Section 80.2

The taxpayer acquired a 100% undivided interest in a property (the "Quarter Claim") adjoining its mine subject to a 50% net profits royalty in favour of the vendor ("Teck/Corona"). Under s. 18(1)(m), the full amount of the taxpayer's mining taxes applicable to the Quarter Claim operation were not a deductible expense. The taxpayer argued that, under its agreement with Teck/Corona, it had effectively received a 50% reimbursement from that corporation for the mining taxes and, as per s. 80.2, paragraph 18(1)(m) did not apply to that 50% and instead denied a deduction to Teck/Corona for that portion of the mining taxes.

D'Arcy J. found that s. 80.2 did not apply because there was no reimbursement. After stating (at para. 41) that "the word reimbursement, as used in section 80.2 of the Act, means the payment by a person of an amount to a third party as repayment of or indemnification for an amount paid or payable by the third party," he noted at para. 75 that the other company was never under an obligation to make any kind of payment to the taxpayer. Furthermore, the grant of the 50% net profits interest indicated an intention to create only a contractual right to the payment of the royalty and not an interest in land (para. 89); and the taxpayer was the sole operator of the Quarter Claim. Accordingly, Teck/Corona had not obligation in respect of the mining taxes for which a reimbursement obligation could arise.