Goetz,
TCJ:—This
is
an
appeal
with
respect
to
the
appellant’s
1977,
1978
and
1979
taxation
years
whereby,
as
a
result
of
a
reassessment,
the
sum
of
$240,000
was
added
to
the
appellant’s
income
for
his
1977
taxation
year
which,
due
to
the
general
averaging
calculations,
increased
his
income
tax
for
his
1978
taxation
year.
At
the
outset
of
the
hearing,
it
was
agreed
that
the
style
of
cause
in
the
appeal
of
Vans
H
Hulbert
(82-48),
now
deceased,
be
changed
to
The
Estate
of
Vans
H
Hulbert,
deceased,
and
that
the
said
appeal
be
heard
on
common
evidence
with
the
appeal
of
Anthony
J
DeLuca.
The
appellant,
with
Vans
H
Hulbert,
acquired
certain
coal
licences
from
the
province
of
British
Columbia
in
1968.
On
May
16,
1969,
the
appellant
with
Vans
H
Hulbert
(“the
vendors’’)
transferred
their
interest
in
these
coal
licences
(40
per
cent
and
60
per
cent
respectively)
to
Crows
Nest
Industries
Limited
(“CNI”)
for
$200,000,
with
a
further
condition
that
the
vendors
would
receive
from
CNI
the
sum
of
$600,000
“out
of
its
first
revenues
from
the
sale
of
any
coal
or
coal
products
from
operations
of
the
licences”.
This
agreement
further
provided:
5.
Likewise,
if
CNI
disposes
of
the
licences
or
leases
other
than
by
surrender
to
the
government
of
British
Columbia,
then
any
proceeds
of
sale
or
disposal
received
by
CNI
up
to
$600,000
shall
be
paid
to
the
Vendors
as
the
same
are
received.
7.
This
agreement
shall
be
deemed
to
be
concluded
and
fully
satisfied
at
any
time
that
the
$600,000
has
been
paid
to
the
Vendors
out
of
revenues
or
proceeds
by
CNI.
On
January
19,
1976,
CNI
transferred
the
licences
to
The
Crow’s
Nest
Pass
Oil
and
Gas
Company,
Limited,
a
wholly-owned
subsidiary.
The
vendors’
legal
counsel
insisted
on
a
formal
assignment
of
contract
agreement
which
was
entered
into
on
September
19,
1977,
between
the
vendors
as
assignors
and
The
Crow’s
Nest
Pass
Oil
and
Gas
Company,
Limited,
as
assignee,
which
provided:
1.
In
consideration
of
the
sum
of
SIX
HUNDRED
THOUSAND
DOLLARS
($600,000.00)
in
Canadian
Funds
by
certified
cheques
payable
to
each
of
Hulbert
and
Deluca
respectively
as
follows:
|
HULBERT
|
—
THREE
HUNDRED
AND
SIXTY
THOUSAND
DOLLARS
|
|
($360,000.00)
|
|
DELUCA
|
—
TWO
HUNDRED
AND
FORTY
THOUSAND
DOLLARS
|
|
($240,000.00)
|
the
receipt
whereof
Hulbert
and
DeLuca
respectively
hereby
acknowledge,
the
Assignors
hereby
assign
to
the
Assignee
all
of
their
rights,
title
and
interest
in
and
to
the
May,
1969
Agreement,
including
all
rights
of
action
or
other
rights
accruing
to
them,
or
which
might
hereafter
accrue
to
them
under
the
said
May,
1969
Agreement.
The
Minister
avers
that
the
vendors
retained
their
rights
to
receive
the
$600,000
as
set
out
in
the
May
16,
1969
agreement
continuously
until
September
19,
1977
and
that
that
interest
was
a
right
to
receive
proceeds
of
disposition
in
respect
of
a
disposition
of
the
coal
licences.
The
respondent
relied,
inter
alia,
upon
sections
66(15)(c)(ii)
and
(vi),
248(1),
59(1.
l)(b),
59(3.1),
59(4),
66.2(5)(b)
(v)(A),
66.2(1)
and
59(3.2)
of
the
Income
Tax
Act,
SC
1970-71-72,
c
63,
as
amended,
to
and
including
1977.
The
appellant
contends
that
the
$600,000
was
consideration
for
the
forebear-
ance
to
sue
on
the
part
of
the
appellant
with
respect
to
his
rights
under
the
May
16,
1969
agreement.
Subsection
59(1.1)
provides:
59
(1.1)
Where
a
taxpayer
disposes
of
(a)
a
Canadian
resource
property,
or
(b)
any
right,
licence
or
privilege
described
in
subsection
83A(5a)
of
this
Act
as
it
read
in
its
application
to
the
1971
taxation
year,
that
was
acquired
by
the
taxpayer,
Subsection
59(2)
states:
59
(2)
There
shall
be
included
in
computing
a
taxpayer’s
income
for
a
taxation
year
any
amount
in
respect
of
(a)
a
Canadian
resource
property,
(d)
any
property
described
in
any
of
subparagraphs
66(15)(c)(i)
to
(vi).
.
.
.
Subsection
59(3.1)
provides:
59
(3.1)
Where
a
taxpayer
had
made
a
disposition
of
property
owned,
or
deemed
to
have
been
owned,
by
him
on
December
31,
1971
and
thereafter
without
interruption
until
the
date
of
disposition
that
is
property
described
in
any
of
subparagraphs
66(15)(c)(i)
to
(vi)
and
is
not
property
described
in
paragraph
(1.
l)(b),
the
following
rules
apply:
(a)
the
relevant
percentage
of
the
taxpayer’s
proceeds
of
disposition
therefrom
shall
be
included
in
the
amount
referred
to
in
subparagraph
66.2(5)(b)(v)
to
the
extent
that
the
proceeds
become
receivable;
and
(b)
where
the
taxpayer
and
the
person
who
acquired
the
property
were
not
dealing
with
each
other
at
arm’s
length,
for
the
purposes
of
this
section
and
sections
66
and
66.2
(i)
the
cost
to
that
person
of
the
property
shall
be
deemed
to
be
the
amount
included
in
the
amount
referred
to
in
paragraph
(a)
in
respect
of
the
disposition
by
the
taxpayer
of
the
property,
and
(ii)
when
that
person
subsequently
disposes
of
the
property
or
any
right
or
interest
therein,
that
person
shall
be
deemed
to
have
owned
the
property
on
December
31,
1971
and
thereafter
without
interruption
until
the
disposition
thereof.
Paragraph
66(15)(c)
provides:
66
(15)
In
this
section
and
sections
66.1
and
66.2,
(c)
“Canadian
resource
property”
of
a
taxpayer
means
any
property
acquired
by
him
after
1971
that
is,
(i)
any
right,
licence
or
privilege
to
explore
for,
drill
for,
or
take
petroleum,
natural
gas
or
other
related
hydrocarbons
in
Canada,
(ii)
any
right,
licence
or
privilege
to
prospect,
explore,
drill,
or
mine
for,
minerals
in
a
mineral
resource
in
Canada,
(iii)
any
oil
or
gas
well
situated
in
Canada,
(iv)
any
rental
or
royalty
computed
by
reference
to
the
amount
or
value
of
production
from
an
oil
or
gas
well,
or
a
mineral
resource,
situated
in
Canada,
(v)
any
real
property
situated
in
Canada
the
principal
value
of
which
depends
upon
its
mineral
resource
content
(but
not
including
any
depreciable
property
situated
on
the
surface
of
the
property
or
used
or
to
be
used
in
connection
with
the
extraction
or
removal
of
minerals
therefrom),
or
(vi)
any
right
to
or
interest
in
any
property
(other
than
property
of
a
trust)
described
in
any
of
subparagraphs
(i)
to
(v)
(including
a
right
to
receive
proceeds
of
disposition
in
respect
of
a
disposition
thereof);
Subsection
83A(Sa)
referred
to
in
subsection
59(1.1)
relates
to
exploration
and
drilling
rights;
payments
deductible.
It
refers
to
a
right,
licence
or
privilege
to
explore
for,
or
drill
for
petroleum,
natural
gas
or
other
related
hydrocarbons
(except
coal).
“Mineral
resource”
is
defined
as
follows
in
section
248
of
the
Act:
248
(1)
In
this
Act,
‘mineral
resource’
means
(a)
a
base
or
precious
metal
deposit,
(b)
a
coal
deposit,
(c)
a
bituminous
sands
deposit,
oil
sands
deposit
or
oil
shale
deposit,
or
(d)
a
mineral
deposit
in
respect
of
which
(i)
the
Minister
of
Energy,
Mines
and
Resources
has
certified
that
the
principal
mineral
extracted
is
an
industrial
mineral
contained
in
a
non-bedded
deposit,
(ii)
the
principal
mineral
extracted
is
sylvite,
halite
or
gypsum,
or
(iii)
the
principal
mineral
extracted
is
silica
that
is
extracted
from
sandstone
or
quartzite;
As
can
be
seen,
these
sections
are
interrelated
and
though
counsel
for
the
appellant
argued
that
subsection
85A(5a)
excluded
coal,
this
section
referred
to
in
subsection
59(1.1),
deals
with
expenses
related
to
exploration
and
drilling.
The
appellant
was
not
in
the
business
of
exploring
or
drilling.
He
was
a
prospector
who
discovered
coal
deposits
and
obtained
licences
to
prospect,
explore,
drill
or
mine
for
minerals.
These
licences
were
transferred
and
assigned
to
CNI
in
May
1969,
with
a
down
payment
of
$200,000
and
the
balance
of
$600,000
to
be
paid
from
revenues
from
the
sale
of
coal
or
coal
products
from
the
operations
of
the
licences
or
from
the
proceeds
of
sale
or
disposal
of
the
licences.
The
appellant
retained
the
right
to
receive
the
proceeds
of
disposition
from
1969
to
1977
when
he
received
his
share
of
the
$600,000,
on
disposition
and
sale
of
the
licences
by
CNI.
He
comes
squarely
under
the
provisions
of
paragraph
66(15)(c)
and
in
particular
subparagraphs
(ii)
and
(vi)
and
subsection
59(3.1)
of
the
Income
Tax
Act,
as
amended
to
1977.
For
the
above
reasons,
the
appeal
is
dismissed.
Appeal
dismissed.
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