Income Tax Application Rules — I-3.31 29
(ii) the prospecting, exploration and development expenses incurred by it in searching for minerals in Canada, as were incurred after April 10, 1962 and before 1972, to the extend that they were not deductible in computing income for a preceding taxation year, and (b) of that total, an amount that would be equal to the total of (i) its income for the taxation year from operating an oil or gas well in Canada in which the corporation has an interest, (ii) its income for the taxation year from royalties in respect of an oil or gas well in Canada, (iii) any amount included in computing its income for the taxation year because of subsection (17), and (iv) the amount, if any, included under paragraph 59(3.2)(b) or (c) of the amended Act in computing its income for the year, if no deduction were allowed under this section or section 65, 66 or 66.1 of the amended Act minus the deductions allowed for the year under subsections (9) and (10) of this section and subsection 66(2) of the amended Act. Deduction by individual of exploration expenses (12) There may be deducted, in computing an individual’s income for a taxation year, the lesser of (a) the total of such of (i) the drilling and exploration expenses, including all general geological and geophysical expenses, incurred by the individual on or in respect of exploring or drilling for petroleum or natural gas in Canada, and (ii) the individual’s share of the drilling and exploration expenses, including all general geological and geophysical expenses, incurred by all associations, partnerships or syndicates described in subsection (9), while the individual was a member or partner thereof, on or in respect of exploring or drilling for petroleum or natural gas in Canada, as were incurred after April 10, 1962 and before 1972, to the extent that they were not deductible in computing the individual’s income for a preceding taxation year, and (b) of that total, an amount that would be equal to the total of (i) the individual’s income for the taxation year from a business that consisted of the operation of an oil or gas well in Canada in which the individual had an interest, (ii) the individual’s income for the taxation year from royalties in respect of an oil or gas well in Canada, (iii) any amount included in computing the individual’s income for the taxation year because of subsection (17), and (iv) the amount, if any, included under paragraph 59(3.2)(b) or (c) of the amended Act in computing the individual’s income for the year, if no deduction were allowed under this section or section 65, 66 or 66.1 of the amended Act, minus the deductions allowed for the year under subsections (9) and (10) of this section. Limitation re payments for exploration and drilling rights (13) In computing a deduction under subsection (1), (3) or (9), no amount shall be included in respect of a payment for or in respect of a right, licence or privilege to explore for, drill for or take petroleum or natural gas, acquired before April 11, 1962, other than an annual payment not exceeding $1 per acre. Exploration and drilling rights; payments deductible (14) Where an association, partnership or syndicate described in subsection (9) or a corporation or individual has, after April 10, 1962 and before 1972, acquired under an agreement or other contract or arrangement a right, licence or privilege to explore for, drill for or take in Canada petroleum, natural gas or other related hydrocarbons (except coal) under which agreement, contract or arrangement there was not acquired any other right to, over or in respect of the land in respect of which such right, licence or privilege was so acquired except the right (a) to explore for, drill for or take materials and substances (whether liquid or solid and whether hydrocarbons or not) produced in association with the petroleum, natural gas or other related hydrocarbons (except coal) or found in any water contained in an oil or gas reservoir, or (b) to enter on, use and occup