Johns-Manville Canada v. The Queen, [1985] 2 S.C.R. 46 (1985)

Extract

---

Johns-Manville Canada v. The Queen, [1985] 2 S.C.R. 46 (1985)

Johns-Manville Canada v. The Queen, [1985] 2 S.C.R. 46

Johns-Manville Canada Inc. Appellant;

and

Her Majesty The Queen Respondent.

File No.: 16940.

1984: May 15, 16; 1985: July 31.

Present: Dickson C.J. and Ritchie, Beetz, Estey, McIntyre, Chouinard and Wilson JJ.

*Ritchie J. took no part in the judgment.

on appeal from the federal court of appeal

Income tax -- Income/capital distinction -- Open pit mining operation -- Land acquired for rimming -- Land not overlaying ore body -- Whether acquisition cost a capital expense or deductible as revenue expense -- Income Tax Act, R.S.C. 1952, c. 148, ss. 4, 11(1)(a), 12(1)(a), (b) -- Income Tax Regulations, s. 1100(1).

Appellant, in the course of operating its open pit mine, was forced to buy peripheral land in order to continue the necessary wall slope and angle of repose of the overburden. The land did not overlay any of the ore body and would gradually disappear as the mine deepened and the mouth of the mine became wider. At issue was whether or not appellant had the right to charge the purchase cost of this land to expense rather than to capital.

Held: The appeal should be allowed.

These expenditures should be allocated to the revenue account and not to capital. Common sense dictated that these expenditures, made in the course of the taxpayer's regular day-to-day business operations, were necessary to avoid a shut down of the taxpayer's operations. These expenditures were not part of a plan for assembling assets and had no semblance of a once and for all acquisition. Since the expenditures were not connected with assembling an ore body or a mining property that itself could be developed independently of any ore body, there was no entitlement to depletion or capital cost allowance. These expenditures, however, were not disqualified by s. 12(1)(a). That section favoured the inclusion of these expenditures in authorized expenses because there is no other provision made in the Act for these items which were incurred of necessity according to good business and engineering practice.

Cases cited

Denison Mines Ltd. v. Minister of National Revenue, [1976] 1 S.C.R. 245; B.P. Australia Ltd. v. Commissioner of Taxation of the Commonwealth of Australia, [1966] A.C. 224, considered; Knight v. Calder Grove Estates (1954), 35 T.C. 447; British Salmson Aero Engines, Ltd. v. Commissioner of Inland Revenue (1937), 22 T.C 29; Minister of National Revenue v. Algoma Central Railway, [1968] S.C.R. 447; Hallstroms Pty. Ltd. v. Federal Commissioner of Taxation (1946), 72 C.L.R. 634; Sun Newspapers Ltd. v. Federal Commissioner of Taxation (1938), 61 C.L.R. 337; Commissioner of Taxes v. Nchanga Consolidated Copper Mines Ltd., [1964] A.C. 948; Mitchell v. B.W. Noble, Ltd., [1927] 1 K.B. 719; British Insulated and Helsby Cables, Ltd. v. Atherton, [1926] A.C. 205; Vallambrosa Rubber Co. v. Farmer, [1910] S...

See the full content of this document

---