Canpar Holdings Ltd. v. Saskatchewan (Minister of Energy and Mines) (1987), 60 Sask R 128 (C.A.)

Before finding that the percentages of net production profits from Canadian resource properties paid by the taxpayer to two other corporations constituted "any other payment in the nature of a royalty" for purposes of s. 8(1) of the Oil Well Income Tax Act (Saskatchewan), Sherstobitoff J.A. stated (p. 144):

"The relationship to a proprietary interest in land or in oil and gas has usually been the hallmark of a royalty."

The taxpayer, which was the co-owner along with Dome Petroleum of the operating rights to certain mineral properties, agreed to pay a percentage of the net proceeds of production from the taxpayer's working interest to Dome Petroleum in consideration for Dome Petroleum's services as operator. In addition, the taxpayer conveyed a net profits interest in Canadian resource properties to a subsidiary of Dome Petroleum in return for fixed payments.

Before going on to find that both categories of payments made by the taxpayer were deductible on other grounds, Gerwing J.A. first rejected a submission that those amounts were not "amounts received or receivable by him in the taxation year as, on account of or in lieu of payment of, or in satisfaction of, any revenue derived from the production of freehold oil from all oil wells" for purposes of s. 4 of the Oil Well Income Tax Act (Saskatchewan). She stated (p. 137):

It cannot be said in this case that the appellant never had any rights to these proceeds. It had the operating rights from which the right to funds arose, and having these rights, chose to alienate them to third parties, giving these third parties a contractual right to claim the funds from them.