A
W
Prociuk:—The
appellants
Oiva
V
Paju
and
Onni
Paju
are
brothers
residing
at
Red
Rock,
Ontario
and
at
all
material
times
hereto
owned
and
operated
a
gravel
pit
in
partnership
known
as
Paju
Brothers.
Their
appeals
are
from
the
respondent’s
reassessments
for
the
taxation
year
1970
wherein
he
disallowed
a
deduction
of
$27,073.43
made
by
each
appellant
under
paragraph
11(1)(a)
of
the
Income
Tax
Act
and
pursuant
to
regulation
1201
of
the
Income
Tax
Regulations;
and,
further
disallowed
a
deduction
of
$4,478.56
made
by
each
appellant
by
way
of
capital
cost
allowance
on
some
of
their
machinery
and
equipment
on
the
ground
that
capital
cost
allowance
could
not
be
claimed
under
Class
22
but
under
Class
10
of
Schedule
B
of
the
said
Regulations.
At
the
commencement
of
the
hearing
of
these
appeals,
it
was
agreed
by
all
parties
that
both
cases
should
be
heard
on
common
evidence
as
the
issues
are
the
same
in
each
case.
Mr
Oiva
Paju
appeared
on
behalf
of
his
brother
Onni
Paju
as
well
as
on
his
own
behalf.
Briefly
the
facts
are
that
the
appellants
sold
an
unusually
large
quantity
of
gravel
in
1970
resulting
in
a
very
substantial
profit
and
a
virtual
depletion
of
gravel
reserves.
The
appellants
stated
that,
because
of
the
heavy
demand
for
gravel,
they
had
to
purchase
a
new
loader
in
1970
and
as
the
loader
was
subjected
to
severe
use
due
to
the
volume
of
gravel
removed
they
classified
this
machine
as
well
as
two
other
loaders,
which
formerly
were
listed
by
them
under
Class
10,
under
Class
22
to
claim
50%
depreciation.
income
Tax
Regulation
1201
permits
a
taxpayer
to
deduct
331/3%
of
his
production
profits
in
the
taxation
year
under
certain
circumstances.
It
reads
in
part
as
follows:
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;
and
(b)
a
person
who
has
an
interest
in
the
proceeds
of
production
from
a
resource,
under
an
agreement
providing
that
he
shall
share
In
the
profits
remaining
after
deducting
the
costs
of
operating
the
resource,
shall
be
deemed
to
be
a
person
who
operates
the
resource.
(2)
Where
a
taxpayer
operates
one
or
more
resources,
the
deduction
allowed
is
33
1/3%
of
(a)
his
production
profits
for
the
taxation
year,
minus
(b)
the
aggregate
amount
of
the
deductions
provided
by
subsections
(4)
and
(4a).
For
the
appellants
to
qualify
for
a
deduction
of
1/3
of
their
profit
from
the
sale
of
gravel,
it
is
necessary
to
find
that
gravel
is
a
mineral
deposit
in
respect
of
which
(A),
(B),
(C),
(D)
or
(E)
stated
by
the
said
Regulations
apply,
as
it
clearly
is
not
an
oil
or
gas
well,
a
bituminous
sands
deposit
or
a
base
or
precious
metal
mine.
Learned
counsel
for
the
respondent
referred
the
Board
to
definitions
of
the
terms—mineral,
sylvite,
halite,
silica—as
same
are
defined
in
Funk
and
Wagnall
Dictionary
as
well
as
The
Oxford
Dictionary.
In
Volume
3,
of
Words
and
Phrases
Legally
Defined,
2nd
edition,
at
page
262,
the
author
states:
There
is
no
general
definition
of
the
word
“mineral”.
The
word
is
susceptible
of
expansion
or
limitation
in
meaning
according
to
the
intention
with
which
it
is
used;
and
the
variety
of
meanings
of
which
it
admits
is
the
source
of
all
the
difficulty
in
the
attempt
to
frame
any
general
definition.
On
occasion
“mineral”
has
been
defined
by
certain
statutes
to
include
sand
and
gravel
in
the
particular
context
of
the
area
covered
by
that
Statute.
However,
in
the
instant
situation
gravel
is
not
referred
to
in
any
way
and
the
respondent
was
correct
in
holding
that
the
appellants
could
not
avail
themselves
of
the
provisions
of
regulation
1201
aforesaid.
With
reference
to
classification
of
the
loaders
in
Class
22,
the
appellants
claimed
the
full
50%
of
cost
of
same
as
of
January
1,
1970,
amounting
to
$22,392.81.
Class
22
is
defined
by
the
Regulations
as
follows:
Property
acquired
after
March
16,
1964,
that
is
power-operated
movable
equipment
designed
for
the
purpose
of
excavating,
moving,
placing
or
compacting
earth,
rock,
concrete
or
asphalt,
but
not
including
a
property
that
is
included
in
class
7.
Learned
counsel
for
the
respondent
argued
that
Class
10
(30%)
applied
to
the
loaders
since
this
was
mining
machinery
and
equipment
acquired
for
the
purpose
of
gaining
or
producing
income
from
a
mine.
On
the
basis
of
the
judgment
in
Canadian
Gypsum
Co,
Ltd
v
MNR,
[1965]
2
Ex
CR
566;
[1965]
CTC
210;
65
DTC
5125,
learned
counsel
argued
that
the
gravel
pit
was
a
mine
and
the
loaders
accordingly
were
properly
classed
in
this
group
by
the
respondent.
In
my
humble
opinion
I
do
not
think
this
resolves
the
point.
The
term
“mine”
is
as
vague
and
indefinite
as
the
term
“mineral”.
Whether
in
the
circumstances
this
particular
gravel
pit
would
be
called
a
“mine”
is
questionable
to
say
the
least.
The
appellants
described
the
1970
loader
as
a
huge
self-propelled
diesel
tractor
on
rubber
tire
wheels
with
a
front-end
hydraulically-operated
bucket
having
a
capacity
of
3
cubic
yards,
and
cost
$44,583.38.
The
two
old
loaders
were
much
smaller
and
on
January
1,
1970
had
a
book
value
of
approximately
$200.
While
it
is
conceivable
that
these
loaders
could
be
used
in
a
mine,
it
does
not
follow
that
Class
22
is
not
open
for
depreciation
purposes
when
they
are
used
for
excavating,
moving
or
loading.
I
have
come
to
the
conclusion
that
the
respondent
erred
in
reducing
the
amount
of
capital
cost
allowance
cai-med
on
the
ground
that
a
loader
does
not
qualify
as
a
Class
22
asset.
The
appeals
are
allowed
in
part
and
referred
back
to
the
respondent
for
reassessment
on
the
basis
that
the
capital
cost
allowance
on
the
loaders
is
increased
by
$4,478.56
for
each
appellant
in
the
taxation
year
1970.
In
all
other
respects
the
appeals
are
dismissed.
Appeals
allowed
in
part.
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