A-756-84
The Queen (Appellant)
v.
British Columbia Forest Products Limited
(Respondent)
Court of Appeal, Thurlow C.J., Mahoney and
Marceau JJ.—Vancouver, October 18; Ottawa,
November 12, 1985.
Income tax — Income calculation — Capital cost allowance
— Appeal from trial judgment — Whether s. 13(7.1) requiring
tax credit claimed to be taken into account in computing
undepreciated capital cost of pertinent classes of depreciable
property — Trial Judge relying on AEL Microtel Limited v.
The Queen (1984), 84 DTC 6374 (F.C.T.D.) where held noth
ing "received" merely because taxpayer taking advantage of
provision permitting payment of less tax than otherwise pay
able — Appeal allowed — Trial Judge in AEL Microtel erred
— Parliament expressly contemplating taxpayer may
"receive" assistance from government in form of "deduction
from tax" in s. 13(7.1) — Respondent receiving assistance
within s. 13(7.1) when electing to take deduction for tax credit
— Income Tax Act, S.C. 1970-71-72, c. 63, ss. 13(7.1) (as am.
by S.C. 1974-75-76, c. 26, s. 6), 125(1), 127(5) (as am. by S.C.
1974-75-76, c. 71, s. 9), (9) (as am. idem), (10) (as am. idem)
— Income Tax Act, R.S.C. 1952, c. 148, s. 20(6)(h) (as am. by
S.C. 1966-67, c. 91, s. 5).
CASES JUDICIALLY CONSIDERED
OVERRULED:
AEL Microtel Limited v. The Queen (1984), 84 DTC
6374 (F.C.T.D.).
CONSIDERED:
G.T.E. Sylvania Canada Limited v. The Queen, [1974] 1
F.C. 726 (T.D.).
COUNSEL:
Ingeborg E. Lloyd for appellant.
Brian J. Wallace for respondent.
SOLICITORS:
Deputy Attorney General of Canada for
appellant.
Lawson, Lundell, Lawson & McIntosh, Van-
couver, for respondent.
The following are the reasons for judgment
rendered in English by
THURLOW C.J. (dissenting): The facts and ap
plicable statutory provisions are sufficiently set out
in the reasons for judgment of Mr. Justice
Mahoney and need not be repeated. The issue is
whether the investment tax credit provided by
subsections 127(5), (9) and (10) of the Income
Tax Act [S.C. 1970-71-72, c. 63 (as am. by S.C.
1974-75-76, c. 71, s. 9)] for the 1975 taxation year
in respect of the acquisition by the taxpayer of
depreciable property was required by subsection
13(7.1) [as am. by S.C. 1974-75-76, c. 26, s. 6] of
the Act to be deducted from the capital cost of the
depreciable property, for the purpose of computing
capital cost allowances, by reason of the credit
being "assistance" which the taxpayer "has
received or is entitled to receive" ... "from a
government, municipality or other public authority
in respect of, or for the acquisition of, depreciable
property, whether as a grant, subsidy, forgiveable
loan, deduction from tax, investment allowance or
as any other form of assistance...."
The position of the appellant as I understand it
is that the investment tax credit was assistance
received as a deduction from tax and thus fell
within the statutory wording.
As the credit in question arises on the wording
of subsection 125(1) that "There may be deducted
from the tax otherwise payable ...", I have no
difficulty in regarding it as being in fact a "deduc-
tion from tax" and, therefore, in the context of
subsection 13(7.1), "assistance" which the taxpay
er "has received or is entitled to receive" within
the meaning of that provision. But I am unable to
see how the credit can be regarded as assistance
from a government, municipality or other public
authority.
It is not a gift or grant by any such body. Nor is
it something that a government, municipality or
other public authority has any discretion or au
thority to give or to refuse. The credit is a statu
tory right which arises to the taxpayer when the
prescribed facts exist. It is simply an amount of
tax that in the circumstances is not imposed or
required by the law to be paid.
Statutory authorities for a government or mu
nicipality or other public authority to afford assis
tance to taxpayers in defined situations by reduc
tions of or deductions from taxation are not
unknown and it appears to me that they are situa
tions in which the wording "assistance" by way of
"deduction from tax" has scope to operate. I see
no sufficient reason to infer that the investment
tax credit, which is provided as a right by subsec
tion 127(5), and which is not subject to being
denied by the Government of Canada or by those
charged with the administration of the Income
Tax Act is referred to or included in the descrip
tion "assistance from a government, municipality
or other public authority".
I would dismiss the appeal with costs.
* * *
The following are the reasons for judgment
rendered in English by
MAHONEY J.: This is an appeal from the Trial
Division [(1984), 84 DTC 6391 (F.C.T.D.)]. The
issue is whether the amount of a tax credit claimed
by the respondent in respect of tax payable for its
taxation year ended December 31, 1975, was
required, by subsection 13(7.1) of the Income Tax
Act, to be taken into account in computing the
undepreciated capital cost of the pertinent classes
of depreciable property owned by it December 31,
1975.
The investment tax credit arose under subpara-
graph 127(10)(c)(vii) of the Act and was calculat
ed, under subsection 127(9), to be $179,807. The
respondent elected, as permitted by subsection
127(5), to deduct the entire $179,807 from its
income tax otherwise payable for 1975. These
matters are not in dispute and the pertinent provi
sions of section 127 need not be recited.
In reassessing, the Minister relied on subsection
13(7.1).
13....
(7.1) For the purposes of this Act, where a taxpayer has
received or is entitled to receive assistance from a government,
municipality or other public authority in respect of, or for the
acquisition of, depreciable property, whether as a grant, sub
sidy, forgiveable loan, deduction from tax, investment allow
ance or as any other form of assistance other than
(a) an amount authorized to be paid under an Appropriation
Act and on terms and conditions approved by the Treasury
Board in respect of scientific research expenditures incurred
for the purpose of advancing or sustaining the technological
capability of Canadian manufacturing or other industry, or
(b) an amount deducted as an allowance under section 65,
the capital cost of the property to the taxpayer shall be deemed
to be the amount by which the aggregate of
(c) the capital cost thereof to the taxpayer, otherwise deter
mined, and
(d) such part, if any, of the assistance as has been repaid by
the taxpayer pursuant to an obligation to repay all or any
part of that assistance,
exceeds
(e) the amount of the assistance.
In allowing the respondent's appeal from that reas
sessment, the learned Trial Judge relied entirely on
an earlier decision of the Trial Division in AEL
Microtel Limited v. The Queen (1984), 84 DTC
6374 (F.C.T.D.), in which, at pages 6386 ff., the
precise issue had been dealt with. That decision, in
turn, had relied extensively on the judgment of this
Court in G.T.E. Sylvania Canada Limited v. The
Queen, [1974] 1 F.C. 726 (T.D.).
In G.T.E. Sylvania, the Court considered a
deduction from tax in 1971, permitted by the
Quebec Corporation Tax Act [R.S.Q. 1964, c. 67]
in respect of the acquisition of new machinery,
taken by the taxpayer. The comparable provision
to subsection 13(7.1) was paragraph 20(6)(h) of
the Income Tax Act [R.S.C. 1952, c. 148 (as am.
by S.C. 1966-67, c. 91, s. 5)]:
20....
(6) For the purpose of this section and regulations made
under paragraph (a) of subsection (1) of section 11, the follow
ing rules apply:
(h) where a taxpayer has received or is entitled to receive
from a government, municipality or other public authority, in
respect of or for the acquisition of property, a grant, subsidy
or other assistance ... the capital cost of the property shall
be deemed to be the capital cost thereof to the taxpayer
minus the amount of the grant, subsidy or other assistance;
The provision was replaced by subsection 13(7.1),
as it stood in 1975, by an amendment effective as
of May 6, 1974, S.C. 1974-75-76, c. 26, s. 6(4).
The ratio of this Court's decision in G.T.E.
Sylvania was that the words "other assistance" in
paragraph 20(6)(h) had to be construed ejusdem
generis with "grant" and "subsidy" and that the
tax credit did not, therefore, fall within the scope
of "other assistance" as employed in the provision.
The Trial Judge in AEL Microtel also understood
the G.T.E. Sylvania decision to hold that a tax
payer cannot be held to have "received" anything
merely because the taxpayer takes advantage of a
provision permitting the payment of less tax than
would otherwise be payable. He held that, while it
had answered the ejusdem generis ground upon
which the taxpayer had succeeded in G.T.E. Syl-
vania, the 1974 amendment was no answer to the
argument that it had "received" nothing.
With respect, I think the learned Trial Judge in
AEL Microtel erred in that conclusion and, it
follows, that the learned Trial Judge here erred.
Stripped of verbiage immaterial to the present
facts, subsection 13(7.1) provided:
... where a taxpayer has received ... assistance from a govern
ment ... in respect of ... the acquisition of, depreciable
property whether as a .. . deduction from tax ... or as any
other form of assistance . .. the capital cost of the property to
the taxpayer shall be deemed to be the amount by which the ...
capital cost thereof to the taxpayer, otherwise determined, ...
exceeds ... the amount of the assistance.
Parliament has expressly contemplated that a tax
payer may "receive" assistance from a government
in the form of a "deduction from tax". Whatever
violence that does to one's semantic scrupulosity,
the Court is obliged to give effect to Parliament's
clear and unambiguous intention if it can sensibly
do so. The concept may be thought awkward, but
it is clearly expressed. In Parliament's prescrip
tion, one can "receive" assistance when one takes
advantage of an opportunity afforded to deduct
from tax an amount that one would otherwise be
required to pay. In the circumstances, the respond
ent did "receive" assistance within the terms of
subsection 13(7.1) when it elected to take the
$179,807 deduction permitted it in respect of its
1975 income tax.
I would allow the appeal with costs here and in
the Trial Division and would restore the assess
ment.
MARCEAU J.: I agree.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.