[OFFICIAL ENGLISH
TRANSLATION]
Date:
20020705
Docket:
2000-1618(IT)G
BETWEEN:
GASTON
CELLARD INC.,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Tardif,
J.T.C.C.
[1] This appeal concerns the 1996 and 1997 taxation years.
[2] To make and issue
the assessments that are the subject of this appeal, the Minister of National
Revenue (the “Minister”) assumed the following facts:
[TRANSLATION]
(a) During
the 1991 taxation year, the appellant operated a sawmill in the county of
Bonaventure in the Gaspé region;
(b) On
March 11, 1991, the appellant received a notice of expropriation from the
ministère des Transports du Québec published in the Bonaventure registry office
No. 2, in Carleton, under the number 62255;
(c) The
notice of expropriation concerned the land on which the appellant operated its
sawmill;
(d) On
or about December 16, 1995, the appellant and the ministère des Transports du
Québec, entered into an agreement by which the appellant would receive
compensation in the amount of $1,150,156.00, which included the following items
of compensation:
·
land
purchase;
·
moving
buildings, equipment, etc.;
·
soil
improvement; and
·
claim
expenses and other damages.
(e) The
appellant had a new sawmill built from this compensation, and construction work
was completed during the year 1995;
The sawmill building:
(f) In
its income tax return for the taxation year ending on December 31, 1995, the
appellant availed itself of the provisions of subsection 44(1) of the Income
Tax Act (the “Act”) by making an election that allowed it to defer
taxation of the capital gain from the disposition of the land and sawmill
building;
(g) The
actual capital cost of the new sawmill building is $479,912;
(h) The
appellant established the deemed capital cost of the new sawmill building (the
“replacement property”) at $58,105 pursuant to paragraph 44(1)(f) of the
Act;
(i) However,
in calculating its investment tax credit at the end of the 1995 taxation year,
the appellant took into account the actual acquisition cost of the new building
and not, as it should have done, the deemed capital cost of the replacement
property provided for in paragraph 44(1)(f) of the Act;
(j) The
Minister of National Revenue accordingly revised the investment tax credit
granted for the construction of the new building to $17,432, as the following
chart indicates:
|
Description of the
property:
|
building – sawmill
|
|
Cost claimed
|
$512,121
|
|
Eligible cost
|
$ 58,105
|
|
Ineligible cost
|
$454,016
|
|
ITC claimed for the
building – 30%
|
$153,636
|
|
ITC granted for the
building – 30%
|
$17,432
|
(k) Revising
the investment tax credit earned in 1995 for the construction of the building
to $17,432 had the effect of reducing the balance of the investment tax credit
available for the 1996 and 1997 taxation years in the manner described in
paragraph 10 of this Reply to the Notice of Appeal and had a consequence on the
amounts of investment tax credit refunded on the tax payable for the years
ending on December 31, 1996, and December 31, 1997;
Transportation and
construction of a concrete base for a weigh scale:
(l) The
Minister of National Revenue took the position that the cost of
$20,640 relating to the transportation and construction of a concrete base
serving to support a used weigh scale in 1996 was not eligible for the purposes
of calculating the investment tax credit;
(m) This
ineligibility had the effect of reducing the balance of the investment tax
credit available for the 1996 and 1997 taxation years in the manner described
in paragraph 10 of this Reply to the Notice of Appeal, affected the refund of
the investment tax credit for the year ending on December 31, 1996, and had a
consequence on the tax payable for the year ending on December 31, 1997;
[3] The appeal raises two issues: the
first is whether the ITC (“investment tax credit”) provided for in subsection
127(9) of the Income Tax Act (the “Act”) must be calculated on
the basis of the capital cost of the building or the deemed capital cost in
accordance with paragraph 44(1)(f) of the Act.
[4] The second issue in dispute consists of deciding whether the
appellant was entitled to an ITC on the cost of the construction of the
concrete foundations required for the installation of a used weigh scale.
[5] In 1991, the appellant’s mill was the subject of expropriation
proceedings by the government of Quebec. After receiving compensation in 1995,
the appellant decided to build its new mill on another site.
[6] The payment of compensation resulting from the expropriation of a
building triggers a deemed disposition under the Act. Consequently, the
expropriated taxpayer can make the election provided for in
paragraph 44(1)(f) of the Act; this election makes it
possible to defer the realizable capital gain resulting from the deemed
disposition triggered by the expropriation. The appellant made this election.
[7] To replace the expropriated mill, the appellant built a new mill.
Having had to assume all of the construction costs for the new mill, the
appellant claimed an ITC on the basis of the actual expenditures required for
the construction of the new mill.
[8] The Minister maintains that the basis for the ITC calculations is
not the actual capital cost but rather the deemed capital cost under paragraph
44(1)(f) of the Act. The Minister also refused to allow the claim
for an ITC with respect to the cost of the foundations erected for the
installation of a used weigh scale.
[9] I shall begin by dealing with the issue concerning the
construction cost for the foundations required for the installation of the used
weigh scale.
[10] The weigh scale had to be moved and reinstalled on new concrete
foundations, on the site of the new mill. The dimensions of the foundations
were 70 feet in length by 10 feet in width. The weigh scale had been purchased
to measure wood by determining its dimensional weight, on the basis of which
the stumpage fees were established; these were new government requirements.
[11] The scale could be moved, provided it was separated from its base,
which then became useless, so to speak. The weigh scale was just as useless
until it was reinstalled on another foundation. To be operational, it had to be
anchored or attached to a concrete foundation.
[12] Once affixed to the new foundations, the installation became
permanent and constituted real property in the same manner as the mill
buildings.
[13] In order to be operational and accomplish its primary purpose, the
weigh scale had two key components: a mechanical part that could be moved and
permanent foundations that had no value without the weigh scale.
[14] To characterize the mechanical part when it is separated from its
foundations is not appropriate since this was a temporary, uncustomary
situation; furthermore, this was property of no interest or use. Once assembled
or attached to the foundation, it became operational, capable of doing its job.
[15] Having regard to the quality of its ties and anchors to the base,
there is no doubt that it was an immovable. This becomes especially clear in
reading the relevant provisions: articles 900 et seq. of the Civil
Code of Québec (the “Code”).
[16] Articles 900 and 901 of the Code read as follows:
Article 900.
Land, and any
constructions and works of a permanent nature located thereon and forming an
integral part thereof, are immovables
Plants and minerals, as
long as they are not separated or extracted from the land, are also immovables.
Fruits and other products of the soil may be considered to be movables,
however, when they are the object of an act of alienation.
Article 901.
Movables incorporated
with an immovable that lose their individuality and ensure the utility of the
immovable form an integral part of the immovable.
[italics added]
[17] I do not accept the respondent’s contention that the foundation is
part of the weigh scale; I believe instead that the nature of the weigh scale
must be assessed from the time it can operate or is in a position to accomplish
the purpose for which it was purchased, that is, to determine the weight of the
wood.
[18] The weigh scale accordingly became an integral part of the
foundation from the moment it was attached or annexed to it. The installation
of the weigh scale on its new foundations had the effect of making it an
immovable.
[19] The foundations required an expenditure of $15,000. This
expenditure was of the same nature as the one required for the construction of
the mill. Consequently, I find that the expenditure of $15,000 for the
construction of the foundations required for the installation of a weigh scale
was eligible for the investment tax credit.
[20] As for the first issue in dispute, that is, the determination of
the capital cost of the mill for which the ITC was to be claimed, the
respondent argues that the deemed capital cost, under paragraph 44(1)(f)
of the Act, should be the basis for calculating the ITC, not the
capital cost expended, as the appellant claims.
[21] To justify her interpretation, the respondent says that nothing in
the provisions of paragraph 44(1)(f) limits or restricts the scope of
the application of the deemed capital cost provided for in this section of the Act.
In other words, the respondent submits that the deemed capital cost, provided
for by section 44, applies to the entire Act, except in the case of
the exceptions for which explicit provision is made; since Parliament did not
provide an exception for the facts at the origin of this case, the Minister
concludes that the deemed capital cost alone applies in the case at bar.
[22] Similarly, the appellant notes that paragraph 44(1)(f)
contains no exception or specific restriction with respect to the facts at the
origin of its appeal.
[23] Although they are in agreement about the lack of specifics, the
parties interpret Parliament’s silence very differently. The appellant contends
that, by its silence, Parliament merely intended that an ITC be obtained on the
actual capital cost, not on the deemed capital cost established under paragraph
44(1)(f). The respondent, on the other hand, submits that, if this had
been the intention of Parliament, it would have expressed this clearly.
[24] The parties also agree on Parliament’s objective that the ITC was
introduced to encourage and support the economic development of certain regions
in Canada that are disadvantaged because of their remoteness.
[25] Apart from the argument that if Parliament did not provide for
anything specifically in subsection 127(11.1) of the Act and,
therefore, that the ITC applies only to the deemed capital cost under
paragraph 44(1)(f), the respondent submits that the appellant’s
investment was not a real investment because it involved the use of the
compensation for the expropriation not to construct a new mill in the region
but essentially to replace the one that was closed as a result of the
expropriation.
[26] This argument is not very convincing since the appellant could
have decided not to rebuild or to reinvest in a wholly different sector of
economic activity or even in an entirely different region; the region in
question would then have been deprived of the investment.
[27] The decision to rebuild consolidated jobs and required the same
expenditures as though a new mill had been built for the first time.
[28] In view of this, the appellant in fact invested the costs required
to build its new mill. The region benefited from the investment and jobs were
maintained and in fact consolidated as a result of the investment. On this
point, the ITC did exactly what it was intended to do in that it undoubtedly
contributed to the decision to rebuild. It was most certainly an inducement to
reinvesting the compensation for the expropriation.
[29] On the basis of the same legal foundations, the parties submitted
valid arguments in support of their respective interpretations. It follows,
then, that the provisions in question are not worded with all the clarity and
precision one might wish.
[30] An ITC is an inducement and a stimulus. If Parliament had wanted
to limit the scope and ambit of the benefit, it would have so provided,
explicitly or specifically, in order to avoid any uncertainty and confusion,
according to the appellant.
[31] As a general rule, if
the terms used in the Act are clear, they are to be interpreted
according to their plain and ordinary meaning. In the case at bar, the issue is
not to interpret the vocabulary of the Act but, rather, to determine
whether a presumption contained in a provision of the Act (paragraph
44(1)(f)) applies to another provision (subsection 127(9)) that is
unrelated to the first. In other words, it must be determined whether the
deemed capital cost, which is less than the actual capital cost of a property,
according to 44(1)(f), must be taken into account for the purposes of
the definition of “investment tax credit” provided for in subsection 127(9) of
the Act.
[32] The term “capital cost”
is not defined in the Act. In analysing what constitutes the capital
cost of a property, the Federal Court of Appeal defined the term in The
Queen (Appellant) v. Geoffrey Stirling (Respondent), [1985] 1 F.C. 342, as follows:
As we understand it, the word "cost" in those sections
means the price that the taxpayer gave up in order to get the asset; it does
not include any expense that he may have incurred in order to put himself in a
position to pay that price or to keep the property afterwards. [See: R. v.
Canadian Pacific Ltd., [1978] 2 F.C. DTC 5383 (C.A.); Birmingham
Corporation v. Barnes, [1935] A.C. 292 (H.L.); R. v. Consumers' Gas
Company Ltd., [1984] 1 F.C. 779; 84 DTC 6058 (C.A.)].
[33] In Singleton v.
Canada, 2001 S.C.C. 61, the Honourable Mr. Justice LeBel, dissenting,
did an excellent job in canvassing the recent history of methods of
interpretation. Mr. Justice LeBel expressed himself as follows at
paragraphs 59 et seq.:
4. Statutory
Interpretation
(a) The
Words-in-Total-Context Approach
59
In Stubart Investments Ltd. v. The Queen, [1984] 1 S.C.R. 536,
this Court articulated a new method of statutory
interpretation appropriate to the Income Tax Act, dubbed the
"words-in-total-context approach" by MacGuigan J.A. in Harris
Steel Group Inc. v. M.N.R., 85 D.T.C. 5140
(F.C.A.). In Stubart, at p. 578, citing Construction of Statutes
(2nd ed. 1983), at p. 87, Estey J. endorsed the rule of statutory
interpretation from E. A. Driedger that this Court had
already adopted for other statutes, viz., that "the words of an 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".
60
Since Stubart, this Court has taken such an
approach in a number of other decisions, such as The Queen v. Golden, [1986] 1 S.C.R. 209,
at p. 214, per Estey J., and Symes v. Canada, [1993] 4 S.C.R. 695,
at p. 744, per Iacobucci J., and at p. 806, per L'Heureux-Dubé J.
Even cases such as Québec (Communauté urbaine) v. Corp. Notre-Dame de Bon-Secours,
[1994] 3 S.C.R. 3, at
p. 15 (advocating the teleological approach), and Friesen v. Canada, [1995] 3 S.C.R. 103,
at para. 10, per Major J. (advocating the "plain meaning"
approach), still refer to Stubart as the foundational modern Canadian
case for statutory interpretation.
61
The words-in-total-context approach steers a middle course between the pure teleological
method of Gonthier J. in Corp. Notre-Dame de Bon-Secours and Major J.'s
focus on the "plain meaning" of the statute in Friesen. As
Professor Duff points out in his article "Interpreting the Income Tax
Act" (1999), 47 Can. Tax J. 741, at p. 787, "[i]n
rejecting the extremes of purposive interpretation on the one hand and the
plain meaning rule on the other, the words-in-total-context approach affirms a
more 'open-textured' approach to statutory interpretation ...".
62
It is important to keep in mind that McLachlin J.'s second caveat in Shell Canada does not require a simplified "plain
meaning" rule of statutory interpretation. The words-in-total-context
approach ensures that clear statutory language is not overlooked in order to
carry out a broad statutory purpose more effectively. It is the approach that
should be applied here.
(b) The Teleological Approach
63
This Court unanimously endorsed a "teleological
approach" to the interpretation of the tax legislation in its 1994
decision Corp. Notre-Dame
de Bon-Secours.
According to
Gonthier J.'s view, at p. 18, courts should look first
to the legislature's purpose in order to determine legislative intent. Once
this intent has been determined, then courts can
identify the sorts of presumptions to be applied to a particular section:
|
|
... it is the
teleological interpretation that will be the means of identifying the purpose
underlying a specific legislative provision and the Act as a whole; and it
is the purpose in question which will dictate in each case whether a
strict or a liberal interpretation is appropriate or whether it is the tax
department or the taxpayer which will be favoured. [Emphasis added.]
|
|
64
This approach, however, cannot be mechanically applied for it may raise the
first of Dickson C.J.'s worries concerning statutory interpretation in Bronfman
Trust (which is the same in substance as McLachlin J.'s first caveat in Shell
Canada, i.e. losing sight of
the fact that an appreciation of the context of legislation is helpful
"provided it is consistent with the text ... of the taxation statute"
(p. 53). If we begin by considering the purposes of the statute we run the risk
of obscuring the meaning of the particular statutory language in our enthusiasm
to forward the general statutory purpose. Careful attention must always be
taken to give effect to the particular language Parliament chose to use.
(c) The Plain Meaning Approach
65
The reaction to the teleological approach emphazises the particular statutory
language and is often referred to as the "plain meaning" approach.
This Court has not dealt consistently with what,
precisely, this approach entails. Some cases, such as Major J.'s majority
decision in Friesen (at pp. 113-114, citing P. W. Hogg and J. E. Magee, Principles
of Canadian Income Tax Law (1995), section 22.3(c), "Strict and
purposive interpretation", at pp. 453-54) take a hard line, as follows:
|
|
... "object
and purpose" can play only a limited role in the interpretation of a
statute that is as precise and detailed as the Income Tax Act. When a
provision is couched in specific language that admits of no doubt or
ambiguity in its application to the facts, then the provision must be applied
regardless of its object and purpose.
|
|
66
Other cases, such as Cory J.'s majority decision in Alberta (Treasury
Branches) v. M.N.R., [1996] 1 S.C.R. 963,
however, have understood the test differently, so much so that it is often
difficult to distinguish from the words-in-total-context approach. In that
case, Cory J. held, at para. 15, that "in order to determine the clear and
plain meaning of the statute it is always appropriate to consider the 'scheme
of the Act, the object of the Act, and the intention of Parliament'".
67
Cory J.'s understanding of the "plain meaning" approach in Alberta
(Treasury Branches) is peculiar but telling. By turning to the total
context of the statute in order to determine the "plain meaning" of
statutory language, he shows that the meaning of statutory language is at times
clear only in a particular context. It is a basic axiom of all textual
interpretation that meaning is context-dependent. Some statutory language might
appear to be obvious in its meaning independent of context. This is not,
however, because context plays no part in interpreting the words used. Rather,
it is simply because the context is so predictable that we need not pay it any
special attention. Nevertheless, it plays a central role in our understanding
of the words used.
68
If the "plain meaning" approach is to make any sense at all, it
surely cannot mean that we are always to ignore context when interpreting
statutory language. Rather, it must be understood to say that although context
is always important, sweeping considerations of general statutory purpose
cannot outweigh the specific statutory language chosen by Parliament. It is an
acknowledgement that Parliament's purposes can be complex. Rather than finding
a single purpose for the Act as a whole and using it to interpret the clear
language of specific provisions, we should use such broad purposes only as a
context to help elucidate the meaning of the specific statutory language.
Understood in this way, it is not inconsistent with the basic thrust of the words-in-total-context
approach.
[34] At paragraph 27, the
majority of the Court cited a passage from Shell Canada Ltd. v. Canada,
[1999] 3 S.C.R. 622, paragraph 40, where Madam Justice McLachlin (now
Chief Justice of Canada) stated as follows:
Second, it is well established in this
Court's tax jurisprudence that a searching inquiry for either the
"economic realities" of a particular transaction or the general
object and spirit of the provision at issue can never supplant a court's duty
to apply an unambiguous provision of the Act to a taxpayer's transaction. Where
the provision at issue is clear and unambiguous, its terms must simply be
applied.
[35] The respondent
interprets the provisions of the Act strictly in stating that, if
Parliament had intended to specifically exclude the definition of capital cost
in paragraph 44(1)(f) for the purposes of calculating the ITC, it
would have done so in subsection 127(11.1) of the Act. If such an
interpretation were to be accepted, one would still need to determine whether
subsection 44(1)(f) of the Act applies to
subsection 127(9) or whether its application is restricted to deferring
the capital gain under subsection 44(1) of the Act.
[36] The respondent submits
that nothing in paragraph 44(1)(f) or in subsection 44(1)
restricts the applicability of paragraph 44(1)(f) solely to the
purposes of subsection 44(1). However, nothing extends the applicability
of paragraph 44(1)(f) to the remaining provisions of the Act.
The respondent adds that Parliament specifies the scope of a definition or term
in order to limit its applicability and concludes that paragraph 44(1)(f)
does not state any such limits or restrictions.
[37] It is important,
however, to recall that there are provisions, including subsection 13(7.1),
that specify that they apply to the entire Act. Subsection 13(7.4) is
connected to subsection 13(7.1); this subsection is, therefore, applicable to
the entire Act.
[38] This example
illustrates that it is not because Parliament did not explicitly limit the application
of paragraph 44(1)(f) that the paragraph applies to the entire Act,
since there are provisions such as subsection 13(7.1) where Parliament has
taken the trouble to specifically extend its application to the entire Act.
[39] This approach is not, however,
sufficient to reach a conclusion since there are also provisions in the Act (such
as subsection 44(6)) that limit their own applicability, thereby showing that
the application of a provision is not automatically limited to the purposes of
the provision itself.
[40] Section 15 of the Interpretation
Act states:
15.(1) Definitions
or rules of interpretation in an enactment apply to all the provisions of the
enactment, including the provisions that contain those definitions or rules of
interpretation.
(2) Where
an enactment contains an interpretation section or provision, it shall be read
and construed
(a) as
being applicable only if a contrary intention does not appear; and
(b) as being
applicable to all other enactments relating to the same subject-matter unless a
contrary intention appears.
[41] Paragraph 44(1)(f)
is not a definition or interpretative provision. Rather, it is a provision that
creates a presumption within a special provision for calculating a capital
gain.
[42] A term employed in a
provision generally has the same meaning throughout the Act. In Schwartz
v. Canada, [1996] 1 S.C.R. 254, at page 298, Mr. Justice La
Forest formulated the principle as follows:
It is a
well-established principle of interpretation that words used by Parliament are
deemed to have the same meaning throughout the same statute; ... This, as all
principles of interpretation, is not a rule, but a presumption that must give
way when circumstances demonstrate that such was not the intention pursued by
Parliament.
[43] One thing is certain:
it is not clear from reading paragraph 44(1)(f) that the capital
cost provided for in that paragraph is the one that applies to the entire Act.
Moreover, it is not obvious that in failing to exclude paragraph 44(1)(f)
in subsection 127(11.1), Parliament intended that this paragraph be taken
into account for the purposes of calculating an ITC. In the circumstances, it
seems to me that the context of the legislation must be analysed to determine
the intention of Parliament.
[44] Consequently, in order to dispose of the issue, it seems necessary
to me to return to the facts and circumstances considered by Parliament.
[45] Subsections 127(5) to
(12) of the Act were enacted by the Act to amend the statute law
relating to income tax (No. 2), S.C. 1974-75-76, c. 71, para. 9(1),
assented to on December 2, 1975. The creation of the ITC is provided for
in the Notice of Ways and Means Motion to amend the Income Tax Act,
issued on June 23, 1975, by the Minister of Finance of Canada, the Honourable
John N. Turner. The Notice is reproduced in Canada Income Tax
Guide Reports, Special Report number 49, 1975 Budget Message, published by
CCH Canadian Limited, June 24, 1975. This report (Special
Report) includes the following comment by the Minister of Finance:
Minister's Comment. If our economy is
to remain productive and competitive and capable of providing jobs, we must
ensure that we have modern capital facilities with which to work. We must guard
against any slowdown in investment. I have been pleased that capital investment
has continued to expand in present circumstances and I want to do what
government can do to ensure that this expansion continues.
...
I am therefore
proposing to introduce an investment tax credit as a temporary extra incentive
for investment in a wide range of new productive facilities. The credit will be
5 per cent of a taxpayer's investment in new buildings, machinery and equipment
which are for use in Canada primarily in a manufacturing or processing
business, production of petroleum or minerals, logging, farming or fishing....
Official
Supplementary Explanation: To sustain investment in new productive facilities the
budget proposes a 5-per-cent credit against federal income tax for specified
investments made between now and July 1, 1977.
[46] The creation of the ITC
was announced in the 1975 budget; the purpose of the measure was to create a
temporary economic incentive. The ITC was extended in the years following 1977
and is still available. In light of the above comments made by the Minister of
Finance, an interpretation to the effect that the deemed capital cost provided
for in paragraph 44(1)(f) of the Act, i.e., the one that, in the
case at bar, must be taken into consideration, is neither rational nor reasonable.
Parliament wanted to create an economic stimulus to promote development. On the
basis of this premise, it would be surprising if the inducement were to be
reduced or diluted by means of another provision of the Act.
[47] The parties have acknowledged that this was clearly an exceptional
measure whose sole purpose was to make a better distribution of the collective
wealth possible by allowing some regions in Canada to obtain the investments
that are essential and beneficial for their survival and economic development.
This uncontested fact leads me to conclude that, if Parliament had wanted to
restrict or limit the benefits flowing from the ITC, it would have explicitly
and specifically so provided.
[48] To support her argument, the respondent also submitted that the
new mill was built from the compensation from an expropriation and that it was
not really a new mill, but rather a replacement, a relocation. This argument is
no doubt based on the restriction that when calculating the ITC, a grant or financial
assistance from a government for the realization of a project is excluded.
[49] Parliament wanted to prevent that an ITC be given for amounts that
it had itself given the investor. In the case at bar, the compensation received
corresponded to the actual value of the property expropriated. It was in no way
a subsidy or any kind of grant; the appellant received only what was owed to it
as a result of the expropriation.
[50] Following the expropriation, the appellant was under no obligation
to construct a new mill and had no obligation to continue in business. It could
simply have decided to cease operations, in which case another business could
have decided to take over, and the respondent could not have raised any of her
arguments.
[51] In essence, Parliament’s purpose was to encourage investments that
would enable the applicable regions to achieve an acceptable level of economic
development so that more jobs would become available.
[52] The realization of the appellant’s project (relocation of its new
mill) is consistent with the motivation and intention of Parliament, which
wanted to consolidate and develop the economic structure of the regions to
which the ITC applied. On the one hand, the appellant was under no legal
obligation to rebuild; on the other hand, it could have chosen to invest in a
wholly different sector of economic activity or even in another region.
[53] Moreover, the compensation from the expropriation, strictly
speaking, had nothing to do with the economic development of the region.
I therefore find that the claim that public funds were involved has no merit.
[54] In the case at bar, there is no need to interpret the terms used
in the Act, since the formulation is clear; instead, it must be
determined whether the deemed capital gain provided for in
paragraph 44(1)(f) applies to subsection 127(9).
[55] In other words, is the deemed capital gain under 44(1)(f),
which is obviously less than the actual capital cost, the figure that should be
used for the purposes of calculating the ITC under subsection 127(9) of
the Act?
[56] From reading subsection 127(11.1), I understand that
Parliament wanted taxpayers to receive the ITC on the capital cost expended, in
other words, on the amount actually invested. This interpretation appears to me
to be in keeping and consistent with the overall objectives of Parliament. A
legislative measure to encourage investment where the benefits would be
considerably reduced as a result of an election authorized by the Act or
on the basis of the taxpayers’ financial situation would have a perverse effect
in that it would essentially be theoretical. I believe it would be no
overstatement to say that this would be an absurd situation.
[57] For these reasons, the appeal is allowed and the case will have to
be reconsidered on the basis that the costs to be used in calculating the
applicable ITC must be the cost of $15,000 expended for the construction
of the foundations required to install a weigh scale and the capital cost
actually expended, not the deemed capital gain under paragraph 44(1)(f).
[58] Costs are awarded on a Class B basis.
Signed at Ottawa, Canada, this 5th day of
July 2002.
J.T.C.C.
Translation
certified true
on
this 10th day of October 2003.
Sophie
Debbané, Revisor
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