INCOME TAX |
Income Calculation |
Rainbow Pipe Line Co. v. Canada
A-661-99
2002 FCA 259, Rothstein J.A.
14/6/02
7 pp.
Appeal from Tax Court of Canada decision--Whether Mogan T.C.J. erred in concluding capitalizing cost of 44 km replacement in appellant's 781 km light crude oil pipeline from Zama to Edmonton provided more accurate picture of appellant's income for 1994 than expensing cost of replacement--In finding against appellant, Tax Court Judge applied correct legal principles to issues before him--Had regard to S.C.C. decision in Canderel Ltd. v. Canada, [1998] 1 S.C.R. 147--Concluded capitalizing cost of 44 km replacement provided more accurate picture of appellant's income for 1994--Open to him to so find--Also concluded replacement should be treated as capital expenditure, not as current expense in 1994--No fixed rules when determining whether to capitalize, expense expenditure--No rule replacement that is not betterment must, according to well-accepted business principles, be expensed--Open to Tax Court Judge to find on facts replacement should be capitalized--Also open to him to conclude expensing would distort appellant's 1994 income--Not inappropriate for Tax Court Judge to have considered distorting effect of expensing on appellant's income--No error in finding well-accepted business principles ran against appellant--In replacing original line in place for long period of time, cost intended to be non-recurring cost--Any other interpretation unreasonable--Appeal dismissed.