TMI Blog1946 (7) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... t, held that the action, which took the form of an Information of the Attorney-General for Canada filed on April 1, 1943, succeeded. Chapter 41 of the Statutes of Canada, 1932-33, added the following provisions, inter alia, to the Income War Tax Act, and these are the sections upon which the controversy turns: 9B―(1) In addition to any other tax imposed by this Act an income tax of 5 per centum is hereby imposed on all persons resident in Canada, except municipalities, or municipal or public bodies which in the opinion of the Minister perform a function of Government, in respect of all interest and dividends paid by Canadian debtors, directly or indirectly to such persons, which interest by the terms of the mortgage deed, hypothec or other instrument under which the debt was contracted or which dividends by the terms of issue, are payable in a currency which is at a premium in excess of 5 per centum in terms of Canadian funds. (2) In addition to any other tax imposed by this Act an income tax of five per centum is hereby imposed on all persons who are non-residents of Canada in respect of (a) All dividends received from Canadian debtors irrespective of the curren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding that it is not a Canadian debtor within the meaning of the section above quoted, and secondly, the legislation is ultra vires the Parliament of Canada, notwithstanding the Statute of Westminster of 1931. On the first question the Exchequer Court took the view that a Canadian debtor meant a debtor of Canadian nationality and, as applied to a company (which is plainly included by reason of the reference to dividends) meant a company registered under Canadian law. It is not perhaps entirely clear from the President's judgment whether he would regard a company incorporated under the law of a Canadian province as a Canadian debtor in respect of its dividends or whether he would apply the term only to companies registered under Dominion law, but the material point is that he considered the test to decide who was a Canadian debtor in the case of an individual depended on the individual's nationality and not on his place of residence, and therefore logically held that in the case of an incorporated company the test was the place of the incorporation of the company and not its place of residence as understood in the law relating to companies, i.e., the place where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e War Tax Act where the test of residence in Canada is expressly applied both with respect to individuals and companies, but it does not follow that Canadian debtors may not have the same meaning as debtors resident in Canada. If the view contended for by the appellant on this point were adopted, extraordinary results would follow. A Canadian citizen who owed a debt for interest would be caught by the Act wherever he resided, purely because of his nationality. The language of the statute would require him to make a deduction when paying his debt, say, when paying interest on a loan made to him by a foreigner, though neither of them was residing in Canada, and to transmit the amount deducted to the Receiver-General of Canada. The view which their Lordships reject would require a company registered in Canada but carrying on all its business and making all its profits at the other end of the world, to deduct the amount of the tax when paying a dividend to its shareholder, wherever the shareholder might be found, and whatever his nationality might be, although there was nothing whatever Canadian about the circumstances except the place of registration of the company. It appears to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a valid discharge. The appellant contends it would not, and reference may be made to such cases as Spiller v. Turner [1897] 1 Ch. 911 and New Zealand Loan and Mercantile Agency Co. v. Morrison [1898] A.C. 349 , as well as to Dicey's Conflict of Laws, Edn. 5, p. 678 et seq. The respondent, on the other hand, does not admit that the receipt would fail to provide the appellant with an efficient shield in an English Court. Their Lordships' conclusion does not require them to decide on this point of controversy, if controversy there be, for, as already stated, the Board does not take the view that the appellant has no liability to deduct unless Section 87 provides it in all Courts with a sufficient discharge. If the shareholder who claims that the appellant has not paid him the full amount to which he is entitled brings his action in the Canadian Courts, Section 87 will, of course, provide the appellant with a defence, for Canadian law gives a valid discharge. But whether this is so or not in the event of a shareholder suing the appellant in England, the fact remains that Section 84 requires the appellant to make the deduction and to remit the amount and imposes, without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to two conditions: that the legislation deal with matter assigned by the British North America Act to the federal legislature; and that it be of such a nature as under international public or private law would be accorded extra-territorial effect. It is then contended that the power of the Dominion under Section 91(3), 'the raising of money by any mode or system of taxation' does not extend to taxation of non-citizens outside the boundaries of Canada; and that international comity, apart from any rule against giving effect in one state to fiscal measures of another state, would not for any purpose recognise the validity of, much less enforce, what Parliament is said to purport by this legislation to do. The power of the Dominion to tax is to be interpreted as being 'as plenary and as ample within the limits prescribed........as the Imperial Parliament in the plenitude of its power possessed or could bestow': Hodge v. The Queen [1883] 9 App. Cas. 117, at p. 132 . But there is obviously a distinction between the standing of legislative enactments by a sovereign state within its boundaries and beyond them. In an effective sense, a declaration by such a legi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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