Imapro Corp. v. Canada
T-3233-90 / T-3234-90
McGillis J.
25/9/92
25 pp.
Appeal from MNR assessments disallowing expenditures claimed by plaintiff (Imapro) for taxation years 1987 and 1988 -- Imapro entering into obligation in writing on June 10, 1987 to construct building for research and development, manufacturing and sales operations -- Activities being scientific research and experimental development (SR & ED) within meaning of Income Tax Act, allowing claim for deduction of expenditures in certain circumstances -- Amendments to ITA in 1988 excluding capital expenditures for acquisition of building-Transitional provision still permitting deduction of SR & ED expenditures in relation to buildings acquired before 1990 under obligation in writing before June 18, 1987 or construction of which commenced before June 18, 1987 -- Construction of building by Imapro begun in September 1987, completed in early 1988 -- Strict rule of interpretation previously applicable in construction of tax legislation abandoned in favour of plain meaning approach -- Whether transitional provision in issue allows taxpayer to deduct capital expenditures of building -- Transitional provisions enacted to alleviate hardship caused by imposition of retroactive legislation-Transitional provision herein should be interpreted as including buildings acquired before 1990 under obligation entered into in writing before June 18, 1987 -- Word "expenditures" in Act, s. 37(7)(c)(ii)(A) including both current and capital expenditures -- Current expenditures may be apportioned to some degree between SR & ED and other uses in building -- "All or substantially all" in Act, s. 37(7)(c)(ii) meaning substantial portion, at least 90% -- 47.3% portion of current expenditures for maintenance and upkeep of common areas not meaning "all or substantially all", not directly attributable to SR & ED -- Reasonable apportionment of construction costs for purpose of claiming capital expenditure on SR & ED permissible -- Common and administrative areas of building integral to functioning of research and development sector and used routinely and regularly by employees -- 47.3% construction costs claimed by Imapro as capital expenditure for SR & ED in relation to common and administrative areas reasonable, must be allowed as deduction -- Appeal allowed in part -- Income Tax Act, S.C. 1970-71-72, c. 63, ss. 37(1) (as am. by 1974-75-76, c. 26, s. 14; 1977-78, c. 1, s. 15; 1977-78, c. 4, s. 3; 1980-81-82-83, c. 48, s. 15; 1980-81-82-83, c. 140, s. 17; 1983-84, c. 1, s. 10; 1986, c. 6, s. 15; 1986, c. 55. s. 6; 1987, c. 46, s. 11; 1988, c. 55, s. 18), (7)(c) (as am. by S.C. 1986, c. 6, s. 15), (f) (as enacted by S.C. 1988, c. 55, s. 18).