Docket: 2020-208(IT)G  
Appellant,  
BETWEEN:  
POTASH CORPORATION OF  
SASKATCHEWAN INC,  
and  
HER MAJESTY THE QUEEN,  
Respondent.  
Appeal heard on March 21, 2022, at Regina, Saskatchewan  
Before: The Honourable Justice John R. Owen  
Appearances:  
Counsel for the Appellant:  
Nathalie Goyette  
Marc Pietro Allard  
Counsel for the Respondent: Courtney Davidson  
Carla Lamash  
JUDGMENT  
UPON hearing the evidence and submissions of counsel for the Appellant and  
counsel for the Respondent;  
IN ACCORDANCE with the attached Reasons for Judgment, the appeal from  
the reassessments that denied the deduction in computing income under the Income  
Tax Act of base payments made to the Province of Saskatchewan under the Mineral  
Taxation Act, 1983 (Saskatchewan) for each of the Appellant’s 1999 through  
2002 taxation years is dismissed with costs to the Respondent.  
The Respondent shall have 30 days from the date of this judgment to submit  
written submissions on costs. The Appellant shall have a further 30 days to provide  
Page: 2  
written submissions in response to the Respondent’s submissions. The written  
submissions of each party are not to exceed 10 pages.  
Signed at Ottawa, Canada, this 7th day of July 2022.  
“J.R. Owen”  
Owen J  
Citation: 2022 TCC 75  
Date: 20220707  
Docket: 2020-208(IT)G  
BETWEEN:  
POTASH CORPORATION OF  
SASKATCHEWAN INC,  
Appellant,  
and  
HER MAJESTY THE QUEEN,  
Respondent.  
REASONS FOR JUDGMENT  
Owen J  
I. Introduction  
Potash Corporation of Saskatchewan Inc (the “Appellant”) appeals  
reassessments that denied the deduction in computing income under the Income Tax  
Act (the “ITA”) of certain payments made to the Province of Saskatchewan under  
the Mineral Taxation Act, 1983 (Saskatchewan) (the “MTA”) for each of its 1999  
through 2002 taxation years (the “Taxation Years”).  
II. Facts  
At the commencement of the hearing, the parties submitted an Agreed  
Statement of Facts (Partial), which included two volumes of documents  
(the “PASF”). I marked the two volumes of documents as exhibit AR-1. I will refer  
to individual documents in AR-1 by their tab numbers. Appendix A to these reasons  
reproduces the facts stated in the PASF.  
In addition to the PASF, Ms. Trina Heal testified for the Appellant. Ms. Heal is  
the senior director of tax compliance and reporting for the Appellant. Ms. Heal was  
not an employee of the Appellant during the Taxation Years, and her testimony was  
limited to explaining how the Appellant calculated its liabilities under the MTA for  
the Taxation Years.  
Page: 2  
The Mining Operation of the Appellant  
During the Taxation Years, the Appellant was an integrated fertilizer and  
related industrial and feed products company, with potash mining operations in the  
province of Saskatchewan. Potash is the common name given to a group of minerals  
containing potassium.  
The mining and processing operations of the Appellant comprised four steps  
which are, illustrated at tab 1 of AR-1:  
1. Mine potash from underground deposits using two- and four-rotor  
continuous boring machines.  
2. Move the mined potash ore by conveyor belt to underground, bins  
where it is stored.  
3. Transport the stored potash ore to a production mineshaft and hoist  
the potash ore to the surface. This step represents the end of the  
extraction process.  
4. Process the potash ore by crushing, grinding, drying, compacting and  
crystallizing it. The crystallized form of potash is the product sold by  
the Appellant.  
The Appellant produced potash from mines in Saskatchewan for no purpose  
other than selling the potash.  
The Base Payment and the Profit Tax  
For each of the Taxation Years, the Appellant paid to the Province of  
Saskatchewan a base payment calculated in accordance with section 5 of The Potash  
Production Tax Schedule (the “PPTS”) and a profit tax calculated in accordance with  
section 6 of the PPTS and The Potash Production Tax Regulations (the “PPTR”).  
The base payments for the Taxation Years were as follows:  
Taxation Year  
1999  
Base Payment  
$14,643,226  
$16,454,834  
2000  
Page: 3  
2001  
2002  
$14,673,344  
$13,655,538  
I will refer to these amounts individually as a “Base Payment” and collectively  
as the “Base Payments”.  
The quantum of the Base Payments is not in dispute. The Appellant  
acknowledged that to the extent that I find that the Base Payments are deductible in  
computing its income under the ITA, there is a corresponding reduction in the  
adjusted resource profits of the Appellant for the purposes of computing the resource  
allowance of the Appellant for the Taxation Years under former  
paragraph 20(1)(v.1) of the ITA. This concession reflects the direct relationship  
between the prohibition in paragraph 18(1)(m) and the resource allowance deduction  
under former paragraph 20(1)(v.1).1  
The detailed calculations made by the Appellant for the Taxation Years are set  
out in tabs 16 through 19 of AR-1. Ms. Heal explained that for each of the Taxation  
Years, the Appellant first computed its liability for the profit tax for the year. This  
required the Appellant to compute its profits for the year in accordance with the  
PPTR.2 The Appellant also used the determination of its profits for the year in the  
computation of the rate of tax in accordance with subsection 5(3) of the PPTS.  
The Appellant filed its federal T2 income tax returns for the Taxation Years on  
the basis that the Base Payments and the profit tax paid by the Appellant for those  
years were not deductible in computing its income under the ITA. Following the  
release of the Tax Court of Canada decision in Cogema Resources Inc v The Queen,3  
the Appellant changed its position and sought to deduct the Base Payments. Nothing  
turns on the fact that the Appellant changed its position regarding the Base  
Payments.4  
III. The Submissions of the Parties  
The Appellant’s Submissions  
1
See the descriptions of the history of these two paragraphs in Mobil Oil Canada Ltd v The Queen, 2001 FCA 333  
(Mobil) at paragraphs 11 and 12 and in Teck Corp v British Columbia, 2004 BCCA 514 (Teck), leave to appeal  
to the Supreme Court of Canada refused on April 28, 2005, at paragraphs 8 to 15.  
2 Subclause 6(1)(a)(i) of the PPTS.  
3 2004 TCC 750 (Cogema), affirmed 2005 FCA 316.  
4 The Queen v Imperial Oil Limited and Inco Limited, 2003 FCA 289.  
Page: 4  
The Appellant submits that the Appellant is liable for a “complex web of taxes  
and levies” applicable to the resource industry in Saskatchewan. Some of these  
amounts are deductible in computing income under the ITA and some are not.  
The Appellant submits that the Base Payments are deductible in computing  
income under the ITA because the base payment, which is calculated in accordance  
with section 5 of the PPTS, is incurred for the purpose of gaining or producing  
income, is not based on the profits of the Appellant, and is not based on potash  
produced but on potash sold or otherwise disposed of.  
The Appellant submits that the base payment and the profit tax are distinct and  
separate liabilities under the MTA. The Appellant cites Cogema as indicative of the  
distinction between a tax on sales and a tax on production and submits that the  
calculation of the base payment shows that it is a tax on sales of potash that is  
deductible in computing income under the ITA.  
In particular, the base payment for a year is calculated by applying a rate of tax  
to the quantity of potash sold or otherwise disposed of by the Appellant in that year.  
The rate of tax is determined by dividing a prescribed percentage of the Appellant’s  
profits for the year by the tonnes of potash sold or otherwise disposed of by the  
Appellant in that year. The rate of tax cannot be less than a prescribed minimum rate  
or greater than a prescribed maximum rate. The Appellant’s profits are therefore  
relevant only to the rate of tax, not to the computation of the base payment.  
The Appellant submits that the base payment is an incident of the Appellant’s  
income earning activities and that the calculation of the base payment shows that the  
base payment is payable regardless of whether the Appellant earns a profit and,  
citing Harrods (Buenos Aires), Ltd v Taylor-Gooby (H M Inspector of Taxes),5 is  
therefore not a tax on income. In contrast, the profit tax is payable only if the  
Appellant earns a profit and is akin to the provincial mining tax addressed by the  
British Columbia Court of Appeal in Teck.  
The Appellant submits that paragraph 18(1)(m) of the ITA does not preclude  
the deduction of the Base Payments. The Appellant cites paragraphs 15, 23 and 24  
of Mobil for the proposition that paragraph 18(1)(m) applies when two conditions  
are met:  
5 41 TC 450 (Eng CA).  
Page: 5  
a. The payment in issue is in the nature of the payments described in  
subparagraph 18(1)(m)(ii), that is, “a royalty, tax [. . .] lease rental or  
bonus or as an amount [. . .] in lieu of any such amount”; and  
b. The payment relates to the acquisition, development or ownership of  
a Canadian resource property or the production in Canada of  
minerals.6  
The Appellant submits that the calculation of the base payment shows that the  
second condition is not satisfied because the payment does not relate to any of the  
activities described by that condition.  
First, the acquisition, development or ownership of a Canadian resource  
property does not result in liability for a base payment. Second, the production of  
potash in and of itself does not result in liability for a base payment. This  
distinguishes the base payment from the royalty payable to Saskatchewan on all  
potash extracted, recovered or produced under leases granted by Saskatchewan.  
Finally, the Appellant submits that contrary to the position of the Respondent,  
the text and effect of subsection 92A(4) of the Constitution Act, 1867 do not  
necessitate that if the base payment is not an income or profit tax, it must be a tax on  
production. The subsection empowers Saskatchewan to make laws in relation to the  
raising of money by any mode or system of taxation in respect of non-renewable  
natural resources. The power is broadly worded, and there are several examples of  
taxes levied by Saskatchewan in respect of non-renewable natural resources that do  
not fall into either of the two categories suggested by the Respondent.  
6 Appellant’s Written Submissions, paragraph 57.  
Page: 6  
The Respondent’s Submissions  
The Respondent submits that the history of resource taxation in Canada and in  
Saskatchewan provides important context to the interpretation of the MTA. Prior to  
1982, provinces were restricted to two methods of raising revenues from natural  
resources in the province: royalties on production from resources in which the  
province had a proprietary interest and “direct” taxes on producers within the  
province. In 1982, subsection 92A(4) was added to the Constitution Act, 1867 to  
empower each province to impose indirect taxes on resource production within the  
province. The Respondent submits that Saskatchewan enacted the PPTS to tax all  
potash produced within its borders.  
Prior to May 6, 1974, a payor could deduct in computing income under the ITA  
a royalty paid to a province but could not deduct an income or profit tax paid to a  
province. To protect the federal tax base, paragraph 18(1)(m) of the ITA was enacted  
on May 6, 1974, to disallow the deduction in computing income under the ITA of  
all provincial royalties and taxes in relation to resource production.  
Citing section 4 of the MTA, the Respondent submits that the MTA imposes a  
“mineral production tax” on “the production or sale or other disposition of each  
scheduled mineral produced in Saskatchewan.By virtue of subsection 2(3) of the  
MTA, the use or consumption of a scheduled mineral such as potash is deemed to  
be a sale or other disposition of that mineral.  
The PPTS and the PPTR detail how the base payment and the profit tax are  
applied and calculated. The Respondent summarizes the pertinent provisions as  
follows:  
a. Subsection 3(1) of the PPTS applies the mineral production taxes  
imposed by the MTA to all potash that is produced from any lands in  
Saskatchewan and that is sold or otherwise disposed of on or after  
January 1, 1990.  
b. Subsection 3(2) of the PPTS states that each producer is liable for the  
mineral production taxes imposed by the MTA on the sale or other  
disposition of potash produced from the mine or mines with respect  
to which that person is a producer.  
c. Clauses 2(a) and (d) of the PPTS define “mine” and “producer”. The  
term “mine” means any opening in or excavation of the ground in  
Page: 7  
Saskatchewan from which potash is or is capable of being produced.  
The term “producer” means a person who has the right to produce  
and sell or otherwise dispose of potash from a mine, whether that  
person does so himself or herself or through any other person.  
d. Clause 2(1)(x) of the PPTR defines “disposition” to mean (i) any  
transaction or event with respect to an asset that entitles a producer  
to proceeds of disposition; (ii) any transfer of an asset by way of gift;  
or (iii) the removal, other than a temporary removal, of an asset from  
a mine for any reason.  
e. Clause 2(1)(mm) of the PPTR defines “proceeds of disposition” to  
mean the fair market value of an asset disposed of in specified  
circumstances such as a non-arm’s length disposition by a producer.  
f. Subsection 2(2) of the PPTR states that “produced” means extracted  
from the ground and includes “treated” as defined in clause 2(1)(yy)  
and stored and shipped in Saskatchewan or with the prior written  
approval of the minister (defined in clause 2(1)(h) of the MTA)  
outside Saskatchewan.  
The Respondent submits that the base payment and the profit tax are created  
under the same enabling provisions of the MTA and notes that section 4 of the PPTS  
provides that the “mineral production taxes” imposed by the MTA consist of the  
base payment and the profit tax. The base payment is a tax on 35% of a potash  
producer’s profits from potash, subject to a minimum and maximum amount, and is  
paid only after the sale or other disposition of the potash. Consequently, the income  
earning process is complete before the base payment becomes payable by the  
Appellant.  
The Respondent cites Roenisch v MNR,7 First Pioneer Petroleums Ltd v MNR8  
and Munich Reinsurance Company (Canada Branch) v R9 for the proposition that  
paragraph 18(1)(a) of the ITA prohibits the deduction of income or profit-based  
taxes in computing income under the ITA and cites Quemont Mining Corp v MNR,10  
Nickel Rim Mines Ltd v Ontario (Attorney General)11 and Teck for the proposition  
7 (1930) [1931] Ex CR 1 (Roenisch).  
8 [1974] CTC 108 (FCTD) (First Pioneer).  
9 2001 FCA 365 (Munich Reinsurance).  
10 (1966) [1967] 2 Ex CR 169 (Quemont).  
11 (1965) [1966] 1 OR 345 (Nickel Rim).  
Page: 8  
that this principle applies to provincial mining taxes that are based on income or  
profit.  
The Respondent cites Teck for the additional proposition that a legislature does  
not have to compute income in a specific manner for a tax to be a tax on income and  
Quemont for the proposition that a tax may be an income or profits tax even though  
it is based on an estimate of profits.  
The Respondent submits that the Appellant’s characterization of the base  
payment as a tax on sales is flawed. A sales tax is paid by the purchaser of a product  
while the base payment is a direct tax on a producer of potash in Saskatchewan.  
The Respondent submits that even if the base payment is not an income or  
profits tax, the deduction of the base payment in computing income under the ITA  
is prohibited by paragraph 18(1)(m) of the ITA. The Respondent submits that the  
application of paragraph 18(1)(m) to the base payment is consistent with the text,  
context and purpose of the provision.  
The Respondent submits that the decision in Cogema is not applicable as the  
statutory regime addressed in that case is different from the regime in the MTA. In  
particular, the regime addressed in Cogema applied only to sales of uranium, while  
the regime in the MTA applies to all potash produced in Saskatchewan that is sold  
or otherwise disposed of, which includes potash used or consumed by the producer.  
IV. The Statutory Provisions  
The Relevant Provisions of the ITA  
The provisions of the ITA relevant to the issue in this appeal are reproduced in  
the analysis section of these reasons.  
Page: 9  
The Relevant Provisions of the MTA  
The provisions of the MTA relevant to the issue in this appeal are reproduced  
in Appendix B to these reasons.  
V. Analysis  
The Appellant submits that the Base Payments are deductible in computing its  
income under subsection 9(1) of the ITA and that paragraphs 18(1)(a) and 18(1)(m)  
of the ITA do not apply to the Base Payments. The Respondent submits that the Base  
Payments are not deductible in computing income because either paragraph 18(1)(a)  
or 18(1)(m) of the ITA, or both of those paragraphs, applies to the Base Payments. I  
will therefore address each of these provisions of the ITA.  
The Deduction of Business Expenses under Subsection 9(1) and  
Paragraph 18(1)(a) of the ITA  
Subsection 9(1) states:  
9(1) Subject to this Part, a taxpayer’s income for a taxation year from a business or  
property is the taxpayers profit from that business or property for the year.  
Paragraph 18(1)(a) states:  
18(1) In computing the income of a taxpayer from a business or property no  
deduction shall be made in respect of  
(a) an outlay or expense except to the extent that it was  
made or incurred by the taxpayer for the purpose of  
gaining or producing income from the business or  
property;  
In Symes v The Queen,12 the Supreme Court of Canada confirmed that because  
profit is a net concept, subsection 9(1) authorizes the deduction of business expenses  
while subsection 18(1) is limiting only. Iacobucci J, writing for the majority, states:  
In other words, the “profit” concept in s. 9(1) is inherently a net concept which  
presupposes business expense deductions. It is now generally accepted that it is  
12 [1993] 4 SCR 695 (Symes).  
Page: 10  
s. 9(1) which authorizes the deduction of business expenses; the provisions of  
s. 18(1) are limiting provisions only.13  
Iacobucci J addresses the relationship between subsection 9(1) and  
paragraph 18(1)(a) as follows:  
. . . the well accepted principles of business practice encompassed by s. 9(1) would  
generally operate to prohibit the deduction of expenses which lack an income  
earning purpose, or which are personal expenses, just as much as ss. 18(1)(a) and  
(h) operate expressly to prohibit such deductions. For this reason, there is an  
artificiality apparent in the suggestion that one can first examine s. 9(1) in order to  
determine whether a deduction is authorized, and can then turn to s. 18(1) where  
another analysis can be undertaken . . . .  
Although ss. 18(1)(a) and (h) may, therefore, simply be analytically repetitive or  
confirmatory of prohibitions already embodied in s. 9(1), they may serve to  
reinforce the point already made, namely, that the s. 9(1) test is a legal test rather  
than an accountancy test. At the same time, they conveniently summarize what  
might otherwise be abstract principles of commercial practice. . .  
There is no doubt that, in some cases, s. 9(1) will operate in isolation to scrutinize  
deductions according to well accepted principles of business practice. In this  
respect, I refer to cases, also noted by the trial judge, in which the real issue was  
whether a particular method of accounting could be used to escape tax liability . . . .  
In other cases, including the present case, however, the real issue may be whether a  
deduction is prohibited by well accepted principles of business practice for the  
reason that it is not incurred for the purpose of earning income, or for the reason  
that it is a personal or living expense. In such cases, any treatment of the issue will  
necessarily blur s. 9(1) with ss. 18(1)(a) and (h).14  
The courts have consistently held that tax imposed upon the income of a  
taxpayer is not deductible in computing the income of that taxpayer under the ITA.  
In Munich Reinsurance, Sharlow JA stated this principle in the following terms:  
In support of that proposition, the appellant cites the well established principle that  
the payment of income tax is not an expenditure made for the purpose of  
earning income because it is an expenditure of income already earned: Roenisch v.  
M.N.R., [1931] Ex. C.R. 1, [1931] 2 D.L.R. 90, 1 D.T.C. 199, First Pioneer  
13 Ibid, page 722. See, also, page 725 and L’Heureux-Dubé J’s comments in dissent at page 788. Iacobucci J, writing  
for a unanimous Court, restated his comments in Symes regarding subsection 9(1) of the ITA in Canderel Limited v  
The Queen, [1998] 1 SCR 147 at paragraph 31.  
14 Ibid, pages 723h to 725b.  
Page: 11  
Petroleums Ltd. v. M.N.R. [1974] C.T.C. 108, 74 D.T.C. 6109, 43 D.L.R. (3d) 722  
(F.C.T.D.). The validity of this principle cannot be challenged . . . .15  
[Emphasis and double emphasis added.]  
An expenditure of the income that has been determined for a taxation period  
cannot be incurred as part of the process of earning that income and therefore runs  
afoul of both the general deductibility rule in subsection 9(1) and the prohibition in  
paragraph 18(1)(a).  
Provincial income taxes imposed by “agreeing” provinces16 provide a  
particularly clear example of the application of this principle because such provinces  
start with taxable income under the ITA and apply their own rules to the taxation of  
that amount. Consequently, there is no doubt that the imposition of the provincial  
income tax follows the income earning process for the taxation period and therefore  
is an expenditure of the income already determined for that period.17  
However, while income taxes provide a clear example of taxes that are not  
incurred as part of the process of earning income but following that process, the  
determination of the deductibility of an expenditure that is in the nature of a tax does  
not rest on the characterization of that expenditure as an income tax, but on the more  
basic questionstated by paragraph 18(1)(a) of the ITAof whether the  
expenditure was made or incurred for the purpose of gaining or producing income  
from a business or property.  
This general proposition was clearly articulated by Sharlow JA in the excerpt  
from Munich Reinsurance reproduced above. Sharlow JA cites the seminal Canadian  
decision of the Exchequer Court of Canada in Roenisch, in which Audette J states:  
It is self-evident that the amount of the income tax paid to the province is not an  
expense for the purpose of earning the income, within the meaning of 6a [the  
predecessor to paragraph 18(1)(a) of the ITA]. When such payment of taxes is made  
to the province, it is not so made to earn the income, it is paid because there is an  
income showing gain and profit.18  
15 Munich Reinsurance at paragraph 26.  
16  
That is, provinces that have entered into an agreement with the federal government regarding the collection and  
administration of income taxes.  
17 Of course, such earned income (i.e., retained earnings) can be expended in a future taxation period in the process of  
earning income for that future period.  
18 Roenisch, page 4.  
Page: 12  
[Emphasis added.]  
In Teck, the appellant argued that provincial mining taxes were in the nature of  
a royalty and therefore were deductible as an outlay or expense made or incurred for  
the purpose of gaining or producing income. The Crown argued that mining taxes  
were income taxes and that a levy in the nature of an income tax was not an expense  
or outlay incurred for the purposes of earning income. Lowry J of the British  
Columbia Supreme Court and Levine JA writing for the British Columbia Court of  
Appeal both agreed with the Crown.  
Because the respective positions of the appellant and the Crown turned on the  
characterization of the mining taxes in issue, Levine JA considered the correct legal  
characterization of those taxes19 and found that they were taxes on income.20  
Levine JA then states:  
I therefore conclude that the Extra-Provincial Mining Taxes are income taxes,  
which, in accordance with wording of the various iterations of the federal Act and  
the authorities, were not deductible in computing income under s. 18(1)(a) of the  
federal Act because they were not outlays or expenses incurred for the purpose  
of gaining or producing income.21  
[Emphasis and double emphasis added.]  
On the basis of the foregoing, the question that must be addressed is whether,  
as implicitly required by subsection 9(1) of the ITA and explicitly required by  
paragraph 18(1)(a) of the ITA, the Base Payments were incurred by the Appellant  
for the purpose of gaining or producing income from its business of mining,  
producing and selling potash. This determination requires consideration of the  
provisions in the MTA imposing liability on the Appellant for the Base Payments.  
These provisions are reproduced in Appendix B.  
For ease of reference, I will reproduce the main charging provisions in the MTA  
here. Clauses 2(1)(e), (k), (l) and (m), subsections 2(2) and 2(3), and sections 4 and  
5 of the MTA state:  
19  
Levine JA holds that “the determination of the nature of the mining taxes involves a question of law”: Teck at  
paragraph 36.  
20 Teck at paragraph 48.  
21 Ibid at paragraph 51. See, also, paragraph 32 of Teck, where Levine JA states:  
The authorities clearly establish that a levy in the nature of an income tax is not an expense or outlay incurred for the  
purposes of earning income, and therefore would not be deductible by virtue of s. 18(1)(a)”.  
Page: 13  
Interpretation  
2(1) In this Act:  
. . .  
(e) “mineral production tax” means any tax imposed by  
this Act on the production or sale or other disposition22 of  
a scheduled mineral;  
. . .  
(k) “prescribed” means prescribed in the regulations;  
(l) “Schedule” means a schedule to this Act;  
(m) “scheduled mineral” means any mineral in respect of  
which a Schedule to this Act is enacted;  
. . .  
(2) Any word or expression used in this Act but not defined in this Act  
may be defined in the regulations.  
(3) The use or consumption of a scheduled mineral by a person who is  
liable to pay the mineral production taxes imposed by this Act on the  
production or sale or other disposition of that scheduled mineral is deemed  
to be a sale or other disposition of that scheduled mineral.  
. . .  
Mineral production taxes  
4 A tax is hereby imposed on the production or sale or other disposition of  
each scheduled mineral produced in Saskatchewan.  
Calculation and payment of taxes  
5 The mineral production taxes imposed by this Act on the production or  
sale or other disposition of a scheduled mineral are to be levied, calculated  
and paid in the manner and at the times required by or under the Schedule  
enacted in respect of that scheduled mineral.  
22  
Subsection 2(3) was added to the MTA and the words “or sale or other disposition” were added to clause 2(1)(e)  
and sections 4, 5 and 6 of the MTA by The Mineral Taxation Amendment Act, 1989, assented to on August 25, 1989  
(the MTAA 1989).  
Page: 14  
Section 4 of the MTA imposes a tax on the “production or sale or other  
disposition of” a scheduled mineral produced in Saskatchewan, and any such tax is  
defined in clause 2(1)(e) of the MTA as a “mineral production tax”.  
The words “or sale or other disposition” were not in the MTA as enacted in  
1983 but were added as part of amendments under the MTAA 1989; these  
amendments added to the MTA the Second Schedule, which taxes sodium chloride,  
and the PPTS, which taxes potash. Consistent with the rules of grammar, the use of  
the word “or” preceding the word “sale” and the fact that the word “production”  
previously stood on its own suggest that the words “sale or other disposition” are  
intended to describe events that follow production.  
Under the PPTS, the application of the base payment and the application of the  
profit tax are each conditional on the occurrence of two events: production of the  
potash followed by the sale or other disposition of the potash.23  
According to the PASF, the production of potash is complete following the  
crushing, grinding, drying, compacting and crystallizing of the ore extracted from  
the mines in Saskatchewan. The Appellant produces all its potash for the purpose of  
sale.  
By way of contrast, the First Schedule to the MTA applies the “mineral  
production taxes” imposed by section 4 of the MTA to the production of all freehold  
coal produced in Saskatchewan on or after January 1, 1984,24 and then calculates  
that tax by multiplying the net value of the freehold coal produced from a mine that  
is sold, used, consumed or otherwise disposed ofby a rate of tax.25  
Notwithstanding the semantic differences between the provisions taxing coal  
and the provisions taxing sodium chloride and potash, each schedule to the MTA  
imposes tax on the sale, use, consumption or other disposition of a mineral produced  
from a mine in Saskatchewan.  
Section 4 of the PPTS states that the mineral production taxes imposed by  
section 4 of the MTA “on the sale or other disposition of potash” consist of a base  
23  
The application of the mineral production tax imposed by the MTA to sodium chloride is subject to the same  
conditions: section 3 of the Second Schedule.  
24 Section 6 of the First Schedule.  
25 Section 7 of the First Schedule.  
Page: 15  
payment calculated in accordance with section 5 of the PPTS and a profit tax  
calculated in accordance with section 6 of the PPTS.  
Under subsection 5(2) of the PPTS, the base payment for a particular year is  
determined by multiplying the quantity of the potash sold or otherwise disposed of  
by the producer in the year (expressed in tonnes) by a calculated tax rate that is  
subject to a prescribed maximum26 and a prescribed minimum,27 and then deducting  
the total of any applicable deductions, allowances and credits that are prescribed28  
or provided for in the PPTS.  
Under subsection 5(3) of the PPTS, the calculated tax rate (R) is expressed in  
dollars per tonne of potash sold or otherwise disposed of and is equal to a prescribed  
percentage29 of the producer’s profits for the year (P), expressed in dollars, divided  
by the quantity in tonnes of potash sold or otherwise disposed of by the producer in  
that year (Q).  
The terms P, Qand Rare defined in subsection 5(1) of the PPTS. The  
definition of Rin clause 5(1)(c) of the PPTS does not make sense because  
subclause 5(2)(a)(i) of the PPTS refers not only to the rate of tax calculated under  
subsection 5(3) of the PPTS, but also to the maximum and minimum rates of tax  
under subsections 5(4) and 5(5) of the PPTS. This anomaly does not alter my  
analysis of the PPTS.  
According to Ms. Heal and tabs 16 through 19 of exhibit AR-1, the Appellant  
calculated the rate of tax under subsection 5(3) of the PPTS ignoring the maximum  
and minimum rates of tax and then determined whether the maximum or minimum  
rate under subsections 5(4) and 5(5) of the PPTS superseded the calculated rate. The  
Appellant’s determination of the calculated rate of tax under subsection 5(3) of the  
PPTS for each of the Taxation Years is not in issue.  
The rate of tax that applied to determine the Base Payment in each of the  
Taxation Years was the maximum rate under subsection 5(4) of the PPTS and  
section 13 of the PPTR.30 I note, however, that if the calculated rate of tax determined  
26 Subsection 5(4) of the PPTS and section 13 of the PPTR.  
27 Subsection 5(5) of the PPTS and section 14 of the PPTR.  
28 Sections 12 and 20 of the PPTR.  
29 Under subsection 10(1) of the PPTR, the prescribed is percentage is 35%.  
30 Tabs 16 through 19 of exhibit AR-1.  
Page: 16  
by subsection 5(3) of the PPTS had applied, the Base Payment would in effect be  
35% of profits less the permitted deductions, allowances and credits.31  
Under subsections 5(4) and 5(5) of the PPTS and sections 13 and 14 of the  
PPTR, the maximum and minimum rates of tax are $12.33 per tonne and $11.00 per  
tonne, respectively.  
Section 5 of the PPTS does not specify how the profits of a producer are  
determined for the purposes of the calculations in subsections 5(1) through 5(5).  
However, section 6 of the PPTS specifies in subclause 6(1)(a)(i) that profits for a  
year are to be determined in accordance with the PPTR.  
Considering the context of section 5 of the PPTS and the interpretive rule in  
subsection 2(2) of the MTA, the only sensible interpretation is that the Saskatchewan  
legislature intended that the profits referenced in section 5 of the PPTS be the same  
as the profits of the Appellant determined in accordance with the PPTR for the  
purposes of section 6 of the PPTS. Ms. Heal testified that that is how the Appellant  
approached the calculations.  
Two of the three components32 that determine the amount of a base payment of  
a producer for a year are the quantity of potash sold or disposed of by the producer  
in the year and the rate of tax in dollars per tonne for the year. By virtue of  
subsection 2(3) of the MTA, the former includes not only potash in fact sold or  
otherwise disposed of by the producer, but also potash that is used or consumed by  
the producer. Subsection 2(3) ensures that the words “sold or otherwise disposed of”  
encompass every way in which a producer may ultimately deal with potash mined  
and produced in Saskatchewan.  
To compute the amount of a base payment for a year, a producer must first  
compute its profits for that year in accordance with the PPTR. This is because it is  
not possible to determine the applicable rate of tax under subclause 5(2)(a)(i) of the  
PPTS without first determining the calculated tax rate under subsection 5(3) of the  
PPTS. Pof the formula used in subsection 5(3) is “the amount in dollars equal to  
the prescribed percentage of the producer’s profits for a year”. If profits for a year  
31 This is because the quantity used to determine the calculated rate of tax and the quantity used to determine the Base  
Payment cancel each other out, leaving only the prescribed amount of profits for the year less the permitted deductions,  
allowances and credits.  
32 The third component is the total of any applicable deductions, allowances and credits that are prescribed or provided  
for in the PPTS.  
Page: 17  
are zero, the calculated rate of tax under subsection 5(3) of the PPTS is also zero and  
the minimum tax rate under subsection 5(5) of the PPTS applies.  
Liability for a base payment will exist only in respect of potash that has been  
“sold or otherwise disposed of” by a producer, which includes use or consumption  
by the producer. Such potash is no longer in the inventory of the producer, so it is  
no longer capable of producing income for the producer.  
These two aspects of the base payment suggest to me that the base payment  
only arises after the conclusion of the producer’s income earning process in respect  
of potash subject to the base payment tax. The same is true for the taxes imposed by  
the First Schedule and the Second Schedule of the MTA.  
Specifically, there must be a realization event (a sale or other disposition of  
potash) before liability for a base payment can exist. Consequently, a base payment  
does not represent an amount paid to Saskatchewan by a producer to earn income  
from potash mined in Saskatchewan because liability for the tax is neither a  
precursor to nor a requirement for the earning of income from mining and producing  
potash in Saskatchewan. It is rather a liability to Saskatchewan that arises following  
the utilization of the potash by the producer by sale or other disposition.  
This is illustrated by the fact that potash mined and produced in Saskatchewan  
that is stored by a producer for sale or other disposition in a future year is not subject  
to the mineral production taxes imposed by the MTA and the PPTS until that future  
year. The liability for the mineral production tax on that potash clearly follows and  
does not contribute to the earning of income from mining and producing the potash.  
Based on the overall structure of the MTA and the PPTS, it is reasonable to  
conclude that the base payment is imposed on a quantity of potash sold or disposed  
of in a year rather than on profits for that year to ensure that a minimum amount of  
tax is paid by a producer of potash mined in Saskatchewan that has sold or disposed  
of that potash. Consequently, an absence of profits for a year does not affect whether  
a producer is liable for a base payment in respect of that year.  
The fact that the base payment is determined by reference to a quantity of  
potash does not preclude the base payment from being a tax on income. As stated by  
Levine JA in Teck:  
49 As Lord Macnaghten said in London County Council v. Attorney-General,  
[1901] A.C. 26 at 35: “Income tax, if I may be pardoned for saying so, is a tax on  
Page: 18  
income.” In that case, the question was whether a tax was an income tax, although  
it was levied on the annual value of land. Lord Davey commented (at p. 45):  
The truth is that the income tax is intended to be a tax upon a person’s income or  
annual profits, and although (for conceivable and no doubt good reasons) it is  
imposed in respect of the annual value of land, that arrangement is but the means or  
machinery devised by the Legislature for getting at the profits.  
50 The fact that the income calculated under the provincial mining statutes does  
not reflect “incomeas calculated under the federal Act has no bearing on the  
characterization of the mining taxes as income taxes. . . . . 33  
The base payment is a tax on an estimate of the value contributed to a  
producer’s business by potash sold or otherwise disposed of by that producer that  
applies even if the producer does not have profits for the year under the PPTR. In  
Teck, Levine JA observed:  
39 In his analysis of the Quebec mining taxes [in Quemont, aff’d Rio Algom  
Miners Limited v Minister of National Revenue [1970] S.C.R. 511], Cattanach J.  
considered that the statutory formula for determining “profits” included the “gross  
value” of ore that had been “sold, utilized or shipped”, with the result that part of  
the profit may not have been realized. Relying on the decision of the Ontario Court  
of Appeal in Nickel Rim Mines Ltd. v. Ontario (Attorney General) (1965), [1966] 1  
O.R. 345 (Ont. C.A.), where Porter C.J.O. for the Court stated (at p. 363): “Although  
the tax in part may be upon profits estimated before actual sale, I do not think that  
the nature of the tax is thereby affected . . . ”, Cattanach J. concluded that a tax on  
realized and estimated profits was a tax on income.34  
I similarly conclude based on the scheme in the MTA and the PPTS that the  
base payment and the profit tax are taxes on the income of a producer from sales or  
other dispositions of potash mined in Saskatchewan. The Saskatchewan legislature  
simply chose in the case of the base payment to substitute quantity of potash as a  
proxy for income to ensure that a minimum amount of tax would be collected in  
respect of such potash even if the producer did not have profits for the year as  
determined under the PPTR.35  
Even if the base payment is not a tax on income or profit as such, that does not  
alter the fact that the base payment is not incurred by the Appellant for the purpose  
33 Teck at paragraphs 49 and 50.  
34 Teck at paragraphs 38 and 39.  
35  
The Saskatchewan legislature took the same approach to the taxation of sodium chloride under section 4 of the  
Second Schedule, which imposes a tax rate on “the quantity of dry sodium chloride produced from” a mine in  
Saskatchewan “that is sold or otherwise disposed of” by the producer.  
Page: 19  
of gaining or producing income from its potash mining business; rather, it is a tax  
that is applied only after the conclusion of the process of earning income from that  
business. As already stated, this conclusion is amply supported by the fact that the  
base payment applies only after a sale or other disposition of potash by the Appellant,  
by the fact that the profits of the Appellant for a taxation year from the same sales  
or other dispositions of potash must be calculated before the base payment for that  
year can be determined, and by the fact that the payment of the base payment is not  
a condition for mining potash in Saskatchewan or for producing and selling or  
disposing of that potash.  
The Prohibition in Paragraph 18(1)(m) of the ITA  
The foregoing conclusion negates the need to consider the prohibition in  
paragraph 18(1)(m) of the ITA. However, to be complete, I will also address that  
paragraph.  
Two versions of paragraph 18(1)(m) are relevant to the Taxation Years. For  
amounts that became payable on or before December 20, 2002, paragraph 18(1)(m)  
of the ITA stated:  
18(1) In computing the income of a taxpayer from a business or property no  
deduction shall be made in respect of  
. . .  
(m) any amount (other than a prescribed amount) paid or payable by virtue  
of an obligation imposed by statute or a contractual obligation substituted  
for an obligation imposed by statute to  
(i) Her Majesty in right of Canada or a province,  
(ii) an agent of Her Majesty in right of Canada or a  
province, or  
(iii) a corporation, commission or association that is  
controlled by Her Majesty in right of Canada or a province  
or by an agent of Her Majesty in right of Canada or a  
province  
as a royalty, tax (other than a tax or portion of a tax that can reasonably be  
considered to be a municipal or school tax), lease rental or bonus or as an  
amount, however described, that can reasonably be regarded as being in  
lieu of any such amount, or in respect of the late payment or non-payment  
Page: 20  
of any such amount, and that can reasonably be regarded as being in  
relation to  
(iv) the acquisition, development or ownership of a  
Canadian resource property, or  
(v) the production in Canada  
(A) of petroleum, natural gas or related hydrocarbons  
from a natural accumulation of petroleum or natural  
gas (other than a mineral resource) located in Canada  
or from an oil or gas well located in Canada,  
(B) of sulphur from a natural accumulation of  
petroleum or natural gas located in Canada, from an  
oil or gas well located in Canada or from a mineral  
resource located in Canada,  
(C) to any stage that is not beyond the prime metal  
stage or its equivalent, of metal, minerals (other than  
iron or petroleum or related hydrocarbons) or coal  
from a mineral resource located in Canada,  
(D) to any stage that is not beyond the pellet stage or  
its equivalent, of iron from a mineral resource located  
in Canada, or  
(E) to any stage that is not beyond the crude oil stage  
or its equivalent, of petroleum or related  
hydrocarbons from tar sands from a mineral resource  
located in Canada;  
For amounts that became payable after December 20, 2002,  
paragraph 18(1)(m) of the ITA stated:  
18(1) In computing the income of a taxpayer from a business or property no  
deduction shall be made in respect of  
. . .  
(m) any amount (other than a prescribed amount)  
(i) that is paid or payable in the year to  
(A) Her Majesty in right of Canada or of a province,  
Page: 21  
(B) an agent of Her Majesty in right of Canada or of  
a province, or  
(C) a corporation, a commission or an association that  
is controlled by Her Majesty in right of Canada or of  
a province or by an agent of Her Majesty in right of  
Canada or of a province, and  
(ii) that can reasonably be considered to be a royalty, tax  
(other than a tax or portion of a tax that can reasonably be  
considered to be a municipal or school tax), lease rental or  
bonus, however described, or to be in respect of the late  
payment or non-payment of any of those amounts, in  
relation to  
(A) the acquisition, development or ownership of a  
Canadian resource property, or  
(B) the production in Canada  
(I) of petroleum, natural gas or related  
hydrocarbons from a natural accumulation of  
petroleum or natural gas (other than a mineral  
resource) located in Canada, or from an oil or gas  
well located in Canada,  
(II) of sulphur from a natural accumulation of  
petroleum or natural gas located in Canada, from  
an oil or gas well located in Canada or from a  
mineral resource located in Canada,  
(III) to any stage that is not beyond the prime metal  
stage or its equivalent, of metal, minerals (other  
than iron or petroleum or related hydrocarbons) or  
coal from a mineral resource located in Canada,  
(IV) to any stage that is not beyond the pellet stage  
or its equivalent, of iron from a mineral resource  
located in Canada, or  
(V) to any stage that is not beyond the crude oil  
stage or its equivalent, of petroleum or related  
Page: 22  
hydrocarbons from a deposit located in Canada of  
bituminous sands or oil shales;36  
The parties focused on the first version of paragraph 18(1)(m) no doubt because  
the second (newer) version applies only to the last 10 days of 2002. I will similarly  
focus on the first version of paragraph 18(1)(m). I note, however, that the second  
version is on its face broader in scope than the first version.37  
There is no dispute that the Base Payments are each a tax imposed by statute  
that is paid by the Appellant to Her Majesty in right of Saskatchewan. Consequently,  
the only question is whether the Base Payments “can reasonably be regarded as being  
in relation to” the acquisition, development or ownership of a Canadian resource  
property, or the production in Canada to any stage that is not beyond the prime metal  
stage or its equivalent of minerals from a mineral resource located in Canada.38  
The Appellant relies on Cogema for the proposition that the base payment  
required by the PPTS is a tax in relation to sales and therefore is not a tax in relation  
to production. In my view, the base payment is not a sales tax in the generally  
understood sense because it is a tax on the producer selling or otherwise disposing  
of its potash rather than a tax on the consumer of that potash. Moreover, the notion  
that the base payment is a tax on sales is unhelpful because many businesses generate  
their income from sales of something, so that characterization does not assist in  
assessing the legal nature of the base payment. For example, a tax on gross revenues  
from the sale of property or services could be described as a tax on sales.  
Even if I accept that the characterization of the base payment as a tax on sales  
is relevant to the legal nature of the base payment, which is a question of law,39  
Cogema does not assist the Appellant because it addresses a different statutory  
regime that was focused solely on sales. By virtue of the words “sold or otherwise  
disposed of” in subclause 5(2)(a)(ii) of the PPTS and the deeming rule in  
subsection 2(3) of the MTA, the MTA and the PPTS apply to all means (including  
consumption or use) by which potash mined in Saskatchewan may be utilized by a  
36 Paragraph 18(1)(m) was subject to prorating rules from 2003 through 2006 and was repealed for taxation years that  
began after 2006.  
37 For example, the second version does not have a requirement that the liability for the amount in issue be imposed  
by statute or a contractual obligation substituted for a statutory obligation.  
38 The question is essentially the same under the second version except that to be caught, it is necessary that the base  
payment “can reasonably be considered” to be a tax “in relation to” the acquisition, development or ownership of a  
Canadian resource property, or the production in Canada to any stage that is not beyond the prime metal stage or its  
equivalent of minerals from a mineral resource located in Canada.  
39 Teck at paragraph 36.  
Page: 23  
producer. Consequently, in response to the question posed by the Tax Court judge  
in paragraph 12 of Cogema, the answer in this case would be yes.  
The fact that the Appellant only sells its potash is not relevant to whether  
paragraph 18(1)(m) of the ITA applies to a base payment imposed by the MTA and  
the PPTS. It is the provisions of the MTA and the PPTS that determine whether  
paragraph 18(1)(m) of the ITA applies to a payment under the MTA and the PPTS,  
not the behaviour of a particular taxpayer.  
The words “can reasonably be regarded as being in relation to” require that for  
paragraph 18(1)(m) of the ITA to apply to the Base Payments, an objective  
assessment of the circumstances must show that each of the Base Payments “relate[s]  
to”40 (i.e., has a “connexion, correspondence or association”41 to) the production in  
Canada of potash.  
The question, therefore, is whether a “sale or other disposition of” potash mined  
by the Appellant in Saskatchewan relates to the production of that potash. The  
Appellant submits that the production of potash and the “sale or other disposition  
of” potash are separate events and that paragraph 18(1)(m) of the ITA applies to the  
production of potash but not to the sale or other disposition of that potash. While I  
agree that production and sale are separate events, I do not agree that one is not in  
relation tothe other.  
In Echo Bay Mines Ltd v Canada (T.D.), [1992] 3 F.C. 707 (Echo Bay), the  
Court considered what was meant by “incomes . . . from . . . the production and  
processing” in the definition of “gross resource profits” in subsection 1204(1) of the  
Income Tax Regulations (the “ITR”).42 The Court observed:  
Production activities yield no income without sales. Activities reasonably  
interconnected with marketing the product, undertaken to assure its sale at a  
satisfactory price, to yield income, and hopefully a profit, are, in my view,  
40 Mobil at paragraph 24.  
41 See definition 3a of “relation” in the Oxford English Dictionary (2nd ed).  
42 The determination of gross resource profits is a step in calculating the resource allowance deduction allowed under  
former paragraph 20(1)(v.1) of the ITA. As noted in the discussion of the history of paragraph 18(1)(m) in Mobil and  
Teck cited above, paragraph 20(1)(v.1) was enacted as partial relief from the prohibition in paragraph 18(1)(m).  
Consequently, the definition of “gross resource profits” is part of the wider context within which paragraph 18(1)(m)  
exists in the ITA.  
Page: 24  
activities that form an integral part of production which is to yield income, and  
resource profits, within Regulation 1204(1).43  
[Emphasis added.]  
Subsection 1204(1) of the ITR does not include connecting language such as  
“in relation to”, yet the Court in Echo Bay had no difficulty finding that  
interconnected activities necessary to realize income from production are integral to  
production.  
I similarly have no difficulty concluding that a “sale or other disposition of”  
potash is an activity that relates to the production of that potash. There is a direct and  
immediate connection between the production of potash and the subsequent sale or  
disposition of that potash. To find otherwise would be to ignore the commercial  
objective of any mining venture, which is to mine and produce minerals to obtain  
the value of those minerals through sale, consumption, or use. The fact that the base  
payment arises after a sale or other disposition of potash does not preclude it being  
in relation to the production of that potash.44  
The application of paragraph 18(1)(m) to the Base Payments is consistent with  
the broad purpose of paragraph 18(1)(m) identified by the Minister of Finance when  
introducing the new rule to Parliament in May 1974:  
. . . I am proposing that revenues derived by provincial governments in respect  
of production from a petroleum or mineral resource should no longer be  
deductible in computing the income of the operator of the resource.45  
[Emphasis added.]  
The application of paragraph 18(1)(m) to the Base Payments is also consistent  
with Sharlow JA’s general observation in Mobil that “paragraph 18(1)(m) deals  
fundamentally with payments to the Crown.”46 The Base Payments are payments by  
the Appellant to the Crown in right of Saskatchewan that are inextricably linked to  
mining and producing potash in Saskatchewan.  
43  
Page 732. The Federal Court of Appeal confirmed that this approach applied to the definition of “gross resource  
profits” in The Queen v 3850625 Canada Inc, 2011 FCA 117 (“3850625 Canada”) at paragraphs 17 to 21.  
44 3850625 Canada at paragraph 24.  
45  
“Budget Speech” Hansard, House of Commons Debates, 29-2 No 2 (6 May 1974) at 2080 (Hon. John Turner,  
Minister of Finance).  
46 Mobil at paragraph 20.  
Page: 25  
VI. Conclusion  
For the foregoing reasons, the appeal of the Appellant is dismissed with costs  
to the Respondent. The Respondent has 30 days from the date of the judgment to  
provide written submissions on costs not to exceed 10 pages. The Appellant has a  
further 30 days to provide written submissions in response to the Respondent’s  
submissions. No further submissions by either party are to be made.  
Signed at Ottawa, Canada, this 7th day of July 2022.  
“J.R. Owen”  
Owen J  
APPENDIX A  
The following is a reproduction of the Agreed Statement of Facts (Partial)  
submitted by the parties.  
IDENTITY OF APPELLANT  
1. Potash Corporation of Saskatchewan (the “Crown Corporation”) was initially  
created as a Saskatchewan crown corporation in 1975.  
2. On November 2, 1989, the Crown Corporation was privatized whereby its  
assets were transferred to Potash Corporation of Saskatchewan Inc. (“PCS” or  
the “Appellant”), which became a public corporation.  
3. The Appellant is a corporation continued under the Canada Business  
Corporations Act1 and is a taxable Canadian corporation for purposes of the  
Income Tax Act.2  
4. On January 1, 2018, Nutrien Ltd. indirectly acquired the shares of each the  
Appellant and Agrium Inc. upon their merger of equals, to become the new  
publicly listed parent of the combined group.  
RELEVANT TAXATION YEARS  
5. The current appeal concerns the taxation years ended December 31,  
a. 1999 (the “1999 TY”);  
b. 2000 (the “2000 TY”);  
c. 2001 (the “2001 TY”); and  
d. 2002 (the “2002 TY”).  
6. Collectively, these taxation years are referred to as the “Taxation Years” or  
the “Relevant Period”).  
1 RSC 1985, c C-44.  
2 RSC 1985, (5th Supp), c 1 [the “Income Tax Act”].  
Page: 2  
THE APPELLANT  
The Appellant’s Business  
7. During the Relevant Period, the Appellant was an integrated fertilizer and  
related industrial and feed products company, with potash mining operations in  
the province of Saskatchewan.  
Potash Production  
8. Potash is the common name given to a group of minerals containing potassium,  
which is essential to all forms of plant and animal life.  
9. During the Relevant Period, the mining operations of the Appellant consisted  
of producing potash.  
10. Producing potash means extracting potash from the ground and processing  
same at mine facilities.  
11. More specifically, producing potash can be described in the following steps  
illustrated in a diagram titled “What is potash and where does it come from?3:  
a. first, potash is mined underground from deposits using two- and four-rotor  
continuous boring machines;  
b. second, conveyor belts carry potash ore to underground bins, where it is  
stored until transportation to the loading pockets of the shaft hoist;  
c. third, potash ore is hoisted to the surface through the production shaft  
(extraction of potash ore is complete); and  
d. fourth, potash ore is processed, notably being crushed, ground, dried,  
compacted and crystallized (“production” of potash is complete).  
3 Copy of a diagram titled “What is potash and where does it come from?Tab 1 of the Joint Book of Documents.  
Page: 3  
12. Potash is a saleable product once it is in its crystallized form, at the end of the  
processing stage of the potash ore (i.e. at the end of the fourth step above).  
13. The Appellant produced potash from mines in Saskatchewan for no purpose  
other than selling that potash.  
Mineral Rights to Extract Potash Ore  
14. The Appellant obtained the right to produce potash in Saskatchewan during the  
Relevant Period through a combination of the following:  
a. it acquired ownership of mineral rights;  
b. it acquired Crown leases from the Saskatchewan Crown pursuant to The  
Crown Minerals Act4 and The Subsurface Mineral Regulations5 and their  
predecessors. By such leases, the Saskatchewan Crown granted the  
Appellant the right to extract, recover or produce minerals (potash, in this  
case) found on, in or under the Saskatchewan Crown’s lands;6 and  
c. it  
obtained  
freehold  
leases  
from  
private  
persons  
(individuals/corporations), that owned the minerals below the surface of  
the lands in question. The leases granted to the Appellant the right to mine,  
extract, recover or produce minerals (potash, in this case).7  
15. During the Relevant Period, the Appellant also obtained potash from ore  
reserves near Esterhazy, Saskatchewan (the “PCS Reserves”). This is so  
because:  
a. the Appellant held the mineral rights to the PCS Reserves;  
4 SS 1984-85-86, c C-50.2 (the “Crown Minerals Act”).  
5 1960, SR 541/67 (the “Subsurface Mining Regs”).  
6
For example, see Copy of Subsurface Mineral Lease issued by the Government of Saskatchewan to Potash  
Corporation of Saskatchewan Mining Limited, dated October 20, 1981. Tab 2 of the Joint Book of Documents.  
7
See for example: Copy of Freehold Mineral Lease between Minerals Ltd. (Lessor) and Alwinsal Potash Canada  
Limited (Lessee), dated March 1, 1965 at Tab 3 of the Joint Book of Documents and Copy of Lease Renewal Notice  
issued to Minerals Ltd. by PCS Mine (successor in title to Alwinsal Potash of Canada Limited, dated April 3, 1986 at  
Tab 4 of the Joint Book of Documents.  
Page: 4  
b. the PCS Reserves are Canadian Resource Property of the Appellant as that  
term Canadian resource property is defined in the Income Tax Act8;  
c. the PCS Reserves were interspersed with other potash ore reserves at the  
same site held by a third party, International Minerals & Chemical  
Corporation (Canada) Limited (“IMC”);  
d. IMC owned and operated a mining facility located at Esterhazy,  
Saskatchewan (“the Esterhazy Mine”) at which it mined and processed  
potash;  
e. upon the Appellant’s purchase of the PCS Reserves, the Appellant and  
IMC entered into a mining and processing agreement (the “Mining  
Agreement”);9  
f. the Mining Agreement (second 3.01(c)) required the Appellant to take up  
certain quantities of processed potash from IMC at a set price of $1 per  
tonne plus actual costs per ton of finished product (section 4.01); and  
g. under section 5.01 of the Mining Agreement, the Appellant was required  
to pay its proportionate share of capital expenditures incurred by IMC  
during each year provided that the capital expenditure did not relate to a  
capital expenditure described in Article VI of the Mining Agreement.  
16. For the purposes of public reporting to its shareholders, the Appellant included,  
in its computation of its annual potash production capacity, the maximum  
annual production it was entitled to take under the Mining Agreement with IMC  
at Esterhazy.10  
8 Section 66(15) of the Income Tax Act.  
9
Copy of Restated Mining and Processing Agreement between IMC and the Appellant (missing page 6), dated  
January 31, 1978; Copy of Memorandum of Agreement between IMC and the Appellant, dated December 21, 1990;  
Copy of Amending Agreement between IMC and the Appellant, dated August 27, 1998; and Copy of Assignment and  
Consent Agreement between IMC and the Appellant, dated August 31, 1998. Tabs 5 to 8 of the Joint Book of  
Documents.  
10 Copy of Cover page and pages 7 and 8 of 1999 Annual Report of the Appellant, undated; Cover pages (2) and pages  
I-1, I-2, I-3, I-4, I-5, I-6, 1-15 and signature page of the Appellant Report on Form 10-K for the Appellant’s year ended  
December 31, 2002, dated March 26, 2003. Tabs 9 and 10 of the Joint Book of Documents.  
Page: 5  
Canadian Resource Property  
17. The potash that the Appellant produced during the Relevant Period, including  
the potash obtained from the Mining Agreement, was from Canadian resource  
properties of the Appellant as that term Canadian resource property is  
defined in the Income Tax Act.11  
BASE PAYMENT  
18. Saskatchewan potash producers are subject to Saskatchewan mining taxes and  
royalties, one of these being the base payment provided for in the Mineral  
Taxation Act, 1983 (Saskatchewan)12 (the “Base Payment”).  
19. Pursuant to section 4 of the Third Schedule of the Mineral Taxation Act  
(“Third Schedule”), the taxes imposed by the Mineral Taxation Act consist of:  
a. the Base Payment, computed in accordance with section 5 of the Third  
Schedule; and  
b. a “profit tax” (the “Profit Tax”), computed in accordance with section 6  
of the Third Schedule.  
20. The Appellant was required to file Annual Base Payment and Profit Tax  
Returns with the Saskatchewan Crown to comply with the Mineral Taxation  
Act.  
21. The Appellant filed the Annual Base Payment and Profit Tax Returns for the  
Taxation Years.13  
11 Section 66(15) of the Income Tax Act.  
12 SS 1983-84, c M-17.1 (“Mineral Taxation Act”).  
13  
Copy of Annual Base Payment Return and Annual of Profits Tax Return for the year ending December 31, 1999  
with handwritten notes; Copy of Annual Base Payment Return and Annual of Profits Tax Return for the year ending  
December 31, 2000 with handwritten notes; Copy of Annual Base Payment Return and Annual of Profits Tax Return  
for the year ending December 31, 2001 with handwritten notes; and Copy of Annual Base Payment Return and Annual  
of Profits Tax Return for the year ending December 31, 2002 with handwritten notes. Tabs 16 to 19 of the Joint Book  
of Documents.  
Page: 6  
22. The Appellant was liable for the Base Payment on the potash received under  
the Mining Agreement with IMC at the Esterhazy Mine that it sold or otherwise  
disposed of.  
23. The Base Payment with respect to the potash it received from the Esterhazy  
Mine under the Mining Agreement is identified in the Appellant’s Annual Base  
Payment Returns.  
TAX REPORTING AND REQUEST  
24. The Appellant filed income tax returns and amended income tax returns for  
each of the Taxation Years.14  
25. In computing and reporting its income for the Relevant Period, the Appellant  
added on Schedule 001 of its income tax returns, as non-deductible provincial  
Crown mineral taxes, the following amounts of Base Payment:  
Taxation Year  
1999  
Base Payment  
$14,643,226  
$16,454,834  
$14,673,344  
$13,655,538  
2000  
2001  
2002  
26. The amounts of Base Payment described in paragraph 25 were paid or accrued  
in respect of the potash that the Appellant produced and sold or disposed of  
during the Relevant Period from mines in Saskatchewan, including the potash  
related to the PCS Reserves.15  
14  
Copy of extracts of the Amended Federal T2 Income Tax Return for the year ended December 31, 1999 dated  
December 16, 2014; Copy of extracts of the Amended Federal T2 Income Tax Return for the year ended  
December 31, 2000 dated December 16, 2014; Copy of extracts of the Amended Federal T2 Income Tax Return for  
the year ended December 31, 2001 dated March 31, 2015; and Copy of extracts of the Amended Federal T2 Income  
Tax Return for the year ended December 31, 2002 dated October 5, 2015. Tabs 11 to 15 of the Joint Book of  
Documents.  
15 Copy of Summary of Tax Paid and Expense as Recorded (CAD) prepared by the Appellant (1999);  
Copy of Summary of Tax Paid and Expense as Recorded (CAD) prepared by the Appellant (2000);  
Copy of Summary of Tax Paid and Expense as Recorded (CAD) prepared by the Appellant (2001);  
and Copy of Summary of Tax Paid and Expense as Recorded (CAD) prepared by the Appellant (2002). Tabs 20 to  
23 of the Joint Book of Documents.  
Page: 7  
27. By letters sent in 2005 (for the 1999 TY, 2000 TY and 2001 TY) and in 2006  
(for the 2002 TY), the Appellant requested to take the deduction of, inter alia,  
the above amounts of Base Payment, subject to a reduction to its resource  
allowance.16  
REASSESSMENTS UNDER APPEAL  
28. Audit reports were issued for each of the Taxation Years.17  
29. The Minister of National Revenue (the “Minister”) issued notices of  
reassessment on July 16, 2015 for the 1999 TY and 2000 TY, and on  
May 17, 2016 for the 2001 TY whereby she did not allow the deduction of the  
Base Payment.  
30. By notices dated October 13, 2015 (for the 1999 TY and 2000 TY) and  
August 10, 2016 (for the 2001 TY), the Appellant objected to the notices of  
reassessment.  
31. The Minister issued notices of confirmation for the 1999, 2000, and 2001  
taxation years respectively on November 1, 12 and 20, 2019.18  
32. Pursuant to a decision on objection, the Minister issued a notice of reassessment  
in respect of the 2002 TY on November 29, 2019.19  
33. In correspondence dated July 7, 2015, December 20, 2018 and  
November 1, 2019 (for the 1999 TY); November 12, 2019 (for the 2000 TY);  
and November 20, 2019 (for the 2001 TY and 2002 TY), the Minister  
16  
Copy of letters from PCS (Bill Flahr) to the Canada Revenue Agency (“CRA”) (Erica Carlton) regarding PCS’s  
2000, 2001 and 2002 taxation years. Tabs 24 to 26 of the Joint Book of Documents.  
17 Copy of “T20 Audit Report for the 1999 taxation year (6 pages) with information redacted that is unrelated to appeal  
issue” dated August 31, 2004; Copy of “T20 Audit Report for the 2000 taxation year (6 pages) with information  
redacted that is unrelated to appeal issue” dated May 26, 2005; Copy of “T20 Audit Report for the 2001 taxation year  
(6 pages) with information redacted that is unrelated to appeal issue” dated June 14, 2006; and Copy of “T20 Audit  
Report for the 2002 taxation year (6 pages) with information redacted that is unrelated to appeal issue” dated  
March 30, 2007. Tabs 35 to 38 of the Joint Book of Documents.  
18 Copy of documents titled “Notices of Confirmation” issued by the CRA in respect of PCS’s 1999, 2000 and 2001  
TYs. Tabs 31 to 33 of the Joint Book of Documents.  
19 Copy of a letter from the CRA (Michael McIntyre) to PCS (Caroline Engel) regarding the Notice of Objection dated  
November 1, 2018 for the 2002 TY. Tab 34 of the Joint Book of Documents.  
Page: 8  
responded to the Appellant’s notices of objection and explained her positon  
regarding the deductibility of the Base Payment.20 The Minister summarized  
her position in the T401 Reports on Objection prepared for the Taxation  
Years.21  
MISCELLANEOUS FACTS  
34. The Appellant sold its potash to three customers: PCS Sales (Canada) Inc., PCS  
Sales (USA), Inc. and Canpotex Limited.  
35. Canpotex Limited was an industry sales organization owned equally by the  
Appellant and two other Saskatchewan potash producers.  
36. PCS Sales (Canada) Inc. was a direct wholly owned subsidiary of the  
Appellant. It was engaged in the sale and distribution of potash in Canada and  
offshore markets.  
37. PCS Sales (USA), Inc. was an indirectly wholly owned subsidiary of the  
Appellant. It was engaged in the sales, marketing and distribution of potash in  
the United States and offshore markets.  
38. PCS Sales (Canada) Inc. was not liable for the taxes under the Mineral Taxation  
Act, including the Base Payment, on the potash it sold. The Appellant was liable  
for the Base Payment computed on the final sale price of the potash paid to PCS  
Sales (Canada) Inc. by its third party customers.  
39. PCS Sales (USA), Inc. was not liable for the taxes under Mineral Taxation Act,  
including the Base Payment, on the potash it sold. The Appellant was liable for  
the Base Payment computed on the final sale price of the potash paid to PCS  
Sales (USA), Inc. by its third party customers.  
20 Copy of a letter from the CRA (Ken Insch) to PCS Re: Notice of Objection for the 1999 TY dated July 7, 2015 and  
Copy of a letter from the CRA (Ken Insch) to PCS (Annette Pilipiak) regarding the Notice of Objection for the 1999  
TY dated December 20, 2018, respectively Tabs 29 and 30 of the Joint Book of Documents. See also documents  
listed in notes 17 and 18 above found in Tabs 31 to 34 of the Joint Book of Documents.  
21 T401 Reports on Objection for the Taxation Years. Tabs 46 to 49 of the Joint Book of Documents.  
Page: 9  
40. In computing income for tax purposes under the Income Tax Act for each of  
the Taxation Years, the Appellant, in respect of its mining operations,  
a. computed adjusted resource profits per Part XII of the federal Income Tax  
Regulations (“ITR”); and  
b. deducted the resource allowance under paragraph 20(1)(v.1) of the  
Income Tax Act, in the following amounts:22  
PROFIT TAX  
Amount computed  
as per Potash  
Adjusted resource Resource allowance  
profits per Part XII  
of the ITR  
deducted under  
paragraph  
20(1)(v.1) of the Act  
$49,482,128  
1999 Taxation Year  
2000 Taxation Year  
2001 Taxation Year  
2002 Taxation Year  
$197,928,513  
$252,767,145  
$200,059,805  
$294,745,532  
$63,191,786  
$50,014,951  
$73,686,383  
41. In computing and reporting its income for the Relevant Period, the Appellant  
added on Schedule 001 of its income tax returns, as non-deductible provincial  
Crown mineral taxes, the following amounts of Profit Tax paid or accrued to  
the Saskatchewan Crown pursuant to the Third Schedule.23  
Taxation Year  
1999  
Profit Tax  
$72,092,574  
$65,438,620  
$59,379,166  
$61,574,892  
2000  
2001  
2002  
22  
Copies of extracts of the Amended Federal T2 Income Tax Return for the Taxation Years. Tabs 11 to 14 of the  
Joint Book of Documents.  
23 More precisely, the amounts were paid or accrued pursuant to sections 4 and 5 of the Mineral Taxation Act, section  
6 of the Third Schedule, and Part IV of The Potash Production Tax Regulations, RRS c. M-17.1 Reg 6.  
Page: 10  
42. By letters sent in 2005 (for the 1999 TY, 2000 TY and 2001 TY) and in 2006  
(for the 2002 TY), the Appellant requested to take the deduction of the amounts  
of Profit Tax listed in paragraph 41 above, subject to the impact on the resource  
allowance.24  
43. The Minister denied the Appellant’s request.  
OTHER SASKATCHEWAN PROVINCIAL TAXES AND LEVIES25  
Mineral Lease Rental  
44. The CRA allowed the deduction of the following amounts of mineral lease  
rental paid or accrued by the Appellant to the Saskatchewan Crown pursuant to  
The Crown Minerals Act, (“Mineral Lease Rental”):26  
Taxation Year  
1999  
Mineral Lease Rental  
$586,982  
2000  
$507,866  
2001  
$569,264  
2002  
$694,010  
Crown Royalties  
45. In computing and reporting its income for the Taxation Years, the Appellant  
added on Schedule 001 of its income tax returns, as non-deductible provincial  
Crown Royalties, the following amounts paid or accrued to the Saskatchewan  
Crown pursuant to the Crown Minerals Act (“Crown Royalties”):27  
Taxation Year  
1999  
Crown Royalties  
$12,448,074  
2000  
$12,328,332  
24 See documents referred to at note 16.  
25 In her closing arguments, the Respondent will argue that the facts under this heading are not relevant to the issues  
in this appeal.  
26 Subsection 20 of The Crown Minerals Act, SS 1984-85-86, c C-50.2.  
27 Sections 14 and 15 of the Crown Minerals Act, supra note 23, and section 38 of The Subsurface Mineral Regulations,  
1960, SR 541/67.  
Page: 11  
2001  
2002  
$11,169,165  
$10,721,160  
46. In computing and reporting its income for its taxation years 2007 to 2020, the  
Appellant claimed the deduction of the Crown Royalties paid or accrued to the  
Saskatchewan Crown.  
47. The CRA did not deny the deduction of the Crown Royalties claimed by the  
Appellant for the taxation years 2007 to 2020.  
Mineral Rights Tax  
48. The CRA allowed the deduction of the following amounts of mineral rights tax  
(also called “acreage tax”) paid or accrued by the Appellant to the  
Saskatchewan Crown pursuant to the Mineral Taxation Act (“Mineral Rights  
Tax”):28  
Taxation Year  
1999  
Mineral Rights Tax  
$161,496  
2000  
$240,391  
2001  
$236,943  
2002  
$251,197  
Capital Tax  
49. In computing and reporting its income for the Taxation Years, the Appellant  
claimed the deduction of the following amounts of corporation capital tax paid  
and accrued to Saskatchewan Crown pursuant to The Corporation Capital Tax  
Act (“Capital Tax”):29  
Taxation Year  
1999  
Capital Tax  
$4,568,492  
$8,245,064  
$8,756,188  
2000  
2001  
28 Part III of the Mineral Taxation Act.  
29 Subsection 3(1) of The Corporation Capital Tax Act, SS 1979-80, c C-38.1.  
Page: 12  
2002  
$8,334,352  
50. The CRA allowed the deduction of the amounts of Capital Tax described in  
paragraph 49.  
Surtax  
51. In computing and reporting its income for the Taxation Years, the Appellant  
added on Schedule 001 of its income tax returns, as non-deductible capital tax  
resource surtax, the following amounts paid or accrued to the Saskatchewan  
Crown pursuant to The Corporation Capital Tax Act (“Surtax”):30  
Taxation Year  
1999  
Surtax  
$22,843,839  
$19,938,440  
$18,177,057  
$18,145,356  
2000  
2001  
2002  
52. In 2005 and 2006, the Appellant made requests to the CRA to deduct the  
amounts of Surtax described in paragraph 51 above, subject to the impact on  
the resource allowance.  
53. The CRA allowed the deduction of the amounts of Surtax described in  
paragraph 51 above.  
30 Subsection 3(1.1) and 13.1 of The Corporation Capital Tax Act, supra note 29.  
APPENDIX B  
The Provisions of the  
Mineral Taxation Act, 1983 (Saskatchewan) (the “MTA”),  
The Potash Production Tax Schedule (the “PPTS”) and1  
The Potash Production Tax Regulations (the “PPTR”)  
The MTA,2  
PART I  
Short Title and Interpretation  
. . .  
Interpretation  
2(1) In this Act:  
. . .  
(d) mineral” means any non-viable substance formed by the processes  
of nature, irrespective of chemical or physical state and both before and  
after production, but does not include any water, agricultural soil, sand or  
gravel or any other prescribed substance;  
. . .  
(e) mineral production tax” means any tax imposed by this Act on the  
production or sale or other disposition of a scheduled mineral;  
. . .  
(g) mineral rights tax” means any tax imposed by this Act on or in  
respect of a mineral right;  
. . .  
1The PPTS is part of the MTA but is referenced separately because it has its own section numbering.  
2
The following provisions reflect amendments made by The Mineral Taxation Amendment Act, 1999, which was  
assented to on May 6, 1999, as well as all prior amendments.  
Page: 2  
(i) owner” means a person who is shown as an owner on a certificate  
of title that includes any mineral right or a person who is deemed to be an  
owner pursuant to section 8; [to June 24, 2001]  
(i) owner” means the registered owner of a mineral title, and includes  
a person who is deemed to be an owner pursuant to section 8; [from  
June 25, 2001]3  
(j) person” includes a corporation, company, syndicate, trust, firm,  
partnership, co-owner or party, and includes the successors, heirs,  
executors, administrators or other legal representatives of any such person;  
(k) prescribed” means prescribed in the regulations;  
(l) Schedule” means a schedule to this Act;  
(m) scheduled mineral” means any mineral in respect of which a  
Schedule to this Act is enacted;  
(n) taxpayer” means any person who is liable to pay any of the taxes  
imposed by this Act.  
(2) Any word or expression used in this Act but not defined in this Act may  
be defined in the regulations.  
(3) The use or consumption of a scheduled mineral by a person who is liable  
to pay the mineral production taxes imposed by this Act on the production or  
sale or other disposition4 of that scheduled mineral is deemed to be a sale or  
other disposition of that scheduled mineral.  
. . .  
3 The definition of “owner” was replaced by section 340 of the Land Titles Act, 2000 (SS2000, c L-5.1) effective June  
25, 2001  
4 Subsection 2(3) was added to the MTA and the words “or sale or other disposition” were added to clause 2(1)(e) and  
sections 4, 5 and 6 of the MTA by The Mineral Taxation Amendment Act, 1989, assented to on August 25, 1989.  
Page: 3  
PART II  
Mineral Production Taxes  
Mineral production taxes  
4 A tax is hereby imposed on the production or sale or other disposition of  
each scheduled mineral produced in Saskatchewan.  
Calculation and payment of taxes  
5 The mineral production taxes imposed by this Act on the production or  
sale or other disposition of a scheduled mineral are to be levied, calculated and  
paid in the manner and at the times required by or under the Schedule enacted  
in respect of that scheduled mineral.  
Matters to be provided for in Schedules  
6 Without limiting the generality of section 5, the following matters in  
respect of the mineral production taxes imposed by this Act on the production  
or sale or other disposition of a scheduled mineral are to be provided for in the  
Schedule enacted in respect of that scheduled mineral:  
(a) the determination of the persons or classes of persons who are to be  
liable to pay or remit such taxes;  
(b) the basis of calculation of such taxes, including any allowances,  
credits or other deductions that may be made or taken in calculating or  
paying such taxes;  
(c) the times at which such taxes are to be levied, calculated and paid;  
(d) any requirements in respect of the administration or collection of  
such taxes to the extent not otherwise provided for in this Act; and  
(e) the authority to make any regulations necessary or advisable in  
respect of the levying, calculation, payment or remittance of such taxes to  
the extent not otherwise provided for in this Act.  
Page: 4  
PART III  
Mineral Rights Tax  
. . .  
Mineral rights tax  
11 Except as otherwise provided in this Part, every owner of a mineral right  
is liable for and shall pay in each year a tax in the amount of $960 for each  
nominal section of the aggregate area of all mineral rights owned by him in the  
year, and a pro rata amount for any area of any mineral rights owned by him  
that is not a full nominal section.  
. . .  
PART IV  
Administration and Enforcement  
GENERAL  
. . .  
Investigations  
25(1) When it is considered by the minister to be necessary for the purposes  
of this Act, the minister or any officer of the department authorized by the  
minister to do so may at any time enter upon any premises for the purposes of  
making enquiries and obtaining information relating to the administration of  
this Act, and for any of those purposes he may use all machinery, equipment,  
appliances and things as he considers necessary or expedient, and is entitled:  
(a) to be given free ingress and egress to, from and over all buildings and  
structures used in connection with the operation of any facility from, at or  
in which any scheduled minerals are produced, sold or otherwise disposed  
of, treated, processed or refined in any way, or any building or office,  
whether or not occupied by a taxpayer, at which any books or records  
pertaining to the production, sale or other disposition, treatment,  
processing or refining of any scheduled minerals are kept;  
. . .  
Page: 5  
THIRD SCHEDULE  
Potash Production Tax  
SHORT TITLE AND INTERPRETATION  
Short title of Schedule  
1 This Schedule may be cited as The Potash Production Tax Schedule.  
Interpretation of Schedule  
2 In this Schedule:  
(a) mine” means any opening in or excavation of the ground in  
Saskatchewan from which potash is or is capable of being produced;  
(b) month” means a calendar month;  
(c) potash” means a non-viable substance that:  
(i) is formed by the processes of nature; and  
(ii) contains the element potassium;  
(d) producer” means a person who has the right to produce and sell or  
otherwise dispose of potash from a mine, whether that person does so  
himself or herself or through any other person;  
(e) quarter” means a calendar quarter ending on March 31, June 30,  
September 30 or December 31 in each year;  
(f) tonne” means a metric tonne;  
(g) year” means a calendar year.  
TAX  
Application  
3(1) The mineral production taxes imposed by this Act apply to all potash that:  
(a) subject to subsection 5(13), is produced from any lands in  
Saskatchewan and;  
Page: 6  
(b) is sold or otherwise disposed of on or after January 1, 1990.  
(2) Each producer is liable for the mineral production taxes imposed by this  
Act on the sale or other disposition of potash produced from the mine or mines  
with respect to which that person is a producer.  
(3) Every producer shall calculate and pay the mineral production taxes  
imposed by this Act in the manner and at the times provided in this Schedule  
and the regulations:  
(a) respecting potash sold or otherwise disposed of prior to  
January 1, 2002, on the basis of the total amount of potash sold or  
otherwise disposed of from each mine individually with respect to which  
that person is a producer; and  
(b) respecting potash sold or otherwise disposed of on or after  
January 1, 2002, on the basis of the total amount of potash sold or  
otherwise disposed of from all of the mines collectively with respect to  
which that person is a producer.  
Components of tax  
4 The mineral production taxes imposed by this Act on the sale or other  
disposition of potash consist of:  
(a) a base payment calculated in accordance with section 5; and  
(b) a profit tax calculated in accordance with section 6.  
Base payment  
5(1) In this section:  
(a) “P” means the amount in dollars equal to the prescribed percentage  
of the producer’s profits for a year;  
(b) “Q” means the quantity of potash, expressed in tonnes, that is sold or  
otherwise disposed of by the producer in a year;  
(c) “R” means the rate of tax mentioned in subclause (2)(a)(i).  
(2) The base payment for a year is the amount equal to the difference between:  
(a) the product of:  
Page: 7  
(i) the rate of tax determined pursuant to subsection (3), (4) or (5);  
and  
(ii) the quantity of potash sold or otherwise disposed of in that year,  
expressed in tonnes; and  
(b) the total of any applicable deductions, allowances and credits that  
are:  
(i) prescribed; or  
(ii) provided for in this Schedule.  
(3) Subject to subsections (4) and (5), for the purposes of calculating the base  
payment, the rate of tax is the rate, expressed in dollars per tonne of potash sold  
or otherwise disposed of, calculated in accordance with the following formula:  
R = P/Q  
(4) Where the rate of tax computed pursuant to subsection (3) is greater than  
the prescribed maximum rate of tax, the rate of tax to be used to calculate the  
base payment is the prescribed maximum rate of tax.  
(5) Where the rate of tax computed pursuant to subsection (3) is less than the  
prescribed minimum rate of tax, the rate of tax to be used to calculate the base  
payment is the prescribed minimum rate of tax.  
(6) Every producer that is liable to pay taxes pursuant to this Schedule shall  
pay to the minister an instalment of the base payment with respect to each  
month:  
(a) not later than the last day of the month next following; and  
(b) calculated in accordance with subsections (7) and (8).  
(7) For the purposes of calculating the rate of tax that is applicable to a  
monthly instalment, the producer shall, in each month, estimate the values of P  
and Q.  
. . .  
Page: 8  
(10) After the last day of each year, every producer shall determine the amount  
of the base payment for the year using the actual amount of profits and the  
actual quantity of potash sold or otherwise disposed of during that year.  
(11) Unless the Act or the regulations provide otherwise, where the amount of  
the base payment determined pursuant to subsection (10) exceeds the total of  
the instalments paid pursuant to subsection (8), the producer shall pay to the  
minister the difference between those amounts within 90 days after the last day  
of the year.  
(12) Where the total of the instalments paid pursuant to subsection (8) exceeds  
the amount of the base payment determined pursuant to subsection (10), the  
minister shall refund to the producer the difference between those amounts  
within 30 days after receipt of the producer’s final return for the year.  
(13) The base payment applies only to potash that is produced on or after  
January 1, 1990.  
Profit tax  
6(1) The profit tax for a year is the amount equal to the difference between:  
(a) the total of the products of:  
(i) profits for that year, determined in accordance with the  
regulations, within each profit bracket that is:  
(A) prescribed pursuant to clause 11(c); and  
(B) expressed in dollars per tonne of potash sold or otherwise  
disposed of; and  
(ii) the rate of tax that is prescribed for each profit bracket; and  
(b) the total of any applicable deductions, allowances and credits that  
are:  
(i) prescribed; or  
(ii) provided for in this Schedule.  
(2) Unless the Act or the regulations provide otherwise, on or before the last  
day of each quarter in any year, every producer shall:  
Page: 9  
(a) estimate the producer’s profits for that year; and  
(b) pay to the minister an instalment of the profit tax with respect to that  
quarter, calculated in accordance with subsection (3).  
. . .  
(5) After the last day of each year, every producer shall determine the amount  
of the profit tax payable for that year, based on the actual amount of profits for  
that year.  
. . .  
The Potash Production Tax Regulations  
CHAPTER M-17.1 REG 6  
The Mineral Taxation Act, 1983  
PART I  
Title and Interpretation  
. . .  
Interpretation  
2(1) In these regulations:  
. . .  
(x) disposition” means, with respect to an asset:  
(i) any transaction or event with respect to an asset that entitles a  
producer to proceeds of disposition;  
(ii) any transfer of an asset by way of gift; or  
(iii) the removal, other than a temporary removal, of an asset from a  
mine for any reason;  
but does not include:  
(iv) any transfer of an asset for the purpose only of securing a debt  
or loan;  
Page: 10  
(v) any transfer of an asset used as security for a debt or loan for the  
purpose only of returning the asset by the creditor; or  
(vi) any transfer of an asset that results in a change of the legal  
ownership of the asset but not a change in the beneficial ownership  
of the asset;  
. . .  
(mm) proceeds of disposition” means:  
(i) the sale price or any other consideration received or receivable  
by a producer for the disposition of an asset, and includes:  
(A) the assumption, undertaking, extinguishment or release of  
any liability:  
(I) of the producer; or  
(II) that affects the asset disposed of; and  
(B) the value of any benefit of any kind conferred on the  
producer or on any other person at the direction of the producer  
as part of the arrangement relating to the disposition of the asset;  
(ii) subject to section 28, any:  
(A) compensation that is received by a producer; or  
(B) amount that is paid to a producer pursuant to a policy of  
insurance;  
with respect to an asset that is lost, destroyed or unlawfully taken;  
(iii) subject to section 28, any:  
(A) compensation that is received by a producer; or  
(B) amount that is paid to a producer pursuant to a policy of  
insurance;  
Page: 11  
with respect to an asset that is damaged, except to the extent that the  
compensation or amount is applied to reduce operating costs pursuant  
to subclause 7(2)(a)(ii);  
(iv) subject to section 28, compensation for an asset taken pursuant  
to statutory authority or the sale price of an asset sold to a person who  
has given notice of intention to take the asset pursuant to statutory  
authority;  
(v) subject to section 28, compensation for an asset injuriously  
affected, whether lawfully or unlawfully or whether pursuant to  
statutory authority or otherwise; and  
(vi) an amount equal to the fair market value of an asset disposed of,  
where the disposition is made:  
(A) by a producer to a person with whom the producer is not  
dealing with at arm’s length at the time of the disposition;  
(B) to a corporation in consideration of the allotment and issue  
of its shares;  
(C) to a corporation without share capital, organization,  
syndicate, association, partnership or joint venture in  
consideration of the admission to membership in it of any  
person;  
(D) by way of gift; or  
(E) by way of removal, other than a temporary removal, of the  
asset from a mine;  
(nn) production” means the quantity of potash produced from a mine and  
includes potash produced from both Crown mineral lands and freehold  
mineral lands;  
. . .  
(yy) treated” means concentrated, refined or otherwise processed:  
(i) in Saskatchewan; or  
Page: 12  
(ii) with the prior written approval of the minister, outside  
Saskatchewan; [Version as of April 20, 1999]  
(yy) treated” means concentrated, refined or otherwise processed at a  
mine or at a location that, in the opinion of the minister, is reasonably near  
to a mine; [Version prior to April 20, 1999]  
. . .  
(2) For the purposes of the Act and in these regulations, “produced” means  
extracted from the ground and includes:  
(a) treated as defined in clause (1)(yy); and  
(b) stored and shipped:  
(i) in Saskatchewan; or  
(ii) with the prior written approval of the minister, outside  
Saskatchewan. [Version as of April 20, 1999]  
(b) stored and shipped if, in the opinion of the minister, storage and  
shipment takes place at or near a mine. [Version prior to April 20, 1999]  
CITATION:  
2022 TCC 75  
COURT FILE NO.:  
STYLE OF CAUSE:  
2020-208(IT)G  
POTASH CORPORATION OF  
SASKATCHEWAN INC v HER  
MAJESTY THE QUEEN  
PLACE OF HEARING:  
DATE OF HEARING:  
Regina, Saskatchewan  
March 21, 2022  
REASONS FOR JUDGMENT BY: The Honourable Justice John R. Owen  
DATE OF JUDGMENT:  
July 7, 2022  
APPEARANCES:  
Counsel for the Appellant:  
Nathalie Goyette  
Marc Pietro Allard  
Counsel for the Respondent: Courtney Davidson  
Carla Lamash  
COUNSEL OF RECORD:  
For the Appellant:  
Name:  
Firm:  
Nathalie Goyette  
Davies Ward Phillips & Vineberg LLP  
Montréal, Quebec  
For the Respondent:  
François Daigle  
Deputy Attorney General of Canada  
Ottawa, Canada  
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