RAND, J. (concurred in by KELLOCK, J.) : The respondent was incorporated in 1897 under the Companies Act (Imperial), 1862- 1893, and was registered as an extra-provincial company under the British Columbia Companies Act of 1897 on January 3rd, 1898. The head office is in Canada, all directors and officers are residents of Canada and all meetings of shareholders and directors are held in Canada. The business of the Company is that of supplying electric power and light and operating electric railways and motor buses; and all of it, except such formal administrative matters as are required by statute or its articles of association to be transacted at its registry office in London, England, is carried on, all of its income earned and all of its assets, except certain records and books of account, are in Canada. The company’s principal register is kept at London and in accordance with see. 103 of the Companies Act (1929) (Imperial) a dominion register at Vancouver, on both of which holdings of its five per cent cumulative perpetual preference stock are registered ; a duplicate of the dominion register is kept in London and is deemed there to be part of the principal register. Stock registered in the dominion office can be transferred only upon that register and all other only upon the register in London, but there is provision for change of registry.
The controversy concerns dividends paid to the holders of the perpetual preference stock who reside in England. They were paid by the company’s registrar and paying agent in London after funds had been remitted to London from Canada. The Crown has assessed taxes under section 9B of the Income War Tax Act on these dividends, and the right to do so is the question presented for decision.
Section 9B, subsections 2 and 4, are the charging provisions and are as follows:
"‘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 currency in which such payment is made. and . . .”
" ‘4. In the case of interest or dividends in respect of fully registered shares, bonds, debentures, mortgages, or other obligations, taxes imposed by this section shall be collected by the debtor who shall withhold five per centum of the interest or dividend on the obligation and remit the same to the Receiver General of Canada.”
It is the contention of the Crown that under this language the company is a Canadian debtor and that it is bound to deduct the tax imposed from the dividends. The President of the Exchequer Court construed the expression ‘‘Canadian debtors’’ in paragraph (a) to mean "Canadian company debtors’’ and 4 ‘Canadian company’’ a company incorporated in Canada: and he dismissed the action.
The substitution of ‘ " Canadian company debtors ‘ ‘ for " " Canadian debtors’’ in paragraph (a) effects a subtle transfer of meaning which I think has escaped the President. Undoubtedly " " Canadian company ’ ‘—and the expression is used in a number of instances in the Act—imports a national characteristic, but that is due to the special and abstract nature of the concept “company” which is not present in the collocation ‘‘ Canadian debtors.’’ What is done by the importation is in fact to qualify the meaning of ‘‘Canadian debtors’’ by introducing a new and significant word.
The same expression is used in paragraph (&) of s.s. 2:
“All interest received from or credited by Canadian debtors if payable solely in Canadian funds, except the interest from all bonds of or guaranteed by the Dominion of Canada. ‘ ‘
If the meaning so given to ‘‘Canadian’’ in (a) is applied to (b), it means that (b) in relation to natural persons is applicable only to Canadian nationals. It would exempt foreign citizen debtors who might have spent their lifetime in Canada and whose nationality would have no relevancy to their being debtors in Canada. We would have also the apparent anomaly in (a) of Canadian companies carrying on their entire business outside of Canada being forced to pay over monies in respect of dividends which would never be in Canada and would move within or between foreign countries.
It was argued by Mr. Geoffrion that the expression, itself ambiguous, 18 in (a) limited to one of two interpretations, either Canadian company or foreign company, that in neither case was any further qualification to be attached, and that, construing the section in the light of the presumptions as to inherent limitations on jurisdiction and the rules of comity between states, the judicial choice must be the former. But I see nothing in the statutory matter to drive us to any such exclusive or limited alternatives, certainly not as the initial step in interpretation.
He argued also that "‘Canadian debtor’’ meant the debtor of a Canadian debt, i.e., a debt arising by virtue of Canadian law; that the dividend as a debt arose from English law and that it was therefore outside the scope of the provision. But there is nothing in the context of the statute that gives significance to the place of origin of the debt or the law from which it arises, and where the creditor is admittedly a non-resident, it would be quite unwarranted and in fact is invidious to do so.
"Canadian debtor’’ must, I think, be considered from the point of view of the Canadian Parliament. It can be said with some force that here we have a creditor in England who purchased his stock in England, who receives his dividend from the agent of the company at the registry office in England, and who looks only to the symbol of the company as that is present in England. But the creditor knows that the substance of the company is in Canada, that it ‘‘ keeps house and does its business ‘ ‘ there, a business completely within Canadian legislative power ; and that he must look to Canada for the act of the company which declares the dividend and for the dividends themselves. The fact that the money is remitted in a lump sum to England and there distributed among the shareholders entitled is not significant. The cheques could have issued direct to the shareholders from the head office, as they were to shareholders shown as resident in Canada on the principal register and to all shareholders on the dominion register.
The imposition of the tax on the non-resident, s.s. 2(a), and the obligation of the debtor ‘‘to withhold’’ and to pay to the Receiver General, s.s. 4, are express: and it is chiefly the latter provision by which, I think, are indicated the distinctive marks of the debtor intended to be charged : a person over whom there is actual power of compulsion; from whom in Canada payment of the debt is to proceed; on whom there is an obligation to pay the dividend qua dividend ; and who, in the course of that act, is ‘‘to withhold.’’ The expression, then, means a debtor resident in Canada by whom the act of paying the dividend as such is, under the obligation itself, to be initiated in and the payment to proceed from this country.
It may be and doubtless is the case that such an exercise of taxing power or, as it may be called, exacting power, is so extraordinary that the court should require a clear identification of any relation to which it is proposed to be applied. With the policy of legislation we have, of course, nothing to do, but 1 think the subject-matter with reference to which the non-resident is taxed is here clearly identified, and that it embraces the correlatives of the obligations of the respondent under consideration.
The legislative competence of Parliament to tax non-residents was challenged. It is argued that the power "‘to make laws having extraterritorial operation’’ as enacted by the Statute of Westminster, 1931, section 3, is subject 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 extraterritorial 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 recognize 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 by section 92(1) as the Imperial Parliament in the plenitude of its power possessed or could bestow’’: Hodge v. The Queen, 9 App. Cas. 117. 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 legislature that it imposes a tax upon a citizen of a foreign country toward whom there is no internationally recognized bond or relation, is, beyond the territories of that state, a futile act, and it is futile for the reason that beyond them it is incapable of enforcement. Within the state, however, it becomes an obligatory rule to be enforced whenever enforcement is feasible. The specific investment of extraterritorial power by section 3 of the Statute of 1931 was designed no doubt to remove the generally accepted limitation of colonial legislative jurisdiction, a limitation which the courts of the colony itself were bound to recognize: McLeod v. New South Wales, [1891] A.C. 455; and any such jurisdictional inadequacy no longer hampers the legislative freedom of the Dominion. Within its field, there is now a legislative sovereignty. That the enactment of section 9B is an exercise of taxing power within that jurisdiction does not, I think, admit of doubt. It is an assessment uniformly imposed in respect of special items of a general class of defined subject-matter in an elaborated tax system; there is admitted jurisdiction over an act essential to the subject-matter, i.e., the act of performance of an obligation; and these, taken with the language used, satisfy the taxation criteria. Legislation so enacted will be effective in, and must be enforced. by the courts of, this country. To what extent, if at all, it will receive recognition in the tribunals of foreign countries depends upon different considerations : but that circumstance, apart from its function in interpretation, is not one in which the local tribunal is interested.
I would, therefore, allow the appeal and direct judgment against the respondent for such sum as may be found to be owing, with costs throughout.
Appeal allowed.