Docket: 2003-797(IT)G
BETWEEN:
ISRAEL CHAFETZ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeals heard with the appeals of Donald
Jordan (2003-800(IT)G) and
James Taylor (2003-802(IT)G) on November 23 and 24, 2005,
at Vancouver, British Columbia, by
The Honourable
Justice Campbell J. Miller
Appearances:
|
Counsel for the Appellant:
|
Roslyn
Goldner and
Donald J. Jordan
|
|
Counsel for the Respondent:
|
Lynn Burch and Margaret Clare
|
____________________________________________________________________
JUDGMENT
The appeals from
assessments of tax made under the Income Tax Act for the 1992 and 1993
taxation years are dismissed, with costs to the Respondent.
Signed at Ottawa, Canada,
this 20th day of December, 2005.
"Campbell J. Miller"
Docket: 2003-800(IT)G
BETWEEN:
DONALD JORDAN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeals heard with the appeals of Israel Chafetz (2003-797(IT)G) and
James Taylor (2003-802(IT)G) on November 23 and 24, 2005,
at Vancouver, British Columbia, by
The Honourable Justice Campbell J. Miller
Appearances:
|
Counsel for the
Appellant:
|
Roslyn Goldner and
the Appellant himself
|
|
Counsel for the
Respondent:
|
Lynn Burch and Margaret Clare
|
____________________________________________________________________
JUDGMENT
The appeals from
assessments of tax made under the Income Tax Act for the 1992 and 1993
taxation years are dismissed, with costs to the Respondent.
Signed at Ottawa, Canada, this 20th day of December, 2005.
"Campbell J. Miller"
Docket: 2003-802(IT)G
BETWEEN:
JAMES TAYLOR,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeals heard with the appeals of Israel Chafetz (2003-797(IT)G) and
Donald Jordan (2003-800(IT)G) on November 23 and 24, 2005,
at Vancouver, British Columbia, by
The Honourable Justice Campbell J. Miller
Appearances:
|
Counsel for the
Appellant:
|
Roslyn Goldner and
Donald J. Jordan
|
|
Counsel for the
Respondent:
|
Lynn Burch and Margaret Clare
|
____________________________________________________________________
JUDGMENT
The appeals from assessments
of tax made under the Income Tax Act for the 1992 and 1993 taxation
years are dismissed, with costs to the Respondent.
Signed at Ottawa, Canada, this 20th day of December, 2005.
"Campbell J. Miller"
Citation: 2005TCC803
Date: 20051220
Docket: 2003-797(IT)G,
2003-800(IT)G,
2003-802(IT)G,
BETWEEN:
ISRAEL
CHAFETZ, and
DONALD JORDAN, and
JAMES TAYLOR,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Miller J.
[1] Messrs. Taylor,
Jordan and Chafetz (the Appellants), three law partners, invested in a joint
venture, Sierra Trinity in 1992 and 1993. They claimed Canadian Exploration
Expense (CEE) in those years in connection with the joint venture. They were
audited and were requested to sign waivers, which they did in 1996 and 1997.
The waivers included reference to "Canadian Exploration and Development
Expense" (CEDE). The Appellants were reassessed in 2001 denying a
deduction for CEE in 1992 and 1993. The Appellants argue that the reassessments
cannot reasonably be regarded as relating to the matters specified in the
waivers, and that the Minister is therefore statute-barred from reassessing in
connection with CEE for 1992 and 1993. I find the waivers are effective and
that the Minister is not statute-barred from reassessing the Appellants' 1992
and 1993 taxation years.
Facts
[2] In 1992 and 1993
the Appellants invested in the Sierra Trinity joint venture. Mr. Taylor was the
partner who more closely investigated this investment, and had knowledge of
what it involved, being the acquisition of seismic data.
[3] The Appellants
claimed CEE in their 1992 and 1993 tax returns in connection with this
investment in Sierra Trinity. They did not claim Canadian Development Expense
(CDE) nor Canadian Oil and Gas Property Expense (COGPE) in their returns. Apart
from carrying charges, CEE was the only joint venture-related claim. This claim
related to the cost of the seismic data.
[4] The Appellants
certified their 1992 and 1993 tax returns as correct, without having reviewed
the significant claims for the CEE. To put this in perspective, Mr. Taylor's
CEE claim for 1992 was approximately $75,000 on income (primarily from his law
practice) of $300,000. All three Appellants testified that their respective
accountants prepared their returns, which they simply signed after checking to
see how much they owed.
[5] In April 1996, Mr.
S.W. Holmes of Revenue Canada wrote to the Appellants asking 14 questions in connection
with the joint venture, specifically alluding to CEE, CDE and COGPE. The
Appellants, upon receipt of this letter from Mr. Holmes, retained Mr. Ian
J. Gamble, a tax lawyer with the firm of Thorsteinssons in Vancouver, British
Columbia,
a firm specializing in taxation law. Neither Mr. Gamble nor the Appellants responded
to the 14 questions.
[6] At this time the
Thorsteinssons firm were acting on a matter, which was proceeding in the Tax
Court of Canada, relating to the qualification of the acquisition cost of
seismic data as CEE. The Appellants had varying degrees of knowledge of this
fact, suffice it to say that they knew there was a case going through the
courts, dealing with the merits of the same issue facing them. Mr. Taylor
also acknowledged that CEE was, as he put it, their "best argument".
Mr. Taylor had some understanding of CEE as he had previously represented
clients in a matter which had a CEE element to it, although he wisely obtained
advice from tax lawyers.
[7] On July 9, 1996,
Mr. Holmes wrote to Mr. Gamble as follows:
Dear Sirs:
Re: Sierra Trinity Joint Venture
(Canadian Exploration Expense
(CEE))
As a result of our telephone conversation
today, please find enclosed waivers for the following:
Donald
J. Jordan
Israel Chafetz
James
P. Taylor
Please advise us immediately if the
waivers for the above captioned taxpayers will be forthcoming as their 1992
income tax returns become statute barred July 25, 1996 and August 2 and 9,
1996 respectively. If we are not provided with waivers we will have to commence
reassessment action. In Mr. Jordan's case this would be July 18, 1996 and
in Mr. Chafetz's and Mr. Taylor's case July 26, 1996. As discussed, no response
has been received to date in respect of our previous letters to the taxpayers.
Thank you for your co-operation and
assistance in this matter.
Yours truly,
_"S.W. Holmes"_______________
Revenue Canada
Vancouver Tax Services Office
[8] The waivers
themselves read:
|
Waiver
The normal reassessment period referred to in
subsection 152(4) of the Income Tax Act, within which the Minister may
reassess or make additional assessments or assess tax, interest or penalties
under Part "I, I.1 and I.2" of the Act is hereby waived for
the taxation year indicated above, in respect of:
Net income
for income tax purposes as affected by application of Canadian Exploration
and Development Expense or Canadian Oil and Gas Property Expense in respect
of Sierra Trinity Inc.
Carrying charges on line
221.
|
[9] The Appellants,
upon receipt of the waivers, met to discuss their course of action. Mr. Taylor
advised the other two Appellants that he believed they were not being asked to
waive CEE. He testified that he did not know the definition of Canadian
Exploration and Development Expense (CEDE), but understood it to be a separate
term from CEE or CDE. He did not look the terms up in the Act. He
further testified that he knew that a similar case was proceeding through the
courts in connection with the acquisition cost of seismic data, and that this
was a factor in deciding to sign the waivers. The Appellants agreed that it
would be in order to proceed to sign the waivers, which they did. They
testified that they believed Revenue Canada required more time to review some expenses, but not
others. Mr. Jordan and Mr. Chafetz relied entirely on Mr. Taylor in reaching
their decision. They did not believe it was necessary to discuss their waivers
with their tax counsel, Mr. Gamble.
[10] In December 1996,
Mr. Holmes again wrote to Mr. Gamble seeking information with respect to CEE.
[11] Again in March 1997,
the Appellants received a letter from Mr. Holmes of Revenue Canada as follows:
Dear Mr. Taylor:
RE: Audit of Joint Venture Business
Canadian Exploration Expense
(CEE)
…
However, due to the approaching statute
barred date of June 27, 1997 for your 1993 return, it may become necessary to
issue a notice of reassessment prior to that date.
As a result, you may wish to sign and
return (unaltered) a waiver to us by April 18, 1997. This will enable
you to present additional representations and/or documentation to our office to
ensure that all facts are fully considered prior to any further action. Failure
to provide a waiver (unaltered) by the specified date will result in our
reassessing your 1993 income tax return without further notice.
[12] The enclosed waivers
were identical in wording to the first waivers except for reference to the 1993
taxation year, as opposed to the 1992 taxation year. The Appellants signed
these waivers on the same basis as they signed the first waivers.
[13] In February 1999, the
Appellants received a proposal letter from Mr. Holmes with respect to
their 1992 and 1993 years indicating that Revenue Canada intended to disallow
the expenses. Mr. Holmes wrote:
Dear Mr. Taylor:
Re: Audit of Joint Venture Business
– 1992 Taxation Year
…
Further to our proposal letter dated
April 24, 1996, we have not been provided with any documents which would
indicate that exploration work was done with the seismic data acquired by the
purported joint venture. The mere possession of seismic data in and by itself
does not qualify the expenditure as being a CEE under the Income Tax Act
(ITA). In order to qualify as CEE, the expense must be incurred
"for the purpose of determining the existence, location, extent or quality
of an accumulation of petroleum or natural gas in Canada". From the information we received from Sierra Trinity Inc. there
was no evidence to show that the seismic data were used for exploration
purposes. No supporting documents were provided to us to verify the acquisition
of leases, the drilling of wells, or letters to investors for additional cash
calls.
The assessments were issued in
2001, and in April 2001 the Appellants filed Notices of Objection claiming the
waivers were defective. This was the first time Revenue Canada was advised by the
Appellants of that position.
[14] Mr. Holmes, of Revenue Canada, testified that he
drafted the waivers. He used the expression Canadian Exploration and Development
Expense to save words, rather than writing out Canadian Exploration Expense and
Canadian Development Expense in full. He was not aware at the time there even was
a defined term "CEDE", and that it pertained to the pre‑1975
period. In conversation with Mr. Gamble, the only aspect of the waiver
addressed between Mr. Holmes and Mr. Gamble were the carrying charges.
Analysis
[15] The relevant legislation
regarding CEDE and CEE is found in subsections 66(15) and 66.1(6) of the Income
Tax Act (see Appendix A). The relevant legislation regarding waivers is found
in subparagraphs 152(4)(a)(i) and (ii) and subparagraphs 152(4.01)(a)(i)
and (ii) of the Act, as follows:
152(4) The Minister may
at any time make an assessment, reassessment or additional assessment of tax
for a taxation year, interest or penalties, if any, payable under this Part by
a taxpayer or notify in writing any person by whom a return of income for a
taxation year has been filed that no tax is payable for the year, except that
an assessment, reassessment or additional assessment may be made after the
taxpayer's normal reassessment period in respect of the year only if
(a) the
taxpayer or person filing the return
(i) has
made any misrepresentation that is attributable to neglect, carelessness or
wilful default or has committed any fraud in filing the return or in supplying any
information under this Act, or
(ii) has
filed with the Minister a waiver in prescribed form within the normal
reassessment period for the taxpayer in respect of the year; or
152(4.01) Notwithstanding
subsections (4) and (5), an assessment, reassessment or additional assessment
to which paragraph (4)(a) or (b) applies in respect of a taxpayer
for a taxation year may be made after the taxpayer's normal reassessment period
in respect of the year to the extent that, but only to the extent that, it can
reasonably be regarded as relating to,
(a) where
paragraph (4)(a) applies to the assessment, reassessment or additional
assessment,
(i) any
misrepresentation made by the taxpayer or a person who filed the taxpayer's
return of income for the year that is attributable to neglect, carelessness or
wilful default or any fraud committed by the taxpayer or that person in filing
the return or supplying any information under this Act, or
(ii) a
matter specified in a waiver filed with the Minister in respect of the year;
and
…
[16] The question to be
determined is whether the Minister's reassessments of the Appellants' 1992 and
1993 taxation years, denying CEE, can reasonably be regarded as relating to a
"matter specified" in the waivers signed by the Appellants. I break
this issue into two components: first, what is the "matter specified"
in the waiver; second, can the reassessments reasonably be regarded as related
to it?
(i) "Matter
specified"
[17] The words in the
waiver which are at the core of this dispute are "Canadian Exploration and
Development Expense". If there was a mutuality of intention between the
Respondent and Appellants as to what that meant, I could quickly move on to the
second branch of the inquiry. But there is no such common understanding. The
Respondent meant Canadian Exploration Expense and Canadian Development Expense
– that is absolutely clear. The Appellants did not know what it meant, but
suggested that they knew it did not mean CEE. I find the Appellants' testimony
that they "knew" that it did not cover CEE overstated. Without having
looked up the definition of CEDE, they could, at best, have assumed it did not
cover CEE. This assumption led to a belief by Mr. Taylor that he was not
waiving CEE, a belief he passed on to his partners.
[18] In this situation,
where the parties hold different opinions as to what is the matter specified,
it is helpful to appreciate that the waiver itself is neither the Appellants'
nor the Respondent's waiver: it is for their mutual advantage (see Cal Investments
Limited. v. The Queen).
I find it is, therefore, insufficient to accept one party's intention as
determinative. I particularly have reservations about accepting the Appellants'
stated intention that they knew CEE was not covered in the waivers. The
Appellants did not word the waivers, nor did they know what they were waiving.
They believed it did not include CEE. This is not strong evidence of an
intention not to waive CEE; I would best describe it as wishful thinking that
the waiver did not cover CEE. I do not deny they had convinced themselves that
was the case; they were credible witnesses. I question the strength of the
foundation of that belief, however.
[19] If I am not prepared
to accept either party's stated intention of the meaning of the matter
specified, it is for me to determine objectively what those words mean. Given
the very nature of a waiver, a "matter specified" in a waiver must
involve a substantial issue between the parties. As indicated in the oft-cited
case of Solberg v. Canada,
where both parties know what is at issue, a technical error will not invalidate
the waiver. It is also clear (see Mah v. Canada) that the Minister cannot base a
reassessment on a substantial issue that is not specified in the waiver. These
cases lead me to conclude that, in determining the matter specified, I should
seek the substantive issue. This interpretation of "matter" accords
with Black's Law of Dictionary interpretation being "a subject
under consideration".
[20] Mr. Jordan suggests
that the matter or substantive issue can only be viewed through the very words
used by the Respondent in the waivers – CEDE (a definition in the Act
that covers pre-1975 exploration expenses only). Further, he argues that if
there is any ambiguity, that should be decided in favour of the taxpayer (see Solberg
and Gagné v. The Queen).
What troubles me with this approach is that it leads to an absurdity: the
matter in issue had nothing to do with pre-1975 expenses. Mr. Jordan argues that the
expression "CEDE" is capitalized, and as such, can only be read as a
defined term, notwithstanding that it yields a nonsensical result. I am not to
consider the result, according to Mr. Jordan. He argues that the defined term means what it
means – no more, no less, and he took me to a number of cases limiting the
usage of defined terms to their meaning (see for example Yellow Cab Ltd. v.
Alberta).
The cases provided do not deal with a defined term used in a waiver, where
words in a waiver are to identify a substantive issue being waived.
[21] The underlying
dispute between the parties related to the acquisition cost of seismic data,
and its deductibility. The Appellants knew that was the issue. They did not
know technically whether, for income tax purposes, that was CEDE, COGPE, CEE or
CDE. They did know that CEE was their best argument. All to say, there was no
doubt as to the substantive issue; the doubt lay in the specific
characterization of the expense.
[22] I do not need to
rely on any extrinsic evidence to find that a waiver for the years 1992 and
1993 of a defined term that only applies to a period before 1975 invites closer
scrutiny of the defined term. The capitalization of the word CEDE in such
circumstances is insufficient to preclude another interpretation. There is an
interpretation that is both reasonable and sensible: CEDE, in a 1992/1993
waiver, can only mean CEE and CDE. Mr. Jordan argues that grammatically the word
"Expense" would have to be pluralized to accept that result. This is
too fine a distinction to rely upon to ignore a common sense interpretation. I
conclude the words CEDE in the context of a 1992 and 1993 waiver are not
ambiguous: they mean CEE and CDE.
(ii) Can
the reassessments reasonably be regarded as relating to the matter specified in
the waivers?
[23] Having found the
"matter specified" is CEE, then it follows that a reassessment of CEE
not only relates to the matter specified – it is the matter specified. Thus the
waiver is effective, and the Minister is not statute-barred.
[24] If I am wrong in my
interpretation of the matter specified in the waivers, and if the Appellants
are correct in suggesting that "CEDE", as expressed in the waivers,
can only mean the 1974 definition, then I wish to address this second branch of
the inquiry on that basis.
[25] Under the first
branch of the inquiry, Mr. Jordan argued that the waivers' reference to "in respect
of" limits the matter to the defined term. I believe Mr. Jordan is sidestepping the
real issue which arises in the second branch of the inquiry, and that is the
meaning of the words "reasonably be regarded as relating to". As was
indicated in the Mah case:
[13] In Stone Container I was
concerned with the phrase "in respect of" in the waiver form. In the
case at bar, I am also concerned of the language of subparagraph 152(4.01)(a)(ii)
and whether that provision authorizes the reassessment in issue on the basis
that "it can reasonably be regarded as relating to a matter specified in
the waiver". The phrase "in respect of" in the standard form of
waiver limits the application of the waiver to the matter specified and, by
virtue of subparagraph 152(4.01)(a)(ii), any other matters that can
reasonably be regarded as relating to the matter specified. In other words, the
phrase "in respect of" in the waiver is simply an expression of the
reasonable relationship required by subparagraph 152(4.01)(a)(ii). It is
quite clear that the Minister cannot base a reassessment on a substantive issue
that is not specified in a waiver or cannot be regarded as relating to the
substantive issue that is specified in the waiver.
[26] I do not believe I
am expanding the definition of CEDE, if I find something outside the definition
is reasonably related to the definition. Indeed, to follow Mr. Jordan's restrictive approach
would render the words "reasonably be regarded as related to"
meaningless. Mr. Jordan argues that in determining whether the assessment can reasonably be
regarded as related to the waivers, I am precluded again from relying on
extrinsic evidence, but must limit myself to the words themselves. Clearly, if
I were to rely on extrinsic evidence, it overwhelmingly points to a
relationship between the ongoing issue of CEE and the waivers. This is evident
in all the correspondence between Revenue Canada and the Appellants. But, accepting
Mr. Jordan's proposition, can
exploration expenses that may or may not qualify as CEE in 1992 and 1993
reasonably be regarded as related to a definition covering exploration expenses
for a period prior to 1974? In looking at the history of these technical
definitions, I characterize CEDE as the predecessor to CEE and CDE. A new
regime was introduced after 1974 and different rates were attached to expenses
depending on their classification as CEE or CDE. I cannot imagine a stronger
relationship between CEE and its predecessor CEDE. Both deal with exploration
expenses and are separated solely by timing considerations. I find that the
denial of a deduction for exploration expenses that in 1992 do not qualify as
CEE can reasonably be regarded as related to a definition that covers such
exploration expenses for an earlier period. On this basis, I also would find
the Minister can rely on the waivers and that the Minister is not
statute-barred.
[27] Does my finding
result in any prejudice to the Appellants? No. It was clear that, had they
refused to sign the waivers, they would have been assessed denying CEE. It is
also clear that, had they undertaken even a cursory investigation into the
import of the waivers (for example, ask their own tax lawyer, read the
definitions, or speak to the Canada Revenue Agency officer) they would have
been fully aware they were waiving CEE. These facts may not go to the
interpretation of the waivers, but they do go to the issue of whether the
Appellants have suffered any prejudice. I find they have not.
[28] I dismiss the
appeals and grant costs to the Respondent.
Signed at Ottawa, Canada, this 20th day of December, 2005.
"Campbell J. Miller"
Appendix A
66(15) In this section,
…
"Canadian exploration and
development expenses” incurred by a taxpayer means any expense incurred before
May 7, 1974 that is
(a) any drilling or
exploration expense, including any general geological or geophysical expense,
incurred by the taxpayer after 1971 on or in respect of exploring or drilling
for petroleum or natural gas in Canada,
(b) any prospecting,
exploration or development expense incurred by the taxpayer after 1971 in
searching for minerals in Canada,
(c) the cost to the
taxpayer of any Canadian resource property acquired by the taxpayer after 1971,
(d) the taxpayer's share of
the Canadian exploration and development expenses incurred after 1971 by any
association, partnership or syndicate in a fiscal period thereof, if at the end
of that fiscal period the taxpayer was a member or partner thereof,
(e) any expense incurred by
the taxpayer after 1971 pursuant to an agreement with a corporation under which
the taxpayer incurred the expense solely in consideration for shares of the
capital stock of the corporation issued to the taxpayer by the corporation or
any interest in such shares or right thereto, to the extent that the expense
was incurred as or on account of the cost of
(i) drilling or
exploration activities, including any general geological or geophysical
activities, in or in respect of exploring or drilling for petroleum or natural
gas in Canada,
(ii) prospecting,
exploration or development activities in searching for minerals in Canada, or
(iii) acquiring a Canadian resource
property, and
(f) any
annual payment made by the taxpayer for the preservation of a Canadian resource
property,
but, for greater certainty, does not include
(g) any consideration given
by the taxpayer for any share or any interest therein or right thereto, except
as provided by paragraph (e), or
(h) any expense described
in paragraph (e) incurred by another taxpayer to the extent that the
expense was, by virtue of that paragraph, a Canadian exploration and
development expense of that other taxpayer;
66.1(6) In this section
..
“Canadian exploration expense” of a
taxpayer means any expense incurred after May 6, 1974 that is
(a) any expense including a
geological, geophysical or geochemical expense incurred by the taxpayer (other
than an expense incurred in drilling or completing an oil or gas well or in
building a temporary access road to, or preparing a site in respect of, any
such well) for the purpose of determining the existence, location, extent or
quality of an accumulation of petroleum or natural gas (other than a mineral
resource) in Canada,
(b) any expense (other than
an expense incurred in drilling or completing an oil or gas well or in building
a temporary access road to, or preparing a site in respect of, any such well)
incurred by the taxpayer after March, 1985 for the purpose of bringing a
natural accumulation of petroleum or natural gas (other than a mineral
resource) in Canada into production and incurred prior to the commencement of
the production (other than the production from an oil or gas well) in
reasonable commercial quantities from such accumulation, including
(i) clearing, removing overburden
and stripping, and
(ii) sinking a shaft or constructing
an adit or other underground entry,
(c) any expense incurred
before April, 1987 in drilling or completing an oil or gas well in Canada or in
building a temporary access road to, or preparing a site in respect of, any
such well,
(i) incurred by the taxpayer in the
year, or
(ii) incurred by the
taxpayer in any previous year and included by the taxpayer in computing the
taxpayer's Canadian development expense for a previous taxation year,
if, within six months after
the end of the year, the drilling of the well is completed and
(iii) it is determined
that the well is the first well capable of production in commercial quantities
from an accumulation of petroleum or natural gas (other than a mineral
resource) not previously known to exist, or
(iv) it is reasonable
to expect that the well will not come into production in commercial quantities
within twelve months of its completion,
(d) any expense incurred by
the taxpayer after March, 1987 and in a taxation year of the taxpayer in
drilling or completing an oil or gas well in Canada or in building a temporary
access road to, or preparing a site in respect of, any such well if
(i) the drilling or
completing of the well resulted in the discovery that a natural underground
reservoir contains petroleum or natural gas, where
(A) before the time of
the discovery, no person or partnership had discovered that the reservoir
contained either petroleum or natural gas, and
(B) the discovery
occurred at any time before six months after the end of the year,
(ii) the well is
abandoned in the year or within six months after the end of the year without
ever having produced otherwise than for specified purposes,
(iii) the period of 24
months commencing on the day of completion of the drilling of the well ends in
the year, the expense was incurred within that period and in the year and the
well has not within that period produced otherwise than for specified purposes,
or
(iv) there has been
filed with the Minister, on or before the day that is 6 months after the end of
the taxation year of the taxpayer in which the drilling of the well was
commenced, a certificate issued by the Minister of Natural Resources certifying
that, on the basis of evidence submitted to that Minister, that Minister is
satisfied that
(A) the total of
expenses incurred and to be incurred in drilling and completing the well, in
building a temporary access road to the well and in preparing the site in
respect of the well will exceed $5,000,000, and
(B) the well will not
produce, otherwise than for a specified purpose, within the period of 24 months
commencing on the day on which the drilling of the well is completed,
(e) any expense deemed by
subsection (9) to be a Canadian exploration expense incurred by the taxpayer,
(f) any expense incurred by
the taxpayer (other than an expense incurred in drilling or completing an oil
or gas well or in building a temporary access road to, or preparing a site in
respect of, any such well) for the purpose of determining the existence,
location, extent or quality of a mineral resource in Canada including any
expense incurred in the course of
(i) prospecting,
(ii) carrying out geological,
geophysical or geochemical surveys,
(iii) drilling by rotary, diamond,
percussion or other methods, or
(iv) trenching, digging test pits and
preliminary sampling,
but not including
(v) any Canadian development expense,
or
(vi) any expense that
may reasonably be considered to be related to a mine that has come into
production in reasonable commercial quantities or to be related to a potential
or actual extension thereof,
(g) any expense incurred by
the taxpayer after November 16, 1978 for the purpose of bringing a new mine in
a mineral resource in Canada into production in reasonable commercial
quantities and incurred before the new mine comes into production in such
quantities, including an expense for clearing, removing overburden, stripping,
sinking a mine shaft or constructing an adit or other underground entry,
(g.1) any Canadian renewable
and conservation expense incurred by the taxpayer,
(h) subject to section
66.8, the taxpayer's share of any expense referred to in any of paragraphs (a)
to (d) and (f) to (g.1) incurred by a partnership in a
fiscal period thereof, if at the end of the period the taxpayer is a member of
the partnership, or
(i) any expense
referred to in any of paragraphs (a) to (g) incurred by the taxpayer pursuant
to an agreement in writing with a corporation, entered into before 1987, under
which the taxpayer incurred the expense solely as consideration for shares,
other than prescribed shares, of the capital stock of the corporation issued to
the taxpayer or any interest in such shares or right thereto,
CITATION: 2005TCC803
COURT FILE NO.: 2003-797(IT)G, 2003-800(IT)G and
2003-802(IT)G
STYLE OF CAUSE: Israel Chafetz, Donald Jordan and
James
Taylor and Her Majesty The Queen
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: November 23 and 24, 2005
REASONS FOR JUDGMENT BY: The
Honourable Justice Campbell J. Miller
DATE OF JUDGMENT: December 20, 2005
APPEARANCES:
|
Counsel for the
Appellants:
|
Roslyn Goldner and
Donald J. Jordan
|
|
Counsel for the
Respondent:
|
Lynn Burch and Margaret Clare
|
COUNSEL OF RECORD:
For the Appellant:
Name: Roslyn Goldner and Donald J. Jordan
Firm: Taylor
Jordan Chafetz
For the
Respondent: John H. Sims, Q.C.
Deputy
Attorney General of Canada
Ottawa,
Ontario
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