T-4982-80
Noranda Mines Limited (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Addy J.—Toronto, April 7; Ot-
tawa, May 11, 1982.
Income tax — Income calculation — Deductions — Appeal
from assessment — Manner in which losses of previous years
taken into account for plaintiffs 1974 taxation year — Plain
tiff contends words `taxable income earned in the year" in s.
124(2)(b) should be construed as having meaning different
from that provided for "taxable income" in s. 2(2) of the Act
— Appeal dismissed — Income Tax Act, S.C. 1974-75-76, c.
26, ss. 2(2), 124(2)(a), (b), ( 4 )(a).
CASES JUDICIALLY CONSIDERED
REFERRED TO:
Williams v. Box (1910), 44 S.C.R. 1; Snow v. The
Minister of National Revenue (1979), 79 DTC 5177
(F.C.A.).
ACTION.
COUNSEL:
C. L. Campbell, Q.C., for plaintiff.
W. Lefebvre and R. McMechan for defendant.
SOLICITORS:
McCarthy & McCarthy, Toronto, for plain
tiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
ADDY J.: The issue in this income tax appeal
involves the manner by which losses of previous
years could properly be taken into account for the
plaintiff's 1974 taxation year. Neither the facts
nor the figures are disputed but merely the manner
of calculation. The determination of the question
in issue turns entirely on the interpretation of the
words "taxable income earned in the year" found
in paragraph 124(2)(b) of the Income Tax Act,
S.C. 1970-71-72, c. 63, as enacted in 1974.
Subsection 124(2) as amended for 1974 [S.C.
1974-75-76, c. 26, s. 79] (it has since been
repealed) read as follows:
124....
(2) There may be deducted from the tax otherwise payable
under this Part by a corporation for a taxation year an amount
equal to 15% of the lesser of
(a) its taxable production profits from mineral resources in
Canada for the year; and
(b) the amount, if any, by which its taxable income earned in
the year exceeds the aggregate of
(i) 4 times the amount, if any, deductible under section
125 from the tax for the year otherwise payable by it
under this Part, and
(ii) its Canadian investment income and its foreign invest
ment income (within the meanings assigned by subsection
129(4)) for the year. [The underlining is mine.]
There is no definition in the Act of the expres
sion "taxable income earned in the year". There is,
however, a clear definition of "taxable income",
which subsection 2(2) defines as follows:
2....
(2) The taxable income of a taxpayer for a taxation year is
his income for the year minus the deductions permitted by
Division C.
Previous to the 1974 amendment, legislation had
been enacted to provide for a deduction of a
portion of actual mining taxes paid to a province
for the year and the expression "taxable income
earned in the year in a province" was defined and
is still defined as follows:
124....
(4) In this section,
(a) "taxable income earned in the year in a province" means
the amount determined under rules prescribed for the pur
pose by regulations made on the recommendation of the
Minister of Finance; and
Counsel for the taxpayer admits that under the
last-mentioned provision, losses would be taken
into account because of subsection 2(2) and the
fact that the Regulations specifically defined the
expression. However, he submits that, as the
Regulations do not define "taxable income earned
in the year", the words "in a province" no longer
being there, we are now dealing with something
quite different. He concedes, however, that if only
the words "taxable income" were used, subsection
2(2) would apply. In drawing the distinction he
relies on the statement of Anglin J. in the case of
Williams v. Box' at page 24:
To treat any part of a statute as ineffectual, or as mere
surplusage, is never justifiable if any other construction be
possible. The rejection or excision of a word or phrase is
permissible only where it is impossible otherwise to reconcile or
give effect to the provisions of the Act.
He points out that, since in paragraph 124(2)(b)
the words "earned in the year" are added to
"taxable income", it must mean something differ
ent from mere "taxable income" provided for in
subsection 2(2) and adds that subsection 2(2)
mentions income for the year while in paragraph
124(2)(b) the Act speaks of income in the year.
There is, of course, a difference in meaning be
tween the words "in" and "for" when used in
relation to the concept of time, "in" being used
generally to indicate inclusion within or occurrence
during a period or limit of time while "for" might
mean "with regard to or with respect to a certain
time", although it also can mean "during the
continuation of".
The Crown's position is that taxable income as
found in paragraph 124(2)(b) simply means tax
able income as defined in subsection 2(2) of the
Act, the words "earned in the year" being mere
surplusage, and that an acceptance of the taxpay
er's argument would be contrary to the scheme of
the Act and would lead to absurd results.
Taxable income is strictly a legal concept
arrived at by applying the provisions of the Act.
(See Snow v. The Minister of National Revenue')
Unless the context clearly indicates it, one should
not conclude that in the same Act there would be
two definitions of tax or two concepts of taxable
income.
There is no doubt that considerable difficulty
arises in attempting to ascertain the meaning of
the words in issue. We are, of course, dealing with
a tax credit and any such provision should be
' (1910), 44 S.C.R. 1.
2 (1979), 79 DTC 5177 (F.C.A.).
strictly construed against the taxpayer and, where
two constructions are plausible, the one which
conforms to what appears to be the general scheme
of the legislation should prevail unless the context
presents an insurmountable obstacle to any such
interpretation.
I am not satisfied that in removing the words
"in a province" Parliament intended to change
completely the meaning of "taxable income" as it
has been clearly defined in subsection 2(2). In the
Act, when one refers to a tax credit the taxable
income has already been determined. In order to
conform to the general scheme of the Act, the
provision can only mean that the corporation is
entitled to 15% of the lesser of: "the amount by
which the taxable income, as defined, exceeds the
investment income" and not "the amount by which
the taxable income (as defined) plus the loss carry
back exceeds the investment income" for the
simple reason that the loss carry back has already
been considered in computing taxable income and
failing a very clear provision of the Act to that
effect, the same deduction should not be taken into
account twice. There exists no such provision.
It follows that the appeal must fail and the
assessment be confirmed. The respondent will be
entitled to costs of the action.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.