Range Grain Co. v. Canada
T-411-88
Wetston J.
7/3/97
14 pp.
Appeal by taxpayer from reassessment for taxation years 1978 to 1984-Taxpayer claiming deduction for manufacturing, processing profits under Income Tax Act, s. 125.1 as part of income from grain elevator operation in Port-Cartier, Quebec, derived from manufacturing, processing-Respondent disallowing s. 125.1 tax credit in each taxation year on grounds manufacturing, processing profits not at least 10% of company's total profits, activities carried out at elevator, except grain cleaning, not manufacturing, processing within meaning of s. 125.1-Taxpayer located in Winnipeg, Manitoba, acting as accredited agent with Canadian Wheat Board, buyer of wheat-Income earned by taxpayer due to purchase of wheat solely commission earned, not price of wheat advanced by American company-Taxpayer not engaging in speculation on price of wheat-No commercial risk of losing money due to purchase-Money received for wheat purchase not increasing net worth of company, simply flowing through company-Taxpayer acting as agent on behalf of American company-Four different types of grain elevators in Canada: primary elevator, process elevator, terminal elevator, transfer elevator-Port-Cartier elevator licensed as transfer elevator which receives grain, facilitates transfer to ocean going vessels for shipping overseas-Throughout transportation process ownership of grain remains with Canadian Wheat Board until transfer to buyer-Relationship one of bailee-bailor in which elevator maintains possession of wheat on behalf of Board until transfer to purchaser-In calculating manufacturing, processing profits, taxpayer included as qualifying activities laker revenue (all costs associated with transferring grain into elevator), conditioning costs (ventilating, fumigating, cleaning), and half revenues for port charges, stevedoring and storage-During taxation years, Minister treating revenues from grain elevator as revenues from partnership-Manufacturing, processing of good to be considered as whole, not divided into separate components-Goods processed, manufactured must be for sale or lease in Canada-Grain elevator in question used primarily for transportation purposes-Taxpayer paid for transportation service, not processing services-Processing herein for strict purpose of maintaining product, not improving it or changing it-Taxpayer performing service, not involved in production of goods for sale within meaning of s. 125.1-Appeal dismissed-Income Tax Act, S.C. 1970-71-72, c. 63, s. 125.1 (as enacted by S.C. 1973-74, c. 29, s. 1).