Date: 19981021
Docket: A-639-96
CORAM: THE CHIEF JUSTICE
LINDEN J.A.
SEXTON J.A.
BETWEEN:
ALLARCOM PAY TELEVISION LIMITED
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
[Delivered orally from the Bench at Toronto, Ontario
Wednesday, October 21, 1998]
THE CHIEF JUSTICE
[1] The appellant appeals from a judgement of the Tax Court of Canada, pronounced on 9 August, 1996, dismissing its appeals from assessments made by the Minister of National Revenue under the Income Tax Act, for the taxation years 1985 and 1988.
[2] During those years the appellant carried on a pay television business in the Province of Alberta. In taxation year 1985 the appellant classified certain of its assets acquired in that year as manufacturing and processing assets and placed them in Class 29 of Schedule II of the Income Tax Regulations. In reporting its income and tax for that year the appellant characterized its income as manufacturing and processing profits. The appellant claimed no deduction in respect thereof as it reported nil taxable income and nil tax, but it did claim a refundable investment tax credit in the amount of $322.00
[3] In reassessing the appellant for the 1985 taxation year, the Minister assessed nil tax, determined that the amount deemed to have been paid by the appellant under subsection 127.1(1) on account of its tax was nil and not $322.00, and claimed repayment of that amount with interest. The Minister also recorded that the appellant's balance of unused investment tax credits be reduced from $24,176.00 to nil.
[4] In reporting income and tax for the 1988 taxation year, the appellant claimed the amount of $24,176,00 being the unused investment tax credit carried forward from the 1985 taxation year. The Minister disallowed this claim.
[5] The issue in this appeal is whether the property in respect of which the appellant claimed the refundable investment tax credit and the investment tax credits was qualified property within the meaning of subparagraph 127(9)(c)(i) of the Act and section 4600 of the Regulations. If it was shown that the property in issue was acquired by the appellant to be used by it in Canada primarily for the purpose of manufacturing or processing goods for sale or lease, then certain capital assets may be properly included in Class 29 and it will be entitled to the manufacturing and processing profits deduction pursuant to section 125.1 of the Act.
[6] The learned Tax Court Judge concluded that the appellant's contracts with the cable companies were not for the sale of goods but were for the supply of services. We are all of the view that the conclusion of the learned Tax Court Judge that the substance of the appellant's business was the supply and provision of services was supported by the evidence and by the jurisprudence by which he was bound. The appellant has not demonstrated to us that the learned Tax Court Judge erred in his appreciation of the facts or in his application of the law to those facts.
[7] Upon a realistic consideration of the whole of the appellant's activities, it is clear to us that the appellant was, for the 1985 and 1988 taxation years, in the business of granting to its cable customers licenses to exhibit motion pictures to their subscribers for viewing in private and not selling or leasing them. In light of this conclusion, we do not find it necessary to deal with the ingenious points raised by Mr. Quigley, namely, whether the appellant was engaged in the business of manufacturing and processing of goods within the meaning of section 125.1 of the Act.
[8] Accordingly, we will dismiss the appeal with costs.
"Julius A. Isaac" C.J.
TORONTO, ONTARIO
October 21, 1998
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
DOCKET: A-639-96
| STYLE OF CAUSE: ALLARCOM PAY TELEVISION LIMITED |
- and -
| HER MAJESTY THE QUEEN |
DATE OF HEARING: WEDNESDAY, OCTOBER 21, 1998
PLACE OF HEARING: TORONTO, ONTARIO
REASONS FOR JUDGMENT BY: THE CHIEF JUSTICE
| DATED: WEDNESDAY, OCTOBER 21, 1998 |
APPEARANCES: Mr. Michael Quigley
For the Appellant
Ms. Margaret J. Nott
Ms. Patricia Lee
For the Respondent
SOLICITORS OF RECORD: McCarthy Tétrault
| Barristers & Solicitors |
| Suite 4700 |
| Toronto Dominion Bank Tower |
Toronto Dominion Centre
Toronto, Ontario
M5K 1E6
For the Appellant
Morris Rosenberg
Deputy Attorney General
of Canada
For the Respondent
| FEDERAL COURT OF APPEAL |
| Date: 19981021 |
| Docket: A-639-96 |
| BETWEEN: |
| ALLARCOM PAY TELEVISION LIMITED |
| Appellant |
| -and- |
| HER MAJESTY THE QUEEN |
| Respondent |
| REASONS FOR JUDGMENT |