International Harvester Co. of Canada v. The Provincial Tax Commission

International Harvester Co. of Canada v. The Provincial Tax Commission
Collection
Supreme Court Judgments
Date
1941-04-22
Report
[1941] SCR 325
Judges
Duff, Lyman Poore; Rinfret, Thibaudeau; Crocket, Oswald Smith; Davis, Henry Hague; Kerwin, Patrick; Hudson, Albert Blellock; Taschereau, Robert
On appeal from
Saskatchewan
Subjects
Taxation
Decision Content
Supreme Court of Canada
International Harvester Co. of Canada v. The Provincial Tax Commission, [1941] S.C.R. 325
Date: 1941-04-22
International Harvester Company of Canada, Limited Appellant;
and
The Provincial Tax Commission, The Commissioner of Income Tax, The Provincial Treasurer, and The Attorney-General for Saskatchewan. Respondents.
1940: October 15, 16, 17, 18; 1941: April 22.
Present: Duff C.J. and Kinfret, Crocket, Davis, Kerwin, Hudson and Taschereau JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR SASKATCHEWAN
Income tax—Companies—Constitutional law—Extra-provincial company selling some of its products within the province—Assessment of company by the province for income tax—Income tax on "the net profit or gain arising" from business in the province—Company not keeping separate profit and loss account in respect of business done in the province—Statute authorizing regulations for determining a company's income within the province where such income cannot be ascertained—Regulation providing that such income shall be taken to be such percentage of company's income "as the sales within the province bear to the total sales"—Constitutionality of statute and regulation—Validity of regulation arid assessment, having regard to the statute—Error in assessment in not allowing for deduction in respect of reserve for bad debts—Right of appeal in respect of assessments for income tax in Saskatchewan—Saskatchewan statutes: The Income Tax Act, 1932, c. 9, and amending Acts; The Income Tax Act, 1936 c. 15, and amending Acts; 1934-35, c. 6 (amending The Treasury Department Act); The Treasury Department Act, 1938, c. 8, and amending Acts.
Appellant company had its head office and central management and control at Hamilton in the province of Ontario. It had branch offices in the province of Saskatchewan. It manufactured agricultural implements, the manufacture being wholly outside of Saskatchewan. It sold its products in Saskatchewan and elsewhere. All moneys received in Saskatchewan, for sales or in payment of debts, were deposited in separate bank accounts and remitted in full to the head office in Hamilton. It kept no separate profit and loss account in respect of the business done in Saskatchewan; it kept at its head office in Hamilton a profit and loss account of its entire business.
By statute of Saskatchewan, every corporation and joint stock company "residing or ordinarily resident or carrying on business within the province" must pay a tax upon its income during the preceding year. "Income" was defined (in part) as "the annual net profit or gain * * * as being profits * * * received by a person * * * from any trade, manufacture or business * * * whether derived from sources within Saskatchewan or elsewhere." Profits earned by a corporation or joint stock company (other than a personal corporation) "in that part of its business carried on at a branch or agency outside of Saskatchewan" were not liable to taxation. The income liable to taxation of every person (including any body corporate and politic) residing outside of Saskatchewan, who was carrying on business in Saskatchewan, "shall be the net profit or gain arising from the business of such person in Saskatchewan" (Income Tax Act, 1932, s. 21 a; Income Tax Act, 1936, s. 23). Where the Minister was unable to determine or to obtain the information required to ascertain the income within the province of any corporation or joint stock company or of any class of corporations or joint stock companies, the Lieutenant-Governor in Council might make regulations for determining such income within the province or might fix or determine the tax to be paid by a corporation or joint stock company liable to taxation. Regulations were issued "covering such cases where the Minister is unable to determine or obtain information required to ascertain the income within the Province of a corporation or joint stock company carrying on a trade or business within and without the Province." A regulation (applied in the present case) provided that the income liable to taxation "shall be taken to be such percentage of * * * the income as the sales within the Province bear to the total sales "; the sales being measured by the gross amount received from sales and other sources (certain kinds of receipts being excluded). Provision was made for a taxpayer objecting as to the application of such method to his business and for re-determining the taxable income by some other method of allocation and apportionment as the Commissioner might decide.
On August 23, 1938, the Commissioner of Income Tax made assessments upon appellant in respect of its income for each of the years 1934, 1935, and 1936, applying the regulation above quoted. Appellant appealed unsuccessfully from the assessments, first to the Board of Revenue Commissioners and then to Anderson J. ([1939] 3 W.W.R. 129). It then appealed to the Court of Appeal for Saskatchewan, which held ([1940] 2 W.W.R. 49) that, on consideration of the relevant statutes, there was no right of appeal to it in respect of the assessment for 1934, and the appeal as to that assessment should be dismissed for want of jurisdiction; but that there was a right of appeal in respect of the assessments for 1935 and 1936; and that the assessments for 1935 and 1936 were defective in that they did not provide for allowance for deduction in respect of a reserve for bad debts, and should be set aside, and in making new assessments the question of such reserve should be reconsidered in the light of the reasons for judgment of the Court of Appeal; but that all other objections to the assessments failed. On appeal and cross-appeal to this Court:
Held (per Rinfret, Crocket, Kerwin and Hudson JJ.): (1) There was a right of appeal to the Court of Appeal with respect to the assessments for 1935 and 1936, as held by the Court of Appeal; but there was also a right of appeal to the Court of Appeal with respect to the assessment for 1934. (Provisions of the following Saskatchewan Acts considered: The Income Tax Act, 1932, c. 9, and amending Act, 1934-35, c. 16; An Act to amend The Treasury Department Act, 1934-35,. c. 6; The Income Tax Act, 1936, c. 15; and amending Acts, 1937, c. 8; 1938, c. 91 (s. 2); 1939, c. 9; The Treasury Department Act, 1938, c. 8; and amending Acts, 1940, c. 5, c. 6). (2) The application of the above quoted regulation was validly adopted in the method of assessment. The regulation, and the authorizing statutory enactment, were intra vires. Their purpose was to reach by taxation only the income arising from the business in Saskatchewan, of non-resident companies which carry on business in Saskatchewan, and the purpose of their application in the present case was to reach by taxation only the income arising from appellant's business in Saskatchewan. And the adoption of such method was proper under the circumstances, as being the best available means to ascertain that income. (Bank of Toronto v. Lambe, 12 App. Cas. 575; Attorney-General v. Till, [1910] A.C. 50, at 72, cited).
(3) The holding of the Court of Appeal that the assessments for 1935 and 1936 were defective as aforesaid and should be set aside, and the direction for reconsideration of the question of a reserve for bad debts, should be affirmed; but the same holding and direction should be applied in respect of the assessment for 1934.
Per the Chief Justice and Davis and Taschereau JJ. (dissenting): The assessments were invalid because the regulation pursuant to which they purported to be made either did not apply to appellant or was beyond the powers of the Lieutenant-Governor in Council. The essence of appellant's profit making business is a series of operations as a whole (including manufacturing, etc.). Though that part of the proceeds of appellant's sales in Saskatchewan which is profit is received in Saskatchewan, yet it cannot be said that the whole of such profit "arises from" that part of its business which is carried on there within the contemplation of s. 21a (above quoted, of the Act of 1932—the same as s. 23 of the Act of 1936). The effect of the words "net profit or gain arising from the business of such person in Saskatchewan" in s. 21a is, for the purpose of s. 21a, to delete from the definition of "income" above quoted the words "or elsewhere." The policy of the Act, as shown by s. 21a, along with other provisions, is that the profits taxable under s. 21a as "arising from the business" of a non-resident "in Saskatchewan" are that part of the profits which is earned therein, and to remove from the incidence of income tax profits earned elsewhere, without regard to the place where those profits may have been received. (Commissioners of Taxation v. Kirk, [1900] A.C. 588, referred to as helpful in the elucidation of the Act now in question). In the present case the method of determination adopted, as put in the regulation, was to ascertain the ratio of the sales in Saskatchewan to the total sales and then apply that ratio to the income (profits). As determined by this method, the subject of taxation is a percentage of the sales in Saskatchewan, a percentage which is identical with the ratio between total profits and total sales. Under the regulation applied, the subject of income tax is that part of the sales in Saskatchewan which is profit; that is to say, the whole of the profit received in Saskatchewan. This is a procedure wholly inadmissible under the Act. Nowhere does the Act authorize the Province to tax a manufacturing company, situated as appellant is, in respect of the whole of the profits received by the company in Saskatchewan. It is not the profits received in Saskatchewan that are taxable; it is the profits arising from its business in Saskatchewan; not the profits arising from its manufacturing business in Ontario and from its operations in Saskatchewan taken together, but the profits arising from its operations in Saskatchewan. The enactment authorizing the making of regulations limits the authority to making regulations "for determining such income within the province"; "such income" being the income contemplated by the taxing provisions of the Act as the subject of income tax; i.e., in the case of non-resident companies, the profits arising out of that part of their business that is carried on in Saskatchewan. Consequently, the regulation in question, if it applied to non-resident companies such as appellant, was not competently made, because its aim was not within the purpose for which the statutory authority was given. The aim of the regulation was to determine the profits received by such companies in Saskatchewan; the authority was to make regulations for determining the net profits as limited and defined by s. 21a.
APPEAL from the judgment of the Court of Appeal for Saskatchewan[1] in so far as it dismissed the present appellant's appeals from the judgment of Anderson J.[2] dismissing its appeals from the decision of the Board of Revenue Commissioners of Saskatchewan dismissing its appeals from three assessments, all bearing date August 23, 1938, for income tax in respect of the years 1934, 1935, and of the period of ten months ending October 31st, 1936, respectively.
The formal judgment of the Court of Appeal was in part as follows:
* * * and this Court having held that there is no appeal from the decision of the said Judge in Chambers in respect of the said assessment for the taxation year 1934, but that the said assessments for the taxation years 1935 and 1936 should be set aside because they are defective in so far as a reserve for bad debts is concerned, and this Court having awarded the appellant two-thirds of its costs incurred in this Court and below, and having held that on all other grounds the said appeals fail;
1. THIS COURT DOTH HEREBY ORDER AND ADJUDGE that there is no appeal from the decision of the said Judge in Chambers under the Income Tax Act of 1932, and that therefore the said appeal in respect of the said assessment for the taxation year 1934 be and the same is hereby dismissed on the ground that this Court has no jurisdiction to entertain the same.
2. THIS COURT DOTH FURTHER ORDER AND ADJUDGE that the said assessments for the taxation years 1935 and 1936 respectively are defective in that they do not make provision for the appellant being allowed any deduction in respect of a reserve for bad debts, and that the said assessments for the said years 1935 and 1936 be and the same are hereby set aside.
3. AND THIS COURT DOTH FURTHER ORDER that the Commissioner in making new assessments for the said years 1935 and 1936 shall reconsider the question of a reserve for bad debts in the light of the reasons for judgment of this Honourable Court delivered this day, and shall exercise the discretion vested in him by section 6 (d) of the Income Tax Act, 1936, upon sound principles.
4. AND THIS COURT DOTH FURTHER ORDER AND ADJUDGE that the respondents do pay to the appellant two-thirds of the appellant's costs of and incidental to its said appeals to this Court and its said appeals to a Judge of the Court of King's Bench, such costs to be taxed on the King's Bench scale.
Special leave to appeal to the Supreme Court of Canada was granted to the appellant by the Court of Appeal for Saskatchewan. Appellant's notice of appeal (following in effect the provisions of the order granting special leave) limited its appeal to complaint against
clause 1 of the formal judgment or order of the Court of Appeal and the judgment or decision of the said Court that on all other grounds, except with respect to the deduction in respect of a reserve for bad debts, as ordered in clauses 2 and 3 of the formal judgment or order of the Court of Appeal, the appellant's appeals fail, and including among the part complained of the disallowance by the said Court (in clause 4 of the formal judgment or order) of one-third of the appellant's costs of its appeals to this Court and to a Judge of the Court of King's Bench.
The respondents cross-appealed, contending that the Court of Appeal should have held that there was no appeal from the decision of the Board of Revenue Commissioners with respect to the assessments for the taxation years 1935 and 1936 respectively; or, if it be held that the Court of Appeal had jurisdiction to hear the appeals with respect to said assessments, then it erred in holding that the Commissioner of Income Tax, in making an allowance for bad debts, made a mistake in law in arriving at the amounts to be assessed; and that the Court of Appeal erred in its award as to costs; and asked for variations in the judgment of the Court of Appeal accordingly.
The material facts of the case, the statutes involved, and the questions in dispute are sufficiently stated in the reasons for judgment in this Court now reported.
The appeal to this Court was allowed in part. The assessment for the taxation year 1934 was set aside and the same directions were given to the Provincial Tax Commissioner in reconsidering the question of a reserve for bad debts as the directions contained in paragraph 3 of the order of the Court of Appeal with respect to the taxation years 1935 and 1936. Appellant was to have one-half of its costs of its appeal. The cross-appeal was dismissed with costs. The Chief Justice and Davis and Taschereau JJ. would allow the appeal and quash the assessments.
Frank L. Bastedo K.C. for the appellant.
Samuel Quigg K.C. for the respondents.
The judgment of the Chief Justice and Davis and Taschereau JJ. was delivered by
The Chief Justice—The appellant company carries on the business of manufacturing and selling agricultural machinery and parts thereof. The Company is incorporated under the Companies Act of Ontario and is registered in Saskatchewan under the Companies Act of that province.
Its head office is at Hamilton, Ontario. Its manufacturing business is carried on wholly outside Saskatchewan. The Company sells its products in Saskatchewan, as well as in other parts of Canada. It is admitted that the central management and control of the Company are at the head office in Hamilton.
On the 23rd of August, 1938, the Commissioner of Income Tax for Saskatchewan made assessments upon the Company in respect of its income for each of the years 1934 to 1936 inclusive. The subject of the tax, the taxable income of the Company for those years, was "determined" by the Commissioner in professed exercise of his authority under regulations approved by Order in Council of the 23rd of November, 1933; which regulations purport to derive their authority from sec. 7 (4) of the Income Tax Act of 1932, chap. 9 of the Statutes of that year.
These assessments are, in my opinion, invalid for the reason that the regulation pursuant to which they purport to be made either does not apply to the appellant company, or was beyond the powers of the Lieutenant-Governor in Council.
The special provision governing the appellant company in respect of income tax is sec. 21a of the Statute of 1932, which is in these words:—
The income liable to taxation under this Act of every person residing outside of Saskatchewan, who is carrying on business in Saskatchewan, either directly or through or in the name of any other person, shall be the net profit or gain arising from the business of such person in Saskatchewan. The appellant company is admittedly resident outside of Saskatchewan, within the meaning of this provision; and the business of the Company in Saskatchewan is limited to making contracts of sale by its agents and by them receiving the proceeds of such sales. The profits of the Company are derived from a series of operations, including the purchase of raw material or partly manufactured articles, completely manufacturing its products and transporting and selling them, and receiving the proceeds of such sales. The essence of its profit making business is a series of operations as a whole. That part of the proceeds of sales in Saskatchewan which is profits is received in Saskatchewan, but it does not follow, of course, that the whole of such profit "arises from" that part of the Company's business which is carried on there within the contemplation of section 21a; and I think such a conclusion is negatived when the language of this section is contrasted with that of other sections of the Act.
By section 3, income is defined; and income of the kind we are considering, profits of a business, is "profits *. * * received by a person * * * from any trade, manufacture or business * * * whether derived from sources within Saskatchewan or elsewhere."
It is clear, I think, that the effect of the words "net profit or gain arising from the business of such person in Saskatchewan" in section 21a is, for the purpose of that section, to delete from the definition of income in section 3 the words "or elsewhere."
This view of section 21a is fortified by the language of other provisions. In section 4 it is enacted:—
The following incomes shall not be liable to taxation hereunder:
***
(m) profits earned by a corporation or joint stock company * * * in that part of its business carried on at a branch or agency outside of Saskatchewan.
"Branch or agency" seems to point to companies having their principal place of business in Saskatchewan and it is, perhaps, to such companies that the subsection is primarily directed. The word "agency" may be comprehensive enough to extend to any establishment of the Company, even at the place of its head office; but it is sufficient to point out that even in the case of companies whose seat of business is in Saskatchewan, the policy of the Statute is to remove from the incidence of income tax profits "earned" at "branches or agencies" elsewhere, without regard to the place where those profits may have been received.
The language of sections 23 and 24 seems also to give support to the view that the profits taxable under section 21a as "arising from the business" of a non-resident "in Saskatchewan" are that part of such profits as is "earned" therein.
Mr. Bastedo relied upon Commissioners of Taxation v. Kirk[3], and I think, with respect, that the judgment of Lord Davey, speaking for the Judicial Committee, is helpful in the elucidation of the Statute before us.
The income in question was in part derived from ore extracted from land in New South Wales and from the conversion there of this ore into a merchantable product. The Income Tax Statute of New South Wales charged within income tax income "derived from lands of the Crown held under lease or licence" in New South Wales, and income "arising or accruing" from "any other source" in New South Wales. The Statute provided that "no tax shall be payable in respect of income earned" outside New South Wales. The company whose income came into question in that case was a mining company owning and working mines in New South Wales, the crude ore being there converted for the most part into concentrates. Almost the whole of the ore so treated was sold and the contracts for sale were made outside New South Wales. The Supreme Court of New South Wales held, following a previous decision, In re Tindal[4], that the whole of the income included in the proceeds of sales was earned and arose at the place where the sales were made and the proceeds of the sales received, and that, consequently, no part of such proceeds was taxable as income in New South Wales.
This judgment was reversed by the Judicial Committee. Their Lordships said at pp. 592 and 593:—
Their Lordships attach no special meaning to the word "derived," which they treat as synonymous with arising or accruing. It appears to their Lordships that there are four processes in the earning or production of this income: (1) the extraction of the ore from the soil; (2) the conversion of the crude ore into a merchantable product, which is a manufacturing process; (3) the sale of the merchantable product; (4) the receipt of the moneys arising from the sale. All these processes are necessary stages which terminate in money, and the income is the money resulting less the expenses attendant on all the stages. The first process seems to their Lordships clearly within sub-s. 3, and the second or manufacturing process, if not within the meaning of "trade" in sub-s. 1, is certainly included in the words "any other source whatever" in sub-s. 4.
So far as relates to these two processes, therefore, their Lordships think that the income was earned and arising and accruing in New South Wales. * * * This point was, if possible, more plainly brought out in Tindal's case[5]. * * * The question in that case, as here, should have been what income was arising or accruing to Tindal from the business operations carried on by him in the Colony.
The fallacy of the judgment of the Supreme Court in this and in Tindal's case5 is in leaving out of sight the initial stages, and fastening their attention exclusively on the final stage in the production of the income.
The distinction under the Statute there in question between "income received" and "income earned" is signalized by their Lordships in these observations at p. 592:—
Nor is it material whether the income is received in the Colony or not if it is earned outside the Colony. The Supreme Court have thought in Tindal's case5 and in these cases that the income was not earned in New South Wales because the finished products were sold exclusively outside the Colony.
The Deputy Attorney-General in his able argument contended that by sec. 21a of the Saskatchewan Act all profits received in Saskatchewan by a company having its residence outside Saskatchewan are taxable as profits "arising out" of that part of the company's business carried on in Saskatchewan. Sufficient has been said to indicate the grounds upon which, I think, considerations on which their Lordships in the Judicial Committee proceeded in Kirk's case[6] are pertinent here, and lead to the conclusion that this contention of the Crown ought not to be accepted.
I now turn to the regulation, the pertinent parts of which are as follows:—
Covering such cases where the Minister is unable to determine or obtain information required to ascertain the income within the Province of a corporation or joint stock company carrying on a trade or business within and without the Province.
1. Interest, dividends, rents and royalties less their proportionate share of deductions allowed shall be separately determined or ascertained, and if they are received in connection with the trade or business of the taxpayer in the Province, shall be income liable to taxation. 2. The income referred to in regulation 1 having been separately determined and ascertained, the remainder of the income of the taxpayer liable to taxation shall be taken to be such percentage of the remainder of the income as the sales within the Province bear to the total sales.
The income with which we are concerned is that dealt with in paragraph two. The method of determination, as it is put in the regulation, is to ascertain the ratio of the sales within the province to the total sales of the company and then apply that ratio to the income. Income, for our present purpose, of course, means profits. I think, perhaps, I can explain my way of looking at the regulation more clearly by calling attention to the fact that the subject of taxation, as determined by this method, is a percentage of the sales in Saskatchewan, a percentage which is identical with the ratio between total profits and total sales. Assume, for example, that the total sales amount to one hundred units of money and the total profits to twelve units of money and the sales in Saskatchewan to fifteen units of money. Then the subject of taxation is twelve per cent. of fifteen, an expression which, of course, is arithmetically identical with the expression fifteen per cent. of twelve, the form in which it is put in the regulation. In other words, under the regulation the subject of income tax is that part of the sales in Saskatchewan which is profit; that is to say, the whole of the profit received in Saskatchewan. This view of the effect of the regulation was not disputed by Mr. Quigg, who, as above intimated, supported it in argument as a proper application of the statutory provisions. I humbly think that this is a procedure wholly inadmissible under the Statute. Nowhere does the Statute authorize the Province of Saskatchewan to tax a manufacturing company, situated as the appellant company is, in respect of the whole of the profits received by the company in Saskatchewan. It is not the profits received in Saskatchewan that are taxable; it is the profits arising from its business in Saskatchewan, not the profits arising from the company's manufacturing business in Ontario and from the company's operations in Saskatchewan taken together, but the profits arising from the company's operations in Saskatchewan.
Section 7 (4), which is the enactment under which the Lieutenant-Governor in Council receives his authority to make regulations, limits that authority to making regulations "for determining such income within the province"; "such income" being (it cannot be anything else) the income contemplated by the taxing provisions of the Statute as the subject of income tax; that is to say, in the case of companies not resident in Saskatchewan, the profits arising out of that part of their business that is carried on in Saskatchewan. The regulation, consequently, if it applies to non-resident companies such as the appellant company, is not competently made, because the aim of it is not within the purpose for which the statutory authority is given to the Lieutenant-Governor in Council. The aim of the regulation is to determine the profits received by such companies in Saskatchewan. The authority is to make regulations for determining the net profits as limited and defined by section 21a.
The appeal should be allowed and the assessments set aside. The appellant company should have its costs throughout.
The judgment of Rinfret, Crocket and Kerwin JJ. was delivered by
Rinfret J.—The appellant is a company incorporated under the Companies Act of the Province of Ontario, having its head office in the city of Hamilton, in that province. It is registered under the provisions of the Saskatchewan Companies Act.
The business of the appellant is the manufacture and sale of agricultural implements and parts thereof and business incidental thereto. The manufacture of these implements and parts is carried on by the appellant entirely outside the province of Saskatchewan. The sale is carried on partly in the province of Saskatchewan and partly in other provinces of Canada and in other countries.
All sales made in Saskatchewan of the appellant's goods are made by the agents of the appellant, at its various branch offices in Saskatchewan; and the sale contracts in respect of such goods are made and executed in Saskatchewan.
All moneys received by the appellant in Saskatchewan, whether in respect of sales or as payments on debts owing to the appellant, are deposited in separate bank accounts and remitted in full to the head office of the appellant in Hamilton, Ontario. There are no directors of the appellant resident in Saskatchewan and no meetings of the Board of Directors of the appellant are held in that province. The central management and control of the appellant are held in the province of Ontario.
The appellant keeps no separate profit and loss account in respect of the business it carries on in the province of Saskatchewan. It only keeps at its head office a profit and loss account of its entire business carried on in Canada and elsewhere.
The province of Saskatchewan levies a tax upon incomes authorized by The Income Tax Act, 1932, which later was followed by a new Act (practically a consolidation of the former Act and its amendments) assented to on April 1st, 1936. This Act of 1936 replaced the Act of 1932 which it repealed, except in certain respects, of which more will have to be said later.
Under the Act of 1932, every person liable to taxation shall on or before the thirty-first day of May in each year deliver to the Minister a return in such form as the Minister may prescribe of any total income during the last preceding year.
The Minister here means the Provincial Treasurer.
"Person" is defined in the Act, s. 2 (8):
An individual, and includes a guardian, trustee, executor, administrator, agent, receiver or any other individual, firm or corporation, acting in a fiduciary capacity, and the heirs, executors, administrators, successors and assigns of such person.
For the purpose of the Act, "Income" is defined:
The annual net profit or gain or gratuity, whether ascertained and capable of computation as being wages, salary or other fixed amount, or unascertained as being fees or emoluments, or as being profits from a trade or commercial or financial or other business or calling, directly or indirectly received by a person from any office or employment, or from any profession or calling, or from any trade, manufacture or business, as the case may be, whether derived from sources within Saskatchewan or elsewhere; and includes the interest, dividends or profits directly or indirectly received from money at interest upon any security or without security, or from stocks, or from any other investment, and whether such gains or profits are divided or distributed or not, and also the annual profit or gain from any other source [sec. 3].
It is stated that "any other source" includes:
(a) the income from, but not the value of, property acquired by gift, bequest, devise or descent; and (b) the income from but not the proceeds of life insurance policies * * *
(c) the salaries, indemnities or other remuneration of all persons whatsoever, whether the said salaries, indemnities or remuneration are paid out of the revenue of His Majesty in respect of his Government of Canada, or of any province thereof, or by any person, except as herein otherwise provided," and
(d) all other gains or profits of any kind derived from any source within or without the province whether received in money or its equivalent.
The Act then provides (sec. 4) for certain exemptions and deductions, of which only subs, (m) need be quoted:
(m) profits earned by a corporation or joint stock company, other than a personal corporation, in that part of its business carried on at a branch or agency outside of Saskatchewan.
It should merely be mentioned that the appellant is not a "personal corporation" within the definition of the Act (s. 2, subs. 9).
The liability to tax is imposed upon corporations and joint stock companies, no matter how created or organized, carrying on business within the province, at the rate applicable thereto set forth in the first schedule of the Act, upon income during the preceding year exceeding one thousand dollars (s. 7, subs. 3).
After examination of the taxpayer's return, already referred to and provided for by sec. 29, the Minister must send a notice of assessment to the taxpayer verifying or altering the amount of the tax as estimated by him in his return; and any additional tax found due over the amount already paid by the taxpayer in accordance with sec. 44 (which provides for the payment of not less than one-quarter of the amount of the tax at the time when the return of the income is made) must then be paid within one month from the date of the mailing of the notice of assessment (s. 51).
The Act then authorizes an appeal to the Minister by any person, corporation or joint stock company who or which objects to the amount at which he or it is assessed, or considers that he or it is not liable to taxation (sec. 53).
Upon receipt of the notice of appeal, the Minister considers the same and is empowered to affirm or amend the assessment appealed against.
An appeal lies from the decision of the Minister to a Judge of the Court of King's Bench (s. 54). At the hearing of the appeal, the Judge hears and considers the cause upon the material filed by the Minister, and upon any further evidence which the appellant or the Crown may produce at the discretion of the Judge. The Judge may affirm, amend or disallow the assessment and it is enacted that "his decision shall be final in all matters relating to the appeal, and there shall be no appeal therefrom."
By an Act to amend the Act of 1932 (which came into force on April 7th, 1934) "person" was declared to include "any body corporate and politic and any association or other body, and the heirs, * * *." (subs. 2 of s. 2 of ch. 5 of the Statutes of 1934).
The administration of the Act and the control and the management of the collection of the taxes imposed thereby was entrusted to the Provincial Treasurer (s. 61); but it was provided that the Minister could authorize the Commissioner of Income Tax, appointed pursuant to the provisions of the Act, to exercise such of the powers conferred by the Act upon the Minister as may, in the opinion of the Minister, be conveniently exercised by the Commissioner (s. 61 (2)).
In 1935 (c. 16 of the Statutes of 1934-1935), the Act of 1932 was amended by providing for an appeal to the Board of Revenue Commissioners in lieu of the appeal to the Minister, and by striking out the word "Minister" wherever it occurred in matters relating to the appeal and substituting for it the word "Board."
Then the Income Tax Act, 1936, came into force on April 1st of that year (c. 15 of the Statutes of 1936). The scheme of this new Act is practically the same as that of the Act of 1932, including the amendments already mentioned, but with some differences which will be mentioned shortly.
On the 28th May, 1935, the appellant filed with the Commissioner of Income Tax its return of income for the taxation year 1934.
On the 2nd day of June, 1936, the appellant filed its return for the year 1935.
On the 26th of May, 1937, the appellant filed its return of income for the period of ten months ending the 31st October, 1936. Prior to assessing the appellant's income for the years 1934, 1935 and 1936, the Commissioner of Income Tax asked for certain information from the appellant. The appellant gave the information on the 6th day of June, 1938. The Commissioner asked for further information, which was given on the 8th of July, 1938.
The Commissioner did not request any further information, nor did the appellant supply any.
On the 23rd August, 1938, the Commissioner made an assessment in the sum of $4,382.07 in respect of the income of the appellant for the taxation year 1934, an assessment in the sum of $11,341.07 in respect of the income of the appellant for the taxation year 1935, and an assessment in the sum of $10,136.60 in respect of the income for the period of ten months ending on the 31st October, 1936.
There was an appeal to the Board of Revenue Commissioners in respect of the assessment for each of the years 1934, 1935 and 1936.
The Board dismissed the three appeals and affirmed the three assessments.
Again there was an appeal from the Board to a King's Bench judge. The latter (Anderson J.) again dismissed the three appeals and confirmed the decision of the Board of Revenue Commissioners.
The matter was then carried to the Court of Appeal of Saskatchewan, which adjudged that there was no right of appeal from the decision of the judge in chambers in respect of the assessment for the taxation year 1934. The appeal in regard to it was accordingly dismissed on the ground that the Court of Appeal had no jurisdiction to entertain the same.
The Court adjudged, however, that it had jurisdiction to entertain the appeals against the assessments for the taxation years 1935 and 1936. It held that they were defective in that they did not make provision for the appellant being allowed any deduction in respect of a reserve for bad debts. It ordered, therefore, that the said assessments be set aside; that the Commissioner, in making new assessments for the years 1935 and 1936, should reconsider the question of a reserve for bad debts in the light of the reasons for judgment of that Court and should exercise the discretion vested in him by s. 6 (d) of the Income Tax Act, 1936, upon sound principles. By special leave of the Court of Appeal for Saskatchewan, the Company now appeals from the judgment of that Court
except that part of the said judgment or order setting aside the said assessments for the taxation years 1935 and 1936 because they are defective in so far as a reserve for bad debts is concerned, as ordered in clauses 2 and 3 of the formal judgment, the part of the judgment or order of the Court of Appeal appealed from being clause 1 of the formal judgment or order of this Court and the judgment or decision of this Court that on all other grounds, except with respect to the deduction in respect of a reserve for bad debts, the appellant's appeals fail and including the disallowance by this Court of one-third of the appellant's costs of its appeals to this Court and a Judge of the Court of King's Bench.
The first point to be considered is whether, as the Court of Appeal has decided, there was a right of appeal to it with respect to the taxation years 1935 and 1936; and the second point is whether there also existed a right of appeal to that Court in respect of the taxation year 1934. As pointed out in the Court of Appeal, these questions of its jurisdiction are not without difficulty. The numerous amendments to the Acts of 1932 and 1936 are not clear and are not made clearer by the introduction of certain other provisions in the successive Treasury Depart