ANGERS, J.:—This is an appeal from the decision of the Income Tax Appeal Board regarding an assessment made on January 16, 1951.
In his notice of appeal the appellant alleges in substance:
his chief source of income is and at all times material hereto was farming, within the meaning of that term in Section 39(1) of the Income Tax Act;
on January 7, 1949, the appellant filed definitive income tax returns with the Director of Income Tax at Saskatoon in respect of the years 1946, 1947 and 1948 and on March 11, 1950, he filed his definitive income tax return for the year 1949 with the said Director ;
he was assessed in respect of the said returns thus:
1946—$237.90
1947— 317.36
1948— 302.25
1949— nil
on March 11, 1950, he elected to average his income under the provisions of Section 39(1) of the Income Tax Act in respect of the years 1946 to 1949 inclusive and filed his election with the said Director in the form provided by the Minister for that purpose ;
the Minister, upon assessing the appellant’s income for the year 1949, refused to average his income for the said years under the provisions of Section 39(1) but instead assessed him in respect of the year 1949 as if no such election had been made by an assessment notice dated January 16, 1951;
the Minister’s reason for such refusal was set forth in the 1949 assessment notice as follows:
“Due to late filing of 1946-47 returns you are not eligible for averaging for period 1946 to 49 inc. ’ ’ ;
on February 8, 1951, he filed a notice of objection to the said assessment and on April 4, 1951, by his registered notice to him, the Minister confirmed the said assessment as having been made in accordance with the provisions of the Act, particularly on the ground that the taxpayer is not entitled to average his income in accordance with the provisions of subsection (1) of Section 39 of the Act, as he did not file returns for 1946 and 1947 as required by the Act.
In his statement of reasons in support of his appeal the taxpayer alleges, inter alia:
the Minister erred in construing Section 39(1) of the Income Tax Act, which, if properly construed, does not make filing by a farmer of his income tax returns for the years 1946 and 1947, within the time specified in Section 40 of the Act, a condition of that farmer obtaining the benefits of Section 39(1), but, on the contrary, properly interpreted, the said section grants to any farmer who has filed his said returns before filing his election to average form, the benefits of such section.
In answer to his notice of appeal the respondent, the Minister of National Revenue, says:
that the appellant is not entitled to average his Income in the taxation year 1949 in the manner provided for by the provisions of subsection (1) of Section 39 of the Income Tax Act, owing to his having failed to comply with the provisions of said subsection (1) relating to the filing of income tax returns for the years preceding the 1949 taxation year;
that the appellant failed to comply with the aforementioned provisions of the said Act in not having filed income tax returns for 1946 and 1947, as required by Part I of the said Act;
that the respondent relies, inter alia, upon Section 39 of the said Act;
that the matters alleged by the appellant do not afford grounds under the said Act for the relief claimed.
The matter was heard before the Income Tax Appeal Board at Saskatoon, Saskatchewan, on December 3, 1951, the Board being presided by Fabio Monet, Q.C., its Chairman.
A notice of objection was given from the assessment dated January 16, 1951. As is usually the practice, a statement of objections, signed by the appellant, was annexed to the notice of objection.
On April 4, 1951, notification was given by the Minister under Section 53 of the Act that, having considered the assessment and the facts and reasons set forth in the notice of objection, he confirms the assessment as having been made in accordance with the provisions of the Act, particularly on the ground that the taxpayer is not entitled to average his income in accordance with the provisions of subsection (1) of Section 39 of the Act, having not filed returns for the years 1946 and 1947 as required by the Act.
The matter was heard before the Income Tax Appeal Board at Regina, Saskatchewan, on December 6, 1951; the appeal was dismissed.
An admission of facts, signed by counsel for appellant and counsel for respondent, was filed on October 6, 1952, reading in part as follows:
“1. The Respondent admits that the appellant was during the years 1946, 1947, 1948 and 1949 a farmer whose chief source of income was derived from farming operations.
2. The Appellant agrees that he was a person liable to taxation under the Income War Tax Act in each of the years 1946, 1947 and 1948 and that his Income Tax Returns for the said years were not filed with the Minister on or before the 30th day of April in the years 1947 and 1948.
3. The Parties agree that the Appellant did file returns of his income with the Minister for the years 1946, 1947 and 1948 and that the said returns were received by the Minister on the 10th day of January, 1949.
4. The Parties agree that the appellant’s return of income for the year 1949 was received by the Minister on the 31st day of March, 1950.
5. The Parties agree that the Appellant did file a form as prescribed by the Minister electing to average his income from his farming business for the years 1946, 1947, 1948 and 1949 on or before March 31st, 1950.
6. The Appellant admits that he was assessed by the Minister and found to be taxable during each of the years 1946, 1947 and 1948 and that the said assessments are correct.
7. The Appellant admits that he was not physically or mentally incapacitated during the months of January, February, March and April in the years 1947 and 1948 so as to prevent the filing of an Income Tax Return by him with the Minister for each of the years 1946 and 1947.”
Counsel for appellant submitted that, besides the statement of claim, his client filed an election to average but that the Minister refused to average on the ground that the returns for the two first years were produced too late. He specified that the Minister took the position that, in order for the taxpayer to obtain the benefit of the averaging provisions, the returns should have been filed by April 30 of the year following the taxation year.
Counsel for appellant stated that there had been three decisions of the Income Tax Appeal Board dealing with the right of a farmer to average. He specified that the first one was rendered by the Chairman, in which it was held that the late filing of income tax returns barred the taxpayer from averaging, that the second one was a decision of Mr. Fisher, a member of the Board, and that the matter was finally heard before me at Vancouver. Counsel said that there was also a decision of the whole Board, tried at Calgary by Mr. Fordham, in which Mr. Fisher held, as he had done in the other case, that the taxpayer had the legal right to average even if he filed his returns late, while Mr. Fordham and the Chairman expressed the opinion that he did not have this right. The present appeal is taken from the decision of the Chairman in which he held that the taxpayer did not have the legal right to average.
Counsel for appellant referred to two decisions, which he summarized thus. He contended that the words most chiefly in question in this section of the Act are ‘‘as required by this part’’ and the word of that phrase which is particularly in dispute is “as”. The Chairman of the Board and Mr. Fordham held that “as” meant ‘‘in the manner and within the time”. According to Mr. Fisher the word ‘‘as’’ meant ‘‘in that manner’’, having no regard to time. It was submitted by counsel for appellant that the meaning of the word ‘‘as’’, fixed, firstly, by the rules of construction and, secondly, by the context of the section, might be one or the other of the two things. Counsel for appellant pointed out that what Parliament intended to do was to grant to every taxpayer, whose chief source of income was farming or fishing for five succeeding years [sw], the legal right to average his income. Counsel drew the attention of the Court to the heading which says : 1 ‘ Averaging for farmers and fishermen”. He specified that, if one reads the entire section and if one sees that the taxpayer filed four yearly returns in time, there is no question but that the section would apply to all taxpayers. On the other hand, he submitted that, if one leaves out the sentence ‘‘and the taxpayer has filed a return of income for the preceding years as required by this part” and reads the balance as an entity, the balance is clear when it says: ‘‘has been farming and fishing in the four preceding years—if the taxpayer before such date files an election’’.
Counsel believed that this portion of the section shows clearly the Parliament’s intention that all taxpayers in this category should have that legal right. He added that, if his contention is correct, he finds himself in the position that this section grants a legal right to do a certain thing to all taxpayers who come within that category. According to him the sentence is merely an outline of the procedure to be followed by the taxpayer in order to obtain the benefit of that legal right.
Counsel summarized his contention in stating that, where a legal right is given and where certain formalities must be com- plied with, it must be inferred that all parties included in the class to whom the legal right is granted should have the power, when they want to exercise that right, to do it.
In counsel’s opinion, the rule regarding the power to perform the condition is found in section 642, p. 501, of 31 Halsbury’s Laws of England, 2nd Edition.
Counsel pointed out that the Chairman of the Board and Mr. Fordham proceeded on the assumption that an existing fact took place before the time for averaging came into being. He added that in 1946-47 one would have to file for 1946 a return on due date to take advantage of averaging in 1950. He believed that it is because of the over a ver aging that the Minister is taking the position that certain taxpayers who have not filed their returns on time are barred from participation to the effects of this general grant.
Counsel expressed the opinion that the rule is that the extension or reservation should be strictly construed against the party setting down, which in this case is the Minister. He relied on 31 Halsbury’s Laws of England, 2nd Edition, par. 607, p. 485.
Counsel added that, as he understands the rule of strict construction, it means that where one has a general word capable of an extended or limited meaning, if one is construing it strictly, one must apply the most limited rather than the most extensive meaning, and, if that is the case, as in the present instance, it would mean that the word “as” should be construed as ‘‘in the manner ’
Counsel argued that Parliament did not say that this was an extension out of the general grant to all taxpayers, although it is true that one can draw an inference even though the word “except” does not appear.
Counsel submitted that the grammatical construction of the Sentence is against the Minister’s interpretation. He specified that the section starts with the word “where”, stating that ‘“where a taxpayer whose source of income has been farming or fishing . . .”’
He then noted that the Parliament goes on with another sentence, to wit: ‘‘and the taxpayer has filed returns of income’’. Counsel then queries whether Parliament, by omitting the word ‘“where’’ between ‘‘and’’ and ‘‘the taxpayer’’, did clearly indicate that this has nothing to do with the condition because as per the grammatical construction of the section itself one has one part thereof starting with the word ‘‘where’’ and another one separated by the word ‘ 1 and” and a new sentence.
Counsel submitted that the word ‘‘where’’ does not apply to the new sentence and that, unless the word ‘‘where’’ is used, it is not a condition but merely a procedure.
Counsel explained then that there is another angle to this part as well and that it says that ‘‘the taxpayer has filed a return of income’’. Counsel believed that the fact that he uses the word ‘‘has’’ is significant.
He suggested that, if Parliament had used the word “had” in the phrase: ‘‘the taxpayer had filed a return’’ that would have clarified the text a great deal and made the Court’s burden much easier.
In Craies, Treatise on Statute Law, 5th Edition, p. 87, it is set out that, if Parliament could have adopted a clear method of expressing certain things and adopted some other method it should be presumed that Parliament did not intend the clearer method. It may be apposite to quote a passage from the author (p. 87):
“7. With regard to what is meant by the expression, ‘the plain meaning of the words of a statute, ’ it is necessary on all occasions, to give the Legislature credit for employing those words which will express its meaning more clearly than any other words; so that if in any particular instance it can be shown that there are two expressions which might have been used to convey a certain intention, but one of those expressions will convey that intention more clearly than the other, it is proper to conclude that, if the Legislature uses that one of the two expressions which would convey the intention less clearly, it does not intend to convey that intention at all, and in that event it becomes necessary to try to discover what intention it did intend to convey . . .’’
Counsel then pointed out that in his judgment Mr. Fisher refers to the fact that Parliament, in some parts of the Act, uses the word “as” and, in other parts thereof, the words ‘‘as’’ and ‘“when’’. Parliament knew that these two words are distinctive and that as it uses them to cover similar circumstances it is done intentionally : 31 Hals!) ury’s Laws of England, 2nd Edition, p. 482, section 600.
Counsel then drew the attention of the Court to the fact that a man who is expressly exempted from filing a return has un- doubtedly no obligation cast upon him to do so by a certain date. This appears to me elementary.
Counsel indicated that this point was considered by the Chairman of the Board and Mr. Fordham and that, if I read the judgment relative thereto, I would conclude that this is how the Minister of National Revenue offered him an explanation for it.
Counsel for appellant further stated that there is another thing which is very material and that, if the Court turns to Section 39(1), it will notice that it is a condition of averaging that the farmer must file returns for the two preceding years as a condition of obtaining that averaging and that, singularly, there is nothing contained in that section requiring that a return for the fifth year needs ever be made.
Counsel added that this may sound strange but that, if one reads on, he will see that, if the taxpayer ‘‘on or before the day on or before which he was required to file his return of income for the year of averaging, files with the Minister an election’’.
He added that now all he says he took it to mean it merely fixes a date, that it expresses no requirement that a return be filed at all. He observed, however, that he is prepared to concede that such a return would need to be filed and that it is an essential part of this section, but that while one may infer that the return would have to be filed to give effect to the section, counsel submitted that the inferring must be limited to that which will give effect to the section.
Counsel said he believed that, if he is correct, the Minister finds himself in a rather peculiar position when he says: ‘‘for the first four years one must file a return on time’’; he admitted being unable to show that Parliament intended that the fifth year’s return must be filed on time as a condition. Counsel then inquired if there is more reason to suppose that the obligation in regard to the four first years is greater than for the fifth, adding that, if the Act intended to make the filing on due date a condition of the right to average, it would have said so.
Counsel suggested that, if the Court examined the rules on averaging, it would find that there is nothing therein contained that would affect the matter in any shape or form. He observed that, if some trouble is caused to the Minister by the filing of a late return, there is a penalty and that the taxpayer, whether farmer or not, pays the same penalty to compensate the Minister.
Counsel, then wondering if it would affect the amount of taxes payable by the rest of the taxpayers who are not farmers, concluded that, if one will turn to the records of Hansard, he will see that the Minister bases his right on statistics. He added then that it might be said that late filing is not a legal filing and observed that it would be ridiculous to say that by his own failure a taxpayer removes an obligation from his shoulders.
Counsel stated that a man should not be entitled to take advantage of his own wrong; such a statement seems to me elementary. Counsel pointed out that, if one turns to Section 199 of the Act, dealing with prosecution for failure to file a return, he will note that this section provides a penalty of $10.00. for each day*of default in filing the return. He said that if, according to Section 52 of the Act, the return of a taxpayer’s income for the taxation year has been made within two years from the end of the year, the Minister may refund the amount of the overpayment.
Counsel submitted that, if the return was not a legal effective one, there would not be a return at all and that payment should be made. He related subsequently that for this reason and common sense, there is actually no reason to apply the suggested construction.
Now, turning to the other side of the picture and taking the taxpayer’s position, counsel wondered why he should be singled out to pay an indemnity much greater than any other taxpayer in default. Counsel admitted that it may be argued that it is not a penalty, but that nevertheless the taxpayer is deprived of the right of averaging because of his failure.
Then counsel referred to the nature of the penalty, saying that if the taxpayer filed on time in 1946, 1947 and 1948 and was only one day late in 1949, according to the construction placed on this by the Chairman of the Board, it would mean that he would not only lose the benefit of this one year, but also of the three years in which he was on time; in other words, counsel submitted that it is an unreasonable penalty and one which nobody would expect the Crown to impose.
Counsel observed that in the present case there are two alternative constructions: one, according to the understanding of the average person, would give a reasonable and fair result; the other would work injustice. He added that the rule of construction in such a case is that, unless one is definitely bound down to the injustice, the alternative would be the construction placed upon it. He cited 31 Halsbury’s Laws of England, p. 501, section 640, item 3.
Counsel pointed out that there is another rule which says that, if the grammatical meaning of the section is plain but an absurdity results, the Court may change the meaning. In support of this contention he relied on the decisions in Bradlaugh v. Clarke (1883), 8 App. Cas. 354, 384, and The Duke of Buccleugh (1889), 15 P.D. 86, 96. He added that he would repeat roughly what he had said previously, to wit that the rules of construction require that a limited rather than a more extended meaning be placed upon the word “as” and, secondly, that the context of the section and the statute itself, in the meaning which he quoted, show that intention.
Counsel for respondent stated that he would like to refer the Court for a moment to the admission of facts and make it clear that the respondent admits that the appellant was, at all times material to this appeal, engaged in the business of farming and that this was his chief source of income. He added that the Court would also notice from paragraph 2 of the admission of facts that the appellant agrees that he was a person liable to taxation under the Income War Tax Act in each of the years 1946, 1947 and 1948 and that his income tax returns for the said years were not filed with the Minister on or before April 30 in the years 1947 and 1948.
Counsel stated that the parties agree that the appellant did file returns of his income with the Minister for the years 1946, 1947 and 1948 and that the said returns were received by the latter on January 10, 1949, and, in paragraph 7, the appellant admits he was not physically or mentally incapacitated during the months of January, February, March and April in the years 1947 and 1948 so as to prevent him from filing an income tax return for each of the years 1946 and 1947.
Counsel then said that his opponent had already intimated that the Minister took the view in this case that the privilege conferred upon the taxpayer, who is a farmer, of averaging under Section 39(1) is not available to the appellant due to the fact that he did not file his income tax returns for 1946 and 1947 on or before April 30, 1947, and April 30, 1948, respectively. He pointed out the fact that the appellant admits that he was liable for taxation in each of the years 1946 and 1947.
He declared that the matter was referred by the appellant to the Income Tax Appeal Board and that the Chairman thereof upheld the view of the Minister. He observed that the appellant in the present case sought to take advantage of the provisions of Section 39(1) ‘‘averaging for farmers and fishermen’’, reading thus :
“39. (1) Where a taxpayer’s chief source of income has been farming or fishing during a taxation year (in this section referred to as the ‘year of averaging’) and the four immediately preceding years (in this section referred to as ‘the preceding years’) and the taxpayer has filed returns of income for the preceding years as required by this part, if the taxpayer on or before the day on or before which he was required to file his return of income for the year of averaging, files with the Minister an election in the prescribed form—”
Counsel argued that, in order for the appellant to take advantage of the privilege of averaging, which he may have had due to the fact that he is a farmer, he must file a return of income for the preceding years as required by this section.
Counsel for respondent, on the other hand, submitted that Section 39 confers a privilege to the taxpayer, which is only available to farmers and fishermen. He drew the attention of the Court to the fact that the part of the sentence ‘ file his return of income as required by this part’’ must be interpreted according to the ordinary plain meaning of these words. He said he submitted these words for their meaning: that in order to average income under Section 39, one has to refer to the section of the Act which sets forth the rules and regulations concerning filing and he thought that it is a rather important point in this part that Section 39 does not stand by itself and does not govern the filing. Counsel continued in saying that the Court will find that Section 40 deals with filing of returns; he submitted that, in order to determine the procedure which the taxpayer must follow to obtain the privilege provided in Section 39, he must comply with Section 40, which reads thus:
“40. (1) A return of the income for each taxation year in the case of a corporation and for each taxation year for which a tax is payable in the case of an individual shall, without notice or demand therefor, be filed with the Minister in prescribed form and containing prescribed information—”
Then Section 40 continues as follows:
‘‘In the case of any other person, on or before April 30 in the next year, by that person or, if he is unable for any reason to file the return, by his guardian, curator, tutor, committee or other legal representative.”
Counsel added that the filing of the return under Section 40 is required for each taxation year and that he wished to point out that the respondent’s submission is that the appellant, by virtue of the fact that he was taxable for the years 1946 and 1947, was obliged to file a return on or before April 30 for each of the said years, in order to obtain the benefit of Section 39. He stated that the respondent is not presenting to the Court or making the submission that, if the appellant had not been taxable in 1946 and 1947, he would have had to file a return. He said he thought that this is important because in the recorded case it has not been referred to to be in question.
Counsel for respondent declared that it has been intimated that, if a farmer does not file a return as required by Section 40 before the date stipulated, he loses the privilege conferred upon him and that he is then on the same level as every other taxpayer.
Counsel further declared that it has been held by the Income Tax Appeal Board in the case of Topham, 6 Tax A.B.C. 242, that the words or portion of the sentence he has already read in Section 39 ‘‘had filed returns of income for the preceding years as required by this part’’ merely refer to the manner of filing returns.
Counsel drew the attention of the Court to a portion of the judgment of the Chairman of the Income Tax Appeal Board where he wrote :
“To obtain the benefit of Section 39(1) of the Act, Appellant had to comply with the provisions of Section 40(1) (c) which is one of the many sections found in Part 1 of the Act; he did not do so. To accept the appellant’s submission, the words ‘as required by this part’ as found in Section 39(1) would have to be ignored. These words are in my opinion an important part of the section, for they indicate the conditions whereby a farmer might benefit by this section of the Act, and they have to be given a meaning.”
He submitted that what has been conferred on the farmer by Section 39(1) is not a legal right but a privilege. He stated that the taxpayer admits that he was taxable in the years 1946 and 1947 and that he did not file his return for those years until January, 1949.
Counsel concluded that the respondent’s submission is that, by non-compliance with the condition precedent, the averaging provision of Section 39, the taxpayer has lost his right to average. He stated that it has been pointed out that it would be absurd if Parliament should require a farmer to report on time the taxable income of the year he received it to claim for a subsequent year.
Counsel admitted that he could not follow that contention but that, before sitting down, he wished to mention another fact: there was no requirement to file another return in the fifth year, which is the same as the year of average.
Mr. Cross felt that the Court will remember that Section 39 refers to the four immediately preceding years and remarked that subsection (11) of Section 129 changes the ‘‘4’’ to “3” and that three years can be averaged. He added that the respondent’s case is that, in order to obtain the privilege of averaging his income, the taxpayer must file with the conditions precedent, as set forth in Sections 39 and 40, whereof the first is to file a return of income for the year in which one is taxable, on or before the 30th April in the following year, which was not complied with for 1946 and 1947.
Mr. Cross thought his opponent was endeavouring to contend that, where the construction of a section of a statute leads to an absurdity, the Court is free to give it a construction widening its grammatical meaning. He continued stating that he wished to point out that there is no absurdity in this section requiring a farmer to report on time the taxable income of the year he received it, as a condition precedent to gaining a privilege, which is the privilege of a peculiar class of taxpayers.
He thereafter asserted that he cannot see any absurdity in a construction of that nature and that, if Parliament was conferring a privilege on a specific class of taxpayers, something which is above what any other type of taxpayers has, he should be required to come up with clean hands. He concluded that it rests with the farmer or fisherman to show that he has complied in every respect with the law applicable to every taxpayer in Canada and that, if he fails to do so, he is not punished, that he carries all the rights and privileges which every other type of taxpayer has, one of which is important, that he is still entitled to carry backwards and forwards the losses gathered from his business over a period of five years. He agreed that it may be that he had a deficit and, should that be the case, he did not have to file a return.
Counsel said that under Section 40 the taxpayer still has the right, if, in a subsequent year he has a profit, to charge against it the loss in question. According to him the taxpayer is in the same position as any other taxpayer; counsel again emphasized that this is not a right he has but a privilege and that the one enjoying it must come with clean hands.
In his reply counsel for appellant declared that, if anything is set forth in the statute granting leave to a person to do something, that is not a privilege but a right. He specified that, in the present case, when the law grants by means of this section to all farmers and fishermen the legal right to average, he is depriving him when contending that he is not treated the same as any other member of his class.
Regarding his opponent’s declaration ‘‘that the farmer or fisherman should come with clean hands’’ counsel for appellant contended that, when his client voluntarily filed his return of income, paid his tax and a penalty, he did everything he could to rectify the situation in which he found himself.
With reference to counsel for appellant’s statement that he was not submitting that the appellant is not taxable and, for this reason, that there is some question about the obligation of filing a return Mr. Smyth observed that he never suggested that the appellant herein was not taxable in 1946 or 1947, but merely expressed this remark about some hypothetical person not taxable for the purpose of illustrating the absurdity in the section.
Counsel added that his opponent also alluded to the fifth year and that, if one reads the words he quoted, he will come to the conclusion that the only thing these words deal with as far as filing on a certain date is concerned is that the income tax return for the fifth year is a fixed date for the filing of the election to average.
After reading the judgment of the Income Tax Appeal Board, the notice of appeal, the admission of facts, studied the precedents relied upon by counsel and duly deliberated on the arguments of the latter, I have reached to conclusion that the appeal should be dismissed. It will be dismissed with costs against the appellant in favour of the Minister of National Revenue, the said costs to be taxed in the usual manner.
Appeal dismissed.