Stelco Inc. v. Canada
A-13-97
Robertson J.A.
14/5/98
5 pp.
Appeal from Trial Division decision ((1996), 97 DTC 5076) denying appellant's appeal from MNR's position deferral of capital cost allowance (CCA) required with respect to both prime metal assets in use and under construction-ITA and ITAR providing three-year tax holiday for new mines-Income derived from operation of mine defined to include income of corporation from processing to "prime metal stage"-Appellant corporate taxpayer fully integrated steel producer-Operations encompassing not only main steel plant but also number of mines, including Griffith iron ore mine, and other facilities for production of raw materials used in steel-making process-By virtue of fact operation of mine included income from corporation to prime metal stage, income derived from operation of Griffith mine included not only income from activities carried out at mine site itself, but also income attributable to activities at other sites-Because of intermingling of iron ore from various sources, not possible to identify any particular pig iron as having been produced from Griffith mine-Accordingly, MNR and taxpayer reached agreement as to percentage of iron ore produced at each site, including Griffith mine-Parties agreed attribution of CCA with respect to assets used up to pig iron stage would be based on same percentages-Parties could not agree if taxpayer could deduct CCA in respect of prime metal assets under construction and not in use at end of taxation year in question and attributable to Griffith mine, in calculating its taxable income from other sources-CCA in relation to prime metal assets used in production of pig iron and attributable to Griffith mine not deductible from taxpayer's income-However, can be deferred until after expiration of tax holiday-MNR took position deferral of CCA required with respect to both prime metal assets in use and under construction-Appeal dismissed-Taxpayer not entitled to deduct from its non-mining income for 1970, 1971 and 1972 taxation years, CCA in respect of Griffith mine portion of prime metal assets under construction and not in use during taxation years in question-Falconbridge Nickel Mines Ltd. v. Minister of National Revenue (1972), 72 DTC 6337 (F.C.A.) and Westar Mining Ltd. v. The Queen (1992), 92 DTC 6358 (F.C.A.) standing for proposition operation of mine as economic activity, not physical acts involved in extracting and processing, generating income-Assets acquired for use in operation of exempt mine form part of economic structure of that mine whether or not those assets actually used-Income Tax Act, R.S.C. 1952, c. 148, s. 83(5)-Income Tax Application Rules, 1971, S.C. 1970-71-72, c. 63, Part III, s. 28(1).