Falconbridge Nickel Mines Ltd. v. Minister of National Revenue

Falconbridge Nickel Mines Ltd. v. Minister of National Revenue

The Court held that although Falconbridge actually incurred the exploration and development expenditures within the ordinary meaning of s.53(4), those expenditures made pursuant to agreements that provided consideration in the form of shares, an option to purchase shares, or a right to purchase shares of a corporation to be formed are excluded from deductible expenses by s.83A(7)(c); consequently the challenged deductions were disallowed except where the Minister had admitted and varied assessments for specific items.

Citation
[1966] SCR 110
Parties
Appellant and Cross Respondent: Falconbridge Nickel Mines Limited; Respondent and Cross Appellant: Minister of National Revenue
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
14 December 1965
Procedural Posture
Income Tax Appeal to Supreme Court of Canada From Exchequer Court / Final Appeal; Judgment on December 14, 1965
Outcome
Appeal of Falconbridge dismissed; Minister's appeal allowed in part; deductions disallowed under s.83A(7)(c) except items V, part of VI ($4,212.36) and IX which were admitted by the Minister and allowed; all other assessments to stand.
Legal Topics
Income Tax Deductions, Prospecting, Exploration and Development Expenses, Statutory Interpretation of Income Tax Act S.53(4) and S.83 A(7)(c), Treatment of Expenditures in Consideration for Shares/options, Agency Vs Principal Expenditure
Source Language
English
Taxation Corporate/commercial Law Mining Law Income Tax Deductions Prospecting, Exploration and Development Expenses Statutory Interpretation of Income Tax Act S.53(4) and S.83 A(7)(c) Treatment of Expenditures in Consideration for Shares/options Agency Vs Principal Expenditure

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Legal principles 4 Authorities cited 6 Party arguments 2 Amounts and remedies 13
Sign in to unlock

Parties

Falconbridge Nickel Mines Limited

Appellant and Cross Respondent

Minister of National Revenue

Respondent and Cross Appellant

Procedural Posture

Income Tax Appeal to Supreme Court of Canada From Exchequer Court / Final Appeal; Judgment on December 14, 1965

Legal Issues

  1. 1 Whether expenditures incurred by a mining company under option/formation/share subscription agreements are deductible under s.53(4) of the Income Tax Act
  2. 2 Whether s.83A(7)(c) excludes deductions where expenses are incurred pursuant to agreements in consideration for shares, options or rights to purchase shares of a company to be formed
  3. 3 Whether the word "undertook" in s.83A(7) requires a legally enforceable liability

Ratio Decidendi

The Court held that although Falconbridge actually incurred the exploration and development expenditures within the ordinary meaning of s.53(4), those expenditures made pursuant to agreements that provided consideration in the form of shares, an option to purchase shares, or a right to purchase shares of a corporation to be formed are excluded from deductible expenses by s.83A(7)(c); consequently the challenged deductions were disallowed except where the Minister had admitted and varied assessments for specific items.

Court Disposition

Appeal of Falconbridge dismissed; Minister's appeal allowed in part; deductions disallowed under s.83A(7)(c) except items V, part of VI ($4,212.36) and IX which were admitted by the Minister and allowed; all other assessments to stand.

Orders

  • Company's appeal dismissed with costs
  • Minister's appeal allowed in part; assessments varied to allow item V, $4,212.36 portion of item VI and item IX; all other disallowed deductions sustained