October 07, 2011

Teck-Bullmoose Coal Inc. (Appellant) v. Her Majesty the Queen (Respondent)

97 DTC 792
Tax Court of Canada
November 21, 1996

(Court File No. 95-80(IT)G.)

Deductions — Eligible capital expenditures or Canadian exploration expense (“CEE”) — Corporate taxpayer holding fifty-one per cent interest in joint venture formed to develop coal mine — New heavy duty road built from mine site to public highway — Whether expenditures on such new road CEE, or “eligible capital expenditures” — Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, as amended, ss. 14(5)(b) and 66.1(6)(a).

The corporate taxpayer held a fifty-one per cent interest in a joint venture formed to develop a coal mine. The taxpayer built a new heavy duty road from the mine site to the public highway. In assessing the taxpayer for 1983, the Minister denied the taxpayer the right to deduct its share of the road construction costs associated with the said road (which it had included in the calculation of its CEE). The taxpayer appealed to the Tax Court of Canada.

Held: The taxpayer’s appeal was dismissed. On the evidence, the road in issue had not been built for the “purpose of bringing a mineral resource in Canada into production” within the meaning of subparagraph 66.1(1)(a)(iii.1) of the Act. Expenditures on the road, therefore, were not CEE, and hence were not deductible as such in computing the taxpayer’s income for its 1983 taxation year. Such expenditures, however, were “eligible capital expenditures” as defined in paragraph 14(5)(b) (as it read for 1983). The Minister’s assessment was affirmed accordingly.