Middleton, J.A.:—These two cases are appeals in the nature of special cases from the decision of His Honour Judge Me- Gibbon, acting Judge of the County of Peterborough, pronounced on the 16th day of Feb., 1934, under the provisions of sec. 84 of the Assessment Act, R.S.O. 1927, c. 238.
In the first case Bradburn is a shareholder in Bradburn’s Ltd., an incorporated company whose income has been assessed. by virtue of sec. Sa of the Corporations Tax Act as enacted by the amendment of 1932, 22 Geo. V, c. 8, sec. 3. During the year 1932 Bradburn received dividends upon his stock holding in the company to the amount of $7,267. He claims exemption by reason of the payment by the company of corporation taxes. The company has been assessed and paid a business assessment but has not been assessed for income.
The appellant Hall is a shareholder of the Peterborough Examiner and has received $5,400 income upon the stock held by him in the company. The company has been assessed for business assessment but has not been assessed in respect of income, but has paid a corporation tax under the Statute mentioned.
To understand these appeals it is necessary to recall shortly the history of the Statute under which the taxation is imposed. The Maclennan Commission reported in 1902 against the continuance of the then provisions by which all personal property, subject to certain exceptions, was liable for assessment and taxation. This tax was found to be unfair and oppressive, subject to many abuses and productive of comparatively small returns. In the opinion of the Commission and of, I may say, everyone, it was desirable to find some method of taxation which would overcome these difficulties. The Legislature in 1904, by 4 Edw. VII, ec. 23, substituted for this tax on personalty the business tax. This tax was upon the value of the lands occupied in connection with the business. An assessment of the business was made at a percentage varying from 150% of the value of the land occupied in a ease of a distiller to 25 % in a ease of a retail merchant, and this tax was to stand in lieu of an income tax. The only exception made was in the case of lawyers, doctors, dentists, engineers and surveyors. These privileged classes were compelled to pay an income tax in addition to their business tax if the income tax should exceed the business tax. There was in addition an income tax to be levied upon all those possessed of an income and who were not subject to business taxes.
In the working out of this scheme the Statute provided, sec. 4, subsec. (17), for an exemption in respect of "the dividends or income from stock held by any person in any incorporated company, the income of which is liable to assessment in this Prov- ince’’, and by sec. 11, that, subject to the exemption provided by the Act, every person would be taxed in respect of income who was not liable to business assessment, and in addition every person liable to business assessment from income who had income not derived from the business, and, thirdly, the income of lawyers, doctors, etc., to the extent to which the income exceeds the business assessment:
In 1922 a radical departure from this scheme of taxation was introduced. The Legislature had apparently forgotten that the business tax was a substitute for a personalty tax and enacted (12-13 Geo. V, c. 78, sec. 9) that it should be in effect a minimum income tax and the'provision which is now found in sec. 10(c) in the Revised Statutes, 1927, c. 238, was substituted for the old provision with respect to the assessment of lawyers, doctors, etc., and enacted that every person liable to business assessment to the extent to which the income exceeds the amount of the business assessment shall be liable for assessment for income tax with respect to the excess, adding the words "‘excepting incorporated companies and commissions, or trustees assessable under sec. 45a’’. See. 45a is now sec. 46 and provides that the land owned by a municipal corporation or commission or trustees or any other body acting for the municipal corporation and for use for public utilities purposes shall be liable to be taxed as therein provided. I find it impossible as a matter of grammatical construction to determine whether it is the intention of this section to except all incorporated companies or only incorporated companies assessable under sec. 46, and I am happy to say I do not think it necessary now to determine this conundrum.
In the meantime the Corporations Tax Act, R.S.O. 1927, c. 29, had been passed providing for the taxation of certain corporations for the purpose of providing a provincial revenue. In 1932 this provincial Act was amended (22 Geo. V, c. 8, secs. 2(9) and 3) so as to include all incorporated companies transacting business within the Province and imposing a tax of ⅒ of. 1% upon the paid-up capital and certain other taxes upon offices occupied by the company, and a tax of 1% on the net revenue of the company. It is the contention of the appellants that the imposition of this tax relieves the shareholders from the payment of municipal income tax by reason of the exemption provision now found as subsec. (20) of sec. 4, of the Assessment Act, R.S.O. 1927, c. 238, "The dividends or income from stock held by any person in an incorporated company, the income of which is liable to assessment in Ontario.’’
I am clearly of the opinion, noth withstanding the very ingenious argument of counsel for the appellants, that the assessment which is spoken of in this section of the Statute is confined to an assessment for the purpose of municipal revenue under the Assessment Act. It operates to exempt the shareholders not merely where the company is assessed in the same municipality, but where the company is assessed anywhere in the Province for municipal purposes. The purpose of the section was to avoid a double assessment for municipal purposes. The section is cognate with the last clause of subsec. (c) of sec. 10 which provides against the assessment of the income of a partner his share of partnership earnings which have already been assessed against the partnership.
Upon the argument of this appeal a question was raised for the first time which was not discussed before the County Judge. I am not sure that it is open upon this stated case. It is said that the income of the company is ‘‘liable to assessment’’ and so the income of the shareholder is exempt (see. 4(20)). This is not shown. The company is assessed for business and so is exempt from income tax unless it is shown that the income exceeds the amount of the business assessment and then only to the amount of such excess. It is not shown that the income of the company exceeds the amount of the business assessment.
It is far from clear that liability for income assessment upon part of this income only would give an exemption to the shareholders under sec. 4(20). The appeal should therefore be dismissed with costs.
The attention of those in authority is drawn to the unsatisfactory condition of this legislation so that it may be remedied. An amendment made in 1934 (24 Geo. V, c. 1, see. 4) does not really touch this difficulty.
Appeals dismissed with costs.