Canadian Tax Foundation
B.C. Tax Conference
September 1991Question 46
What are RCT guidelines for assessment of M&P tax credits in light of the Halliburton and Nowsco decisions?
Department's Position
The Federal Court of Appeal dismissed the Department's appeal in Nowsco Well Service Ltd., 90 DTC 6312 and Halliburton Services Ltd., 90 DTC 6320. At issue in the first case was the taxpayer's entitlement to: the manufacturing and processing profits deduction provided by section 125.1 of the Act; the investment tax credit available under subsection 127(5) of the Act; and capital cost allowance pursuant to class 29. Common to each issue was whether well site services of fracturing, acidizing and cementing fell within the meaning of "processing in Canada of goods for sale". The court concluded strictly on the facts that the taxpayer processed goods to the client's specification, which were then utilized in performing the specialized services. Accordingly, the taxpayer qualified for the above three incentives. The court stressed the unique fact situation which distinguished this case from other service cases. In the second case, the court held that the taxpayer, in a well service business similar to that of Nowsco, was also entitled to the deduction provided under section 125.1 of the Act.
It is our position that the judgements in these two court cases are applicable only for taxpayers in the oil or gas well service industry with identical operations.
Canadian Tax Foundation - B.C. Conference September 1991 C. Bowen CCM # 912407
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