Adélard Soucy (1975) Inc. v. Agence du revenu du Québec, 2019 QCCQ 6956, rev'd 2021 QCCA 1050

The taxpayer, whose business entailed the bending, cutting and assembly through soldering of metallic equipment such as junction boxes, gutters and truck boxes mainly for mining customers, leased space for a nominal rent at the remote northern site of one of its mining-company customers (AM) in order that it could assemble such items (which were quite bulky – e.g., 5 tonnes) on site. It needed to house its fabrication operation there in a building in order that the soldering could occur at close to room temperature. Accordingly, it purchased a pre-assembled shelter (the “Econox”) which it installed there - and also installed a bridge crane.

Whether the Econox qualified for Quebec investment tax credit purposes turned on whether it constituted a Class 29 property which, in turn, rested on whether it was a property described in Class 8. In finding that the Econox was a “a structure that is manufacturing or processing machinery or equipment” as per para. (a) of the Class 8 description, Popescu JCQ stated (at paras. 117-122, TaxInterpretations translation):

The plaintiff had learned that when its soldering work was not carried out in thermally optimal conditions (i.e., 16° C), cracks would emerge in its soldered products.

Consequently, the manufacturing and processing activities of the taxpayer could only be carried out within the Econox, which was closely linked to this activity.

The Econox also was fixed equipment which permitted the plaintiff to manufacture and process industrial and mining items.

… In default of being able to speak of permanent physical integration, one can certainly speak of a functional integration as the plaintiff could not carry out its operations in the Great North without the Econox.

It must be stated that the Econox is part of the manufacturing and processing machinery used by the plaintiff for the purposes of its business.

The Court also finds that the Econox is a structure within the meaning of paragraph (a) of Class 8.

The taxpayer custom-fabricated pieces of heavy specialized equipment at the northern mining site of one of its mining customers. In order that its soldering work did not fracture (which required that the soldering be carried out at close to room temperature), it needed to house its operation in a pre-assembled shelter (the “Econox”) which it installed at the site. Whether the Econox qualified for Quebec investment tax credit purposes turned on whether it constituted a Class 29 property which, in turn, rested on whether it was a property described in Class 8. In finding that the Econox was a “a structure that is manufacturing or processing machinery or equipment” as per para. (a) of the Class 8 description, Popescu JCQ stated (at paras. 118-122, TaxInterpretations translation):

[T]he manufacturing and processing activities of the taxpayer could only be carried out within the Econox, which was closely linked to this activity.

The Econox also was fixed equipment which permitted the plaintiff to manufacture and process industrial and mining items.

… In default of being able to speak of permanent physical integration, one can certainly speak of a functional integration as the plaintiff could not carry out its operations in the Great North without the Econox.