JACKETT,
P.:—This
is
an
appeal
by
the
Estate
of
Chesley
Arthur
Crosbie
of
the
City
of
St.
John’s,
Newfoundland,
who
died
on
December
26,
1962,
from
an
assessment
under
the
Estate
Tax
Act,
chapter
29
of
the
Statutes
of
Canada,
1958,
as
amended.
The
sole
reason
for
the
appeal
is
the
inclusion
by
the
respondent,
in
the
computation
of
the
aggregate
net
value
of
property
passing
on
the
death
of
the
deceased,
of
the
sum
of
$109,150
as
being
the
value
of
a
gift
deemed
to
have
been
made
by
the
deceased
within
three
years
prior
to
his
death
to
Andrew
C.
Crosbie,
or,
alternatively,
as
being
the
amount
of
a
benefit
deemed
to
have
been
conferred
by
the
deceased
within
three
years
prior
to
his
death
upon
Andrew
C.
Crosbie
by
a
disposition
of
property
for
partial
consideration.
It
is
common
ground
that,
at
all
times
material
to
this
appeal
prior
to
his
death,
Newfoundland
Engineering
and
Construction
Limited
(hereinafter
referred
to
as
the
company’’)
was
a
corporation
‘‘controlled’’
by
the
deceased
within
the
meaning
of
the
word
‘‘controlled’’
as
used
in
paragraph
(b)
of
subsection
(6)
of
Section
3
of
the
Estate
Tax
Act.
On
November
30,
1961,
the
company
had
an
employee,
Wallace
Pennell,
who
had
been
a
full-time
employee
for
seven
years,
and
one
Andrew
C.
Crosbie,
who
had
been
a
director
of
the
company
since
September
1958
and
secretary-treasurer
of
the
company
since
June
1959.
It
is
common
ground
that
Andrew
C.
Crosbie,
who
was
paid
a
salary
as
secretary-treasurer,
was
‘‘connected
with
the
deceased
by
blood
relationship’’
within
the
meaning
of
those
words
as
used
in
paragraph
(b)
of
subsection
(6)
of
Section
3
aforesaid,
and
that
Wallace
Pennell
was
not
so
connected
with
the
deceased.
On
that
day,
that
is
November
30,
1961,
the
directors
of
the
company
adopted
two
resolutions
reading
as
follows:
“The
Chairman
advised
the
meeting
that
in
view
of
the
long
and
faithful
service
of
Mr.
Wallace
Pennell
to
the
Company
and
as
a
further
incentive
to
him
to
continue
to
render
such
service
to
the
Company,
Mr.
Pennell
should
be
granted
an
option
to
purchase
eighteen
thousand
five
hundred
(18,500)
shares
without
par
value
of
the
capital
stock
of
Newfoundland
Engineering
and
Construction
Company
Limited
for
the
price
of
ten
cents
(10¢)
per
share
which
option
should
extend
for
a
period
of
one
month
from
the
date
of
this
meeting.
On
motion
duly
made
and
seconded,
Mr.
Pennell
refraining
from
voting,
it
was
unanimously
resolved
that
Mr.
Wallace
Pennell,
Vice-
President
and
General
Manager
of
the
Company,
be
granted
an
option
effective
for
one
month
from
the
date
of
this
resolution
to
purchase
from
the
Company
eighteen
thousand
five
hundred
(18,500)
shares
without
par
value
of
the
capital
stock
of
the
Company
for
the
price
of
ten
cents
(10^)
per
share
in
recognition
of
his
services
to
the
Company.
The
Chairman
advised
the
meeting
that
in
view
of
the
valuable
and
faithful
service
of
Mr.
Andrew
Crosbie
to
the
Company,
in
view
of
his
present
and
the
prospect
of
his
continued
valuable
service
to
the
Company
and
as
a
further
incentive
to
him
to
continue
to
render
such
service
to
the
Company,
Mr.
Crosbie
should
be
granted
an
option
to
purchase
eighteen
thousand
five
hundred
(18,500)
shares
without
par
value
of
the
capital
stock
of
the
Company
for
the
price
of
ten
cents
(10^)
per
share,
which
option
should
only
be
exercisable
by
him
as
long
as
he
remains
an
employee
of
the
Company
and
which
option
should
be
exercisable
by
him
during
the
year
1961
for
sixty-one
hundred
and
sixty-seven
(6,167)
shares,
exercisable
by
him
during
the
year
1962
for
sixty-one
hundred
and
sixtyseven
(6,167)
shares
and
exercisable
by
him
during
the
year
1963
for
sixty-one
hundred
and
sixty-six
(6,166)
shares
of
the
Company.
Upon
motion
duly
made
and
seconded,
Mr.
Andrew
Crosbie
refraining
from
voting,
it
was
resolved
that
Mr.
Andrew
Crosbie,
Secretary-Treasurer
of
the
Company,
be
granted
an
option
effective
only
so
long
as
he
continues
to
be
an
employee
of
the
Company
to
purchase
from
the
Company
during
the
year
1961
sixty-one
hundred
and
sixty-seven
(6,167)
shares
without
par
value
of
the
capital
stock
of
the
Company
for
the
price
of
ten
cents
(10^)
per
share,
during
the
year
1962
sixty-one
hundred
and
sixty-seven
(6,167)
shares
without
par
value
of
the
capital
stock
of
the
company
for
the
price
of
ten
cents
(10^)
per
share,
and
during
the
year
1963
sixty-one
hundred
and
sixty-six
(6,166)
shares
without
par
value
of
the
capital
stock
of
the
Company
for
the
price
of
ten
cents
(10¢)
per
share
in
recognition
of
his
past
and
present
service
to
the
Company.”’
In
December
1961,
Pennell
exercised
the
‘‘option’’
so
granted
to
him
and
18,500
fully-paid
shares
were
issued
to
him
by
the
company
upon
payment
by
him
to
the
company
of
ten
cents
per
share.
In
December
1961,
and
March
1962,
respectively,
Andrew
C.
Crosbie
exercised
the
‘‘option’’
so
granted
to
him
in
respect
of
6,167
shares
on
each
occasion,
and,
on
each
occasion,
6,167
fully-
paid
shares
were
issued
to
him
by
the
company
upon
payment
by
him
to
the
company
of
ten
cents
per
share.
As
already
indicated,
the
deceased
died
on
December
26,
1962.
In
January
1963,
Andrew
C.
Crosbie
again
exercised
the
“option”
that
had
been
granted
to
him
by
the
company
in
November
1961,
and
6,166
shares
were
issued
to
him
by
the
company
upon
payment
by
him
to
the
company
of
ten
cents
per
share.
At
all
times
material
to
this
appeal,
the
shares
so
issued
to
Pennell
and
Andrew
C.
Crosbie
had
a
fair
market
value
of
$4.94
per
share.
The
parties
to
the
appeal
have
expressly
agreed
that
the
aforesaid
“options”
were
‘‘granted’’
for
“legitimate
business
reasons
’
’.
The
parties
have
also
agreed,
although
it
is
probably
not
relevant
to
the
determination
of
this
appeal,
that
Pennell
and
Andrew
C.
Crosbie
paid
income
tax
under
Section
85A
of
the
Income
Tax
Act
on
the
benefits
that
accrued
to
them
from
the
exercise
of
the
aforesaid
options,
which
income
tax
was
not
payable
unless
the
benefit
was
received
‘‘in
respect
of,
in
the
course
of
or
by
virtue
of
the
employment”
as
employees
of
the
company.
(See
subsection
(7)
of
Section
85A.)
It
is
common
ground
that
the
assumption
as
to
the
value
of
the
shares
upon
which
the
Minister
based
the
assessment
appealed
against
was
excessive
and
that,
assuming
that
the
appellants
are
otherwise
unsuccessful,
the
appeal
is
to
be
allowed
with
costs
to
the
respondent
and
the
assessment
is
referred
back
to
the
Minister
for
re-assessment
on
the
basis
that
the
aggregate
net
value
of
property
passing
on
the
death
of
the
deceased
be
reduced
by
$19,600
from
the
amount
upon
which
the
assessment
was
based.
The
relevant
provisions
in
the
Estate
Tax
Act
read
as
follows:
“3.
(1)
There
shall
be
included
in
computing
the
aggregate
net
value
of
the
property
passing
on
the
death
of
a
person
the
value
of
all
property,
wherever
situated,
passing
on
the
death
of
such
person,
including,
without
restricting
the
generality
of
the
foregoing,
(e)
property
disposed
of
by
the
deceased
under
a
disposition
operating
or
purporting
to
operate
as
an
immediate
gift
inter
vivos,
whether
by
transfer,
delivery,
déclara-
tion
of
trust
or
otherwise,
made
within
three
years
prior
to
his
death
;
(g)
property
disposed
of
by
the
deceased
under
any
disposition
made
within
three
years
prior
to
his
death
for
partial
consideration
in
money
or
money’s
worth
paid
or
agreed
to
be
paid
to
him,
to
the
extent
that
the
value
of
such
property
as
of
the
date
of
such
disposition
exceeds
the
amount
of
the
consideration
so
paid
or
agreed
to
be
paid
;
(6)
For
the
purpose
of
this
Act,
(b)
a
disposition
made
by
a
corporation
controlled
by
the
deceased
to
or
for
the
benefit
of
any
person
connected
with
the
deceased
by
blood
relationship,
marriage
or
adoption
shall
be
deemed
to
be
a
disposition
made
by
the
deceased
to
or
for
the
benefit
of
that
person,
and,
in
relation
to
any
such
disposition,
any
act
or
thing
done
or
effected
by
that
corporation
shall
be
deemed
to
have
been
done
or
effected
in
all
respects
as
though
that
corporation
were
the
deceased
;
4,
(1)
Notwithstanding
section
3,
there
shall
not
be
included
in
computing
the
aggregate
net
value
of
the
property
passing
on
the
death
of
the
person
the
value
of
any
such
property
acquired
pursuant
to
a
bona
fide
purchase
made
from
the
deceased
for
a
consideration
in
money
or
money’s
worth
paid
or
agreed
to
be
paid
to
the
deceased
for
his
own
use
or
benefit,
unless
such
purchase
was
made
otherwise
than
for
full
consideration
in
money
or
money’s
worth
paid
or
agreed
to
be
paid
as
hereinbefore
described,
in
which
case
there
shall
be
included
in
computing
the
aggregate
net
value
of
the
property
passing
on
the
death
of
the
deceased
in
respect
of
the
property
so
acquired
only
the
amount
by
which
the
value
of
the
property
so
acquired
computed
as
of
the
date
of
its
acquisition
exceeds
the
amount
of
the
consideration
actually
paid
or
agreed
to
be
paid.
58.
(1)
In
this
Act,
(e)
disposition’
includes
any
arrangement
or
ordering
in
the
nature
of
a
disposition,
whether
by
one
transaction
or
a
number
of
transactions,
effected
for
the
purpose
or
in
any
other
manner
whatever
;
’
’
As
I
appreciate
the
position
of
the
parties
to
this
appeal,
there
is
no
dispute
as
to
the
basic
facts
although
there
may
be
some
question
as
to
what
inferences
should
be
drawn
from
them.
Nothing,
therefore,
turns
on
an
onus
of
proof.
What
has
to
be
decided
is
a
question
of
law
as
to
whether
the
assessment
can
be
supported
in
whole
or
in
part
by
the
provisions
of
the
taxing
statute.
The
respondent’s
position
as
to
that,
as
I
understand
it,
may
be
stated
as
follows
:
(1)
In
the
first
place,
he
says
that
the
grant
of
the
“option”
by
the
company
to
Andrew
C.
Crosbie
in
November
1961,
was
a
“disposition”
made
by
a
“corporation
controlled
by
the
deceased’’
to
a
“person
connected
with
the
deceased
by
blood
relationship’’
and
must
therefore
be
“deemed”
by
virtue
of
Section
3(6)
(b)
to
be
‘‘a
disposition
made
by
the
deceased
to
.
.
.
that
person’’;
and,
that
being
so,
the
option
is
“property
disposed
of
by
the
deceased’’
under
a
‘‘disposition
operating
.
.
.
as
an
immediate
gift
inter
vivos
.
.
.
made
within
three
years
prior
to
his
death’’
and
so
must
be
included
in
computing
the
aggregate
net
value
of
the
property
passing
on
his
death
by
virtue
of
Section
3(1)
(c).
(2)
Alternatively,
he
says
that,
if
the
grant
of
the
“option”
was
not
such
a
disposition,
the
issue
of
the
shares
by
the
company
to
Andrew
C.
Crosbie
in
December
1961,
and
March
1962,
was
a
‘‘disposition’’
made
by
‘‘a
corporation
controlled
by
the
deceased’’
to
“a
person
connected
with
the
deceased
by
blood
relationship’’
and
must
therefore
be
“deemed”,
by
virtue
of
Section
3(6)
(b),
to
be
‘‘a
disposition
made
by
the
deceased
to
.
.
.
that
person’’;
and,
that
being
so,
the
shares
are
‘‘property
disposed
of
by
the
deceased’’
under
a
“disposition
made
within
three
years
prior
to
his
death
for
partial
consideration
in
money
or
money’s
worth
paid
or
agreed
to
be
paid
to
him’’
and
so
must
be
included
in
computing
the
aggregate
net
value
of
the
property
passing
on
his
death,
by
virtue
of
Section
3(1)
(g),
‘‘to
the
extent
that
the
value
of
such
property
as
of
the
date
of
such
disposition
exceeds
the
amount
of
the
consideration
so
paid
or
agreed
to
be
paid”.
There
are
at
least
two
submissions
made
by
the
appellant
against
the
respondent’s
position
upon
which
I
do
not
propose
to
express
any
opinion
and
which,
therefore,
I
will
merely
endeavour
to
indicate
at
this
point.
The
first
of
these
is
that
the
creation
of
a
right
or
property
falls
outside
the
word
“disposi
tion’’
and
therefore
neither
the
grant
of
an
option
nor
the
issue
by
a
company
of
shares
can
be
regarded
as
a
disposition
of
property.
The
second
is
that,
even
if
the
issue
of
the
shares
can
be
regarded
as
a
disposition
by
the
company
of
shares
to
Andrew
C.
Crosbie
for
a
partial
consideration,
the
partial
consideration
cannot
be
regarded
as
having
been
“paid
to
him’’
(“him”
being
the
deceased)
within
Section
3(1)
(g)
inasmuch
as
the
concluding
words
of
Section
3(6)
(b)
expressly
deem
any
act
or
thing
done
or
effected
by
the
company
to
have
been
done
or
effected
as
though
the
company
were
the
deceased
(but
does
not
contain
any
provision
which
deems
anything
paid
to
the
company
to
have
been
paid
to
the
deceased).
Another
position
taken
by
the
appellant
upon
which
I
do
not
have
to
express
any
concluded
opinion,
having
regard
to
the
ground
upon
which
I
have
decided
to
dispose
of
the
appeal,
is
that
the
so-called
grant
of
an
“option”
was
no
disposition
of
property
because
it
created
no
legal
right
in
Andrew
C.
Crosbie,
being
no
more
than
an
offer
to
Crosbie
to
issue
shares
to
him
on
certain
terms.
The
respondent
took
the
position
that
there
was
an
implied
contract—implied
in
the
sense
that
it
was
not
expressed—whereby,
in
consideration
of
Crosbie
continuing
to
work
after
the
resolution
was
passed
in
November
1961,
the
company
bound
itself
to
issue
the
shares
in
accordance
with
the
terms
of
the
resolution
if
Crosbie
elected
to
exercise
the
option.
If
I
had
to
decide
this
question
upon
the
view
I
have
so
far
been
able
to
form
of
the
matter,
I
should
have
to
find
that
there
is
no
basis
for
inferring
any
such
contract
and
that
there
was
therefore
no
disposition
or
creation
of
any
rights
on
property
until
such
time
as
the
option
was
exercised.
I
come
to
the
view
of
the
matter
upon
which,
in
my
view,
the
appeal
should
be
decided.
The
question
that
has
to
be
decided
is
whether
a
benefit
conferred
by
a
company
controlled
by
the
deceased,
upon
Andrew
C.
Crosbie
as
an
employee
of
the
company
‘‘for
legitimate
business
reasons’’
is
to
be
dealt
with
for
estate
tax
purposes
as
property
passing
on
the
death
of
the
deceased
by
reason
of
the
fact
that
Andrew
C.
Crosbie
happened
to
be
a
blood
relation
of
the
deceased.
There
is
no
suggestion
that
the
transaction
was
a
mere
subterfuge
for
conferring
a
benefit
on
Andrew
C.
Crosbie
as
a
blood
relation
of
the
deceased
and
there
is
no
suggestion
that
any
part
of
the
amount
of
the
benefit
is
for
anything
other
than
the
benefit
that
‘‘legitimate
business
reasons’’
dictated
that
it
was
in
the
commercial
interest
of
the
company
that
it
should
confer
on
this
employee.
This
aspect
of
the
case
is
underlined
by
the
otherwise
irrelevant
fact
that
a
similar
arrangement
was
made
for
a
fellow
employee
on
very
similar
terms
at
the
same
time.
One
further
point
needs
to
be
developed
in
considering
the
neat
point
that
has
to
be
decided
on
this
appeal.
In
my
view,
what
was
done
here
falls
into
a
not
uncommon
category
of
business
transactions,
namely,
payments
made
in
the
ordinary
course
of
business
without
legal
liability.
A
business
is
operated
to
make
a
profit.
No
disbursement
is
a
proper
business
disbursement
unless
it
is
made
directly
or
indirectly
to
attain
that
end.
Generally
speaking,
business
payments
are
made
pursuant
to
contracts
whereby
the
business
man
receives
a
quid
pro
quo
for
that
payment—e.g.,
contracts
for
services,
purchase
contracts,
construction
contracts,
etc.
Nevertheless,
good
business
can
dictate,
depending
on
the
circumstances,
disbursements
over
and
above
the
amounts
legally
owing
for
what
the
business
man
has
received
or
is
to
receive.
A
special
payment
to
a
good
contractor
in
unforeseen
difficulties
so
that
he
will
be
available
for
future
work,
is
one
example.
Bonuses
to
employees
over
and
above
any
requirement
of
the
contracts
of
employment,
so
as
to
maintain
their
goodwill
and
keep
employee
morale
high
is
another.
Still
another
is
the
very
type
of
benefit
conferred
on
senior
executives
that
we
find
in
this
appeal.
That
it
is
a
very
common
type
of
benefit
conferred
on
senior
executives
is
evidenced
by
the
special
provision
made
in
Section
85A
of
the
Income
Tax
Act
for
their
income
tax
treatment.
Two
aspects
of
the
facts
call
for
special
attention
when
it
is
claimed
that
the
benefit
should
be
treated
as
part
of
the
deceased’s
estate
for
estate
tax
purposes,
viz.:
(a)
the
benefit
was
conferred
on
Andrew
C.
Crosbie
as
an
employee
of
the
company
and
not
as
a
blood
relation
of
the
deceased,
and
(b)
while
the
benefit
was
completely
gratuitous
in
the
sense
that
it
was
not
conferred
pursuant
to
a
legal
obligation
as
payment
for
something
already
received
or
pursuant
to
a
contract
for
something
to
be
received,
it
was
nevertheless
an
ordinary
business
transaction
and
had
none
of
the
characteristics
of
what
is
commonly
thought
of
as
a
gift
inter
vivos.
Counsel
for
the
respondent
submits
that
neither
of
these
aspects
of
the
matter
is
of
any
significance.
He
would
say,
I
believe,
that
the
statute
necessarily
contains
arbitrary
provisions
designed
to
bring
into
the
tax
net
transactions
that
might
otherwise
be
employed
to
avoid
the
incidence
of
estate
tax
and
that
such
provisions
are
to
be
applied
quite
literally
to
transactions
that
are
not
avoidance
transactions—probably
because
of
the
difficulty
involved
in
establishing
that
any
particular
transaction
has
a
tax
avoidance
character.
I
accept
the
proposition
that
provisions
such
as
Section
3(1)
(ce)
and
(g)
and
3(6)
(b),
by
their
very
nature,
must
be
applied
according
to
their
terms,
regardless
of
whether
their
application
to
particular
circumstances
may
go
further
than,
in
the
opinion
of
the
Court,
is
required
to
carry
out
the
scheme
of
the
statute.
I
am
of
opinion,
however,
that
in
determining
the
effect
of
such
a
provision,
as
in
the
case
of
determining
the
effect
of
any
other
provision
in
a
statute,
it
must
be
weighed
having
regard
to
the
place
it
occupies
in
the
scheme
of
the
statute.
Three
further
questions
arise,
viz.:
(a)
whether
Section
3(6)
(b)
applies
to
a
payment
by
a
company
controlled
by
the
deceased
to
an
employee
in
respect
of
past
and
future
services
if
that
employee
happens
to
be
a
blood
relative
of
the
deceased,
and
(b)
whether
a
payment
made
gratuitously
by
an
employer
to
an
employee
is
a
disposition
operating
or
purporting
to
operate
as
a
“gift”
within
Section
3(1)
(c)
even
though
such
payment
was
remuneration
for
services
and
was
motivated
exclusively
by
legitimate
business
reasons,
and
(c)
whether
a
transaction
whereby
a
deceased
conferred
a
benefit
on
an
employee
by
conferring
property
rights
on
him
for
a
nominal
payment
is
a
disposition
‘‘for
partial
consideration
in
money
or
money’s
worth’’
within
Section
3(1)
(g)
even
though
the
benefit
is
conferred
as
remuneration
for
services
and
was
motivated
exclusively
by
legitimate
business
reasons.
As
far
as
I
know
there
is
no
authority
to
guide
the
Court
in
deciding
any
of
these
questions.
In
view
of
my
conclusion
with
reference
to
the
second
and
third
of
these
questions,
it
is
unnecessary
for
me
to
reach
a
concluded
opinion
with
regard
to
the
interpretation
of
Section
3(6)
(b).
Having
said
that,
I
may
say
that
I
am
inclined
to
the
view
that
that
paragraph
does
not
apply
to
a
disposition
made
by
the
controlled
corporation
to
a
person
unless
it
was
made
to
that
person
as
a
‘‘person
connected
with
the
deceased
by
blood
relationship,
marriage
or
adoption’’,
and
that
it
does
not
therefore
apply
to
a
payment
made
by
the
company
to
an
employee
for
services
merely
because
that
employee
happened
to
be
so
connected
with
the
deceased.
This
is
not
to
say
that
a
payment
or
benefit
would
not
fall
within
that
provision
if
the
employeremployee
relationship
between
the
controlled
company
and
the
blood
relation
were
being
used
as
a
means
of
making
to
the
blood
relation
a
gift
consisting
in
whole
or
in
part
of
the
amount
of
the
payment
or
benefit.
The
questions
that
I
have
formulated
with
regard
to
paragraphs
(c)
and
(g)
of
Section
3(1)
may,
in
my
view,
be
discussed
together.
The
respondent’s
position,
as
I
understood
it,
was
that
there
is
a
gift
within
paragraph
(c)
if
there
is
no
“consideration”
in
the
sense
of
the
consideration
required
as
a
condition
to
the
validity
of
a
contract
made
otherwise
than
under
seal
at
common
law
regardless
of
whether
the
disposition
was
made
in
the
ordinary
course
of
business.
Similarly,
the
respondent’s
position
was
that
a
disposition
was
made
for
‘‘
partial
consideration”
within
paragraph
(g)
if,
on
the
evidence,
the
value
of
the
‘‘consideration’’
in
the
aforesaid
sense
was
less
than
the
value
of
the
property
disposed
of
even
if
the
disposition
was
the
subject
of
an
arm’s
length
contract.
I
am
of
opinion
that
these
paragraphs
must
be
read
as
companion
provisions.
If
a
gratuitous
(Le.,
unenforceable)
payment
by
a
business
man
to
an
employee
as
remuneration
for
services
is
a
‘‘gift’’
within
the
meaning
of
that
word
in
paragraph
(c),
then
a
transaction
whereby
a
business
man,
in
lieu
of
simply
making
such
a
payment,
confers
a
benefit
on
an
employee
by
charging
him
a
nominal
price
for
shares
is,
for
the
purposes
of
paragraph
(g),
a
disposition
‘‘for
partial
consideration’’.
Conversely,
if
a
gratuitous
payment
by
a
business
man
to
an
employee
as
remuneration
for
services
is
not
a
‘‘gift’’
within
the
meaning
of
that
word
in
paragraph
(c),
then
a
transaction
whereby
a
business
man,
in
lieu
of
simply
making
such
a
payment,
confers
a
benefit
on
an
employee
by
charging
him
a
nominal
price
for
shares
is
not,
for
the
purposes
of
paragraph
(g),
a
disposition
‘‘for
partial
consideration”.
It
is
beyond
controversy
that
gratuitous
payments
to
employees
having
regard
to
their
services,
past
and
future,
are
nevertheless,
for
business
and
income
tax
purposes,
payments
as
remuneration
for
services;
and
are
taxable
in
the
hands
of
the
employee
and
are
deductible
in
computing
the
employer’s
profit
from
his
business.
While
such
payments
may
fall
within
the
concept
of
a
‘‘gift’’
for
the
purposes
of
certain
principles
of
common
law—e.g.,
that
a
contract
to
make
a
gift
is
unenforceable
—with
much
hesitation,
I
have
reached
the
conclusion
that
they
are
not
gifts
within
the
meaning
of
the
word
‘‘gift’’
as
used
in
Section
3(l)(c)
of
the
Estate
Tax
Act.
While
there
is
no
‘‘consideration’’
for
such
a
gratuitous
payment
in
the
sense
in
which
the
word
‘‘consideration’’
is
used
by
the
common
law
of
contracts,
there
is,
from
the
point
of
view
of
the
employer,
a
business
reason—that
is
a
‘‘cause’’—for
making
the
payment.
Having
regard
to
the
scheme
of
Section
3,
I
cannot
conclude
that
Parliament
intended,
by
paragraph
(c)
of
Section
3(1),
to
bring
within
the
concept
of
“property
.
.
.
passing
on
the
death’’
of
the
deceased
all
payments
made
by
the
deceased
in
the
ordinary
course
of
business
during
the
three
years
prior
to
his
death
that
did
not
happen
to
have
been
made
pursuant
to
legally
enforceable
obligations.
Such
payments
are
not,
in
my
view,
‘‘gifts’’
within
the
ordinary
use
of
that
word
and
are
not,
therefore,
gifts
within
Section
3(1)
(c)
of
the
Estate
Tax
Act.
Compare
Finch
v.
Commissioner
of
Stamp
Duties,
[1929]
A.C.
427.
I
am
reinforced
in
my
view
of
Section
3(1)
(c)
when
I
come
to
consider
Section
3(1)
(g).
Section
3(1)
(g)
applies
to
dispositions
made
‘‘for
partial
consideration’’.
While
my
first
reaction
was
that
this
was
an
adoption
by
Parliament
of
the
common
law
concept
of
‘‘consideration’’,
I
find
on
referring
to
the
French
version
that
the
corresponding
phrase
is
“pour
une
cause
ou
considération
partielle”
which,
to
me,
indicates
that
what
we
are
talking
about
is
a
payment
that
is
not
supported
exclusively
by
business
considerations
but
is
partially
supported
by
such
motives
as
love
and
affection,
family
duty
or
philanthropy.
Compare
Attorney-General
v.
Boden,
[1912]
1
K.B.
539;
Attorney-General
v.
Earl
of
Sandwich,
[1922]
2
K.B.
500;
In
re
Baroness
Bateman,
[1925]
2
K.B.
429;
and
Gorkin
et
al,
v.
M.N.R.,
[1962]
S.C.R.
363;
[1962]
C.T.C.
245.
For
the
above
reasons,
the
appeal
is
allowed
with
costs
to
the
appellant
and
the
assessment
is
referred
back
to
the
respondent
for
re-assessment
on
the
basis
that
the
aggregate
net
value
of
property
passing
on
the
death
of
the
deceased
is
$109,150
less
than
that
on
which
the
assessment
appealed
from
was
based.
I
should
add
that,
while
the
issues
upon
which
I
have
decided
the
appeal
as
I
have
formulated
them
differ
somewhat
from
the
issues
formulated
in
the
‘‘
Agreed
Statement
of
Facts’’
that
was
filed
as
Exhibit
1,
the
issues
as
I
have
formulated
them
were
accepted
by
counsel
for
both
parties
as
having
been
raised
by
the
appeal
and
submissions
were
made
on
both
sides
with
regard
thereto.
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