The Queen v. Nowsco Well Service Ltd., 90 DTC 6312, [1990] 1 CTC 416 (FCA)

Urie, J.A.:—This is an appeal from a judgment of the Trial Division whereby the appeal by the respondent from income tax assessments made by the Minister of National Revenue ("the Minister”) in respect of the respondent's 1977, 1978 and 1979 taxation years was allowed with costs.

The Issues

The principal issue before the Court is whether the respondent during its 1977, 1978 and 1979 taxation years manufactured or processed in Canada, goods for sale or lease as a result of which it would have been entitled to:

(a) deduct from the tax otherwise payable by it the manufacturing and processing tax credit provided by section 125.1 of the Income Tax Act ("the Act");

(b) deduct in respect of property acquired by it the investment tax credit provided by subsection 127(10) of the Act; and

(c) include in class 29 of Schedule B (now Schedule 11) of the Income Tax Regulations ("the Regulations”) certain property acquired by the respondent during its 1977, 1978 and 1979 taxation years.

The Statutory Provisions

For a proper understanding of what follows it would be useful initially to be made aware of the relevant portions of the statutory provisions relating to the manufacturing tax credit deduction permitted by section 125.1 of the Act. The other statutory provisions relating to (b) and (c) above will be set forth when the issues arising therefrom are addressed.

SEC. 125.1. Deduction from corporate tax: manufacturing and processing profits

(1) There may be deducted from the tax otherwise payable under this Part by a corporation for a taxation year an amount equal to the aggregate of

(a) 9% of the lesser of

(i) the amount, if any, by which the corporation's Canadian manufacturing and processing profits for the year exceed the least of the amounts determined under paragraphs 125(1)(a) to (d) in respect of the corporation for the year, and

(3)(a) "Canadian manufacturing and processing profits" — Canadian manufacturing and processing profits" of a corporation for a taxation year means such portion of the aggregate of all amounts each of which is the income of the corporation for the year from an active business carried on in Canada as is determined under rules prescribed for that purpose by regulation made on the recommendation of the Minister of Finance to be applicable to the manufacturing or processing in Canada of goods for sale or lease; and

(b) Manufacturing or processing — “manufacturing or processing" does not include

(iv) Operating an oil or gas well,

5200. Subject to section 5201, for the purposes of paragraph 125.1(3)(a) of the Act, “Canadian manufacturing and processing profits” of a corporation for a taxation year are hereby prescribed to be that proportion of the corporations adjusted business income for the year that

(a) the aggregate of its cost of manufacturing and processing capital for the

year and its cost of manufacturing and processing labour for the year,

is of

(b) the aggregate of its cost of capital for the year and its cost of labour for the year.

The Minister in his reassessment reduced the manufacturing and processing deduction claimed under section 125.1 for the respondent's 1977 tax year and totally disallowed such deductions for its 1978 and 1979 tax years. The trial judge allowed the appeals in respect of each of the years on the basis that the respondent's claimed deductions were properly claimed under section 125.1 of the Act and section 5200 of the Regulations. The appeal is, in part, from that decision.

The Facts

The learned trial judge thoroughly reviewed and analyzed the evidence which he set out in great detail in his reasons for judgment. Counsel for the parties did not in any substantial way contest the factual review so that I would think that it would suffice for purposes of these reasons to highlight only what I conceive to be the key elements of the activities performed and products used in such performance by the respondent for its customers and which the trial judge found to be manufacturing and processing within the meaning of those terms in the Act. While the parties understandably tend to emphasize different aspects of the respondent's activities to buttress their respective points of view, basically the facts to which I will allude are not in dispute, only the inferences drawn from those facts.

The respondent, an Alberta corporation, operates as part of the oil and gas industry which, at least in Canada, according to the evidence, is divided into three recognized sectors: [1]

(a) the operating sector, comprising the companies which own the reserves, produce oil and gas from the reserves and sell it;

(b) the supply sector, comprising those who own supply stores where the operator can purchase the materials, hardware and equipment required in the drilling and production of gas or oil wells; and

(c) the service sector, comprising companies which, inter alia, provide the operator with what he requires at the well site during the drilling and production of the well.

The respondent's business is in the service sector. It provides to the operators a wide range of services in the completion and stimulation of oil and gas wells. As part of the completion aspect is the cementing procedure which involves the pumping of a cement slurry to support and keep in place the surface casing or pipe which is lowered into the well bore. The cement is pumped through the casing to the bottom of the hole and back up the outside of the pipe between the pipe and the bore hole to create a sheath to bond the casing to the hole. Further casing or piping is lowered through the surface casing and is cemented into place therein in the same way as the surface cementing. The slurry is blended by the respondent from a mixture of dry powder cement, water and various additives, the amount and composition of which varies from job to job. Proper placement of the cement in the well bore in its various stages depends upon the respondent's specialized pumping equipment and other related equipment and by the skill of the respondent's experienced employees. The respondent maintains several bulk plants to blend the cement and additives. Thus, normally blended, it is transported to the well site, mixed with water to create the slurry and pumped into the well under pressure. Further blending and the mixing takes place in motorized mixing and pumping equipment at the well site.

The respondent does not manufacture cement but does develop its own additives. The respondent rarely, if ever, simply sells its blends of cement. Rather, it supplies the materials so blended in conjunction with its placement services performed at the well site.

The other aspect of the respondent's business is the provision of its stimulation services. These services are designed to stimulate the flow of oil and gas into the well bore so that it can flow or be pumped to the surface. These services often require the respondent to mix or blend different materials at the well site to be pumped down the bore and circulated into the formation. The two major types of stimulation are fracturing and acidizing. Fracturing involves the use of a fluid to crack or fracture the rock formation and the placement of a proppant in the cracks to prop them open to create channels through which the oil can flow.

Acidizing involves the use of a specially blended acid, often but not always, hydrochloric acid which either creates flow channels by dissolving some of the formation or removes debris from the formation. The characteristics of the fluid used are determined for each well by considerations such as temperature, depth and the nature of the rock formation e.g. limestone, sandstone and dolomites. Fracturing and acidizing may be used independently or in conjunction with one another. Nitrogen or carbon dioxide may be used in acidizing, fracturing and acid fracturings. Proper pressure, rate, volumes and materials are all essential to effective formation treatment.

In respect of both its cementing and stimulation services, the respondent normally prepares treatment proposals or programs. They assist the respondent in the solicitation of business. The proposal prepared in consultation with the operator sets out the intended equipment, materials, blending procedures, safety precautions and the volumes and pressures under which the materials will be pumped in an effort to accomplish the desired results. However, while the respondent makes recommendations, it is the operator who decides on the products and processes which will be specified in the program. When the decisions have been taken and after the treatment has been completed in accordance with the proposal, a treatment report, prepared at the well site, provides the historical record of what transpired during the treatment. No guarantee as to results is given.

Finally, in summary, the respondent in its memorandum of fact and law describes the manner in which it carries out its business activities in the following way:

(a) Upon receiving instructions from the customer to proceed to the well site, the Respondent's field station will commence assembly of the necessary raw materials, personnel and equipment for transportation to the well site. Some initial blending or mixing may occur at this stage.

(b) At the well site, the equipment is "rigged in” in such a manner that it is made ready for its mixing, blending and pumping activities. The equipment and the wellhead are interconnected. During “rigging-in” there is often pre-mixing and blending of raw materials and additives.

(c) Prior to commencement of the actual delivery of any products to the customer's wellhead, the respondent and the customer's representative pressure test the equipment and interconnections and hold a meeting of all persons on the well site to review safety procedures and the program to be followed.

(d) Constituent ingredients are combined by mixing and blending to create a specialized fluid which is then pressurized ana delivered through the respondent's equipment to the customer's wellhead. The mixing, blending, pressurizing and delivery of the respondent's products is a sophisticated, continuous process.

(e) Upon completion of delivery of the products, the equipment is disassembled and made ready to return to the field station. The customer's representative and the respondent complete documentation to record the activities at the well site and the quantities of product delivered.

The Problem

As earlier stated, there is one principal issue before the Court, namely, did the respondent during the 1977, 1978 and 1979 tax years, manufacture or process in Canada, goods for sale or lease so that it would have been entitled to the three tax benefits with which I will now deal, seriatim.

Sub-Issue I

Was the Respondent entitled to the manufacturing and processing rate reduction provided by section 125.1 of the Act?

For convenience' sake, I repeat subsection 125.1(3)(a) of the Act:

(3)(a) "Canadian manufacturing and processing profits" — “Canadian manufacturing and processing profits" of a corporation for a taxation year means such portion of the aggregate of all amounts each of which is the income of the corporation for the year from an active business carried on in Canada as is determined under rules prescribed for that purpose by regulation made on the recommendation of the Minister of Finance to be applicable to the manufacturing or processing in Canada of goods for sale or lease; . . .

Subsection 125.1(3)(b) excludes from “manufacturing and processing” certain enumerated activities.

While the Act does not define either “manufacturing” or "processing", it will not be necessary for their meanings to be decided in this appeal, since counsel for the appellant conceded that what the respondent was doing was either one, probably processing. His concession did not extend, however, to agreeing that the respondent was processing "goods" as that term is used in the Act nor in any event, was it processing "goods for sale” as required by the Act.

I have no difficulty in concluding that the trial judge correctly held on the evidence that what was being processed by the respondent were "goods" within either the ordinary meaning or the technical meaning of that term, if any. The difficult question is were they "goods for sale”? In the view of counsel for the appellant they were not because the respondent was not engaged in the business of "processing of goods for sale” but rather was in the business of providing a service to oil and gas well operators which involved incidentally the processing and supplying of materials necessary to carry out that service. On that basis, it was counsel's contention that the trial judge erred in declining to apply the common law distinction between a contract for the sale of goods and a contract for work, labour and materials. The application of that distinction, it was Said, was consistent with the apparent scheme and intent of the Act which was to enable Canadian manufacturers and processors to maintain their competitive positions as against other industrialized nations and to protect Canadian jobs. That protection does not and was not intended to extend, counsel argued, to service industries such as that of the respondent. In drawing this distinction counsel relied on a passage from Benjamin - Sale of Goods, [2] a line of cases from the Trial Division of this Court, the Tax Court of Canada and one from the Court of Appeal. Among those cited were Canadian Wirevision Limited v. the Queen, [3] Crown Tire Service Ltd v. the Queen, [4] Nova Construction Company Limited v. M.N.R., [5] and Tenneco Canada Inc. v. the Queen. [6]

I have reviewed each of those authorities as well as others cited by counsel but find them to be each quite distinguishable on their facts. I prefer the reasoning of Reed, J. in the Trial Division in the case of Halliburton Services Ltd v. the Queen, [7] the appeal from which was heard immediately following the conclusion of argument in this case. Halliburton was engaged in the same type of business as Nowsco in this case. In fact, they were competitors. As will be seen from the excerpt from the reasons for judgment at pages 53-54 (D.T.C. 5337), the work in which Halliburton was engaged and the position which it took as to the nature of its services is identical to that of the appellant here:

The activities in issue are all ones in which the plaintiff produces a specialized product for its customers as well as providing certain services connected there

with. These activities are: (1) oil and gas well cementing activities; (2) a fracturing process which involves the pumping of a specialized fluid into an oil or gas well, and (3) an acidizing process which involves the pumping of a specially prepared acid blend into a well. The plaintiff's position is that with respect to all three activities, while a service may be provided, it is also involved in the manufacture or processing of goods for sale as that concept is used in paragraph 125.1(3)(b) of the Income Tax Act.

While, in the following excerpt from her reasons, Reed, J. specifically was dealing with the phrase "manufacturing or processing" as it appears in paragraph 125.1(3)(b) it is equally applicable to that phrase as it appears in paragraph 125.1(3)(a) to which argument was directed in this case. She stated, at pages 55-56 (D.T.C. 5338):

The defendant does not dispute the fact that in all three activities there is processing carried out. Nor does she dispute the fact that "goods" are produced. What is disputed, however, is that there is a “sale of a good". It is argued that the plaintiff's main activity is the provision of services and that the production of "goods" in connection therewith is only incidental to the service being provided. Therefore, it is argued there can be no “manufacturing or processing of goods for sale" as that concept is used in paragraph 125.1 (3)(b) of the Income Tax Act.

This argument is based on the well known distinction between contracts for the sale of goods and contracts for work, labour and materials, developed with respect to sales of goods legislation. The defendant cites in support of its argument Sterling Engine Works v. Red Deer Lumber Co. (1920), 51 D.L.R. 509 (Man. CA.), and Scott Maritimes Pulp Ltd. v. B.F Goodrich Canada Ltd. et al. (1977), 72 D.L.R. (3d) 680 (N.S.S.C. App. Div.). It is argued that the test of relative importance set out at page 40 of Benjamin —Sale of Goods (1974) is applicable, and that in the present case the services provided by the taxpayer are a much more important component of its contract with its customers than are the products it produces. It is argued that the services and products are inseparable; that customers (except with respect to one specialized product) do not purchase the goods without the services. The way the industry is structured makes it impractical for customers to do so (as noted above some of the processing of the product must necessarily be done at the well site immediately before use). It is argued that what the customer contracts for is the placing of the cement in the well, the fracturing of the hydrocarbon bearing formation, or the cleaning of the well to free it from debris, blockage etc., not the products used to accomplish these results. Also, in two cases (fracturing and cleaning) the product is consumed in the providing of the service.

I have considerable difficulty with this line of argument. In the first place, it is based on distinctions developed for purposes of the sale of goods legislation, not with respect to paragraph 125.1(3)(b) of the Income Tax Act. I do not read paragraph 125.1 (3)(b) as requiring that a taxpayer's profit has to arise out of a contract for a sale of goods as defined by the various Sales of Goods Acts. Paragraph 125.1(3)(b) does not talk of a sale of goods. It talks of profit arising out of the processing of goods for sale. There is no doubt that the products in question are sold to the plaintiff's customers in the sense that the invoices list the cost of the various components which go into each product and the blending and processing charges are specifically detailed in the invoice.

Secondly, I do not find any requirement that the contract which gives rise to the taxpayer's profit must be of a particular nature, eg: one for the sale of goods and not one of a more extensive nature involving work and labour as well as the goods or material supplied. In my view it is the source of the profit, (arising out of process) that is important for the purposes of paragraph 125.1 (3)(b), not the nature of the taxpayer's contract with its customers.

In the third place, to adopt the distinction for which the defendant argues would be to create an illogical result. As counsel for the plaintiff pointed out, under such a regime, a manufacturer or processor of a product (eg: a chemical fertilizer) who also provided a service in connection therewith (eg: spreading the fertilizer for his customers) would be denied the processing tax deduction. If he merely sold the product to his customers he would be allowed the deduction.

I wholly subscribe to what the learned judge said in the foregoing passage and I do not think that I could improve on it by a prolonged analysis of it. Suffice it to say that to focus on the fact, as did counsel for the appellant in this case, relying on the Crown Tire Service [8] case for support, that the work having been done to the property of the respondent's customers involving the use or affixing of materials thereto was the provision of a service to the customers, misconstrued the nature of the relationship between the parties. The factual situation in that case was not comparable to that in this case. A brief reference to the evidence indicates the reality of the relationship here.

First, as earlier noted, the respondent, in consultation with the operator, its customer, prepares a treatment proposal. According to the evidence, it is the operator who is familiar with the formation through which the drill hole is bored as well as that from which he hopes to extract the oil or gas. Consequently, he must decide on the type of cement slurry required and the stimulation most likely to assist in the extraction, relying on the advice of the respondent in each case as to the proper products to be used to achieve the best results, the equipment to be used and the pressures and rates utilized for the best results. In all cases it is the customer who must ultimately make the decisions on each branch of the proposal. [9]

Secondly, as I understand the evidence, after the proposal as amended is accepted, the respondent proceeds to the well site with its equipment to carry out its proposal which involves, on a carefully orchestrated and integrated basis, the mixing, blending, pressuring and pumping of the various materials, additives, acids, proppants and gases required in cementing and well stimulation. The general terms and conditions of the contract between the parties is found on the back of the form completed after completion of the operations at the well site, setting forth the materials provided, the services performed, the quantities used, the prices and times elapsed for performing the contract. It is signed by the customer's representative who acknowledges that he has read and understood the terms and conditions on the reverse side of the document. [10] The first paragraph of the conditions [11] states:

GENERAL TERMS AND CONDITIONS OF SERVICE

The service consists of delivery to the Customer at the well of the Nowsco product requested by the Customer (hereafter called "the product") by means of well connections furnished by the Customer, the quantities, pressures and times of delivery being subject to the Customer's directions. The Customer at all times has complete charge, custody, control and responsibility for all tubing or other connections or equipment furnished for this receipt of delivery of the product for the well, the conditions within the well, the drilling or production pipe or other equipment about or in the well and the premises about the well.

Paragraph 1 reads:

(1) A responsible representative of the Customer must be present at all times to designate and provide the point of connection into which the product is to be delivered and to designate the quantities of the product to be delivered, the pressures at which the same shall be delivered, and the times at which the same shall be delivered.

Paragraph 4 is the limited warranty clause which reads:

(4) While NOWSCO will render the services contracted for to the best of its ability, it does not guarantee any results and, except in the case of gross or wilful negligence on its part, shall not be liable or responsible for any damage to the well or any well equipment, any subsurface damage or surface damage arising out of the subsurface damage or operations or for any loss or damage whatsoever including injury to or death of persons, reservoir loss or property damage growing out of or in any way connected with its operations and Customer shall absolve and hold NOWSCO harmless against all liability for any such loss or damage sustained or incurred by Customer or any third party irrespective of the cause.

Thirdly, the form of invoice rendered clearly indicates that the customer is billed for both the materials which it provides in accordance with the customer's specifications and the services it performs in utilizing those materials to achieve the stimulation or cementing results required by the customer. Even a rather cursory inspection of the various invoices in the record, apparently selected and entered in evidence on a random basis, indicates that in dollar amounts the division between materials and services is roughly fifty-fifty.

Fourthly, while the evidence is somewhat sparse there is on the record [12] evidence of an element of profit to the respondent in the sale of its material which on a gross profit basis, (which is the only basis disclosed) is roughly equivalent to the gross profit derived from it by the supply and rental of its equipment.

While I cannot say that the answer to the question as to whether or not the goods are processed for sale is entirely free from doubt, because of the lack of precision in the words of the statute as to the meaning to be ascribed to the words, I am obliged to be guided by what Lord Pearce said in B.P. Australia Ltd. v. Commissioner of Taxation of the Commonwealth of Australia,™ [13] although, admittedly in a different context:

The solution to the problem is not to be found by any rigid test or description. It has to be derived from many aspects of the whole set of circumstances some of which may point in one direction, some in the other. One consideration may point so clearly that it dominates other and vaguer indications in the contrary direction. It is a commonsense appreciation of all the guiding features which must provide the ultimate answer.

I am also guided by what Estey, J. said in Johns-Manville Canada Inc. v. the Queen:" [14]

. . . Such a determination is, furthermore, consistent with another basic concept in tax law that where the taxing statute is not explicit, reasonable uncertainty or factual ambiguity resulting from lack of explicitness in the statute should be resolved in favour of the taxpayer.

I am of the opinion that a commonsense, realistic and business-like appreciation of all of the foregoing indicates that the respondent does not enter into pure service contracts, but, rather processes goods to the operator/customer's specification which it utilizes to perform the specialized services required of it by its customer. It does so by means of what the trial judge described as a "mobile factory" which utilizes the various materials, mixtures and blends produced for delivery to the well bore for the purposes required by the customer. Contrary to the argument of counsel for the respondent, I believe that determining the particular time at which and where title to the goods passes, is of little importance, on the facts of this case, in the determination of the relationship between the parties. However, what is of some significance, I think, is that since the products furnished are produced to the particular specifications of the operator/customer and must be paid for by it whether completely used or not (subject to some limited contractual exceptions), it may well be that title passes when the mixing and blending is effected. At whatever point the transfer is effected, adopting the modern principle of statutory interpretations that "the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, and the intention of Parliament", [15] I am of the opinion that the processing activities of the respondent fall within the meaning of processing of goods for sale in paragraph 125.1(3)(a) of the Act.

I am, therefore, of the opinion that the trial judge correctly held that the respondent was entitled in the taxation years in issue, to the tax deductions provided by section 125.1 of the Act.

Sub-Issue II

Was the respondent entitled to claim investment tax credits under subsection 127(5) of the Act in respect of the cost to it of the equipment and machinery used in its processing activities?

Subsection 127(5) reads as follows:

127(5) Investment tax credit. There may be deducted from the tax otherwise payable by a taxpayer under this Part for a taxation year an amount not exceeding the lesser of

(a) his investment tax credit at the end of the year, and

(b) the aggregate of

(i) $15,000, and

(ii) /2 the amount, if any, by which the tax otherwise payable by him under this Part for the year exceeds $15,000.

"Investment tax credit” is defined by subsection 127(9) of the Act.

To qualify for an investment tax credit as so defined, the property acquired by a taxpayer in a year must be a “qualified property" within the meaning of subsection 127(10) of the Act. To the extent applicable in this appeal, that subsection reads:

127(10) "Qualified Property". For the purposes of subsection (9), a “qualified property" of a taxpayer means

(b) prescribed machinery and equipment acquired by the taxpayer after June 23, 1975 and before July 1, 1980

that has not been used for any purpose whatever before it was acquired by the taxpayer and that is

(c) to be used by him in Canada primarily for the purpose of

(i) manufacturing or processing of goods for sale or lease

[Emphasis added.]

"Prescribed machinery" is defined by Regulation 4600(2)(e) reading as follows:

Prescribed Property for the Purposes of Determining Investment Tax Credit

4600. (2) Property is prescribed machinery and equipment for the purposes of paragraph 127(10)(b) of the Act if it is depreciable property of the taxpayer (other than property referred to in subsection (1)) that is

(e) a property included in paragraph (a) of class 10, or class 22, of Schedule B

(other than a car or truck designed for use on highways or streets).

It is the appellant's contention that the machinery and equipment at issue was not used by the respondent primarily for the purpose of manufacturing of goods for sale or lease. Alternatively, the respondent's cement trucks, frac pumpers and similar automotive equipment are cars or trucks designed for use on highways or streets within the meaning of paragraph 4600(1)(e) of the Regulations thus excluding it from the category of “prescribed machinery and equipment" referred to in section 127(10) as “qualified property" and thus disqualified for an investment tax credit.

The respondent says that none of its equipment is "automotive equipment" described in paragraph (a) of Class 10 of Schedule B. It further says that whether the respondent's equipment is "automotive equipment” or something else it is to be determined by reference to its "primary purpose" which is to prepare and deliver the respondent's products at the well site. It is only because the well sites are frequently in difficult, inaccessible locations that the equipment for processing at the site and delivering there the goods to go down the well that the equipment is mobile.

The trial judge's finding on this aspect of the case is found at page 2048 of Vol. 11 of the Appeal Book and reads as follows:

It must be clear at this stage that I cannot find any basis on the evidence and argument I heard for deciding that the plaintiff has front end and back end equipment. The equipment is specially designed for a particular job of work and requires all the equipment including iron trucks that bring out the treating iron, bulkers that bring out cement, liquid gases or the acids. They are part of the process and qualify for the investment tax credit.

While perhaps initially the vehicles used by the respondent were “designed for use on highways or streets" their design was so modified for purposes of their utilization, that the limited design purpose was of minimal importance. Their primary purpose was to become parts of an integrated process for the cementing and/or stimulation of oil or gas wells. I agree with Cullen, J. when he said: [16]

This equipment was designed and fabricated for a particular purpose, that is, functioning equipment at the job or well site. None of its equipment ought to be included in Class 10(a). Also, to divide the equipment into what has been called front end and back end engines fails to give effect to the basic purpose for which the equipment was designed. Often, at the job site, the machinery is powered by the same engine that moves the equipment on the highway. Even when trailers are used, the evidence was clear that the same trailer is used with the same equipment whenever possible.

I also agree with him and with counsel for the respondent that on the particular and somewhat unusual facts of this case, since the respondent's property is not described in any other class in Schedule B, it is property which falls into the residual Class 8(i) as a "tangible capital asset that is not included in another Class. It is, therefore, as found by the trial judge, equipment and machinery that falls within Regulation 4600(2)(c) and qualifies for the investment tax credit.

Sub-Issue III

Was the Respondent entitled to include the equipment and machinery used in its processing activities in Class 29 for capital cost allowance purposes?

The relevant provisions of Class 29 of Schedule B (now Schedule II) of the Act are:

Property, that would otherwise be included in another class,

(a) that is property manufactured by the taxpayer, the manufacture of which was completed by him after May 8, 1972, or other property acquired by the taxpayer after May 8, 1972,

(i) to be used directly or indirectly by him in Canada primarily in the manufacturing or processing of goods for sale or lease

(b) that is

(i) property that, but for this class, would be included in class 8, but not including railway rolling stock or a property described in paragraph (e) of class 8.

For the reasons which I have already given with respect to Sub-Issue II, the equipment and machinery in issue is property described in Class 8(i) of Schedule B and is therefore to be included in Class 29 by reasons of subparagraph (b)(i) thereof.

Accordingly, for all of the foregoing reasons I would dismiss the appeal with costs.

Appeal dismissed.