Wilson,
J.:—The
resolution
of
this
appeal
turns
primarily
on
the
interpretation
of
certain
provisions
in
The
Corporations
Tax
Act,
1972,
S.Q.
1972,
c.
143,
as
amended
(the
Act).
The
principal
issue
is
whether
the
appellant
Mattabi
Mines
Limited
(Mattabi)
can
claim
an
investment
tax
credit
for
its
1974
taxation
year.
I.
The
Facts
Mattabi
was
incorporated
in
1970
and
began
exploration
and
development
of
its
mining
properties
in
the
same
year.
By
August
1972,
when
production
in
reasonable
commercial
quantities
was
achieved,
it
had
incurred
total
development
costs
of
nearly
$36
million.
From
then
on
it
showed
a
profit.
It
made
$7.3
million
from
August
to
December
1972
and
$39.9
million
in
1973.
(Its
fiscal
year
coincides
with
the
calendar
year).
This
profit,
however,
was
exempt
from
all
taxation
since
both
the
federal
and
provincial
governments
gave
companies
involved
in
new
mining
developments
a
36-month
tax
holiday
on
income
from
mining
from
the
time
that
production
in
reasonable
commercial
quantities
was
begun:
see
paragraph
75(2)(a)
of
the
Act
and
section
28
of
the
Income
Tax
Application
Rules,
1971,
being
Part
III
of
the
Income
Tax
Act,
S.C.
1970-71-72,
c.
63.
Accordingly,
in
its
1972
and
1973
returns
Mattabi
reported
its
income
as
“nil”
to
both
levels
of
government.
In
June
1971
the
federal
government
announced
that
the
three-year
tax
holiday
would
end
as
of
December
31,
1973.
The
Ontario
government
also
abolished
the
exemption
as
of
December
31,
1973
but
announced
that
decision
retroactively
in
April
1974.
Mattabi
was
therefore
liable
for
both
federal
and
provincial
taxes
in
1974.
When
it
filed
its
1974
return
with
the
provincial
government
it
attempted
to
reduce
that
liability
by
an
investment
tax
credit.
The
criteria
for
qualifying
for
this
credit
are
laid
out
in
subsection
106(1)
of
the
Act
which
reads:
106.
(1)
There
may
be
deducted
from
the
tax
otherwise
payable
under
this
Part
for
a
fiscal
year
by
a
corporation
an
amount
equal
to
5
per
cent
of
the
cost
of
machinery
and
equipment
acquired
and
used
in
that
fiscal
year
by
the
corporation
which
machinery
and
equipment
is
acquired
pursuant
to
an
agreement
entered
into
after
the
26th
day
of
April,
1971,
and
which
shall
be
used
by
the
corporation
solely
in
Ontario
prior
to
the
1st
day
of
April,
1973,
for
the
purpose
of
earning
income.
Although
this
credit
was
normally
only
available
for
the
fiscal
year
in
which
the
machinery
and
equipment
was
"acquired
and
used",
subsection
106(4)
permitted
it
to
be
carried
forward
if
the
taxpayer
had
incurred
a
"net
loss"
in
previous
taxation
years.
Paragraph
106(5)(b)
of
the
Act
defined
"net
loss":
(b)
“net
loss"
means
the
amount,
if
any,
by
which
the
noncapital
losses
exceed
the
incomes
of
a
corporation
for
the
fiscal
years
ending
between
the
26th
day
of
April,
1971,
and
the
1st
day
of
April,
1973.
.
.
.
Along
with
its
1974
return
claiming
the
tax
credit
($736,962)
Mattabi
also
filed
an
amended
return
for
the
fiscal
year
ending
December
31,
1971.
This
amended
return
claimed
a
loss
of
$100
for
1971
by
adding
a
capital
cost
allowance
claim
of
that
amount
to
the
previously
reported
income
of
“nil”!
Given
that
Mattabi's
reported
taxable
income
for
the
fiscal
year
1972
was
also
"nil",
it
claimed
a
"net
loss”
of
$100
for
all
fiscal
years
ending
between
April
26,1971
and
April
1,1973
which
brought
it
within
the
terms
of
the
section
106
carryforward
provisions.
The
Minister
refused
to
accept
the
amended
return
and
consequently
disallowed
the
claim
for
a
tax
credit.
The
Minister
also
refused
to
accept
two
further
amendments
to
the
1971
and
1972
returns
which
would
also
have
created
a
"net
loss”
for
Mattabi.
Mattabi
successfully
appealed
the
Minister's
decision
on
the
capital
cost
allowance
to
the
Supreme
Court
of
Ontario,
[1982]
C.T.C
382,
but
the
Court
of
Appeal
for
Ontario,
[1984]
C.T.C.
566,
allowed
an
appeal
from
that
decision
by
the
Minister.
II.
The
Judgments
Below
(a)
Supreme
Court
of
Ontario
A
preliminary
issue
raised
on
the
appeal
to
Keith,
J.
was
whether
Mattabi
could
submit
an
alternative
claim
to
the
one
for
the
tax
credit.
In
the
event
that
it
failed
to
get
the
credit,
it
wanted
a
reassessment
of
the
1974
return
so
that
“additional
capital
cost
allowance
.
.
.
up
to
the
maximum
amount
permitted
by
the
.
.
.
Act
and
.
.
.
regulations"
could
be
included.
The
company
had
not
taken
the
maximum
allowance
because
it
expected
to
receive
the
investment
tax
credit.
Keith,
J.
allowed
the
amendment.
He
considered
the
procedures
for
the
filing
of
notices
of
assessment,
objection
and
appeals,
particularly
the
fact
that
upon
the
filing
of
the
required
material
"the
matter
shall
be
deemed
to
be
an
action
in
the
Court"
(subsection
157(1))
and
that
pursuant
to
section
159
of
the
Act
"the
practice
and
procedure
of
the
Supreme
Court,
including
the
right
of
appeal
.
.
.
apply
to
every
matter
deemed
to
be
an
action
under
section
157".
He
concluded
at
page
387:
The
practice
of
this
Court
has
always
been
to
permit
amendments
to
pleadings
that
are
required
to
form
the
foundation
of
a
just
judgment
of
the
Court,
at
any
stage
of
the
proceedings,
even
extending
to
the
end
of
a
trial.
On
occasion
it
may
be
necessary
to
refuse
an
application
to
amend
at
a
late
time;
on
other
occasions,
it
may
be
right
and
proper
in
the
discretion
of
the
judge,
to
impose
terms
on
the
applicant.
The
essential
point
however,
is
that
no
application
for
leave
to
amend
a
pleading
is
to
be
rejected
on
the
sole
ground
that
it
is
made
at
a
late
time
in
the
proceedings.
In
any
event,
while
the
decisions
of
members
of
the
Tax
Appeal
Board
are
always
entitled
to
the
greatest
respect
and
in
many
cases
have
persuasive
force,
they
are
not
binding
on
this
Court.
On
the
principal
issue
Keith,
J.
permitted
the
change
to
the
1971
return.
He
noted
that
while
the
federal
government
had
announced
an
end
to
the
tax
holiday
in
June
1971,
the
province
"remained
silent
for
almost
3
years
and
then
acted
retroactively":
When
the
Province
belatedly
took
action,
the
appellant
.
.
.
knew
that
its
mining
income
for
1974
would
be
subject
to
provincial
tax
.
.
.
instead
of
being
totally
exempt
for
1974
and
the
first
7
months
of
1975,
but
it
could
hardly
have
expected
to
be
deprived
at
the
same
time
of
the
benefit
of
the
incentive
tax
deduction
contained
in
section
106
of
the
Statute.
(p.
389).
What
the
appellant
has
sought
to
do
in
1974
is
not
to
alter
its
tax
obligation
for
the
fiscal
year
1971,
but
to
take
the
step
it
could
and
undoubtedly
would
have
taken
had
the
respondent
made
known
its
intention
to
terminate
the
36-month
tax
holiday
at
any
time
prior
to
June
30,
1972,
the
last
day
for
filing
its
1971
corporate
tax
return.
(p.
390).
Keith,
J.
also
noted
that
the
federal
government's
Interpretation
Bulletins
permitted
such
a
revision
of
past
capital
cost
allowance
claims
on
certain
conditions
and
had
in
fact
done
so
in
this
case.
This
assumed
a
particular
significance
in
the
eyes
of
Keith,
J.
because
the
applicable
Ontario
regulations
required
taxpayers
to
deduct
the
same
capital
cost
allowance
in
the
provincial
return
as
they
did
in
the
federal
return.
He
concluded
at
pages
392-3:
Thus
in
the
case
before
me,
there
is
a
long
standing
departmental
practice
of
the
federal
authorities,
to
permit
and
accept
amended
corporate
income
tax
returns,
to
claim
a
revision
of
capital
cost
allowance
in
accordance
with
the
Interpretation
Bulletins
I
have
quoted.
I
am
firmly
of
the
opinion
that
the
federal
authorities
having
accepted
such
an
amendment
for
the
appellant's
1971
fiscal
year,
the
respondent
was
obliged
by
the
applicable
Ontario
regulations
to
do
likewise.
That
this
amendment
caused
the
appellant
to
qualify
for
an
investment
tax
credit
in
1974,
provides
no
basis
in
law
or
logic
for
the
respondent
to
refuse
to
accept
such
amendment.
Thereafter,
without
addressing
the
interpretation
of
the
section,
Keith,
J.
found
that
Mattabi
had
incurred
a
"net
loss”
for
purposes
of
paragraph
106(5)(b)
and
could
claim
the
tax
credit.
Although
he
did
not
need
to
do
so,
Keith,
J.
noted
briefly
that
he
would
not
have
permitted
Mattabi's
alternative
claim
to
create
a
net
loss
in
1972
by
altering
its
characterization
of
certain
interest
expenditures
from
capital
expense
to
interest
expense.
He
made
no
comment
on
Mattabi's
further
alternative
claim
to
the
same
end
which
was
based
on
a
$50
capital
tax
payment
in
1971
allegedly
erroneously
recorded
as
part
of
exploration
and
development
expenses.
Because
of
his
decision
on
the
tax
credit,
Keith,
J.
also
did
not
discuss
the
merits
of
the
alternative
general
claim
for
relief
based
on
a
re-opening
of
the
1974
tax
return.
(b)
Ontario
Court
of
Appeal
The
Court
of
Appeal
(Brooke,
Weatherston
and
Robins,
JJ.A.)
took
a
rather
different
approach
to
the
issues
before
them.
Robins,
J.A.,
for
the
Court,
began
by
noting
that
it
was
irrelevant
whether
or
not
Mattabi
could
amend
its
1971
return.
Since
in
his
view
it
did
not
affect
the
result,
he
was
prepared
to
accept
that
it
could
do
so,
although
he
disagreed
with
Keith,
J.
that
the
retroactive
nature
of
the
abolition
was
significant:
That
section
was
repealed
by
a
valid
enactment
of
the
provincial
legislature.
Its
repeal
in
no
way
affects
the
law
applicable
to
the
filing
of
amended
tax
returns
and
is
irrelevant
to
a
determination
of
whether
the
Minister
is
obliged
to
accept
an
amended
return,
(p.
570).
Robins,
J.A.
concentrated
on
the
interpretation
of
paragraph
106(5)(b),
the
definition
of
"net
loss”.
He
noted
the
Company's
argument
that
income
exempt
from
tax
was
not
to
be
included
in
the
calculation
of
whether
such
a
loss
had
occurred
but
rejected
it.
In
his
view
the
definition
of
"net
loss"
did
not
exclude
income
exempt
from
tax
from
the
calculations.
He
noted
that
the
section
"speaks
of
'incomes'
in
the
plural”.
In
addition
the
tax
credit
provision
itself,
subsection
106(1),
required
that
the
machinery
be
used
"for
the
purpose
of
earning
income",
which
the
Company
claimed
was
the
case
here.
Robins,
J.A.
thought
the
Company's
position
inconsistent
and
untenable:
.
.
.
the
Company's
position
is,
on
the
one
hand,
that
its
income,
even
though
non-taxable,
is
to
be
taken
into
account
in
determining
whether
the
Company
qualifies
in
the
first
place
for
the
tax
incentive
provided
by
subsection
106(1),
while,
on
the
other
hand,
that
same
income
is
not
to
be
taken
into
account
in
determining
whether
the
Company
sustained
a
"net
loss"
as
defined
by
subsection
106(5)
for
the
purposes
of
subsection
106(4).
I
am
unable
to
accept
that
position.
.
.
.
In
my
view,
“income”
must
be
treated
in
a
consistent
manner
and
given
the
same
meaning
throughout
the
section.
If
non-taxable
income
is
to
be
considered
"income"
for
the
purpose
of
qualifying
a
corporation
for
the
deduction
under
subsection
106(1),
such
income
should
also
be
included
in
the
"incomes"
to
be
taken
into
account
in
calculating
the
"net
loss"
under
subsection
106(5).
Conversely,
if
non-taxable
income
is
not
to
be
considered
“income”
for
the
purposes
of
subsection
106(1),
it
should
also
be
excluded
from
the
"incomes"
referred
to
in
subsection
106(5).
Either
way,
the
Company
cannot
succeed.
.
.
.
(p.
571).
Robins,
J.A.
found
support
for
this
interpretation
in
the
policy
of
the
Act
and
in
principles
of
statutory
interpretation.
The
result
he
had
reached:
.
.
.
is
consonant
with
the
purpose
and
intent
of
this
tax
incentive
provision.
Since
the
deduction
was
made
available
only
as
against
tax
payable,
it
could
not
have
been
intended
(if,
indeed,
any
thought
was
given
to
the
highly
unusual
circumstances
here)
to
benefit
a
mining
company
that
had
been
given
a
full
tax
holiday
under
another
section
of
the
Act
for
the
entire
qualifying
period.
No
genuine
loss
was
suffered
by
the
Company
during
that
period
and,
in
my
view,
section
106
cannot
properly
be
construed
so
as
to
entitle
the
Company
to
the
deduction
claimed.
A
taxpayer
must,
of
course,
bring
its
claim
within
the
express
terms
of
the
provision
conferring
a
deduction
and
in
the
event
of
doubt
or
ambiguity,
it
is
well
established
that
the
doubt
or
ambiguity
must
be
resolved
in
favour
of
the
Minister.
(page
572).
This
conclusion
meant
also
that,
even
if
permitted,
the
alternative
attempts
to
create
a
net
loss
would
not
do
so.
Robins,
J.A.
therefore
did
not
discuss
them.
He
did,
however,
specifically
reject
the
Company's
alternative
claim
for
relief
based
on
amendments
to
the
1974
return.
He
said
at
page
572:
.
.
.
there
is
no
valid
basis
upon
which
this
Court
can
or
should
order
the
Minister
to
permit
the
Company
to
deduct
in
computing
its
income
for
1974
additional
capital
cost
allowance
up
to
the
maximum
permitted
by
the
Act.
The
subjectmatter
of
the
Minister’s
reassessment
in
no
way,
directly
or
indirectly,
related
to
or
involved
a
claim
for
the
maximum
capital
cost
allowance
the
Company
might
have
claimed
in
1974.
The
Minister
was
not
called
upon
to
consider
or
to
determine
any
request
for
relief
of
this
nature.
The
matter
was
simply
not
in
issue
in
the
proceedings
up
to
the
Minister's
reassessment
or,
indeed,
at
any
time
before
the
amendment
was
asked
for
at
trial.
Furthermore,
it
is
evident
that
the
order
requested
would
involve
the
reopening
of
assessments
subsequent
to
1974
that
are
not
subject
to
objection
or
appeal.
The
Company
chose
the
course
it
wished
to
pursue
in
regard
to
its
1974
taxation
year.
Neither
the
applicable
statutory
provisions
or
the
case
law
to
which
we
were
referred
lend
support,
in
my
view,
to
the
contention
that
the
Company,
having
failed
in
that
course,
is
now
entitled
to
compel
the
Minister
to
permit
it
to
adopt
an
approach
to
its
1974
tax
accounting
wholly
unrelated
to
the
matters
in
issue
in
its
appeal
from
the
Minister’s
reassessment.
III.
The
Interpretation
of
section
106
Leaving
aside
for
the
moment
questions
relating
to
the
specific
grounds
on
which
Mattabi
claims
that
it
can
create
a
"net
loss"
for
the
qualifying
period,
the
threshold
issue
in
this
appeal
concerns
the
interpretation
of
section
106.
In
particular,
it
is
necessary
to
decide
the
meaning
of
“for
the
purpose
of
earning
income"
in
subsection
106(1)
and
"incomes"
in
paragraph
106(5)(b).
The
requirements
for
claiming
the
tax
credit
set
out
in
subsection
106(1)
are
that,
inter
alia,
the
machinery
and
equipment
must
be
used
"for
the
purpose
of
earning
income".
What
does
this
phrase
mean?
The
Court
of
Appeal
held
that
"income"
must
mean
taxable
income
under
Division
B
of
the
Act,
not
tax
exempt
income.
In
other
words,
there
must
be
a
direct
connection
between
expenditures
eligible
for
the
investment
tax
credit
and
the
earning
of
taxable
income.
With
respect,
I
do
not
agree.
Similar
qualifying
provisions
have
been
held
to
impose
only
a
general
purpose
or
intention
test.
In
both
the
Act
(paragraph
22(1)(a))
and
the
federal
Income
Tax
Act,
S.C.
1970-71-72,
c.
63,
paragraph
18(1)(a),
as
amended,
the
phrase
“for
the
purpose
of
gaining
or
producing
income”
is
used
in
the
general
sections
specifying
allowable
deductions:
22.
(1)
In
computing
the
income
of
a
corporation
from
a
business
or
property
no
deduction
shall
be
made
in
respect
of,
(a)
an
outlay
or
expense
except
to
the
extent
that
it
was
made
or
incurred
by
the
corporation
for
the
purpose
of
gaining
or
producing
income
from
the
business
or
property;
18.
(1)
In
computing
the
income
of
a
taxpayer
from
a
business
or
property
no
deduction
shall
be
made
in
respect
of
(a)
an
outlay
or
expense
except
to
the
extent
that
it
was
made
or
incurred
by
the
taxpayer
for
the
purpose
of
gaining
or
producing
income
from
the
business
or
property;
The
jurisprudence
interpreting
this
phrase
has
provided
some
clear
principles.
In
Royal
Trust
Co.
v.
M.N.R.,
[1957]
C.T.C.
32
(Ex.
Ct.);
57
D.T.C.
1055,
Thorson,
P.
said
this
about
the
provision
in
the
federal
act
(then
paragraph
12(1)(a)),
at
pages
43-4
(D.T.C.
1061):
It
is
not
necessary
that
the
outlay
or
expense
should
have
resulted
in
income.
In
Consolidated
Textiles
Limited
v.
M.N.R.,
[1947]
Ex.
C.R.
77
at
81;
[1947]
C.T.C.
63,
I
expressed
the
opinion
that
it
was
not
a
condition
of
the
deductibility
of
a
disbursement
or
expense
that
it
should
result
in
any
particular
income
or
that
any
income
should
be
traceable
to
it
and
that
it
was
never
necessary
to
show
a
causal
connection
between
an
expenditure
and
a
receipt.
And
I
referred
to
Vallambrosa
Rubber
Co.
v.
C.I.R.
(1910),
47
S.C.L.R.
488
as
authority
for
saying
that
an
item
of
expenditure
may
be
deductible
in
the
year
in
which
it
is
made
although
no
profit
results
from
it
in
such
year
and
to
C./.R.
v.
The
Falkirk
Iron
Co.
Ltd.
(1933),
17
T.C.
625,
as
authority
for
saying
that
it
may
be
deductible
even
if
it
is
not
productive
of
any
profit
at
all.
.
.
.
The
essential
limitation
in
the
exception
expressed
in
Section
12(1)(a)
is
that
the
outlay
or
expense
should
have
been
made
by
the
taxpayer
"for
the
purpose”
of
gaining
or
producing
income
"from
the
business”.
It
is
the
purpose
of
the
outlay
or
expense
that
is
emphasized
but
the
purpose
must
be
that
of
gaining
or
producing
income
"from
the
business"
in
which
the
taxpayer
is
engaged.
If
these
conditions
are
met
the
fact
that
there
may
be
no
resulting
income
does
not
prevent
the
deductibility
of
the
amount
of
the
outlay
or
expense.
Thus,
in
a
case
under
the
Income
Tax
Act
if
an
outlay
or
expense
is
made
or
incurred
by
a
taxpayer
in
accordance
with
the
principles
of
commercial
trading
or
accepted
business
practice
and
it
is
made
or
incurred
for
the
purpose
of
gaining
or
producing
income
from
his
business
its
amount
is
deductible
for
income
tax
purposes.
[Emphasis
added.]
Similar
views
were
expressed
by
this
Court
in
Premium
Iron
Ores
Ltd.
v.
M.N.R.,
[1966]
S.C.R.
685;
[1966]
C.T.C.
391.
A
majority
of
the
Court
found
that
the
limitation
in
the
federal
Act
permitted
the
taxpayer
to
deduct
legal
expenses
incurred
in
successfully
resisting
a
tax
demand
by
the
United
States
Internal
Revenue
Service.
In
separate
opinions,
Martland,
Abbott
and
Hall,
JJ.,
all
noted
that
the
current
paragraph
18(1)(a),
which
dates
from
1948,
liberalized
claims
for
deductible
expenses.
The
previous
provision,
paragraph
6(a)
of
the
Income
War
Tax
Act,
R.S.C.
1927,
c.
97,
had
read:
6.
In
computing
the
amount
of
the
profits
or
gains
to
be
assessed,
a
deduction
shall
not
be
allowed
in
respect
of
(a)
disbursements
or
expenses
not
wholly,
exclusively
and
necessarily
laid
out
or
expended
for
the
purpose
of
earning
the
income;
[Emphasis
added
by
Martland,
J.]
In
addition,
the
old
Act
had
defined
"income"
as
"the
annual
net
profit
or
gain.
.
.".
According
to
Martland,
J.
"the
present
wording
of
para.
(a)
.
.
.
was
intended
to
broaden
the
definition
of
deductible
expenses
.
.
.
[a]s
now
worded,
[it]
permits
the
deduction
of
any
expense
made
for
the
purpose
of
producing
income
from
a
property
or
business”
(p.
702
(C.T.C.
394-5)).
He
then
went
on
to
take
a
broad
approach
to
the
meaning
of
"purpose"
(at
p.
703
(C.T.C.
395)):
Clearly
these
expenses
were
not
made
solely
for
the
purpose
of
earning
income
in
the
year
in
which
they
were
incurred.
They
did
not
directly
result
in
the
earning
of
income
at
all.
But
they
were
made
with
a
view
to
protecting
the
income
earning
capacity
of
the
company,
.
.
.
.
Hall,
J.
adopted
a
similarly
broad
view
of
income
when
used
in
the
phrase"gaining
or
producing
income”.
He
said
at
page
711
(C.T.C.
404):
The
limitation,
spelled
out
in
s.
12(1)(a),
does
not,
in
referring
to
“producing
income
from
the
property
or
business
of
a
taxpayer",
limit
the
words
quoted
solely
to
the
taxation
year
in
which
the
deduction
is
being
claimed.
It
is
a
clear
indication
to
me
that
the
income
thus
referred
to
may
be
the
income
of
the
taxation
year
under
review
or
of
a
succeeding
year.
A
company
such
as
the
appellant
exists
to
make
a
profit.
All
its
operations
are
directed
to
that
end.
The
operations
must
be
viewed
as
one
whole
and
not
segregated
into
revenue
producing
as
distinct
from
revenue
retaining
functions,
otherwise
a
condition
of
chaos
would
obtain.
Similar
comments
to
the
effect
that
there
need
be
no
specific
relationship
between
the
expenditure
and
any
particular
income
may
be
found
in
M.N.R.
v.
M.
P.
Drilling
Ltd.,
[1976]
C.T.C.
58;
76
D.T.C.
6028
(F.C.A.),
and
The
Queen
v.
Royal
Trust
Corp.
of
Canada,
[1983]
C.T.C.
159;
83
D.T.C.
5172
(F.C.A.).
Although
none
of
these
cases
deal
specifically
with
taxpayers
who
are
temporarily
exempt
from
tax,
I
think
the
principles
emerging
from
them
are
applicable
here.
(I
would
note
in
passing
that
I
attach
no
significance
to
the
use
of
the
word
"earning"
rather
than
“gaining”
or
"producing"
income).
If
there
is
no
need
to
demonstrate
a
causal
connection
between
a
particular
expenditure
and
a
particular
income,
and
no
need
for
the
income
to
be
generated
in
the
same
year
in
which
the
expenditure
was
made,
then
it
would
not
seem
to
matter
whether
Mattabi
suffered
tax
losses
in
1971
or
that
it
would
have
been
exempt
from
tax
had
it
made
a
profit.
The
only
thing
that
matters
is
that
the
expenditures
were
a
legitimate
expense
made
in
the
ordinary
course
of
business
with
the
intention
that
the
company
could
generate
a
taxable
income
some
time
in
the
future.
It
seems
to
me
self-
evident
that
the
purchase
of
mining
machinery
and
equipment
by
a
mining
company
meets
this
general
purpose
or
intention
test.
I
would,
therefore,
respectfully
disagree
with
Robins,
J.A.
when
he
states
that
the
phrase
“for
the
purpose
of
earning
income"
is
necessarily
a
bar
to
a
claim
by
a
taxpayer
temporarily
exempt
from
tax.
I
find
support
for
this
conclusion
in
the
federal
government's
Interpretation
Bulletin
dealing
with
paragraph
18(1)(a).
An
Interpretation
Bulletin
does
not,
of
course,
have
the
binding
effect
of
law
(I
discuss
this
later)
but
such
Bulletins
do
have
persuasive
force
in
the
event
of
ambiguity.
The
federal
government's
Bulletin
IT-487,
April
26,
1982,
entitled
"General
Limitation
on
Deduction
of
Outlays
or
Expenses",
states
in
part:
2.
The
Department's
views
may
be
helpful
in
the
interpretation
of
certain
phrases
used
in
the
opening
words
of
subsection
18(1)
and
in
paragraph
18(1)(a),
but
it
should
be
remembered
that
these
phrases
must
also
be
considered
in
relation
to
the
wording
of
the
paragraph
as
a
whole.
(b)
”.
.
.
for
the
purpose.
.
.
."
It
is
not
necessary
to
show
that
income
actually
resulted
from
the
particular
outlay
or
expenditure
itself.
It
is
sufficient
that
the
outlay
or
expense
was
a
part
of
theincome-earning
process.
(c)
”.
.
.
gaining
or
producing
income.
.
.
."
The
word
“income”
refers
to
income
after
deductions
as
computed
under
Division
B
of
the
Income
Tax
Act.
An
expense
would
not
be
disallowed
simply
because
the
income-earning
process
produced
a
loss
as
long
as
the
intention
in
making
the
expenditure
was
to
produce
income.
Outlays
or
expenses
made
or
incurred
to
maintain
income
or
to
reduce
other
expenses
are
also
deductible
as
their
purpose
would
be
to
increase
income
whether
or
not
such
an
increase
resulted.
[Emphasis
added.]
As
I
have
indicated,
this
Bulletin
is
in
accord
with
the
interpretation
the
courts
have
put
on
phrases
such
as
“gaining
or
producing"
income
and
“earning
income”.
I
conclude
that
Mattabi
meets
the
qualifying
provisions
in
subsection
106(1)
of
the
Act.
My
conclusion
to
this
point
only
assists
Mattabi
to
qualify
for
the
tax
credit
in
the
year
in
which
the
expenditures
were
made,
i.e.
1971.
But
the
Company
was
exempt
from
tax
in
that
year
and
thus
for
the
credit
to
be
of
any
practical
use
the
Company
must
be
able
to
carry
it
forward.
The
conditions
under
which
that
may
be
done
are
set
out
in
subsections
106(2)—(4)
:
(2)
For
the
purposes
of
this
section,
where
the
machinery
and
equipment
in
respect
of
which
the
provisions
of
subsection
1
would
otherwise
apply,
is
not
used
by
the
corporation
in
the
fiscal
year
in
which
it
is
acquired,
such
machinery
and
equipment
shall
be
deemed
to
have
been
acquired
and
used
by
the
corporation
in
the
fiscal
year
in
which
it
is
first
used.
(3)
Any
amount
which
may
be
deducted
under
subsection
1
may
be
deducted
in
subsequent
fiscal
years
to
the
extent
that
the
deduction
allowed
under
subsection
1
exceeds
the
tax
otherwise
payable
by
the
corporation
in
the
previous
fiscal
years
and,
except
as
herein
provided,
no
deduction
shall
be
allowed
in
any
fiscal
year
of
the
corporation
ending
after
the
31st
day
of
March,
1973,
except
that
with
respect
to
the
first
fiscal
year
of
the
corporation
ending
after
the
31st
day
of
March,
1973,
the
amount
which
may
be
deducted
from
the
tax
otherwise
payable
for
that
fiscal
year
shall
not
exceed
that
portion
of
the
tax
otherwise
payable
for
that
fiscal
year
that
the
number
of
days
in
that
fiscal
year
prior
to
the
1st
day
of
April,
1973,
bears
to
365.
(4)
Notwithstanding
subsection
3,
where
a
corporation
has
a
net
loss,
any
amount
which
may
be
deducted
under
subsection
1
may
be
deducted
in
subsequent
fiscal
years
to
the
extent
that
the
deduction
allowed
under
subsection
1
exceeds
the
tax
otherwise
payable
by
the
corporation
in
the
previous
fiscal
years
and,
except
as
herein
provided,
no
deduction
shall
be
allowed
in
any
fiscal
year
of
the
corporation
ending
after
the
31st
day
of
March,
1974.
.
.
.
The
crucial
phrase
here
is
"net
loss",
which
is
defined
in
paragraph
106(5)(b):
(5)
In
this
section,
(b)
"net
loss"
means
the
amount,
if
any,
by
which
the
non-capital
losses
exceed
the
incomes
of
a
corporation
for
the
fiscal
years
ending
between
the
26th
day
of
April,
1971,
and
the
1st
day
of
April,
1973.
.
.
.
This
is
a
definition
peculiar
to
section
106.
It
requires
Mattabi
to
establish
that
its
"non-capital
losses”
exceeded
its
"incomes"
in
the
relevant
years,
i.e.
1971
and
1972.
What
do
these
terms
mean?
The
Court
of
Appeal
thought
the
word
"incomes"
should
be
construed
as
referring
to
more
than
one
income
in
any
given
year.
In
its
view,
it
would
cover
both
taxable
and
exempt
income
in
a
particular
year.
I
would
attribute
a
different
significance
to
the
use
of
"incomes"
in
the
plural.
It
seems
to
me
that
the
plural
was
used
because
the
necessary
calculation
includes
more
than
one
fiscal
year.
This
view
is
supported
by
the
fact
that
neither
"income"
nor
"non-capital
loss"
is
defined
in
section
106.
One
must
turn
therefore
to
the
Act
in
general
for
their
meaning.
Income
is
dealt
with
in
Part
Il
of
the
Act
which
covers
sections
8-122
and
therefore
includes
section
106.
Division
B
of
Part
Il
entitled
"Computation
of
Income"
begins
with
the
formula
for
determining
the
income
of
a
corporation
in
any
fiscal
year
(section
12).
The
section
begins:
The
income
of
a
corporation
for
a
fiscal
year
for
purposes
of
this
Part
is
its
income
for
the
year
determined
by
the
following
rules,
..
.
[Emphasis
added.]
"This
Part”
is,
as
noted
above,
Part
Il
and
includes
section
106.
The
rules
laid
out
in
section
12
are
followed
by
a
large
number
of
sections
dealing
with
what
must
be
included,
what
may
be
deducted,
and
so
on.
Subdivision
F
of
Division
B
headed
"Amounts
Not
Included
in
Computing
Income"
contains
paragraph
75(2)(a):
Subject
to
the
prescribed
conditions,
there
shall
not
be
included
in
computing
the
income
of
a
corporation
income
derived
from
the
operation
of
a
mine
during
the
period
of
thirty-six
months
commencing
with
the
day
on
which
the
mine
came
into
production.
Two
possible
ways
of
interpreting
the
relationship
between
paragraph
75(2)(a)
and
section
106
were
advanced
by
the
parties.
The
Company's
argument
was
simply
that
the
plain
meaning
of
the
Act
resulted
in
Mattabi
having
no
income
for
the
purposes
of
Part
II
(including
section
106)
during
this
period.
The
Minister
implicitly
accepted
that
this
correctly
represented
the
plain
meaning
but
urged
this
Court
to
hold
that
the
carry
forward
provisions
“could
not
have
been
intended
to
apply
to
corporations
which
earned
large
incomes
but
which
were
exempted
under
other
provisions
of
the
Act
from
paying
taxes
on
those
incomes
during
the
qualifying
period".
To
qualify,
he
submitted,
a
taxpayer
must
have
incurred
a
"true
net
loss".
The
Minister
supported
this
interpretation
by
noting
that
the
credit
was
designed
to
provide
an
incentive
to
purchase
equipment
and
that
such
incentive
would
only
be
effective
in
the
case
of
a
company
that
actually
paid
tax.
Therefore,
it
could
not
in
his
submission
have
been
intended
to
apply
in
the
present
case.
The
Minister,
in
effect,
asks
the
Court
to
find,
in
the
absence
of
a
separate
definition
for
the
section,
that
"income"
has
a
different
meaning
in
section
106
from
its
meaning
"for
the
purposes
of”
Part
Il
of
the
Act
in
which
the
section
appears.
Robins,
J.A.
in
the
Court
of
Appeal
seems
to
have
accepted
this
submission.
He
concludes
that
"income"
in
section
106
is,
in
effect,
a
synonym
for
profit.
Accordingly,
it
does
not
matter
whether
the
profit
is
tax
exempt
or
not.
The
difficulty
with
this
position,
as
I
see
it,
is
that
a
taxing
statute
is
a
highly
technical
piece
of
legislation
which
requires
an
interpretation
that
will
ensure
certainty
for
the
taxpayer.
Many
of
the
words
used
carry
a
very
specific
and
technical
meaning
because
they
identify
the
fundamental
concepts
underpinning
the
legislation.
"Income"
is
one
of
those
fundamental
concepts.
"Net
loss”
is
a
defined
item
for
purposes
of
paragraph
106(5)(b).
Both"in-
come"
and
“non-capital
loss"
are
defined
for
the
purposes
of
the
Act.
(Noncapital
loss
is
defined
in
sections
1(1)(48)
and
99(7)(b)).
The
legislature
did
not
enact
a
separate
definition
of
"income"
for
section
106,
which
it
could
easily
have
done,
and
in
my
view
it
should
not
readily
be
taken
to
have
intended
it
to
have
a
different
meaning
in
section
106
from
its
meaning
in
Part
Il
generally.
The
Minister,
however,
relies
on
this
Court's
judgment
in
Stubart
Investments
Ltd.
v.
The
Queen,
[1984]
1
S.C.R.
536;
[1984]
C.T.C.
294,
and
in
particular
on
one
of
the
guidelines
to
the
interpretation
of
taxing
statutes
set
out
by
Estey,
J.
at
pages
579-80
(C.T.C.
317):
3.
Moreover,
the
formal
validity
of
the
transaction
may
also
be
insufficient
where:
(c)
"the
object
and
spirit”
of
the
allowance
or
benefit
provision
is
defeated
by
the
procedures
blatantly
adopted
by
the
taxpayer
to
synthesize
a
loss,
delay
or
other
tax
saving
device,
although
these
actions
may
not
attain
the
heights
of
“artificiality”
in
s.
137.
This
may
be
illustrated
where
the
taxpayer,
in
order
to
qualify
for
an
“allowance”
or
a
“benefit”,
takes
steps
which
the
terms
of
the
allowance
provisions
of
the
Act
may,
when
taken
in
isolation
and
read
narrowly,
be
stretched
to
support.
However,
when
the
allowance
provision
is
read
in
the
context
of
the
whole
statute,
and
with
the
“object
and
spirit”
and
purpose
of
the
allowance
provision
in
mind,
the
accounting
result
produced
by
the
taxpayer's
actions
would
not,
by
itself,
avail
him
of
the
benefit
of
the
allowance.
With
respect,
I
do
not
think
Stubart
supports
the
Minister’s
interpretation
of
“income”
here.
The
issue
in
Stubart
was
whether
a
corporate
taxpayer,
with
the
avowed
purpose
of
reducing
its
taxes,
can
establish
an
arrangement
whereby
future
profits
are
routed
through
a
subsidiary
in
order
to
avail
itself
of
the
latter
corporation's
loss
carry-forward.
It
was
held
that
it
could
since:
Neither
the
loss
carry-forward
provisions,
nor
any
other
provision
of
the
Act,
have
been
shown
to
reveal
a
parliamentary
intent
to
bar
the
appellant
from
entering
into
such
a
binding
transaction
and
to
make
the
payments
here
in
question.
Once
the
tax
loss
concept
is
included
in
the
statute,
the
revenue
collector
is
exposed
to
the
chance,
if
not
the
inevitability,
of
the
reduction
of
future
tax
collections
to
the
extent
that
a
credit
is
granted
for
past
losses.
(p.
581
(C.T.C.
317)).
The
submission
of
the
Minister
is
that
a
reading
of
the
whole
statute
according
to
its
plain
meaning
can
defeat
a
narrow,
technical
interpretation
of
a
particular
provision.
However,
in
the
present
case
consideration
of
the
whole
statute
reveals,
if
anything,
support
for
the
Company's
position.
"Income"
is
a
defined
term
in
Part
II
of
the
Act
and
the
failure
to
define
income
differently
for
purposes
of
section
106
which
is
contained
in
Part
Il
has
to
be
treated
as
significant.
Interpretation
according
to
the
“object
and
spirit"
of
the
legislation
cannot,
in
my
view,
overcome
a
clear
statutory
definition.
This
is
not
a
case
in
which
the
Court
has
a
choice
of
the
interpretations
it
may
put
upon
the
language
used
by
the
legislature.
The
legislature
has
specifically
addressed
the
subject.
I
would
therefore
conclude
that
in
assessing
whether
Mattabi
had
a
"net
loss"
one
must
start
with
the
finding
that
for
purposes
of
paragraph
106(5)(b)
its
"incomes"
were
"nil".
Paragraph
106(5)(b)
requires
that
"non-capital
losses"
be
deducted
fronT'incomes"
in
the
search
for
a
net
loss.
"Non-capital
loss"
is
defined
in
sections
1(1)(48)
and
99(7)(b)
of
the
Act.
I
do
not
intend
to
analyze
these
provisions,
however,
since
it
is
common
ground
that
Mattabi's
"non-capital
losses"
for
the
relevant
period
were
"nil".
Its
"net
loss"
is
therefore
also
“nil”
unless
it
can
produce
a
negative
sum
for
non-capital
losses
by
revising
its
1971
or
1972
tax
return.
IV.
Revision
of
the
1971
Return
The
appellant
submitted
that
it
was
not
only
entitled
to
revise
its
1971
return
in
1974
but
was,
indeed,
required
to
do
so
in
the
circumstances.
It
cited
the
federal
government's
Interpretation
Bulletin
IT-112
of
July
10,
1973
which
states:
9.
Where
a
taxpayer
requests
a
revision
of
capital
cost
allowance
claimed
in
a
year
which
was
assessable
to
a
“nil”
income
tax
(because
of
a
loss
in
that
year,
the
application
of
a
loss
of
another
year,
or
the
fact
that
income
was
exempt
from
tax
in
that
year),
such
requests
will
be
allowed
only
if
there
is
no
resulting
change
in
the
tax
assessed
for
the
year
or
any
other
year
of
the
taxpayer
for
which
the
time
has
expired
for
filing
a
notice
of
objection.
[Emphasis
added.]
Mattabi
had
submitted
such
a
revision
for
1971
to
the
federal
government
in
1975
along
with
its
1974
return
and
the
federal
government
accepted
it.
We
were
referred
to
Ontario
Regulation
350/73,
s.
301(1),
which
states:
Allowances
in
Respect
of
Capital
Cost
301.
(1)
Except
as
otherwise
provided
in
this
section,
every
corporation
shall,
for
the
purposes
of
clause
a
of
subsection
1
of
section
24
of
the
Act,
deduct
for
each
fiscal
year
the
same
part
of
the
capital
cost
to
the
corporation
of
property,
or
the
same
amount
in
respect
of
the
capital
cost
to
the
corporation
of
property,
as
is
deducted
by
the
corporation
under
paragraph
a
of
subsection
1
of
section
20
of
the
Income
Tax
Act
(Canada).
.
.
.
Combining
the
federal
Interpretation
Bulletin
(to
which
the
provincial
government
admits
that
it
adheres)
and
the
provincial
Regulation,
the
appellant
submitted
that
it
was
entitled
by
the
Bulletin
to
revise
the
capital
cost
allowance
in
1971
if
it
met
the
necessary
conditions
and
that
it
was
required
by
the
Regulation
to
submit
a
similar
revision
to
the
Ontario
government.
The
appellant
further
submitted
that
the
Regulation
requires
Ontario
to
accept
the
revision
when
the
federal
authorities
have
done
so.
This
latter
submission
is
strongly
resisted
by
the
Minister.
Crucial
to
a
resolution
of
this
issue
is
an
understanding
of
the
legal
effect
of
administrative
practice
as
publicized
in
Interpretation
Bulletins.
As
already
mentioned,
the
latter
are
not
authoritative
sources
for
the
interpretation
of
taxing
statutes.
As
Cattanach,
J.
put
it
in
Southside
Car
Market
Ltd.
v.
The
Queen,
[1982]
2
F.C.
755
(T.D.)
at
770;
[1982]
C.T.C.
214
at
223,
"an
interpretation
is
not
law
until
so
interpreted
by
a
court
of
competent
jurisdiction".
The
same
judge
noted
in
Shekel
v.
M.N.R.,
[1972]
F.C.
672
(T.D.)
at
684;
[1972]
C.T.C.
210
at
218,
that
"[t]he
Deputy
Minister
does
not
have
the
power
to
legislate”.
Interpretation
Bulletins,
however,
do
have
some
persuasive
force
where
there
is
an
ambiguity
in
the
legislation.
In
Harel
v.
Deputy
Minister
of
Revenue
of
Quebec,
[1978]
1
S.C.R.
851;
[1977]
C.T.C.
441;
this
fact
was
recognized
in
a
case
in
which
Quebec
considered
a
lump
sum
payment
to
be
taxable
as
such
while
the
federal
government
treated
it
as
eligible
for
forward
averaging.
De
Grandpré,
J.
said
at
pages
858-9
(C.T.C.
447-8):
That
was
the
situation
in
1954
when
the
provincial
law
closely
modelled
on
the
federal
law
was
adopted.
At
that
time,
the
provincial
legislator
was
familiar
not
only
with
the
wording
of
s.
36(1)
of
the
federal
Act
but
also,
undoubtedly,
with
the
administrative
interpretation
there,
which
was
to
the
effect
that
taxpayers
in
Mr.
Harel's
situation
could
avail
themselves
of
the
averaging
provided
for
in
the
section.
Although
the
wording
of
s.
45
of
the
provincial
Act
differs
somewhat
from
that
of
s.
36(1)
of
the
federal
Act,
the
concept
is
the
same.
Consequently,
when
c.
17
of
the
Statutes
of
Quebec,
1953-54
was
adopted,
the
administrative
interpretation
of
the
federal
Act
gave
it
a
colour
that
the
provincial
legislator
could
not
ignore.
The
1954
provincial
Act
became
c.
69
of
the
1964
Revised
Statutes,
and
in
1965
c.
26
of
13-14
Eliz.
Il
revoked
s.
45
and
replaced
it
with
the
section
currently
in
effect.
At
that
time,
the
administrative
interpretation
of
the
provincial
Act
was
consistent
with
that
of
the
federal
Act,
so
that
in
1965
a
case
similar
to
that
of
appellant
would
have
been
decided
in
his
favour.
This
administrative
interpretation
was
maintained
until
1968,
at
which
time,
for
reasons
that
have
not
been
explained,
the
department
reversed
its
policy.
Once
again,
I
am
not
saying
that
the
administrative
interpretation
could
contradict
a
clear
legislative
text;
but
in
a
situation
such
as
I
have
just
outlined,
this
interpretation
has
real
weight
and,
in
case
of
doubt
about
the
meaning
of
the
legislation,
becomes
an
important
factor.
[Emphasis
added.]
Harel
was
affirmed
recently
in
Nowegijick
v.
The
Queen,
[1983]
1
S.C.R.
29;
[1983]
C.T.C.
20.
Dickson,
J.,
as
he
then
was,
stated
at
page
37:
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:
per
de
Grandpre
J.,
Harel
v.
Deputy
Minister
of
Revenue
of
Quebec.
.
.
.
I
have
no
doubt
that
the
legislation
creates
an
ambiguity
in
this
area.
The
Ontario
regulation
requires
a
taxpayer
to
submit
the
same
capital
cost
allowance
claim
that
it
submits
to
the
federal
government
but
it
does
not
in
terms
require
the
Ontario
authorities
to
accept
the
claim.
Should
the
latter
be
forced
to
adopt
the
appellant's
capital
cost
revision
on
the
basis
of
the
federal
government's
practice?
The
appellant
submits
that
it
should
on
the
basis
that
the
ambiguity
arising
from
the
combined
effect
of
the
federal
Interpretation
Bulletin
and
the
provincial
Regulation
should
be
resolved
in
favour
of
the
taxpayer.
This
Court's
judgment
in
Johns-Manville
Canada
Inc.
v.
The
Queen,
[1985]
2
S.C.R.
46;
[1985]
2
C.T.C.
111,
is
cited
in
support.
In
Johns-Manville
Estey,
J.
said
at
page
67
(C.T.C.
123):
.
.
.
if
the
interpretation
of
a
taxation
statute
is
unclear,
and
one
reasonable
interpretation
leads
to
a
deduction
to
the
credit
of
a
taxpayer
and
the
other
leaves
the
taxpayer
with
no
relief
from
clearly
bona
fide
expenditures
in
the
course
of
his
business
activities,
the
general
rules
of
interpretation
of
taxing
statutes
would
direct
the
tribunal
to
the
former
interpretation.
Later
in
his
judgment
at
page
72
(C.T.C.
126)
he
referred
to:
.
.
I
another
basic
concept
in
tax
law
that
where
the
taxing
statute
is
not
explicit,
reasonable
uncertainty
or
factual
ambiguity
resulting
from
lack
of
explicitness
in
the
statute
should
be
resolved
in
favour
of
the
taxpayer.
Although
Estey,
J.
was
referring
to
ambiguity
within
a
single
statute,
I
believe
these
principles
are
not
inappropriate
to
a
case
like
the
present
in
which
the
ambiguity
stems
from
the
interplay
of
a
provincial
Regulation
and
federal
administrative
practice.
They
do
not,
however,
assist
the
appellant
here.
Mattabi
can
hardly
claim
to
have
had
"no
relief
from
clearly
bona
fide
expenditures".
It
had
relief
in
the
form
of
a
total
exemption
from
taxation
during
the
qualifying
period.
It
was
in
fact
enjoying
a
complete
tax
holiday.
I
see
no
reason
therefore
to
interpret
the
provincial
Regulation
as
imposing
an
obligation
on
the
Ontario
authorities
to
accept
the
appellant's
revised
return
when
there
is
nothing
in
the
Act,
the
Regulation
or
any
provincial
Interpretation
Bulletin
to
support
it.
While
the
federal
authorities
accepted
the
revision
pursuant
to
their
own
practice,
there
was
no
reason
for
them
not
to
do
so
since
the
amendment
was
made
to
the
federal
return
solely
for
the
purpose
of
making
the
same
amendment
provincially.
We
do
not
know
whether
or
not
the
federal
authorities
would
have
so
readily
accepted
it
had
it
been
attended
by
the
same
consequences
under
the
federal
legislation
as
under
the
provincial.
It
is
my
view,
moreover,
that
the
retroactive
abolition
of
the
tax
holiday
by
the
province
cannot
per
se
constitute
a
reason
for
interpreting
the
Regulation
so
as
to
compel
the
authorities
to
accept
the
amendment.
The
fact
that
the
tax
holiday
in
the
case
of
the
province
was
abolished
retroactively,
thereby
depriving
the
appellant
of
the
opportunity
to
make
out
its
return
in
the
manner
most
advantageous
to
it,
obviously
influenced
the
trial
judge.
I
agree,
however,
with
Robins,
J.A.
in
the
Court
of
Appeal
for
the
reasons
he
gives
that
it
is
irrelevant
to
the
issue
of
interpretation.
The
Province's
repeal
of
the
tax
holiday
in
no
way
changes
the
law
applicable
to
the
filing
of
amended
returns
and
the
question
whether
on
the
true
interpretation
of
the
provincial
legislation
the
Minister
is
obliged
to
accept
them.
It
goes
without
saying,
of
course,
that
it
may
be
very
relevant
to
the
decision
the
Minister
makes
in
the
exercise
of
his
discretion
whether
to
accept
them
or
not.
I
would
conclude,
for
the
reasons
I
have
indicated,
that
this
Court
cannot
compel
the
Ontario
government
to
accept
the
appellant's
revision
to
its
1971
tax
return.
It
may
do
so
if
it
wishes
but
it
remains,
in
my
opinion,
a
matter
within
the
scope
of
the
Minister's
discretion.
V.
Mattabi's
Alternative
Claims
These
claims
are
threefold:
the
first
two
represent
alternate
methods
of
creating
a
net
loss
in
the
1971
and
1972
taxation
years
so
as
to
claim
the
investment
tax
credit;
the
third
is
a
claim
that
the
1974
return
be
re-opened
so
that
the
Company
can
readjust
its
deductions
in
light
of
its
failure
to
be
allowed
that
credit.
I
will
deal
with
each
of
them
in
turn.
(a)
Capitalization
of
Interest
Expense
When
the
appellant's
mining
operations
came
into
production
in
reasonable
commercial
quantities
in
1972
it
was
required
to
close
its
books
and
reopen
them
immediately
because
this
date
represented
the
point
at
which
the
tax
holiday
began.
When
it
did
so
it
had
a
choice
of
how
to
deal
with
$1,183,477
paid
in
interest
during
the
first
seven
months
of
1972.
It
could
treat
this
sum
as
a
deductible
expense
or
it
could
elect
to
include
it
as
pre-
production
capital
expenditure.
These
options
are
provided
for
in
section
25
of
the
Act
and
section
21
of
the
Income
Tax
Act.
Since
its
income
for
1972
was
"nil",
Mattabi
chose
to
capitalize
the
interest
payments
but
failed
to
submit
the
appropriate
documents
for
such
election.
Despite
this
failure,
both
levels
of
government
accepted
the
election.
The
appellant
now
argues,
somewhat
ironically,
that
it
should
not
be
permitted
to
get
away
with
this
oversight.
Interest
expenses
ought
to
be
treated
as
a
deductible
item
for
1972
which
would
create
a
non-capital
loss
for
1972
and
therefore
a
net
loss
for
the
qualifying
period
under
section
106
of
the
Act.
I
find
no
merit
in
this
argument.
Keith,
J.
had
this
to
say
on
it
at
page
393:
I
am
of
the
opinion
that
the
Minister
is
entitled
to
waive
strict
compliance
with
the
Statute
and
treat
the
appellant's
reporting
of
the
item
in
its
financial
statements
and
corporations
tax
return
for
1972
as
an
election.
I
would
agree.
The
Company
made
its
choice
of
how
to
characterize
the
interest
payments
in
1972.
The
choice
may
not
have
turned
out
to
be
the
best
one
but
that
fact
plus
a
technical
oversight
cannot
be
used
to
demand
what
is
effectively
a
re-opening
and
revision
of
the
1972
return
long
after
the
time
for
assessment,
objection
and
appeal
has
passed.
There
is,
of
course,
no
statutory
provision
to
permit
such
a
re-opening.
I
would
reject
this
ground
of
appeal.
(b)
1972
Capital
Tax
Payment
I
find
even
less
merit
in
this
claim.
In
1971
the
appellant
paid
$50
in
capital
tax
under
Part
III
of
the
Act.
This
was
erroneously
included
in
exploration
and
development
expenses
for
1972.
Again,
the
appellant
asks
this
Court
to
hold
that
this
error,
accepted
or
overlooked
by
both
taxing
authorities,
was
sufficiently
egregious
that
it
be
required
to
alter
its
1972
return
by
making
this
$50
payment
a
deductible
loss
in
1972
pursuant
to
paragraph
60(1)(c)
of
the
Act.
Precisely
the
same
considerations
lead
me
to
reject
this
argument.
The
appellant
can
cite
no
authority
that
requires
the
government
to
accede
to
this
request.
The
error
was
a
minor
one
accepted
by
the
government
and
the
time
for
amending
returns
without
authority
is
long
past.
I
have
no
doubt
that,
if
the
government
were
attempting
at
this
stage
to
alter
these
returns,
the
Company
would
be
strenuously
arguing
an
estoppel
based
on
the
intervening
years
and
the
earlier
acceptance
of
the
returns
by
the
authorities.
I
find
no
merit
in
this
claim.
(c)
The
1974
Return
The
appellant's
final
claim
is
an
alternative
pleading
to
all
of
its
other
contentions.
If,
for
one
reason
or
another,
it
is
denied
the
1974
investment
tax
credit,
then
it
asks
the
Court:
.
.
is
the
Appellant
entitled
to
deduct
in
computing
its
income
for
1974
additional
capital
cost
allowance
(greater
than
the
amount
of
capital
cost
allowance
deducted
in
the
Appellant's
1974
tax
return)
up
to
the
maximum
amount
permitted
by
the
Ontario
Act
and
its
regulations?
In
support
of
this
claim
Mattabi
points
out
that
it
did
not
claim
the
maximum
capital
cost
allowance
in
1974
because
it
assumed
it
would
receive
the
tax
credit
and
did
not
wish
to
reduce
the
tax
against
which
the
credit
would
be
applied.
It
puts
its
claim
for
relief
this
way:
In
preparing
a
tax
return
under
the
Ontario
Act,
each
corporate
taxpayer
must,
of
necessity,
make
a
number
of
assumptions
as
to
how
certain
amounts
are
to
be
calculated,
characterized,
claimed
and
apportioned.
Some
of
these
assumptions
will
suggest
or
dictate
other
calculations
or
claims
that
must,
or
should
reasonably,
be
made.
Thus,
in
this
case
the
Appellant,
assuming
that
it
was
entitled
to
a
substantial
investment
tax
credit
for
1974,
did
not
deduct
all
of
the
capital
cost
allowance
which
was
available
in
1974
because
to
do
so
would
have
reduced
the
Appellant's
income,
taxable
income
and
resulting
tax
against
which
the
investment
tax
credit
was
to
be
applied.
Conversely,
the
only
prudent
decision
for
the
Appellant,
if
it
was
not
entitled
to
the
investment
tax
credit
for
1974,
was
to
deduct
such
amount
of
capital
cost
allowance
as
would
minimize
its
tax
liability
for
1974.
There
is
no
opportunity,
in
preparing
a
tax
return,
for
the
taxpayer
to
claim
in
the
alternative.
Thus,
an
honest
and
prudent
taxpayer,
such
as
the
Appellant,
may
file
a
tax
return
making
certain
legal
or
factual
assumptions,
only
to
find
later
that
those
assumptions
are
not
well
founded
in
law
or
in
fact.
It
should
be
noted
that
the
issue
of
capital
cost
allowances
in
1974
was
not
the
subject
of
any
objection
by
the
Company
prior
to
trial.
It
arose
for
the
first
time
in
the
form
of
an
amendment
to
the
pleadings
at
trial,
and,
indeed,
a
large
part
of
Keith,
J.'s
reasons
is
concerned
with
whether
such
an
amendment
could
be
allowed.
The
view
that
I
take
of
this
matter
makes
it
unnecessary
to
go
into
this
question.
I
will
assume
that
the
amendment
to
the
pleadings
can
be
made,
but
I
do
not
think
the
appellant
can
succeed
in
its
amended
claim.
The
hurdle
that
the
Company
must
overcome
on
this
issue
is,
as
with
the
other
claims,
that
it
cannot
cite
any
statutory
provision
by
which
the
government
is
required
to
accept
this
amendment.
Indeed,
these
provisions
militate
against
the
claim
because
Ontario
Reg.
350/73,
cited
above,
requires
that
the
same
capital
cost
allowance
be
claimed
in
the
provincial
return
as
is
claimed
in
the
federal
return.
The
Company
would
therefore
have
to
attempt
a
revision
of
its
1974
federal
return
which
I
do
not
think
it
is
entitled
to
do
at
this
stage.
A
second
reason
for
not
allowing
this
claim
at
this
stage
is
that,
as
the
appellant
concedes,
the
result
would
be
that
it
has
overstated
its
capital
cost
allowances
for
1975
and
1976.
The
time
limit
for
objections
and
appeals
for
those
years
has
expired
but
a
reassessment
would
have
to
take
place.
Again,
returns
made
to
the
federal
government,
not
a
party
to
this
appeal,
would
also
have
to
be
revised.
I
am
not
suggesting
here
that
the
Minister
could
not,
if
he
wished,
allow
changes
to
the
1974
return
provided
he
conformed
to
the
requirements
of
Ontario
Reg.
350/73.
The
issue
before
this
Court
is
whether
he
can
be
compelled
to
do
so.
The
only
cases
cited
to
us
by
the
appellant
go
to
the
issue
of
whether
the
amendment
could
be
added
to
the
pleadings
at
trial
and
I
have
already
noted
that
I
am
prepared
to
assume,
without
deciding,
that
it
can.
But
accepting
the
amendment
is
not
the
same
as
allowing
the
claim
and
on
the
principal
point
I
would
agree
with
Robins,
J.A.
in
the
Court
of
Appeal:
Neither
the
applicable
statutory
provisions
or
the
case
law
to
which
we
were
referred
lend
support,
in
my
view,
to
the
contention
that
the
Company
having
failed
in
that
course,
is
now
entitled
to
compel
the
Minister
to
permit
it
to
adopt
an
approach
to
its
1974
tax
accounting
wholly
unrelated
to
the
matters
in
issue
in
its
appeal
from
the
Minister's
reassessment,
(p.
572).
[Emphasis
added.]
VI.
Disposition
For
all
the
foregoing
reasons
I
would
dismiss
the
appeal
with
costs.
Appeal
dismissed.