Harvey C. Smith Drugs Ltd. v. Minister of National Revenue, [1986] 1 CTC 2339, 86 DTC 1243

Brulé, T.C.J.:—The appellant is herein appealing an assessment for its 1979 taxation year wherein it sought to deduct the sum of $1,450 from the tax otherwise payable by it as a manufacturing and processing deduction pursuant to section 125.1 of the Income Tax Act.

ISSUE

The issue in this appeal is whether or not at least ten per cent of the appellant’s gross revenue from all active businesses carried on by it in 1979 qualified under subparagraph 125.1 (3)(b)(x) of the Income Tax Act.

This subparagraph provides that ""manufacturing and processing” does not include:

125.1(3)(b)

(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.

To meet the ten per cent de minimus test the dispensing by the appellant by prescription of tablets and capsules must be considered to be “manufac- turing and processing” within the meaning of those words as used in section 125.1 of the Act.

The questions put by the appellant to be answered by this Court in order to dispose of this appeal are as follows:

(i) Is the dispensing of prescription tablets or capsules “processing” for purposes of section 125.1 of the Act?

(ii) Is “packaging” of prescription tablets and capsules “processing” for purposes of section 125.1 of the Act?

(iii) Is the timing of the “packaging” whether at the wholesale or retail level, relevant?

(iv) Is it relevant whether items are packaged in standard size quantities or in quantities as required by specific customers?

(v) In dispensing drugs in tablet or capsule form, are pharmacists “packaging” or “processing” or both?

(vi) If “packaging” and “processing” demand a special technique, do pharmacists engage in a special technique when dispensing drugs in tablet or capsule form?

(vii) Are pharmacists, when dispensing drugs in tablet form, “processing” goods for sale for purposes of section 125.1 of the Act?

APPELLANT'S POSITION

One of the functions of a pharmacist is to provide prescription sales of various categories including those items sold in original packages, liquids purchased in bulk and dispensed in smaller bottles, ointments and creams purchased in bulk and dispensed in smaller jars, reconstituting powders, compounding prescriptions such as ointments and syrups and dispensing tablets and capsules from bulk containers in smaller quantities.

This latter category of dispensing prescription tablets and capsules which amounted to a large percentage of the appellant’s gross revenue meets the ten per cent de minimus test and should be considered to be manufacturing or processing for the purpose of the manufacturing and processing deduction.

Counsel for the appellant submitted that a pharmacist is a highly trained individual in a rigorously controlled profession and by law is the only person permitted to dispense prescription drugs. He is the person solely responsible for packaging and proper regulated labelling.

It was argued that the process by which pharmacists dispense prescription drugs in tablet or capsule form obviously adds to the marketability of the product. It is this process, including packaging, and this process alone that allows such drugs to be dispensed at the retail level. The pharmacist and his input are essential to the sale of prescription drugs. While he does not manufacture the product the process by which the product is made ready for sale at the retail level is solely the jurisdiction of the pharmacist.

The appellant’s counsel pointed out to the Court that section 125.1 neither defines the words “manufacturing” nor “processing”, but that Regulation 5202 made under this section is instructive in that it defines “qualified activities” and includes inter alia:

(a) . . .

(iv) inspecting and packaging of finished goods.

This, it was said, is exactly what a pharmacist does in dispensing prescription drugs in tablet form.

In the Tax Appeal Board decision of W.G. Thompson & Sons Limited v. M.N.R., 41 Tax A.B.C. 1; 66 D.T.C. 291, it was held that packaging is “processing”.

It was further suggested that it is instructive to review Revenue Canada’s position with respect to section 125.1 as set out in Interpretation Bulletin IT-145 published in 1974. Paragraph 6 of the bulletin is as follows:

The Department views packaging and wrapping as processing provided they are carried out in conjunction with other manufacturing or processing activities. As well, the activities of breaking bulk and repackaging are generally considered to be processing.

Authority for considering Interpretation Bulletins is found in J. Harel v. The Deputy Minister of Revenue of the Province of Quebec, [1978] 1 S.C.R. 851; [1977] C.T.C. 441, wherein de Grandpré, J. said that administrative policy and interpretation are not determinative but are entitled to weight and can be an “important factor” in case of doubt about the meaning of legislation. This position was approved in G.A. Nowegijick v. The Queen, [1983] C.T.C. 20; 83 D.T.C. 5041, and Royal Trust v. The Queen, [1983] C.T.C. 159; 83 D.T.C. 5172, decisions of the Supreme Court of Canada and the Federal Court of Appeal, respectively.

It was pointed out that Revenue Canada made a complete about-face with the withdrawal of IT-145 and the publication of IT-145R in June 1981. In the revised bulletin drugstore operations, in dispensing prescriptions as envisaged in this appeal, are explicitly excluded as qualifying for manufacturing and processing benefits.

The case of Federal Farms Limited v. M.N.R., [1966] C.T.C. 62; 66 D.T.C. 5068 was cited as authority that the word “processing” was not susceptible to any technical meaning, but was used in its “ordinary” sense which the Court held was to convert the subject property into marketable form by a particular method, system or technique of preparation, handling or other treatment. The procedure of the pharmacist fits into this description.

The appellant said that the dispensing of prescription drugs is clearly “processing” for purposes of section 125.1 and authority can be found in the case of Admiral Steel Products Limited v. M.N.R., 40 Tax A.B.C. 322; 66 D.T.C. 174, where the cutting and shearing of steel to retail customers’ specifications was processing, while in the case of M. Kimel v. M.N.R., [1982] C.T.C. 2076; 82 D.T.C. 1086, the cutting of fabric was not considered as “processing”.

In this latter case, there was no “packaging” while in the present case there is by the pharmacist when he takes pills and capsules purchased in bulk form and puts these in smaller containers, but as set out in the Thompson case (supra) “packaging” was considered “processing”.

Counsel for the appellant made reference to what he said was an emerging approach to interpretation of tax statutes described as the “‘object and spirit” approach condoned by Estey, J. in Stubart Investments Limited v. The Queen, [1984] C.T.C. 294; 84 D.T.C. 6305. Reference was also made to Estey, J.’s comments in The Queen v. Malloney’s Studio Limited, [1979] C.T.C. 206; 79 D.T.C. 5124, wherein he appears to uphold the doctrine of strict interpretation of taxing statutes.

By the assessment of the appellant the Minister is attempting to limit the word “processing” as found in section 125.1 and there is nothing to suggest a limitation. As Christie, A.C.J. said in Susan Bracken v. M.N.R., [1984] C.T.C. 2922 at 2928; 84 D.T.C. 1813 at 1818, to find limitation requires:

. .. interpretive contortionism designed to arrive at a subjective or quasi- subjective notion regarding the object or purpose . . .

of section 125.1

RESPONDENTS POSITION

Counsel for the Minister maintained that the dispensing of tablets and capsules by prescription is neither manufacturing nor processing within the meaning of those words as used in section 125.1 of the Income Tax Act in that the operations of the appellant:

(i) do not result in the production of the tablets or capsules; and

(ii) do not bring about any change in the form or appearance or other characteristic of the tablets or capsules.

It was suggested that to qualify under the section the deductionprovisions ought to be strictly construed against the taxpayer and as authority cited the cases of Lumbers v. M.N.R., [1944] C.T.C. 67; 2 D.T.C. 652, a decision of the Supreme Court of Canada, and W.A. Sheaffer Pen Company of Canada v. M.N.R., [1953] C.T.C. 345; 7 D.T.C. 1223, a decision of the Exchequer Court.

While there is no statutory definition (except by exclusion) of the words “manufacturing or processing . . . of goods” their ordinary meaning should be taken and the meaning most appropriate in the context of the Act. In support of this, the following cases were referred to:

Stubart Investments Limited v. The Queen, [1984] C.T.C. 294; 84 D.T.C. 6305, Federal Farms Limited v. M.N.R., 67 D.T.C. 5311, both decisions of the Supreme Court of Canada. Qualico Developments Ltd. v. The Queen, [1984] C.T.C. 122; 84 D.T.C. 6119, a case heard by the Federal Court of Appeal, and Controlled Foods Corporation Limited v. The Queen, [1979] C.T.C. 270; 79 D.T.C. 5189 (F.C.T.D.) and on appeal at [1980] C.T.C. 491; 80 D.T.C. 6373 (F.C.A.).

Counsel then proceeded to refer to the dictionary meaning of the words “manufacture” and “processing”. (As it was admitted that the appellant did not “manufacture” I will not deal with this aspect.)

The Shorter Oxford English Dictionary, Oxford, Clarendon Press, 1973 Vol. Il, p. 1677 defines “process” as

1. "the fact of going on or being carried on; progress course . . . a continuous and regular or succession of actions, taking place or carried on in a definite manner; a continuous (natural or artificial) operation or series of operations . . . a particular method of operation in any manufacture . . .”

2. “‘to treat by a special process eg. to reproduce (a drawing etc.) by a mechanical or photographic process . . .”

The appellant’s (sic) counsel then went on to suggest that:

The Courts have recognized the principle that the word "processing” in section 125.1 is used by Parliament:

. in the ordinary parlance of treating or preparing, putting into marketable form

Canadian Wirevision Limited v. The Queen, 78 D.T.C. 6113 at 6118 (F.C.T.D.) and upheld on appeal 79 D.T.C. 5101 (F.C.A.)

and further, that operations, to constitute processing, must:

. . . bring about (a) change in the form, appearance or other characteristics of the (good) ....

Kimel Limited et al. v. M.N.R., 82 D.T.C. 1086 at 1089 (T.C.C.)

and, finally, Mr. Justice Rouleau found expert testimony more helpful than dictionary definitions in the decision of the Federal Court in Mother’s Pizza Parlour (London) Limited v. The Queen, 85 D.T.C. 5271, wherein it was determined that the preparation of good; that is, pizza and lasagna for immediate consumption was not “processing even if that term is given a very broad meaning” for the purposes of qualifying for the investment tax credit where the expert testified that:

. . . food processing includes some element of transformation or preservation to allow wide distribution at a later date.

In the present case, the Minister, through the expert testimony of a Mr. R.R. Jalbert, who provides consulting services to the pharmaceutical industry in the areas of regulatory affairs and quality control, gave an opinion as follows:

The terms manufacturing and processing, as they are generally understood by those involved in the drug industry, refer to the operations that change the chemical ingredients to produce a drug in dosage form. This involves physical or chemical changes to the ingredients to create a drug.

Manufacturing and processing involves weighing the ingredients according to a formula, blending, granulating, sizing (sieving) and compressing the materials into tablets or filling the capsules to produce a drug. Through these processes, the pharmaceutical manufacturer creates the drug in dosage form for the administration in individual doses to a patient. Furthermore, the manufacturing and processing of the ingredients takes place in specialized rooms with specialized equipment within the pharmaceutical manufacturing plant.

The difference between drug manufacturing and the activities of a registered pharmacist is that the objective of drug manufacturing is to create a drug in dosage form. The objective of the activities of a registered pharmacist in dispensing a drug is to fill a prescription for a patient with the proper drug as prescribed by the physician. The pharmacist is not manufacturing or processing a drug as he dispenses the drug in the same dosage form as he receives it and the packaging and labelling performed by him does not change or alter the drug.

For these reasons, I am of the opinion that a registered pharmacist, in a retail drug store, is not engaged in manufacturing or processing a drug as these terms are used in the pharmaceutical industry.

The judicial interpretations set out above, along with the expert opinion, it was submitted, are consistent with the dictionary definition of the word “processing” in that there must be an element of change in form, composition or quality of the good. This, it was suggested, is further consistent with:

(i) the fact that “manufacturing” is associated with “processing” throughout section 125.1 with the result that those words take their colour and meaning from each other; and,

E.A. Dreidger, Construction of Statutes, Second Editon, 1983 at p. 109

(ii) the intent of Parliament which was to provide an incentive to industries engaged in “manufacturing” or “processing” so as to stimulate growth and employment;

Mother's Pizza Parlour (London) Limited, supra

Tsuda Canada Ltd. v. M.N.R., 76 D.T.C. 1010 at 1017 (T.R.B.)

Budget Speech, The Honourable John N. Turner, Minister of Finance, House of Commons, May 18, 1972.

(iii) the scheme of section 125.1 and related regulations whereby certain activities such as the selling of finished goods and purchase and resale operations are excluded from the ambit of activities which qualify for the manufacturing and processing tax credit.

Regulation 5202 “qualified activities”: d, g

The appellant’s activities in dispensing prescription tablets and capsules, it was submitted, are not those which may reasonably be considered to be “processing” within the meaning of section 125.1. In particular:

(i) the tablets and capsules are received by the pharmacist in dosage form with the result that the qualitative and quantitative composition of the tablets and capsules have already been determined and produced;

(ii) the dispensing operations of the Appellant do not effect a further change in the form of composition of the tablets or capsules but ensure a safe and proper distribution and allocation of the tablets or capsules to the public.

The tablets or capsules received by the Appellant are already in marketable form. The tablets or capsules are in the form as will be ingested by the ultimate user. Further, by definition, they have been marketed as they have been sold to the pharmacist. The operations of the pharmacist ensure the proper and orderly distribution of the tablets or capsules to the public.

The advanced level of skill and training required by a pharmacist dispensing prescription tablets and capsules, as well as the regulatory environment under which a pharmacist operates, relates to ensuring that the distribution of drugs to the public is orderly and proper (that is, strictly in accordance with the prescription) but does not relate to effecting a change in the form or composition of the tablets or capsules.

Further, it was submitted that the operations of the appellant are similar to those of other pharmacists and, in essence, are similar to those involved in other retailing operations, notwithstanding that the pharmacist, in order to ensure that the “retailing” is carried out properly, must be knowledgeable, highly skilled and trained.

ANALYSIS

It was pointed out by the appellant that until 1979 the respondent considered all dispensing of prescription drugs by pharmacists to be “processing” for purposes of section 125.1

On February 5, 1974, the Department of National Revenue published Interpretation Bulletin IT-145 wherein it discussed the meaning of “manufacturing or processing”. At paragaph 5, it states:

. . . processing of goods usually refers to a technique of preparation, handling or other activity designed to effect a physical or chemical change in an article or substance,

and at paragraph 6:

. . . the activities of breaking bulk and repackaging are generally considered to be processing.

On June 19, 1981, the Department of National Revenue updated IT-145 with the publication of IT-145R. On the definition of “manufacturing and processing” it states at paragraph 5:

The activities of breaking bulk and repackaging for subsequent resale where there is a systematic procedure to make a product more marketable are generally considered to be procesing. However, the filling of orders from bulk inventories is not viewed as processing where the activities involved are nothing more than counting or measuring and packaging.

At paragraph 41 of IT-145R, the Department states, specifically with respect to drugstores, that:

The mixing of various liquids or compounds when preparing a drug prescription is considered to constitute manufacturing or processing. However, the filling of prescriptions by placing labels on products already in their own container or by the placing of pills, capsules or liquids purchased in bulk into small containers and labelling them is not considered to qualify as manufacturing or processing. Where a corporation has considered activities referred to in the previous sentence as qualified activities in computing their manufacturing and processing deduction in previous years, this will be accepted by the Department for taxation years ending prior to January 1, 1979.

The appellant argued that the respondent's marked departure in IT-145R from its position in IT-145 with respect to the treatment of drugstores is tantamount to amending the Income Tax Act by a change in policy. It appears to me, however, that the respondent is changing its interpretation of the Act without changing the Act itself and this it is quite entitled to do. Of course, whether or not the respondent is correct in its interpretation of the Act is another matter altogether.

DEFINITION OF MANUFACTURING AND PROCESSING

The terms “manufacturing and processing” are not defined in the Act. In order to adduce their meaning as E.A. Dreidger put it in Construction of Statutes, 2nd ed. (1983) at page 87:

. . . there is only one principle or approach, namely, the words of (the) Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.

The true intention of Parliament is the overriding consideration in this case. The Court must determine whether or not it was intended for the manufacturing and processing credit to afford the various drugstores in this country a substantial tax advantage for the activity of dispensing capsules and tablets by prescription from bulk containers in smaller quantities to the retail customer. In order to answer that question, it is important to examine the object or social purpose of the manufacturing and processing credit. To use the words of Lord Edmund-Davies:

A statute does not exist in limbo. It has a background, it rests on an assumption that it will operate only in a certain climate and that circumstances of a certain sort will prevail. Morris v. Beardmore [1981] T.C. 446 at 459.

In Escoigne Properties v. C.I.R., [1958] 1 All E.R. 406 at 414, Lord Denning said:

A statute is not passed in a vacuum, but in a framework of circumstances, so as to give a remedy for a known state of affairs. To arrive at its true meaning, you should know the circumstances with reference to which the words were used; and what was the object apppearing from those circumstances, which Parliament had in view . . . But how are the courts to know what were the circumstances with reference to which the words were used? And what was the object Parliament had in view? . . . All that the courts can do is to take judicial notice of the previous state of the law and of other matters generally known to well informed people.”

Object or social purpose:

It would seem generally accepted today based on the various judicial interpretations of the object or social purpose of the manufacturing and processing credit that it was introduced as a tax incentive, in an effort to help the various manufacturers and processors maintain their competitive positions relative to those of other industrialized nations with a view to the creation or at least to the protection of Canadian jobs. As A.W. Prociuk, Q.C. put it in Tsuda Canada Ltd. v. M.N.R., [1975] C.T.C. 2384 at 2387; 76 D.T.C. 1010 at 1012 (T.R.B.):

There can be no doubt that the deduction under section 125.1 is a tax incentive. It is, I suggest for the purpose of inducing actual manufacturers and processors to expand and improve their operations and thus provide more jobs for the Canadian labour force . . .

See also: Federal Farms Ltd. v. M.N.R., [1966] C.T.C. 62; 66 D.T.C. 5068 (Ex. Ct.), Mother’s Pizza Parlour (London) Limited v. The Queen, [1985] 1 C.T.C. 361; 85 D.T.C. 5271 (F.C.T.D.), M. Kimel Limited and Latter Investments Limited v. M.N.R., [1982] C.T.C. 2076; 82 D.T.C. 1086 (T.R.B.), Admiral Steel Products Ltd. v. M.N.R., 40 Tax A.B.C. 322; 66 D.T.C. 174 (T.A.B.).

Grammatical and ordinary sense:

As was stated before that the activities of the Appellant do not consist of manufacturing, and so admitted by his counsel. I will address myself, therefore, solely to the interpretation of the word “processing”.

Various interpretations of the word “processing”, in the context of section 125.1 of the Income Tax Act have been suggested by the cases over the years (Federal Farms Ltd. v. M.N.R., [1966] C.T.C. 62; 66 D.T.C. 5068 (Ex. Ct.), W.G. Thompson & Sons Limited v. M.N.R., 41 Tax A.B.C. 1; 66 D.T.C. 291 (T.A.B.), M. Kimel Limited et al. v. M.N.R., [1982] C.T.C. 2076; 82 D.T.C. 1086 (T.T.C.)).

The appellant argued, based on these interpretations, that since the word “processing” is not defined in the Act its ordinary dictionary meaning must be adopted and that the activities of the appellant clearly fall within that definition.

The problem with limiting ourselves to this approach is that the ordinary sense of the word “processing” is so general that, in the words of J.O. Weldon, Q.C.;

It readily lends itself to any commercial operation which is made up of a series of steps. W.G. Thompson & Sons Limited v. M.N.R. (supra).

If one were to retain the ordinary meaning of the word “processing” as the only guide to its interpretation there would, of course, be very little in our society that could not be categorized as some form of processing. What the Court must do is to draw a line between what is and what is not “processing” in the context of the Act, based on the facts of the case.

Guidelines for interpretation

The word “process” as J.O. Weldon, Q.C. said in the Thompson case (supra) at 297:

. is a word . . . which not only has a broad meaning to begin with, but has an ever-increasing range of meaning, and so is almost impossible to define.

It is possible, however, to highlight certain guidelines for its interpretation.

The first is found in the question: — Does the process change the product in its form, appearance or other characteristic? (Kimel Limited et al. v. M.N.R.) (supra). It is essential, in the context of section 125.1, that the process, or at least part of the process, change the product in “its form, appearance or other characteristic”. I say “part of the process” in that if a corporate taxpayer were involved in the preparation of fresh vegetables, for example, as was the case in Federal Farms Ltd. v. M.N.R., (supra) and one of the steps in their preparation consisted of packaging the vegetables, then the packaging activity would be considered “processing” even though it did not change it. I suggest that this is what is meant by “in connection with the manufacturing and processing . . . of goods . . .” referred to in Regulation 5202 — “qualified activity”.

In the case of Mother’s Pizza Parlour (London) Limited v. The Queen (supra), Rouleau, J. determined whether or not certain buildings leased by the appellant were used for the “processing of goods for sale”. In the course of his reasons, he said of the Federal Farms case (supra) as follows at 369 (D.T.C. 5277):

Federal Farms may be distinguished from the present cases on two key points. First, the integrated market gardening corporation in question was involved in both the primary and secondary stages of food production. In contrast, Mother's Pizza Parlours are retail sales and service operations which prepare meals for immediate sale to the public as finished goods. Second, the operations performed in Federal Farms included washing and grading to facilitate later use, spraying to retard bacterial growth and increase shelf life and packaging for the wholesale market. It is primarily the spraying and packaging for wholesale distribution of the vegetables which distinguishes Federal Farms operation from the activities carried out in the buildings in the present cases.

It seems to me that the Federal Farms case can be distinguished from the present case on the same two points. In fact, that the appellant runs a retail sales operation dispensing pills that are already in dosage form when received from the manufacturers makes it all the more evident that neither the form, appearance or other characteristic of the product is being changed by the activities of the appellant.

The second guideline to consider is: — Does the process make the product more marketable? (Admiral Steel Products Limited v. M.N.R. (supra). The marketability of the product is an economic concept, not a legal one. For instance, the legal requirement that a product be packaged in a transparent container does not increase the intrinsic economic worth or marketability of a product, although it may be the only legal way of getting the product to market.

It is important to establish the economic purpose of a particular activity in order to determine whether or not it consists of processing.

When a pharmacist mixes distilled water with an antibiotic powder to make a new product, say amoxicillin, he would then be processing. If a doctor prescribed a child the amoxicillin, the distilled water or the antibiotic powder, taken alone, would be a completely useless remedy. Clearly, the economic purpose of mixing the distilled water with the antibiotic powder is to make the product more usable, more marketable.

On the other hand, when a pharmacist purchases antibiotic powder in the form of capsules, then it is difficult to understand what he could do to those capsules to increase their economic worth. In fact he is proscribed by law from tampering with the capsules. Of course the pharmacist will check the capsules, package them and label the package, but this has not, from an economic point of view, made the capsules more usable.

In addition, we are dealing in this case with the sale of prescription pills. Before the pharmacist ’’processes” these prescription pills, the sale to the customer has already been consummated. That is to say, the customer has already seen his doctor and was prescribed the needed medication. By the time the customer finds himself in the drugstore he is there to purchase whatever happens to be written on the doctor's prescription paper. It would seem ironic, at this point, that the pharmacist should engage in an activity to make the product more marketable.

Naturally, the sale of non-prescription pills is different. If, for example, a drugstore were to purchase non-prescription pills in bulk and package them in eye-catching containers under their own brand name in perhaps quantities not normally available then this would, it seems to me, increase the marketability of the pills. This, I believe, was the intention of the original Interpretation Bulletin IT-145, paragraph 6.

In the case of Admiral Steel Products Limited v. M.N.R., 40 Tax A.B.C. 322, 66 D.T.C. 174, it was found that the cutting and shearing of steel wire to retail customers' specifications was processing. At 328 (D.T.C. 178) Mr. St- Onge said:

To sum up the matter, the appellant through different processing operations, has rendered its product more usable, and therefore, more marketable and more saleable . . .

In the present case the appellant has not made the product more usable. In fact, the product has remained intact from the time it entered the appellant's store to the time it left in the form of a dispensed prescription.

I would like to make one other point. When the pharmacist dispenses prescription drugs he gets remunerated in two ways. First, he makes a profit from buying pills in bulk and then selling them in smaller quantities. Second, when he fills a prescription he charges a “dispensing fee” which, in most cases, is the one as set out in the Parcost Comparative Drug Index. This fee is negotiated between the Ministry of Health of Ontario and the Ontario Pharmacists’ Association. Presumably, it is adequate to cover the work involved in the dispensing operation. What the appellant is seeking to do now is to increase his profit a third way, that is by reducing his tax liability. I find it difficult to ascribe to the intention of Parliament the desire to allow the appellant to claim the manufacturing and processing credit in these circumstances.

The answers therefore to the questions put forth above are:

(1) No.

(ii) No.

(iii) No at the retail level, and not necessary to consider the wholesale level.

(iv) Not relevant, but must conform to the prescription requirements.

(v) No, in terms of the Income Tax Act.

(vi) No special technique required when dispensing tablets or capsules, but the pharmacist must conform to the requirements of the Ontario Health Disciplines Act.

(vit) No.

For the foregoing reasons this appeal is hereby dismissed.

Appeal dismissed.