Date: 20030310
Docket: A-267-02
Neutral citation: 2003 FCA 126
CORAM: LÉTOURNEAU J.A.
BETWEEN:
GENERAL MOTORS OF CANADA LIMITED
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
Heard at Toronto, Ontario, on Monday, March 10, 2003.
Judgment delivered from the Bench at Toronto, Ontario, on Monday, March 10, 2003.
REASONS FOR JUDGMENT OF THE COURT BY: SHARLOW J.A.
Date: 20030310
Docket: A-267-02
Neutral citation: 2003 FCA 126
ROTHSTEIN J.A.
SHARLOW J.A.
BETWEEN:
GENERAL MOTORS OF CANADA LIMITED
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench at Toronto, Ontario
on Monday, March 10, 2003.)
SHARLOW J.A.
[1] This is an appeal from a decision of the Tax Court in which the appellant General Motors of Canada Limited was held not to be entitled to the benefit of the "grandfathering" provision in subsection 24(2) of P.C. 1989-2464 (SOR/90-22). That provision referred to the amendment to subsection 1100(2) of the Income Tax Regulations which extended the half-year rule to property in class 12, for taxation years ending after 1986. The decision under appeal is reported as General Motors of Canada Ltd. v. Canada, 2002 D.T.C. 1592, [2002] 3 C.T.C. 2008 (T.C.C.).
[2] Subsection 24(2) reads as follows:
| 24(2) Subsection 1(6) is applicable in respect of property acquired by a taxpayer after 1987 other than property acquired by the taxpayer before 1990 |
24(2) Le paragraphe 1(6) s'applique aux biens acquis par un contribuable après 1987, à l'exclusion de ceux qu'il a acquis avant 1990 et, selon le cas: |
| (a) pursuant to an obligation in writing entered into by the taxpayer before June 18, 1987, |
a) qui ont été acquis conformément à une obligation écrite contractée par le contribuable avant le 18 juin 1987; |
| (b) that was under construction by or on behalf of the taxpayer on June 18, 1987, or |
b) dont la construction par le contribuable ou pour son compte était commencée le 18 juin 1987; |
| (c) that is a fixed and integral part of property under construction by or on behalf of the taxpayer on June 18, 1987. |
c) qui sont une partie fixe et intégrante d'un bien dont la construction par le contribuable ou pour son compte était commencée le 18 juin 1987. |
[3] The facts are not in dispute. They are fully stated in the Tax Court judgment. For present purposes it is enough to say that the case arises from the appellant's obligation, which existed prior to June 18, 1987, to undertake the assembly of Chevrolet Lumina and Buick Regal models for the 1988 model year. This required a significant investment in new machinery, including a complete retooling of the appellant's Oshawa plants.
[4] The property that is the subject of the case is "special tooling", which are dies and moulds required to make certain metal and plastic car parts for the Lumina and Regal models. The special tooling was not physically located in the appellant's plants, but on the premises of the appellant's parent corporation or other manufacturers who were contracted to make the parts required for the new models. The special tooling was acquired prior to 1990 by an agreement dated December 11, 1987.
[5] The only issue in the case is whether the Tax Court Judge correctly interpreted paragraphs 24(2)(a) and (c).
[6] The appellant's main argument in the Tax Court, and in this Court, is that paragraph 24(2)(a) should apply to the special tooling because the appellant acquired it before 1990 and, prior to June 18, 1987, the appellant had a legal obligation, evidenced in writing, to obtain access to and the use of the special tooling. The appellant could have obtained the required access by leasing or acquiring the special tooling. When it chose to acquire an ownership interest in the special tooling, it became entitled to the benefit of paragraph 24(2)(a). The Tax Court Judge rejected that argument. He held that paragraph 24(2)(a) does not apply because the appellant had no legal obligation, prior to June 18, 1987, to acquire the special tooling.
[7] The appellant's alternative argument in the Tax Court, and in this Court, is that it should be entitled to the benefit of paragraph 24(2)(c) for the special tooling because the retooling of its Oshawa plants was in progress on June 18, 1987 but the retooled Oshawa plants could not be used for their intended purpose without the special tooling. The Tax Court Judge also rejected that argument. He held that paragraph 24(2)(c) does not apply because the special tooling was not physically incorporated into the appellant's Oshawa plants.
[8] We are all of the view that the interpretation of paragraphs 24(2)(a) and (c) adopted by the Tax Court Judge accords with their ordinary grammatical meaning, and that there is no basis for any other interpretation. It follows that the judgment of the Tax Court Judge is correct.
[9] For these reasons, this appeal will be dismissed with costs.
"Karen R. Sharlow"
J.A.
FEDERAL COURT OF CANADA
APPEAL DIVISION
Names of Counsel and Solicitors of Record
DOCKET: A-267-02
STYLE OF CAUSE: GENERAL MOTORS OF CANADA LIMITED
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
DATE OF HEARING: MONDAY, MARCH 10, 2003
PLACE OF HEARING: TORONTO, ONTARIO
REASONS FOR JUDGMENT
OF THE COURT BY: SHARLOW J.A.
DATED: MONDAY, MARCH 10, 2003
JUDGMENT DELIVERED FROM THE BENCH ON MONDAY, MARCH 10, 2003.
APPEARANCES BY: Mr. Joseph M. Steiner
Mr. Al Meghji
For the Appellant
Mr. J.S. Gill
For the Respondent
SOLICITORS OF RECORD: Osler, Hoskin & Harcourt LLP
Barristers & Solicitors
P.O. Box 50, First Canadian Place
Toronto, Ontario
M5X 1B8
Donahue LLP
Barristers & Solicitors
Ernst & Young Tower
222 Bay Street
Suite 1800 P.O. Box 197, TD Centre
Toronto, Ontario
M5K 1H6
For the Appellant
Morris Rosenberg
Deputy Attorney General of Canada
For the Respondent