Capital receipt from land sale remains non-taxable income even when linked to future oil production.

Receipts under a land sale and oil-sharing arrangement were treated as capital consideration, not taxable income. The Privy Council viewed the transaction as a sale of the taxpayer's right, title and interest in the land, with the reserved share of oil or its monetary equivalent forming part of the purchase price rather than profit from a business, lease, or royalty in the ordinary sense. Payment measured by a percentage of future oil production did not change the essential capital character of the receipt. The assessment therefore could not stand, because the amount was not income or annual profit or gain within the Act.

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Issues: Whether the amount received by the taxpayer under the land sale and oil-sharing arrangement was income taxable under the Income War Tax Act or was part of the capital price of the land.

Analysis: The arrangement was a sale of land, not a joint venture or lease. The taxpayer sold her right, title and interest in the land, and the reserved share of oil or its monetary equivalent was treated as an incident of the sale price rather than as profit from a business or royalty in the ordinary sense. The fact that the payment was measured by a percentage of oil produced did not alter its essential character, which remained capital in nature. The Minister did not displace the view that the taxpayer had converted capital into money, shares, and a stipulated share of minerals to be won by the purchaser.

Conclusion: The amount was not income within the meaning of the Act and was not taxable as annual profit or gain.

Final Conclusion: The assessment could not stand because the receipt was held to be capital consideration arising from the sale of the land, and the appeal failed.

Ratio Decidendi: A receipt arising from the sale of capital assets remains capital in nature, even if measured by or payable out of future production, unless it is shown to be profit or gain rather than part of the purchase price.

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