Pacific Northern Gas Ltd. v. Minister of National Revenue, (1990) 33 F.T.R. 258 (TD)

• Judge: Joyal, J.
• Court: Federal Court (Canada)
• Case Date: December 05, 1989
• Jurisdiction: Canada (Federal)
• Citations: (1990), 33 F.T.R. 258 (TD)

Pacific Northern Gas Ltd. v. MNR (1990), 33 F.T.R. 258 (TD)

MLB headnote and full text

Pacific Northern Gas Ltd. (plaintiff) v. Her Majesty The Queen (defendant)

(No. T-111-86)

Indexed As: Pacific Northern Gas Ltd. v. Minister of National Revenue

Federal Court of Canada

Trial Division

Joyal, J.

March 21, 1990.

Summary:

Pacific Northern bought, transmitted and distributed gas to customers. The Minister of National Revenue classified certain compression equipment under the Income Tax Act Regulations, Schedule II, as class 2 equipment. The Minister also assessed certain payments from customers as income rather than capital receipts. Pacific Northern appealed.

The Federal Court of Canada, Trial Division, allowed the appeal in part.

Income Tax - Topic 1178

Income from business or property - Deductions - Capital cost allowance - What constitutes - The taxpayer bought, transmitted and distributed natural gas to customers - The taxpayer charged customers a portion of the cost of installing customer service lines that were more than 70 feet from the taxpayer's main line - The Federal Court of Canada, Trial Division, held that the customer payments were capital receipts, not income - See paragraphs 46 to 58.

Income Tax - Topic 1195

Income from business or property - Deductions - Capital cost allowance - Oil and gas pipeline systems - Pacific bought, transmitted and distributed natural gas to customers - Compressor stations were necessary to reduce gas pressure in the main pipeline before delivery to lateral lines - The Income Tax Act Regulations, Schedule II, class 2, provided 6% capital cost allowance for "distributing equipment and plant acquired primarily for the production or distribution of gas" - Pacific submitted that its compression equipment was used in "transmission", not "distribution", therefore it fell under class 8 (20%) - The Federal Court of Canada, Trial Division, held that the equipment fell in class 2; class 2 included all pipeline equipment whether used in the production, transmission or distribution of gas - See paragraphs 5 to 45.

Words and Phrases

Distribution - The Federal Court of Canada, Trial Division, referred to the meaning of "distribution", as found in Schedule II, class 2 of the Income Tax Act Regulations - See paragraphs 5 to 45.

Cases Noticed:

Johns-Manville Canada Inc. v. Minister of National Revenue, [1985] 2 S.C.R. 46; [1985] 2 C.T.C. 111; 60 N.R. 244, refd to. [para. 11].

Northern and Central Gas Corp. Ltd. v. Minister of National Revenue (1985), 85 D.T.C. 5144 (F.C.T.D.), affd. (1987), 80 N.R. 383; 87 D.T.C. 5439 (F.C.A.), appld. [para. 15].

Nova, an Alberta Corporation v. Minister of National Revenue (1988), 87 N.R. 101; 88 D.T.C. 6386 (F.C.A.), dist. [para. 20].

Consumers' Gas Company Ltd. v. Minister of National Revenue (1983), 52 N.R. 106; 84 D.T.C. 6058 (F.C.A.), refd to. [para. 51].

Consumers' Gas Company Ltd. v. Minister of National Revenue (1986), 2 F.T.R. 30; 86 D.T.C. 6132 (F.C.T.D.), affd. 72 N.R. 206; 87 D.T.C. 5008 (F.C.A.), appld. [para. 53].

Statutes Noticed:

Income Tax Act, Interpretation Bulletin IT-482, para. 8 [paras. 12, 13].

Income Tax Act Regulations, Schedule II, classes 2, 8 [para. 5].

Interpretation Bulletins - see Income Tax Act.

Counsel:

W.J.A. Mitchell, Q.C., for the applicant;

J.A. Vandperen, Q.C., and B. Paris, for the respondent.

Solicitors of Record:

Thorsteinsson, Mitchell, Little, O'Keefe and Davidson, for the applicant;

John C. Tait, Deputy Attorney General of Canada, Ottawa, Ontario, for the respondent.

This appeal was heard on December 5, 1989, at Vancouver, B.C., before Joyal, J., of the Federal Court of Canada, Trial Division, who delivered the following judgment on March 21, 1990.