CRA indicates that pre-production revenues cannot be netted against costs of bringing a new mine into production

Can revenues earned while a mine is in the development phase and before the mine comes into production in reasonable commercial quantities (“Pre-Production Revenues”) be netted against expenses included in a taxpayer’s Canadian development expenses under para. (c.2) of the definition thereof, rather than being included in income under s. 9?

In responding negatively, CRA noted that there was a telling contrast with the permitted netting of Pre-Production Revenues in parts of the definition of Canadian exploration expense. CRA also stated that the purpose of moving what now was para. (c.2) from the CEE to the CDE definition was “to better align the tax treatment of pre-production mining expenditures with the tax treatment of pre-production oil and gas expenditures,” and inferred that no such netting was permitted for the latter type of expenditure.

Neal Armstrong. Summary of 3 May 2021 External T.I. 2019-0831981E5 under s. 66.2(5) - "Canadian development expense" - (c.2).