A-786-87
Her Majesty the Queen (Appellant)
v.
Nomad Sand and Gravel Ltd. (Respondent)
INDEXED AS: CANADA V. NOMAD SAND & GRAVEL LTD. (CA.)
Court of Appeal, Unie, MacGuigan and Linden
JJ.A.—Toronto, November 28; Ottawa, December
6, 1990.
Income tax — Income calculation — Deductions — Gravel
pit operation — Province imposing levy on material extracted
as security for cost of site rehabilitation — Not made once and
for all without recourse — Refundable with interest if statu
tory obligations fulfilled — Becoming absolute property of
Province only if obligations not met — Levy payments depos
its, not expense to earn income — Trial Judge inaccurate in
saying "expenditure properly deducted according to account
ing standards would be deductible for tax purposes unless
prohibited by some provision of the Act".
Income tax — Income calculation — Capital cost allow
ance — Front-end loaders used in gravel pit properly within
Class 22 — Not within Class 10 unless used to gain income
from "mine" — Sand and gravel pit not "mine" — Consider
ations including: size of operation, absence of professional
engineers or geologists.
•
The taxpayer operated a sand and gravel pit. Under the
Ontario Pits and Quarries Control Regulations a levy was
imposed on gravel extracted as security for the cost of site
rehabilitation. The levy was refundable with interest when and
if rehabilitation was completed. Taxpayer claimed the amount
of the provincial levy as an expense of carrying on business
under Income Tax Act, paragraph 18(1)(a). The Minister
reassessed on the grounds that (1) the taxpayer was not entitled
to claim the levy as an expense, and (2) front-end loaders used
to transport raw material from the gravel pit to crushers and
washers should have been classified as Class 10 rather than
Class 22 assets as claimed by the taxpayer. Class 10 assets
include machinery or equipment used to produce income from a
mine. Class 22 assets include power-operated movable equip
ment designed to excavate or move rock. The Trial Judge held
that the levy payments were deductible as part of taxpayer's
current operating expenses. He commented that an expendi
ture, properly deductible according to accounting standards
would be deductible for tax purposes unless prohibited by some
provision of the Act. The appellant contended that the front-
end loaders were acquired to produce income from a "mine".
"Mine" is not defined in the Act, but its meaning is restricted
in some provisions of the Act and Regulations. The appellant
contended that sand and gravel are industrial minerals and the
pits they are extracted from are industrial mineral mines. The
Trial Judge concluded that the equipment was properly classi
fied as Class 22 assets. The issues were (1) whether the
amounts paid to the Province were deductible under Income
Tax Act, paragraph 18(1)(a) as expenses to produce income
from the business and (2) whether the front-end loaders were
Class 10 or 22 assets.
Held, the appeal should be allowed with respect to the first
issue and dismissed with respect to the second.
(1) The Trial Judge's comment about the applicability of
generally accepted accounting principles to income tax law was
inaccurate. The question is one of law which must be answered
in light of the facts of the particular case. As it is a question of
law, the evidence of experts is not conclusive. The particular
facts in this case relate to the character of the payments made
by the taxpayer under the Pits and Quarries Control Act, 1971
and Regulations. The proper method of recording those pay
ments may be different for financial purposes than for the
calculation of taxable income. For taxation purposes, the ques
tion is whether these payments, as a matter of law, have the
characteristics of expenses or outlays made in earning or pro
ducing income or of transfers to a reserve for the purpose of
securing the performance of the respondent's obligation to
rehabilitate the site. While the annual payments under the
Regulations had to be made to obtain and maintain a licence to
operate the pit and therefore to earn income, they did not have
the characteristic of deductible expenses for tax purposes as
they were not made once and for all, without recourse. They
were refundable in whole or in part with interest upon dis
charge of the payer's obligation to rehabilitate the pit site. They
did not become the absolute property of the Province until
forfeited for failure to discharge the statutory obligations. That
the annual payments of security deposits may have been inade
quate to cover the costs of site rehabilitation did not change
their character into expenses incurred to produce income.
(2) The front-end loaders were Class 22 assets. Although
sand and gravel may be described as "industrial minerals", they
do not come from a "mine". The operation was not a "mine" as
that term is ordinarily understood. It was relatively small.
There were no professional engineers or geologists involved as
would normally be in mining operations. The operation was a
gravel pit which was akin to a stone quarry. This machinery
was equipment used in the extraction, removal and transporta
tion of sand and gravel.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Income Tax Act, S.C. 1970-71-72, c. 63, s. 18(1)(a),(e).
Income Tax Regulations, SOR/54-682, ss. 1104(5),(6)
(as added by SOR/72-272, s. 4), (7),(8) (as added
idem), Schedule B, Class 10 (as am. by SOR/74-402,
s. 1), 22 (as am. by SOR/64-167, s. 3).
Pits and Quarries Control Act, 1971, S.O. 1971, c. 96,
ss. 11, 19.
Pits and Quarries Control Regulations, O. Reg. 545/71,
ss. 2, 5.
CASES JUDICIALLY CONSIDERED
APPLIED:
Canada v. Foothills Pipe Lines (Yukon) Ltd., F.C.A.,
A-306-90, judgment dated 11/10/90, Urie and Marceau
JJ.A., not yet reported; Minister of Nat'l Revenue v.
Anaconda American Brass Ltd. (1955), 2 D.L.R. (2d) 1;
[1955] C.T.C. 311; 55 DTC 1220; [1956] 1 All E.R. 20;
[1956] A.C. 85 (P.C.); Associated Investors of Canada
Ltd. v. Minister of National Revenue, [1967] 2 Ex.C.R.
96; [1967] C.T.C. 138; (1967), 67 DTC 5096; Nova
Scotia Sand and Gravel Ltd v. The Queen, [1980] CTC
378; (1980), 80 DTC 6298; 34 N.R. 297 (F.C.A.); Avril
Holdings Ltd. v. Minister of National Revenue, [1971]
S.C.R. 601; (1970), 17 D.L.R. (3d) 23; [1970] C.T.C.
572; 70 DTC 6366; Canadian Gypsum Co. Ltd. v. Minis
ter of National Revenue, [1965] 2 Ex.C.R. 556; [1965]
C.T.C. 210; (1965), 65 DTC 5125.
REVERSED:
Canada v. Nomad Sand & Gravel Ltd., [ 1988] 1 F.C. 95;
[ 1987] 2 C.T.C. 112; (1987), 87 DTC 5343; 13 F.T.R. 81
(T.D.); Nomad Sand & Gravel Ltd v MNR, [1982] CTC
2035; (1982), 82 DTC 1070 (T.R.B.).
REFERRED To:
Dominion Taxicab Assn. v. Minister of National Reve
nue, [1954] S.C.R. 82; [1954] 2 D.L.R. 273; [1954]
C.T.C. 34; (1954), 54 DTC 1020; R. v. Imperial General
Properties Limited, [1985] 1 F.C. 344; (1985), 16 D.L.R.
(4th) 615; [1985] 1 CTC 40; 85 DTC 5045; 56 N.R. 358
(C.A.).
COUNSEL:
Sandra E. Phillips and Paul E. Plourde for
applicant.
Randy T. Hughes and Ian V. B. Nordheimer
for respondent.
SOLICITORS:
Deputy Attorney General of Canada for
applicant.
Fraser & Beatty, Toronto, for respondent.
The following are the reasons for judgment
rendered in English by
URIE J.A.: The appellant appeals from a deci
sion of Rouleau J. in the Trial Division [[1988] 1
F.C. 95] in which he dismissed the appellant's
appeal from a decision of the Tax Review Board
[[1982] CTC 2035] rendered in 1987, whereby the
respondent's appeal from reassessments of income
tax for its 1974, 1975, 1976 and 1977 taxation
years were allowed. This appeal relates only to the
respondent's 1976 taxation year since in the other
three years 1974, 1975 and 1977 — there were
nil assessments in respect of the respondent's
income and for those three taxation years the
respondent's appeals should have been dismissed at
the Tax Review Board level and since that had not
been done, the appellant's appeal to the Trial
Division for those years should have been allowed.
Counsel for the respondent agreed that this should
have been the proper disposition of the appeal
before Rouleau J. so that to that extent at least the
appeal will be allowed in this Court.
THE FACTS
The facts, which are not in dispute, were suc
cinctly and accurately summarized by the learned
Trial Judge in the following passage from his
reasons for judgment [at pages 97-98].
During the period in question the defendant company carried
on the business of operating a sand and gravel pit at Brighton,
Ontario. The company's operation consisted of removing raw
material from a gravel pit, transporting it to crushers and
washers and from there to loading trenches. Three "966 Car-
ruthers" front-end loaders were used to transport the material.
In order for the defendant to obtain the necessary licence to
operate a gravel pit, it was required, pursuant to the Pits and
Quarries Control Act, 1971, S.O. 1971, c. 96, to produce a site
plan for the rehabilitation of the area. The rehabilitation
required by the Act comprised levelling off the banks of the pit,
the gradual sloping of the floor of the pit, covering the area
with top soil and planting grass and trees on the site. The
defendant estimated the cost of such rehabilitation to be
approximately between $125,000 and $130,000.
Pursuant to section 5 of the Pits and Quarries Control
Regulations, O. Reg. 545/71, a levy of $0.02 per ton was
imposed on the material extracted from the pit as security
towards the cost of the rehabilitation. The amount paid by the
defendant as a levy bore interest at the rate of 6% and was
refundable when and if the rehabilitation of the pit was
completed.
In its 1976 taxation year, the defendant claimed as an
expense in carrying on business the amount of $7,994.02 paid
by it to the Ontario government pursuant to the Pits and
Quarries Control Act, 1971. The Minister reassessed the
defendant's 1976 taxation year on the basis that the defendant
was not entitled to claim the amount as an expense and that
certain assets owned by the defendant and used in its opera
tions, namely front-end loaders, should be classified as Class 10
assets [Income Tax Regulations, SOR/54-682, Schedule B (as
am. by SOR/74-402, s. 1)] for capital cost allowance purposes,
rather than as Class 22 assets [idem (as added by SOR/64-167,
s. 3)] as claimed by the defendant, with the result that the
capital cost allowance claimed was reduced by the amount of
$3,972.85.
The defendant objected to the reassessment of March 1979
and the Minister of National Revenue confirmed the reassess
ment by a notification of confirmation dated June 13, 1980.
The defendant then appealed to the Tax Review Board which,
by judgment dated January 4, 1982, allowed the appeal. It is
that judgment which is now under appeal.
THE ISSUES
There are just two issues in the appeal:
(1) Whether in computing its income from its
business the respondent was entitled to deduct the
payments which it made to the government of
Ontario in compliance with the Pits and Quarries
Control Act, 1971 [S.O. 1971, c. 96] on the basis
that they were outlays or expenses incurred by it in
earning or producing income from the business
and, accordingly, deductible in the computation of
its taxable income for the 1976 taxation year by
virtue of paragraph 18(1)(a) of the Income Tax
Act [S.C. 1970-71-72, c. 63] ("the Act") or
whether, properly understood, they were deposits
transferred or credited to a reserve and thus pre
cluded from deductibility for such purpose, by
virtue of paragraph 18(1)(e) of the Act.
(2) Whether the front-end loaders used by the
respondent in its sand and gravel operations ought,
for the purpose of calculating capital cost allow-
ance, to have been classified as Class 10 or as
Class 22 assets [Income Tax Regulations, SOR/
54-682, Schedule B (as am. by SOR/64-167, s. 3;
SOR/74-402, s. 1)].
THE ARGUMENT
Issue I
After rejecting the applicability of several cases
cited by the appellant as supporting its proposition
that the annual payments made by the respondent
to the government of Ontario as security for the
rehabilitation of the gravel and sand pits site were
security deposits not deductible in the calculation
of the respondent's taxable income, the learned
Trial Judge made the following finding [at pages
103-104];
In my opinion, the annual levy payments made by the
defendant to the province constitute a part of the defendant's
current operating expenses and are deductible under paragraph
18(1)(a) the Income Tax Act. Subsection 9(1) of the Act states
that income for a taxation year from a business or property is
the "profit" therefrom for the year. It has long been recognized
that tax must be imposed not on the gross amount received but
on that amount less the expenses incurred to produce it.
Paragraph 18(1)(a) of the Income Tax Act is recognition of
that very fundamental principle:
18. (1) In computing the income of a taxpayer from a
business or property no deduction shall be made in respect of
(a) an outlay or expense except to the extent that it was
made or incurred by the taxpayer for the purpose of gaining
or producing income from the business or property;
The Income Tax Act does not define the term "profit" as
that word is used in subsection 9(1) of the Act. However, a
judicial statement as to the proper approach for determining
net profit is set out in Daley v. M.N.R., [1950] C.T.C. 254 (Ex.
Ct.), where Thorson P. stated at page 260:
The correct view, in my opinion, is that the deductibility of
the disbursements and expenses that may properly be deduct
ed "in computing the amount of the profits or gains to be
assessed" is inherent in the concept of "annual net profit or
gain" in the definition of taxable income contained in section
3. The deductibility from the receipts of a taxation year of
the appropriate disbursements or expenses stems, therefore,
from section 3 of the Act, if it stems from any section, and
not at all, even inferentially, from paragraph (a) of section 6.
That being so, it follows that in some cases the first enquiry
whether a particular disbursement or expense is deductible
should be [sic] whether it is excluded from deduction by
section 6(a) or section 6(b) but rather whether its deduction
is permissible by the ordinary principles of commercial,
trading or accepted business and accounting practice ... .
[Emphasis added.]
Section 3 was the forerunner to the present subsection 9(1)
and paragraph 6(a) was the forerunner to the present para
graph 18(1)(a).
Therefore, in accordance with this principle, an expenditure
properly deducted according to accounting standards would be
deductible for tax purposes unless prohibited by some provision
of the Act.
There is, in my opinion, no question that the amount paid in
this case by the defendant to the Province of Ontario in the
form of an annual levy constitutes an allowable deduction. The
expenditure was made, indeed had to be made by the defend
ant, for the purpose of gaining income from its sand and gravel
pit operation and is clearly not capital in nature.
The applicability of the generally accepted
accounting principles in relation to income tax law
has been the subject of comment in many cases,
the latest of which in this Court was in Canada v.
Foothills Pipe Lines (Yukon) Ltd.' where at page
11 of the reasons, speaking on behalf of the Court,
I say:
Among those principles is that which recognizes that according
to generally accepted accounting principles, sums received by a
taxpayer should be recorded in a taxpayer's financial state
ments, in the way which most nearly reflects its actual financial
position at any given time or for any given period, but for
purposes of ascertaining the taxpayer's income for tax purposes
the receipt of the sums may require to be recorded differently.
In Neonex International Ltd. v. The Queen ([1978] CTC 485
(F.C.A.), at p. 499) I had occasion to express the principle in
this way:
There is no doubt that the proper treatment of revenue and
expenses in the calculation of profits for income tax purposes
with a view to obtaining an accurate reflection of the taxable
income of a taxpayer, is not necessarily based on generally
accepted accounting principles. Whether it is so based or not
is a question of law for determination by the Court having
regard to those principles (see MNR v. Anaconda American
Brass Ltd. [1956] A.C. 85; [1955] CTC 311; 55 DTC 1220;
see also Associated Investors of Canada Ltd. v. MNR,
[1967] Ex CR 96; [1967] CTC 138; 67 DTC 5096).
[Emphasis added.]
The reference in the passage to Minister of
Nat'l Revenue v. Anaconda American Brass Ltd., 2
is to the following excerpts from the judgment of
the Privy Council where Viscount Simonds said:
' Not yet reported, October 11, 1990, Court File No.
A-306-90.
2 (1955), 2 D.L.R. (2d) 1 (P.C.), at pp. 7 and 10.
The income tax law of Canada as of the United Kingdom is
built upon the foundations described by Lord Clyde in Whim-
ster & Co. v. Inland Revenue Com'rs (1925), 12 Tax Cas. 813,
in a passage cited by the Chief Justice which may be here
repeated: "In the first place, the profits of any particular year
or accounting period must be taken to consist of the difference
between the receipts from the trade or business during such
year or accounting period and the expenditure laid out to earn
those receipts. In the second place, the account of profit and
loss to be made up for the purpose of ascertaining that differ
ence must be framed consistently with ordinary principles of
commercial accounting, so far as applicable, and in conformity
with the rules of the Income Tax Act, or of that Act as
modified by the provisions and schedules of the Acts regulating
Excess Profits Duty, as the case may be...."
But it at least supports the view that new theories of accountan
cy though they may be accepted and put into practice by
business men, do not finally determine a trading company's
income for tax purposes.
The reference to Associated Investors of
Canada Ltd. v. Minister of National Revenue, 3 is
to the following passage from Jackett P.'s
judgment:
Profit from a business, subject to any special directions in the
statute, must be determined in accordance with ordinary com
mercial principles (Canadian General Electric Co. Ltd. v.
Minister of National Revenue, [1962] S.C.R. 3, per Martland
J. at page 12.) The question is ultimately "one of law for the
court". It must be answered having regard to the facts of the
particular case and the weight which must be given to a
particular circumstance must depend upon practical consider
ations. As it is a question of law, the evidence of experts is not
conclusive (see Oxford Motors Ltd. v. Minister of National
Revenue, [1959] S.C.R. 548, per Abbott J. at page 553, and
Strick v. Regent Oil Co. Ltd., [1965] 3 W.L.R. 636 per Reid
J., at pages 645-6. See also Minister of National Revenue v.
Anaconda American Brass Ltd., [1956] A.C. 85 at page 102.)
[Emphasis added.]
It is clear from the foregoing, it seems to me,
that the Trial Judge did not wholly accurately
describe the law when he said that "an expenditure
properly deducted according to accounting stand
ards would be deductible for tax purposes unless
prohibited by some provision of the Act." More
precisely, the question is one of law for the Court
which must, as Jackett P. (as he then was) said,
"be answered having regard to the facts of the
particular case and the weight which must be
given to a particular circumstance must depend
upon practical circumstances. As it is a question of
law, the evidence of experts is not conclusive".
3 [1967] 2 Ex.C.R. 96, at pp. 101-102.
(Emphasis added.) The particular facts in this case
relate to the character of the payments made by
the respondent each year in compliance with the
Pits and Quarries Control Act, 1971 and the
Regulations pursuant thereto.
The proper accounting of those payments for the
taxpayer's financial purposes, to most accurately
reflect its actual financial position at any given
time, may well be that they be recorded as
expenses incurred for the purpose of gaining or
producing income. That may not, as a matter of
law, be the proper way for them to be recorded in
the calculation of the taxpayer's taxable income.
The question to be asked for that purpose must
be — do these payments, as a matter of law, have
the characteristics of expenses or outlays made in
earning or producing income, as the expert called
by the respondent before the Tax Review Board
apparently testified, or had they the characteristics
of transfers to a reserve for the purpose of securing
the performance of the respondent's obligation to
rehabilitate the site, within the meaning of para
graph 18(1)(e) 4 as counsel for the appellant
urged?
Even a cursory analysis of the Pits and Quarries
Control Act, 1971 and its Regulations [Pits and
Quarries Control Regulations, O. Reg. 545/71],
leads inevitably to the conclusion, in my view, that
while the annual payments made pursuant thereto
have to be made in order to earn income, in that to
obtain and maintain the licence issued under that
Act (subsection 4(1)) to operate the pit and there
by to earn that income the payments had to be
made, they do not have the characteristic of
deductible expenses for tax purposes, in that they
are not made once and for all, without recourse.
Rather they are payments which may be refunded
° 18. (1) In computing the income of a taxpayer from a
business or property no deduction shall be made in respect of
(e) an amount transfered or credited to a reserve, con
tingent account or sinking fund except as expressly
permitted by this Part;
in whole or in part, together with interest thereon,
upon discharge of the payer's (in this case the
respondent's) obligation to rehabilitate the pit site.
The licence must be renewed annually to insure
compliance with the Act, the Regulations and the
licence, failing which it may be revoked. Subsec
tion 11(1) requires that every licensee maintain on
deposit with the Treasurer of Ontario the security
prescribed by the Regulations. Subsection 11(2)
authorizes the Minister to direct the security
deposited to be forfeited if the rehabilitation is not
carried out as required by the Act, the Regulations
and the licence. Subsection 11(3) authorizes the
Minister to cause the rehabilitation to be com
pleted at the expense of the licensee out of the
monies forfeited.
Section 19 provides the authority to make regu
lations, inter alia, prescribing the form, terms,
conditions and the amount of security to be depos
ited under section 11.
Subsection 5(1) of the Regulations requires that
the security obliged to be paid by virtue of section
11 of the Act will be deposited annually "and held
by the Treasurer of Ontario bearing simple inter
est at the rate of 6% per annum." [Underlining
added.] This requirement of holding is in contrast
to the licence fee to be paid under subsection 2(8)
which "shall be paid to the Treasurer of Ontario"
[underlining added] an outright payment of an
expense, presumably properly deductible, having
been incurred to permit the operator to operate his
pit and thereby to earn or produce income.
There is no doubt in my mind that the foregoing
analysis demonstrates that the annual payments
are made as deposits to secure the rehabilitation of
the site. That they may be insufficient to achieve
that purpose does not change their character to
that of an expense incurred for the purpose of
gaining or producing income. The deposits do not
become the absolute property of the province until
they are forfeited as a result of the operation of the
Act, for the purpose of paying, or to assist in
paying, the respondent's obligations under the Act
to rehabilitate. If they are not forfeited they will
be returned to the taxpayer together with simple
interest calculated at 6% per annum. That is the
substance of their character as well as their form,'
and clearly differentiates them from business
expenses deductible under paragraph 18(1)(a).
I would, therefore, allow the appeal in respect of
Issue I.
Issue II
Should the front-end loaders used by the
respondent in its sand and gravel operation be
classified as Class 10 or Class 22 assets for the
purpose of calculation of capital cost allowance?
The respondent claimed capital cost allowance
on its front-end loaders on the basis that they were
Class 22 assets under Schedule B to the Regula
tions, depreciable at the rate of 50% under the
provision as it read in 1976, namely:
CLASS 22
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.
It would appear that the respondent's equipment
both by its nature and purpose falls squarely
within the definition of Class 22 assets. However,
the appellant's contention is that the respondent's
front-end loaders were acquired for the purpose of
gaining or producing income from a mine with the
result that they are Class 10 assets for capital cost
allowance purposes.
The Trial Judge had no difficulty in concluding
that the respondent's equipment was properly clas
sified as Class 22 assets and dismissed the appel
lant's appeal on that issue. I am of the opinion that
he was correct in so holding.
5 See Dominion Taxicab Assn. v. Minister of National Reve
nue, [1954] S.C.R. 82, at pp. 83-85. Compare R. v. Imperial
General Properties Limited, [1985] 1 F.C. 344 (C.A.), at pp.
359-360.
Class 10 assets were defined, in part, in 1976,
as:
CLASS 10
Property not included in any other class that is
(k) property (other than a property included in class 28 or a
property described in paragraph (ka)) that was acquired for
the purpose of gaining or producing income from a mine and
that is
(ii) machinery or equipment,
Capital cost allowance on such assets is calculat
ed at the rate of 30%.
"Mine" is not defined in the Act. Its meaning is
restricted in some of the provisions of the Act and
Regulations. For example, subsections 1104(7)
and (8) [as added by SOR/72-272, s. 4] of the
Regulations specifically exclude sand pits, gravel
pits and quarries for purposes of Classes 12 and 28
of Schedule B but not for purposes of Class 22
assets. Subsections 1104(5) and (6) [as added by
SOR/72-272, s. 4] specifically refer to Class 10
without any such restriction, but they do refer to
"mineral ores from mineral resources". It is, thus,
the appellant's contention that sand and gravel are
industrial minerals and the pits from which they
are extracted are industrial mineral mines. There
fore, it is argued, the specific provisions of the
definition of Class 10 assets override the general
provisions of the definition of Class 22 assets. That
being so the Class 10 30% capital cost allowance
rate prevails in the view of appellant's counsel.
I have little trouble in accepting on the author
ity of at least some jurisprudence that sand and
gravel may be described as "industrial minerals". 6
But that does not mean that they come from a
"mine" as that term is generally understood. In
fact, Pigeon J. in Avril Holdings Ltd. v. Minister
of National Revenue,' observed in a different
statutory context but in an apposite factual situa
tion that:
6 Nova Scotia Sand and Gravel Ltd v. The Queen, [ 1980]
CTC 378 (F.C.A.), at p. 379.
7 [1971] S.C.R. 601, at p. 605.
In the context of Schedule E, it is apparent that the word
"mine" is not taken in its usual meaning as applied to metal
mines but in a special meaning as part of the expression
"industrial mineral mine". With respect to metal mines, it was
pointed out that "a portion of the earth containing mineral
deposits" was not the usual meaning of the word mine. Here, it
must be noted that the word "mine" is not in common use to
describe a sand or gravel pit. This is therefore a case where the
word is obviously not taken in the usual sense. [Emphasis
added.]
Further assistance is derived from what Dumou-
lin J. said in the Exchequer Court case of Canadi-
an Gypsum Co. Ltd. v. Minister of National
Revenue: 8
I cannot but renew my assent to the "dicta" of Lord Watson
and Justice Kitto, that "mines" and "minerals" are not definite
terms: "they are susceptible of limitation or expansion, accord
ing to the intention with which they are used" (Lord Watson):
and "The meaning of the words `mine' and `mining' like the
word `minerals' is by no means fixed and is readily controlled
by context and subject matter". (Kitto, J.)
The vast and constantly expanding proportions of the de
velopment area in depth, width or circumference, the costly and
powerful equipment at work, a labour force of about 175 men,
the assignment of one or two professional engineers and of two
geologists in a permanent testing laboratory, convince me that
Miller's Creek clearly evinces the characteristics of a mine.
Exhibit A-I 1, a lot of 22 photos of the site (11a to 11v) fully
substantiate such a conclusion as to the material facts of the
problem.
The respondent's admission that Miller's Creek was not a
"stone quarry" has greatly simplified the legal aspect of the
case. Section 83(5), cited supra, is an exempting provision "at
large", restricted only by the excluding clause of 83(6), specifi
cally disqualifying from the exemption benefit a "stone
quarry".
In a fiscal statute, the age-long maxim •'inclusio unius est
exclusio alterius" finds its fullest justification. I could well
agree with Mr. Finlayson's argument, on appellant's behalf,
that "the nominal exclusion of a `stone quarry' in the definition
of the noun `mine', coupled with the admission that Miller's
Creek is not a stone quarry, must, irresistibly, lead to the
deduction that, legally speaking at the very least, it is a mine".
[Underlining added.]
Three things are noteworthy from that quota
tion. First, the meaning of the word "mine", inter
alia, "is by no means fixed and is readily con
trolled by context and subject matter". Two, the
size of the • operation and the skills of those
involved was relevant. Three, the learned Judge
would have had difficulty in finding the operation
8 [1965] 2 Ex.C.R. 556, at pp. 567-568.
in question to be a mine had it not been for the
admission by the Minister that it was not a stone
quarry.
Applying those factors here, it is to be noted
first, that the subject-matter is equipment used in
the extraction, removal and transportation of sand
and gravel, which is the context within which the
claim that the operation is a "mine" must be
viewed. Clearly, it was not a "mine" as that term
is ordinarily understood. Secondly, the operation in
question here was apparently relatively small.
There is no evidence that professional engineers or
geologists were involved as they would normally be
in mining operations. Thirdly, the operation here
was a gravel pit which is akin to a stone quarry, a
fact which at the time of that case was of some
significance to the Minister and to the Court in
deciding whether the operation there was a mine.
These factors, when coupled with Pigeon J.'s
comment that the word "mine is not a common use
to describe a sand or gravel pit", and the fact that
when Parliament wished to include or exclude such
operations from the ambit of "mines" it said so,
leads me irresistibly to the conclusion that the
operation in question is not a mine. Therefore, the
respondent's front-end loaders were not machinery
and equipment "acquired for the purpose of gain
ing or producing income from a mine". They are
not Class 10 assets but were properly character
ized as Class 22 assets by the learned Trial Judge.
The appeal, as it relates to Issue II, will, accord
ingly be dismissed. Success having been divided,
the appellant will be entitled to one half of its
taxable costs both here and in the Trial Division.
MACGUIGAN J.A.: I agree.
LINDEN J.A.: 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.