The Chief Justice (judgment delivered from the Bench) (concurred in by Pratte, J and Hyde, DJ):—Except as hereinafter set out, the circumstances in this appeal do not differ materially from those in The Queen v Rockmore Investments Ltd [see p 291], which was heard simultaneously and in which we have dismissed an appeal by the respondent from the judgment of the Trial Division referring the assessment appealed against back for reassessment. I direct that a copy of my reasons in that appeal, when transcribed, be placed on this file
The difference between the two matters appears from the following portion of the reasons of the learned trial judge:
However, although counsel appeared to agree that all three companies were in the same position with respect to the applicability of section 125 to the amounts of income earned by them, I do not find this to be the case. In accordance with the findings in the Cosmopolitan Investments Co and the Finning cases, and the statement in the Weintraub case (supra), I find that ESG is in a different position from Rockmore and MRT. Its business activity was not carried on by its officers or directors or by any of its shareholders but was merely turned over to Mr Godel’s Monarch Management Company, which operated it. No further intervention or supervision was done on its behalf nor were any directions given in connection with its day-to-day operations. The receipt of semi-annual reports from the agent is not in itself a business activity. I cannot, therefore, conclude that this manner of operation constitutes the carrying on of an “active business” by the company itself. Therefore, in the case of ESG the appeal must fail.
With respect, I do not agree that there is any material difference in principle, in so far as the carrying on of an active business by a corporation is concerned, between carrying it on through the agency of officers or servants of the corporation and carrying it on through the agency of an independent contractor. The question is whether the taxpayer’s “income” is “from an active business” and, in my view, the answer must be the same in both cases.
I am therefore of opinion that this appeal by the taxpayer must be allowed.
I propose that this appeal be allowed with costs, and that the appellant’s assessment under Part I of the Income Tax Act for the 1972 taxation year be referred back to the Minister of National Revenue for reassessment on the basis that the appellant’s income for that year was income from “an active business carried on in Canada” within the meaning of those words in subparagraph 125(1)(a)(i) of the Income Tax Act.