Stone,
J.:—This
appeal
and
cross-appeal
from
a
judgment
of
the
Trial
Division
raise
two
separate
issues
concerning
the
interpretation
of
section
125.1
of
the
Income
Tax
Act,
S.C.
1970-71-72
c.
63
as
amended
as
well
as
certain
of
the
capital
cost
allowance
provisions
found
in
Schedule
B
to
the
Income
Tax
Regulations,
P.C.
1954-1917
as
amended.
The
learned
trial
judge
decided
against
the
respondent
on
the
first
issue
but
in
its
favour
on
the
second.
This
appeal
and
cross-appeal
bring
forward
these
issues
for
decision
by
this
Court.
In
its
taxation
years
1974
and
1975
the
respondent
engaged
in
highway
construction
in
Nova
Scotia
and
Newfoundland
from
its
head
office
situate
in
the
eastern
Nova
Scotia
university
town
of
Antigonish.
In
carrying
on
its
business
it
employed
various
kinds
of
construction
equipment
including
trucks,
tractor-trailers
and
asphaltic
concrete
rollers.
Much
of
its
work
involved
the
laying
of
asphaltic
concrete
on
road
surfaces.
This
material
it
produced
by
mixing
asphalt,
a
hot
tar-like
substance,
with
sand
and
crushed
stone
under
Certain
conditions.
The
produce
was
then
deposited
on
road
surfaces
from
trucks
and
rolled
into
place.
In
1974
the
respondent
acquired
a
new
piece
of
equipment
called
“The
Parker
Super
Blackmobile”.
It
was
put
into
use
for
the
first
time
in
the
1975
taxation
year.
According
to
the
agreed
facts,
the
blackmobile
produced
asphaltic
concrete
by
passing
sand
and
stone
in
measured
quantities
through
a
dryer
and
then
to
a
mixer
where
hot
liquid
asphalt
was
injected.
The
sand
and
stone
were
derived
from
gravel
or
quarried
rock
which
had
been
crushed
and
screened.
The
blackmobile
is
made
up
of
component
parts
including
hopper
bins,
generator,
conveyor,
dust
collector,
dryer,
hot
elevator,
screen
and
mixer.
It
could
be
disassembled
and
moved
from
pit
to
pit
which
indeed
happened
in
the
1975
taxation
year.
Some
of
its
parts
were
equipped
with
wheels
which
allowed
them
to
be
towed.
Other
parts
could
be
placed
by
crane
on
low
bed
trailers
and
moved
in
that
fashion.
The
time
required
to
disassemble,
move
and
reassemble
the
plant
varied
with
the
distance
moved.
Trucks,
tractor-trailers
and
a
crane
were
required.
A
number
of
employees
were
engaged.
Similar
plants
not
equipped
with
wheels
produced
the
same
sort
of
product
as
the
plant
in
question.
These
too
could
be
moved
but
required
more
time
to
do
so.
During
the
1975
taxation
year
the
blackmobile
was
used
in
connection
with
a
number
of
construction
projects
carried
out
by
the
respondent
on
the
mainland
side
of
the
Canso
Causeway
—
at
Antigonish,
Mulgrave,
Cape
George
and
on
the
old
Antigonish
Road
leading
to
the
Strait
of
Canso
—
as
well
it
was
on
the
Cape
Breton
side
between
Port
Hastings
and
Port
Haw-
kesbury
and
at
Port
Malcolm.
In
none
of
these
projects
was
the
plant
located
at
the
actual
construction
sites.
It
was
placed
in
neighbouring
pits
situate
as
few
as
two
miles
and
as
many
as
34
miles
away.
These
pits
produced
sand
and
gravel
and,
by
addition
of
hot
asphalt,
the
asphaltic
concrete
needed
for
road
hard-surfacing
was
produced
there.
I
come
now
to
the
issues
raised
in
these
proceedings.
In
calculating
its
taxable
income
for
its
1974
and
1975
taxation
years
the
respondent
claimed
the
“Canadian
manufacturing
and
processing
profits”
deduction
available
under
section
125.1
of
the
Income
Tax
Act.
The
terms
“Canadian
manufacturing
and
processing
profits”
and
"manufacturing
or
processing”
for
the
purposes
of
section
125.1
are
defined
in
subsection
3(a)
and
(b)
thereof:
(a)
“Canadian
manufacturing
and
processing
profits”
of
a
corporation
for
a
taxation
year
means
such
portion
of
the
aggregate
of
all
amounts
each
of
which
is
the
income
of
the
corporation
for
the
year
from
an
active
business
carried
on
in
Canada
as
is
determined
under
rules
prescribed
for
that
purpose
by
regulation
made
on
the
recommendation
of
the
Minister
of
Finance
to
be
applicable
to
the
manufacturing
or
processing
in
Canada
of
goods
for
sale
or
lease;
and
(b)
“manufacturing
or
processing”
does
not
include
(i)
farming
or
fishing,
(ii)
logging,
(iii)
construction,
(iv)
operating
an
oil
or
gas
well,
(v)
extracting
minerals
from
a
mineral
resource,
(vi)
processing,
to
the
prime
metal
stage
or
its
equivalent,
ore
from
a
mineral
resource,
(vii)
producing
industrial
minerals,
(viii)
producing
or
processing
electrical
energy
or
steam,
for
sale,
(ix)
processing
gas,
if
such
gas
is
processed
as
part
of
the
business
of
selling
or
distributing
gas
in
the
course
of
operating
a
public
utility,
or
(x)
any
manufacturing
or
processing
of
goods
for
sale
or
lease,
if,
for
any
taxation
year
of
a
corporation
in
respect
of
which
the
expression
is
being
applied,
less
than
10%
of
its
gross
revenue
from
all
active
businesses
carried
on
in
Canada
was
from
(A)
the
selling
or
leasing
of
goods
manufactured
or
processed
in
Canada
by
it,
and
(B)
the
manufacturing
or
processing
in
Canada
of
goods
for
sale
or
lease,
other
than
goods
for
sale
or
lease
by
it.
The
deduction
from
tax
was
disallowed
by
the
Minister.
He
also
disallowed
the
respondent's
claim
of
capital
cost
allowance
in
respect
of
its
blackmobile
at
the
rate
of
50
per
cent.
The
respondent's
position
is
that
it
is
class
29
property
described
in
Schedule
B
provided
for
under
section
1100
to
the
Income
Tax
Regulations
(made
pursuant
to
paragraph
20(1)(a)
of
the
Act):
1100.
(1)
Under
paragraph
(a)
of
subsection
(1)
of
section
20
of
the
Act,
there
is
hereby
allowed
to
the
taxpayer,
in
computing
his
income
from
a
business
or
property,
as
the
case
may
be,
deductions
for
each
taxation
year
equal
to
.
.
.
Class
29
(y)
such
amount
as
he
may
claim
in
respect
of
property
of
class
29
in
Schedule
B
not
exceeding
the
aggregate
of
(i)
50%
of
the
lesser
of
(A)
the
aggregate
of
the
capital
cost
of
all
property
of
that
class
acquired
in
the
taxation
year,
or
(B)
the
undepreciated
capital
cost
to
him
of
property
of
that
class
as
of
the
end
of
the
taxation
year
(before
making
any
deduction
under
this
paragraph
for
the
taxation
year),
and
(ii)
the
amount,
if
any,
by
which
the
amount
determined
under
clause
(i)(B)
exceeds
the
amount
determined
under
clause
(i)(A).
The
provisions
of
class
29
in
Schedule
B
read
in
part:
Class
29
Property
that
would
otherwise
be
included
in
another
class,
(a)
that
is
property
manufactured
by
the
taxpayer,
the
manufacture
of
which
was
completed
by
him
after
May
8,
1972,
or
other
property
acquired
by
the
taxpayer
after
May
8,
1972,
(i)
to
be
used
directly
or
indirectly
by
him
in
Canada
primarily
in
the
manufacturing
or
processing
of
goods
for
sale
or
lease,
or
(ii)
to
be
leased,
in
the
ordinary
course
of
carrying
on
a
business
in
Canada
of
the
taxpayer,
to
a
lessee
who
can
be
reasonably
expected
to
use,
directly
or
indirectly,
the
property
in
Canada
primarily
in
the
manufacturing
or
processing
by
him
of
goods
for
sale
or
lease,
if
the
taxpayer
is
a
corporation
whose
principal
business
is
(A)
leasing
property,
(B)
manufacturing
property
that
it
sells
or
leases,
(C)
the
lending
of
money,
or
(D)
the
purchasing
of
conditional
sales
contracts,
accounts
receivable,
bills
of
sale,
chattel
mortgages,
bills
of
exchange
or
other
obligations
representing
part
or
all
of
the
sale
price
of
merchandise
or
services,
or
any
combination
thereof,
unless
use
of
the
property
by
the
lessee
commenced
before
May
9,
1972,
and
(b)
that
is
(i)
property
(other
than
railway
rolling
stock)
that,
but
for
this
class,
would
be
included
in
class
8,
(ii)
an
oil
or
water
storage
tank,
(iii)
a
powered
industrial
lift
truck,
or
(iv)
electrical
generating
equipment
described
in
class
9,
but
not
including.
.
..
The
term
“manufacturing
or
processing”
as
it
appears
in
the
text
of
class
29
is
defined
in
section
1104(9)
of
the
same
regulations:
(9)
For
the
purpose
of
class
29
in
Schedule
B,
“manufacturing
or
processing”
does
not
include
(a)
farming
or
fishing,
(b)
logging,
(c)
construction,
(d)
operating
a
gas
or
oil
well,
(e)
extracting
minerals
from
a
mineral
resource,
(f)
processing
of
ore
from
a
mineral
resource
to
the
prime
metal
stage
or
its
equivalent,
(g)
producing
industrial
minerals,
(h)
producing
or
processing
electrical
energy
or
steam,
for
sale,
or
(i)
processing
gas,
if
such
gas
is
processed
as
part
of
the
business
of
selling
or
distributing
gas
in
the
course
of
operating
a
public
utility.
The
Minister
reassessed
the
respondent's
income
for
its
1974
and
1975
taxation
years
on
the
basis
that
the
blackmobile
was
properly
classifiable
as
property
falling
within
class
10
of
Schedule
B
rather
than
within
class
29.
I
will
deal
with
these
two
issues
separately.
The
manufacturing
and
processing
profits
deduction
The
respondent
by
its
cross-appeal
alleges
an
error
on
the
part
of
the
trial
judge
in
refusing
to
interfere
with
this
aspect
of
the
Minister’s
reassessment.
He
concluded
at
page
2
of
his
reasons
for
judgment:
The
Act
clearly
contemplates
that
an
activity
may
constitute
either
manufacturing
or
processing
and,
at
the
same
time,
fall
within
the
exclusion
of
construction,
just
as,
for
example,
it
contemplates
a
manufacturing
or
processing
activity
may
also
be
farming,
fishing
or
logging,
to
cite
other
exclusions.
In
its
use
of
the
term
“construction”,
Parliament
seems
to
have
had
in
mind
construction
as
an
industrial
undertaking
rather
than
construction
in
the
narrower
sense
of
an
activity.
The
only
question
as
to
the
first
issue
is
whether
the
Plaintiff’s
use
of
the
plant
was
within
the
scope
of
its
construction
undertaking.
If
not
within
that
exception,
it
clearly
qualifies
for
the
deduction
allowed
by
section
125.1.
The
plant
processed
aggregates
and
asphalt
to
produce
asphaltic
concrete
for
pavement.
About
90%
of
its
production
in
the
period
in
issue
was
used
by
the
Plaintiff
in
the
fulfilment
of
contracts
it
had
entered
into
with
provincial,
municipal
and
private
owners.
Some
of
those
contracts
entailed
a
high
proportion
of
other
work;
some
were
primarily
for
the
paving.
The
remaining
10%
was
sold
to
third
parties
to
permit
them
to
fulfil
contracts
to
pave
or
to
do
that
for
themselves.
“Construction”
is
not
a
term
of
art.
The
paving
of
roads,
parking
lots,
and
so
on,
is
construction.
That
is
so
whether
the
paving
is
the
initial
application
of
pavement
to
a
newly
constructed
grade,
the
maintenance
or
repair
of
an
old
pavement
or
a
combination
as
in
the
case
of
a
road
widening
and
reconstruction.
The
production
of
asphaltic
concrete
was
an
integral
part
of
the
Plaintiff's
construction
undertaking
as
well
as
a
processing,
if
not
manufacturing,
operation.
The
Minister
was
right
to
reject
the
claim
for
a
deduction
under
section
125.1.
I
share
the
opinion
of
the
learned
trial
judge
that
the
word
“construction”
in
its
context
in
subparagraph
125.1
(3)(b)(iii)
refers
to
a
construction
undertaking
or
enterprise
rather
than
to
construction
in
any
narrower
sense.
I
also
share
his
views
that
the
blackmobile
is
manufacturing
or
processing
equipment
and
that
the
production
of
asphaltic
concrete
was
“a
processing,
if
not
manufacturing,
operation”.
The
issue
thus
reduces
itself
to
whether
the
word
“construction”
found
in
subparagraph
125.1
(3)(b)(iii)
excludes
the
profits
in
question
from
the
definition
of
“Canadian
manufac-
turing
and
processing
profits”
found
in
paragraph
125.1
(3)(a)
so
as
to
render
the
deduction
unavailable.
It
was
the
opinion
of
the
learned
trial
judge
that
it
had
such
effect.
If
that
be
so
it
would
become
unnecessary
to
discuss
an
ancillary
issue,
namely,
whether
the
asphaltic
concrete
manufactured
or
produced
by
the
blackmobile
was
“goods
for
sale”
within
the
meaning
of
paragraph
125.1
(3)(a)
and
even
though
the
Government
of
Nova
Scotia
itself
supplied
the
asphalt
used
to
produce
the
product
for
its
own
highway
construction
projects.
Did
the
learned
judge
err
in
his
conclusion
that
"production
of
asphaltic
concrete
was
an
integral
part
of
the
plaintiff’s
construction
undertaking”
so
as
to
render
the
"construction”
exclusion
applicable?
The
respondent
argues,
inter
alia,
such
conclusion
ignores
the
fact
that
the
blackmobile
operation
was
physically
separated
from
that
of
its
paving
operations
and
as
such
was
a
business
unto
itself,
that
it
produced
asphaltic
concrete
for
all
of
the
paving
jobs,
that
it
was
operated
by
a
single
employee
exclusively
assigned
for
the
purpose
and
that
10
per
cent
of
its
output
was
sold
to
third
parties.
It
urges
that
the
learned
judge's
conclusion
has
given
the
word
"construction”
far
too
broad
a
meaning.
According
to
this
argument
that
meaning
would
extend,
for
example,
to
a
building
contractor
supplying
lumber
from
his
own
sawmill
operation
for
a
building
being
constructed
by
him.
We
have
not
in
this
case
to
decide
that
particular
question
but
even
so
I
am
not
prepared
to
say
that
the
situation
here
is
altogether
analogous.
In
argument
the
appellant
relied
upon
various
interpretations
of
the
word
"construction”
or
"construct”
by
other
courts
(Mary
Jane
Hoddinott
v.
Newton,
Chambers
&
Co.
Ltd.,
[1901]
A.C.
49
(H.L.)
at
53;
The
City
of
West
Toronto
and
Toronto
R.W.
Co.
(1911),
24
O.L.R.
9
(Ont.
C.A.);
Hillfield
School
v.
The
City
of
Hamilton,
[1954]
O.W.N.
184
(Ont.
C.A.)
and
City
of
Dawson
Creek
v.
Lougheed
(1959),
19
D.L.R.
(2d)
249
(B.C.C.A.))
but,
on
the
whole,
I
find
those
cases
of
little
or
no
assistance.
Each
was
concerned
with
the
meaning
to
be
ascribed
to
one
or
other
of
those
words
in
the
context
of
a
private
agreement
or
of
a
particular
statute.
On
the
other
hand,
I
would
respectfully
subscribe
to
the
reasoning
expressed
by
Lord
Macnaghten
in
the
following
passage
from
his
judgment
in
the
Hoddinott
case
(at
54):
Many
cases
were
put
in
argument,
and
many
others
may
be
suggested.
Is
a
man
who
adds
a
storey
or
a
new
room
to
a
house
constructing
a
building?
Is
a
man
constructing
a
building
if
he
strips
off
a
coating
of
stucco
and
faces
his
house
with
red
brick
or
cut
stone?
In
one
sense
he
is;
in
another
sense
he
is
not.
It
depends
upon
what
is
meant
by
“construction”,
and
whether
reference
is
made
to
the
building
as
it
was,
or
to
the
building
as
it
will
be
when
the
proposed
alteration
is
complete.
My
Lords,
these
and
such-like
questions
may
be
very
interesting
puzzles,
but
I
do
not
think
they
help
one
much.
The
question,
after
all,
must
be
what
is
construction
.
.
.
in
this
Act
of
Parliament.
.
.
.
[Emphasis
added.]
Similarly,
in
the
present
case
the
question
for
decision
is
whether
by
including
the
word
"construction”
among
the
exclusions
contained
in
paragraph
125.1
(3)(b)
Parliament
intended
to
render
that
exclusion
applicable
in
the
circumstances
of
this
particular
case.
In
my
opinion
the
learned
judge
correctly
decided
that
the
respondent
is
not
entitled
to
a
deduction
under
section
125.1
of
the
Act.
The
blackmobile
was
used
in
the
1975
taxation
year
primarily
to
produce
a
product
needed
by
the
respondent
to
carry
out
various
obligations
under
construction
contracts.
It
is
immaterial
that
the
produce
happened
to
be
produced
some
distance
from
actual
construction
sites.
Nor,
in
my
view,
does
it
matter
that
some
of
the
paving
work
involved
repair
to
existing
highways
as
distinguished
from
the
paving
of
new
ones.
As
was
well
stated
by
the
learned
trial
judge
himself,
the
production
of
the
product
in
either
case
was
“construction”
within
the
meaning
of
subparagraph
125.1
(3)(b)(iii)
of
the
Act.
The
resulting
profits
are
not
eligible
for
the
tax
deduction
under
that
section.
Finally,
as
the
respondent
has
not
shown
that
asphaltic
concrete
manufactured
or
processed
for
sale
to
third
parties
falls
outside
the
exclusion
in
subparagraph
125.1
(3)(b)(x),
it
is
not
eligible
for
any
tax
relief
under
section
125.1
of
the
Act.
The
capital
cost
allowance
rate
The
appellant
argues
that
the
learned
trial
judge
erred
in
classifying
the
blackmobile
under
class
29
of
Schedule
B
and
as
such
that
it
was
subject
to
a
50
per
cent
rate
of
capital
cost
allowance.
In
arriving
at
that
conclusion
he
reviewed
certain
of
the
provisions
of
classes
8
and
10
Class
8
(20%)
Property
not
included
in
Class
2,
7,
9
or
30
that
is:
(a)
a
structure
that
is
manufacturing
or
processing
machinery
or
equipment;
(i)
a
tangible
capital
asset
that
is
not
included
in
any
other
class
in
this
Schedule
except
.
.
.
Class
10
(30%)
Property
not
included
in
any
other
class
that
is
(h)
contractor's
moveable
equipment,
including
portable
camp
buildings,
except
..
.
and
of
class
29,
after
which
he
concluded
at
page
4
of
his
reasons
for
judgment.
The
Plaintiff
was
a
contractor.
The
plant
was
contractor's
equipment,
in
fact,
as
well
as
generically.
The
question
is:
was
it
moveable?
Clearly,
it
was
when
disassembled
but
not
otherwise.
It
is
hard
to
conceive
of
anything
that
is
not
moveable
provided
it
can
be
broken
down
into
transportable
elements.
I
do
not
think
that
the
mere
fact
that
a
structure
can
be
disassembled
and
moved
makes
it
moveable.
However,
when
the
structure
is
designed
to
be
disassembled
and
moved
and
when
it
is,
in
fact,
assembled
so
as
to
preserve
that
moveability,
e.g.,
not
anchored
or
enclosed
or
otherwise
assembled
so
that
it
cannot
be
disassembled
as
intended
by
its
designer,
it
remains
moveable.
The
plant
was
contractor’s
moveable
equipment
as
well
as
a
structure
that
is
manufacturing
or
processing
machinery
or
equipment.
Having
regard
to
the
introductory
words
in
each
case,
it
is
not
excluded
from
Class
8
by
the
words
“property
not
included
in
class
2,
7,
9
or
30”
but,
once
within
Class
8,
it
is
excluded
from
Class
10
by
the
words
“Property
not
included
in
any
other
class”.
The
plant,
was
prima
facie,
a
Class
8
asset
but,
in
view
of
Class
29,
it
is
property
that
would
be
included
in
Class
8
but
for
Class
29.
As
it
is,
it
was
a
Class
29
asset.
If
I
am
wrong
in
finding
the
plant
to
be
within
Class
8
by
virtue
of
paragraph
(a)
thereof,
then
the
only
other
provision
under
which
it
might
fall
in
Class
8
is
paragraph
(i).
The
finding
that
the
plant
is
contractor’s
moveable
equipment
excludes
the
plant
from
Class
8
on
that
basis,
since
paragraph
(i)
extends
only
to
an
“asset
that
is
not
included
in
any
other
class”.
If
it
is
not
within
Class
8
by
virtue
of
paragraph
(a),
it
is
within
Class
10
as
contractor's
moveable
equipment
and
not
to
be
included
in
Class
29.
The
Minister’s
reassessment
was
made
on
the
basis
that
the
blackmobile
was
properly
classifiable
as
class
10
property.
A
number
of
submissions
were
made
against
the
inclusion
of
the
black-
mobile
in
class
29
but
I
find
it
unnecessary
to
deal
with
all
of
them.
It
seems
to
me
that
there
is
substance
to
the
appellant’s
primary
attack,
namely,
that
class
29
cannot
apply
because
of
the
presence
of
the
exclusionary
word
“construction”
in
the
definition
of
“manufacturing
or
processing”
found
in
subsection
1104(9)
of
the
Regulations.
That
definition
is
expressly
made
applicable
to
the
provisions
of
that
class.
By
its
own
terms
class
29
applies
to:
“Property,
that
would
otherwise
be
included
in
another
class,
.
.
.
that
is
.
.
.
property
acquired
by
the
taxpayer
after
May
8,
1972
.
.
.
to
be
used
directly
or
indirectly
by
him
in
Canada
in
the
manufacturing
or
processing
of
goods
for
sale
or
lease.
.
.
.”.
As
paragraph
1104(9)(c)
of
the
Regulations
expressly
excludes
“construction”
from
the
term
“manufacturing
or
processing”,
the
simple
position
taken
by
the
appellant
is
that
the
learned
judge
ought
not
to
have
included
the
blackmobile
under
class
29
having
already
found
it
was
used
in
“construction”.
The
point
is
not
specifically
discussed
in
the
reasons
for
judgment.
Although
there
are
differences
in
the
arrangement
and,
to
some
extent,
the
content
of
the
exclusions
found
in
subsection
1104(9)
of
the
Regulations
as
compared
with
those
of
paragraph
125.1
(3)(b)
of
the
Act,
I
am
unable
to
see
how
the
“construction”
exclusion
in
paragraph
(c)
of
subsection
1104(9)
should
not
apply.
That
it
does
apply
would
appear
to
follow
once
it
is
decided,
as
I
have,
that
the
blackmobile
was
used
in
the
respondent's
construction
business.
In
my
opinion,
the
presence
of
the
exclusionary
word
“construction”
in
paragraph
1104(9)(c)
of
the
Regulations
means
that
the
blackmobile
cannot
properly
be
classified
as
class
29
property.
It
would
seem
to
be
arguable
that
the
blackmobile
falls
into
class
8
rather
than
into
class
10
as
the
Minister
concluded
but
it
is
unnecessary
to
reach
a
decided
opinion
on
the
point
as
neither
party
took
that
position
and
the
decision
to
classify
the
blackmobile
under
class
10
and
as
such
subject
to
a
capital
cost
allowance
rate
of
30
per
cent
rather
than
under
class
8
to
which
a
rate
of
20
per
cent
applies
is
not
a
subject
of
these
proceedings.
In
my
judgment
this
aspect
of
the
reassessments
should
be
restored.
I
would
therefore
allow
the
appeal
and
dismiss
the
cross-appeal
with
costs
both
here
and
below
and
would
restore
the
assessments
or
reassessments
made
herein
by
the
Minister
of
National
Revenue
in
respect
of
the
respondent's
1974
and
1975
taxation
years.
Crown's
appeal
allowed;
respondent’s
cross-appeal
dismissed.
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