M.N.R. v. Veritas Seismic Ltd.
A-284-93
Pratte J.A.
18/1/94
5 pp.
Appeal from judgment of Canadian Tax Court allowing respondent's appeal from income tax assessment for 1988 taxation year -- Tax Court concluded respondent entitled to deduction provided in Income Tax Act, s. 125.1(1) since more than 90% of profit had been derived from manufacturing or processing in Canada of goods for sale in Canada -- Whether Tax Court correctly held bulk of respondent's income for 1988 derived from manufacturing or processing of goods for sale in Canada-Respondent involved in making images earth sections to detect presence of oil or gas -- Seismic method involving three steps-Respondent involved only in second stage: processing of data-Processing consisting in different operations where information collected to finally produce images called seismic sections-Output tapes produced from seismic sections -- Both section and tape delivered to customer for geophysicist's interpretation-Respondent not owner of information received from customers -- Costs of printing new information on seismic sections and output tapes minimal -- Decision of Tax Court based on erroneous assumption if income earning activity culminates in production of tangible property having market value, earnings resulting from activity necessarily derived from manufacturing or processing of goods -- To determine if taxpayer engaged in manufacturing or processing of goods, should consider whole of taxpayer's activity -- Respondent provided services to customers by processing raw information and derived income from activity, not from manufacturing or processing of goods -- Appeal allowed -- Income Tax Act, S.C. 1970-71-72, c. 63, s. 125.1(1) (as enacted by S.C. 1973-74, c. 29, s. 1; 1984, c. 1, s. 70; c. 45, s. 41; 1986, c. 55, s. 46; 1988, c. 55, s. 201; c. 55, s. 103; 1993, c. 24, s. 64), (3)(b) (as am. by S.C. 1977-78, c. 1, s. 60; 1980-81-82-83, c. 48, s. 71; c. 140, s. 87; 1985, c. 45, s. 70).