Noel
J.:-The
plaintiff
is
appealing
by
declaration
from
reassessments
for
its
1981,
1982,
1983
and
1984
taxation
years.
The
plaintiff
carries
on
a
business
in
Canada
producing
and
publishing
two
newspapers
which
are
distributed
free
to
readers
on
a
weekly
basis.
Nearly
all
the
income
associated
with
their
publication
comes
from
advertising
contracts
concluded
between
the
plaintiff
and
its
customers,
who
use
advertising
space
in
these
newspapers.
The
two
newspapers
have
a
regional
circulation
in
the
Mauricie
area.
Apart
from
the
fact
that
one
is
distributed
in
the
Shawinigan
vicinity
and
the
other
in
the
vicinity
of
Trois-Rivières/Cap-de-la-Madeleine,
the
circumstances
surrounding
their
publication
and
distribution
are
almost
identical.
Under
advertising
contracts,
some
of
which
were
entered
in
evidence,
the
plaintiff
undertakes
to
publish
advertisements
in
these
newspapers
for
its
customers
in
return
for
a
payment
calculated
on
the
basis
of
space
actually
used
at
so
much
a
line.
Seventy-two
to
75
per
cent
of
the
content
of
these
newspapers
consists
of
advertising,
the
rest
being
reserved
exclusively
for
journalistic
work
in
the
form
of
editorials,
features,
news
stories
and
news
of
a
regional
nature.
Of
the
space
reserved
for
advertising,
some
ten
to
12
per
cent
is
occupied
by
what
is
commonly
called
classified
advertisements,
the
rest
being
taken
up
by
occasional
advertising
and
advertising
by
customers
who
under
a
standard
advertising
contract
undertake
to
have
their
advertising
messages
published
in
various
issues.
Although
the
standard
contracts
which
were
entered
in
evidence
speak
of
commitments
for
a
year,
this
period
may
be
less
if
the
customer
wishes.
Under
these
standard
contracts
customers
undertake
to
have
the
minimum
number
of
agate
lines
indicated
by
them
published
in
a
given
period
in
the
issues
of
their
choice.
Since
the
rate
per
line
depends
on
the
number
of
lines
requested
by
the
customer,
the
contract
provides
that
the
rate
may
be
revised
upwards
or
downwards
in
accordance
with
the
rate
scale
determined
by
the
editor
if
during
the
period
the
customer
occupies
more
or
less
space
than
what
was
requested.
The
scale
is
determined
annually
but
the
editor
reserves
the
right
to
alter
it
at
any
time.
The
scale
card
which
was
entered
in
evidence
provided
in
general
for
a
fixed
rate
per
line
for
contracts
concluded
with
advertising
agencies
(the
"national"
scale)
and
for
publications
without
contract
(the
"general"
scale)
and
a
decreasing
rate
per
line
bracket
according
to
the
amount
of
space
used
for
customers
making
term
commitments
(the
"contract"
scale).
The
scale
card
also
indicates
special
rates
for
publication
of
business
cards,
addition
of
colour,
photographs
and
so
on.
In
many
cases
the
plaintiffs
only
function
is
that
of
reproducing
advertising
messages
supplied
by
advertisers
without
change.
This
is
true
inter
alia
of
the
publication
of
business
cards
and
the
content
of
classified
advertisements.
Certain
more
elaborate
advertising
messages
are
also
submitted
for
publication
in
final
form.
This
is
the
case
with
advertisements
from
an
advertisement
agency
acting
for
major
customers
as
part
of
provincial
or
national
advertising
campaigns.
Other
advertisements
require
the
plaintiff
to
become
involved
in
their
design
and
composition.
One
or
two
out
of
a
total
of
some
twenty
employees
work
on
this.
No
charge
is
shown
in
the
scale
for
their
services
apart
from
the
additional
specific
rate
for
special
effects
such
as
colour,
photographs
or
borders,
if
applicable.
The
papers
are
delivered
by
news
vendors
to
each
of
the
street
addresses
located
within
the
distribution
network.
The
printing
of
these
newspapers
is
verified
by
the
ODC
and
each
edition
reflects
this
certification.
At
the
relevant
time
the
two
newspapers
had
a
combined
circulation
of
some
63,000
copies.
During
the
taxation
years
in
question
the
plaintiff
published
these
two
newspapers
and
to
do
so
purchased
various
equipment.
In
calculating
its
income
for
the
relevant
taxation
years
it
considered
income
from
the
publication
of
these
newspapers
as
profit
from
manufacturing
or
processing,
claiming
the
investment
tax
credit
for
the
1982,
1983
and
1984
taxation
years.
By
his
notices
of
reassessment
the
Minister
of
National
Revenue
reassessed
the
plaintiff’s
taxable
income
on
the
basis
that
the
income
from
newspaper
distribution
did
not
come
from
the
sale
or
lease
of
goods
within
the
meaning
of
paragraph
125.1(3)(b)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-
71-72,
c.
63)
(the
’’Act”)
and
that
as
such
it
was
not
manufacturing
and
processing
profits
for
the
purpose
of
subsection
125.1(1).
For
the
same
reason
the
Minister
disallowed
the
investment
tax
credit
claimed
by
the
plaintiff
for
the
equipment
purchased
to
produce
the
newspapers
under
paragraph
127(10)(c),
and
refused
to
admit
it
under
Class
29
of
Schedule
II
of
the
Income
Tax
Regulations.
These
reassessments
were
affirmed
and
the
plaintiff
appealed
to
this
Court.
The
only
point
at
issue
in
the
case
at
bar
is
whether
the
plaintiff’s
activities
resulted
in
manufacturing
and
processing
profits
for
the
purposes
of
section
125.1.
To
be
successful
the
plaintiff
must
show
that
the
newspapers
it
produced
were
intended
for
"sale
or
lease”
within
the
meaning
of
paragraph
125.1(3)(a).
The
defendant
argued,
first,
that
since
the
newspapers
are
distributed
free
as
part
of
an
advertising
contract
they
are
not
subject
to
any
sale
or
lease.
The
plaintiff
conceded
there
was
no
sale
but
maintained
that
its
customers
lease
advertising
space
in
the
newspapers
and
that
as
such
they
are
for
lease
within
the
meaning
of
paragraph
125.1(3)(a).
Paragraph
125.1(3)(a)
defines
the
term
"Canadian
manufacturing
and
processing
profits"
as
follows:
125.1(3)(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....
[Emphasis
added.
I
Although
there
has
been
some
judicial
disagreement
as
to
the
scope
of
the
term
"goods
for
sale
or
lease"
within
the
meaning
of
the
foregoing
paragraph,
this
now
seems
to
have
been
resolved
in
light
of
the
Court
of
Appeal’s
judgment
in
Coopers
&
Lybrand
Ltd.
v.
Canada,
[1994]
2
C.T.C.
2244,
94
D.T.C.
6541
(T.C.C.).
In
that
case
Isaac
C.J.,
speaking
for
a
unanimous
Court,
said
the
following
at
page
2271
(D.T.C.
6548):
As
I
have
said,
Parliament
did
not
define
the
phrase
"for
sale
or
lease"
in
the
legislation.
How
then
should
its
meaning
be
determined?
We
are
invited
by
the
modern
rule
of
statutory
interpretation
to
give
those
words
their
ordinary
meaning.
But
we
are
dealing
with
a
commercial
statute
and
in
commerce
the
words
have
a
meaning
that
is
well
understood.
In
the
common
law,
"for
sale"
does
not
mean
"for
use
in
a
repair
process".
And
I
doubt
that
any
informed
commercial
person
would
seriously
say
that
the
manufacture
of
parts
to
be
used
to
repair
a
customer’s
defective
equipment
was
a
manufacture
of
those
parts
for
sale.
Strayer
J.
was
right,
in
my
respectful
view,
to
say
in
Crown
Tire
at
page
415
(D.T.C.
5428)
that
One
must
assume
that
Parliament,
in
speaking
of
"goods
for
sale
or
lease"
had
reference
to
the
general
law
of
sale
or
lease
to
give
greater
precision
to
this
phrase
in
particular
cases.
In
that
case
and
in
each
of
the
cases
cited
in
the
footnote
the
Court
was
confronted
by
what
in
Quebec
law
were
mixed
contracts
of
lease
of
work
and
sale.
Some
years
before
the
judgment
in
Coopers
&
Lybrand,
supra,
the
Court
of
Appeal
in
Nowsco,
supra,
had
adopted
the
reasoning
of
Reed
J.
in
Halliburton,
supra,
where
she
concluded
that:
1.
paragraph
125.
l(3)(a)
does
not
require
that
the
profits
in
question
derive
from
a
"contract
of
sale"
in
the
strictly
legal
sense
of
that
term;
2.
the
application
of
paragraph
125.1(3)(a)
is
not
limited
to
profits
from
a
sale
of
goods
as
such,
excluding
income
from
the
"sale"
of
manufactured
goods
in
connection
with
a
contract
for
another
purpose.
It
follows
from
this
that,
up
to
the
time
when
the
Court
of
Appeal
judgment
was
rendered
in
Coopers
&
Lybrand,
supra,
it
could
be
said
that
a
transaction
by
virtue
of
which
manufactured
goods
were
incidentally
"sold"
in
connection
with
a
contract
for
the
lease
or
hire
of
work
came
within
the
ambit
of
the
provision.
Since
then,
it
has
been
clear
that
only
a
contract
of
sale
understood
as
such
in
legal
terms
in
light
of
the
applicable
law
confers
the
benefit
mentioned
in
section
125.1.
A
fortiori,
therefore,
only
a
contract
of
lease
meeting
the
same
requirements
is
capable
of
coming
within
the
ambit
of
the
provision.
Clearly,
this
makes
the
plaintiff’s
task
more
difficult.
While
it
may
argue
that
under
the
advertising
contracts
between
it
and
its
customers
there
is
a
kind
of
lease
of
the
advertising
space
which
appears
in
its
newspapers,
it
must
also
persuade
the
Court
that
these
are
first
and
foremost
contracts
for
the
lease
of
property
in
Quebec
law.
The
question
of
whether
the
owner
of
a
newspaper
is
engaged
in
a
form
of
sale
when
he
allows
his
advertisers
to
occupy
advertising
space
in
his
newspaper
has
already
been
decided.
In
this
connection
the
two
parties
drew
the
Court’s
attention
to
the
decision
of
Noël
J.
in
Soleil
Ltée
v.
M.N.R.,
[1972]
C.T.C.
244,
72
D.T.C.
6207
(F.C.T.D.),
where
he
says
at
248
(D.T.C.
6210):
the
fact
remains
that
the
publication
of
advertisements
in
the
newspaper
does
not
constitute
a
true
sale
of
"goods
processed
or
manufactured",
such
as
that
which
occurs
on
sale
of
the
newspaper
itself
to
the
reader,
or
even
on
the
sale
of
circulars
to
the
advertiser.
In
fact,
one
aspect
is
lacking
which
is
essential
in
order
to
bring
the
amounts
paid
for
advertisements
inserted
in
the
taxpayer’s
newspaper
within
its
net
income
from
the
sale
of
processed
or
manufactured
goods,
in
that
it
is
paid
for
services
rendered,
and
not
for
goods
sold,
since
the
advertiser
receives
no
goods
except
the
benefit
of
using
the
newspaper’s
facilities
to
get
his
information
across
to
actual
or
potential
customers.
There
is
in
such
a
case
no
goods
which
change
hands,
and
the
advertiser
obtains
no
property
right
in
the
advertisement
paid
for
by
him
and
inserted
in
the
newspaper.
I
feel,
therefore,
that
it
is
more
true
to
say
that
where
advertisements
are
concerned,
the
newspaper
only
undertakes
to
perform
certain
services
for
the
advertiser,
namely
that
when
the
newspaper
is
printed
and
sold
it
will
contain
the
advertisement
ordered
by
the
advertiser.
On
appeal
from
this
judgment
the
Federal
Court
of
Appeal,
in
an
obiter,
made
the
matter
still
more
clear
as
follows:
We
are
in
complete
agreement
with
the
decision
of
the
Associate
Chief
Justice
on
the
appeal
as
it
was
argued
before
him
and
we
should
be
content
to
adopt
his
reasons.
As
it
seems
to
us,
the
appellant’s
argument
was
based
on
a
view
of
the
contract
with
its
advertisers
for
which
there
is
no
support.
The
appellant
dealt
with
its
advertisers
as
a
person
whose
business
consisted
in
producing
newspapers
and
selling
them
to
the
public.
As
such
a
person,
for
a
consideration,
it
agreed
to
put
an
advertisement
on
behalf
of
the
advertiser
in
its
(the
appellant’s)
newspaper
so
that,
when
a
member
of
the
public
got
the
newspaper,
the
advertiser’s
message
would,
it
might
be
hoped,
be
communicated
to
him.
In
this
contract,
there
is
no
sale
of
anything
to
the
advertiser.
According
to
that
judgment,
the
salient
feature
of
a
contract
for
advertising
in
newspapers
is
the
services
offered
by
a
newspaper
owner
in
conveying
the
advertising
message
of
his
advertisers.
However,
counsel
for
the
plaintiff
correctly
pointed
out
that
in
that
case
the
Court
had
before
it
only
the
question
of
whether
advertising
contracts
of
the
kind
at
issue
here
amounted
to
a
sale.
This
is
the
background
against
which
the
Court
concluded
that
these
advertising
contracts
were
more
like
contracts
for
services.
They
argued
that
the
same
analysis
based
on
the
concepts
underlying
a
contract
for
the
lease
of
property
leads
to
the
conclusion
that
these
were
contracts
for
the
lease
of
advertising
space
rather
than
contracts
for
services.
To
this
effect
counsel
for
the
plaintiff
cited
the
opinion
expressed
by
Léon
Faribault
in
his
Traité
de
Droit
civil
du
Québec.
In
a
chapter
dealing
with
the
legal
effects
of
mixed
contracts
the
writer
makes
the
following
comment
about
the
advertising
contract:
When
a
newspaper
owner
rents
someone
newspaper
space
for
the
insertion
of
an
advertisement
this
clearly
is
a
lease
of
a
thing.
The
same
is
true
when
an
owner
gives
someone
the
right
to
post
an
advertisement
on
his
property.
The
second
example
given
by
the
writer
seems
to
me
more
apt
than
the
first.
Though
under
the
advertising
contracts
between
the
plaintiff
and
its
advertisers
the
right
to
occupy
certain
space
in
the
plaintiff’s
newspapers
is
given
to
the
advertisers,
this
is
only
one
aspect
of
the
contracts.
The
space
so
leased
would
have
no
value
as
such
to
the
advertiser.
It
is
the
printing
of
the
advertising
message
in
that
space
by
the
plaintiff
together
with
the
distribution
network
created
by
it
which
enables
advertisers
to
get
their
advertising
messages
across
and
that
is
the
subject-matter
of
the
contract.
Both
the
printing
of
the
message
in
its
newspapers
and
their
distribution
are
part
of
the
service
offered
by
the
plaintiff,
which
is
to
convey
its
advertisers’
advertising
messages
in
the
newspapers
produced
by
it.
Aside
from
this,
however,
since
the
newspapers
are
distributed
free
and
their
only
commercial
purpose
is
to
convey
the
advertisers’
message,
the
plaintiff
prints
for
this
purpose
not
only
those
messages
but
the
entire
journalistic
content
of
its
newspapers.
It
is
this
journalistic
content
which
arouses
the
interest
of
readers
and
which
gives
the
plaintiff’s
customers’
advertisements
the
visibility
sought
by
them.
On
the
evidence,
a
minimum
of
25
per
cent
of
the
space
in
the
newspapers
was
reserved
for
this
purpose.
Accordingly,
the
service
offered
by
the
plaintiff
is
not
limited
to
printing
its
customers’
advertising
messages
but
also
consists
of
doing
so
in
association
with
journalism
which
is
able
to
capture
and
hold
the
interests
of
readers,
so
as
to
more
readily
convey
the
customers’
advertising.
All
this
input
indicates
an
elaborate
service
in
which
the
provision
of
space
in
the
newspapers
is
a
necessary
but
incidental
part
of
the
principal
purpose
of
the
contracts.
To
treat
these
contracts
as
contracts
for
the
lease
of
property
in
Quebec
law
would
be
disregard
their
purpose.
It
therefore
seems
clear
that
the
newspapers
filed
by
the
plaintiff
are
not
for
lease.
They
are
to
convey
customers’
advertising
as
part
of
the
service
offered
by
the
plaintiff,
and
that
is
why
they
are
produced.
As
such,
their
production
is
not
for
lease
within
the
meaning
of
paragraph
125.1(3)(a).
Before
the
Court
of
Appeal’s
judgment
in
Coopers
&
Lybrand,
supra,
it
could
be
said
that
any
form
of
sale
or
lease,
even
if
it
was
incidentally
included
in
a
contract
with
a
completely
different
purpose,
could
give
rise
to
the
application
of
paragraph
125.1(3)(a).
Strictly
speaking,
this
might
have
enabled
me
to
come
to
a
different
conclusion.
However,
the
contrary
is
now
established
and
as
I
am
bound
by
the
earlier
judgment
I
can
only
dismiss
the
plaintiffs
appeal.
Additionally,
I
approve
the
consent
by
the
parties
who
asked
that
if
the
appeal
were
dismissed
the
plaintiff’s
production
equipment
should
be
included
in
Class
8
of
Schedule
II
of
the
Regulations
for
depreciation
purposes.
The
appeal
is
dismissed
with
costs
against
the
plaintiff.
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