Mogan, J.T.C.C.:—This is an appeal in respect of the appellant's 1988 taxation year. The respondent admitted all of the facts alleged in the notice of appeal and no evidence (oral or documentary) was entered at the hearing. The appeal was argued on the facts admitted and agreed.
The appellant is a company incorporated under the laws of Ontario and its principal business is the development and manufacture of computer software for real estate management companies. In addition, the appellant conducts scientific research and experimental development in a portion of the building it owns and occupies in Markham, Ontario. In 1988, the appellant incurred interest expense in the amount of $398,341 relating to the Markham building; and it characterized a portion ($295,697) of that amount as a "qualified expenditure" in calculating an investment tax credit and refundable investment tax credit for the year. The appellant claims that it used 74.3 per cent of the building for the prosecution of scientific research and experimental development and, therefore, the appellant determined the precise amount of $295,697 by taking 74.3 per cent of $398,341. The appeal depends upon the characterization of this amount of approximately $295,000 as being either a “ qualified expenditure” or a“ "prescribed expenditure” in accordance with certain provisions of the Income Tax Act and the Income Tax Regulations.
The investment tax credit is found in subsection 127(5) of the Act and the refundable investment tax credit is in section 127.1. Subsection 127(9) defines the phrase “ qualified expenditure” as follows:
127 (9) In this section and section 127.1,
“qualified expenditure” means an expenditure in respect of scientific research and experimental development made by a taxpayer after March 31, 1977 that qualifies as an expenditure described in paragraph 37(1)(a) or subparagraph 37(1)(b)(i), but does not include
(a) a prescribed expenditure, nor
(b) ... .
The crux of the appeal is the interpretation of certain words used in the description of a“ prescribed expenditure” in Regulation 2902. Omitting many words which are not necessary for the purposes of this appeal, Regulation 2902 reads:
2902 For the purposes of the definition “ qualified expenditure" in subsection 127(9) of the Act, a prescribed expenditure is
(a) an expenditure of a current nature incurred by a taxpayer in respect of
(i) the general administration or management of a business, including
(A) an administrative salary or wages and related benefits in respect of a person whose duties are not all or substantially all directed to the prosecution of scientific research and experimental development, except to the extent that such expenditure is described in subsection 2900(2) or (3),
(B) a legal or accounting fee,
(C) an amount described in any of paragraphs 20(1)(c) to of the Act, (D) an entertainment expense,
(E) an advertising or selling expense,
(F) a convention expense,
(G) a due or fee in respect of membership in a scientific or technical society or organization, and
(H) a fine or penalty, or
(ii) . . .
except any such expenditure incurred by a taxpayer who derives all or substantially all of his revenue from the prosecution of scientific research and experimental development or the sale of rights in or arising out of scientific research and experimental development carried on by him;
The respondent took the position that the amount in issue was a "prescribed expenditure" because it was of current nature incurred in respect of the “ general administration or management" of the appellants business. During the hearing, the appellant agreed that the amount in issue was in fact of a current nature. Therefore, the issue in this appeal is reduced to whether the portion ($295,697) of the interest expense relating to the portion of the building used by the appellant for purposes of scientific research and experimental development was an expense in relation to the “general administration or management" of the appellants business. There does not seem to be any doubt that the amount in issue would fall within clause 2902(a)(i)(C) as an amount described in paragraph 20(1)(c) of the Act.
The appellants argument may be summarized as follows. A "prescribed expenditure” in Regulation 2902 must satisfy the following two conditions:
a) it is of a current nature; and
b) it is in respect of the general administration or management of a business.
An ordinary reading of Regulation 2902(a)(i) would require that the items listed in clauses (A) to (H), and in particular clause (C) which refers to the interest expense, should be considered in light of the word "including" that precedes the listed items. It is the appellants position that each item listed in (A) through to (H) was merely an example of the kind of expenditure that would fall within the ambit of prescribed expenditure” if it satisfied the above two conditions. Counsel for the appellant argued that if the draftsman had intended to include items (A) to (H) without regard to whether they complied with the two conditions, he would have substituted the words "and includes" in place of the word “including” in Regulation 2902(a)(i). In support of this position, counsel for the appellant cited the following passage from The Construction of Statutes (1983) by Elmer A. Driedger (at page 21):
But use of the word including in a definition, rather than includes, can create ambiguity. Thus in "A means B including C there is doubt as to what does the including; is it the word defined, or the definition? If the former, and includes, and if the latter, and would be clearer.
The appellant therefore submitted that Regulation 2902(a)(i) creates ambiguity and, as a result, the interpretation of any ambiguous provision should be resolved in favour of the taxpayer. He relied on certain statements in Johns- Manville Canada Inc. v. The Queen,  2 C.T.C. 111, 85 DTC 5373, at page 126 (D.T.C. 5384) and Canterra Energy Ltd v. The Queen,  1 C.T.C. 89, 87 D.T.C. 5019, at page 95 (D.T.C. 5023) to support his argument concerning the construction of an ambiguous provision in a taxing statute.
In my view, there is no ambiguity in the provision which I am required to construe because the language in Regulation 2902(a)(i) is clear and unequivocal in its description of a "prescribed expenditure”. In the passage from E.A. Driedger's book quoted above, the most important word is the first word “but” because the learned author is himself stating an exception to a general rule when he writes" But use of the word including . . . can create ambiguity". In the immediately preceding passage from the same book (at pages 20-21), the learned author makes the following statements:
It seems to be generally accepted now that means is restrictive and includes is enlarging.
A definition that a word or expression means one thing and then goes on to say that it includes something else is in reality a double definition; it is commonly found, and is not subject to the objection to means and includes, since the restriction and enlargement are separate and not fused. The definition to start is restrictive, but then, to remove doubt, an inclusive element is added. Sometimes the added definition is negative—but does not include.
It was argued that the word including restricted the words preceding it. The cou rt rejected the ejusdem generis doctrine, and as to including, Hughes, C.J.N.B. said:
” Including" instead of limiting has the opposite effect. In Re Grindlay Masten, JA., adopted the meaning of "including" accepted by Mulock, C.J.O., in delivering the judgment of the Ontario Court of Appeal in Philips v. Joseph, which I think is applicable . . . The word including” . . . in my opinion means something in addition . .. The weight of authorities I think show that the word 'including' is ordinarily construed as an enlargement of what had preceded it . . . (It) is not a word of limitation. Rather it is a word of enlargement, and in ordinary signification implies that something else has been given beyond the general language which precedes it.
The passage cited by counsel for the appellant stated an exception to the general rule that the word “including” is an expansive term that broadens the words directly preceding it. A common sense reading of Regulation 2902(a)(i) indicates that the items listed in clauses (A) to (H) are not merely examples of a current expenditure “in respect of the general administration or management of a business”. The word including directly following that phrase is expansive in and of itself. In my opinion, it was the draftsman's intention that each item in clauses (A) to (H) would be a prescribed expenditure if it was of a current nature without regard to whether it was in respect of the general administration or management of a business.
Counsel for the appellant also examined the words "general administration or management" as they appear in Regulation 2902(a)(i). He relied on definitions contained in The Concise Oxford Dictionary, 7th ed. (1988) and Black's Law Dictionary, 5th ed. (1983) to demonstrate that the expression "general administration or management" referred to the overall operation of a business and not a specific activity like scientific research and experimental development. He argued that if a particular expenditure was not in respect of the overall operation of a business, then it was not a "prescribed expenditure” within the meaning of Regulation 2902 because it was not in respect of the general administration or management of the business. On that basis, he argued that a specific portion ($295,697) of the overall interest expense was attributable to the specific portion of the appellant's building used for scientific research and experimental development and, therefore, that specific portion ($295,697) of the overall interest expense was not a prescribed expenditure.
In my view, there are no admitted facts and there is no evidence to support this argument. The relevant facts are as follows:
1. In 1988 the appellant incurred interest expense in the amount of $398,341
relating to its Markham building.
2. The $295,697 of mortgage interest expense which the appellant claims as
a“ "qualified expenditure" was determined by multiplying the total mortgage interest expense ($398,341) by 74.3 per cent, which is the percentage of the building that the appellant claims it used for scientific research and experimental development.
It is apparent from these facts that the appellant at some time has borrowed a very substantial amount of money on which the annual interest payable in 1988 was $398,341; and the appellant has granted a mortgage on its building at Markham, Ontario as security for the loan. There is no evidence, however, concerning how the borrowed funds were used. During argument, I sug- gested to the appellant’s counsel the possibility that the borrowed funds might ave been used to construct a production facility in some other city. If that possibility were true, then no portion of the overall interest expense ($398,341) would be attributable to any particularly business activity performed in the appellants building at Markham; and the percentage of that building used for any particular purpose would be irrelevant. In the absence of evidence, I cannot assume that any portion of the overall interest expense was related to any activity performed in the Markham building.
Even if it had been proven that all of the borrowed funds were used to construct or purchase the building at Markham, I might have concluded that all of the annual interest payable in 1988 ($398,341) was in respect of the general administration or management of the appellants business because (i) the appellants principal business is the development and manufacture of computer software for real estate management companies; and (ii) there was no evidence concerning the proportionate use of the building from the time of its acquisition by the appellant up to 1988. During the period of the appellants ownership of the Markham building, it is possible that the percentage of the building used for scientific research and experimental development was not always 74.3 per cent. When scientific research and experimental development is only ancillary to the appellants principal business, I am inclined to the view that the cost (i.e., annual interest) of money borrowed to acquire the site of the appellants head office and principal place of business is an expenditure in respect of the general administration or management of its business.
Having reached the conclusion that the amount in issue is a "prescribed expenditure” within the meaning of Income Tax Regulation 2902(a), that same amount is excluded from the definition of "qualified expenditure” in subsection 127(9) of the Income Tax Act, and may not be the basis for an investment tax credit. The appeal is dismissed.