1948 (10) TMI 17 - Other - Indian Laws

Summary

Issues Involved:
1. Entitlement to a depletion allowance under the Dominion Income War Tax Act.
2. Minister's discretion in granting or withholding the depletion allowance.
3. Legal interpretation of the term "may" in the statutory context.
4. Validity of the Minister's exercise of discretion.
5. Historical context and legislative amendments.
6. Fairness and consistency in the Minister's decision-making.

Detailed Analysis:

1. Entitlement to a Depletion Allowance:
The appellant company, engaged in lumbering, held Government licenses to cut timber on Crown Land in Alberta and claimed a depletion allowance under s. 5 (1)(a) of the Dominion Income War Tax Act. The Minister of National Revenue disallowed this deduction, leading the appellant to appeal on the grounds of a "statutory right" to the allowance for timber exhaustion. The appellant argued that the Minister had a quasi-judicial duty to determine a fair and reasonable depletion allowance.

2. Minister's Discretion in Granting or Withholding the Depletion Allowance:
The Minister's decision was based on the interpretation that the appellant, as a licensee and not a lessee or owner of the timber limits, was not entitled to the depletion allowance. The Minister's discretionary power under the Act was a central issue, with the appellant asserting that the Minister failed to exercise this discretion properly.

3. Legal Interpretation of "May" in the Statutory Context:
The Court examined whether the term "may" in s. 5 (1)(a) implied an obligation for the Minister to grant a depletion allowance. The judgment clarified that the language of the statute was permissive, not obligatory, giving the Minister discretion to decide whether to grant any allowance at all. The Dominion Interpretation Act supported this interpretation, distinguishing between "shall" (imperative) and "may" (permissive).

4. Validity of the Minister's Exercise of Discretion:
The Court evaluated whether the Minister's discretion was exercised on just, reasonable, and admissible grounds. The Minister's decision considered that the appellant had already recovered the entire cost of the timber licenses through previous allowances. The Minister's view was that no further depletion allowance was warranted as the appellant had no capital investment requiring depletion.

5. Historical Context and Legislative Amendments:
The historical context of the statutory provisions was significant. Initially, the statute mandated the Minister to grant depletion allowances. However, following the Pioneer Laundry and Dry Cleaners Limited v. Minister of National Revenue case, the statute was amended to change "shall" to "may," reinforcing the discretionary nature of the Minister's power. This amendment indicated a deliberate legislative intent to provide the Minister with broader discretion.

6. Fairness and Consistency in the Minister's Decision-Making:
The appellant argued that the Minister's decision was based solely on their status as licensees, which was seen as a misdirection. However, the Court found that the Minister had also considered that the appellant had already received allowances covering their capital outlay. The Minister's decision was deemed to be based on a tenable and admissible view of the circumstances, exercised bona fide and without irrelevant considerations.

Conclusion:
The appeal was dismissed, affirming the judgment of the Supreme Court of Canada. The Court held that the Minister had appropriately exercised his discretion and was not legally obligated to grant a depletion allowance. The appellant company was ordered to pay the respondent's costs of the appeal.