12 March 2004 Internal T.I. 2004-0064901I7 - Passenger Vehicles

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether a van, pick-up truck or similar vehicle that is used in a business activity that is not a "commercial activity" for purposes of the Excise Tax Act, may still be considered used in the course of gaining or producing income from the business for purposes of determining whether the vehicle is an automobile under the Income Tax Act.

Position: Yes.

Reasons: The fact that an activity is not considered a commercial activity under the ETA does not mean that the activity is not carried on in the course of gaining or producing income from a business for purposes of the definition of automobile in subsection 248(1) of the Income Tax Act. Therefore, the vehicle may be excluded from the definition of automobile depending on the amount of use in transporting goods, equipment or passengers in the course of gaining or producing income from the business.

		March 12, 2004

Mr. Brian Olsen	HEADQUARTERS
	Northern BC & Yukon Tax Services Office	Randy Hewlett, B.Comm.
		613-957-8973

		2004-006490

Definition of "Passenger Vehicle" - Income Tax Act ("the ITA")

We are writing in response to your request for our opinion on the definition of "passenger vehicle" in subsection 248(1) of the ITA, as it pertains to certain motor vehicles that are used in a business activity which is not considered a "commercial activity" for purposes of the Excise Tax Act (the "ETA").

For purposes of the ETA, a passenger vehicle has the meaning assigned by subsection 248(1) of the ITA. A passenger vehicle for purposes of the ITA generally means an "automobile", which is also defined in subsection 248(1) of the ITA. For purposes of the ETA, certain activities carried on by a business may not be considered a commercial activity (e.g. making an "exempt supply"). As discussed, your concern is whether a van, pick-up truck or similar vehicle that is used in a business activity which is not considered a commercial activity for purposes of the ETA, may still be considered "used ... in the course of gaining or producing income" from the business for purposes of determining whether the vehicle is an automobile under the ITA.

Our Comments

Certain vans, pick-up trucks or similar vehicles are excluded from the definition of automobile in subsection 248(1) of the ITA, depending on their use in transporting goods, equipment or passengers in the course of gaining or producing income. For example, subparagraph (e)(i) excludes such a vehicle that "has a seating capacity for not more than the driver and two passengers and that, in the taxation year in which it is acquired or leased, is used primarily for the transportation of goods or equipment in the course of gaining or producing income". Subparagraph (e)(ii) excludes such a vehicle "the use of which, in the taxation year in which it is acquired or leased, is all or substantially all for the transportation of goods, equipment or passengers in the course of gaining or producing income".

In our view, the fact that an activity is not considered a commercial activity under the ETA does not mean that the activity is not carried on in the course of gaining or producing income from a business for purposes of the definition of automobile in subsection 248(1) of the ITA. Therefore, it is our opinion that a van, pick-up truck or similar vehicle which is being used to transport goods, equipment or passengers in a business activity that is not considered a commercial activity for purposes of the ETA, may be excluded from the definition of automobile depending on the amount of use of the vehicle in transporting the goods, equipment or passengers in the course of gaining or producing income from the business.

We trust our comments are of assistance.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the CRA's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch

cc. Owen Newell, Manager

General Operations Unit
Excise and GST/HST Rulings Directorate