Canada v. Canadian Reynolds Metals Co.
A-562-94
Décary J.A.
1/5/96
7 pp.
Appeals and cross-appeals from three Trial Division judgments disposing of three appeals by respondent against reassessments for income tax-Judge finding cost of replacing carbon cathode lining steel pots used in production of primary aluminum capital expenditure and not current expense-Also found coke, pitch and anode paste which constitute carbon anode not converted into property for sale in ordinary course of business such that respondent entitled to claim inventory allowance provided in Act, s. 20(1)(gg)-Characterization of expenditures as current or capital in nature complicated by trend to focus on nature of asset itself and whether or not it must be replaced on recurring basis rather than on benefit expenditure intended to confer upon enterprise-Also clear asset need not be perpetual in nature to classify as capital for purposes of tax treatment-Linings in question fundamental to electrolytic process and employed and maintained over several fiscal periods-Properly characterized as capital assets of enduring nature-For property to qualify for inventory allowance, must "actually be part of final product"-Where "tangible property" within meaning of Act anode carbon and final product aluminium, section requiring anode carbon itself, and not its subatomic components taken individually, to find its way into aluminium at end of process-Trial Judge correctly finding anode carbon not actually becoming part of aluminium-Appeals and cross-appeals dismissed-Income Tax Act, S.C. 1970-71-72, c. 63, s. 20(1)(gg) (as enacted by S.C. 1977-78, c. 1, s. 14).