Urie, J:—These appeals are from decisions of the Tax Appeal Board dismissing the appellants’ appeals from their reassessments under Part I of the Income Tax Act for the 1964 taxation year. By consent the appeals were heard together because the circumstances relating to each appeal are identical. The sole question involved in each is whether the appellants are entitled to an order under subparagraph 138A(3)(b)(ii) of the Income Tax Act vacating a direction of the respondent made pursuant to subsection 138A(2) that the appellants be deemed to be associated for the purposes of section 39 of the Act for the 1964 taxation year.
In 1935 Victor Levitt commenced business in Toronto, as a sole proprietor, for the distribution of first aid and safety equipment, including such things as goggles, respirators, masks, clothing, special lamps, signs and various other articles designed to protect men from accidents. In the years following he expanded the lines to include the sale of fire equipment such as fire extinguishers, fire hose and equipment for fire trucks. The bulk of the products were imported from the United States. In 1945 he engaged a salesman to sell the firm’s products in the City of Montreal and other parts of Quebec. In 1949 Levitt-Safety Limited (hereinafter called Safety) was incorporated under the laws of the Province of Ontario and the business of the sole proprietorship apparently was purchased as a going concern by the corporate entity. Victor Levitt was the principal shareholder of Safety. In or about the year 1950 Safety applied to and was granted by the respondent a manufacturer’s licence pursuant to section 34 (now section 31) of the Excise Tax Aci. This permitted the purchase of partly manufactured goods without payment of sales tax if sold to another licensed manufacturer and on the importation of such goods for inclusion in Safety’s manufactured goods.
Early in 1950 Safety acquired the assets of a sole proprietorship known as Toronto Fire Equipment Company, which company was in the business of servicing fire extinguishers and was described by Mr Levitt to be complementary to his own business. In November of 1956 a company was incorporated under the laws of the Province of Ontario bearing the name of Toronto Fire Equipment Company Limited by Walter Levitt, a brother of Victor Levitt, who had for a number of years been employed by Safety. The purpose for the incorporation of Toronto Fire Equipment Company Limited was to carry on the business of the former Toronto Fire Equipment Company.
In 1957 Toronto Fire Equipment Company Limited applied for and received from the Minister of National Revenue a wholesaler’s licence pursuant to the provisions of section 35 (now section 32) of the Excise Tax Act which had the effect of permitting the purchase or importation of goods for resale without payment of tax at the time of purchase, the excise tax payable being collected at the time of resale. By supplementary letters patent dated April 18, 1963 the name of Toronto Fire Equipment Company Limited was changed to Levitt-Safety (Eastern) Limited (hereinafter called Eastern). It acted as an importer and wholesale distributor of fire extinguishers and other fire equipment, selling mainly to fire equipment dealers. It operated successfully for a period of time but later; when Canadian manufacturers of fire equipment geared up their production lines and reduced their costs, it no longer could compete and the company became dormant although it continued to hold its wholesaler’s licence.
The above general background of the affairs of the appellant Levitt- Safety Limited is necessary to appreciate certain changes in the corporate structure of Safety made in April 1963, which eventually resulted in the Minister’s direction that for purposes of the Income Tax Act the two companies, and a third known as Levitt-Securite (Atlantique) Limitée, to which reference will later be made, were to be deemed associated. The thrust of the appellants’ argument that the direction was wrong and ought to be vacated is that the changes made were necessitated for the following reasons none of which were related to the reduction of income tax payable:
1. the continued inability of Safety to acquire a wholesaler’s licence caused great administrative complications in the operation of its business;
2. the lack of progress in the sales of Safety’s branch in the Province of Quebec, which was a matter of great concern to Mr Levitt;
3. Mr Levitt’s desire to properly arrange his affairs to best protect his wife and family in the event of his death.
I will deal with the evidence adduced relating to the reasons for the changes in the same order as given above.
1. Since Safety did not have a wholesaler’s licence it was necessary for it to pay sales or excise tax at the time of importation of goods purchased from other countries and at the time payment was made on purchases of goods from domestic sources, other than in cases where the goods were purchased by Safety as a licenced manufacturer. The effect of the lack of a wholesaler’s licence was to create two types of inventory in the hands of Safety, namely a tax paid inventory and a tax free inventory, where the purchases were pursuant to Safety’s manufacturer’s licence. Since sales to certain customers, such as provincial governments, were sales tax exempt, in such instances Safety was obliged to apply for a refund of the sales tax paid on goods sold to such customers. Mr Levitt described the refund procedure as most complicated.
Because of the complications and expense inherent in having two types of inventories, Safety applied to the Excise Tax Branch of the Department of National Revenue to become a licensed wholesaler. Holding such a licence would have permitted Safety to buy all that part of its inventory not purchased under its manufacturer’s licence tax free. Tax payable then would be accountable at the time of sale on a base price which would be Safety’s cost or the duty paid value of the goods. If it had been granted it would have freed up working capital and eliminated the need for refund claims for sales tax paid in the case of sales made to tax exempt customers. Safety, however, was unable to comply with the conditions precedent to obtaining such a licence and it was therefore unsuccessful in the prosecution of its application. The conditions with which Safety was unable to comply are set forth in subsection 35(1) (now subsection 32(1)) of the Excise Tax Act. In particular it failed to meet the requirement that 50% of its sales for the three months immediately preceding its application were exempt from sales tax under the Excise Tax Act.
Notwithstanding his lack of success in having Safety become a licensed wholesaler, Mr Levitt persisted in his endeavours to arrange some system which would obviate the necessity of going through the cumbersome procedure of applying for refunds and at the same time would permit all of Safety’s inventory to be held free of tax until the time of sale. On July 20, 1956 (Exhibit A-1, page 32) Safety was advised that it would be permitted to obtain articles and material capable of being used in, wrought into, or attached to other taxable goods without payment of sales tax by quoting its manufacturer’s sales tax licence number on its purchase orders or customs import entries and certifying thereon that they were being used in, wrought into, or attached to taxable goods for sale, following which it would be its responsibility to account for sales tax on any taxable sales, such accounting to be on a value of not less than Safety’s cost or the duty paid value of the goods.
Mr Levitt described the permission which had been granted as a “privilege” rather than a right, which privilege could be withdrawn at any time. The description of the arrangement, which had no statutory sanction, as a “privilege” was confirmed by the evidence of A P Mills who was at the time a senior official in the Excise Tax Branch of the Department of National Revenue, and by Brian W Hoyle, who is at present the director of the Belleville District of the Excise Tax Branch. To ensure that Safety would not pay less than the amount of sales tax due under the privilege and because of the existence of the words “not less than the duty paid value or its cost” a so-called 5% safety factor was included. This 5% safety factor was calculated as an additional charge on the tax paid and arose by reason of the fact that between the date upon which the importation was made and the date of sale there might well be a fluctuation in exchange value between the United States and Canadian dollar which would make the cost either greater or less than the duty paid value.
Other evidence was adduced that later on Safety’s manufacturer’s licence was cancelled with the result that the privilege above referred to was withdrawn. Both were subsequently restored after consultation with the Department. It left, however, a continuing fear, according to Mr Levitt, that the manufacturer’s licence might at any time be cancelled and the privilege withdrawn with consequent financial embarrassment to Safety in that it would immediately become liable for payment of all sales tax due on its inventory as well as being required, thereafter, to pay sales tax on all future purchases.
Mr Levitt continued from time to time to press for the issuance of a wholesaler’s licence to Safety in order to regularize and stabilize the system which was then in existence and on September 15, 1961 requested a departmental ruling on whether or not Toronto Fire Equipment Company Limited’s wholesaler’s licence could be transferred to Safety in the event that the two companies were to amalgamate. Safety was advised that the wholesaler’s licence could not be transferred to Safety in the event of amalgamation since Safety did not qualify for a wholesaler’s licence under section 35 of the Excise Tax Act. Mr Levitt testified that as a result of this continuous concern, in 1963 Toronto Fire Equipment Company Limited was reactivated since it still was a licensed wholesaler and its name was changed, as previously stated, to Levitt-Safety (Eastern) Limited. By agreement dated April 30, 1963 Safety then sold to Eastern that part of the business of Safety carried on in the Province of Ontario (except the northwest part of the province) and in the Provinces of Newfoundland, Prince Edward Island, Nova Scotia and part of New Brunswick for a purchase price agreed upon in an agreement dated May 1, 1963, namely the sum of $544,233.38 payable (a) by the assumption of all debts and liabilities relating to that portion of the vendor’s business;
(b) by the issuance of 100 common shares of the purchaser’s capital stock at the rate of 10 cents per share; and (c) the balance of the purchase price by way of a demand loan bearing interest at the rate of 6% per annum. All costs in relation to the purchase were payable by Eastern and, in addition, by a subsequent agreement dated May 1, 1963 it assigned to Safety its accounts receivable from time to time for which Safety agreed to pay to the purchaser 10% of the amount of all accounts receivable so assigned after deducting from that 10% one-quarter of 1% as a remuneration to the purchaser for collecting the accounts receivable.
2. At about the same time, namely on April 24, 1963, a company was incorporated in the Province of Quebec bearing the name of Levitt- Securité (Atlantique) Limitée (hereinafter called Securité) to which, by agreement dated April 30, 1963, Safety sold that part of its business carried on in the Province of Quebec, the northerly part of the Province of New Brunswick and part of Labrador. By a separate agreement dated May 1, 1963, the value of the vendor’s business for purposes of the aforementioned purchase contract was agreed to be $75,264.24. The purchase price was paid by the assumption of all of the debts and liabilities of Safety in respect of the business being purchased and the balance of the purchase price was paid by the purchaser giving to the vendor a promissory note payable on demand with interest at 6% per annum. The purchaser by the May 1 agreement also assigned its accounts receivable on the same basis as in the sale from Safety to Eastern.
There was a great deal of evidence adduced from various witnesses as to the reason for the sale of what may be termed the Quebec business. Concisely stated, Mr Victor Levitt felt that the unsatisfactory level of sales in Quebec in 1960-61-62 were, at least in part, the result of the company’s personnel being primarily English speaking. He formed the opinion that the company should be changed to one largely Francophone in nature. The need to develop a Francophone business image was due to the fact that outside of Montreal the marketing of Safety’s products depended largely upon reaching the actual users of the equipment such as foremen, fire chiefs, labourers in the bush; all of whom tended to be French speaking. He caused Securité, therefore, to be incorporated and during the succeeding years. gradually increased the number of French speaking personnel in Securité to the point that all of its salesmen, with the exception of one, are now persons whose first language is French. Evidence was adduced that thereafter sales in the Province of Quebec increased substantially though not at the same rate as did those in other parts of Canada and in particular in Ontario and British Columbia but Mr Levitt testified that in retrospect he felt that the decision taken to incorporate a company in Quebec was a correct one.
Victor Levitt continued to be the president and general manager of Safety and of Securité. His brother, Walter Levitt, was the president of Eastern but Victor Levitt continued to be the general manager of Eastern. Eastern, by reason of its wholesaler’s licence, purchased and continues to purchase all of the inventory of all three companies. It also purchases the inventory required to be purchased under Safety’s manufacturer’s licence. Goods are consigned by Eastern to Safety and to Securité, the ownership remaining in Eastern until the goods are sold. They may be delivered from the consigned inventories in the hands of Safety and Eastern at their various offices throughout the country or, on occasion, they may be delivered directly by Eastern to the customer.
When questioned as to why it was necessary to keep Safety in existence, Mr Levitt testified as follows:
(a) it was necessary to do so to retain its manufacturer’s licence in order to buy production equipment on a tax free basis;
(b) that the Department of National Revenue “frowned on” the practice of one company holding both manufacturer’s licences and wholesaler’s licences;
(c) Safety was already registered in the western provinces as an extra-provincial company whereas Eastern was not and the costs which would have been incurred in registering Eastern in the western provinces amounting to an estimated $5,000 was an expense which he deemed unnecessary;
(d) since Safety had been operating in the western provinces it had built up goodwill which might have been lost had the operations been transferred to Eastern.
Mr Mills corroborated Mr Levitt’s testimony that the Department at that time did not wish the company to’ have both a manufacturer’s and wholesaler’s licence. Mr Hoyle, on the other hand, in his examination-in-chief stated that he knew of cases-in which,a single company held both types of licence but in cross-examination. admitted that, since he had only joined the Department in 1963 and in light of Mr Mills’ testimony, he had “erred” in stating that prior to 1963 the Department would not issue both kinds of licence to a single company.
Each of the three companies, Mr Levitt testified, operated as separate businesses, each with their own separate staffs, premises, records, payrolls, bank accounts and operations. However, the companies’ auditor, Claude Abrams, testified that Eastern prepared the general ledger or summary of the operations of each of the companies. It also prepared the annual financial statements as well as the corporate tax returns for each. The mailing addresses shown for each company on the latter were the same, namely the head office of Eastern at 747 Vaughan Road, Toronto.
Mr Abrams further testified that the calculation of the cost of goods sold by each of the companies was apportioned between the three companies on the’ basis of the sales made by each of the companies. He testified that the reason for costing the goods in this fashion was because it was easier than precisely costing the goods which had been consigned to or delivered on behalf of any of the companies. A charge was made for the accounting function performed by Eastern for each of the companies as well as for the factoring of each of the company’s accounts receivable and for management services. Mr John Rennie, the Comptroller of Eastern, testified that the charge for the above mentioned services was 12% calculated on each company’s gross sales, and is for accounting, factoring, administrative and warehousing functions performed at the head office of Eastern in Toronto. The charge, therefore, varies from year to year as the sales of each company vary.
3. The other impelling reason for the changes made in the corporate structure of Safety in 1963 arose out of Victor Levitt’s marriage in 1962 to a woman 22 years his junior. Since that time four children have been born of the marriage. Prior to his marriage he had been a bachelor and his attitude toward his estate therefore changed with the acquisition of a family and, in particular, he had in mind the family history of the deaths at early ages of his father and a brother, both of whom left substantial businesses to widows and both of which businesses just “evaporated” after their respective deaths: As a result he consulted his solicitor and auditor to find ways for the protection of his family and the maintenance of the business in the event of his death, with the result that in 1963 two trusts known as the Victor Levitt Trust and the Trudy Levitt Trust were formed. These trusts, which had separate trustees, acquired all the company stock of Safety, Eastern and Securité and the purpose for their existence was to enable the businesses to continue to exist to provide financial security for his wife and children. The beneficiaries of the Victor Levitt Trust were the children of Victor Levitt and his wife Trudy. The beneficiaries of the Trudy Levitt Trust were the children of Victor Levitt and Victor Levitt.
Victor Levitt testified that he was aware of the fact that there were income tax advantages accruing to the company by virtue of the manner in which the shares of Safety, Eastern and Securité were held but he stated that his attitude towards the tax advantages was “merely incidental”. He further stated that he had been aware of these advantages for some time because his auditor had brought him up to date on tax matters from time to time and he had been aware of these advantages for at least ten years prior to 1963. Mr Abrams, in his testimony, confirmed that of Mr Levitt’s in this connection. Mr Levitt also testified that the actions which he undertook in 1963 would all have been carried out even if there had been no tax saving.
The narration of the evidence now enables me to discuss the applicable law. The appellants seek an order pursuant to subparagraph 138A(3)(b)(ii) of the Income Tax Act vacating the respondent’s direction made pursuant to subsection 138A(2). Subsection 138A(3) reads as follows:
138A. (3) On an appeal from an assessment made pursuant to a direction under this section, the Tax Review Board or the Federal Court may
(a) confirm the direction;
(b) vacate the direction if
(i) in the case of a direction under subsection (1), it determines that none of the purposes of the transaction or series of transactions referred to in subsection (1) was or is to effect a substantial reduction of, or disappearance of, the assets of a corporation in such a manner that the whole or any part of any tax that might otherwise have been or become payable under this Act in consequence of any distribution of income of a corporation has been or will be avoided; or
(ii) in the case of a direction under subsection (2), it determines that none of the main reasons for the separate existence of the two or more corporations is to reduce the amount of tax that would otherwise be payable under this Act; or
(c) vary the direction and refer the matter back to the Minister for reassessment.
The sole issue required to be determined, therefore, is whether none of the main reasons for the separate existence of the three companies was to reduce the amount of tax that would otherwise be payable under the Income Tax Act. In Alpine Furniture Company Limited v MNR, [1969] 1 Ex CR 307 at 319; [1968] CTC 532 at 543; 68 DTC 5338 at 5345, Cattanach, J stated:
That question is one of fact to be decided upon the evidence adduced and the proper inferences to be drawn from that evidence and the onus of establishing that the sole main reason was that of business consideration falls upon the appellants.
In my opinion the appellants have failed to discharge this onus.
The main witness for the appellants was Victor Levitt and it can be said of his testimony that he was articulate, knowledgeable about the intricacies of his business and that he was confronted by the three problems, to which I have already made reference, which required resolution. In his narration of the problems he was, in my opinion, a credible witness and I believe, therefore, that the actions that he took were for valid business and personal reasons. However, I do not believe that these were the only reasons that changes were made in the corporate structure of his business since I believe that the evidence also indicates that it must have been in the minds of Mr Levitt and his advisers that substantial tax savings were available in adopting the solutions to the problems which he did, namely in dividing Safety’s business into three separate entities, none of which were associated within the meaning of section 39 of the Income Tax Act as it then stood. As Jackett, P, as he then was, said in Holt Metal Sales of Manitoba Limited et al v MNR, [1970] Ex CR 612 at 622; [1970] CTC 144 at 149-50; 70 DTC 6108 at 6111-12:
If the evidence were such as to convince me that some or all of these and other reasons that have been advanced were sufficiently compelling in the minds of William Holt and his advisers to constrain them to select the creation of the Appellants in preference to all other possible methods of achieving the same results, I should have thought that it might be open to me to conclude that the probable reduction in income taxes through having three companies instead of one to enjoy the 18 per cent tax rate was not one of the “main” reasons for deciding to have three companies instead of one. An example of a case where the other considerations dictated the creation of several corporations and the income tax benefit arising therefrom was only an incidental benefit, is Jordans Rugs Ltd et al. v MNR, [1969] CTC 445. Here, however, no attempt was made to show that, in the minds of William Holt and his advisers, to achieve any one or more compelling objectives (such as conferring property benefits on members of the family) the only practicable method was the creation of multiple companies (and other methods of achieving such objectives certainly existed); one is left with the conclusion that the very substantial prospective annual reduction in income tax must have been, consciously or unconsciously, one of the main factors that operated on the thinking of William Holt and his advisers to bring them to elect for this particular method of reorganization and rearrangement of William Holt’s affairs in preference to all other alternatives.
[Italics mine.]
Those words appear to me to be entirely appropriate in this case. Mr Levitt’s evidence was not sufficiently compelling to convince me that the vehicle selected to achieve his purposes comprising three separate entities was preferable to all other methods of achieving the same results. A simpler method might have been found within the framework of his existing corporation structure to obtain solutions to his pressing problems but the adoption of such simpler method might not have achieved any income tax reduction. Prima facie, therefore, it would appear that a logical conclusion is that one of the reasons for creating and maintaining in existence the separate entities was to reduce taxes payable.
Had Mr Levitt chosen, for example, to have caused Safety to sell its business as a going concern to Eastern and subsequently changed Eastern’s name to Safety, with any minor modification that the Minister of Financial and Commercial Affairs might have required, and then changed the name of Safety to an entirely dissimilar name, or wound up the company if that could have been done without creating other problems, the following would have been accomplished:
(a) Safety would then have had its desired wholesaler’s licence.
(b) Safety would also have had its manufacturer’s licence if the licence could have been among the assets purchased by Eastern prior to its change of name. If it could not have been purchased then, notwithstanding Mr Mills’ testimony that in 1963 or 1964 the holding by one company of both the manufacturer’s licence and wholesaler’s licence was frowned upon, I believe that the mandatory character of subsection 34(1) of the Excise Tax Act (now subsection 31(1)) required a licence to be issued to a company which is in the business’ of manufacturing. Moreover, since the appellants’ adduced evidence that a wholesaler’s licence is not normally cancelled after its ‘issuance, I cannot. conceive that in circumstances such as those faced by Mr Levitt, both could not have been retained.
(c) There would have been no loss of the goodwill attaching to Safety’s name in western Canada which Messrs Levitt and Abrams thought might result if the name Levitt-Safety (Eastern) Limited were used in the west. As can be seen from some of the exhibits filed by the appellants, the emphasis in the catalogues and other publications, invoices and telephone listings has always been on the phrase “Levitt-Safety” in any event, and therefore the addition of “Eastern” or any other differentiating name required by the incorporating authority could be de-emphasized in the same way.
(d) The objective of giving the company a Francophone image in Quebec would have been accomplished by doing as Securité did in any event simply by hiring French speaking personnel. It was ad- admitted by the appellants’ witnesses that until very recently this is virtually all that Securité did since it continued to use the name of Levitt-Safety in its catalogues; other company publications and telephone listings, without even, for example, in the telephone listings, having the alternative French name. Even in instances where the name Levitt-Securité Limitée was used and is now being used it is without the inclusion of part of the company . name, namely, Atlantique.
The disadvantage, of course, would have been that it would have necessitated registering the company as an extra-provincial company in the various provinces in which it was to do business with whatever expense would have been involved in such registration, that expense having been estimated to be perhaps $5,000 in the case of the registration of the company in the western provinces. Since, apparently Eastern did register in the Maritime provinces because there is evidence that it had offices in each of them, with the exception of Prince Edward Island, and since Ontario and Quebec have reciprocal legislation permitting companies incorporated in each to do business in the other without registration as extra-provincial companies, certainly that estimate of cost would be generous.
The fact that this rather modest one-time expense for registration was taken into account in arranging the corporate structure in itself indicates that Mr Levitt and his advisers were cost-conscious people. This also was evidenced from the testimony that one of the reasons for not having telephone listings in the Province of Quebec in both languages and for not having the company’s signs changed or constructed to show Securité’s proper name in full was because of the cost involved. With such cost consciousness, therefore, it is quite conceivable to me that Mr Levitt would dismiss as “merely incidental” the substantial tax savings which were inherent in the adoption of the corporate structure comprising three companies. Incidentally, that corporate structure avoided the companies being classified as associated under section 39 of the Income Tax Act until, of course, the direction which the appellants are seeking to have vacated herein was made by the respondent pursuant to subsection 138A(2). Section 138A was, of course, not enacted until 1963 and did not come into force until 1964 so that its implications were not known to the appellants and their advisers when they adopted their plan of reorganization. I adapt the words of Cattanach, J in Alpine Furniture Company Limited et al v MNR (supra) to indicate my views of the appellants’ evidence in this connection:
It is inconceivable to me in this day when the incidence of tax is always present that persons with the business experience and acumen which [Victor Levitt] possessed would have been oblivious of the tax advantage that might result from the arrangement adopted and it is even more inconceivable that the incidence of tax was not raised and discussed with [him] by the specialists whom [he] consulted.
Mr Levitt and Mr Abrams candidly admitted that they knew of the tax savings but as above stated they considered such savings to be “merely incidental” to the overall advantages in their plan. From my observations of Mr Levitt in the witness box, I perceived him to be a careful and astute person and such a reaction to an obvious advantage is completely out of character. I cannot accept his explanation and I infer from the nature of the plan adopted that the probability of reduction in the amount of income tax payable was one of the main reasons for the adoption of the arrangement.
The above inference is reinforced by the following uncontradicted facts leading to the conclusion that the total operation of the business was only superficially changed, and thus the real reason for the changes was only to distribute the net profit among the three companies to lower the tax payable:
(a) The major accounting records were kept by Eastern in Toronto, the local offices only keeping day-to-day sales records, payrolls and things of that nature.
(b) All purchases and warehousing of inventory were made and kept by Eastern in Toronto.
(c) There was only one catalogue for all the companies although there was a French version of the catalogue. The name emphasized in the catalogue was Levitt-Safety.
(d) All invoices bore the names of all three companies but the name Levitt-Safety Limited had the greatest prominence.
(e) Mr Levitt continued to be president and general manager of Levitt-Safety Limited and Levitt-Securité (Atlantique) Limitée and general manager of Levitt-Safety (Eastern) Limited and obviously was a senior responsible officer.
(f) Accounts receivable were all collected by Eastern although a factoring charge was made for doing so.
(g) The announcement of the opening of the new building in Montreal referred to it as being Levitt-Safety Limited head office for Quebec. No mention of Securité was made.
(h) The mailing address shown on income tax returns for all companies was the same, namely 747 Vaughan Road, Toronto.
(i) A charge of 12% of the respective gross sales of the three companies was made by Eastern to cover the cost of administration, accounting, purchasing and warehousing and included the salaries of Victor Levitt and others.
(j) The cost of goods sold by each company was calculated as a percentage of the total purchases made by Eastern according to their respective gross sales. That is the cost was not the cost of the precise goods sold by each.
None of these facts individually would cast doubt on the appellant’s contention that tax considerations were not involved in the decision to restructure the business, but their cumulative effect, in my view, leaves the clear impression that the changes were only cosmetic and had to be for other than the admitted reasons since, if it were only for those reasons the multiplicity of companies was unnecessary. The real reason, then, for creating and maintaining in existence the three companies was to effect a reduction in income tax payable in the future.
For all of the above reasons, therefore, I confirm the direction of the Minister and dismiss the appellants’ appeals with costs.