Kettle River Sawmills Ltd. v. MNR, (1993) 164 N.R. 241 (FCA)

• Judge: Mahoney, Hugessen and Robertson, JJ.A.
• Court: Federal Court of Appeal (Canada)
• Case Date: November 12, 1993
• Jurisdiction: Canada (Federal)
• Citations: (1993), 164 N.R. 241 (FCA)

Kettle River Sawmills Ltd. v. MNR (1993), 164 N.R. 241 (FCA)

MLB headnote and full text

Her Majesty The Queen (appellant/defendant) v. Kettle River Sawmills Ltd. (respondent/plaintiff)

(A-1299-92)

Her Majesty The Queen (appellant/defendant) v. Elk Bay Logging Ltd. (respondent/plaintiff)

(A-1300-92)

Indexed As: Kettle River Sawmills Ltd. v. Minister of National Revenue

Federal Court of Appeal

Mahoney, Hugessen and

Robertson, JJ.A.

November 12, 1993.

Summary:

Two timber operators sold their timber sales licences and treated the proceeds of sale as a capital gain. The Minister reassessed and included the proceeds as income from timber resource property under s. 13(21)(d.1) of the Income Tax Act. The operators appealed the reassessments. The appeals were heard together.

The Federal Court of Canada, Trial Divi­sion, in a judgment reported 56 F.T.R. 191, held that the proceeds were income, but the capital cost of the licences should be deducted. The Minister appealed the calcula­tion of the capital cost to be deducted.

The Federal Court of Appeal allowed the appeal. Capital cost should have been calcu­lated in accordance with the normal rules (i.e., actual cost less accumulated depreci­ation).

Income Tax - Topic 1039

Income from business or property - Prop­erty income - Timber resource property - Section 13(21)(d.1) of the Income Tax Act provided that the proceeds from a sale of a timber resource property acquired after May 6, 1974 were to be included in income - A timber operator acquired timber sales licences and quotas before 1974, which were renewed or substituted until 1980, when they were sold - The trial judge held that the licences, whether renewals, extensions or substitutions for the earlier licences, were timber resource properties and the proceeds of sale less capital cost (cost of the first acquisition after May 6, 1974) were to be included in income - The Federal Court of Appeal agreed that the sales proceeds less unde­preciated capital cost was income, but held that capital cost equalled actual cost less accumulated depreciation.

Cases Noticed:

D'Auteuil Lumber Co. v. Minister of Na­tional Revenue (1970), 70 D.T.C. 6096 (Ex. Ct.), refd to. [para. 23].

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 10(1) [para. 25]; sect. 13(1), sect. 13(1.1) [para. 7]; sect. 13(21)(d.1) [para. 5]; sect. 69(1) [para. 26].

Income Tax Act Amendment Act, S.C. 1974-75-76, c. 26, sect. 6(9) [para. 8].

Counsel:

Ingebord E. Lloyd and I. Thomas Torrie, for the applicant;

Ian H. Pitfield and Lorne Green, for the respondent.

Solicitors of Record:

John C. Tait, Q.C., Deputy Attorney Gen­eral of Canada, Ottawa, Ontario, for the applicant;

Thorsteinssons, Vancouver, B.C., for the respondent.

This appeal was heard on October 28, 1993, at Vancouver, B.C., before Mahoney, Hugessen and Robertson, JJ.A., of the Fed­eral Court of Appeal.

On November 12, 1993, Hugessen, J.A., delivered the following judgment for the Court of Appeal.