Under the Road Allowances Crown Oil Act (Alberta), 1.88% of producing oil reservoirs of the taxpayer was deemed to be property of the Alberta Crown; and the taxpayer was accorded the right to sell its entire oil production from the reservoirs, including the Province's 1.88% share, upon paying the Province 1% of the total value of the production.
In finding that such payments were "royalties", Sharlow J.A. stated (at p. 5673) that:
"The word 'royalty' is still used in Canada to describe a payment that is required by a provincial statute to be paid to the province as a share of the production of a resource"
She also rejected a submission that s. 18(1)(m)(v) imposed any condition as to the ownership of the oil with respect to which the payments were made. Accordingly, s. 18(1)(m) prohibited the deduction of the 1% payments.