THE
CHIEF
Justice.—This
appeal
raises
a
question
of
the
construction
and
application
of
section
17
of
the
Income
War
Tax
Act
(ch.
97,
R.S.C.
1927)
which
is
as
follows:
et
17.
Where
a
corporation,
having
undistributed
income
on
hand,
redeems
its
shares
at
a
premium
paid
out
of
such
income,
the
premium
shall
be
deemed
to
be
a
dividend
and
to
be
income
received
by
the
shareholder.
The
question
to
be
determined
is
whether
certain
sums
received
in
1929
by
the
appellants
from
the
Massey-Harris
Co.,
Ltd.,
on
the
redemption
of
shares
held
by
them
in
that
Company
are
assessable
to
income
tax
as
being
within
the
scope
of
this
definition
of
income.
The
Massey-Harris
Co.,
Ltd.,
is
a
manufacturing
company
created
under
the
provisions
of
the
Dominion
Companies
Act.
By
a
document
described
as
supplementary
letters
patent
of
the
17th
of
February,
1926,
the
Secretary
of
State,
pursuant
to
statutory
authority,
approved
a
resolution
of
the
Company
of
the
2nd
of
February
converting
250,000
shares
of
the
capital
stock
of
the
Company
of
the
par
value
of
$100
each
into
125,000
cumulative
preference
shares
of
the
par
value
of
$100
and
125,000
common
shares
of
the
same
value.
By
this
document
it
was
declared:
The
Company
shall
also
have
the
right
without
the
consent
of
the
holders
thereof,
from
time
to
time
to
redeem
the
whole
or
any
number
of
the
said
cumulative
preference
shares
at
One
hundred
and
ten
(1101%
)
per
centum
of
their
par
value,
together
with
any
accumulated
dividends
thereon
upon
giving
[the
prescribed]
notice
*
*
*
dicv
The
late
Walter
E.
H.
Massey
at
his
death
was
the
registered
holder
of
9,122
of
these
shares.
By
a
document
also
described
as
supplementary
letters
patent,
of
March
19th,
1929,
the
Secretary
of
State,
in
exercise
of
authority
vested
in
him
by
the
Companies
Act,
confirmed
a
by-law
of
the
company
increasing
the
capital
stock
of
the
company
from
125,000
7
per
cent.
cumulative
preference
shares
of
$100
each
and
500,000
common
shares
without
nominal
or
par
value
to
125,000
7
per
cent.
cumulative
preference
shares
of
$100
each
(being
the
already
authorized
preference
shares)
and
150,000
5
per
cent,
cumulative
convertible
preference
shares
of
$100
each
and
1,000,000
common
shares
without
nominal
or
par
value,
being
an
addition
of
150,000
5
per
cent.
cumulative
convertible
preference
shares
of
$100
each
and
500,000
common
shares
without
nominal
or
par
value
of
the
company.
Upon
the
same
date
the
company
gave
notice
to
the
shareholders
of
the
7
per
cent.
cumulative
preference
shares
of
its
intention
to
redeem
these
shares
by
paying
the
redemption
price
of
$110
per
share
together
with
the
accrued
dividend.
The
shares
held
by
the
appellants
as
the
executors
of
the
late
Walter
E.
H.
Massey
were
redeemed
on
the
15th
of
May,
1929.
Accompanying
the
notice
to
the
shareholders
was
a
hypothetical
balance
sheet
certified
by
the
auditors
as
of
the
30th
of
November,
1928,
but
modified
by
making
allowances
for:
(1)
the
redemption
of
the
7
per
cent.
cumulative
preference
shares
and
the
issue
of
120,899
redeemable
5
per
cent.
cumulative
preferred
shares,
(2)
the
issue
of
241,798
additional
common
shares
of
no
par
value
at
$60
per
share,
(3)
the
writing
off
of
the
entire
bond
discount
and
expenses
shown
as
an
asset
on
the
actual
balance
sheet
of
the
30th
of
November,
1928,
and
"‘making
reserve
against
any
premium
payable
on
redemption
of
the
7
per
cent.
preferred
shares,”
(4)
the
repayment
of
bank
advances
out
of
the
proceeds
of
new
capital.
The
actual
surplus
of
the
30th
of
November,
1928,
is
given
in
this
balance
sheet
as
$6,982,098.02.
The
surplus
left
after
the
deductions
mentioned
in
the
third
of
the
allowances
enumerated
above,
amounting
to
$2,109,960.20,
is
shown
to
be
$4,872,137.82.
This
balance
sheet
was
certified
by
the
auditors.
The
premium
of
$10
attributable
to
9,122
shares,
amounting
in
the
aggregate
to
$91,220,
was
duly
paid
to
the
appellants
and
was
assessed
as
taxable
income
in
their
hands.
I
repeat,
at
the
close
of
the
fiscal
year
ending
the
30th
of
November,
1928,
the
directors’
report
to
the
shareholders
showed
a
surplus
of
$6,982,098.02.
The
surplus
at
the
end
of
the
year
ending
the
380th
of
November,
1929,
was
$5,786,337.67.
In
the
year
1929
there
was
earned
a
profit
of
$2,800,813.35,
but
the
deductions
on
account
of
bond
discount
and
expenses,
premium
on
7
per
cent.
preference
shares
and
dividends
paid
in
the
year
1929
had
the
effect
of
reducing
the
surplus
to
the
figure
mentioned.
The
amount
paid
for
premiums
on
the
7
per
cent.
preference
shares
redeemed
was
$1,100,770.
This
is
all
shown
in
the
directors’
report
to
the
shareholders
for
the
year
ending
the
30th
of
November,
1929,
and
submitted
to
the
shareholders
at
the
annual
meeting
on
February
21st,
1930.
It
seems
advisable
to
notice
the
manner
in
which
(as
it
appears
from
the
directors’
reports
to
the
shareholders
and
the
balance
sheets)
this
surplus
of
nearly
seven
millions
was
built
up
and
what
it
represented.
The
earliest
directors’
report
and
the
earliest
balance
sheet
before
us
are
those
for
the
year
1924.
The
report
showed
that
the
surplus
at
the
30th
of
November,
1923,
that
is
the
end
of
the
fiscal
year,
was
$750,152.73.
The
surplus
at
the
30th
of
November,
1924,
ascertained
by
deduct-
ting
from
the
surplus
of
the
previous
year
a
sum
required
for
an
adjustment
in
connection
with
subsidiary
companies’
stock
and
adding
the
net
profit
for
1924,
is
given
at
$818,709.60,
and
this
sum
appears
in
the
balance
sheet
as
a
credit
to
profit
and
loss
account.
Net
profit
for
the
year
is
ascertained
by
deducting
from
the
income
of
the
year’s
operations
interest
on
borrowings
and
appropriations
for
certain
reserves.
Reserves
appear
,
in
each
of
the
balance
sheets
for
the
years
1924
to
1929
inclusive
and
are
for
taxes,
foreign
exchange,
etc.,
pensions,
buildings
and
equipment,
possible
losses
on
collection,
fire
indemnity,
contingent
account
as
called
for
by
charters
and
by-laws
of
companies
and,
as
appears
from
the
directors’
reports,
appro-'
priations
were
made
from
time
to
time
during
these
years
for
one
or
more
of
these
accounts.
In
each
year
the
surplus
is
ascertained
by
adding
to
the
surplus
of
the
preceding
year
the
net
profit
for
the
year
in
question
and
deducting
sums
paid
for
dividends,
if
any,
the
net
profit
in
each
case
being
arrived
1
at
in
the
manner
already
mentioned.
Now,
it
appears
from
the
hypothetical
balance
sheet
sent
to
the
shareholders
with
the
notice
of
redemption
that
any
premium
payable
on
redemption
of
the
7
per
cent.
preferred
shares
would
be
paid
out
of,
or
would
go
in
reduction
of
the
surplus
of
$6,982,098.02
at
the
30th
of
November,
1928;
and,
in
the
report
of
the
directors
for
the
year
ending
the
30th
of
November,
1929,
submitted
to
the
shareholders
at
the
annual
meeting
on
the
21st
of
February,
1930,
the
sum
paid
for
such
premiums,
$1,100,770,
is
charged
to
and
goes
in
reduction
of
such
surplus.
We
have,
as
I
have
said,
no
directors’
reports
or
balance
sheets,
prior
to
1924
but,
from
the
evidence
of
Mr.
Vardon,
there
is
no
doubt,
I
think,
that
the
surplus
at
November
30th,
1924,
was
treated
by
the
company
as
income
and
assessable
to
income
tax;
and
subject
to
qualifications
as
to
a
sum
of
$130,000
transferred
to
surplus
account
in
1925,
the
surplus
in
each
year
is
calculated,
as
I
have
said,
by
adding
the
net
profit
for
the
year
to
the
surplus
of
the
preceding
year
and
deducting
sums
paid
for
dividends.
The
sum
of
$130,000
was
transferred
in
1924
direct
from
the
contingent
account,
$380,000,
to
surplus,
increasing
the
surplus
by
that
amount
and
correspondingly
diminishing
the
contingent
account.
The
transfer
was
explained
by
the
fact
that
this
sum
was
held
in
the
contingent
account
of
subsidiary
companies
no
longer
required
because
of
the
surrender
of
their
charters.
I
have
already
observed
that
in
all
these
years
the
net
profit
was
as
a
rule
ascertained
by
deducting
from
the
income
from
the
year’s
operations,
interest
on
borrowings
and
appropriations
for
the
reserves
mentioned.
There
are,
however,
two
credits
to
income,
one
in
the
year
1925,
and
the
other
in
the
year
1928,
which,
perhaps,
call
for
some
comment.
The
first
is
a
sum
of
$661,139.20
in
1925,
representing
‘recovery
of
assets
written
off
in
the
war
years.’’
The
other
is
a
profit
on
the
sale
of
assets
in
the
year
1928
amounting
to
$835,218.16.
Both
of
these
credits,
as
well
as
the
nature
of
the
receipts
they
represent,
appear
explicitly
in
the
directors’
reports
submitted
to
the
shareholders
in
the
respective
years
mentioned.
Having
regard
to
the
way
in
which
the
income
account
is
made
up,
as
already
explained,
and
especially
to
the
appropriations
for
the
reserves
mentioned
which
appear
to
have
been
built
up
by
such
appropriations
from
income,
it
would
appear
to
have
been
a
perfectly
natural
and
reasonable
thing
to
credit
both
these
sums
to
income
account
and,
this
having
been
done
with
the
assent
of
the
shareholders,
it
seems
to
me
the
net
profit
in
each
year,
as
it
appears
in
the
directors’
reports,
must
be
considered
to
fall
within
the
category
of
income.
Subject
to
a
question
as
to
the
sum
of
$130,000
mentioned,
the
surplus
at
the
30th
of
November,
1928,
which
apparently
stood
at
the
same
figure
on
the
15th
of
May
when
the
Massey
shares
were
redeemed,
represented
accumulated
income.
Whether
this
last-
mentioned
sum
represented
accumulated
income
or
not
we
have
no
means
of
knowing.
Turning
now
to
the
application
of
section
17.
The
question
to
be
determined
is
whether
or
not
the
premium
of
$10
a
share
received
by
the
appellants
was
paid
out
of
undistributed
income
on
hand.
I
think
it
ought
to
be
observed
that
this
is
not
necessarily
the
same
question
as
the
question
to
which
the
learned
trial
judge
seems
chiefly
to
have
applied
himself,
whether
it
was
paid
out
of
undistributed
profits
available
for
the
payment
of
dividends.
The
Dominion
Companies
Act,
which
governs
the
Massey-Harris
Co.,
Ltd.,
provides
(s.
98)
:
No
dividend
shall
be
declared
which
will
impair
the
capital
of
the
This
section
does
not
prevent
the
distribution
of
a
capital
profit
provided
the
effect
of
doing
so
will
not
reduce
the
value
of
the
assets
below
the
sum
total
of
the
liabilities
and
the
share
capital.
Broadly,
it
may
be
said
that
the
company
may
distribute
any
of
its
assets
among
the
shareholders
so
long
as
such
is
not
the
result
of
the
distribution.
The
fact,
therefore,
that
the
surplus
was
drawn
against
for
dividends
is
not
at
all
conclusive;
undistributed
profits
are
not
necessarily
undistributed
Income
within
the
meaning
of
section
17;
but,
I
repeat,
the
proper
conclusion
from
the
evidence
is
that
the
surplus
represented
accumulated
income
with
the
exception
of
the
sum
mentioned
of
$130,000
which,
as
I
have
said,
may
or
may
not
be
within
that
category.
Since
the
transfer
of
this
sum
took
place
in
1925,
the
total
surplus
was
drawn
upon
to
the
extent
of
more
than
30
per
cent.
and
this
sum
must,
therefore,
be
proportion-
ately
reduced;
so
reduced
it
may,
I
think,
be
disregarded.
There
remains
the
question
whether,
within
the
meaning
of
section
17,
the
premiums
on
the
shares
redeemed
were
"paid
out
of”
undistributed
income
"‘on
hand’’
which
the
surplus
represented
at
the
time.
That
the
intention
of
the
directors
was
to
charge
the
premiums
against
the
surplus,
that
is
to
say,
that
they
should
go
in
reduction
of
the
surplus,
is
plain;
and
it
is
also
plain
that
the
shareholders
acquiesced
in
this
manner
of
dealing
with
the
surplus.
The
shareholders
became
aware
of
it
at
the
meeting
of
February,
1930,
and
there
is
no
suggestion
that
any
shareholder
ever
took
exception
to
it.
The
undistributed
income,
no
doubt,
existed
in
various
forms
in
the
current
assets,
as
Mr.
Vardon
says,
but
it
was
there
nevertheless
and
the
fact
that
it
was
not
in
a
form
in
which
the
company
could
conveniently
employ
it
for
the
purpose
of
making
payments
or
convert
it
into
cash
does
not
appear
to
me
to
be
conclusive
upon
the
point
we
are
considering.
I
can
see
no
reason
why
the
company,
having
cash
on
hand,
might
not
treat
this
cash
as
the
embodiment
of
the
surplus.
If
that
was
done,
I
do
not
think
it
matters
whether
this
cash
was
derived
from
the
sale
of
shares
or
from
a
loan
unless
there
is
something
in
the
law
or
the
constitution
of
the
company
preventing
such
funds
being
so
dealt
with.
Of
course,
in
the
present
case
the
direct
and
immediate
source
of
the
monies
put
to
the
credit
of
the
Preference
Dividend
Account
was
the
money
subscribed
for
share
capital
and,
if
that
were
the
whole
story,
nothing
more
could
be
said;
but
I
think
it
is
clear
enough
in
point
of
fact
that
the
directors,
with
the
assent
of
the
shareholders,
did
intend,
as
I
have
said,
to
pay
the
premium
out
of
the
surplus
and,
pro
tanto,
to
reduce
the
surplus;
and
by
resorting
to
the
fund
they
made
use
of
they
thereby
treated
that
fund
as
part
of
the
surplus
of
undistributed
income
and,
therefore,
as
"‘undistributed
income
on
hand.
‘
‘
If
I
am
right
in
my
view
that
in
fact
the
surplus
represented
undistributed
income
actually
existing,
though
in
various
forms
as
current
assets,
then
I
think
the
conclusion
is
that
the
con
pt
ditions
of
section
17
have
been
fulfilled.
I
should
add
that,
in
my
view,
the
premium
so-called
was
a
premium
within
the
contemplation
of
section
17.
For
these
reasons
I
think
the
appeal
must
be
dismissed
with
costs.
The
judgment
of
Rinfret
and
Kerwin
J
J.
was
delivered
by
KERWIN
J.—This
is
an
appeal
by
the
executors
of
Walter
E.
H.
Massey
from
a
judgment
of
the
Exchequer
Court,
ante,
p
…,
confirming
the
assessment
levied
upon
the
appellants
for
h
income
for
the
year
1929.
The
appellants
were
the
owners
of
a
number
of
preference
shares
of
Massey-Harris
Company,
Limited,
upon
the
redemption
of
which
they
received
a
premium,
and
the
real
point
for
determination
is
whether
this
premium
was
paid
out
of
the
company’s
"‘undistributed
income
on
hand’’
within
the
meaning
of
section
17
of
the
Income
War
Tax
Act.
This
section,
as
it
stood
at
the
time
of
the
redemption
of
the
shares
in
1929,
was
in
the
following
terms
:—
Where
a
corporation,
having
undistributed
income
on
hand,
redeems
its
shares
at
a
premium
paid
out
of
such
income,
the
premium
shall
be
deemed
to
be
a
dividend
and
to
be
income
received
by
the
shareholder.
Before
this
Court,
however,
counsel
for
the
appellants
took
a
point
that
had
not
been
previously
raised.
He
contended
that,
as
section
17
is
not
a
charging
section
and
as
there
is
no
evidence
that
the
premium
received
by
the
appellants
was
income
accumulating
in
trust
for
the
benefit
of
unascertained
persons
or
of
persons
with
contingent
interests
within
the
meaning
of
subsection
2
of
section
11
of
the
Act,
the
appellants
could
not
be
assessed
for
income
tax.
Apparently
the
solicitors
for
the
appellants
desired
to
obtain
a
decision
on
the
point
of
i,
substance,
and,
no
doubt,
having
the
assessment
made
against
the
appellant
executors
was
considered
a
covenient
method
of
securing
an
adjudication.
The
will
of
the
late
Walter
E.
H.
Massey
is
not
before
us
but
it
should
be
assumed
that
the
premium
did
constitute
income
accumulating
in
trust
as
defined
in
subsection
2
of
section
11
and
it
must
be
held
that
the
point
is
not
open
to
the
appellants.
On
the
other
hand,
counsel
for
the
appellants
abandoned
one
claim
he
had
advanced
before
the
Exchequer
Court,
1.e.,
that
as
a
portion
of
the
surplus
account
of
the
company
was
earned
prior
to
the
coming
into
force
of
the
Income
War
Tax
Act,
1917,
the
premium,
if
held
to
be
paid
out
of
undistributed
income
on
‘i
hand,
should
be
deducted
from
that
portion
that
had
been
earned
prior
to
1917.
It
is
therefore
unnecessary
to
deal
with
that
question.
With
reference
to
the
main
contention,
that
section
17
contemplates
an
actual
payment
out
of
accumulated
cash
income
on
hand,
I
agree
with
the
reasons
for
judgment
of
the
President
of
the
Exchequer
Court
and
have
nothing
to
add.
I
would
dismiss
the
appeal
with
costs.
Davis
J.
(dissenting).—At
the
time
of
the
redemption
of
the
shares
in
question
and
the
payment
of
what
has
been
treated
by
both
parties
as
"‘a
premium’’
of
10
per
cent.,
the
company
admittedly
had
undistributed
income
but
it
was
not
in
liquid
form—it
had
gone
into
and
had
become
part
of
the
physical
assets
of
the
company.
At
the
same
time
the
company
owed
its
bankers
over
six
million
dollars.
Obviously,
in
any
practical
business
sense
the
company
was
not
in
a
position
to
redeem
in
cash
large
blocks
of
its
capital
stock
at
par
plus
10
per
cent.
But
the
company
desired
to
get
rid
of
heavy
dividend
burdens
on
its
outstanding
preference
shares
by
taking
advantage
of
much
lower
prevailing
interest
rates,
and
worked
out
a
plan
whereby
it
would
reduce
its
annual
charge
for
dividends
by
$241,798
by
calling
in
outstanding
securities
and
issuing
new
securities
at
a
lower
rate
of
dividend.
The
company,
duly
incorporated
under
the
(Dominion)
Companies
Act,
R.S.C.
1886,
ch.
119,
had
the
right,
by
virtue
of
supplementary
Letters
Patent,
without
the
consent
of
the
holders
thereof,
from
time
to
time
to
redeem
the
whole
or
any
number
of
the
said
[7%]
cumulative
preference
shares
at
One
hundred
and
ten
(110%)
per
centum
of
their
par
value,
together
with
any
accumulated
dividends
thereon.
The
company
had
the
further
right,
by
supplementary
Letters
Patent,
to
issue
5
per
cent.
cumulative
convertible
preference
shares
of
the
par
value
of
$100
each
as
well
as
additional
common
shares
without
nominal
or
par
value.
What
actually
was
done
was
that
the
company
created
and
issued
a
new
series
of
securities
(both
preference
and
common
shares)
and
from
the
proceeds
of
the
sale
of
these
securities
realized
nearly
fifteen
million
dollars
in
cash
out
of
which
to
pay,
and
did
in
fact
pay,
in
cash
the
redemption
price
of
the
outstanding
preference
shares,
including
what
has
been
called
the
premium
thereon
of
10
per
cent.
The
sole
question
in
this
appeal
is
whether
or
not
the
appellants
are
liable
for
income
tax
on
the
$10
per
share
received
by
them
as
part
of
the
redemption
moneys.
The
Minister
of
National
Revenue
contends
that
they
are
liable
under
section
17
of
the
Income
War
Tax
Act
as
it
stood
when
the
said
shares
were
redeemed.
That
section
as
it
stood
at
the
material
date
had
been
enacted
by
ch.
10
of
the
Statutes
of
1926
in
the
following
words:
Where
a
corporation,
having
undistributed
income
on
hand,
redeems
its
shares
at
a
premium
paid
out
of
such
income,
the
premium
shall
be
deemed
to
be
a
dividend
and
to
be
income
received
by
the
shareholder.
This
provision
was
carried
into
the
Revised
Statutes
of
Canada
1927,
and
remained
in
force
until
repealed
in
1934
(by
ch.
55,
section
9,
of
the
Statutes
of
1934)
and
present
section
17,
which
does
not
affect
the
issue
in
this
appeal,
was
substituted
in
the
following
words
:
Where
a
corporation
redeems
its
shares
at
a
premium,
the
premium
shall
be
deemed
to
be
a
dividend
and
to
be
income
received
by
the
shareholder.
The
appellants
contend
they
are
not
liable,
in
that
the
said
moneys
were
not
"‘paid
out
of’’
undistributed
income
of
the
company
"‘on
hand’’
within
the
meaning
of
section
17.
Counsel
for
the
Minister
very
frankly
and
accurately
set
out
in
their
factum
certain
facts
that
were
proved
at
the
trial
in
the
Exchequer
Court.
I
set
out
below
a
complete
paragraph
that
appears
in
the
respondent
‘s
factum
:
On
April
30th,
1929,
that
is
fifteen
days
before
the
redemption
of
the
7
per
cent
preference
shares
the
company
was
indebted
to
the
Bank
in
the
sum
of
$6,040,657.99.
Between
that
date
and
May
16th,
the
company
received
cash
as
follows:
in
respect
of
common
share
subscriptions—$3,737,449.30;
in
respect
of
the
sale
of
5
per
cent
preference
shares—$11,010,900;
and
in
respect
of
ordinary
operations
—$398,693.04,
making
a
total
of
$15,147,042.34.
These
receipts
were
utilized
as
follows:
The
sum
of
$971,510.59
was
expended
for
current
operations
during
the
period,
the
sum
of
$5,000,000
was
transferred
to
a
special
bank
account
called
the
Preference
Dividend
Account
and
it
was
out
of
this
fund
that
the
redemption
payments
were
made,
and
finally
the
Bank
loan
above
mentioned
was
paid
off.
The
company
after
making
these
several
disbursements,
still
had
a
credit
balance
of
$3,124,873.66
on
May
15th.
This
surplus,
however,
was
rapidly
depleted
as
funds
were
transferred
to
the
preference
dividend
account
to
meet
redemption
cheques
as
presented.
By
May
17th,
the
company
was
once
more
indebted
to
the
Bank
and
the
redemption
cheques
paid
on
that
day
and
the
following
days
were
paid
out
of
loans
or
advances
by
the
Bank.
The
Massey
stock
was
paid
for
by
cheques
which
were
accepted
for
payment
on
May
15th.
Upon
these
admitted
facts,
how
can
the
respondent
contend
that
the
$10
per
share
was
"‘paid
out
of
undistributed
income
on
hand’’?
The
governing
section
(17)
at
the
time
of
the
transaction
was
not,
as
it
is
to-day,
"Where
a
corporation
redeems
its
shares
at
a
premium,
the
premium
shall
be
deemed
to
be
a
dividend
and
to
be
income
received
by
the
shareholder,’’
nor
did
it
declare
that
premiums
"‘shall
be
deemed
to
be
paid
out
of
income’’
as
section
21
(6),
as
enacted
by
the
1926
statute,
i
had
declared
with
respect
to
dividends
actually
declared
by
a
personal
corporation.
The
liability
under
the
section
as
it
stood
at
the
time
of
the
transaction
involved
two
matters
of
fact—
(1)
undistributed
income
"‘on
hand,’’
and
(2)
a
premium
“paid
out
of’’
such
income.
The
evidence
plainly
does
not
establish,
in
my
opinion,
the
facts
necessary
to
support
the
contention
advanced
by
the
Minister.
Although
the
income
of
a
beneficiary
from
an
estate
is
(apart
from
non-residents)
not
assessable
at
its
source
in
the
hands
of
the
trustee
but
assessable
against
the
beneficiary
who
receives
the
same,
except
in
those
cases
where
income
is
accumulating
in
trust
for
the
benefit
of
unascertained
persons
or
of
persons
with
contingent
interests
(section
11),
the
appellants
at
no
time
disputed
liability
upon
the
ground
that
the
10
per
cent.
payment
sought
to
be
taxed
was
not
accumulating
in
their
hands
but
had
been
received
by
the
beneficiaries,
and
it
must
therefore
be
taken
for
the
purpose
of
this
appeal
that
if
the
10
per
cent.
payment
in
question
came
under
old
section
17,
the
trustees
are
liable
to
be
assessed.
The
question
whether
or
not
the
$10
per
share
of
the
$111.75
per
share
paid
by
the
company
for
the
redemption
of
its
shares
was
strictly
"
"
a
premium
‘
‘
was
not
raised.
It
has
been
assumed
throughout
that
it
was
and
the
appeal
has
been
dealt
with
on
that
basis,
but
I
should
like
to
reserve
the
point
for
consideration
should
it
ever
come
up
in
another
case.
There
may
well
be
a
difference’
between
the
case
where
a
company,
having
authority
to
do
so,
offers
its
shareholders
an
opportunity
to
turn
back
their
shares
to
the
company
in
payment
of
a
bonus
or
premium,
and
the
case
such
as
this
where
the
shares
were
sold
to
the
public
with
certain
defined
rights,
permitted
by
statutory
authority,
which
included
a
right
in
the
company,
without
the
consent
of
the
shareholders,
from
time
to
time
to
redeem
the
shares
at
a
fixed
price
(i.e.,
110
per
cent.
of
their
par
value).
A
company
may
sell
its
preference
shares,
of
a
par
value
of
$100
each,
at
$105
or
$110
or
for
any
amount
in
excess
of
the
par
value,
and
if
it
has
authority
to
repurchase
these
shares
at
any
time
and
obligates
the
holder
to
resell
at
any
time
at
a
fixed
price,
I
doubt
that
the
exercise
of
that
right
of
repurchase
is
redeeming
the
shares
‘‘at
a
premium.’’
The
right
here
given
to
the
company
was
not
restricted,
as
it
is
under
section
46
of
the
English
Act
of
1929
which
provides
that
a
company
may,
if
so
authorized
by
its
articles,
issue
preference
shares
which
are,
or
at
the
option
of
the
company
are
to
be
liable,
to
be
redeemed
provided
that
no
such
shares
shall
be
redeemed
except
out
of
profits
of
the
company
which
would
otherwise
be
available
for
dividends
or
out
of
the
proceeds
of
a
fresh
issue
of
shares
made
for
the
purposes
of
the
redemption.
I
would
allow
the
appeal
and
set
aside
the
judgment
appealed
from
and
the
decision
of
the
Minister
and
the
assessment,
with
costs
throughout.
Appeal
dismissed
with
costs.
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