Kettle River Sawmills Ltd. v. Canada
A-1299-92 / A-1300-92
Hugessen J.A.
12/11/93
18 pp.
Appeals from Trial Division decisions ((1992), 56 F.T.R. 191) in respect of respondents' 1980 and 1981 taxation years -- System of taxation of timber tenures in Canada altered since May 6, 1974 -- "Timber resource property" defined in Income Tax Act, s. 13(21)(d.1) -- Respondent Kettle River acquiring timber sale licence in 1961 and two further licences after May 6, 1974-Business sold in 1980 taxation year -- Kettle River treating proceeds of disposition of licences as capital gain -- Minister reassessing it as income, being proceeds of disposition of timber resource property -- Respondent Elk Bay acquiring number of licences since 1962 -- Interests in licences sold to Weldwood of Canada Ltd. in 1981 -- Elk Bay treating proceeds of sale as capital gain in 1981 tax return -- Minister reassessing entire proceeds as income -- Whether quotas timber resource properties -- Trial Judge right in holding quota entity not separate from licence -- Licence "original right", right to cut or remove timber-Quota, as incident of licence, part of original right albeit most valuable part -- No error in findings of fact, questions of law -- Whether licences extended, renewed or substituted after May 6, 1974, "acquired" after that date -- Issue involving proper construction of Act, s. 13(21)(d.1) -- Answer in bracketed words of clause (i)(A): (other than in the manner referred to in subparagraph (ii)) -- View confirmed by coming into force provision, s. 6(9) of enacting statute -- Whether capital cost of timber resource properties at time of first extension, renewal or substitution after May 6, 1974, fair market value thereof -- Real issue how capital cost should be determined in practice -- Trial Judge right in deciding capital cost for licences newly acquired after May 6, 1974 amount actually paid for them -- Wrong in holding respondents had "given up" market value of quotas when they applied for and obtained renewals of licences -- Also wrong in finding requirements of fairness met -- Tax law, common use of language drawing clear distinction between cost and value -- Act, ss. 10(1), 69(1) clear examples of distinction -- Respondents, by renewal of licences, exercising and enjoying rights they had by virtue of quotas -- "Rolling over" quotas, not giving them up-Fairness for taxation purposes presumption of intention to treat in similar fashion all taxpayers similarly situated -- No acquired right not to be taxed -- Respondents disposing of valuable property at freely negotiated price -- Acquiring property with pre-tax dollars, charging off as expenses against income all costs of acquisition -- Nothing unfair about treating proceeds of disposition as income -- Undepreciated capital cost of respondents' timber resource properties should be calculated in accordance with ordinary rules, actual cost less accumulated depreciation -- Appeals allowed -- Income Tax Act, S.C. 1970-71-72, c. 63, ss. 10, 13(21)(d.1) (as enacted by S.C. 1974-75-76, c. 26, s. 6(7)), 69.