Income Tax Application Rules — I-3.31 29
eement, contract or arrangement described in that subsection, the proceeds of disposition of the interest shall to be deemed to be proceeds of disposition of the right, licence or privilege; and (b) where an association, partnership or syndicate described in subsection (9) or a corporation or an individual has acquired a right, licence or privilege described in subsection (14) under an agreement, contract or arrangement described in that subsection and subsequently disposes of any interest (i) in the right, licence or privilege, or (ii) in the production of wells situated on the land to which the right, licence or privilege relates, the proceeds of disposition of the interest shall be deemed to be proceeds of disposition of the right, licence or privilege. Idem (20) Subsections (11), (12) and (17) do not apply in computing the income for a taxation year of a taxpayer whose business includes trading or dealing in rights, licences or privileges to explore for, drill for or take in Canada petroleum, natural gas or other related hydrocarbons (except coal). Bonus payments (21) Notwithstanding subsection (13), where a corporation whose principal business is of the class described in paragraph (3)(a) or (b) or an association, partnership or syndicate formed for the purpose of exploring or drilling for petroleum or natural gas has after 1952 paid an amount (other than a rental or royalty) to the government of Canada or a province for (a) the right to explore for petroleum or natural gas on a specified parcel of land in Canada (which right is, for greater certainty, declared to include a right of the type commonly referred to as a “licence”, “permit” or “reservation”), or (b) a legal lease of the right to take or remove petroleum or natural gas from a specified parcel of land in Canada, and before April 11, 1962 acquired the rights in respect of which the amount was so paid and, before any well came into production on the land in reasonable commercial quantities, the corporation, association, partnership or syndicate surrendered all the rights so acquired (including, in respect of a right of the kind described in paragraph (a), all rights thereunder to any lease and all rights under any lease made thereunder) without receiving any consideration therefor or repayment of any part of the amount so paid, the amount so paid shall, for the purposes of subsections (3), (4), (7), (9) and (10) of this section, and for the purposes of subsections 66(1), (10) and (10.1) and the definitions Canadian exploration and development expenses in subsection 66(15) and Canadian exploration expense in subsection 66.1(6) of the amended Act, be deemed to have been a drilling or exploration expense on or in respect of exploring or drilling for petroleum or natural gas in Canada or a Canadian exploration expense described in paragraph (a) of the definition Canadian exploration expense in subsection 66.1(6) of the amended Act, as the case may be, incurred by the corporation, association, partnership or syndicate during the taxation year in which the rights were so surrendered. Idem (22) In applying the provisions of subsection (25) to determine the amount that may be deducted by a successor corporation in computing its income for a taxation year, where the predecessor corporation has paid an amount (other than a rental or royalty) to the government of Canada or a province for (a) the right to explore for petroleum or natural gas on a specified parcel of land in Canada (which is, for greater certainty, declared to include a right of the type commonly referred to as a “licence”, “permit” or “reservation”), or (b) a legal lease of the right to take or remove petroleum or natural gas from a specified parcel of land in Canada, if, before the predecessor corporation was entitled, because of subsection (21), to any deduction in computing its income for a taxation year in respect of the amount so paid, the property of the predecessor corporation was acquired by the succ