Leisureland of Regina LTD v. Minister of National Revenue, [1981] CTC 2088, 81 DTC 138

John B Goetz:—This is an appeal by the appellant with respect to an assessment for its taxation year ending August 31, 1976. The assessment relates to the classification of the building owned and constructed by the appellant. The appellant, in its notice of appeal in paragraph 2, states as follows:

2. Said building was constructed:

(a) of standard steel span design,

(b) with an exterior surface of corrugated iron, and

(c) with a supporting structure of steel girders

The appellant contends that the building should be classified as Class 6 for the purposes of capital cost allowance, whereas the Minister has, in his assessment, disallowed this approach and has classified the building as a Class 3 asset for the purposes of deducting capital cost allowance. In reassessing the appellant, the respondent relied, inter alia, upon sections 13 and 20 of the Income Tax Act, SC 1970-71-72, c 63, as amended, and upon Part Xl and Schedule B of the Income Tax Regulations. Counsel for the Minister had previously advised counsel for the appellant that he was relying strictly on the provisions of the Income Tax Act and Regulations relating thereto and put the appellant to the strict proof. Counsel for the respondent proceeded with this case on this basis.

Facts

The appellant constructed a building as set out in paragraph 2 of its notice of appeal. The exterior of the said building was of painted galvanized steel, corrugated sheeting. The appellant called on its behalf Mr Robert Rowley, sales manager for Stelco in Saskatchewan. Mr Rowley stated that corrugation meant a profile built into the sheet by pressure or by roll forming. He could not say what kind of metal it was and said that he would require a metallurgist to do this, but no metallurgist was called in support of the appeal. He said that pictures and his personal knowledge of the building indicate that it was covered with “galvanized steel sheets’’. The galvanized steel is used in the construction of grain bins and quonset huts and is generally corrugated. He stated that tinsmiths refer to galvanized steel sheets as galvanized iron when, in fact, they mean galvanized steel sheets. He has never heard of the term corrugated iron. Further, Mr Rowley stated that iron can be cast but not rolled. Most of his evidence is based on assumptions in that he was not an expert. He says he has never seen an iron sheet. Pig iron must be put into a blast furnace to become steel. Pig iron could only be cast or molded. He further said that cast iron was different than steel.

Sherman Clifton, the contractor who constructed the building, said that he used 26-inch gauge steel for the sheeting of the appellant’s building. This sheeting is galvanized steel, prefinished in colour according to City bylaws. He says that he calls his employees “iron workers’’ and that he does not know what iron looks like. In cross-examination Mr Clifton admitted that the building in question was not covered with galvanized iron but rather with corrugated steel.

Counsel for the respondent provided the Board with a copy of Webster’s Dictionary, p 1141, wherein “iron’’ is described as follows:

iron—Chemically, iron is chiefly base-forming, being bivalent in the ferrous compounds, which are white or pale green, and trivalent in the ferric compounds, which as a rule are yellow or brown. Passage from either of these series to the other by oxidation or reduction is readily effected. Commercial iron contains varying amounts of carbon and other substances (esp silicon, sulphur, phosphorus, and manganese), which greatly affect its properties. Its constituents have been named from a physical-chemical standpoint, as: ferrite, or pure iron; martensite, a solid solution, and pearlite, the eutectoid alloy, of iron and carbon; cementite, a carbide; etc (see these terms). Cast iron, the direct product of the blast furnace or of the cupola, is fusible and brittle. It can be tempered, but not welded or forged.

Steel is iron which is malleable between certain (variable) limits of temperature and is either capable of being cast into an initially malleable mass, or becomes extremely hard when suddenly cooled or possesses both of these properties.

Counsel for the respondent also provided the Board with copies of the Customs Tariff Act, RSC 1970, c C-41, and the Excise Tax Act, RSC 1970, c E-13. In both these statutes “steel” and “iron” appear to be described as separate and different commodities. He therefore invoked the pari materia rule.

Maxwell, on The Interpretation of Statutes, 1969 edition at 33, states as follows:

Omissions not to be inferred

It is a corollary to the general rule of literal construction that nothing is to be added to or taken from a statute unless there are adequpate grounds to justify the inference that the legislature intended something which it omitted to express. Lord Mersey said: “It is a strong thing to read into an Act of Parliament words which are not there, and in the absence of clear necessity it is a wrong thing to do.”“We are not entitled,’’ said Lord Loreburn LC, “to read words into an Act of Parliament unless clear reason for it is to be found within the four corners of the Act itself.” A case not provided for in a statute is not to be dealt with merely because there seems no good reason why it should have been omitted, and the omission appears in consequence to have been unintentional.

At 66 of the same book, Lord Russell of Killowen stated:

“it is . .. proper to refer to earlier Acts in pari materia only where there is ambigu ity.”

Statutes are said to be in pari materia when they deal with the same person or thing or class; it is not enough that they deal with a similar subject matter, (italics mine).

Findings

Paragraph 20(1)(a) of the new Act permits the deduction of a capital cost allowance as determined by regulation. In the said regulations, property is divided by class. Since property in Class 3 and in Class 6 is the point at issue in the case at bar, the property listed under the said classes must be cited:

Class 3 (5%)

Property not included in any other class that is

(a) a building or other structure, including component parts such as electric wiring, plumbing, sprinkler systems, air-conditioning equipment, heating equipment, lighting fixtures, elevators and escalators,

(b) a breakwater (other than a wooden breakwater)

(c) a dock,

(d) a trestle,

(e) a windmill,

(f) a wharf, or

(g) an addition or alteration made after March 31,1967, to a building that would be included in this class but for the fact that it is included in Class 20. Class 6 (10%)

Property not included in any other class that is

(a) a building of

(i) frame,

(11) log,

(iii) stucco on frame,

(iv) galvanized iron, or

(v) Corrugated iron,

construction including component parts such as electric wiring, plumbing, sprinkler systems, air-conditioning equipment, heating equipment, lighting fixtures, elevators and escalators

(b) a wooden breakwater,

(c) a fence,

(d) a greenhouse,

(e) an oil or water storage tank,

(f) a railway tank car,

(g) a wooden wharf,

(h) an aeroplane hangar acquired after the end of the taxpayer’s 1958 taxation year, or

(i) an addition or alteration made after March 31, 1967, to a building that would

be included in this class but for the fact that it is included in Class 20.

In the case of Belgen Inc VMNR, [1978] CTC 2099; 78 DTC 1067, a judgment of Guy Tremblay, CGA, Member of the Tax Review Board, it was found that “galvanized iron” and “corrugated iron” referred only to iron and not to steel, and that the legislation must be construed literally and consequently it would appeal that the building was a Class 6 asset. I deal with this decision later in my judgment.

In the case of Harry Meraw v MNR, 23 Tax ABC 146; 59 DTC 576, Maurice Boisvert, Esq, QC, Member of the Tax Appeal Board at that time, stated at 148 and 577 respectively:

For the purpose of ascertaining the type of buildings covered by Class 3 of Schedule B (supra), the construction is to be examined as a whole, said Class 3 including “building or other structure” of any kind, as long as it is not a building of “frame, log, stucco on frame galvanized iron, or corrugated iron”, as these last types of buildings are covered by Class 6 of the said Schedule B (supra). (Italics mine).

In the case of Thorne’s Hardware Ltd v MNR, 28 Tax ABC 58; 61 DTC 646, at 59 and 647 respectively, Maurice Boisvert, Esq, QC, states:

The golden rule of interpretation of statutes is that words are to be given their plain, ordinary meaning.

See also the cases of Regina v Parnell, a decision of the British Columbia Court of Appeal, delivered on December 4, 1979; and Thistle Knitwear Company Limited v MNR, 28 Tax ABC 147; 61 DTC 711.

I have dealt with the decision in Belgen Inc (supra) in my recent judgment in Triple “F” Holdings Ltd v MNR, [1981] CTC 2084 where I disagree with certain statements and findings in the Be/gen case. The presiding Member in the Belgen appeal did not have availablé to him the benefit of clear evidence of a qualified metallurgist as I had in Triple “F” Holdings Ltd (supra). In that appeal I ruled in favour of the appellant that the terms “galvanized iron” and “corrugated iron” were meaningless unless they received their meaning from common usage, plus metallurgical evidence that words “corrugated iron” (as physical impossibility) and “galvanized iron” must be interpreted as “corrugated steel” respectively.

Following my reasoning in Triple “F” Holdings Ltd (supra), a copy of which is attached, in therefore allow this appeal and refer the matter back to the respondent for reconsideration and reassessment.

Appeal allowed.