October 07, 2011

Newfoundland Minerals Limited (Appellant) v. Minister of National Revenue (Respondent)

69 DTC 331
Tax Appeal Board
April 30, 1969

Tax exemption for new mines — Exemption claimed for profit realized later on ore mined in exempt period — “Income derived from operation of mine” construed — Income Tax Act, R.S.C, 1952, s. 83(5) — Income Tax Regulations, s. 1900.

The appellant company, NML, was incorporated in 1956 and was engaged in the mining of ore in Newfoundland. The mine in question was brought into production in 1959 and, according to an agreed statement of facts, the exemption period for the mine commenced October 1, 1959 and ended September 30, 1962. Before the exemption period began, NML had on hand ore which it sold during the exemption period and the profit from which it claimed as exempt income. (NML later claimed that it had erroneously included this profit in its exempt income and that it should have been included in its taxable income.) There was also a quantity of ore mined during the exemption period which was sold after the period expired. The profit was thus realized in 1963 after the exempt period. The Minister, in assessing for 1963, included this profit in NML’s taxable income. NML claimed that since the profit was realized on ore mined during the exemption period it should be exempt whenever realized. According to NML, the profit was income derived from the operation of the mine during the exempt period, within the meaning of section 83(5).

Held: The appeal was dismissed. The assessment was confirmed. The profit realized after the expiration of the three-year period was properly included in the appellant company’s taxable income. The wording of section 83(5) was clear and unambiguous. In the Board’s opinion, the section exempted the income realized during the exempt period and not income from ore mined during that period. The appellant company’s argument, based on the decision of the Supreme Court of Canada in M.N.R. v. Hollinger North Shore Exploration Co. Ltd. (63 DTC 1031) that the word “derived” should be broadly construed as meaning arising or accruing”, was rejected. The issue in the present appeal was completely different from that involved in the Hollinger case, and the latter case was, for that reason, distinguishable.