A
W
Prociuk
(orally):—The
appellant
claimed
a
depletion
allowance
of
33
/3%
of
its
production
profits
in
producing
barite
during
the
years
1966
to
1969
inclusive,
pursuant
to
paragraph
11(1)(b)
of
the
Income
Tax
Act
and
section
1201
of
the
Income
Tax
Regulations.
By
Notice
of
Assessment
dated
December
22,
1970
the
Minister
disallowed
the
claim
and
the
appellant
has
appealed
therefrom.
The
appellant
was
incorporated
under
the
laws
of
Canada
on
April
1,
1952,
and
is
a
wholly-owned
subsidiary
of
Baroid
N
L
Industries.
I
gathered
from
the
evidence
that
its
principal
business
is
the
manufacture
and
sale
of
drilling
mud,
of
which
the
main
ingredient
is
barite.
In
September
1960
the
appellant
purchased
a
mine
consisting
of
some
46
claims,
including
all
improvements
thereon,
located
some
8
miles
from
the
Town
of
Spillamacheen,
BC
from
Giant
Mascot
Mines
for
$155,000.
Prior
to
this
date
Giant
Mascot
Mines
operated
the
mine
producing
lead,
zinc
and
silver.
Their
operation
included
mining
the
ore,
crushing
it
to
sand
and
then
removing
therefrom
lead,
zinc
and
silver
by
a
flotation
method.
The
waste
product,
being
in
the
form
of
sand
known
as
tailings
flowed
in
an
open
ditch
to
a
tailings
impoundment
area
and
the
clear
water
therefrom
was
drained
away.
This
area
of
about
10
acres
eventually
accumulated
tailings
from
several
inches
to
several
feet
in
thickness
and
represented
a
large
supply
of
easily
available
barite
concentrates.
The
mine
itself
contains
barite
ore
which
would
require
underground
workings.
The
appellant,
having
acquired
this
property,
began
to
extract
barite
from
the
tailings
by
a
further
process
using
a
tilt
and
shake
table.
When
the
barite
was
removed
it
was
stockpiled
for
shipment,
and
the
waste
once
again
was
channelled
to
another
area.
The
point
to
resolve
is
whether
or
not
this
processing
of
barite
from
the
tailings
qualifies
the
appellant
for
a
depletion
allowance.
In
this
connection,
regard
must
be
had
to
section
11
of
the
Act
and
the
pertinent
section
of
the
Regulations.
Subsection
11(1)
reads:
11.
(1)
Notwithstanding
paragraphs
(a),
(b)
and
(h)
of
subsection
(1)
of
section
12,
the
following
amounts
may
be
deducted
in
computing
the
income
of
a
taxpayer
for
a
taxation
year:
(b)
such
amount
as
an
allowance
in
respect
of
an
oil
or
gas
well,
mine
or
timber
limit,
if
any,
as
is
allowed
to
the
taxpayer
by
regulation;
Section
1200
of
the
Regulations
reads:
1200.
For
the
purpose
of
paragraph
(b)
of
subsection
(1)
of
section
11
of
the
Act
there
may
be
deducted
in
computing
the
income
of
a
taxpayer
for
a
taxation
year
amounts
determined
as
hereinafter
set
forth
in
this
Part.
Section
1201
of
the
Regulations
is
entitled
“Deductions
Allowed
to
Operators”,
and
reads:
1201.
(1)
for
the
purpose
of
this
Part,
(a)
“resource”
means
(i)
an
oil
or
gas
well,
(ii)
a
bituminous
sands
deposit,
(iii)
a
base
or
precious
metal
mine,
or
(iv)
a
mineral
deposit
in
respect
of
which
(A)
the
Minister
of
Energy,
Mines
and
Resources
has
certified
that
the
principal
mineral
extracted
is
an
industrial
mineral
contained
in
a
non-bedded
deposit,
(B)
the
principal
mineral
extracted
is
sylvite,
(C)
the
principal
mineral
extracted
is
halite
and
it
is
extracted
by
underground
mining
and
not
by
operating
a
brine
well,
(D)
the
principal
mineral
extracted
is
silica
and
it
is
extracted
from
sandstone
or
quartzite,
or
(E)
the
principal
mineral
extracted
is
gypsum;
..
.
.
It
is
apparent
from
the
definition
that
tailings
would
have
to
be
classified
as
a
resource
before
the
appellant
could
succeed
in
its
appeal.
Learned
counsel
for
the
appellant
ably
argued
that,
notwithstanding
the
fact
that
tailings
was
a
man-made
mineral
deposit
above
the
surface,
it
nevertheless
contained
raw
barite
which
was
extracted
therefrom
and
therefore
was
a
resource.
Giving
it
the
widest
and
the
most
liberal
interpretation
I
cannot
read
into
the
definition
that
a
pile
of
tailings
would
constitute
a
non-bedded
deposit
and
thereby
be
a
resource
within
the
meaning
of
section
1201
of
the
Regulations.
If
it
were
otherwise,
then
each
processing
of
the
remaining
waste
products
would
similarly
qualify,
and
that
surely
is
not
the
purpose
nor
the
intent
of
this
section
of
the
Regulations.
The
case
naturally
would
be
entirely
different
if
it
were
a
case
of
actual
mining
and
thereafter
processing
raw
barite
ore.
Accordingly,
the
appeal
is
dismissed.
Appeal
dismissed.
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