Income Tax Application Rules — I-3.31 29
ction to any such corporation the references, respectively, in subsections (3), (21), (24) and (25) to the years 1952, 1953 and 1954 shall be read as a reference in each case to the year 1956. Meaning of drilling and exploration expenses (27) For the purposes of this section, drilling and exploration expenses incurred on or in respect of exploring or drilling for petroleum or natural gas in Canada include expenses incurred on or in respect of (a) drilling or converting a well for the disposal of waste liquids from a petroleum or natural gas well in Canada; (b) drilling for water or gas for injection into a petroleum or natural gas formation in Canada; and (c) drilling or converting a well for the injection of water or gas to assist in the recovery of petroleum or natural gas from another well in Canada. Deduction from expenses (28) For the purposes of this section, there shall be deducted in computing (a) drilling and exploration expenses incurred by a taxpayer on or in respect of exploring or drilling for petroleum or natural gas in Canada, and (b) prospecting, exploration and development expenses incurred by a taxpayer in searching for minerals in Canada, any amount paid to the taxpayer before 1972 under the Northern Mineral Exploration Assistance Regulations made under an appropriation Act that provides for payments in respect of the Northern Mineral Grants Program, and there shall be included in computing those expenses any amount, except an amount in respect of interest, paid by the taxpayer before 1972 under those Regulations to Her Majesty in right of Canada. Inclusion in drilling and exploration expenses (30) For the purposes of this section, drilling and exploration expenses incurred on or in respect of exploring or drilling for petroleum or natural gas in Canada include an annual payment made for the preservation of a right, licence or privilege described in subsection (14). General limitation (31) Where a corporation, association, partnership or syndicate has incurred expenses the deduction of which from income is authorized under more that one provision of this section, it is not entitled to make the deduction under more than one provision but is entitled to select the provision under which to make the deduction. Deduction for provincial tax (32) Where a corporation whose principal business is production, refining or marketing of petroleum, petroleum products or natural gas or exploring or drilling for petroleum or natural gas could have deducted an amount in respect of expenditures of the corporation in connection with exploration or drilling for petroleum or natural gas incurred in a preceding taxation year from the tax payable under a provincial statute for the 1952 or a subsequent taxation year if the provincial statute were applicable to that year, the corporation may deduct from the tax otherwise payable by it under Part I of the amended Act for the year an amount not exceeding the amount that would have been so deductible. Definition of provincial statute (33) For the purposes of subsection (32), provincial statute means a statute imposing a tax on the incomes of corporations enacted by the legislature of a province in 1949 and, for the purpose of that subsection, an amount deductible thereunder for one year shall, for the purpose of computing the deduction for a subsequent year, be deemed to have been deductible under the provincial statute. Expenses deductible under certain enactments deemed not otherwise deductible (34) Where expenses are or have been, under this section, section 8 of the Income War Tax Act , section 16 of chapter 63 of the Statutes of Canada, 1947, section 16 of chapter 53 of the Statutes of Canada, 1948, section 53 of chapter 25 of the Statutes of Canada, 1949 (Second Session) or section 83A of the former Act, deductible from or in computing a taxpayer’s income, or where any amount is or has been deductible in respect of expenses under any of those provisions from taxes otherwise payabl