Gulf Canada Resources Ltd. v. Minister of National Revenue, (1996) 192 N.R. 283 (FCA)

• Judge: Pratte, Strayer and Linden, JJ.A.
• Court: Federal Court of Appeal (Canada)
• Case Date: January 26, 1996
• Jurisdiction: Canada (Federal)
• Citations: (1996), 192 N.R. 283 (FCA)

Gulf Can. Resources Ltd. v. MNR (1996), 192 N.R. 283 (FCA)

MLB headnote and full text

Her Majesty The Queen (appellant/defendant) v. Gulf Canada Resources Limited (Previously Gulf Oil Canada Ltd.) (respondent/plaintiff)

(A-195-95)

Indexed As: Gulf Canada Resources Ltd. v. Minister of National Revenue

Federal Court of Appeal

Pratte, Strayer and Linden, JJ.A.

January 26, 1996.

Summary:

Gulf participated in Syncrude in the pro­duction of crude oil from bituminous sands. For the first time in 1978, crude oil was sold. The Minister reassessed Gulf for the 1978 taxation year. The Minister deducted capital cost allowance and interest expenses from Gulf's "resource profits" under s. 1204 of the Income Tax Regulations. Gulf ap­pealed.

The Federal Court of Canada, Trial Divi­sion, in a judgment reported 91 F.T.R. 131, allowed the appeal. The Minister appealed.

The Federal Court of Appeal allowed the appeal in part. Linden, J.A., dissenting, would have allowed the appeal in whole.

Income Tax - Topic 2784

Deductions in computing income - Resource and processing allowances - Resource profits - Calculation of - Gulf participated in Syncrude in the production of crude oil from bituminous sands - The production process comprised mining the sands, extracting the bitumen and upgrad­ing the bitumen into crude oil - The Minister reassessed Gulf for the 1978 taxation year and deducted capital cost allowance and interest expenses from Gulf's "resource profits" under s. 1204 of the Income Tax Regulations - The Federal Court of Appeal affirmed the reassessment in part - The court held that the Minister could not deduct that part of the two de­ductions reasonably applicable to extrac­tion and upgrading because extraction and upgrading were operations whereby petro­leum or related hydrocarbons were pro­cessed within the meaning of s. 1204(3) of the Income Tax Regulations.

Cases Noticed:

Gulf Canada Ltd. v. Minister of National Revenue, [1990] D.T.C. 6222; 38 F.T.R. 81 (F.C.T.D.), refd to. [para. 8].

Gulf Canada Ltd. v. Minister of National Revenue, [1992] D.T.C. 6123; 136 N.R. 187 (F.C.A.), refd to. [para. 8].

Moldowan v. Minister of National Reve­nue, [1978] 1 S.C.R. 480; 15 N.R. 476; [1977] C.T.C. 310; 77 D.T.C. 5213; 77 D.L.R.(3d) 112, refd to. [para. 10].

Tonn et al. v. Minister of National Reve­nue (1995), 191 N.R. 182 (F.C.A.), refd to. [para. 25].

Canadian National Railway Co. and Cana­dian Pacific Ltd. v. Canada (1994), 171 N.R. 64 (F.C.A.), consd. [para. 41].

Statutes Noticed:

Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, sect. 20(1)(v.1), sect. 65 [para. 29]; sect. 248(1) [para. 21].

Income Tax Act Regulations (Can.), sect. 1104(5) [para. 45]; sect. 1104(9) [para. 32]; sect. 1204 [paras. 2, 30, footnote 1].

Authors and Works Noticed:

Economist, The, vol. 337, No. 7946, page 87 [para. 30].

Counsel:

W. Lefebvre, Q.C., R. Taylor and W. Birnbaum, for the appellant;

J.L. Finlay, T.B. Akin and J. Wortsman, for the respondent.

Solicitors of Record:

Ogilvy Renault, Montreal, Quebec, and George Thomson, Deputy Attorney General of Canada, Ottawa, Ontario, for the appellant;

McCarthy Tétrault, Toronto, Ontario, for the respondent.

This appeal was heard at Ottawa, Ontario, on December 11 and 12, 1995, by Pratte, Strayer and Linden, JJ.A, of the Federal Court of Appeal.

The decision of the Court of Appeal was delivered at Ottawa, Ontario, on January 26, 1996, and the following opinions were filed:

Pratte, J.A. (Strayer, J.A., concurring) - see paragraphs 1 to 24;

Linden, J.A., dissenting - see paragraphs 25 to 60.