Cattanach,
J:—There
are
three
appeals
by
the
plaintiff
from
notices
of
reassessment
made
by
the
Minister
of
National
Revenue
for
the
plaintiffs
1975,
1976
and
1977
taxation
years
heard
together
pursuant
to
orders
of
my
brother
Collier
dated
June
25,
1982
because
the
same
issues
arose
in
each
taxation
year
although
in
the
1975
year
the
issue
arose
as
a
consequence
of
an
incentive
grant
made
to
the
plaintiff
by
the
Minister
of
Regional
Economic
Expansion
pursuant
to
the
Department
of
Regional
Economic
Expansion
Act,
RSC
1970,
Chapt
R-4,
(popularly
known
by
the
acronym
DREE)
for
the
purpose
of
establishing
a
manufacturing
facility
in
Saskatoon,
Sask
and
continue
into
the
two
succeeding
years
whereas
like
issues
arose
as
a
consequence
of
an
incentive
grant
made
to
the
plaintiff
pursuant
to
the
Regional
Development
Incentives
Act
(popularly
known
as
RDIA)
to
establish
a
manufacturing
facility
in
Winnipeg,
Manitoba
in
the
plaintiffs
1977
taxation
year.
Prior
to
trial
counsel
for
the
parties
agreed
upon
a
statement
of
facts
and
a
statement
of
the
issue
to
be
determined
which
are
reproduced:
AGREED
STATEMENT
OF
FACTS
1.
The
Plaintiff
is
a
corporation
created
by
the
amalgamation
of
GTE
Lenkurt
Electric
(Canada)
Ltd.
(hereinafter
referred
to
as
“Lenkurt”)
and
its
former
parent
company,
AEL
Microtel
Limited
under
the
provisions
of
the
Canada
Business
Corporations
Act,
SC
1974-75,
c
33.
2.
At
all
times
material
to
this
Appeal,
Lenkurt
carried
on
business
in
various
parts
of
Canada
as
a
leading
supplier
and
manufacturer
of
telecommunications
systems
and
equipment.
3.
On
the
7th
day
of
November
1972,
Lenkurt
applied
to
the
Minister
of
Regional
Economic
Expansion
for
a
development
incentive
grant
pursuant
to
the
Department
of
Regional
Economic
Expansion
Act,
RSC
1970,
c
R-4
for
the
purpose
of
establishing
a
new
facility
for
the
manufacture
of
multiplex
products
at
Saskatoon,
Saskatchewan.
On
the
16th
day
of
April,
1973,
Lenkurt
was
notified
that
its
application
had
been
approved
and
that
the
granting
of
a
development
incentive
had
been
authorized.
4.
By
Agreement
dated
the
16th
day
of
April
1973,
(Tab
1)
between
Lenkurt
and
the
Government
of
Canada
represented
by
the
Minsiter
of
Regional
Economic
Expansion,
the
Minister
agreed
to
pay
to
Lenkurt
a
“development
incentive
.
.
.
based
on
the
approved
costs
and
the
number
of
jobs”
estimated
for
the
facility,
averaged
over
the
second
and
third
years
after
the
date
of
commercial
production
of
the
new
facility.
The
estimated
aggregate
incentive
of
$549,000
was
calculated
as
follows:
|
(1)
|
Development
incentive
based
on
approved
capital
costs:
20%
of
|
|
|
$1,020,000
|
$204,000
|
|
(2)
|
Development
incentive
based
on
eligible
jobs:
$1,500
for
230
|
|
|
jobs
|
345,000
|
|
Total
Development
Incentive
|
$549,000
|
The
incentive
grant
was
subject
to
several
terms
and
conditions
specified
by
the
Minister
in
the
said
Agreement
and
was
expressly
subject
to
all
the
provisions
of
the
Regional
Development
Incentives
Act,
RSC
1970,
c
R-3
and
the
Regional
Development
Incentives
Regulations.
5.
The
first
payment
in
respect
of
the
aforementioned
grant
was
received
by
Lenkurt
in
July,
1975
in
the
amount
of
$463,680
of
which
$276,000
was
“based
on”’
the
average
estimated
number
of
jobs
to
be
created
in
the
multiplex
manufacturing
facility
(Tab
2).
In
1978
Lenkurt
received
the
balance
of
the
grant,
the
actual
aggregate
amount
of
which
was
$466,800,
based
on
approved
capital
costs
of
$1,173,000
and
154.8
approved
new
eligible
jobs
(Tab
3).
The
final
calculation
of
the
grant
after
completion
of
the
facility
was
as
follows:
(Tab
3)
Approved
capital
cost
—
$1,173,000
X
20%
$234,600
154.8
new
jobs
at
$1,500
per
job
232,200
$466,800
Received
July,
1975
$463,680
Received
July,
1978
3,120
$466,800
The
amount
of
$43,800
(being
the
difference
between
the
amount
received
in
July,
1975
for
the
estimated
number
of
jobs
($276,000)
and
the
lesser
amount
finally
approved
for
the
number
of
jobs
actually
created
($232,200))
was
reimbursed
by
Lenkurt
to
the
government.
6.
All
funds
received
by
Lenkurt
under
the
Department
of
Regional
Expansion
Act
were
expended
and
the
said
facility
is
now
fully
operative
and
employs
165
persons
on
a
full
time
basis.
7.
By
Notice
of
Reassessment
(No.
254195)
dated
the
28th
day
of
May
1979,
in
respect
of
Lenkurt’s
1975
taxation
year,
the
Minister
of
National
Revenue
(hereinafter
referred
to
as
the
“Minister”)
adjusted
Lenkurt’s
calculation
of
capital
cost
allowance
by
deducting
from
its
total
undepreciated
capital
costs
that
part
of
the
incentive
grant
received
in
1975,
being
$463,680.
The
result
of
the
adjustment
was
to
decrease
the
capital
cost
allowance
claimed
by
Lenkurt
in
1975,
thereby
increasing
Lenkurt’s
income
and
tax
payable
for
its
1975
taxation
year.
8.
At
the
close
of
its
1975
taxation
year,
Lenkurt
became
entitled
to
an
investment
tax
credit
related
to
capital
goods,
pursuant
to
subsection
127(5)
of
the
Income
Tax
Act
in
the
amount
of
$22,166.
Lenkurt
claimed
this
amount
as
an
investment
tax
credit
in
its
1975
taxation
year
and
deducted
an
equivalent
amount
against
certain
prescribed
classes
of
depreciable
property
in
its
1976
income
tax
return
pursuant
to
subsection
13(7.1)
of
the
Income
Tax
Act.
By
the
1975
Notice
of
Reassessment,
the
Minister
deducted
from
certain
prescribed
classes
of
depreciable
property
the
amount
of
$22,166
in
Lenkurt’s
1975
taxation
year.
9.
By
Notice
of
Reassessment
(No
254246)
dated
the
28th
day
of
May,
1979
in
respect
of
Lenkurt’s
1976
taxation
year,
the
Minister
disallowed
the
capital
cost
allowance
claimed
by
Lenkurt
in
respect
of
certain
Class
3
and
Class
29
assets
on
the
basis
of
the
aforementioned
grant
received
by
Lenkurt
in
1975,
thereby
increasing
Lenkurt’s
income
and
tax
payable
for
its
1976
taxation
year.
10.
At
the
close
of
it
1976
taxation
year,
Lenkurt
became
entitled
to
an
investment
tax
credit
related
to
capital
goods,
pursuant
to
section
127(5)
of
the
Income
Tax
Act
in
the
amount
of
$60,137.
Lenkurt
claimed
this
amount
as
an
investment
tax
credit
in
its
1976
taxation
year
and
deducted
an
equivalent
amount
against
certain
prescribed
classes
of
depreciable
property
in
its
1977
tax
return,
pursuant
to
subsection
13(7.1)
of
the
Income
Tax
Act,
whereas
by
the
1976
reassessment,
the
Minister
deducted
the
amount
of
$60,137
from
certain
prescribed
classes
of
depreciable
property
in
Lenkurt’s
1976
taxation
year.
11.
Lenkurt
duly
filed
Notices
of
Objection
against
the
1975
and
1976
Reassessments.
12.
By
Notification
dated
the
4th
day
of
March
1980,
the
Minister
confirmed
the
1975
and
1976
Reassessments
on
the
ground
that
for
the
purposes
of
the
Income
Tax
Act
where
a
taxpayer
has
deducted
an
amount
under
subsection
127(5)
or
(6)
in
respect
of
a
depreciable
property
or
has
received
or
is
entitled
to
receive
assistance
from
a
government,
in
respect
of,
or
for
the
acquisition
of,
depreciable
property,
whether
as
a
grant,
subsidy,
forgiveable
loan,
deduction
from
tax,
investment
allowance
or
as
any
other
form
of
assistance,
the
capital
cost
of
the
property
to
the
taxpayer
shall
be
deemed
to
be
the
amount
by
which
the
capital
cost
thereof
to
the
taxpayer,
otherwise
determined,
exceeds
the
aggregate
of
the
amount
deducted
under
subsection
127(5)
or
(6)
in
respect
of
that
property,
and
the
amount
of
the
assistance,
in
accordance
with
the
provisions
of
subsection
13(7.1)
of
the
Income
Tax
Act.
13.
On
the
13th
day
of
June
1975,
Lenkurt
applied
to
the
Minister
of
Regional
Economic
Expansion
for
a
development
incentive
grant
pursuant
to
the
Regional
Development
Incentives
Act,
RSC
1970,
c
R-3,
for
the
purpose
of
establishing
a
new
facility
for
the
manufacturing
of
microwave
radio
systems
at
Winnipeg,
Manitoba.
On
the
5th
day
of
November,
1975
(Tab
4),
Lenkurt
was
notified
that
its
application
had
been
approved
and
that
the
granting
of
a
development
incentive
had
been
authorized
under
the
said
Act
and
was
expressly
subject
to
the
said
Act
and
the
Regional
Development
Incentives
Regulations
1974.
14.
By
agreement
dated
the
5th
day
of
November,
1975
(Tab
4),
between
Lenkurt
and
the
Government
of
Canada,
represented
by
the
Minister
of
Regional
Economic
Expansion,
the
Minister
agreed
to
pay
to
Lenkurt
a
development
incentive
“based
on
the
approved
capital
costs
(ACC),
and
the
approved
wages
and
salaries
(AWS)
averaged
over
the
second
and
third
years
after
the
date
the
facility
is
brought
into
commercial
production
where
the
wages
and
salaries
relate
to
the
incremental
eligible
jobs,
averaged
over
those
years
.
.
The
estimated
aggregate
incentive
of
$530,425
was
calculated
as
follows:
|
(1)
|
Development
incentive
based
on
approved
capital
costs:
25%
of
|
|
|
$1,303,000
|
$325,750
|
|
(2)
|
Development
incentive
based
on
eligible
jobs:
15%
of
$1,364,500
|
|
|
approved
wages
and
salaries
for
81
jobs
|
204,675
|
|
Total
Development
Incentive
|
$530,425
|
The
incentive
grant
was
subject
to
several
terms
and
conditions
specified
by
the
Minister
in
the
said
agreement.
15.
The
first
payment
in
respect
of
the
aforementioned
grant
was
received
by
Lenkurt
in
September,
1977
(Tab
5)
in
the
amount
of
$275,868
of
which
$108,000
was
“based
on’’
the
estimated
number
of
jobs
created
in
the
microwave
manufacturing
facility.
A
second
payment
was
received
by
Lenkurt
in
July,
1978
(Tab
6)
in
the
amount
of
$75,872
of
which
$12,000
was
“based
on’’
the
estimated
number
of
jobs
so
created.
The
balance
was
received
in
1980.
The
final
calculation
of
the
grant
after
completion
of
the
facility
was
as
follows:
|
Approved
capital
cost
—
25%
of
$1,628,752
|
$407,188
|
|
Approved
wages
and
salaries
—
15%
of
$1,253,527
|
188,029
|
|
$595,217
|
|
Received
September,
1977
|
$275,868
|
|
Received
July,
1978
|
75,872
|
|
Received
July,
1980
|
243,477
|
|
$595,217
|
16.
All
funds
received
by
Lenkurt
under
the
Regional
Development
Incentives
Act
were
expended
and
the
said
facility
is
now
fully
operative
and
employs
114
persons
on
a
full-time
basis.
17.
By
Notice
of
Reassessment
(No
355601)
dated
the
3rd
day
of
December,
1979,
in
respect
of
Lenkurt’s
1977
taxation
year,
the
Minister
adjusted
Lenkurt’s
calculation
of
capital
cost
allowance
by
deducting
from
its
total
undepreciated
capital
costs
that
part
of
the
incentive
grant
received
in
1977,
being
$275,868.
The
result
of
this
adjustment
was
to
decrease
the
capital
cost
allowance
claimed
by
Lenkurt
in
1977,
thereby
increasing
Lenkurt’s
income
and
tax
payable
for
its
1977
taxation
year.
In
reassessing
in
respect
of
Lenkurt’s
1977
taxation
year,
the
Minister
also
disallowed
the
capital
cost
allowance
claimed
by
Lenkurt
in
respect
of
certain
assets
on
the
basis
of
the
grant
received
by
Lenkurt
in
1975
thereby
further
increasing
Lenkurt’s
income
and
tax
payable
for
its
1977
taxation
year.
18.
By
the
1977
Reassessment,
the
Minister
reduced
the
undepreciated
capital
cost
of
certain
of
Lenkurt’s
depreciable
capital
property
pursuant
to
subsection
13(7.1)
of
the
Income
Tax
Act
by
an
amount
of
$58,838
which
had
been
claimed
by
Lenkurt
in
its
1977
taxation
year
as
an
investment
tax
credit
related
to
capital
goods
pursuant
to
subsection
127(5)
of
the
Income
Tax
Act.
Lenkurt
had
provided
for
this
reduction
to
the
undepreciated
capital
cost
of
certain
prescribed
classes
of
its
depreciable
property
in
its
1978
taxation
year.
19.
Lenkurt
duly
filed
a
Notice
of
Objection
against
the
1977
Reassessment.
There
are
six
appendices
to
the
statement
of
facts.
1.
An
agreement
dated
April
16,
1973
between
Lenkurt
and
the
Government
of
Canada
respecting
the
Saskatchewan
grant.
Referred
to
in
paragraph
4
of
the
agreed
statement
of
facts.
2.
Letter
dated
July
15,
1975
from
the
Department
of
Regional
Expansion
to
Lenkurt
enclosing
first
payment
in
respect
of
the
grant
for
Saskatchewan.
Referred
to
in
paragraph
5
of
the
agreed
statement
of
facts.
3.
Letter
dated
July
4,
1978
from
the
Department
of
Regional
Economic
Expansion
to
Lenkurt
enclosing
balance
of
grant
and
calculation.
Also
referred
to
in
paragraph
5
of
the
agreed
statement
of
facts.
Appendices
1
to
3
relate
to
the
Saskachewan
grant
made
pursuant
to
the
Department
of
Regional
Economic
Expansion
Act
(DREE).
4.
Letter
dated
November
5,
1978
from
Department
of
Regional
Economic
Expansion
to
Lenkurt
notifying
that
its
application
for
a
development
incentive
grant
in
respect
of
a
Manitoba
facility
had
been
approved.
Referred
to
in
paragraph
13
of
the
agreed
statement
of
facts.
5.
Letter
dated
September
12,
1977
from
Department
of
Regional
Economic
Expansion
to
Lenkurt
enclosing
first
payment
in
respect
of
Manitoba
grant.
Referred
to
in
paragraph
15
of
the
agreed
statement
of
facts.
6.
Letter
dated
July
19,
1978
from
Department
of
Regional
Economic
Expansion
to
Lenkurt
enclosing
the
second
payment
in
respect
of
the
Manitoba
grant.
Appendices
4
to
6
relate
to
the
Manitoba
grant
made
pursuant
to
the
Regional
Development
Incentive
Act
(RDIA).
The
Issues
The
questions
to
be
decided
are:
(1)
Having
regard
to
the
provisions
of
the
Regional
Development
Incentives
Act
and
Regulations
and
subsection
13(7.1)
of
the
Income
Tax
Act
what
amount,
if
any,
of
the
grants
received
in
1975,
1976
and
1977
should
be
deducted
in
calculating
capital
cost
and
therefore
capital
cost
allowance
for
the
purposes
of
the
Income
Tax
Act.
(2)
Whether
subsection
13(7.1)
of
the
Income
Tax
Act
requires
investment
tax
credits
related
to
capital
goods
to
be
deducted
in
calculating
the
capital
cost
of
assets
acquired
in
each
of
the
years
1975,
1976
and
1977
and,
if
so:
(i)
whether
the
amount
of
such
deduction
is
the
amount
of
the
investment
tax
credit
claimed
or
such
amount
less
the
increase
in
taxes
payable
resulting
from
the
reduction
of
the
capital
cost
of
the
relevant
property
and
(ii)
whether
the
amount
to
be
deducted
is
deductible
in
calculating
the
capital
cost
of
assets
in
the
year
the
investment
tax
credit
is
claimed
or
in
the
following
year.
With
respect
to
the
first
question
so
posed
the
contention
on
behalf
of
the
plaintiff
is
that
the
incentive
grants
received
should
not
be
deducted
in
any
of
the
plaintiffs
taxation
years
in
calculating
the
capital
cost
to
the
plaintiff.
That
contention
is
based
upon
paragraph
81(l)(a)
of
the
Income
Tax
Act
which
reads:
81.(1)
There
shall
not
be
included
in
computing
the
income
of
a
taxpayer
for
a
taxation
year
(a)
an
amount
that
is
declared
to
be
exempt
from
income
tax
by
any
other
enactment
of
the
Parliament
of
Canada
Section
12
of
the
Regional
Development
Incentives
Act,
SC
1968-69,
Chapter
56
reads:
12.
An
amount
payable
to
an
applicant
on
account
of
a
development
incentive
under
this
Act
is
exempt
from
income
tax.
In
an
antecedent
statute,
the
Area
Development
Incentives
Act,
SC
1965,
Chapter
12
(which
came
into
force
on
July
1,
1965)
section
7
thereof
provided:
7.(1)
An
amount
payable
to
an
applicant
on
account
of
a
development
grant
under
this
Act
is
exempt
from
income
tax.
(2)
Paragraph
(h)
of
subsection
6
of
section
20
of
the
Income
Tax
Act
does
not
apply
in
respect
of
a
development
grant
authorized
to
be
paid
under
this
Act.
Paragraph
20(6)(h)
of
the
Income
Tax
Act
then
in
force
to
which
reference
is
made
in
subsection
7(2)
corresponded
to
former
paragraph
13(7)(e)
of
the
Income
Tax
Act
now
subsection
13(7.1).
The
categorical
purpose
and
effect
of
subsection
7(2)
of
the
1965
Area
Development
Incentives
Act
was
that
any
development
grant
made
under
that
statute
was
that
such
grant
was
not
excluded
from
capital
cost
for
tax
purposes.
In
Part
IV
of
the
Government
Organization
Act,
(17-18
Elizabeth
II,
Chapter
28)
the
Department
of
Economic
Expansion
was
constituted
to
achieve
“economic
expansion
and
social
adjustment
in
areas
requiring
special
measures
to
improve
opportunities
for
productive
employment
and
access
to
those
opportunities”.
Provision
was
made
in
paragraph
28(1
)(b)
of
that
statute
for
a
“grant
or
loan
in
respect
of
a
part
of
the
capital
costs
of
establishing,
expanding
or
modernizing”
a
commercial
establishment
but
no
provision
was
included
therein
that
such
a
grant
would
be
exempt
from
income
tax
or
that
the
grant
may
be
included
in
the
capital
cost
for.
tax
purposes
as
was
the
case
in
section
7
of
the
Area
Development
Incentives
Act
of
1965
mentioned
immediately
above.
However
as
was
also
mentioned
immediately
above
section
12
of
the
Regional
Development
Incentives
Act
provided
that
a
development
incentive
grant
thereunder
was
exempt
from
income
tax
but
no
mention
was
made
therein
to
the
effect
such
a
grant
was
not
excluded
from
capital
cost
for
tax
purposes
as
was
the
case
in
section
7
of
the
Area
Development
Incentives
Act.
The
Minister,
in
assessing
the
appellant
as
he
did
for
its
1975,
1976
and
1977
taxation
years,
did
not
include
the
incentive
grants
as
income
for
taxation
purposes.
Therefore
that
is
not
an
issue.
But
the
Minister
did
decrease
the
amount
of
the
capital
cost
by
the
entire
amount
of
the
incentive
grants
received
by
the
plaintiff
as
had
been
included
and
claimed
by
the
appellant
in
its
capital
cost.
The
propriety
of
the
Minister
deducting
the
entire
amount
of
the
incentive
grants
from
the
capital
cost
in
respect
of
the
plaintiffs
depreciable
property
is
the
first
issue
between
the
parties.
The
plaintiffs
position
is
that
the
entire
amount
of
an
incentive
grant
received
is
properly
included
in
the
capital
cost,
that
is
to
say
it
should
not
be
excluded.
In
the
light
of
section
12
of
the
Regional
Development
Incentives
Act
which
provides
that
a
development
incentive
grant
under
that
Act
is
exempt
from
income
tax
and
paragraph
81(l)(a)
of
the
Income
Tax
Act,
that
an
amount
declared
by
any
other
enactment
of
the
Parliament
of
Canada
to
be
exempt
from
income
tax
“shall
not
be
included
in
computing
the
income
of
a
taxpayer”,
it
is
clear
that
such
an
amount
is
exempt
from
tax
and
shall
not
be
included
in
computing
the
income
of
the
taxpayer.
However
subsection
13(7.1)
of
the
Income
Tax
Act
being
the
provision
in
force
during
the
appellant’s
taxation
years
under
review
reads:
13.(7.1)
For
the
purposes
of
this
Act,
where
a
taxpayer
has
received
or
is
entitled
to
receive
assistance
from
a
government,
municipality
or
other
public
authority
in
respect
of.
or
for
the
acquisition
of,
depreciable
property,
whether
as
a
grant,
subsidy,
forgive-
able
loan,
deduction
from
tax,
investment
allowance
or
as
any
other
form
of
assistance
other
than
(a)
an
amount
authorized
to
be
paid
under
an
Appropriation
Act
and
on
terms
and
conditions
approved
by
the
Treasury
Board
in
respect
of
scientific
research
expenditures
incurred
for
the
purpose
of
advancing
or
sustaining
the
technological
capability
of
Canadian
manufacturing
or
other
industry,
or
(b)
an
amount
deducted
as
an
allowance
under
section
65,
the
capital
cost
of
the
property
to
the
taxpayer
shall
be
deemed
to
be
the
amount
by
which
the
aggregate
of
(c)
the
capital
cost
thereof
to
the
taxpayer,
otherwise
determined,
and
(d)
such
part,
if
any,
of
the
assistance
as
has
been
repaid
by
the
taxpayer
pursuant
to
an
obligation
to
repay
all
or
any
part
of
that
assistance,
exceeds
(e)
the
amount
of
the
assistance.
The
marginal
note
reads,
“Deemed
capital
cost
of
certain
property”
which
is
gleaned
from
the
language
of
the
subsection
reading
“the
capital
cost
of
the
property
to
the
taxpayer
shall
be
deemed
the
amount”
which
is
reached
by
the
formula
for
calculation
which
follows.
When
a
statute
enacts
that
something
shall
be
deemed
to
be
something
else
it
sometimes
obligates
a
Court
to
put
an
interpretation
on
language
that
it
would
not
otherwise
bear.
The
clear
purpose
of
subsection
13(7.1)
is
that
any
form
of
financial
assistance
received
from
a
federal,
provincial
or
municipal
government
or
other
public
authority
whether
in
the
form
of
a
direct
grant,
tax
relief
or
like
assistance
in
respect
of
or
for
the
acquisition
of
depreceiable
property
by
the
taxpayer
shall
be
deducted
in
computing
the
capital
cost
of
the
relevant
property.
Thus
on
the
one
hand
there
is
incentive
legislation
by
means
of
relief
by
a
grant
or
concession
not
being
included
in
the
computation
of
the
income
of
the
taxpayer
and
countervailing
legislation
on
the
other
hand
as
expressed
in
subsection
13(7.1)
of
the
Income
Tax
Act
whereby
the
capital
cost
to
the
taxpayer
of
depreciable
property
acquired
shall
be
the
cost
to
the
taxpayer
minus
the
amount
of
the
assistance
which
results
in
a
lesser
capital
cost
allowance
with
an
accordingly
increased
income
tax
being
payable.
That
is
the
basis
of
the
contention
on
behalf
of
the
plaintiff
that
the
incentive
grant
should
not
be
excluded
from
the
capital
cost
to
it
of
the
depreciable
property
because
to
do
so
is
tantamount
to
taxing
the
plaintiff
thereon
which
is
contrary
to
paragraph
81(l)(a)
of
the
Income
Tax
Act
and
section
12
of
the
Regional
Development
Incentives
Act.
There
has
been
no
disposition
of
the
depreciable
property
acquired
by
the
plaintiff
and
accordingly
there
would
be
no
requirement
that
the
excess
over
the
undepreciated
cost
shall
be
included
in
the
plaintiffs
income.
Until
and
unless
that
happens
it
is
difficult
to
follow
how
it
can
be
said
that
subsection
13(7.1)
imposes
a
tax
on
the
incentive
grant
as
income.
What
it
does
do
is
to
decrease
the
capital
cost
to
the
plaintiff
by
the
amount
of
the
grant
and
accordingly
the
capital
cost
allowance
thereon.
The
plaintiff
is
not
taxed
on
the
incentive
grant
received
by
it
as
income.
That
does
deference
both
to
section
12
of
the
Regional
Development
Incentives
Act
and
to
paragraph
8
l(l)(a)
of
the
Income
Tax
Act.
The
grant
is
not
included
in
the
income
of
the
plaintiff
and
is
not
taxed
as
such.
Subsection
13(7.1)
is
designed
by
the
legislature
to
prevent
the
incentive
grant
received
by
the
plaintiff,
which
has
not
been
taxed
as
income,
from
being
included
in
the
plaintiffs
capital
cost
of
the
depreciable
property
acquired
by
use
of
such
grant
for
capital
cost
allowances
thereby
duplicating
the
tax
exemption,
albeit
at
different
rates,
already
granted
to
the
plaintiff.
On
behalf
of
the
plaintiff
it
was
contended
that
the
expression,
“capital
cost
of
the
property
to
the
taxpayer”
has
been
construed
to
mean
the
gross
costs
paid
or
incurred
by
the
taxpayer
for
the
acquisition
of
property
and
that
where
the
taxpayer
has
been
reimbursed
for
part
of
the
cost
by
a
third
party
there
does
not
result
a
reduction
of
the
capital
cost
to
the
taxpayer.
The
capital
cost
is
the
gross
cost
to
the
taxpayer
not
the
net
cost.
This
contention
is
based
upon
the
decision
of
the
House
of
Lords
in
Corporation
of
Birmingham
v
Barnes
([1935]
AC
292).
The
Corporation
had
entered
into
an
agreement
with
a
company
to
lay
a
tramway
track
and
establish
a
tramway
service
to
the
company’s
works.
By
virtue
of
the
work
being
done
by
a
certain
date,
and
in
accordance
with
an
agreement
with
the
company
the
Corporation
received
from
the
company
a
specified
sum.
The
Corporation
also
expended
considerable
sums
on
track
renewal
for
which
the
Corporation
received
grants
from
the
Unemployed
Grants
Committee.
These
grants
were
made
to
local
authorities
to
assist
in
carrying
out
approved
schemes
of
work
of
public
utility
on
which
a
substantial
number
of
unemployed
persons
would
be
engaged.
It
was
held
that
the
payment
by
the
company
and
the
grants
from
the
Unemployed
Grants
Committee
should
not
be
taken
into
account
in
ascertaining,
under
Rule
6(6)
of
Cases
I
and
II
of
Schedule
D
to
the
Income
Tax
Act,
the
“actual
cost”
to
the
Corporation
for
the
purpose
of
computing
depreciation.
The
Inspector
of
Taxes
had
claimed
that,
“the
actual
cost
to
the
Corporation”
must
be
measured
by
deducting
from
the
total
expended
the
amount
paid
to
it
by
the
company
and
the
amount
paid
to
it
by
the
Unemployment
Grants
Committee.
Lord
Atkin
had
this
to
say
at
296:
The
question
now
is
whether
this
meaning
of
“actual
cost
to
the
person”
is
correct.
My
Lords,
in
my
opinion
the
words
“the
actual
cost
to
the
person
by
whom
the
trade
is
carried
on”
used
in
this
context
have
no
relation
to
the
source
from
which
that
person
has
received
the
money
which
he
has
expended
on
the
plant.
He
continued
to
say
at
297:
The
word
“actual”
itself
gives
me
no
assistance.
It
seems,
as
Mr
Latter
(for
the
Corporation)
suggested,
to
give
emphasis
to
the
word
following
(ie
“cost”).
It
is
to
be
the
cost,
the
whole
cost
and
nothing
but
the
cost.
.
.
.
The
word
“actual”
is
used
in
the
same
emphatic
sense
in
Rules
2
and
3
of
the
Rules
applicable
to
Cases
I
and
II
of
Schedule
D
in
respect
of
actual
wages,
actual
expenditure
and
and
actual
loss.
I
do
not
read
“actual
cost”
to
mean
anything
more
than
cost
accurately
ascertained.
[Parentheses
added]
The
House
of
Lords
also
rejected
the
contention
that
“cost
to
the
person”
meant
only
the
actual
burden
borne
by
him.
Lord
Atkin
continued
at
216
and
217:
But
it
is
said
that
the
words
“to
that
person”
in
the
phrase
“actual
cost
to
that
person”
plainly
indicate
that
the
Section
is
intending
to
confine
the
relief
to
an
aggregate
equal
to
the
sum
of
money
which
the
person
has
defrayed
out
of
his
own
re-
sources,
the
cost
of
the
burden
which
has
ultimately
fallen
upon
him.
My
Lords,
I
confess
I
do
not
think
that
this
is
the
natural
meaning
of
the
words.
What
a
man
pays
for
construction
or
for
the
purchase
of
a
work
seems
to
me
to
be
the
cost
to
him;
and
that
whether
someone
has
given
him
the
money
to
construct
or
purchase
for
himself,
or
before
the
event
has
promised
to
give
him
the
money
after
he
has
paid
for
the
work,
or
after
the
event
has
promised
or
given
the
money
which
recoups
him
what
he
has
spent.
The
same
issue
was
considered
by
the
Appeal
Division
in
The
Queen
v
Canadian
Pacific
Limited,
([1977]
CTC
606;
77
DTC
5383).
The
taxpayer
railway
company
incurred
capital
expenditures
at
the
request
of
a
customer
and
subsequently
received
sums
from
the
customer
not
exceeding
the
amount
of
the
expenditure.
It
was
contended
by
the
appellant
that
the
“capital
cost
to
the
taxpayer
of
the
depreciable
property”
within
the
meaning
of
paragraph
20(5)(e)
of
the
Income
Tax
Act
is
the
net
cost
to
the
taxpayer.
The
trial
judge
rejected
that
contention
as
inconsistent
with
the
decision
in
Birmingham
Corp
v
Barnes.
Pratt,
J
speaking
for
the
Court
of
Appeal
agreed.
Counsel
for
the
appellant
sought
to
distinguish
the
Birmingham
case
on
the
grounds:
(1)
that
the
capital
expenditure,
in
that
case,
had
not
been
incurred
at
the
request
of
the
third
party,
and
(2)
that
in
that
case
the
amount
contributed
by
the
third
party
was
not
earmarked
for
any
special
purpose.
As
to
the
first
proposed
distinction,
Pratte,
J
said
that
it
appeared
to
him
to
be
entirely
irrelevant.
As
to
the
second
distinction,
Pratte,
J
said
at
612
[5386]:
.
.
.
The
Respondent
entered
into
contracts
with
thirds
(sic)
parties
under
which
the
Respondent
agreed
to
make
certain
capital
expenditures
and
the
third
parties
agreed,
in
return,
to
pay
the
Respondent
sums
not
exceeding
the
amount
of
the
expenditures
made
or
to
be
made
by
it.
I
do
not
understand
how
it
can
be
said
that,
in
those
circumstances,
the
sums
paid
by
the
third
parties
were
“earmarked”
and
were
not
at
the
Respondent’s
free
disposal.
Thus
the
principle
of
general
application
as
set
out
in
the
Birmingham
case
is
applicable
in
Canada
tax
law.
The
capital
cost
is
the
gross
amount
put
out
for
that
property,
whether
or
not
reimbursement
is
subsequently
received,
provided
that
the
amount
of
reimbursement
is
not
earmarked
for
that
specific
purpose.
But
in
the
light
of
the
express
provisions
of
subsection
13(7.1)
of
the
Income
Tax
Act
as
in
force
at
the
time
of
and
applicable
to
the
circumstances
of
the
transactions
which
form
the
basis
of
the
present
appeal
that
general
principle
cannot
be
applicable.
Those
transactions
fall
within
the
four
corners
of
the
subsection.
An
incentive
development
grant
was
made
to
the
plaintiff
in
each
of
the
taxation
years.
The
subsection
provides
that
the
capital
cost
of
the
property
to
the
taxpayer
is
the
amount
by
which
the
amount
expended
to
purchase
the
property
or
expended
upon
the
property
if
not
purchased
to
make
it
suitable
for
the
plaintiffs
needs
exceeds
the
amount
of
the
grant.
That
effectively
excludes
the
grant
from
the
computation
of
the
capital
cost.
For
the
foregoing
reasons
the
provision
in
section
12
of
the
Regional
Development
Incentives
Act
cannot
be
interpreted
so
as
to
prohibit
the
exclusion
of
the
development
incentives
grant
from
the
computation
of
the
capital
cost
to
the
plaintiff
with
consequent
reduction
in
the
capital
cost
allowance.
That
conclusion
gives
rise
to
the
second
part
of
the
first
issue
between
the
parties,
that
is
what
amount
of
the
grants
received
by
the
plaintiff
in
the
three
taxation
years
should
be
deducted
in
calculating
the
capital
cost
to
the
plaintiff.
The
contention
on
behalf
of
the
plaintiff
with
respect
of
this
second
phase
of
the
first
issue
is
predicated
upon
the
computation
of
the
amounts
of
the
incentive
grants
made
to
the
plaintiff
pursuant
to
the
Department
of
Regional
Economic
Expansion
Act,
the
purpose
of
the
establishment
of
a
manufacturing
facility
in
Saskatoon,
Saskatchewan
in
the
plaintiffs
1975
taxation
year
and
continued
into
its
1976
and
1977
taxation
years
and
an
incentive
grant
made
to
the
plaintiff
for
the
establishment
of
a
like
facility
in
Winnipeg,
Manitoba
in
the
plaintiffs
1977
taxation
year.
The
“development
incentive
.
.
.
based
on
the
approved
work
and
the
number
of
jobs’’
estimated
for
the
facility
averaged
over
the
second
and
third
years
of
commercial
production
were
estimated
to
be
$549,000
computed
as
set
forth
in
paragraph
4
of
the
agreed
statement
of
facts
divided
into
$204,000
based
on
approved
capital
costs
and
$345,000
based
on
230
jobs
at
$1,500
each.
The
final
calculation
is
as
set
forth
in
paragraph
5
of
the
agreed
statement
of
facts
being
for:
|
Approved
capital
cost
|
|
|
20%
of
$1,173,000
and
|
$234,600.00
|
|
154.8
new
jobs
@
$1,500
each
|
$232,200.00
|
|
Total
Development
Incentive
|
$466,800.00
|
of
which
$463,680
was
received
in
July
1975
and
$3,120
was
received
in
July
1978.
With
respect
to
the
project
in
Winnipeg,
Manitoba
the
aggregate
incentive
was
estimated,
as
set
out
in
paragraph
14
of
the
agreed
statement
of
facts,
to
be
$530,425
(1)
Development
incentive
based
on
approved
capital
costs:
|
25%
of
$1,303,000
|
325,750.00
|
|
(2)
Development
incentive
based
on
|
|
|
eligible
jobs:
|
|
|
15%
of
$1,364,500
approved
wages
|
|
|
and
salaries
for
81
jobs
|
204,675.00
|
In
September
1977
the
first
payment
in
respect
of
the
grant
was
in
the
amount
of
$275,868
of
which
$108,000
was
based
on
the
estimated
number
of
jobs
to
be
created
(ie,
15
per
cent
of
wages
and
salaries).
The
balance
of
$167,868
would
be
the
incentive
based
on
approved
capital
costs.
The
difference
between
the
Saskatoon
proposal
and
the
Winnipeg
proposal
was
that
in
the
former
it
was
$1,500
for
each
job
created
whereas
in
the
latter
it
was
15
per
cent
of
the
wages
and
salaries
paid
rather
than
on
jobs
created.
I
make
no
mention
of
payments
in
the
two
successive
taxation
years
of
1978
and
1980
because
only
the
1977
taxation
year
is
under
review
and
the
appeal
involves
the
deduction
of
the
incentive
grant
in
the
amount
of
$275,868
in
its
entirety
from
the
capital
cost
allowance.
In
arithmetical
figures
the
contention
by
the
plaintiff
is
that
with
respect
to
the
Saskatchewan
project
the
total
development
incentive
grant
received
in
July
1975
in
the
total
amount
of
$463,680
of
which
$276,000
was
based
on
the
jobs
to
be
created
only
the
difference
of
$187,680
which
would
be
attributable
to
“ap
proved
capital
costs”
should
have
been
deducted
in
arriving
at
the
base
of
the
capital
cost
allowance
and
the
$276,000
attributable
to
jobs
created
should
not.
Likewise
in
the
Winnipeg
payment
for
the
1977
taxation
year
the
contention
is
whether
the
total
amount
of
the
incentive
grant
received
by
the
plaintiff
in
that
year
being
$275,868
was
properly
deducted
in
its
entirety
by
the
Minister
in
calculating
the
plaintiffs
undepreciated
capital
costs,
as
he
did,
rather
than
$167,868
which
would
exclude
the
amount
of
$108,000
based
on
the
wages
and
salaries
for
the
estimated
number
of
jobs
created.
The
computations
indicate
that
of
the
total
amount
of
the
development
incentive
grants
a
sum
is
specified
as
being
for
(1)
approved
capital
costs,
and
(2)
for
new
jobs.
The
approved
capital
costs
are
those
for
the
construction
of
a
facility
or
remodelling
an
existing
structure
to
serve
the
manufacturer
and
the
new
jobs
were
based
first
on
a
specified
sum
per
job
and
latterly
on
salaries
and
wages.
Consequent
upon
that
distinction
the
contention
on
behalf
of
the
plaintiff
is
that
the
capital
cost
allowance
shall
be
calculated
by
including
that
portion
of
the
grants
“in
respect
of
or
for
the
acquisition
of
depreciable
property”
(the
quoted
words
being
those
used
in
subsection
13(7.1)
of
the
Income
Tax
Act)
only
and
that
would
not
include
the
amount
of
the
grant
attributable
to
job
creation.
The
amount
of
the
grants
relating
to
job
creation
should
not
be
allowed
to
decrease
the
capital
cost
allowance.
The
contention
contrary
to
that
on
behalf
of
the
plaintiff,
advanced
by
counsel
for
Her
Majesty
is
that
the
entire
amount
of
the
incentive
grant
is
in
respect
of
depreciable
property
—
the
capital
cost
of
the
undertaking
—
which
was
a
condition
precedent
to
the
grant
without
which
the
Department
was
devoid
of
authority
to
make
the
grant
—
without
the
facility
there
could
be
no
jobs
created
and
that
any
reference
to
the
number
of
jobs
is
merely
a
tool
for
the
calculation
of
the
amount
of
the
grant
for
the
facility.
It
has
been
well
put
by
Baron
Pollock
when
he
said
some
ninety-seven
years
ago
that
in
order
to
arrive
at
the
real
meaning
of
a
statute
it
is
always
necessary
to
get
an
exact
conception
of
the
aim,
scope
and
object
of
the
whole
Act.
There
are
a
series
of
statutes
with
respect
to
incentive
grants,
the
first
of
which
is
the
Government
Organization
Act,
1969
(SC
1968-69
c
28)
by
Part
IV
of
which
the
Department
of
Regional
Economic
Expansion
was
created.
In
section
23
paragraph
(a)
of
that
statute
the
duties
of
the
Minister
are
set
forth
as
to:
all
matters
.
.
.
relating
to
economic
expansion
and
social
adjustment
in
areas
requiring
special
measures
to
improve
opportunities
for
productive
employment
and
access
to
these
opportunities.
By
section
27
“a
special
area”
is
one
designated
as
such
which
has
been
determined:
to
require,
by
reason
of
the
exceptional
inadequacy
of
opportunities
for
productive
employment
of
the
people
of
that
area
.
.
.
,
special
measures
to
facilitate
economic
expansion
and
social
adjustment.
The
statute
authorizes
the
Governor
in
Council
to
make
regulations
respecting
the
factors
relating
to
inadequacy
of
opportunities
for
productive
employment
to
be
taken
into
account
in
determining
whether
an
area
requires
special
measures
to
facilitate
economic
expansion
and
social
adjustment.
The
successor
to
that
statute
was
the
Department
of
Regional
Economic
Expansion
Act
(DREE),
(supra),
which
repeats
in
sections
5,
6
and
21
the
substance
of
paragraph
23(a)
and
sections
24
and
39
of
the
first
mentioned
statute
expanded
to
participate
with
and
assist
other
federal
government
agencies
and
any
province
when
the
Minister
is
satisfied
that
the
establishment
expansion
or
modernization
of
a
commercial
undertaking
will
further
the
economic
expansion
and
social
adjustment
in
the
area.
Areas
of
the
province
of
Saskatchewan
were
designated
as
Special
Areas
from
April
1,
1970
to
June
30,
1972
and
were
extended
by
PC
1972-1111
to
December
31,
1973.
Privy
Council
Order
dated
April
8,
1970
after
reciting
exceptional
inadequacies
of
opportunities
for
productive
employment
requiring
special
measures
to
facilitate
economic
expansion
and
social
adjustment
stated
in
part
in
section
3
that
due
to
adverse
problems
in
marketing
grain
and
potash:
it
is
planned
to
develop
additional
employment
opportunities
by
extending
financial
assistance
to
enable
commercial
undertakings
to
be
established,
expanded
or
modernized.
By
PC
1973-753
dated
March
27,
1973
the
Governor
General
in
Council,
on
the
recommendation
of
the
Minister
of
Regional
Economic
Expansion
pursuant
to
paragraph
10(l)(b)
of
the
DREE
Act,
approved
the
payment
of
a
grant
to
the
plaintiff:
.
.
.
in
respect
of
a
part
of
the
capital
cost
of
establishing,
expanding
or
modernizing
the
undertaking
as
detailed
in
the
schedule.
(attached
to
the
PC)
at
the
rate
specified
therein.
That
schedule
reads
in
part:
|
Investment
in
fixed
assets
|
$1,020,000
|
|
Jobs
created
|
230
|
|
Recommended
grant:
|
|
|
20%
of
the
eligible
assets
of
|
|
|
$1,020,000
|
$204,000
|
|
$1,500
for
each
of
the
230
jobs
|
$345,000
|
Paragraph
10(l)(b),
(supra),
pursuant
to
which
the
grant
was
made
reads:
10.
(1)
Where
the
Minister
is
satisfied
that
the
establishment,
expansion
or
modernization
of
any
commercial
undertaking
in
a
special
area
is
essential
to
the
successful
implementation
of
a
plan
undertaken
pursuant
to
section
7
or
8
and
that
special
assistance
is
required
to
enable
the
undertaking
to
be
established,
expanded
or
modernized,
the
Minister
may,
with
the
approval
of
the
Governor
in
Council
and
subject
to
the
regulations,
enter
into
an
agreement
with
the
person
carrying
on
or
proposing
to
carry
on
the
commercial
undertaking
in
the
special
area
providing
for
.
.
.
(b)
the
payment
by
Canada
of
a
grant
or
loan
in
respect
of
a
part
of
the
capital
cost
of
establishing,
expanding
or
modernizing
the
undertaking;
The
long
title
to
the
Regional
Development
Incentives
Act
(1969-70
SC
Chap
26)
reads:
An
Act
to
provide
incentives
for
the
development
of
productive
employment
opportunities
in
regions
of
Canada
determined
to
require
special
measures
to
facilitate
economic
expansion
and
social
adjustment.
In
olden
days
the
preponderance
of
authority
was
that
the
title
formed
no
part
of
the
Act
and
could
not
even
be
looked
at
for
the
purpose
of
construing
the
Act.
That
is
no
longer
so.
For
some
years
past
the
title
of
an
Act
of
Parliament
has
been
an
important
part
of
the
Act.
The
title
may
be
looked
at
in
order
to
remove
any
ambiguity
in
the
words
of
the
statute
and,
here
I
am
mindful
of
Baron
Pollock’s
remarks,
to
ascertain
its
scope
and
object.
The
title
serves
the
like
purpose
of
a
preamble.
They
are
a
key
to
open
the
minds
of
the
makers
of
the
Act
and
the
mischiefs
they
intend
to
redress.
In
this
statute
again
an
area
is
designated
3.
.
.
.
(2)
(a)
the
existing
opportunities
for
productive
employment
in
the
region
are
exceptionally
inadequate;
and
(b)
the
provision
of
development
incentives
under
this
Act
for
the
establishment
of
new
facilities
or
the
expansion
or
modernization
of
existing
facilites
in
the
region
will
make
a
significant
contribution
to
economic
expansion
and
social
adjustment
.
.
.
In
section
4
of
this
Act
(RDIA)
there
are
three
categories
of
incentives
to
an
applicant
therefor
proposing
to
establish
a
new
facility
or
to
expand
or
modernize
an
existing
one.
They
are:
(1)
a
primary
development
incentive,
(2)
a
secondary
development
incentive,
and
(3)
a
special
development
incentive.
By
subsection
5(1)
a
primary
development
is
based
on
20
per
cent
of
approved
capital
costs
or
$6,000,000
whichever
is
the
lesser.
By
subsection
5(2)
the
amount
of
a
secondary
development
incentive
is
based
on:
(d)
approved
capital
costs
and
(e)
the
number
of
jobs
created
directly
in
the
operation
not
to
exceed:
(1)
five
per
cent
of
the
approved
capital
costs
plus
(2)
$5,000
for
each
job
created.
By
paragraph
5(3)(b)
the
amount
of
a
special
development
incentive
when
the
incentive
is
for
a
new
facility
or
expansion
of
an
existing
facility
to
manufacture
a
new
product
not
before
manufactured
is
based
on:
(1)
the
approved
capital
costs,
and
(2)
on
the
number
of
jobs
created.
Subsection
5(4)
provided
that
the
maximum
incentive
or
a
combined
incentive
shall
not,
in
certain
cases,
exceed
the
lesser
of
(1)
$30,000
for
each
job
created
and
(2)
one
half
of
the
capital
to
be
employed
in
the
operation.
The
Minister
by
virtue
of
section
10
may
pay
the
incentive
authorized
on
being
satisfied
it
is
warranted
in
the
amount
which
was
based
on:
(1)
the
approved
capital
costs,
or
(2)
the
approved
capital
cost
and
the
number
of
jobs
created.
By
section
13
the
recipient
of
a
development
incentive
grant
shall
keep
the
Department
of
Employment
informed
of
vacancies
and
shall
cooperate
in
recruitment
and
training
of
employees.
The
intention
of
Parliament
is
overwhelmingly
clear
from
the
pertinent
section
of
the
statutes
of
which
mention
has
been
made
that
its
primary
purpose
and
objective
is
to
improve
the
lot
of
the
population
of
designated
areas
by
correcting
the
inadequacy
of
opportunities
for
productive
employment
by
enticing
substantive
stable
and
long-range
industries
to
locate
in
those
areas
to
improve
those
opportunities
for
productive
employment
and
access
to
them.
That
is
the
clear
and
paramount
purpose
sought
to
be
achieved
by
the
development
incentive
grant
consequent
upon
which
economic
expansion
and
social
adjustment
beneficial
to
the
designated
area
will
result.
The
inducement
of
industry
to
locate
in
the
designated
areas
is
the
means
to
that
end.
The
means
to
that
inducement
is
development
incentive
grants.
And
how
is
the
amount
of
these
grants
to
be
arrived
at.
Very
simply.
In
these
appeals
that
amount
is
based
on
two
factors:
(1)
development
incentive
based
on
approved
capital
costs,
and
(2)
a
development
incentive
based
on
the
number
of
eligible
jobs
available.
These
two
incentives
combine
for
a
total
development
incentive.
The
Regional
Development
Incentives
Act
is
a
more
sophisticated
statute
than
was
its
predecessor,
the
Department
of
Regional
Economic
Expansion
Act.
The
latter
and
its
immediate
predecessor
the
Government
Organization
Act
constituting
the
departments
of
government
were
the
practical
means
of
implementing
the
plan
of
regional
development
incentives
to
remedy
the
inadequacy
of
opportunities
for
productive
employment
in
an
area
by
development
incentive
grants
to
facilitate
economic
expansion
and
development.
The
last
statute
is
the
embodiment
of
the
experience
in
the
administration
of
the
first
two
statutes.
In
section
2,
the
interpretation
section,
“approved
capital
costs”
is
defined
as
meaning
the
capital
costs,
as
determined
by
the
Minister,
of
establishing,
expanding
or
modernizing
a
facility
in
respect
of
which
a
development
incentive
is
authorized.
A
“facility”
is
defined
in
section
2
as
structures,
machinery
and
equipment
that
constitute
the
necessary
components
of
a
manufacturing
or
processing
operation,
that
is
the
building
and
the
fixed
costs
in
the
building.
The
“total
capital
costs”
means
as
defined
in
section
2
the
total
of:
(a)
the
approved
capital
costs,
(b)
the
value,
as
accepted
by
the
Minister,
of
the
fixed
assets
that
are
to
be
employed
in
the
operation
and
that
are
not
included
in
the
approved
capital
costs,
and
(c)
the
value,
as
accepted
by
the
Minister,
or
the
capitalized
expenses
incurred
in
bringing
a
new
facility
or
commercial
facility
into
commercial
production
or
operation
or
in
bringing
an
expanded
or
modernized
facility
into
commercial
production.
None
of
the
components
of
the
total
capital
costs
includes
an
item
with
respect
to
job
creation.
On
the
contrary
section
5
of
the
Act
makes
specific
provision
for
the
maximum
amounts
of
development
incentives.
Subsection
5(2)
makes
the
secondary
incentive
development,
as
the
grant
to
the
appellant
herein
must
be,
the
total
of:
(a)
five
per
cent
of
the
approved
capital
costs,
and
(b)
a
maximum
of
$5,000
for
each
job
created
in
the
operation.
Likewise
in
a
special
development
incentive
the
amount
thereof,
in
accordance
with
paragraph
5(3)(c)
shall
be
based
on
the
approved
capital
costs
of
establishing
the
facility
and
on
the
number
of
jobs
created
directly
in
the
operation.
Thus
it
is
abundantly
clear
that
there
are
two
components
of
the
total
incentive
grant
(not
the
total
capital
costs).
That
this
was
done
in
the
case
of
the
appellant
herein
is
also
abundantly
clear
from
paragraphs
4
and
5
of
the
statement
of
facts
with
respect
to
the
Saskatoon
project
and
paragraphs
14
and
15
of
the
agreed
statement
of
facts
with
respect
to
the
Winnipeg
project.
PC
1973-753
dated
March
27,
1973
approved
the
payment
of
a
grant
to
the
appellant
in
accordance
with
a
schedule
showing
the
total
recommended
grant
to
be
based
upon
20
per
cent
of
eligible
assets
and
$1,500
for
each
job
created.
The
term
“eligible
assets”
is
not
defined
in
the
Regional
Development
Incentive
Act
but
it
is
in
paragraph
2(1
)(b)
of
the
Regulations
thereto
made
as
meaning
the
assets
approved
by
the
Minsiter
as
forming
the
whole
or
part
of
a
facility
subject
to
enumerated
exceptions
such
as
land
and
patents
and
the
like
which
are
normally
capital
assets.
As
used
the
term
“eligible
assets”
appears
to
be
substantially
similar
to
“capital
assets”.
In
the
light
of
the
repeated
segregation
of
the
amount
of
the
total
development
incentives
to
be
attributable
to
an
incentive
based
on
“approved
capital
costs”,
and
capital
costs
are
defined
as
being
the
structures
and
fixed
assets,
and
an
incentive
based
on
“jobs
created”
directly
in
the
operation
in
the
Regional
Development
Incentives
Act,
the
preceding
legislation
and
the
Regulations,
with
the
sole
exception
of
a
primary
incentive
under
subsection
5(1)
of
that
Act
which
is
a
grant
exclusively
for
the
establishment
of
a
facility,
it
is
not
possible,
in
my
view,
to
include
the
incentive
grant
for
job
creation
as
a
“capital
cost”
nor
is
such
inclusion
contemplated
or
necessarily
implied
in
that
legislation.
Accordingly
because
of
the
clearly
discernible
objective
of
the
legislation
to
remedy
the
inadequate
job
opportunities
in
an
area
and
to
remedy
that
inadequacy
by
special
measures
to
foster
economic
expansion
and
social
adjustment
I
do
not
accept
the
contention
of
counsel
for
Her
Majesty
that
the
entire
amount
of
the
incentive
grant
is
in
respect
of
depreciable
property,
that
is
the
capital
cost
of
the
location
of
the
undertaking.
In
my
view
one
portion
of
the
total
development
incentive
grant
is
directly
attributable
to
the
establishment
of
the
facility
which
is
the
structure
and
fixed
assets,
tangible
property
and
the
other
portion
of
the
total
is
attributable
to
job
creation,
an
intangible
factor.
Of
course
I
accept
the
logic
of
the
defendant’s
counsel’s
contention
that
without
the
facility
there
would
be
no
jobs
but
by
the
like
logic,
if
there
was
no
prospect
of
the
creation
of
the
jobs
by
the
construction
of
the
facility
there
would
be
no
secondary
development
incentive
grant
made.
The
contrary
may
well
be
the
case
with
a
primary-development
incentive-grant
restricted
as
it
is
to
the
approved
capital
cost
of
constructing
the
facility.
Reverting
to
subsection
13(7.1)
of
the
Income
Tax
Act,
the
provision
reads:
For
the
purposes
of
this
Act,
where
a
taxpayer
has
received
or
is
entitled
to
receive
assistance
from
a
government,
municipality
or
other
public
authority
in
respect
of,
or
for
the
acquisition
of,
depreciable
property,
whether
as
a
grant,
subsidy,
forgiveable
loan,
deduction
from
tax,
investment
allowance
or
as
any
other
form
of
assistance
.
.
.
and
I
paraphrase
the
capital
cost
of
the
property
to
the
taxpayer
shall
be
the
cost
to
him
less
the
assistance.
Because
the
Development
Incentive
legislation
specifically
directs
that
there
shall
be
a
grant
as
to
approved
capital
costs,
it
follows
that
such
is
the
amount
of
the
assistance
in
the
grant
directed
to
the
acquisition
of
depreciable
property.
The
additional
grant
as
to
the
creation
of
jobs
is
an
incentive
held
out
to
the
manufacturer
to
relocate
in
a
designated
area
when
he
might
well
locate
in
a
different
area.
The
manufacturer
is
provided
with
general
assistance
to
establish
the
facility
in
a
designated
area
and
an
additional
grant
as
an
inducement
to
locate
there.
The
grant
to
assist
in
the
establishment
of
the
facility
is
a
grant
received
with
respect
to
or
for
the
acquisition
of
depreciable
property.
The
other
portion
of
the
total
incentive
grant
is
not
in
respect
of
depreciable
property.
It
follows
therefore
that
the
amount
of
the
development
incentive
grant
specifically
designated
as
attributable
to
“approved
capital
costs”
shall
be
deducted
in
computing
the
capital
cost
allowance
for
each
of
the
appellant’s
1975-76
and
1977
taxation
years
and
the
amount
specifically
designated
for
job
creation
shall
be
excluded
from
the
deduction
and
included
in
computing
the
taxpayer’s
capital
cost
allowances
in
those
years.
The
next
ensuing
issues
and
questions
to
be
resolved
concern
the
investment
tax
credits
claimed
by
the
appellant
in
its
1975,
1976
and
1977
tax
returns
to
be
allocated
to
its
1976,
1977
and
1978
taxation
years
respectively.
The
investment
tax
credit
is
an
innovation
introduced
into
the
Canadian
tax
structure
by
the
enactment
of
subsection
127(5)
as
an
addition
to
the
Income
Tax
Act
by
chapter
71
of
the
Statutes
of
1974-75-76
applicable
to
the
1975
and
subsequent
taxation
years.
It
was
inspired
by
its
entrenchment
in
the
United
States
tax
system
and
is
a
logical
supplement
to
existing
Canadian
incentive
legislation
to
further
stimulate
business
investment.
Subsection
127(5)
provides
that
there
may
be
deducted
from
the
tax
payable
by
a
taxpayer
for
a
taxation
year
his
“investment
tax
credit”,
the
amount
of
which
is
the
lesser
of
his
investment
tax
credit
at
the
end
of
the
year
and
the
aggregate
of
$15,000
and
one
half
of
the
amount,
if
any,
by
which
the
tax
otherwise
payable
exceeds
$15,000.
There
is
a
quasi-definition
of
the
words
“investment
tax
credit”
in
subsection
127(9),
also
introduced
by
the
Statutes
of
1974-75-76
applicable
to
1975
and
subsequent
taxation
years,
as
meaning
an
amount
calculated
by
a
formula.
In
its
1975
taxation
year
the
appellant
had
claimed
all
investment
tax
credit
with
respect
to
its
1976
taxation
year.
The
notice
of
assessment
with
respect
thereto
stated:
Your
investment
tax
credit
has
been
changed
to
$22,160.00
and
is
allowed
in
full
as
a
deduction
from
Part
I
tax
otherwise
payable.
There
is
no
carryforward
to
subsequent
years.
In
its
1976
taxation
year
the
appellant
again
claimed
an
investment
tax
credit
applicable
to
its
1977
taxation
year.
The
notice
of
assessment
was
in
the
identical
language
as
that
for
the
1975
taxation
year
except
the
amount
of
the
investment
tax
credit
was
changed
to
$60,187.
The
same
occurred
in
the
appellant’s
1977
taxation
year.
The
appellant
claimed
an
investment
tax
credit
applicable
to
its
1978
taxation
year
and
received
a
notice
of
assessment
in
the
identical
language
as
that
in
the
1975
and
1976
assessments
except
that
in
the
1977
assessment
the
investment
tax
credit
was
changed
to
$184,833.
There
is
no
dispute
between
the
parties
as
to
the
qualification
for
and
the
amount
of
the
investment
tax
credits.
The
dispute
is,
therefore,
based
upon
the
initial
question
posed
in
this
respect
in
the
agreed
statement
of
facts
and
issues
between
the
parties.
For
convenience
I
repeat
the
questions
there
set
forth
for
answer:
(2)
Whether
subsection
13(7.1)
of
the
Income
Tax
Act
requires
investment
tax
credits
related
to
capital
goods
to
be
deducted
in
calculating
the
capital
cost
of
assets
acquired
in
each
of
the
years
1975,
1976
and
1977
and
if
so:
(i)
whether
the
amount
of
such
deduction
is
the
amount
of
the
investment
tax
credit
claimed
or
such
amount
less
the
increase
in
taxes
payable
resulting
from
the
reduction
of
the
capital
cost
of
the
relevant
property
and
(ii)
whether
the
amount
to
be
deducted
is
deductible
in
calculating
the
capital
cost
of
assets
in
the
year
the
investment
tax
credit
is
claimed
or
in
the
following
year.
Naturally
being
assessed
as
it
was
the
appellant
lodged
notices
of
objection
to
the
assessments
substantially
upon
the
same
grounds
as
the
present
appeals
are
based.
The
Minister
considered
the
notices
of
objection
and
confirmed
the
assessments
as
having
been
made
in
accordance
with
the
provisions
of
the
Act
and
in
particular
on
the
ground
that:
for
the
purposes
of
the
Income
Tax
Act,
where
a
taxpayer
has
deducted
an
amount
under
subsection
127(5)
or
(6)
in
respect
of
a
depreciable
property
or
has
received
or
is
entitled
to
receive
assistance
from
a
government,
in
respect
of,
or
for
the
acquisition
of,
depreciable
property
whether
as
a
grant,
subsidy,
forgiveable
loan,
deduction
from
tax,
investment
allowance
or
as
any
other
form
of
assistance
the
capital
cost
of
the
property
to
the
taxpayer
shall
be
deemed
to
be
the
amount
by
which
the
capital
costs
thereof
to
the
taxpayer,
otherwise
determined
exceeds
the
amount
of
the
aggregate
of
the
amount
deducted
under
subsection
127(5)
or
(6)
in
respect
of
that
property,
and
the
amount
of
the
assistance,
in
accordance
with
the
provisions
of
subsection
13(21)
of
the
Income
Tax
Act.
In
so
doing
the
Minister,
who
was
not
E
EA
Dayton
who
signed
the
notification
in
that
capacity
even
though
there
is
below
that
signature
the
printed
legend
“per
E
EA
Dayton,
Chief
of
Appeals
etc”
but
was
no
doubt
authorized
to
sign
on
behalf
of
the
Minister
but
the
proper
form
to
do
so
would
have
been
to
sign
“for”
the
Minister
of
National
Revenue
or
under
the
Minister’s
name
per
proc
E
A
Dayton
(see
Fredericton
Housing
v
The
Queen,
[1973]
FC
196),
paraphrased
subsection
13(7.1)
with
the
omission
of
irrelevant
passages
as
it
was
amended
by
section
2,
chap
4,
SC
1977-78
applicable
to
the
1979
taxation
year
and
following
years.
Subsection
13(7.1)
as
applicable
to
the
1975,
1976
and
1977
taxation
years,
which
are
the
years
for
which
the
assessments
are
under
appeal,
I
again
reproduce
at
this
point
for
the
purpose
of
convenience:
13.
(7.1)
For
the
purposes
of
the
Act,
where
a
taxpayer
has
received
or
is
entitled
to
receive
assistance
from
a
government,
municipality
or
other
public
authority
in
respect
of,
or
for
the
acquisition
of,
depreciable
property,
whether
as
a
grant,
subsidy,
forgiveable
loan,
deduction
from
tax,
investment
allowance
or
as
any
other
form
of
assistance
other
than
(a)
an
amount
authorized
to
be
paid
under
an
Appropriation
Act
and
on
terms
and
conditions
approved
by
the
Treasury
Board
in
respect
of
scientific
research
expenditures
incurred
for
the
purpose
of
advancing
or
sustaining
the
technological
capability
of
Canadian
manufacturing
or
other
industry,
or
(b)
an
amount
deducted
as
an
allowance
under
section
65,
the
capital
cost
of
the
property
to
the
taxpayer
shall
be
deemed
to
be
the
amount
by
which
the
aggregate
of
(c)
the
capital
cost
thereof
to
the
taxpayer,
otherwise
determined,
and
(d)
such
part,
if
any,
of
the
assistance
as
has
been
repaid
by
the
taxpayer
pursuant
to
an
obligation
to
repay
all
or
any
part
of
that
assistance,
exceeds
(e)
the
amount
of
the
assistance.
Subsection
13(7.1)
as
it
so
read
was
amended
by
section
2,
chap
4,
SC
1977-78
in
this
manner:
2.
(1)
All
that
portion
of
subsection
13.(7.1)
of
the
said
Act
preceding
paragraph
(a)
thereof
is
repealed
and
the
following
substituted
therefor:
(a)
“(7.1)
For
the
purposes
of
this
Act,
where
a
taxpayer
has
deducted
an
amount
under
subsection
127(5)
in
respect
of
depreciable
property
or
has
received
or
is
entitled
to
receive
assistance
from
a
government,
municipality
or
other
public
authority
in
respect
of,
or
for
the
acquisition
of,
depreciable
property,
whether
as
a
grant,
subsidy,
forgiveable
loan,
deduction
from
tax,
investment
allowance
or
as
any
other
form
of
assistance
other
than”.
In
subsection
13(7.1)
as
it
read
applicable
to
the
taxation
years
in
question
the
language
preceding
paragraph
(a)
does
not
include
the
words:
where
a
taxpayer
has
deducted
an
amount
under
subsection
127(5)
in
respect
of
depreciable
property
or
Neither
is
there
a
paragraph
(e)
reading:
(e)
All
amounts
under
subsection
127(5)
in
respect
of
that
property
and
The
Minister
did
not
have
reference
to
13(7.1)
as
applicable
to
the
1979
and
subsequent
years
but
to
a
still
later
amendment
applicable
to
the
1981
and
subsequent
taxation
years
which
is
evident
from
the
reference
to
subsection
127(6)
which
was
not
in
prior
legislation.
Thus
it
occurs
to
me
that
there
would
be
no
impediment
to
quashing
the
confirmation
of
the
assessments
following
the
notices
of
objection
because
the
delegate
of
the
Minister
in
so
confirming
the
assessment
did
so
on
the
basis
of
a
section
of
the
Income
Tax
Act
not
applicable
to
the
taxation
years.
In
exculpation
of
that
officer
it
is
conceivable
that
he
considered
that
those
words
must
be
imported
into
subsection
13(7.1)
by
necessary
implication
despite
their
absence
—
a
case
of
the
administrator
abandoning
that
function
and
assuming
that
of
the
legislature.
Despite
the
Minister’s
corruption
of
the
applicable
language
of
subsection
13(7.1)
it
is
expedient
to
consider
the
contention
on
behalf
of
the
appellant
that
the
subsection
as
it
was
applicable
does
not
require
investment
tax
credits
to
be
deducted
in
calculating
the
capital
cost
of
the
assets
acquired
and
those
of
counsel
for
Her
Majesty
to
the
contrary.
In
GTE
Sylvania
Canada
Limited
v
The
Queen,
([1974]
FC
726)
I
had
for
consideration
paragraph
20(6)(h)
of
the
Income
Tax
Act
then
in
force,
which
paragraph
was
the
forerunner
of
subsection
13(7.1)
applicable
to
the
taxation
years
here
under
review.
That
paragraph
was
to
the
effect
that
where
a
taxpayer
has
received
or
is
entitled
to
receive
from
a
government,
municipality
or
other
public
authority
in
respect
of
or
for
the
acquisition
of
property
“a
grant,
subsidy
or
other
assistance”
for
the
purpose
of
advancing
Canadian
industry
the
capital
cost
of
the
property
shall
be
deemed
to
be
the
cost
to
the
taxpayer
less
the
amount
of
the
grant
subsidy
or
other
assistance.
It
was
held
that
a
tax
concession
ensuing
to
the
plaintiff
company,
which
allowed
a
deduction
for
amounts
invested
in
new
capital
and
deducted
the
capital
cost
in
full
in
computing
the
capital
cost,
was
not
“a
grant,
subsidy
or
other
assistance”
within
the
meaning
of
those
words
in
paragraph
20(6)(h)
and
accordingly
properly
included
in
full
in
calculating
the
capital
cost
of
the
equipment.
This
was
predicated
upon
the
ejusdem
generis
rule
of
construction
whereby
the
specific
words
“grant”
and
“subsidy”
do
not
introduce
changes
of
a
different
character
in
the
general
words,
“or
other
assistance”.
What
seems
to
be
overlooked
is
that
there
was
another
ground
upon
which
the
decision
was
based.
What
the
province
did
was
to
forebear
exacting
from
companies
which
met
prescribed
conditions
a
greater
tax
under
provincial
legislation
that
it
might
otherwise
have
done.
That
differed
from
a
grant,
subsidy
and
was
not
“‘other
assistance”
within
the
meaning
of
those
words
in
paragraph
20(6)(h).
What
was
meant
by
those
words
was
active
payment
rather
than
passive
forebearance
in
exacting
the
maximum
tax
otherwise
exigible.
The
possibility
of
entrapment
by
the
ejusdem
generis
rule
was
later
overcome
in
the
amendment
effected
in
subsection
13(7.1).
In
addition
to
the
words
“grant”
and
“subsidy”
the
following
“forgiveable
loan,
deduction
from
tax,
investment
allowance”’
were
introduced
after
“grant,
subsidy”
and
before
general
words
reading
“or
as
any
form
of
assistance”.
The
decision
of
the
Trial
Division
was
appealed.
In
The
Queen
v
GTE
Sylvania
Canada
Limited
([1974]
2
FC
212),
Jackett,
C
CJ
delivered
a
terse
judgment
from
the
Bench,
in
a
footnote
reserving
the
accuracy
of
the
ground
for
allowing
the
appeal
from
the
assessment
on
the
application
of
the
ejusdem
generis
rule
but
dismissed
the
appeal
on
the
ground
that
the
taxpayer,
by
taking
advantage
of
a
provision
which
permitted
it
to
pay
less
tax,
had
not
“received”
anything
within
the
meaning
of
paragraph
20(6)(h).
Jackett,
CJ
said:
In
so
far
as
the
reduction
in
tax
is
concerned
the
respondent
literally
received
nothing.
It
is
clear
that
the
Chief
Justice
considered
it
inappropriate
to
extend
the
meaning
of
the
word
“received”
to
include
the
advantage
provided
in
the
provincial
legislation.
He
continued
to
say:
If
a
meaning
were
given
to
the
expression
“received
.
.
.
other
assistance”
broad
enough
to
include
such
a
reduction
in
tax,
the
ambit
of
the
rule
in
section
20(6)(h)
would
be
such
as
to
include
a
reduction
effected
by
various
allowances
in
the
Income
Tax
Act
itself
that
could
not,
in
my
view,
be
taken
or
have
been
intended
without
more
explicit
language.
The
words
used
in
subsection
127(5)
and
other
subsections
of
section
127
are
“investment
tax
credit”.
It
is
a
rule
of
construction
that,
where
in
the
same
Act,
and
in
relation
to
the
same
subject
matter,
different
words
are
used
such
choice
of
different
words
must
be
considered
intentional
and
indicative
of
a
change
in
meaning
or
a
different
meaning.
The
only
words
in
subsection
13(7.1)
which
might
approximate
the
meaning
of
“investment
tax
credit”
are
“investment
allowance”,
which
is
clearly
different,
and
“deduction
from
tax”
which
is
also
different
in
connotation
and
is
susceptible
of
many
meanings
when
contrasted
with
a
“tax
credit”
which
are
not
synonymous
with
that
expression.
An
investment
tax
credit
is
an
incentive
and
as
such
would
be
a
forebearance
to
exact
an
amount
of
tax
otherwise
exigible
or
put
another
way,
a
forgiveness.
In
subsequent
legislation
a
tax
credit
is
susceptible
of
being
a
rebate
or
a
refund
but
not
in
the
legislation
as
was
applicable
in
the
taxation
years
here
under
review.
The
kind
of
assistance
provided
under
the
legislation
under
review
in
The
Queen
v
GTE
Sylvania
Canada
Limited,
(supra),
was
not
a
“deduction
from
tax”
but
rather
an
exemption
permitted
in
computing
taxable
revenue
which
resulted
in
a
lesser
tax
being
exigible.
If
the
kind
of
assistance
contemplated
by
an
“investment
tax
credit”
is
covered
by
the
amended
provision
(ie,
13(7.1),
as
applicable
to
the
taxation
year
here
under
review)
then
it
must
be
regarded
as
falling
under
the
words
‘‘any
form
of
assistance”.
If
that
be
the
case
it
follows
that
the
interpretation
of
the
word
“received”
would
be
that
found
by
Jackett,
C
J
in
the
GTE
Sylvania
case,
(supra),
that
nothing
tangible
moved
to
the
taxpayer.
More
telling,
in
my
view,
are
the
remarks
of
the
Chief
Justice
quoted
above
that
if
a
meaning
were
given
to
the
expression
“received
.
.
.
other
assistance”
broad
enough
to
include
such
a
reduction
in
tax
the
ambit
of
the
rule
would
also
be
such
as
to
include
a
reduction
effected
by
various
allowances
in
the
Income
Tax
Act
itself
that
could
not
have
been
intended
“without
more
explicit
language”.
An
investment
tax
credit
is
such
an
allowance.
No
such
more
explicit
language
as
stated
by
Jackett,
C
J
to
be
necessary
has
been
introduced
into
the
subsection
13(7.1)
as
applicable
to
the
appellant’s
1975,
1976
and
1977
taxation
years.
As
I
understand
the
principle
of
fiscal
legislation
it
is
this:
if
a
person
sought
to
be
taxed
comes
within
the
letter
of
the
law
he
must
be
taxed.
On
the
other
hand,
if
the
Crown
seeking
to
recover
the
tax
cannot
bring
the
taxpayer
within
the
letter
of
the
law,
the
taxpayer
is
free,
however
apparently
within
the
spirit
of
the
law
the
case
might
otherwise
appear
to
be.
For
the
reasons
I
have
expressed
I
have
concluded
that
the
taxpayer
does
not
fall
within
the
ambit
of
subsection
13(7.1)
with
respect
to
investment
tax
credits
as
the
subsection
then
read.
I
am
confirmed
in
that
conclusion
by
the
amendments
effected
to
subsection
13(7.1)
as
it
read
before
by
applying
the
reasons
for
the
amendments
by
an
invocation
of
the
rule
in
Heydon’s
case
((1584),
3
Co
Rep
7a)
to
the
amending
legislation
and
to
repeat
what
Lindley,
MR
said
in
Re
Mayfair
Property
([1898]
2
Ch
28)
at
35:
In
order
to
properly
interpret
any
statute
it
is
as
necessary
now
as
it
was
when
Lord
Coke
reported
Heydon’s
case
to
consider
how
the
law
stood
when
the
statute
to
be
construed
was
passed,
what
the
mischief
was
for
which
the
old
law
did
not
provide,
and
the
remedy
provided
by
the
statute
to
cure
that
mischief.
Subsection
13(7.1)
made
no
specific
provision
for
deducting
the
amount
of
an
investment
tax
credit
from
the
capital
cost
of
goods
acquired
in
calculating
capital
cost
allowance.
As
stated
by
Jackett,
C
J
In
the
GTE
Sylvania
case
the
ambit
of
a
section
of
the
Income
Tax
Act
to
be
broad
enough
to
include
a
reduction
effected
by
an
allowance
in
the
Income
Tax
Act
itself
must
be
with
sufficiently
explicit
language
to
accomplish
that
purpose.
The
mischief
sought
to
be
cured
by
the
legislative
branch
of
government
by
an
appropriate
amendment
to
subsection
13(7.1)
was
to
provide
that
investment
tax
credits
under
subsection
127(5)
shall
be
deducted
in
computing
the
capital
cost
of
depreciable
property
which,
without
the
amendment
must
have
been
otherwise.
The
remedy
provided
by
the
amendment
to
subsection
13(7.1)
was
to
enact,
in
explicit
language,
that
investment
tax
credits
received
by
a
taxpayer
are
to
be
so
deducted
from
capital
cost
to
the
taxpayer.
Obviously
since
no
such
provision
was
in
the
prior
legislation
the
intention
of
Parliament
was
not
that
such
investment
tax
credits
should
reduce
the
capital
cost
of
depreciable
property
to
a
taxpayer.
The
amendment
demonstrates
a
different
intention
clearly
expressed
but
applicable
only
to
the
1978
and
subsequent
taxation
years.
By
reducing
the
size
of
the
mesh
in
the
taxation
net
by
explicit
language
the
tax
incentive
credit
which
is
a
reduction
effected
by
the
Income
Tax
Act
itself
is
now
ensnared
by
the
amendment
to
subsection
13(7.1)
to
so
ensure.
Having
concluded
that
subsection
13(7.1)
as
it
read
applicable
to
the
appellant’s
1975,
1976
and
1977
taxation
years
did
not
require
investment
tax
credits
relating
to
capital
goods
to
be
deducted
in
calculating
the
capital
cost
of
the
assets
acquired
it
is
not
incumbent
upon
me
to
answer
the
next
question
posed
in
the
agreed
statement
of
issues
between
the
parties
that
is
if
the
investment
tax
credits
were
not
to
be
deducted
in
their
entirety
whether
the
amount
should
be
the
amount
of
an
investment
tax
credit
less
the
increase
in
taxes
payable
resulting
from
the
reduction
of
the
capital
cost
of
the
relevant
property.
Thus
the
sole
remaining
issue
arises
from
paragraph
2(ii)
of
the
agreed
statement
of
issues
which
reads:
Whether
the
amount
(ie,
the
whole
or
part
of
the
investment
tax
credit)
to
be
deducted
is
deductible
in
calculating
the
capital
cost
of
assets
in
the
year
the
investment
tax
credit
is
claimed
or
in
the
following
year
The
appellant
in
its
income
tax
return
for
the
taxation
years
1975,
1976
and
1977
at
the
close
of
such
years
claimed
in
each
such
year
an
income
tax
credit
for
qualified
assets
acquired
in
each
of
those
years
to
be
applicable
in
the
next
ensuing
year,
that
is
to
say
for
the
assets
acquired
in
1975
the
investment
tax
credit
was
applied
for
applicable
in
the
1976
year,
in
its
1976
year
applicable
in
its
1977
year,
and
in
its
1977
year
in
its
1978
year.
This
the
Minister
disallowed
and
deducted
the
investment
tax
credit
in
the
previous
year
not
in
the
following
year
for
which
the
appellant
had
claimed
it.
As
a
consequence
of
the
conclusion
I
have
reached
that
the
investment
tax
credit
is
not
deductible
in
computing
capital
cost
allowance
in
the
appellant’s
1975,
1976
and
1977
taxation
years
I
would
be
absolved
from
deciding
the
issue
as
phrased.
However
it
is
the
three
assessments
that
are
under
review
and
the
investment
tax
credit
was
disallowed
for
the
year
for
which
it
was
claimed.
Despite
the
way
the
issue
is
put
in
the
agreed
statement
of
facts
I
do
not
think
I
can
avoid
the
issue
as
to
when
the
investment
tax
credit
becomes
an
actuality
and
may
be
claimed
as
such
by
a
taxpayer.
As
previously
indicated
subsection
127(5)
was
enacted
by
chapter
71
of
the
Statutes
of
Canada
of
1974-75-76,
applicable
to
the
1975
and
subsequent
taxation
years.
It
is
this
subsection
that
first
provided
for
an
investment
tax
credit
in
Canada
as
a
means
of
the
stimulation
of
capital
investment
through
the
tax
system
in
industries.
As
originally
enacted,
and
that
original
enactment
is
the
provision
applicable
to
the
taxation
years
here
in
question,
the
investment
tax
credit
was
only
applicable
in
respect
of
qualified
property
acquired
between
June
24,
1975
and
June
30,
1977.
The
rate
of
credit
was
five
per
cent
limited
in
any
one
year
to
the
lesser
of:
(a)
the
taxpayer’s
tax
otherwise
payable
for
the
year,
and
(b)
$15,000
plus
half
the
difference
between
$15,000
and
the
taxpayer’s
tax
otherwise
payable
for
the
year.
Any
investment
tax
credit
not
used
in
the
year
in
which
it
first
became
available
remains
deductible
from
the
taxes
of
the
five
subsequent
years.
That
I
take
to
be
what
is
referred
to
in
the
vernacular
as
“carryover”.
The
rate
of
credit
of
five
per
cent
was
increased
to
seven
and
a
half
per
cent
and
10
per
cent
applicable
to
expenditures
made
after
March
31,
1977
and
the
final
date
of
acquisition
was
extended
to
June
30,
1980.
Other
increases
followed
as
to
other
qualified
expenditures
in
subsequent
years
and
the
termination
date
of
June
30,
1980
was
repealed
continuing
the
system
in
effect
indefinitely.
A
rate
of
50
per
cent
is
applicable
to
certified
property
acquired
after
October
28,
1980.
Investment
made
in
prior
years
will
continue
to
attract
tax
credits
at
the
rates
then
at
that
time
applicable
thereto.
Thus
the
investment
tax
credit
is
a
running
account
which
will
necessitate
separate
accounts
being
kept
with
respect
to
the
expenditures
made
in
each
period.
But
nowhere
in
the
legislation
have
I
been
able
to
find
nor
was
any
pointed
out
to
me
whereby
a
taxpayer
is
obligated
to
claim
the
investment
tax
credit
in
the
year
the
assets
were
acquired.
Accordingly,
in
my
view,
a
taxpayer
may
claim
the
investment
tax
credit
in
any
of
the
five
succeeding
years
to
the
year
in
which
the
expenditure
was
made
but
at
the
rate
applicable
for
the
year
in
which
the
expenditure
was
made
as
contemplated
by
subsection
127(9).
Therefore
there
was
no
impediment
to
the
appellant
claiming
investment
tax
credits
for
expenditures
made
in
the
1975,
1976
and
1977
taxation
years
respectively
in
its
1976,1977
and
1978
taxation
years
under
the
circumstances
as
it
did.
The
three
appeals
are
therefore
allowed
with
costs
to
the
appellant
and
the
assessments
for
the
appellant’s
1975,
1976
and
1977
taxation
years
are
referred
back
to
the
Minister
for
reassessment
on
the
bases:
(1)
that
the
amounts
of
the
incentive
grants
received
by
the
appellant
in
its
1975,
1976
and
1977
taxation
years
shall
be
restricted
to
development
incentives
based
on
approved
capital
costs
and
that
the
respective
amounts
so
received
in
each
taxation
year
shall
be
deducted
from
the
appellant’s
total
undepreciated
costs
in
computing
the
capital
cost
allowance
for
each
such
year
but
that
the
amount
of
the
incentive
grant
so
deducted
from
the
undepreciated
costs
shall
not
include
that
for
the
development
incentive
based
on
eligible
jobs
created
in
each
taxation
year,
(2)
that
the
amounts
of
the
investment
tax
credits
related
to
capital
goods
received
by
the
appellant
shall
not
be
deducted
in
calculating
the
capital
cost
of
those
assets
acquired
by
the
appellant
in
each
of
its
1975,
1976
and
1977
taxation
years,
and
(3)
that
the
amounts
of
the
investment
tax
credit
claimed
shall
be
applicable
in
the
taxation
years
for
which
they
were
claimed
by
the
appellant.
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