Income Tax Application Rules — I-3.31 29
ntitled, 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 successor corporation before April 11, 1962 in the manner set out in subsection (25), and the successor corporation did, before any well came into production in reasonable commercial quantities on the land referred to in paragraph (a) or (b), surrender all the rights so acquired by the predecessor corporation (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 payment of any part of the amount so paid by the predecessor corporation, the amount so paid by the predecessor corporation shall be added to the amount determined under paragraph 25(c). Expenses incurred for specified considerations not deductible (23) For the purposes of this section and section 53 of chapter 25 of the Statutes of Canada, 1949 (Second Session), it is declared that expenses incurred before 1972 by a corporation, association, partnership or syndicate on or in respect of exploring or drilling for petroleum or natural gas in Canada or in searching for minerals in Canada do not and never did include expenses so incurred by that corporation, association, partnership or syndicate under an agreement under which it undertook to incur those expenses in consideration for (a) shares of the capital stock of a corporation that owned or controlled the mineral rights; (b) an option to purchase shares of the capital stock of a corporation that owned or controlled the mineral rights; or (c) a right to purchase shares of the capital stock of a corporation that was to be formed for the purpose of acquiring or controlling the mineral rights. Exception (24) Notwithstanding subsection (23), a corporation whose principal business is (a) production, refining or marketing of petroleum, petroleum products or natural gas or exploring or drilling for petroleum or natural gas, or (b) mining or exploring for minerals, may deduct, in computing its income for a taxation year, the lesser of (c) the total of such of (i) the drilling and exploration expenses, including all general geological and geophysical expenses, incurred by it on or in respect of exploring or drilling for petroleum or natural gas in Canada, and (ii) the prospecting, exploration and development expenses incurred by it in searching for minerals in Canada, as were incurred after 1953 and before 1972, (iii) under an agreement under which it undertook to incur those expenses for a consideration mentioned in paragraph (23)(a), (b) or (c), and (iv) to the extent that they were not deductible in computing income for a preceding taxation year, and (d) of that total, an amount equal to its income for the taxation year if no deduction were allowed under this subsection or subsection (4) or under section 65, 66 or 66.1 of the amended Act minus the deductions allowed for the year under subsection 66(2) and sections 112 and 113 of the amended Act. but where a corporation has incurred expenses in respect of which this subsection authorizes deduction from income for a taxation year, no deduction in respect of those expenses may be made in computing the income of any other corporation or from the business of an association, partnership or syndicate for any taxation year. Successor rule (25) Notwithstanding subsection (24) and subject to subsections 66.7(6) and (7) of the amended Act, where a corporation (in this subsection referred to as the “successor”) whose principal business is (a) a production, refining or marketing of petroleum, petroleum products or natural gas, or exploring or drilling for petroleum or natural gas, or exploring or drilling for petroleum or natural gas, or (b) mining or exploring for minerals, has, at any time after 1954, acquired a particular Canadian resource proper