Department of Finance restricts the resource allowance

"The Department of Finance introduced draft amendments to the resource allowance regulations on July 23, 1992 that effectively nullify the decision in the Gulf Canada Limited case. Prior to the amendments it appeared that only ""directly"" related general and administrative, capital cost allowance and scientific research expenditures had to be deducted from resource profits. Now ancillary expenditures are required to be deducted. Consequently, the ability of taxpayers to claim the resource allowance is curtailed.IntroductionOn October 25, 1990 it was almost certain that taxable mines were going to get a break. The Federal Court-Trial Division had just decided in Gulf Canada Limited's favour to allow it to claim resource related tax benefits larger than what Revenue Canada evidently wished. Revenue Canada appealed first to the Federal Court of Appeal and then to the Supreme Court of Canada. On January 10, 1992 the Federal Court of Appeal agreed with the Federal Court decision and on July 2, 1992the Supreme Court declined to hear any further appeal. A mere three weeks later, on July 23, 1992, the Department of Finance issued draft ""clarifying"" measures to amend the calculation of the resource allowance. These measures effectively nullify the benefits that arose under the decisions of the Federal Court."