Rouleau,
J:—These
two
actions
were
heard
together
on
essentially
common
evidence
and
were
the
object
of
identical
argument
by
counsel.
Both
actions
were
brought
against
the
Crown
pursuant
to
sections
172
and
175
of
the
Income
Tax
Act,
SC
1970-71-72,
c
63,
as
amended
(all
subsequent
references
are
to
that
Act
unless
otherwise
noted)
as
a
result
of
reassessment
for
the
1976
taxation
years
disallowing
deductions
claimed
under
subsection
127(5).
I—Facts
The
parties
submitted
an
agreed
statement
of
facts.
Plaintiff
Mother’s
Pizza
Parlour
Limited
(“Mother’s”)
was
a
corporation
incorporated
under
the
laws
of
Ontario
on
May
24,
1972.
Plaintiff
Mother’s
Pizza
Parlour
(London)
Limited
(“Mother’s
London”)
is
a
corporation
incorporated
under
the
laws
of
Ontario
on
March
18,
1974.
Mother’s
and
Mother’s
London
are
members
of
a
group
of
companies
which
operate
establishments
under
the
name
and
style
of
“Mother’s
Pizza
Parlour
and
Spaghetti
House”.
These
establishments
offer
a
variety
of
foods
of
which
pizza
is
the
specialty.
Generally,
they
provide
dining
room,
take-out
and
delivery
service
to
their
customers.
Mother’s,
as
at
December
31,
1976
was
a
joint
venture
partner
in
three
joint
ventures
to
the
following
extent:
Wellington
Road
Associates
|
6/22
|
Brantford
Associates
|
50
per
cent
|
Kitchener
Associates
|
37.5
per
cent
|
Mother’s
London,
as
at
December
31,
1976,
had
a
3/22
interest
in
Wellington
Road
South
Associates
Joint
Venture.
Wellington
Road
Associates,
Brantford
Associates
and
Kitchener
Associates
each
acquired
after
June
23,
1975
and
before
July
1,
1977
(dates
relevant
under
subsection
127(10),
(infra)
to
the
availability
of
the
investment
tax
credit
in
question)
buildings
located
in
London,
Brantford
and
Kitchener,
Ontario
at
the
following
costs:
London
|
$309,525
|
Brantford
|
258,453
|
Kitchener
|
296,938
|
The
Wellington
Road
Associates
joint
venture
leased
the
building
in
London
to
Mother’s
Pizza
Parlour
(Wellington
Road)
Limited
(“Wellington
Road”)
an
Ontario
corporation
incorporated
on
September
8,
1975.
The
Brantford
Associates
joint
venture
leased
the
building
in
Brantford
to
Mother’s
Pizza
Parlour
(Brantford)
Limited
(“Brantford”),
a
corporation
incorporated
under
the
laws
of
Ontario
on
August
22,
1975.
The
Kitchener
Associates
joint
venture
leased
the
building
in
Kitchener
to
Mother’s
Pizza
Parlour
(Kitchener)
Limited
(“Kitchener”),
an
Ontario
corporation
incorporated
in
December
25,
1975.
All
of
these
buildings
were
operated
as
eating
establishments
under
the
name
“Mother’s
Pizza
Parlour
and
Spaghetti
House”
(for
simplicity
I
shall
refer
collectively
to
the
buildings
in
question
and
the
operations
therein
as
“Mother’s
Pizza
Parlours”).
In
calculating
federal
income
taxes
payable
for
1976
Mother’s
sought
to
deduct
an
amount
of
$18,181
from
the
tax
otherwise
payable
as
an
investment
tax
credit
under
subsection
127(5)
including
an
amount
of
$16,250
calculated
as
arising
from
its
interest
in
the
three
buildings.
Similarly
Mother’s
London
sought
to
deduct
the
amount
of
$2,436
including
an
amount
of
$2,110
calculated
in
respect
of
its
interest
in
the
London
building.
By
notice
of
reassessment
of
May
23,
1980,
the
Minister
of
National
Revenue
disallowed
Mother’s
claim
of
$16,250
as
an
investment
tax
credit
in
1976
arising
from
its
interest
in
the
three
buildings.
Similarly
by
notice
of
reassessment
of
June
13,
1980
Mother’s
London
attempt
to
deduct
$2,110
was
disallowed.
Both
of
these
reassessments
were
based
on
the
Minister’s
view
that
the
building
was
not
used
nor
could
reasonably
be
expected
to
be
used
by
the
lessee
in
1976
“primarily
for
the
purpose
of
manufacturing
or
processing
of
goods
for
sale”
as
required
by
subsection
127(10).
In
short
they
were
found
not
to
be
subsection
127(10)
“qualified
property”.
In
each
case
a
notice
of
objection
was
filed
by
the
plaintiff
and
in
both
cases
the
Minister
of
National
Revenue
confirmed
his
reassessment.
II—
Issues
The
defendant
disputes
the
investment
tax
credit
claimed
by
the
plaintiffs
as
“qualified
property”
under
paragraph
127(10)(c)
of
the
Act.
I
must
determine
whether
or
not
buildings
leased
in
1976
were
used
for
the
“processing
of
goods
for
sale”;
if
I
find
in
the
affirmative,
were
the
buildings
used
“primarily”
for
that
purpose.
III—
Statutory
Provisions
Reference
must
of
course
be
made
to
the
provisions
of
the
Income
Tax
Act
as
they
existed
in
the
1976
taxation
year.
Subsection
127(5)
establishes
a
deduction
from
tax
otherwise
payable
in
the
following
terms:
(5)
There
may
be
deducted
from
the
tax
otherwise
payable
by
a
taxpayer
under
this
Part
for
a
taxation
year
an
amount
not
exceeding
the
lesser
of
(a)
his
investment
tax
credit
at
the
end
of
the
year,
and
(b)
the
aggregate
of
(i)
$15,000,
and
(ii)
/z
the
amount,
if
any,
by
which
the
tax
otherwise
payable
by
him
under
this
Part
for
the
year
exceeds
$15,000.
Subsection
127(9)
elaborates
the
calculation
of
the
“investment
tax
credit”
as
being
essentially
five
per
cent
of
the
capital
cost
of
qualified
property.
Subsection
127(10)
provides
the
definition
of
“qualified
property”.
Particular
attention
should
be
paid
to
subparagraph
127(10)(c)(i).
The
entire
subsection
reads
as
follows:
(10)
For
the
purposes
of
subsection
(9),
a
“qualified
property”
of
a
taxpayer
means
(a)
a
prescribed
building
to
the
extent
that
it
is
(i)
acquired
by
the
taxpayer
after
June
23,
1975,
and
before
June
1,
1977,
or
(ii)
acquired
by
the
taxpayer
after
June
30,
1977,
if
installation
of
the
footings
or
other
base
support
for
the
building
was
commenced
by
the
taxpayer
after
June
23,
1975
and
before
July
1,
1977
and
the
building
was
completed
in
substantial
accordance
with
plans
and
specifications
agreed
to
in
writing
by
the
taxpayer
before
July
1,
1977,
or
(b)
prescribed
machinery
and
equipment
acquired
by
the
taxpayer
after
June
23,
1975
and
before
July
1,
1977
that
has
not
been
used
for
any
purpose
whatever
before
it
was
acquired
by
the
taxpayer
and
that
is,
(c)
to
be
used
by
him
in
Canada
primarily
for
the
purpose
of
(i)
manufacturing
or
processing
of
goods
for
sale
or
lease,
(ii)
operating
an
oil
or
gas
well,
(iii)
extracting
minerals
from
a
mineral
resource,
(iv)
processing,
to
the
prime
metal
stage
or
its
equivalent,
ore
from
a
mineral
resource,
(v)
exploring
or
drilling
for
petroleum
or
natural
gas,
(vi)
prospecting
or
exploring
for
or
developing
a
mineral
resource,
(vii)
logging,
(viii)
farming
or
fishing,
or
(ix)
the
storing
of
grain,
or
(d)
to
be
leased
by
the
taxpayer,
to
a
lessee
(other
than
a
person
exempt
from
tax
under
section
149)
who
can
reasonably
be
expected
to
use
the
property
in
Canada
primarily
for
any
of
the
purposes
referred
to
in
subparagraphs
(c)(i)
to
(ix),
but
this
paragraph
does
not
apply
in
respect
of
property
that
is
a
prescribed
property
for
the
purposes
of
paragraph
(b),
unless
(i)
the
property
is
leased
by
the
taxpayer
in
the
ordinary
course
of
carrying
on
a
business
in
Canada
and
the
taxpayer
is
a
corporation
whose
principal
business
is
(A)
leasing
property,
(B)
manufacturing
property
that
it
sells
or
leases,
(C)
the
lending
of
money,
or
(D)
the
purchasing
of
conditional
sales
contracts,
accounts
receivable,
bills
of
sale,
chattel
mortgages,
bills
of
exchange
or
other
obligations
representing
part
or
all
of
the
sale
price
of
merchandise
or
services,
or
(E)
selling
or
servicing
a
type
of
property
that
it
also
leases,
or
any
combination
thereof,
and
(ii)
use
of
the
property
by
the
first
lessee
commenced
after
June
23,
1975
and
before
July
1,
1977.
Subsection
127(11)
refines
the
definition
of
“qualified
property”
in
the
following
terms:
(11)
For
the
purposes
of
subsection
(10),
(a)
“manufacturing
or
processing”
does
not
include
any
of
the
activities
referred
to
in
subparagraphs
125.
l(3)(b)(i)
to
(ix),
and
(b)
for
greater
certainty,
the
purposes
referred
to
in
subparagraphs
(10)(c)(i)
to
(ix)
do
not
include
(i)
storing
(other
than
the
storing
of
grain),
shipping,
selling
and
leasing
of
finished
goods,
(ii)
purchasing
of
raw
materials,
(iii)
administration,
including
clerical
and
personnel
activities,
(iv)
purchase
and
resale
operations,
(v)
data
processing,
and
(vi)
providing
facilities
for
employees,
including
cafeterias,
clinics
and
recreational
facilities.
Subparagraphs
125.1
(3)(b)(i)
to
(ix)
referred
to
in
paragraph
127(1
l)(a)
read
as
follows:
“manufacturing
and
processing”
does
not
include
(i)
farming
or
fishing,
(ii)
logging,
(iii)
construction,
(iv)
operating
an
oil
or
gas
well,
(v)
extracting
minerals
from
a
mineral
resource,
(vi)
processing,
to
the
prime
metal
stage
or
its
equivalent,
ore
from
a
mineral
resource,
(vii)
producing
industrial
minerals,
(viii)
producing
or
processing
electrical
energy
or
steam,
for
sale,
(ix)
processing
gas,
if
such
gas
is
processed
as
part
of
the
business
of
selling
or
distributing
gas
in
the
course
of
operating
a
public
utility.
IV—Plaintiffs’
Argument
Counsel
for
the
plaintiffs
dealt
first
with
the
meaning
of
the
term
“processing
of
goods
for
sale”
and
submits,
in
his
view,
that
the
activity
carried
on
was
processing,
and
that
the
buildings
were
used
“primarily”
for
that
purpose
in
1976.
The
plaintiffs
argued
that
“processing”
is
not
a
term
of
art
and,
in
the
absence
of
clear
statutory
authority
to
the
contrary,
should
be
given
its
ordinary
dictionary
meaning
(I
shall
refer
to
the
suggested
definitions
further
on).
In
this
connection
reference
was
made
to
the
decision
in
Federal
Farms
v
MNR,
[1966]
Ex
Ct
R
410;
[1966]
CTC
62;
appeal
dismissed
without
reasons,
[1967]
SCR
vi.
The
Court
is
specifically
urged
to
avoid
relying
on
any
commercially
accepted
usage
of
the
term
and
thus
reject
the
expert
evidence
of
Mr
Kitson
(Exhibit
D-8)
appearing
on
behalf
of
the
defendants
and
who
testified
that
the
operations
conducted
by
Mother’s
Pizza
Parlours
do
not
constitute
food
processing
as
that
term
is
generally
understood
in
the
food
industry.
The
plaintiffs
criticize
Controlled
Foods
v
The
Queen,
[1981]
2
FC
238;
[1980]
CTC
491
affirming
[1979]
2
FC
825;
[1979]
CTC
270
(FCTD)
as
wrongly
accepting
such
commercial
usage
as
a
guide.
Counsel
for
the
plaintiffs
suggests
that
“processing”
is
a
much
wider
term
and
may
include
any
process
involving
the
combination
of
various
foodstuffs
into
edible
food
such
as
the
work
carried
on
at
Mother’s
Pizza
Parlours.
Relying
on
an
interpretive
argument
involving
the
reference
in
paragraph
127(1
l)(a)
to
subparagraphs
125.l(3)(b)(i)
to
(ix)
(which
I
will
discuss
further
on)
and,
inter
alia,
on
Canadian
Wirevision
v
The
Queen,
[1978]
2
FC
577
at
586;
[1978]
CTC
69
at
76
(TD)
and
Le
Soleil
Ltée
v
MNR,
[1973]
FC
97;
[1973]
CTC
91
(CA)
affirming
[1972]
FC
423;
[1972]
CTC
244
(FCTD),
the
plaintiffs
urge
this
Court
to
opt
for
a
broad
interpretation
of
the
term
“processing”.
Further,
with
respect
to
the
definition
of
processing
the
plaintiffs
cite
authority
which
permits
the
use
of
departmental
interpretation
bulletins
as
an
aid
to
interpreting
the
Income
Tax
Act
[Hare]
v
Deputy
Minister
of
Revenue
(Quebec),
[1978]
1
SCR
851
at
859;
[1977]
CTC
441
at
447;
Nowegijick
v
The
Queen,
[1983]
1
SCR
29
at
37;
[1983]
CTC
20
at
24;
and
The
Queen
v
Royal
Trust,
[1983]
CTC
159
at
165-66;
83
DTC
5172
at
5177].
They
refer
the
Court
to
paragraph
26
or
IT-331
where
the
view
is
expressed
that
“the
activities
of
preparing
meals
for
consumption
constitute
processing”.
The
plaintiffs
then
submit
that
the
buildings
were
“primarily”
used
for
processing.
On
the
basis
of
various
dictionary
definitions
they
argue
that
“primarily”
is
not
a
quantitative
notion
like
“mainly”
or
“substantially”
but
rather
means
“essentially”,
“fundamentally”,
‘‘of
first
importance”.
In
support
of
this
view
they
referred
to
several
authorities,
notably
Madat
v
Riddell
383
US
569
(1966),
Scroll
v
Commissioner
of
Internal
Revenue
447
F
2d
612
(1971)
(USCA
Fifth
Cir)
and
Canada
Trust
v
MNR,
[1979]
CTC
2199;
79
DTC
177.
Counsel
in
argument
points
to
a
number
of
facts
with
respect
to
Mother’s
Pizza
Parlours
operations
to
emphasize
that
they
are
“primarily”
engaged
in
what
is
alleged
to
be
processing,
including
the
relative
importance
of
the
kitchen,
take-out
and
delivery
aspects
of
the
operation
and
to
diminish
the
importance
of
the
dining
room
at
Mother’s
Pizza
Parlours.
V—Defendant's
Argument
According
to
counsel
for
the
defendant,
subsection
127(5)
creates
a
tax
credit
of
five
per
cent
of
the
cost
of
qualified
property;
but,
one
must
keep
in
mind
the
tax
policy
approach
taken
by
Mr
Justice
Estey
in
Stubart
Investments
v
MNR,
[1984]
CTC
294;
53
NR
241.
The
section
is
designed
to
stimulate
certain
industrial
sectors
in
Canada
by
providing
a
tax
incentive
for
investment
in
buildings
and
equipment.
It
is
the
view
of
the
defendant
that
the
words
“primarily
for
the
purpose
of
manufacturing
and
processing”
in
subsection
127(10)
are
conditioned,
inter
alia,
by
paragraph
127(1
l)(b)
so
as
to
exclude
buildings
used
for
the
selling
of
finished
goods
or
by
service
industries.
In
reviewing
these
subsections,
one
should
look
to
the
Stubart
Investments
case
which
expresses
the
view
that
the
courts
must
not
take
a
strict
view
of
the
words
of
the
taxing
statute
without
examining
the
theme,
intent
and
policy
object
of
the
enactment
in
question.
The
defendant
further
submits
that
Mother’s
Pizza
Parlours
are
not
engaged
in
manufacturing
or
processing
for
the
purposes
of
subsection
127(10),
but
rather
involved
in
the
preparation
of
food
for
immediate
consumption.
In
support
of
this
proposition
the
defendant
cites
Controlled
Foods
v
The
Queen
(supra),
and
McDonald's
v
Oklahoma
Tax
Commission
Okl,
563
P
2d
655.
In
addition
to
its
relevance
to
the
argument
that
restaurants
do
not
engage
in
processing,
the
Controlled
Foods
case
also
sustains
the
principle
that
“generally
accepted
commercial
view”
may
be
used
by
the
court
in
defining
processing.
Counsel
contends
that
Mother’s
Pizza
Parlours
prepare
food
for
immediate
consumption;
that
according
to
generally
accepted
commercial
usage,
this
does
not
constitute
food
processing.
Food
processing
involves
the
adding
of
value
to
foodstuffs
through
various
techniques
which
increases
shelf-life
and
allows
distribution
over
a
wide
area.
He
distinguishes
the
decision
in
Federal
Farms
v
MNR
(supra).
Interpretation
Bulletins
may
be
consulted
by
the
court
in
the
case
of
ambiguity,
but
the
defendant
asserts
that
they
are
guidelines
only
to
be
considered
along
with
the
rest
of
the
evidence.
Finally,
counsel
for
the
defendant
submits
that
even
if
I
should
find
Mother’s
Pizza
Parlours
buildings
are
used
for
processing
they
were
not
“primarily”
so
used;
despite
take-out
and
delivery
services,
Mother’s
Pizza
Parlour
buildings
are
basically
restaurants.
They
are
primarily
service
and
sales
locations
with
the
processing
being
of
lesser
importance.
The
largest
portion
of
Mother’s
floor
space
and
staff
are
involved
in
dining
room
service.
VI—Disposition
I
would
make
one
brief
preliminary
remark.
I
have
no
difficulty
with
the
proposition
that
income
tax
Interpretation
Bulletins
may
be
consulted
[see
Hard
v
Deputy
Minister
of
Revenue
(Quebec),
[1978]
1
SCR
851
at
859;
[1977]
CTC
441
at
447;
Nowegijick
v
The
Queen,
[1983]
1
SCR
29
at
37;
[1983]
CTC
20
at
24;
and
The
Queen
v
Royal
Trust,
[1983]
CTC
159
at
165-66;
83
DTC
5172
at
5177
(FCA)]
but
these
materials
are
not
binding
on
Her
Majesty
and
should
be
considered
only
as
persuasive
authority.
Were
Mother’s
Pizza
Parlour
buildings
used
for
“processing”
and
if
so,
were
they
“primarily”
so
used?
Subsection
127(10)
is
a
statutory
provision
whose
meaning
is
less
than
clear,
and
requires
interpretation.
There
appears
to
be
no
authority
directly
on
point.
A
careful
reading
of
the
statutory
provision
in
order
to
discover
its
meaning
in
the
total
scheme
of
the
Income
Tax
Act
is
required,
keeping
in
mind
the
economic
policy
objectives
of
Parliament
in
allowing
the
investment
tax
credit.
It
is
my
view
that
the
word
“processing”
must
not
be
given
an
all-encompassing
definition.
There
are
a
number
of
reasons
for
this
conclusion.
Even
in
the
light
of
the
Stubart
Investments
(supra),
decision,
it
is
still
permissible
to
require
that
a
taxpayer’s
circumstances
bring
him
squarely
within
the
four
corners
of
a
section,
so
long
as
the
economic
policy
objective
of
the
deduction
is
kept
in
perspective.
I
cannot
agree
to
giving
an
all-encompassing
meaning
for
“processing”
because
of
exclusions
from
127(10)(c)
found
in
127(1
l)(b).
Counsel
for
the
plaintiffs
argued
that
the
127(ll)(a)
exclusion
by
reference
to
the
exclusions
of
125.
l(3)(b)(i)
to
(ix)
from
the
definition
of
“manufacturing
or
processing”
indicates
that
those
terms
as
used
in
127(10)(c)
have
an
otherwise
broad
meaning.
However,
in
my
view,
the
exclusions
in
127(1
l)(b)
are
of
much
greater
relevance
to
the
cases
before
this
Court.
Subparagraph
127(1
l)(b)(iv)
excludes
what
I
understand
to
be
ordinary
retail
and
middle-man
operations
where
no
product
is
prepared
in
the
building
in
question
[see
the
reasons
of
my
brother
Cullen,
J
in
O’Neill
v
The
Queen,
[1984]
CTC
682;
85
DTC
5026.
In
these
circumstances
subparagraph
127(1
l)(b)(i)
must
be
given
some
meaning.
I
think
its
meaning
and
interpretation
are
obvious.
Subparagraph
127(1
l)(b)(i)
deletes
from
the
meaning
of
“manufacturing
and
processing”
any
operation
using
its
building
for
the
“selling
.
.
.
of
finished
goods”.
I
find,
as
a
matter
of
fact,
that
whatever
the
intermediate
steps
may
be,
Mother’s
Pizza
Parlours’
buildings
were
used
for
the
selling
of
finished
goods,
namely
meals,
whether
they
were
consumed
on
the
premises
or
were
picked
up
or
delivered
for
consumption
in
the
homes
of
customers.
There
is
further
reinforcement
for
my
view
as
to
the
effect
of
subparagraph
127(1
l)(b)(i).
Parliament
could
not
have
intended
such
a
broad
meaning
for
the
word
“processing”
as
the
plaintiffs
would
have
me
adopt.
Paragraph
127(10)(c),
when
read
as
a
whole,
indicates
that
the
investment
tax
credit
was
intended
to
provide
an
incentive
for
investment
in
Canada’s
traditional
primary
and
secondary
industries;
to
provide
a
reward
for
enterprises
in
those
industries
who
have
already
made
investments
in
new
buildings
or
equipment.
The
effect
intended
was
to
protect
or
create
Canadian
jobs
in
certain
sectors.
No
doubt
Mother’s
Pizza
Parlours
is
a
large-scale
operation
with
a
large
number
of
employees
and
expansive
equipment
and
buildings.
But
I
see
no
logical
distinction,
other
than
the
scale
of
the
operation,
between
Mother’s
Pizza
Parlour
amd
any
other
restaurant;
or
for
that
matter,
a
corner
pastry
shop,
a
haberdashery
which
makes
suits
to
measure
or
even
a
hot
dog
stand.
I
cannot
accept
that
Parliament
intended
to
benefit
all
such
operations
with
the
investment
tax
credit.
I
am
convinced
that
it
was
intended
to
avoid
such
an
absurd
result
that
subparagraph
127(1
l)(b)(i)
excludes
operations
using
machinery
and
buildings
to
sell
finished
goods.
Even
if
I
am
wrong
in
stating
that
the
word
“processing”
cannot,
in
this
instance,
be
given
a
wide
definition
because
of
the
overall
scheme
and
intent
of
the
investment
tax
credit,
I
do
not
think
Mother’s
Pizza
Parlours’
operations
can
be
viewed
as
processing
even
if
that
term
is
given
a
very
broad
meaning.
The
buildings
were
used
for
the
preparation
of
meals
for
immediate
consumption,
not
for
the
processing
of
food.
For
example,
pizzas
were
prepared
(or
assembled)
using
purchased
ingredients
and
the
dough
was
not
even
made
on
the
premises.
It
was
purchased
from
an
independent
supplier.
The
plaintiffs
place
great
reliance
on
what
they
consider
to
be
the
ordinary
meaning
of
processing
as
reflected
in
dictionary
definitions.
These
definitions
are
helpful,
but
they
certainly
do
not
settle
the
matter.
The
plaintiffs
submitted,
as
part
of
Exhibit
P-5,
the
definitions
of
“process”
found
in
Webster’s
Third
International
Dictionary
(1959)
and
Webster’s
Third
International
Dictionary
(1964).
They
read
respectively
as
follows:
To
subject
(especially
raw
materai)
to
a
process
of
manufacturing,
development,
preparation
for
market,
etc;
to
convert
into
marketable
form
as
live
stock
by
slaughtering,
grain
by
milling,
cotton
by
spinning,
milk
by
pasturizing,
fruits
and
vegetables
by
sorting
and
repacking.
To
subject
to
a
particular
method,
system
or
technique
of
preparation,
handling
or
other
treatment
designed
to
effect
a
particular
result:
put
through
a
special
process
as
(1)
to
prepare
for
market,
manufacture
or
other
commercial
use
by
subjecting
to
some
process
(-ing
cattle
by
slaughtering
them)
(-ed
milk
by
pasturizing
it)
(-ing
grain
by
milling)
(-ing
cotton
by
spinning).
These
definitions
seem
to
confirm
my
view
that
processing
does
not
include
the
preparation
of
meals
for
immediate
sale
as
a
finished
product
to
the
public.
These
definitions
all
suggest,
with
examples,
that
a
factory
freezing
pizzas
or
pizza
ingredients
might
be
“processing”,
but
not
a
restaurant
preparing
pizza
for
immediate
consumption.
I
found
the
expert
testimony
of
Mr
John
A
Kitson
more
helpful
that
the
dictionary
definitions.
Mr
Kitson
testified
that
Mother’s
Pizza
Parlours
are
not
food
processing
operations.
He
would
appear
to
base
his
opinion
on
two
factors.
First,
that
ordinary
commercial
usage
in
the
industry
does
not
include
the
preparation
of
food
for
immediate
consumption
in
a
restaurant
or
for
delivery
or
pick-up
in
the
notion
“food
processing”.
The
admissibility
and
probative
nature
of
such
evidence
is
confirmed
by
the
decision
of
the
Federal
Court
of
Appeal
in
Controlled
Foods
v
The
Queen
(supra).
Second,
that
food
processing
includes
some
element
of
transformation
or
preservation
to
allow
wide
distribution
at
a
later
date.
This
does
not
describe
the
operations
carried
out
at
Mother’s
Pizza
Parlours.
Preservation
is
not
a
condition
sine
qua
non
of
food
processing.
This
brings
me
to
the
case
law.
There
is
no
authority
that
has
come
to
my
attention
which
is
directly
on
point.
However,
there
are
some
decisions
which
bear
careful
scrutiny.
The
Controlled
Foods
case
(supra)
involved
the
applicability
of
the
federal
excise
tax
exemption
for
“manufacturers
or
producers”
on
machinery
purchased
for
use
in
the
“manufacture
or
production
of
goods”
and
did
not
deal
directly
with
the
meaning
of
“processing”.
However,
the
exemption
was
claimed
in
respect
of
restaurant
equipment
alleged
to
be
used
for
the
manufacture
or
produc-
tion
of
meals
and
drinks
in
a
restaurant.
The
Federal
Court
of
Appeal
did
not
interfere
with
the
refusal
of
the
Trial
Division
[1979]
2
FC
825;
[1979]
CTC
270,
to
accord
the
exemption
to
such
a
restaurant
operation.
This
case
is
instructive
and
enlightening
in
view
of
the
similarity
to
the
facts
to
the
present
cases.
In
Canadian
Wirevision
v
The
Queen
(supra),
it
was
held
that
cable
television
signals
are
not
goods
and
therefore
the
taxpayer’s
profits
did
not
qualify
as
“Canadian
manufacturing
and
processing
profits’’
under
subsection
125.1(3)
of
the
Income
Tax
Act.
It
was
also
stated
obiter
that
capture
and
delivery
of
television
signals
constituted
processing
in
the
“ordinary
reasonable
sense’’
of
that
term
(ibid
at
586).
I
do
not
regard
this
obiter
dictum
as
applicable
to
the
present
cases
because
of
its
vastly
different
facts.
Similarly,
the
decision
of
the
Federal
Court
of
Appeal
in
Le
Soleil
v
MNR
(supra),
involved
facts
very
far
removed
from
the
present
case.
That
a
newspaper
was
considered
to
be
a
“manufacturing
and
processing
corporation’’
does
not
settle
the
case
of
Mother’s
Pizza
Parlours.
It
should
also
be
noted
that
the
narrow
question
before
the
Court
in
that
case
was
not
whether
a
newspaper
is
involved
in
processing,
but
rather
whether
advertising
sales
can
be
regarded
as
manufacturing
or
processing
sales.
This
leaves
the
decision
of
Cattanach
J
in
Federal
Farms
v
MNR
(supra),
which
was
urged
upon
me
by
the
plaintiffs.
Like
the
Le
Soleil
Ltée
case,
Federal
Farms
involved
the
determination
of
whether
the
appellant
qualified
as
a
“manufacturing
and
processing
corporation’’
for
the
purposes
of
then
section
40A
of
the
Income
Tax
Act.
Federal
Farms
may
be
distinguished
from
the
present
cases
on
two
key
points.
First,
the
integrated
market
gardening
corporation
in
question
was
involved
in
both
the
primary
and
secondary
stages
of
food
production.
In
contrast,
Mother’s
Pizza
Parlours
are
retail
sales
and
service
operations
which
prepare
meals
for
immediate
sale
to
the
public
as
finished
goods.
Second,
the
operations
performed
in
Federal
Farms
included
washing
and
grading
to
facilitate
later
use,
spraying
to
retard
bacterial
growth
and
increase
shelf
life
and
packaging
for
the
wholesale
market.
It
is
primarily
the
spraying
and
packaging
for
wholesale
distribution
of
the
vegetables
which
distinguishes
Federal
Farms
operation
from
the
activities
carried
out
in
the
buildings
in
the
present
cases.
For
all
these
reasons
I
find
that
the
plaintiffs
did
not,
in
the
1976
taxation
year,
lease
the
buildings
in
question
to
lessees
who
used
them
for
the
processing
of
goods
for
sale.
In
the
circumstances
it
is
not
strictly
necessary
to
decide
whether
the
activities
that
the
plaintiffs
allege
to
be
processing,
were
the
activities
for
which
the
buildings
were
“primarily’’
used.
In
summary,
I
find
that
the
buildings
in
question
were
not
used
in
1976
for
“processing’’
as
that
term
may
be
understood
for
the
purposes
of
subsection
127(10)
of
the
Income
Tax
Act.
Thus,
the
Minister
of
National
Revenue
was
correct
in
his
notices
of
reassessment
for
the
1976
taxation
year.
Mother’s
is
not
entitled
to
the
deduction
of
$16,250
and
Mother’s
London
is
not
entitled
to
the
deduction
of
$2,110
both
claimed
under
subsection
127(5)
with
respect
to
the
three
buildings
as
they
were
not
“qualified
property’’
within
the
meaning
assigned
to
that
term
by
subsection
127(10).
Accordingly,
both
actions
are
dismissed
with
costs.
Appeals
dismissed.