TMI Blog1933 (7) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... for its objects drilling for and procuring the production and vending of oil. By this agreement the respondent sold to the provisos conditions and royalties hereinafter recovered. In consideration of the said sale the sum of $5,000 in cash on the execution of the agreement, to issue to her 25,000 full paid shares of $1 each in the company, and further to deliver to her order: the royalty hereby reserved...namely 10 per cent of all the petroleum, natural gas and oil produced and saved from the said lands free of costs. 2. The company undertook to deliver this percentage at least once in every 30 days, to keep and make available to the respondent proper books of account showing the quantity of petroleum, natural gas and oil produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had received from the oil company, the amount of the tax being $301.07 The Minister of National Revenue, the present appellant, to whom the respondent appealed, confirmed the assessment subject to adjustment as to depletion in accordance with Section 4, Chap. 12, of the Statutes of 1928. The respondent having appealed to the Exchequer Court of Canada her appeal was dismissed by Audette, J. On a further appeal to the Supreme Court of Canada the respondent obtained a unanimous judgment in her favour, setting aside the assessment. From this judgment the Minister of National Revenue has now appealed to His Majesty in Council, The Income War Tax Act contains the following definition of income: 3--(1) For the purposes of this Act 'inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Cas. 608 at p. 119 quoting previous authorities). It may be that ordinary mineral royalties, though not expressly mentioned in the definition section, are taxable income in Canada, subject to an allowance for exhaustion. The term royalty occurs in Section 27 of the Act, which provides that any non-resident person who receives a royalty for anything used or sold in Canada shall be deemed to be carrying on business in Canada and to earn a proportionate part of the income derived therefrom in Canada. 5. This section may have been enacted to obviate the argument that the mere receipt of royalties is not a carrying on of business, as was decided in the excess profits duty cases, Commissioner of Inland Revenue v. Marine Steam Turbine C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t really so. The agreement provides for a sale to the company of all the respondent's right, title and interest in the land, which includes the right to any oil which it may contain. The respondent was not in any sense a joint adventurer with the company in the business of oil prospecting or oil production. 6. While their Lordships, of course, recognise that a profit or gain may be received in kind as well as in money it is not without some significance that the respondent bargained to receive her share in oil. What she has a right to is so much oil, and the fact that she accepted a sum of money in the year in question in lieu of her share of oil does not effect the true position, though no doubt if she had taken her share in oil sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions, but they are net prepared to differ from the view of the transaction which that eminent Judge took, and with which all his colleagues agreed, namely, that the respondent has converted the land, which is capital, into money, sharers and 10 per cent, of the stipulated minerals which the company may win...there is no question of profit or gain, unless it be as to whether she has made an advantageous sale of her property. 7. It was for the Minister to displace this view as being manifestly wrong. In their Lordships' opinion he has failed to do so. Their Lordships will therefore humbly advise His Majesty that the appeal should be dismissed and the judgment of the Supreme Court affirmed. The respondent will have her costs of the app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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