6 December 1996 External T.I. 9631615 - LEGALLY BINDING OBLIGATION IN WRITING.

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Whether in a particular fact situation the grandfather provisions in Clause (j)(i)(B) of Class 34 have been met?

Position:

Unable to determine on basis of limited documentation submitted.

Reasons:

Taxpayer only submitted a "rate offer". Other relevant documents & agreements not submitted.

									963161
XXXXXXXXXX							Wm. P. Guglich

Attention: XXXXXXXXXX

December 6, 1996

Dear Sirs:

Re: XXXXXXXXXX

This is in reply to your letter, received on September 19, 1996, concerning the eligibility of cogeneration property, for inclusion in Class 34 pursuant to proposed draft clause (j)(i)(B).

You submitted a copy of a rate offer along with a copy of an appendix which describes the conditions and assumptions respecting the rates. However, proposed draft clause (j)(i)(B) of Class 34 requires that the property must be acquired in order to satisfy a legally binding obligation entered into by the taxpayer in writing before February 22, 1994 to sell electricity to a public utility in Canada. In the absence of other corroborating documents or agreements, the rate offer, in and by itself, would not, in our view, constitute a legally binding obligation entered into in writing to sell electricity.

The determination as to whether specific property is acquired to satisfy a legally binding obligation entered into in writing by the taxpayer before February 22, 1994 to sell electricity must be made on the basis of all the relevant documents and agreements. In the rate offer reference is made to other agreements and documents, however, these other agreements and documents were not submitted to us. We would be pleased to further consider the issue should you provide us with all the relevant documents and agreements along with your views as to why the partnership would be considered to have a legally binding obligation entered into in writing before February 22, 1994 to sell electricity to a public power utility in Canada.

We trust our comments will be of assistance to you.

Yours truly,

R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch