Lord Macmillan.-

In the fiscal year 1940-41 the appellant company, in pursuance of their business as lumbermen, held three Government licences under which they cut timber in three areas of Crown Land in the Province of Alberta. In making their income tax return for the year they deducted a sum which they claimed as an allowance for depletion of the timber included in their licences at the rate of $1.40 per thousand feet of timber cut. To this deduction they claimed that they were entitled under S. 5 (1) (a), Dominion Income War Tax Act, R.S.C. 1927 C. 97 which, as amended by S. 10 of 1940 C. 34, reads as follows:

"5 'Income' as hereinbefore defined shall for the purposes of this Act be subject to the following exemptions and deductions :

(a) The Minister in determining the income derived from mining and from oil and gas wells and timber limits may make such an allowance for the exhaustion of the mines, wells and timber limits as he may deem just and fair, and in the case of leases of mines, oil and gas wells and timber limits the lessor and lessee shall be entitled to deduct a part of the allowance for exhaustion as they agree, and in case the lessor and lessee do not agree the Minist