CAMERON,
Deputy
JUDGE:—This
is
an
appeal
from
an
assessment
dated
February
5,
1944,
made
in
respect
of
the
Appellant’s
income
for
the
year
1941.
Notice
of
Appeal
is
dated
March
4,
1944,
and
on
September
26,
1944,
the
Minister,
by
his
decision,
affirmed
the
assessment,
stating
in
part:
"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
is
not
entitled
to
an
allowance
under
the
provisions
of
Subsection
(a)
of
Section
5
of
the
Income
War
Tax
Act
for
the
exhaustion
of
timber
limits
owned
by
the
Crown
in
right
of
the
Province
of
Alberta
on
which
the
taxpayer
has
been
licensed
to
cut
timber.
Therefore
on
these
and
related
grounds
and
by
reason
of
other
provisions
of
the
Income
War
Tax
Act
and
Excess
Profits
Tax
Act
the
said
Assessment
is
affirmed.’’
On
October
23,
1944,
the
appellant
gave
Notice
of
Dissatisfaction
and
the
reply
of
the
Minister
dated
December
2,
1944,
affirmed
the
Assessment.
Pleadings
were
delivered.
At
the
trial,
on
motion
of
appellant’s
counsel,
I
approved
of
two
amendments
to
the
Statement
of
Claim:
(1)
By
substituting
an
amended
schedule
of
timber
limits
in
Paragraph
14;
(2)
By
adding
to
the
prayer
of
the
Statement
of
Claim
the
following
clause
:
"‘(aa)
That
the
Appellant’s
assessment
be
amended
by
making
it
an
allowance
for
exhaustion
of
$1.40
per
thousand
feet
board
measure,
or
a
just,
fair
and
reasonable
allowance
for
exhaustion.”
I
also
approved
of
an
amendment
to
the
Statement
of
Defence
by
adding
thereto
Paragraph
17
as
follows:
"17.
That
in
the
years
prior
to
the
taxation
year
1941
the
Minister
has
allowed
to
the
Appellant
amounts
for
exhaustion
which
have
enabled
the
Appellant
to
recover,
free
of
income
tax,
its
entire
cost
of
any
timber
licenses
or
permits
held
by
it,
and
in
making
the
said
allowances
the
Minister
has
exercised
the
discretionary
power
vested
in
him
by
the
provisions
of
Section
5.1(a)
of
‘The
Income
War
Tax
Act.’
The
Appellant
has,
for
many
years,
operated
a
logging,
sawing,
planing
and
general
lumber
milling
business
in
Alberta
and
dur-
ing
its
fiscal
year
ending
October
31,
1941,
produced
8,031,305
board
feet
of
lumber
from
three
timber
limits,
licenses
for
which
were
granted
to
it
by
the
Minister
of
Lands
and
Forests
of
Alberta.
It
claims
to
be
entitled
to
an
allowance
for
exhaustion
of
these
timber
limits
under
the
provisions
of
Section
5(1)
(a)
of
the
Income
War
Tax
Act
which
is
as
follows:
Depletion
‘5.1.
‘Income’
as
hereinbefore
defined
shall
for
the
purposes
of
this
Act
be
subject
to
the
following
exemptions
and
deductions
:—
(a)
The
Minister
in
determining
the
income
derived
from
mining
and
from
oil
and
gas
wells
and
timber
limits
may
make
such
an
allowance
for
the
exhaustion
of
the
mines,
wells
and
timber
limits
as
he
may
deem
just
and
fair,
and
in
the
case
of
leases
of
mines,
oil
and
gas
wells
and
timber
limits
the
lessor
and
the
lessee
shall
each
be
entitled
to
deduct
a
part
of
the
allowance
for
exhaustion
as
they
agree
and
in
ease
the
lessor
and
the
lessee
do
not
agree
the
Minister
shall
have
full
power
to
apportion
the
deduction
between
them
and
his
determination
shall
be
conclusive.
’
‘
For
the
Respondent
it
is
urged
that
the
Appellant
has
no
proprietary
or
other
depletable
interests
in
the
timber
limits;
that
it
is
not
such
a
lessee
as
is
referred
to
in
Section
5(1)
(a)
but
merely
a
purchaser
of
timber
the
cost
of
which
has
been
allowed
as
a
deduction
in
determining
the
profits
subject
to
tax;
and,
alternatively,
that
in
the
years
prior
to
1941
the
Minister
has
allowed
the
Appellant
amounts
for
exhaustion
which
enabled
it
to
recover
free
of
income
tax
its
entire
cost
of
such
timber
limits
or
permits
and
in
so
doing
that
the
Minister
has
exercised
the
discretionary
powers
vested
in
him
under
the
said
section.
It
is
clearly
established
that
the
Appellant
did
recover
the
above
mentioned
amounts
of
timber
from
the
said
limits
in
1941.
Exhibit
21
is
a
statement,
dated
June
8,
1944,
signed
by
the
Minister
of
Lands
and
Forests
of
Alberta,
indicating
that
the
Appellant
is
entitled
to
99%
of
the
allowance
for
exhaustion
and
the
Province
of
Alberta
is
entitled
to
1%
thereof
for
the
year
1941.
In
approaching
the
problem
involved,
it
is
necessary
to
first
consider
the
agreements
under
which
the
Appellant
operated
these
timber
limits.
Berth
1161
was
originally
acquired
in
1904
from
the
Dominion
Government
by
the
Appellant
and
an
associate;
the
latter’s
interest
was
subsequently
acquired
by
the
Appellant.
The
license
was
renewed
from
year
to
year
by
the
issue
of
a
new
license
and
Exhibit
8
is
a
photostatic
copy
of
the
last
one
issued
by
the
Minister
of
the
Interior;
Exhibit
9
is
the
first
license
issued
to
the
Appellant
by
the
Province
of
Alberta
and
is
for
the
year
ending
March
31,
1932.
It
has
been
renewed
from
year
to
year
by
the
issue
of
a
new
license,
and
apparently
without
tender.
Exhibits
10
and
11
are
respectively
the
licenses
for
the
years
ending
March
31,
1941,
and
March
31,
1942.
Berth
1727
was
acquired
from
the
Dominion
Government
in
1912
by
the
Appellant
and
Walters
but
later
the
licenses
were
granted
in
the
name
of
the
Appellant
only.
Exhibit
13
is
a
copy
of
the
last
license
issued
by
the
Dominion
Government,
expiring
April
30,
1931.
Subsequently
annual
licenses
were
granted
by
the
Province
of
Alberta
and
Exhibits
14
and
15
are
copies
of
such
licenses
for
the
year
ending
March
31,
1941
and
March
31,
1942
respectively.
Berth
6722
was
acquired
in
1940
from
the
Province
of
Alberta.
Exhibits
19
and
20
are
respectively
the
licenses
for
the
years
ending
March
31,
1941
and
March
31,
1942.
This
berth
was
secured
by
the
Appellant
following
a
sale
by
public
tender
and
Exhibit
17
is
the
advertisement
of
such
"‘sale
of
timber
by
public
tender.’’
In
1941
therefore,
the
Appellants
were
operating
all
these
berths
under
Provincial
licenses,
identical
in
character,
except
as
to
the
consideration
and
description
of
the
property.
As
mentioned
above,
berths
1161
and
1727
were
originally
acquired
from
the
Dominion
Government.
Tenders
were
called
for
and
the
license
was
granted
to
the
highest
bidder,
who,
in
addition
to
the
amount
of
his
bid,
was
required
to
pay
an
annual
ground
rent,
certain
costs
for
fire
protection
and
dues
according
to
the
amount
of
lumber
and
timber
manufactured
and
sold.
The
amount
of
this
bid
or
"
"
bonus,
‘
‘
as
it
was
called,
was
not
returned
to
the
licensee.
The
amount
of
dues
varied
from
time
to
time.
In
the
Provincial
licenses
for
the
year
1941,
in
addition
to
the
dues
fixed
by
the
regulations,
there
was
paid
at
the
time
of
granting
the
annual
license,
an
amount
expressed
to
be
for
ground
rent,
license
fee,
fire
guarding
charges
and
Timber
Areas
tax.
When
new
areas
are
put
up
for
public
tender
the
bidder
makes
an
offer
of
a
certain
amount
per
1,000
feet
board
measure
;
and
in
addition
makes
a
deposit
which,
if
his
bid
has
been
successful,
is
retained
as
a
guarantee
of
compliance
with
the
conditions
of
sale.
Eventually
it
is
credited
or
returned
to
the
licensee.
For
the
year
1941
all
amounts
paid
by
the
Appellant
to
the
Province
of
Alberta
in
respect
of
the
licenses
(other
than
the
deposit)
and
whether
for
ground
rent,
etc.,
or
for
dues,
were
allowed
as
deductions
in
arriving
at
the
taxable
income.
As
regards
the
cost
of
acquiring
berths
1161
and
1727,
for
cruising,
^bonus’’
and
purchase
of
the
interests
of
the
former
associates
ete.
the
Appellant
entered
these
in
its
own
books
as
capital
assets
and
annually
wrote
off
an
amount
as
an
operating
expense
to
earn
the
income.
In
its
income
tax
returns
it
showed
these
amounts
so
written
off,
merely
as
an
expense
of
operation,
and
the
amounts
so
shown
were
allowed
by
the
Income
Tax
Department
and
by
1939
the
entire
cost
had
been
fully
written
off.
The
basis
on
which
they
were
passed
by
the
Department
is
not
shown:
it
may
have
been
as
an
expense
of
operation
as
claimed
in
the
Appellant’s
tax
return;
or
it
may
have
been
as
an
allowance
for
exhaustion
under
the
then
See.
5(1)
(a).
In
any
event
it
is
clear
that
the
Appellant,
by
its
return,
indicated
that
it
viewed
it
as
a
matter
of
ordinary
operating
expense.
If
in
fact,
it
were
a
capital
asset,
then
by
the
provisions
of
Sec.
6(1)
(c)
no
allowance
for
depletion
or
exhaustion
could
be
allowed
except
as
otherwise
provided
in
the
Act,
namely
See.
5(1)
(a)
as
it
then
stood.
While
the
Appellant
in
1928
had
on
its
own
books
appreciated
value
of
the
berths,
it
continued
to
claim
as
deductions
from
income
on
the
basis
of
cost
only.
After
1939
no
additional
claim
was
made
for
further
deductions
in
respect
of
these
items,
the
entire
cost
having
been
written
off.
The
cost
of
road,
mill
and
camp
construction
was
written
off
from
year
to
year
during
the
life
of
the
particular
area
served,
as
depreciation.
Wages
and
normal
operating
costs
were
allowed
as
deductions
under
the
heading
of
operating
expenses.
I
am
satisfied
that
the
income
here
is
derived
from
timber
limits
and
I
think
it
is
clear
also
that
the
words
"‘derived
from”
apply
equally
to
oil,
gas
wells
and
timber
limits
as
well
as
to
mining
notwithstanding
the
suggestion
of
Respondent’s
counsel
to
the
contrary.
It
is
to
be
noted
that
the
allowance
provided
for
is
"‘for
the
exhaustion
of
the
timber
limits.”
The
marginal
note
to
the
section
is
‘‘depletion’’
but
the
word
is
not
used
in
the
section
nor
is
it
defined
in
the
interpretation
section.
There
is
no
provision
for
depletion
as
such
in
the
English
Act
and
while
in
the
United
States
of
America
such
an
allowance
is
made
it
is
on
an
entirely
different
basis.
So
far
as
I
am
aware
there
are
no
reported
Canadian
cases
where
the
principles
applicable
to
an
extractive
industry
have
been
fully
considered.
I
think
I
can
assume
that
this
section
is
made
part
of
the
Income
War
Tax
Act
in
order
to
ensure
that
the
tax
is
levied
on
income
and
not
on
capital
and
that,
therefore,
special
consideration
is
given
to
the
industries
where
the
capital
asset
is
extracted
and
disposed
of
and
where
in
the
ordinary
course
of
things
the
proceeds
of
such
disposal
would
be
income.
The
apparent
intention
is
to
provide
for
a
deduction
from
gross
income
of
an
amount
which
in
part
at
least
will
take
the
place
of
the
capital
asset
so
extracted
and
disposed
of.
The
first
part
of
the
section,
in
my
opinion,
is
intended
to
give
such
relief
to
the
owner
of
the
capital
asset
being
exhausted.
But
with
the
knowledge
that
some
extractive
industries
are
frequently
worked
under
a
lease
special
provision
is
made
later
in
the
section
for
the
division
of
such
allowance
as
the
Minister
may
make,
between
the
lessor
and
the
lessee
as
they
agree;
and
failing
agreement,
to
be
apportioned
between
them
as
the
Minister
may
determine.
It
would
seem
that
except
for
the
special
provision
relating
to
the
case
of
lessor
and
lessee,
the
allowance
should
be
made
to
the
‘owner
of
the
industry,
for
it
is
his
capital
asset
that
is
being
exhausted.
But
the
section
does
include
a
provision
for
the
case
where
timber
limits
are
operated
under
a
lease
and
that
in
such
cases
each
is
entitled
to
that
portion
of
the
allowance
agreed
upon.
I
think
that
what
is
here
contemplated
is
that
when.
the
Minister
has
determined,
after
consideration
of
all
the
facts,
that
an
allowance
for
exhaustion
should
be
made,
that
the
lessor
and
the
lessee
may
then
deduct
such
allowance
in
the
proportions
they
have
agreed
upon.
The
Appellant
here
is
clearly
not
the
owner
of
the
capital
asset
being
exhausted
i.e.
the
standing
timber;
the
owner
is
the
Province
of
Alberta
and
the
terms
of
the
annual
licenses
clearly
provide
for
the
vesting
of
the
right
of
property
in
the
Appellant
only
when
the
trees
have
been
cut.
The
ownership
of
all
uneut
trees
is
clearly
still
in
the
Province
and
remains
so
until
such
trees
have
been
cut
in
any
subsequent
year
under
the
terms
of
a
new
license.
Reference
may
be
made
to
Smylie
v.
The
Queen
(1900),
27
O.A.C.
172.
While
the
question
there
had
to
do
with
the
right
of
the
Province
of
Ontario
to
attach
new
conditions
to
the
granting
of
a
renewal
of
the
license
to
cut
timber,
the
Court
had
to
consider
timber
licenses
very
similar
to
the
one
here
in
question.
At
p.
178,
Osler
J.A.
said:
"'The
case
was
argued
as
if
by
the
purchase,
as
it
is
called,
of
the
berth
or
limit,
the
licensee
acquired
some
title
to
or
ownership
of
the
timber
beyond
that
which
by
virtue
of
the
Act
the
license
conferred
upon
him
for
the
time
it
was
in
force.
That
contention
cannot,
in
my
opinion,
be
supported.
The
right
acquired
was
to
cut,
during
the
term
of
the
license,
timber
belonging
to
the
Crown.
That
timber,
when
it
was
cut,
and
not
until
then,
became
the
property
of
the
licensee,
as
provided
by
the
Act.
When
a
new
license
was
granted
the
Crown
was
dealing
with
its
own
property
and
not
the
property
of
the
licensee.
.
.
.”
And
on
p.
2
of
the
license
here
in
question
certain
rights
are
given
the
Appellant
regarding
proceedings
against
trespassers
"‘and
any
such
proceedings
which
have
commenced
and
are
pending
at
the
expiration
may
be
continued
as
if
this
license
had
not
expired.^
The
rights
of
the
licensee
were
confined
to
the
timber
cut
during
the
term
of
the
license
(see
judgment
of
Maclennan,
J.A.
in
Smylie
v.
The
Queen
(supra)
at
p.
183).
Unless,
therefore,
the
Appellant
is
a
lessee
of
the
Province
of
Alberta,
it
cannot,
in
my
view,
come
within
the
provisions
of
Section
5(1)
(a).
Are
the
documents,
under
which
the
Appellant
operated
the
timber
limits
in
1941
and
which
are
called
‘licenses
to
cut
timber
on
the
provincial
lands,’’
licenses
or
leases?
In
deciding
whether
a
grant
amounts
to
a
lease
or
is
only
a
license,
regard
must
be
had
to
the
substance
of
the
agreement
(Halsbury,
2
Ed.
Vol.
20
p.
9).
Exhibit
19
is
a
copy
of
the
provincial
license
for
berth
6722
for
the
year
ending
March
31,
1942,
and
for
all
practical
purposes
is
the
same
as
all
the
other
"‘licenses’’
under
which
the
Appellant
operated
in
1941.
The
Respondent
argued
that
in
fact
this
"
"
license
‘
is
actually
nothing
more
than
a
sale
of
goods
and
in
support
of
that
contention
he
referred
to
Marshall
v.
Green
(1875),
1
C.P.D.
35
at
38,
and
to
Kauri
Timber
Co.
Ltd.
v.
Commissioner,
[1913]
A.C.
771
at
778.
In
the
former
case
it
was
held
that
a
sale
of
growing
timber
to
be
taken
away
as
soon
as
possible
by
the
purchaser
is
not
a
contract
or
sale
of
land
or
any
interest
therein
within
the
fourth
section
of
the
Statute
of
Frauds.
Brett,
J.
at
p.
42
outlined
the
judicial
test
in
regard
to
the
question
and
said:
“Then
there
comes
the
class
of
case
where
the
purchaser
is
to
take
the
thing
away
himself.
In
such
a
case
where
the
things
are
fructus
industriales
then
although
they
are
still
to
derive
benefit
from
the
land
after
the
sale
in
order
to
become
fit
for
delivery
nevertheless
it
is
merely
a
sale
of
goods
and
not
within
the
section.
If
they
are
not
fructus
industriales
then
the
question
seems
to
be
whether
it
can
be
gathered
from
the
contract
that
they
are
intended
to
remain
in
the
land
for
the
advantage
of
the
purchaser
and
are
to
derive
benefit
from
so
remaining;
then
part
of
the
subject
matter
of
the
contract
is
the
interest
in
the
land
and
the
case
is
within
the
section.
‘
‘
In
the
case
at
bar
it
is
clear
that
the
timber
is
not
fructus
industriales
and
that
as
the
licenses
were
renewable
for
a.
period
of
some
years,
the
timber
would
derive
benefit
by
way
of
increase
from
so
remaining
in
the
soil.
The
timber
here
appears
to
be
fructus
naturales.
The
principles
enumerated
in
that
case
were
followed
in
the
Kauri
Timber
case
(supra)
and
Lord
Shaw
of
Dunfermline
stated
at
p.
778:
"‘The
law—so
clearly
settled
with
regard
to
the
working
of
coal
and
of
nitrates,
and
settled
upon
a
broad
general
principle—is
in
no
way
different
when
it
comes
to
be
applied
to
timber-bearing
lands.
The
principle
set
out
above
in
the
present
judgment
as
to
the
true
reason
for
holding
that
such
timber
rights
are
of
the
nature
of
possession
of,
and
interest
in,
the
land
itself
has
long
been
settled.
A
note
by
the
learned
editor
in
the
first
volume
of
Saunders’
Reports,
p.
27
7
c,
puts
the
matter
thus:
‘The
principle
of
these
decisions
appears
to
be
this:
that
wherever
at
the
time
of
the
contract
it
is
contemplated
that
the
purchaser
should
derive
a
benefit
from
the
further
growth
of
the
thing
sold,
from
further
vegetation
and
from
the
nutriment
afforded
by
the
land,
the
contract
is
to
be
considered
as
for
the
interest
in
the
land;
but
where
the
process
of
vegetation
is
over,
or
the
parties
agree
that
the
thing
sold
shall
be
immediately
withdrawn
from
the
land,
the
land
is
to
be
considered
as
a
mere
warehouse
of
the
thing
sold
and
the
contract
is
for
goods.’
There
may
have
been
certain
necessary
modifications
of
the
generality
of
this
principle
with
respect
to
emblements
or
the
products
of
industry
like
ordinary
agricultural
crops;
but
it
is
unnecessary
to
analyse
these
instances
or
to
make
any
pronouncement
upon
some
of
the
dicta
of
judges
in
later
times.
For
the
present
is
a
broad
case
of
natural
products
of
the
soil
in
timber—a
crop
requiring
long-continued
possession
of
land
until
maturity
is
reached,
and
the
contract
with
regard
to
it
in
the
present
case
raises
none
of
the
difficulties
springing
out
of
a
covenant
for
immediate
severance
and
realization.
The
judgment
of
Brett
J.
in
Marshall
v.
Green,
1
C.P.D.
35,
distinguishes
this
broad
case
and
properly
accepts
the
note
in
Saunders’
Reports
which
has
just
been
cited.”
I
was
also
referred
to
St.
Catherines
Milling
&
Lumber
Co.
v.
The
Queen,
2
Ex.
C.R.
202,
in
which
it
was
held
that
a
permit
under
which
the
purchaser
had
the
right
within
a
year
to
cut
from
Crown
property
1,000,000
feet
of
lumber
is
a
contract
for
sale
of
chattels.
But
by
reason
of
a
particular
term
of
that
contract
it
was
not
within
the
contemplation
of
the
parties
that
the
purchasers
were
to
derive
any
benefit
from
its
future
growth
in
the
soil.
The
same
judge
(Burbidge,
J.)
in
the
case
of
Bulmer
v.
The
Queen
(1893),
3
Ex.
C.R.
184,
stated
at
p.
217:
"‘Here,
however,
the
facts
are
very
different.
The
licensee
is
given,
subject
to
certain
exceptions
that
are
not
material,
the
exclusive
possession
of
the
lands
and
the
right
to
bring
an
action
against
any
person
unlawfully
in
possession
thereof
and
to
prosecute
all
trespassers
thereon,
and
a
ground-rent
is
reserved.
Then,
if
the
licenses
were
renewable
from
year
to
year,
possibly
for
twenty
years
or
more,
at
the
request
of
the
licensee,
subject
only
to
a
revision
of
the
ground-rent
and
royalty,
and
that
is
a
necessary
part
of
the
claimant’s
case,
how
can
it
be
said
that
the
agreements
entered
into
were
for
the
sale
of
goods
and
not
of
an
interest
in
land
?
‘
‘
These
decisions
however
were
made
before
the
passing
of
the
Sale
of
Goods
Act.
This
Act
in
Alberta
is
Chap.
146,
R.S.A.
1922.
It
defines
"‘goods''
as
follows:
"‘goods
shall
include
all
chattels
personal
other
than
things
in
action
or
money.
The
term
shall
include
emblements,
industrial
growing
crops,
and
things
attached
to
or
forming
part
of
the
land
which
are
agreed
to
be
severed
before
sale
or
under
the
contract
of
sale.
‘
‘
In
Lord
Hailsham's
2
Ed.
Halsbury
Vol.
29,
p.
11,
dealing
with
the
Sale
of
Goods
Act,
it
is
stated:
“The
concluding
words
of
the
definition
appear
to
give
a
general
rule
for
dealing
with
all
things
attached
to
the
land,
other
than
emblements
and
industrial
growing
crops,
and
to
get
rid
of
subtleties
as
to
whether
they
were
to
be
severed
by
buyer
or
seller,
or
whether
they
were
to
get
any
benefit
from
remaining
attached
to
the
land
before
severance.
Under
the
Act
the
sole
test
appears
to
be
whether
the
thing
attached
to
the
land
has
become
by
agreement
goods,
by
reason
of
the
contemplation
of
its
severance
from
the
soil
.
.
.
.”
Applying
this
test
to
the
instant
case
it
would
seem
that
as
the
"‘license''
itself
provides
for
vesting
all
rights
of
property
in
the
trees,
timber,
etc.,
which
have
been
cut,
that
the
thing
attached
to
the
land,
namely
the
trees,
has
become
by
agreement
‘‘goods’’
by
reason
of
contemplation
of
its
severance
from
the
soil.
The
case
of
Carlson
v.
Duncan,
[1931]
2
W.W.R.
343,
dealt
with
the
contention
that
‘‘timber’’
was
within
the
definition
of
""goods”
in
the
Sale
of
Goods
Act
and,
while
the
Court
of
Appeal
there
held
that
in
that
case
they
were
not
goods
the
decision
was
arrived
at
because
of
the
special
conditions
of
the
contract.
There
the
sale
was
an
out
and
out
sale
of
all
the
trees
mentioned,
the
purchaser
to
have
as
much
time
as
he
desired
to
remove
them
from
the
land.
The
agreement
did
not
provide
that
the
timber
should
be
severed
before
sale;
and
the
Court
held
(presumably
because
the
timber
had
been
sold
for
cash)
that
before
severance
the
purchaser
had
title
to
an
interest
in
the
timber
which
was
part
of
the
land.
MacDonald,
J.A.
said
:
"Whether
a
contract
relating
to
timber
constitutes
a
sale
of
chattels
or
relates
to
an
interest
in
land
depends
upon
the
terms
of
the
contract.
Because
of
the
special
terms
of
the
contract
we
are
considering
it
is
not
one
for
the
sale
of
goods.”
In
the
case
of
James
Jones
&
Sons
Limited
v.
Tankerville,
[1909]
2
Ch.
445,
after
discussing
Marshall
v.
Green
(supra)
it
was
said:
"‘Lastly,
in
determining
the
effect
of
such
a
contract
at
law
the
effect
of
the
Sale
of
Goods
Act,
1893,
has
now
to
be
considered.
Goods
are
there
defined
in
such
a
manner
as
to
include
growing
timber
which
is
to
be
severed
under
the
contract
of
sale,
whether
by
the
vendor
or
the
purchaser.”
In
Fredkin
v.
Glines
(1908),
18
M.L.R.
249
at
252,
Perdue,
J.A.
said:
“By
this
definition
we
are
to
consider
as
goods
things
attached
to,
or
forming
part
of,
the
lands
which
are
agreed
to
be
severed
under
the
contract
of
sale.
It
appears
to
me
that
by
this
definition
the
intention
of
the
parties
as
evidenced
by
the
contract
is
the
determining
factor
in
arriving
at
the
conclusion
whether
the
article
in
question
is,
or
is
not,
a
chattel.
If,
therefore,
growing
trees,
or
natural
grass,
be
sold
for
the
purpose
of
being
cut
and
taken
away,
pursuant
to
the
contract,
they
are
goods
under
this
definition.
There
does
not
appear
to
be
any
limit
of
time
imposed
by
the
statute
within
which
the
intended
severance
is
to
take
place.
The
question
is
well
discussed
in
Benjamin
on
Sales,
5th
ed.
190.’’
In
Benjamin
on
Sales
7th
ed.
199,
in
discussing
the
question
"
"
What
are
goods
”
it
is
stated:
“The
definition
therefore
includes
such
things,
when
sold
as
chattels
as
fixtures,
buildings
and
other
erections
and
fructus
naturales.
ff
And
at
page
200:
"
"
It
should
be
remarked
that
the
Act
in
referring
to
severance
lays
down
no
limit
of
time,
thus
going
beyond
Marshall
v.
Green
(supra);
for
even
if
the
‘things’
sold
are
to
derive
further
benefit
from
the
soil,
and
are
not
to
be
removed
within
a
short
period,
provided
that
they
are
agreed
to
be
severed
‘under
the
contract
of
sale,’
they
are
declared
to
be
'goods’
within
the
Act.’’
I
have
reached
the
conclusion
that
in
this
particular
case
the
contract,
in
so
far
as
it
relates
to
the
acquisition
of
timber
by
the
Appellant,
was
a
contract
for
the
sale
of
goods.
The
timber
had
to
be
cut
before
it
became
the
property
of
the
Appellant
and
it
was
then
completely
severed
from
the
soil.
The
severance
was
clearly
in
the
contemplation
of
the
parties
and
payment
was
provided
for
on
the
basis
of
board
measure
after
milling.
(See
exihibit
17.)
But
in
the
view
that
I
have
taken
of
the
whole
contract
that
does
not
dispose
of
the
matter.
In
my
opinion
the
contract
is
something
more
than
a
mere
sale
of
goods.
It
is
also
a
right
to
enter
upon
the
land
for
the
purpose
of
cutting
and
removing
the
goods
agreed
to
be
sold.
Do
these
rights
in
the
land
constitute
a
license
or
a
lease?
Counsel
for
the
appellant
relied
strongly
on
the
case
of
Glenwood
Lumber
Co.
Ltd.
v.
Phillips,
[1904]
A.C.
405,
in
support
of
his
contention
that
the
licenses
were
in
fact
leases.
The
Court
there
was
dealing
with
the
effect
of
certain
timber
cutting
rights
in
Newfoundland.
Lord
Davey
said
at
p.
408:
"The
appellants
contended
that
this
instrument
conferred
only
a
license
to
cut
timber
and
carry
it
away,
and
did
not
give
the
respondent
any
right
of
occupation
or
interest
in
the
land
itself.
Having
regard
to
the
provisions
of
the
Act
under
the
powers
of
which
it
was
executed
and
to
the
language
of
the
document
itself,
their
Lordships
cannot
adopt
this
view
of
the
construction
or
effect
of
it.
In
the
so-called
license
itself
it
is
called
indifferently
a
license
and
a
demise,
but
in
the
Act
it
is
spoken
of
as
a
lease,
and
the
holder
of
it
is
described
as
the
lessee.
It
is
not,
however,
a
question
of
words
but
of
substance.
If
the
effect
of
the
instrument
is
to
give
the
holder
an
exclusive
right
of
occupation
of
the
land,
though
subject
to
certain
reservations
or
to
a
restriction
of
the
purposes
for
which
it
may
be
used,
it
is
in
law
a
demise
of
the
land
itself.’’
The
Provincial
Lands
Act
of
Alberta
1939
is
an
act
to
amend
and
consolidate
the
Provincial
Lands
Act.
It
provides
for
the
disposal
of
agricultural
land,
grazing
land,
hay
and
marsh
lands,
etc.
by
lease.
Then
follows
certain
sections
under
the
heading
‘‘disposal
of
Timber.”
Section
49
gives
to
the
Lieutenant
Governor
in
Council
power
to
make
regulations
for
the
disposal
by
public
competition
of
the
right
to
cut
timber
on
berths
to
be
defined
in
the
public
notice
of
such
competition.
Section
50
reads:
"The
person
to
whom
a
timber
berth
is
awarded
under
the
last
preceding
section
shall
be
granted
a
license
therefor.
Throughout
the
section
the
person
to
whom
the
berth
is
awarded
is
referred
to
as
a
licensee
and
the
authority
granted
to
him
is
called
a
license
and
not
a
lease.
Under
the
regulations
of
July
25,
1940,
a
timber
license
means
"any
permit
granted
under
these
or
any
former
regulations
for
the
cutting
and
removal
of
Crown
timber
for
any
purposes.”
It
was
under
that
Act
and
those
regulations
that
the
licenses
in
question
were
granted.
By
the
terms
of
exhibit
17—in
regard
to
berth
6722—the
successful
bidder
was
required
to
apply
for
a
license
and
the
appellant
apparently
did
so.
All
the
documents
under
which
the
appellant
operated
in
1941
were
called
licenses
throughout.
The
distinction
between
licenses
and
leases
is
discussed
in
the
24th
Edition
of
Woodfall
on
Landlord
and
Tenant
p.
6
and
in
English
and
Empire
Digest
Vol.
30
p.
501,
and
all
the
relevant
cases
are
referred
to
therein.
In
Woodfall
it
is
stated
"‘it
has
been
seen
above
that
there
is
a
demise
where
a
right
is
granted
to
the
exclusive
possession
of
the
lands
or
tenements
for
a
determinate
term.
’
‘
The
grant
of
such
exclusive
possession
is
a
lease
although
there
may
be
certain
reservations
or
restrictions
of
the
purpose
for
which
the
possession
may
be
used
and
although
it
may
be
described
as
a
license.
In
proceedings
between
the
parties
to
the
contract
it
might
well
be
impossible
to
successfully
assert
that
what
each
has
called
a
license
was
in
fact
a
lease.
But
this
is
not
such
an
action
and
I
have
to
determine
whether
under
the
Income
War
Tax
Act
the
contract
is
a
lease
of
timber
limits.
There
being
no
definition
of
lease
in
the
Act
I
think
I
am
not
entitled
to
construe
the
word
as
it
may
have
been
defined
in
any
Provincial
Act
but
rather
to
ascertain
how
it
has
been
judicially
construed.
In
the
case
of
Grand
Trunk
Railway
v.
Washington,
[1899]
A.C.
280,
it
was
said:
"As
these
are
enactments
emanating
from
a
different
legislative
body
from
that
which
passed
the
statute
to
be
interpreted,
their
Lordships
are
unable
to
see
that
they
ought
to
have
any
influence
upon
the
question
to
be
decided
arising
exclusively
upon
the
Dominion
Act.”
Exhibit
19,
as
to
the
rights
conferred
on
the
appellant
in
the
land,
seems
to
answer
all
the
tests
laid
down
in
the
cases
referred
to
in
the
text
books
I
have
mentioned
and
in
the
eases
therein
noted
as
well
as
the
ones
I
have
specifically
referred
to.
A
fixed
rental
is
provided
for;
exclusive
possession,
subject
to
specific
reservations,
is
given
and
there
is
a
definite
term—
1
year.
Rights
of
action
against
trespassers
are
given
the
Appellant
and
the
latter
is
required
to
pay
all
rates
and
assessments
and
taxes
imposed
by
any
municipal
improvement
scheme
or
drainage
district
to
be
charged
on
the
timber
berth.
Looking
therefore
at
the
substance
of
the
agreement
I
must
on
the
authorities
reach
the
conclusion
that,
notwithstanding
the
words
used
in
the
document
itself,
it
contains
a
lease
of
the
land,
and
I
so
find.
The
so-called
license
is,
I
think,
both
a
contract
for
the
sale
of
goods
and
a
lease.
Reference
to
the
regulations
(Ex.
28
sec.
8)
and
to
the
conditions
of
sale
(Ex.
17)
shows
that
a
bidder
in
addition
to
tendering
for
the
sawn
lumber,
is
required
also
to
enter
into
a
contract
to
pay
rent.
The
"‘license’’
embodies
in
one
document.
(See
Bulmer
v.
The
Queen
(1894),
23
S.C.R.
448
at
496.)
Counsel
for
the
appellant
urged
upon
me
that
his
client
had
a
statutory
right
to
an
allowance
for
depletion
and
referred
me
to
the
Pioneer
Laundry
Case,
[1940]
A.C.
127.
The
decision
in
that
case
was
made
under
section
5(a)
which
then
read:
"‘5.
‘Income’
as
hereinbefore
defined
shall
for
the
purposes
of
this
Act
be
subject
to
the
following
exemptions
and
deductions
:—
(a)
Such
reasonable
amount
as
the
Minister,
in
his
discretion,
may
allow
for
depreciation,
and
the
Minister
in
determining
the
income
derived
from
mining
and
from
oil
and
gas
wells
and
timber
limits
shall
make
such
an
allowance
for
the
exhaustion
of
the
mines,
wells
and
timber
limits
as
he
may
deem
just
and
fair;
And
in
the
case
of
leases
of
mines,
oil
and
gas
wells
and
timber
limits,
the
lessor
and
the
lessee
shall
each
be
entitled
to
deduct
a
part
of
the
allowance
for
exhaustion
as
they
agree
and
in
case
the
lessor
and
the
lessee
do
not
agree,
the
Minister
shall
have
full
power
to
apportion
the
deduction
between
them
and
his
determination
shall
be
conclusive.
‘
’
In
Lord
Thankerton’s
judgment
he
stated:
"
1
Their
Lordships
are
unable
to
agree
with
these
views,
and
they
agree
with
the
opinion
of
Davis
J.,
in
which
the
Chief
Justice
concurred,
and
in
which
he
states
:
The
appellant
was
entitled
to
an
exemption
or
deduction
in
‘such
reasonable
amount
as
the
Minister,
in
his
discretion,
may
allow
for
depreciation’.
That
involved,
in
my
opinion,
an
administrative
duty
of
a
quasi-judicial
character—a
discretion
to
be
exercised
on
proper
legal
principles.
In
their
Lordships’
opinion,
the
taxpayer
has
a
statutory
right
to
an
allowance
in
respect
of
depreciation
during
the
accounting
year
on
which
the
assessment
in
dispute
is
based.
’
’
But
following
that
decision
the
section
was
changed
and
insofar
as
depletion
or
exhaustion
is
concerned
from
1940
on
the
section
has
been
as
shown
on
page
482
herein.
The
changes
in
my
view
are
important
and
it
is
necessary
to
consider
whether,
under
the
new
wording
the
taxpayer,
has
now
a
statutory
right
to
the
deduction
or
whether
the
granting
of
such
an
allowance
by
the
Minister
is
purely
permissive.
Before
the
amendment
it
is
to
be
noted
that
the
words
were:
‘‘Income
as
hereinbefore
defined
shall
for
the
purposes
of
this
Act
be
subject
to
the
following
exemptions
and
deductions:
(a)
Such
reasonable
amount
as
the
Minister
in
his
discretion
may
allow
for
depreciation
..
.’’
As
stated
in
the
Pioneer
Laundry
case
the
taxpayer
had
a
statutory
right
to
an
allowance,
the
amount
of
which
was
in
the
discretion
of
the
Minister,
and
as
laid
down
by
the
Privy
Council
the
Minister
had
a
duty
to
fix
a
reasonable
amount
with
which
decision
the
Court
would
not
interfere
unless
it
was
manifestly
against
sound
and
fundamental
principles.
As
the
section
then
read
it
was
only
the
amount
of
the
allowance
which
was
left
to
the
discretion
of
the
Minister.
As
it
now
stands
the
first
part
of
the
section
reads
:
"Income
as
hereinbefore
defined
shall
for
the
purposes
of
this
Act
be
subject
to
the
following
exemptions
and
deductions
:—
(a)
The
Minister
in
determining
income
derived
from
mining
and
from
oil
and
gas
wells
and
timber
limits
may
make
such
an
allowance
for
the
exhaustion
of
the
mines,
wells
and
timber
limits
as
he
may
deem
just
and
fair.
.
.
.”
The
discretion
here
conferred
on
the
Minister
is
in
my
view
quite
different
from
that
which
he
had
prior
to
the
amendment.
In
my
opinion
the
word
"‘may''
is
used
in
its
permissive
sense
and
not
as
imperative.
The
Interpretation
Act,
section
37
(24)
says
"‘shall'
is
to
be
construed
as
imperative
and
"‘may''
as
permissive.
Reference
may
be
made
to
the
judicial
interpretation
of
the
words
“may”
and
‘‘shall’’
in
the
case
of
Canada
Cement
v.
The
King,
[1923]
Ex.
C.R.
145
at
150,
and
cases
therein
referred
to.
In
that
case
Audette
J.
quoted
the
judgment
of
Lord
Moulton
in
McHugh
v.
Union
Bank,
[1913]
A.C.
299
at
314,
as
follows:
"It
is
true
that
(as
is
customary
in
interpretation
clauses)
these
subsections
are
prefaced
by
the
words
‘unless
the
context
otherwise
required,’
but
that
does
not
take
away
from
the
authority
of
the
express
direction
as
to
the
construction
of
the
words
‘shall’
and
‘may'.
The
court
is
bound
to
assume
that
the
legislature
when
it
used
in
the
present
instance
the
word
‘may’
intended
that
the
imposition
of
the
penalties
should
be
permissive
as
contrasted
with
obligatory
unless
such
an
interpretation
would
be
inconsistent
with
the
context,
that
is,
would
render
the
clause
irrational
or
unmeaning.
But
there
is
nothing
in
the
context
which
creates
any
difficulty
in
accepting
this
statutory
interpretation
of
the
word
‘may'.
The
clause
is
just
as
intelligible
with
the
one
interpretation
as
with
the
other.
So
far
from
creating
any
difficulty
the
interpretation
which
leaves
it
permissive
appears
more
reasonable
seeing
that
there
is
no
exception
in
the
clause
for
cases
where
the
excess
has
been
taken
either
under
mistake
or
by
inadvertence,
and
it
is
not
likely
that
the
legislature
would
insist
on
penalties
being
enforced
where
no
blame
attached.
Be
this
as
it
may,
there
is
nothing
in
the
clause
which
will
permit
their
lordships
to
depart
from
the
express
provision
of
the
Interpretation
Ordinance
stating
that
‘may’
shall
be
construed
as
permissive.
This
being
the
case,
it
is
not
necessary
to
examine
the
English
decisions
which
establish
that
in
certain
cases
‘may’
must
be
taken
as
equivalent
to
‘must'.
In
the
light
of
those
decisions
it
is
often
difficult
to
decide
the
point,
and
in
their
Lordships
’
opinion
the
object
and
the
effect
of
the
insertion
of
the
express
provision
as
to
the
meaning
of
‘may’
and
‘shall’
in
the
Interpretation
Ordinance
was
to
prevent
such
questions
arising
in
the
case
of
future
statutes.
’
’
In
this
ease
I
think
the
court
is
bound
to
assume
that
when
Parliament
changed
the
wording
of
the
section
it
intended
that
the
allowance
should
be
permissive
as
contrasted
with
obligatory
and
it
must
be
so
read
unless
such
an
interpretation
would
be
inconsistent
with
the
context,
that
is,
render
the
clause
irrational
or
unmeaning.
No
such
inconsistency
appears
in
the
section.
Here
a
much
wider
direction
is
given
to
the
Minister
than
if
the
wording
were
‘‘shall’’
be
entitled
to
such
an
allowance
as
the
Minister
may
deem
fair
and
just.
’
’
In
my
view
the
discretion
extends
not
only
to
the
determination
of
what
is
a
fair
and
just
allowance
but
also
as
to
whether
or
not,
under
all
the
circumstances,
any
allowance
should
be
made.
It
may
seem
to
be
a
somewhat
arbitrary
power
but
it
is
not
for
the
Court
to
question
the
wisdom
of
Parliament
in
so
enacting.
But,
in
fact,
in
this
particular
case
the
discretion
of
the
Minister
does
not
seem
to
have
been
used
in
any
arbitrary
way
as
will
appear
from
a
consideration
of
all
the
facts.
As
I
have
found,
the
appellant
is
not
the
owner
of
the
timber
being
exhausted,
and
has
no
depletable
interest
therein.
In
addition,
it
has
already
benefited
by
deductions
from
its
income
over
a
period
of
years
of
all
costs
which
could
possibly
be
called
capital
costs
(as
well
as
all
costs
of
operation)
and,
therefore,
by
such
deductions,
has
been
allowed
to
keep
its
capital
investment
intact.
And
while,
apparently,
the
appellant
had
never
previously
claimed
these
deductions
as
depletion
under
section
5(1)
(a),
but
rather
by
way
of
depreciation
or
as
disbursements
or
expenses
wholly,
exclusively
and
necessarily
laid
out
or
expended
for
the
purpose
of
earning
the
income,
they
were
in
fact
allowed.
The
result
was
that
the
appellant
was
eventually
able
to
write
off
its
full
capital
investment.
Moreover,
there
is
a
special
situation
here
which
deserves
comment.
It
seems
to
me
that
Parliament
in
providing
for
the
division
of
any
allowance
made
by
the
Minister
between
the
lessor
and
lessee
"‘as
they
agree”
may
have
had
in
mind
that
a
lessor
and
lessee,
both
of
whom
were
interested
in
a
share
of
such
allowance,
would
endeavour
to
reach
an
agreement
which
would
reasonably
reflect
their
actual
respective
interests
in
the
thing
which
was
being
exhausted.
Failing
such
an
agreement
the
Minister
would
have
had
to
give
similar
consideration
to
the
facts
disclosed
to
him.
But
here
it
is
to
be
observed
that
the
Province
of
Alberta
is
not
subject
to
payment
of
income
tax
and
having
no
interest
in
claiming
a
part
of
such
allowance
has
indicated
its
consent
to
99%
of
such
allowance
being
made
to
the
appellant.
The
result
is
quite
clear,
namely
that
the
appellant,
having
little
or
no
proprietary
interest
in
the
asset
being
exhausted
and
having
had
all
its
costs
already
taken
care
of
by
annual
deductions,
would
escape
a
considerable
degree
of
taxation.
It
is
true
of
course
that
a
taxpayer
may
take
such
legal
steps
in
managing
his
affairs
as
may
avoid
attracting
tax
to
his
income.
But
it
seems
to
me
that
situations
such
as
I
have
outlined
are
matters
which
the
Minister
is
quite
entitled
to
consider
in
reaching
any
conclusion
as
to
whether
any
allowance
should
be
made.
It
is
apparent
that
he
has
had
them
or
some
of
them
in
mind
and
has
concluded
that
no
allowance
in
this
case
should
be
made.
It
is
not
a
case
where
allowances
had
formerly
been
made
to
operators
of
timber
limits,
holding
under
such
an
agreement
as
this
over
a
long
period
of
time;
the
evidence
indicates
that
they
had
never
been
made
up
to
1941.
Inasmuch
therefore
as
the
Minister
appears
to
have
reached
a
conclusion
which,
in
my
interpretation
of
his
powers
he
was
quite
entitled
to
reach
and
the
decision
on
which
is
left
to
him,
it
is
not
a
matter
where
the
Court
should
interfere.
Nor
can
I
find
that
in
exercising
his
discretion
the
Minister
has
proceeded
on
any
wrong
principles.
All
the
facts
necessary
to
determine
the
matter
were
in
his
possession
and
it
has
not
been
shown
that
in
reaching
his
conclusion
he
did
not
follow
the
principles
laid
down
for
the
exercise
of
discretion
in
the
Pioneer
Laundry
and
other
eases.
At
the
trial
I
allowed
certain
evidence
to
be
given
subject
to
later
ruling
as
to
its
relevancy
and
admissibility.
Certain
^rulings”
given
by
the
Department
and
published
in
Gordon’s
Digest
of
Income
Tax
Cases
(1939)
were
tendered.
This
digest
was
published
by
the
direction
of
the
then
Minister
of
National
Revenue
and
printed
by
the
King’s
Printer.
These
""rulings”
appear
to
have
been
issued
from
time
to
time
by
the
Department
and
sent
to
the
various
branch
offices
of
the
Income
Tax
Department
as
an
indication
of
the
view
taken
by
the
Department
in
certain
problems;
they
sometimes
included
information
as
to
changes
in
rates
of
depletion
and
gave
lists
of
cases
in
which
shareholders
were
entitled
to
depletion
allowances
and
other
matters
of
a
like
nature.
They
have
received
fairly
wide
publicity
and
are
well
known
to
lawyers,
accountants,
ete.
The
statement
of
claim
brings
in
issue
the
practice
of
the
Department
in
regard
to
the
administration
of
depletion
allowances;
generally
speaking,
I
think
it
may
be
said
that
evidence
of
departmental
practice
is
inadmissible
in
construing
a
statute
but
there
are
cases
in
which
it
would
be
of
assistance
in
interpreting
an
ambiguous
statute,
particularly
when
such
practice
has
long
continued
and
is
clearly
not
contrary
to
the
Act
itself.
And
as
the
"‘rulings''
referred
to
have
to
do
with
other
extraction
industries
mentioned
in
the
subsection,
I
have
reached
the
conclusion
that
they
are
relevant
to
the
issue
and
should
be
admitted.
Evidence
was
also
tendered
as
to
certain
special
allowance
for
sawlogs
scaled
in
1943
west
of
the
Cascade
Range
etc.
(in
which
area
the
appellant
was
not
included)
and
as
to
several
allowances
for
depletion
granted
in
1945
to
the
pulp
and
paper
industry
only,
to
commence
in
the
1941
period.
This
evidence
is,
I
think,
quite
irrelevant
to
the
issue
before
me.
These
special
allowances
were
made
as
a
war
measure
to
stimulate
production
of
certain
commodities
in
certain
areas
and
they
do
not
affect
the
appellant.
I
recall
no
evidence
that
they
were
made
under
See.
5(1)
(a),
and
if,
as
a
war
measure,
the
Minister
exercised
his
discretion
in
a
special
way
for
certain
limited
groups
of
the
industry,
I
can
see
no
reason
why
it
must
be
made
applicable
to
all.
My
conclusions,
therefore,
are
that
while
the
contracts
in
question
are
leases
as
to
the
land
mentioned
therein,
and
are
contracts
for
the
sale
of
goods
as
to
the
timber
purchased,
that
the
Minister
having
a
discretionary
power,
after
considering
all
the
facts
in
the
case
to
grant
or
withhold
any
allowances,
and
having
exercised
that
discretion
according
to
proper
legal
principles,
his
discretion
should
not
be
interfered
with.
The
appeal
is
therefore
dismissed
with
costs.
Judgment
accordingly.
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