15
Ch.
D.
247,
in
which
Jessel,
M.R.,
at
page
260,
expressed
the
following
opinion:
‘“When
you
come
to
an
association
or
company
formed
for
a
purpose,
you
say
at
once
that
it
is
a
business,
because
there
you
have
that
from
which
you
would
infer
continuity;
it
is
formed
to
do
that
and
nothing
else,
and,
therefore,
at
once
you
would
say
that
the
company
carries
on
a
business.
So
in
the
ordinary
case
of
investments,
a
man
who
has
money
to
invest,
invests
his
money
and
he
may
occasionally
sell
the
investments
and
buy
others,
but
he
is
not
carrying
on
a
business.
But
when
you
have
an
association
formed,
or
where
an
individual
makes
it
his
continuous
occupation—the
business
of
his
life
to
buy
and
sell
securities—he
is
called
a
stock-jobber
or
share-jobber,
and
nobody
doubts
for
a
moment
that
he
is
carrying
on
business.
‘
‘
In
the
case
of
California
Copper
Syndicate
v.
Harris
(1904)
o
Tax
Cases
159
Clerk,
L.J.
made
the
following
observations
(p.
165)
:
'It
is
quite
a
well
settled
principle
in
dealing
with
questions
of
assessment
of
Income
Tax,
that
where
the
owner
of
an
ordinary
investment
chooses
to
realise
it,
and
obtains
a
greater
price
for
it
than
he
originally
acquired
it
at,
the
enhanced
price
is
not
profit
in
the
sense
of
Schedule
D
of
the
Income
Tax
Act
of
1842
assessable
to
Income
Tax.
But
it
is
equally
well
established
that
enhanced
values
obtained
from
realisation
or
conversion
of
securities
may
be
so
assessable,
where
what
is
done
is
not
merely
a
realisation
or
change
of
investment,
but
an
act
done
in
what
is
truly
the
carrying
on,
or
carrying
out,
of
a
business.
The
simplest
case
is
that
of
a
person
or
association
of
persons
buying
and
selling
lands
or
securities
speculatively,
in
order
to
make
gain,
dealing
in
such
investments
as
a
business,
and
thereby
seeking
to
make
profits.
*****
‘What
is
the
line
which
separates
the
two
classes
of
cases
may
be
difficult
to
define,
and
each
case
must
be
considered
according
to
its
facts;
the
question
to
be
determined
being—
Is
the
sum
of
gain
that
has
been
made
a
mere
enhancement
of
value
by
realising
a
security,
or
is
it
a
gain
made
in
an
operation
of
business
in
carrying
out
a
scheme
for
profitmaking
?‘‘
In
the
case
of
Cooper
v.
Stubbs
[1925]
2
K.B.
753
the
appellant
Stubbs
appealed
against
assessments
made
under
Sch.
D
to
the
Income
Tax
Act,
1918,
in
various
sums
for
the
years
ended
April
5,
1921,
1922
and
1923.
Stubbs
was
a
member
of
a
firm
of
cotton
brokers
and
merchants.
It
was
the
practice
for
such
firms
to
protect
themselves
against
fluctuations
in
the
market
by
buying
cotton
for
future
delivery
against
sales
made
and
vice
versa.
These
contracts
for
future
purchase
or
delivery
of
cotton
were
made
through
the
exchanges
in
Liverpool,
New
York
or
New
Orleans.
Dealings
of
this
kind
were
known
as
dealings
in
"futures”.
The
assessments
in
question
were
made
upon
the
appellant
in
respect
of
profits
made
in
such
dealings.
These
dealings
were
private
speculations
of
the
appellant
in
which
his
firm
had
no
interest.
It
was
held
that
these
transactions
constituted
a
trade
within
the
meaning
of
Sch.
D,
para.
1(a)
(ii),
of
the
Income
Tax
Act,
1918
and
that
the
profits
arising
from
such
transactions
were
annual
profits
and
gains
chargeable
with
the
tax.
In
Martin
v.
Lowry,
43
T.L.R.
116,
the
headnote,
fully
comprehensive,
reads
thus
:
"The
appellant,
who
was
an
agricultural
machinery
merchant,
bought
a
gigantic
consignment
of
linen
and
set
to
work
to
make
people
buy
it,
and
he
succeeded
in
selling
it
within
a
year
by
organizing
a
vast
activity
for
that
purpose.
He
was
assessed
to
income-tax
under
Schedule
D
on
his
profits
on
the
sale
of
the
linen,
and
on
appeal
to
the
Special
Commissioners
he
contended
that
he
did
not
carry
on
any
trade
in
connection
with
linen,
that
the
transaction
was
an
isolated
one,
and
that
the
profit
was
not
an
annual
profit
chargeable
to
income-tax.
The
Special
Commissioners
held
that
in
exercising
these
activities
the
appellant
was
for
the
time
being
carrying
on
a
trade
the
profits
of
which
were
chargeable
to
income-tax.
"‘Held,
that
there
was
evidence
on
which
the
Special
Commissioners
could
find
the
transaction
to
be
in
the
nature
of
a
trade,
and
that
the
fact
of
the
profits
being
the
income
of
a
trade
and
belonging
to
the
year
of
assessment
was
enough
to
make
the
profits
‘annual’
within
Case
VI.
of
Schedule
D,
and
the
decision
of
the
Special
Commissioners
must
be
affirmed/
‘
In
the
case
of
Pickford
v.
Quirke,
44
T.L.R.
15,
it
appears
that
during
the
"‘boom’’
in
the
Lancashire
cotton
trade
in
1919
the
appellant,
in
company
with
other
persons,
engaged
in
the
operation
known
as
"'turning
over’’
a
cotton
mill,
i.e.,
acquiring
a
controlling
interest
in
the
mill,
organizing
its
administration
and
finances
and
reselling
it
to
a
new
company.
The
operation
was
successful
and
the
appellant
was
asked
to
join
other
syndicates,
composed
partly
of
the
same
persons
engaged
in
‘‘turning
over’’
three
other
mills.
In
each
case
a
profit
resulted
to
the
appellant.
On
March
24,
1923,
the
Additional
Commissioners
for
the
Division
in
which
the
appellant
resided
signed
the
book
containing
an
estimated
assessment
upon
the
appellant
to
income
tax
under
Schedule
D
for
the
year
1919-20.
The
book
was
not
delivered
to
the
General
Commissioners
until
April
18,
1923,
notice
was
given
to
the
appellant
on
May
5,
1923,
and
the
assess-
ment
was
signed
by
the
General
Commissioners
on
September
5,
1923.
It
was
held,
inter
alia,
that:
‘‘though
each
adventure
of
‘turning
over
’
a
mill,
taken
singly,
was
not
a
trade,
but
a
capital
transaction,
yet
the
succession
of
such
adventures,
in
each
of
which
the
appellant
took
part,
might
constitute
the
carrying
on
of
a
trade,
and
the
Special
Commissioners
on
an
appeal
against
the
assessment
were
not
stopped
by
their
previous
decisions
from
reconsidering
the
whole
of
the
facts,
and
finding
that
the
appellant
in
so
doing
was
carrying
on
a
trade
on
the
profits
of
which
he
was
liable
to
income-tax
and
excess
profits
duty
on
the
profits.”
Reference
may
also
be
had
with
profit
to
the
following
cases:
T.
Bey
non
and
Co.
v.
Ogg
(1918)
7
Tax
Cases
125;
Gloucester
Ry.
Carriage
and
Wagon
Co.
v.
Corners
of
Inland
Revenue
[1925]
A.C,
469.
Konstam,
in
The
Law
of
Income
Tax,
10th
ed.,
says
(p.
104)
:
"
"
Controversy
often
arises
as
to
whether
the
net
proceeds
of
sales
of
investments
in
securities,
landed
property
and
so
on
are
profits
of
a
trade
or
accretions
of
capital.
The
test
is,
whether
or
not
a
trade
is
carried
on
in
the
buying
and
selling
of
the
investments.
Thus,
a
man
who
possesses
a
collection
of
pictures
for
his
own
enjoyment,
and
who
sells
one
of
them
to
meet
his
pecuniary
necessities—or
even
because
a
tempting
offer
happens
to
be
made
to
him—is
not
taxable
for
the
proceeds
of
the
sale
(Stevens
v.
Hudson^s
Bay
Co.
(1909)
5
Tax
C.
424.
Cf.
Jones
v.
Leeming
[1930]
A.C.
415;
Hudson
v.
Wrightson
(1934)
26
Tax
C.
55)
;
but
a
picture
dealer
who
has
bought
to
sell
again
is
liable
on
his
net
profits.
"
‘Where
the
owner
of
an
ordinary
investment
chooses
to
realise.it,
and
obtains
a
greater
price
for
it
than
he
originally
acquired
it
at,
the
enhanced
price
is
not
profit
in
the
sense
of
Schedule
D.
.
.
.
But
enhanced
values
obtained
from
realisation
or
conversion
of
securities
may
be
so
assessable,
where
what
is
done
is
not
merely
a
realisation
or
change
of
investment,
but
an
act
done
in
what
is
truly
the
carrying
on,
or
carrying
out,
of
a
business.
The
simplest
ease
is
that
of
a
person
or
association
.
.
.
buying
and
selling
lands
or
securities
speculatively,
in
order
to
make
gain,
dealing
in
such
investments
as
a
business,
and
thereby
seeking
to
make
profits.
There
are
many
companies
which
in
their
very
inception
are
formed
for
such
a
purpose,
and
in
these
cases
it
is
not
doubtful
that,
where
they
make
a
gain
by
realisation,
the
gain
they
make
is
liable
to
be
assessed
for
income
tax.’
(Californian
Copper
Syndicate
v.
Harris
(1904)
6
F.
894;
5
Tax
C.
159;
approved
in
Com’rs
of
Taxes
v.
Melbourne
Trust,
Ltd.
[1914]
A.C.
1001,
1010,
and
Ducker
v.
Rees
Roturbo
Syndicate
[1928]
A.C.
140.’’
See
also
Dowell
9
s
Income
Tax
Laws,
9th
ed.,
p.
546,
under
the
heading
“‘Sales
of
Investments”?
With
only
the
figures
of
1940
I
do
not
see
that
I
can
reach
any
other
conclusion
than
that
the
appellant
was
carrying
on
a
business
and
that
he
is
accordingly
liable
to
the
tax
provided
for
by
para.
(g)of
subsec.
1
of
see.
8
of
the
Excess
Profits
Tax
Act.
For
the
reasons
aforesaid
I
am
satisfied
that
the
assessment
and
the
decision
of
the
Minister
affirming
it
must
be
maintained
and
the
appeal
dismissed.
The
respondent
will
be
entitled
to
his
costs
against
the
appellant.
Appeal
dismissed.
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