Canada v. Mont-Sutton Inc.
A-764-95
Létourneau, J.A.
29/6/99
17 pp.
Whether taxpayer entitled, for 1986 to 1989 taxation years, to capital cost allowance provided in Income Tax Regulations (ITR), Class 17, on ground its ski trails depreciable properties due to their construction and development (whether ski trail can be considered "road, sidewalk, airplane runway, parking area, storage area or similar surface construction"); to credit on Canadian manufacturing and processing profits from goods for lease, as provided in Income Tax Act (ITA), s. 125.1, investment tax credit on manufacturing and processing of goods for lease provided in Act, s. 127(5) and capital cost allowance provided in ITR, Class 29 for property acquired for manufacturing or processing of goods for lease as manufacturing artificial snow, which it used in copious amounts to cover ski trails, and leased these snow-covered trails to downhill skiing enthusiasts-MNR rejected capital cost allowance and investment tax credit-T.C.C. refused investment tax credit but allowed capital cost allowance-Appeal by Crown and cross-appeal by taxpayer-Appeal and cross-appeal dismissed-(1) Capital cost allowance-Taxpayer not entitled to manufacturing and processing profits credit, investment tax credit and Class 29 capital cost allowance-Taxpayer clearly does not lease artificial snow as such, just as owner of a parking lot clearly does not lease asphalt to someone who wants to park his automobile there-Once manufactured property incorporated with another property or becomes accessory, albeit important or necessary, thereto, loses its own identity and therefore no longer object of lease-Informed commercial person cannot seriously claim manufacture of artificial snow to be used to enhance ski slopes manufacture for lease: Canada v. Hawboldt Hydraulics (Canada) Inc. (Trustee), [1995] 1 F.C. 830 (C.A.)-Main purpose of contract entered into with downhill skier lease of land specifically developed for practice of this sport and snow, gradient of slope and ski-lifts important accessories making land appropriate for intended use and thereby promote its leasing-(2) Capital cost allowance on ski trails as Class 17 property-Necessary, first, to identify like features of surface constructions listed in Regulations and, second, to ask ourselves whether construction of ski trails constituing surface construction and, if so, whether displaying characteristics peculiar to listed structures-T.C.C. Judge accepted as feature common to all of enumerated surface constructions fact they are all flattened properties converted through necessary intervention of man, final product of which makes them distinguishable from any other land in natural state-Whatever interpretative approach selected, one fact remains: Class 17(c) artificially groups together, and considers as surface constructions, some disparate items for which construction aspect, in some instances, as minimal as can be-First, land which, as a result of work performed, becomes surface construction should display clearly discernible change in configuration and be readily distinguishable from another property in its natural state-Second, these surface constructions occupy circumscribed space identifiable as such, are visible and to varying degrees require addition of some materials in order to fulfill intended function-Third, because subject to wear and tear, constructions have recurring need for and cost of maintenance to retain identity and purpose-Ski slopes built by taxpayer herein meet these three criteria and are surface construction similar to those enumerated in Class 17(c)-Income Tax Act, S.C. 1970-71-72, c. 63, s. 125.1(3) (enacted by S.C. 1973-74, c. 29, s. 1; 1977-78, c. 1, s. 60(1); 1980-81-82-83, c. 48, s. 71(1); c. 140, s. 87(1); 1985, c. 45, s. 70(1); 1986, c. 6, s. 31(2)), 127(5) (enacted by S.C. 1974-75-76, c. 71, s. 9(1); 1984-85, c. 1, s. 72(2); 1988, c. 55, s. 106(1))-Income Tax Regulations, C.R.C., c. 945, Schedule II, Classes 17, 29.