Cullen,
J.:—
The
plaintiff,
Cumberland
Ready
Mix
Ltd.,
appeals
to
this
Court
from
notices
of
reassessment
by
the
Minister
of
National
Revenue
(the
Minister),
dated
July
3,
1987,
in
respect
of
the
plaintiff’s
1983,
1984,
1985
and
1986
taxation
years.
The
Minister
denied
the
plaintiff's
claim
for
investment
tax
credits
and
refunds
in
those
years.
The
claim
was
denied
on
the
basis
that
the
property
with
respect
to
which
the
plaintiff
sought
to
claim
a
credit
was
neither
"qualified
property”
nor
“qualified
construction
equipment”
within
the
meaning
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act").
Counsel
for
the
plaintiff
advised
the
Court
during
his
opening
address
that
the
plaintiff
was
no
longer
pursuing
the
remedy
sought
in
paragraph
B.
12
of
the
amended
statement
of
claim
which
read
as
follows:
12.
The
plaintiff
further
submits
in
the
alternative
that
the
vehicles
are
“qualified
construction
equipment”
as
defined
in
paragraph
127(10.1)(f)
of
the
Income
Tax
Act
as
amended
for
the
1983
and
1984
taxation
years
and
subsection
127(9)
of
the
Income
Tax
Act
as
amended
for
the
1985
and
1986
taxation
years,
since
they
are
prescribed
equipment
for
the
purposes
of
Regulation
4603,
which
were
used
by
the
plaintiff
principally
for
the
purpose
of
construction
in
Canada
in
the
course
of
carrying
on
a
business.
Agreed
statement
of
facts
The
plaintiff
and
the
defendant
agree
that
the
following
facts
are
not
in
dispute:
1.
The
plaintiff,
Cumberland
Ready
Mix
Ltd.,
carries
on
an
integrated
operation
for
the
provision
of
pre-mixed
cement
products.
2.
The
plaintiff
owns
a
fleet
of
vehicles,
commonly
referred
to
as
concrete
readymixers.
3.
Each
ready-mixer
is
comprised
of
a
truck
cab
and
chassis
on
which
a
concrete
mixer
has
been
mounted.
4.
The
plaintiff
uses
the
ready-mixers
to
manufacture
and
process
concrete,
and
to
deliver
the
concrete
to
construction
sites.
5.
The
concrete
ready-mixers
are
property
described
in
Class
22
of
Schedule
II
of
the
Income
Tax
Regulations
(capital
cost
allowance)
as
power-operated,
movable
equipment
designed
for
the
purpose
of
placing
concrete.
1984
Taxation
Year
6.
In
filing
its
T2
Corporation
Income
Tax
Return
for
the
1984
taxation
year,
the
plaintiff
claimed
investment
tax
credits
for
some
of
its
vehicles,
as
follows:
(1)
#11—1980
Ford
LTS
9000
Cost:
$68,340
ITC
claimed:
$4,784
Date
of
purchase
contract:
August
26,
1980
(2)
#12—1979
Ford
LTS
9000
Cost:
$62,979
ITC
claimed:
$4,408
Date
of
purchase
contract:
August
8,
1980
(3)
#51—1984
Ford
LT
9000
Cost:
$53,000
ITC
claimed:
$3,710
Date
of
purchase
contract:
January
30,
1984
(4)
#14—1980
Intl.
Paystar
F5070
Cost:
$66,353
ITC
claimed:
$4,645
Date
of
purchase
contract:
April
6,
1981
(5)
#15—1980
Intl.
Paystar
F5070
Cost:
$64,962
ITC
claimed:
$4,547
Date
of
purchase
contract:
March
18,
1981
(6)
#16—Mack
DM
685
S
Cost:
$102,630
ITC
claimed:
$7,184
Date
of
lease
agreement:
August
25,
1980
7.
All
of
the
vehicles
listed
above
are
concrete
ready-mixers
except
vehicle
no.
51
which
is
a
stone
slinger.
A
stone
slinger
spreads
stone
on
construction
sites.
8.
The
investment
tax
credits
which
the
plaintiff
claimed
in
the
1984
taxation
year
were
as
shown
in
the
attached
chart
(Schedule
"A").
9.
The
total
of
the
investment
tax
credits
which
the
plaintiff
claimed
in
its
1984
taxation
year
was
$36,528.31.
The
vehicles
listed
above
accounted
for
$29,278
of
that
amount.
10.
Of
the
investment
tax
credits
claimed
for
the
concrete
ready-mixers
in
the
1984
taxation
year,
the
plaintiff
carried
back
$7,921.33
to
its
1983
taxation
year,
and
carried
forward
$8,276.98
to
its
1985
taxation
year,
leaving
$13,079.87
to
be
applied
to
its
1984
taxation
year.
1986
Taxation
Year
11.
In
filing
its
T2
corporation
income
tax
return
for
the
1986
taxation
year,
the
plaintiff
claimed
investment
tax
credits
for
some
of
its
concrete
ready-mixers,
as
follows:
Truck
Cabs
and
Chassis
(1)
#28—1985
Mack
DM
685
S
Cost:
$67,600
ITC
claimed:
$4,732
Date
of
purchase
contract:
May
8,
1985
(2)
#29—1985
Mack
DM
685
S
Cost:
$67,600
ITC
claimed:
$4,732
Date
of
purchase
contract:
May
9,
1985
(3)
#30—1985
Mack
DM
685
S
Cost:
$67,600
ITC
claimed:
$4,732
Date
of
purchase
contract:
May
14,
1985
(4)
#31—1985
Mack
DM
685
S
Cost:
$67,600
ITC
claimed:
$4,732
Date
of
purchase
contract:
May
14,
1985
(5)
#32—1985
Mack
DM
685
S
Cost:
$67,950
ITC
claimed:
$4,756.50
Date
of
purchase
contract:
September
24,
1986
(6)
#33—1985
Mack
DM
685
S
Cost:
$67,950
ITC
claimed:
$4,756.50
Date
of
purchase
contract:
September
24,
1986
(7)
#34—1986
Mack
DM
686
S
Cost:
$72,195
ITC
claimed:
$5,053.65
Date
of
purchase
contract:
February
14,1986
(8)
#35—1986
Mack
DM
686
S
Cost:
$72,195
ITC
claimed:
$5,053.65
Date
of
purchase
contract:
February
14,1986
Mixer
Units
(a)
Four
Jaeger
model
RE-100TD
mixers
(all
on
one
purchase
contract)
Cost:
$75,600
ITC
claimed:
$5,292
Date
of
purchase
contract:
April
10,
1985
(b)
Two
Jaeger
model
RE-100TD
mixers
(both
on
one
purchase
contract)
Cost:
$40,700
ITC
claimed:
$2,849
Date
of
purchase
contract:
September
24,
1985
(c)
Two
London
Action
85
mixers
(both
on
one
purchase
contract)
Cost:
$41,000
ITC
claimed:
$2,870
Date
of
purchase
contract:
February
19,1986
12.
The
investment
tax
credits
which
the
plaintiff
claimed
in
the
1986
taxation
year
were
as
shown
in
the
attached
chart
(Schedule
"A"),
13.
The
total
of
the
investment
tax
credits
which
the
plaintiff
claimed
in
its
1986
taxation
year
was
$51,246.
The
truck
cabs
and
chassis
and
mixers
listed
above
accounted
for
$49,559
of
that
amount.
14.
Of
the
investment
tax
credits
claimed
for
the
truck
cabs
and
chassis
and
mixers
in
the
1986
taxation
year,
the
plaintiff
sought
to
carry
back
$16,429
to
its
1983
taxation
year
and
$7,230
to
its
1985
taxation
year.
In
addition,
the
plaintiff
applied
$16,240
to
its
1986
taxation
year
and
claimed
a
refundable
investment
tax
credit
of
$3,864
for
that
year.
The
plaintiff
left
the
amount
of
$5,796
for
carryforward
to
future
taxation
years.
Investment
Tax
Credits
15.
The
plaintiff
claimed
investment
tax
credits
for
all
of
the
truck
cabs
and
chassis
and
mixers
listed
in
paragraphs
6
and
11
above
on
the
basis
that
they
are
"prescribed
machinery
and
equipment"
and
thus
“
qualified
property"
as
defined
by
the
Income
Tax
Act
and
Income
Tax
Regulations.
16.
All
of
the
truck
cabs
and
chassis
and
mixers
listed
in
paragraphs
6
and
11
above
were
new
when
the
plaintiff
acquired
them.
17.
In
addition,
all
of
the
truck
cabs
and
chassis
and
mixers
listed
in
paragraphs
6
and
11
above
were
acquired
by
the
plaintiff
principally
for
the
manufacturing,
processing
and
delivery
of
concrete
in
connection
with
its
major
business
activity
of
manufacturing
and
processing
concrete
for
sale.
18.
The
plaintiff
also
claimed
the
manufacturing
and
processing
profits
deduction
in
each
of
its
1983,
1984,
1985
and
1986
taxation
years.
Notices
of
reassessment
19.
The
Minister
of
National
Revenue,
by
notices
of
reassessment
dated
July
3,
1987,
reassessed
the
plaintiff
for
its
1983,
1984,
1985
and
1986
taxation
years
after
determining
that
the
plaintiff
was
not
entitled
to
investment
tax
credits
in
the
amounts
of
$30,014.18
for
the
1984
taxation
year
and
$49,559
for
the
1986
taxation
year.
The
reassessments
disallowed
the
following
investment
tax
credits
claimed
for
the
truck
cabs
and
chassis
and
mixers
mentioned
in
paragraphs
6
and
11
above:
|
1983—
|
$7,921.33
|
|
1984—
|
$13,079.87
|
|
1985—
|
$
8,276.98
|
|
1986—
|
$16,240
|
20.
As
regards
paragraph
14
above,
the
reassessment
for
the
1986
taxation
year
reduced
the
plaintiff's
refundable
investment
tax
credit
from
$3,864
to
nil.
Further,
to
date
the
Minister
has
denied
the
plaintiff's
request
to
carry
the
1986
investment
tax
credits
back
and
forward
as
indicated.
21.
The
Minister
disallowed
the
investment
tax
credits
claimed
by
the
plaintiff
on
the
basis
that
the
plaintiff's
concrete
ready-mixers
are
trucks
"designed
for
use
on
highways
and
streets".
Therefore,
according
to
the
Minister,
the
trucks
are
not
“prescribed
machinery
and
equipment”
and
thus
are
not
"qualified
property"
as
defined
by
the
Income
Tax
Act
and
Income
Tax
Regulations.
Notices
of
objection
22.
The
plaintiff
contested
the
Minister’s
reassessments
for
the
1983,
1984,
1985
and
1986
taxation
years
by
notices
of
objection
dated
August
31,1987.
Minister's
confirmation
23.
The
Minister,
by
notice
of
confirmation
issued
on
December
17,
1987,
confirmed
the
reassessments
against
the
plaintiff.
During
the
course
of
the
trial,
counsel
for
the
defendant
noted
that
in
paragraph
6
of
the
amended
statement
of
claim
the
figure
$30,014.98
in
line
12
should
now
read
$29,278.
It
is
also
agreed
that
over
the
time
of
this
action
income
tax
provisions
relating
to
investment
tax
credits
have
been
amended
several
times
between
1983
and
1986.
Many
paragraphs
have
been
added
or
deleted,
and
further,
sections
and
paragraphs
dealing
with
the
definition
of
qualified
property
and
qualified
construction
equipment
have
been
moved
around.
The
wording
in
the
provisions
relating
what
is
qualified
property
(and
qualified
construction
property)
has
remained
constant
throughout
the
tax
years
in
dispute.
Plaintiff's
position
Cumberland
Ready
Mix
Ltd.
carries
on
business
for
the
provision
of
premixed
cement
products.
As
part
of
this
business
the
plaintiff
owns
several
"cement
mixer”
trucks
and
one
stone
slinger.
The
plaintiff
acquired
these
after
June
23,
1975.
The
plaintiff
uses
the
mixers
to
manufacture,
process
and
deliver
cement
products
and
claims
to
incorporate
them
into
concrete
structures
in
Canada
as
part
of
the
construction
process.
Further,
these
mixers
are
"property"
as
defined
in
Class
22
of
Schedule
II
of
the
Income
Tax
Regulations.
The
plaintiff
claims
that
the
mixers
are
"power
operated
movable
equipment
for
the
placing
of
concrete".
The
plaintiff
claims
that
the
mixers
are
designed
for
use
on
"construction
site
terrain"
so
they
can
deliver
cement
products
at
the
construction
site.
The
Minister,
by
notice
of
reassessment
dated
July
3,
1987,
reassessed
the
plaintiff
to
deny
"investment
tax
credits".
The
Minister
also
denied
the
plaintiffs
claim
for
an
"investment
tax
refund”.
Finally,
the
Minister
denied
the
investment
tax
credits
earned
by
the
plaintiff
with
respect
to
mixers
acquired
in
the
1984
and
1986
tax
years.
The
Minister,
by
notice
of
confirmation
issued
December
17,
1987,
confirmed
the
reassessment
of
the
plaintiff.
The
plaintiff
appealed
to
this
Court.
The
defendant's
position
In
reassessing
the
plaintiff's
1983,
1984,
1985,
and
1986
taxation
years
the
Minister
proceeded
on
the
basis
that:
(i)
the
plaintiff's
mixers
were
trucks
designed
for
use
on
highways
and
streets
(therefore
not
qualified”
property);
and
(ii)
the
mixers
were
acquired
principally
for
the
purpose
of
manufacturing,
processing
and
delivery
of
concrete
in
connection
with
its
major
business
activity
of
manufacturing
and
processing
concrete
for
sale
and
were
not,
therefore,
acquired
for
the
purpose
of
construction
in
Canada,
in
the
course
of
carrying
on
business
(therefore
not
qualified
construction
equipment).
As
indicated
this
claim
has
been
removed
by
the
plaintiff.
Issue
Can
the
plaintiff's
mixer
be
defined
as
“
qualified
property"
for
the
purpose
of
the
investment
tax
credit
provisions
of
the
Act?
The
legislative
scheme
Subsection
127(9)
of
the
Act
provides
a
method
by
which
the
investment
tax
credit
may
be
calculated.
It
does
this
by
defining
the
investment
tax
credit.
It
states
in
part:
investment
tax
credit—!*
investment
tax
credit"
of
a
taxpayer
at
the
end
of
a
taxation
year
means
the
amount,
if
any,
by
which
the
aggregate
of
(a)
the
aggregate
of
all
amounts
each
of
which
is
the
specified
percentage
of
the
capital
cost
to
him
of
qualified
property,
qualified
transportation
equipment,
qualified
construction
equipment,
approved
project
property
or
certified
property
acquired
by
him
in
the
year.
.
.
.'
[Emphasis
added.]
It
is
clear
from
the
wording
of
subsection
127(9)
that
the
taxpayer
has
acquired
qualified
property
or
qualified
construction
property
in
order
to
be
able
to
calculate
an
investment
tax
credit
and
therefore
make
a
deduction
or
get
a
refund.
Subsection
127(9)
also
provides
a
definition
of
qualified
property.
It
states
in
part:
qualified
property.—"
qualified
property"
of
a
taxpayer
means
property
(other
than
an
approved
project
property
or
certified
property)
that
is.
.
.
.
(b)
prescribed
machinery
and
equipment
acquired
by
the
taxpayer
after
June
23,1975,
that
has
not
been
used,
or
acquired
for
use
or
lease,
for
any
purpose
whatever
before
it
was
acquired
by
the
taxpayer
and
that
is
(c)
to
be
used
primarily
in
Canada
for
the
purpose
of
(i)
manufacturing
or
processing
goods
for
sale
or
lease
Whether
something
is
prescribed
machinery
or
equipment
will
depend
upon
Regulation
4600.
This
regulation
reads
in
part:
4600.(1)
Qualified
Property
(2)
Property
is
prescribed
machinery
and
equipment.
.
.if
it
is
depreciable
property
of
the
taxpayer.
.
.that
is.
.
.
(e)
a
property
included
in
paragraph
(a)
of
Class
10,
or
Class
22,
in
Schedule
II
(other
than
a
car
or
a
truck
designed
for
use
on
highways
or
streets).
.
.
.
This
is
where
the
issue
arises.
Although
it
is
agreed
that
the
mixers
are
part
of
Class
22,
the
Minister,
nonetheless,
takes
the
position
that
they
are
not
prescribed
machinery
or
equipment
given
the
exclusionary
effect
of
Regulation
4600(2)(e),
namely
that
they
are
designed
for
use
on
highways
or
streets.
As
a
result
of
the
plaintiff
withdrawing
its
alternate
claim
that
the
mixers
are
construction
equipment,
the
sole
issue
for
me
to
determine
is
whether
these
mixers
are
excluded
under
Regulation
4600(2)(e).
The
equipment
in
question
Cumberland
Ready
Mix
purchases
cement
mixers
from
at
least
three
different
companies;
Mack,
International
Paystar
and
Ford.
The
stone
slinger
in
question
was
purchased
from
Ford.
The
plaintiff
called
as
witnesses
a
representative
from
each
of
the
above
three
companies.
Each
witness
explained
how
their
particular
vehicle
was
designed,
what
modifications
are
made
to
a
basic
truck
design
to
allow
it
to
be
used
as
a
mixer,
and
how
they
market
and
sell
the
equipment.
For
the
purposes
of
these
reasons,
it
will
be
sufficient
for
me
to
review
the
evidence
of
the
first
witness,
Mr.
David
McKenna
of
Mack,
and
simply
to
state
that
his
evidence
is
essentially
in
line
with
the
evidence
of
the
other
two
witnesses.
Mr.
McKenna
is
experienced
in
sales
and
marketing
of
these
types
of
mixers,
as
well
as
in
the
technology
behind
the
equipment.
He
also
takes
credit
for
designing
the
Mack
Track
system
which
I
will
explain
shortly.
Mr.
McKenna
testified
that
there
are
two
types
of
trucks
from
Mack's
point
of
view,
a
highway
truck
and
a
construction
truck.
The
differences
are
such
that,
in
the
words
of
the
Mack
brochure
(exhibit
7):
"Mack
does
not
send
a
highway
truck
to
do
a
construction
truck's
job".
In
Mr.
McKenna's
opinion,
mixers
are
clearly
construction
trucks.
Mr.
McKenna
then
went
on
to
detail
some
of
the
modifications
on
the
DM
(dumper/mixer)
trucks
to
prepare
them
for
use
as
mixers,
as
opposed
to
highway
trucks.
As
these
modifications
are
crucial
in
deciding
the
issue
at
hand,
I
shall
review
them
in
some
detail.
Firstly,
he
stated
that
the
frame
on
the
mixer
would
be
a
deep
section
frame
with
a
reinforced
channel,
and
I-beam
cross
members.
These
modifications
add
rigidity
to
the
frame
so
that
it
won't
bend
or
flex
under
the
load
of
the
cement
barrel.
Next,
he
discussed
the
powertrain,
for
which
Mack
uses
the
Maxidyne
EM6,
a
high
torque
rise
engine
designed
to
deliver
high
power
at
extremely
low
motor
speed,
or
revolutions
per
minute
(r.p.m.).This
high
torque
rise
allows
the
mixer
to
move
around
the
severe
terrain
of
a
job
site
and
drive
the
auxiliary
features
such
as
the
front
pump
for
the
mixer.
The
next
area
discussed
was
the
transmission.
Mr.
McKenna
testified
(page
87
of
the
transcript):
A.
The
transmission
that
we
would
use
in
a
construction
truck,
specifically
a
mixer,
would
be
a
six-speed
transmission
that
we
would
use,
our
own
six
speed,
it
has
what
we
call
a
low
hole
in
it,
which
is
a
very,
very,
very
low
first
gear.
And
the
reason
for
this
is
this
gear
is
used
specifically
ana
only
for
a
mixer
chassis
that
would
be
involved
with
a
so-called
motion
pour,
where
the
mixer
has
to
move
ahead
at
a
very,
very
low
rate
of
speed,
but
at
an
even
speed
to
maintain
the
quality
of
the
pour.
And
you
would
not
use
this
transmission
—
as
a
matter
of
fact,
you
cannot
use
lights,
it's
that
low.
Modifications
to
the
front
and
rear
axles
were
also
detailed.
The
front
are
20,000
pound
axles
with
a
wide
pivot,
as
compared
to
12,000
pounds
for
highway
trucks.
The
extra
weight
is
to
support
the
heavy
load
required
of
a
mixer,
and
the
wide
pivot
is
to
facilitate
the
use
of
flotation
tires,
which
will
be
discussed
below.
The
front
axle
also
has
unequal
front
springs,
higher-rated
on
the
left-hand
side
than
the
right
in
order
to
handle
the
weight
shifts
in
the
barrel
while
it
mixes
the
concrete.
With
this
arrangement,
there
is
less
likelihood
that
the
chassis
would
lean
to
one
side
and
pose
a
safety
threat.
The
front
axle
and
flotation
tires
also
require
a
special
steering
gear,
to
allow
extra
manoeuvrability
on
the
job
site.
The
rear
axle
is
a
44,000
pound
unit.
It
contains
a
Hendrickson
suspension,
which,
in
this
case,
is
a
heavy
duty,
rubber
block
suspension,
namely
three
rubber
blocks
per
side
that
isolate
the
road
from
the
chassis.
This
arrangement
offers
increased
stability
for
uneven
surfaces,
as
well
as
increased
rigidity
to
compensate
for
the
high
centre
of
gravity
on
the
mixer.
Both
this
and
the
front
axle
add
to
the
weight
of
the
vehicle,
making
it
uneconomical
for
regular
highway
usage.
The
trucks
in
question
also
have
a
26
inch
frame
extension
at
the
front
of
the
chassis.
This
extension
allows
the
oil
pump
or
drive
unit
which
drives
the
mixer
to
be
fixed
to
the
frame
and
connected
to
the
engine
through
a
small
drive
shaft
and
a
crankshaft
adaptor.
The
frame
is
also
fitted
with
heavy
duty
bumpers
to
allow
for
minor
collisions
on
the
job
site.
Flotation
tires
are
large,
wide-based
tires
that
are
used
to
support
the
extra
load
and
have
the
ability
to
"float"
over
mud,
snow
and
imperfections
in
the
surface
on
which
the
truck
is
being
driven.
The
ones
in
question
are
18
to
20-
ply
rating,
meaning
they
are
heavier
and
more
durable
for
use
on
construction
sites.
Mr.
McKenna
stated
that
the
increased
ply
rating
(as
compared
to
the
normal
14-ply
for
highway
trucks)
allows
the
vehicle
to
run
over
stones,
bricks
and
demolition
debris
on-site,
without
carving
up
the
side
of
the
tires.
In
addition
to
the
modifications
discussed
above,
when
selling
a
mixer,
or
similar
construction
vehicle,
Mack
uses
a
computerized
ordering
system
known
as
Mack
Track.
It
is
a
system
whereby
an
order
is
put
into
the
computer
but
if
the
order
does
not
contain
certain
mandatory
options
for
the
given
application,
the
computer
won't
accept
it.
For
example,
Mr.
McKenna
stated
that
if
you
were
to
submit
a
mixer
chassis
order
leaving
out
certain
options
on
the
chassis,
the
system
would
not
accept
it,
based
on
strict
engineering
guidelines.
The
other
two
representatives,
Mr.
Speller
from
International
Paystar
and
Mr.
Pelkey
from
Ford,
testified
as
to
substantially
similar
modifications
on
each
of
their
products.
In
addition,
although
their
companies
do
not
have
a
Mack
Track
system,
they
each
have
similar
safeguards
in
place
to
ensure
the
vehicles
ordered
meet
or
exceed
engineering
requirements
for
this
type
of
application.
The
meaning
of
“designed
for
use
on
highways
or
streets”
It
is
the
Minister's
position
that
the
trucks
in
question
are
designed
for
three
purposes:
firstly,
to
manufacture
and
process
concrete,
secondly,
for
use
on
highways
and
streets,
in
order
to
transport
the
concrete
to
customers,
and
thirdly,
to
deliver
the
concrete
at
the
construction
site.
Based
on
the
second
of
these
purposes,
the
defendant
Minister
argues
that
the
mixers
and
stone
slinger
are
excluded
from
prescribed
machinery
and
equipment
within
the
meaning
of
Regulation
4600(2)(e).
The
Minister
further
argues
that
the"
primary
purpose"
test
urged
by
the
plaintiff
does
not
apply
to
the
regulation
at
issue,
and
therefore
it
is
immaterial
that
the
mixers
and
stone
slinger
are
not
primarily
designed
for
use
on
roadways.
Counsel
suggests
that
this
is
the
common
sense
approach
to
this
problem.
Counsel
for
the
plaintiff
urges
a
different
common
sense
approach.
He
suggests
focusing
on
the
words
designed
for”,
and
then
applying
the
primary
purpose
test
as
set
out
by
the
Federal
Court
of
Appeal
in
Nowsco
Well
Services
Ltd.
v.
The
Queen,
[1990]
1
C.T.C.
416,
90
D.T.C.
6312
[aff'g
[1988]
2
C.T.C.
24,
88
D.T.C.
6300
(F.C.T.D.)].
He
does
concede
that
if
the
regulation
was
worded
as
"a
truck
used
on
highways”,
Cumberland's
mixers
and
stone
slinger
could
probably
be
excluded.
However,
he
submits
that
this
Court
must
focus
on
the
words
"designed
for”
and
as
such
he
provided
a
dictionary
definition
of
"design"
to
mean:
.
I.
.to
have
a
purpose,
have
an
intention
or
purpose,
or
to
devise
something
for
a
specific
function
or
end.
(transcript,
page
171)
The
plaintiff
relied
on
the
evidence
to
show
that
the
trucks
in
issue
were
designed
for
the
specific
function:
operating
off-highway,
Counsel
for
the
plaintiff
readily
conceded,
both
in
his
opening
remarks
and
his
closing
arguments
that
the
vehicles
use
the
highways
and
streets,
but
he
argued
that
these
roadways
were
simply
a
means
of
getting
to
the
work
site
and
that
the
true
purpose
was
to
get
from
the
entrance
of
the
work
site
to
the
place
the
customer
wanted
the
concrete
to
be
placed.
The
use
of
the
roads
and
highways
must
not
take
away
from
what
the
vehicles
were
truly
designed
for,
namely
to
process
concrete,
and
then
place
it
at
a
wide
variety
of
job
sites.
I
agree
with
counsel
for
the
defendant
that
if
the
primary
purpose
test
from
Nowsco,
supra,
does
not
apply
to
the
regulation
in
question,
then
the
vehicles'
other
design
purpose,
using
the
highways
and
streets,
may
be
sufficient
to
exclude
the
mixers
and
stone
slinger
from
the
investment
tax
credits
claimed.
I
thus
turn
to
decide
what
is
the
proper
test
to
be
applied
in
this
case.
The
test
to
be
applied
Although
the
Court
of
Appeal
in
Nowsco,
supra,
was
not
dealing
with
property
governed
under
Regulation
4600(2)(e),
(i.e.,
property
within
Class
10(a),
22
or
38)
Urie,
J.A.
did
interpret
the
language
found
in
that
regulation.
In
upholding
the
trial
decision,
he
stated
at
page
6319
of
his
reasons:
While
perhaps
initially
the
vehicles
used
by
the
respondent
were
"designed
for
use
on
highways
or
streets"
their
design
was
so
modified
for
purposes
of
their
utilization,
that
the
limited
design
purpose
was
of
minimal
importance.
Their
primary
purpose
was
to
become
parts
of
an
integrated
process
for
the
cementing
and/or
stimulation
of
oil
or
gas
wells.
[Emphasis
added.]
Counsel
for
the
defendant
is
correct
in
asserting
that
the
exclusionary
language
of
Regulation
4600(2)(e)
does
not
include
the
word
“
primarily”,
or
any
similar
qualification.
However,
based
on
the
words
of
Urie,
J.A.,
the
Court
of
Appeal
has
added
the
extra
requirement.
This
test
was
applied
to
the
regulation
in
question
in
a
decision
of
the
Tax
Court
of
Canada
by
Mogan,
J.T.C.C.
in
Terraco
Industries
Ltd.
v.
M.N.R.,
[1993]
1
C.T.C.
2614,
93
D.T.C.
1.
In
that
case,
the
appellant
carried
on
the
business
of
providing
hot
oil
services
to
wells
of
major
oil
companies.
The
vehicles
at
issue
were
trucks
modified
to
transport
and
power
these
hot
oil
service
units.
In
reaching
his
decision
that
the
vehicles
were
not
excluded
from
the
investment
tax
credits,
Judge
Mogan
applied
the
primary
purpose
test
and
stated
at
page
2618
(D.T.C.
4):
Any
heavy
equipment
(e.g.
a
hot
oil
unit)
can
be
made
mobile
by
mounting
it
on
wheels.
If
it
is
towed
around
on
a
trailer,
there
is
no
risk
that
it
will
be
mistaken
for
a
truck.
But
if,
for
efficiency,
safety
and
convenience,
it
is
mounted
on
the
chassis
of
a
truck
and
the
truck's
engine
is
used
to
power
it,
is
the
resulting
equipment
primarily
a
truck
used
to
transport
only
a
hot
oil
unit
or
is
it
primarily
a
self-
propelled
hot
oil
unit
which
has
assimilated
what
was
originally
designed
as
a
truck.
If
the
hot
oil
unit
and
the
truck
are
brought
together
for
the
sole
purpose
of
making
the
unit
mobile,
it
does
not
seem
reasonable
to
regard
the
truck
component
of
the
resulting
equipment
as
if
its
chassis
and
engine
had
not
been
absorbed
into
the
overall
system
of
the
hot
oil
unit
to
provide
it
with
power
and
a
platform
It
is
the
specifications
imposed
by
the
appellant
which
change
the
basic
concept
of
the
truck
into
a
power
plant
which
can
operate
equipment
at
a
fixed
location
and
then
move
it
to
another
location.
[Emphasis
added.]
Judge
Mogan
then
concluded
at
page
2619
(D.T.C.
5)
that
the
vehicles
were
not
trucks
designed
for
use
on
highways
or
streets
and
thus
not
excluded
from
the
definition
of
prescribed
machinery
and
equipment
by
virtue
of
Regulation
4600(2)(e).
Although
counsel
for
the
plaintiff
proposed
the
“assimilation”
argument
from
Terraco,
supra,
as
an
alternative
to
the
primary
purpose
test,
I
believe
the
two
approaches
can
be
treated
as
one.
Further,
I
believe
that
this
is
the
proper
standard
to
be
applied
to
the
plaintiff's
mixers
and
stone
slinger.
The
evidence
which
I
detailed
earlier
demonstrates
to
me
that
the
mixers
and
stone
slinger
are
not
designed
to
be
an
ordinary
truck.
The
requirements
of
their
respective
applications
dictate
that
they
be
much
more.
True,
they
have
a
chassis
and
an
engine
and
they
are
operated
on
the
highways
and
streets,
but
in
my
opinion,
that
use
is
ancillary
to
the
main
purpose,
namely
to
process
and
deliver
concrete
for
Cumberland's
customers.
The
chassis
and
engine
of
the
truck
have
been
substantially
modified
so
as
to
become
assimilated
with
the
hopper
(or
stone
slinger
mechanism),
thus
becoming
one
new
piece
of
equipment.
This
equipment
has
as
its
primary
purpose
to
operate
off-highway
on
construction
sites
or
at
the
plant.
It
is
this
primary
purpose
for
which
the
vehicles
are
designed.
This
fact
is
supported
by
the
evidence
of
the
representatives
from
the
truck
manufacturers,
as
well
as
the
buyer
of
the
equipment,
the
plaintiff,
Cumberland,
represented
by
Mr.
Prud'Homme.
The
chassis
of
the
trucks
is
modified
to
provide
extra
rigidity
and
weight
in
order
to
support
the
hopper
and
the
cement.
The
front
axle
is
specially
designed
to
support
the
extra
weight,
to
allow
for
increased
manoeuvrability
at
the
job
site
and
to
allow
the
use
of
the
large,
18-ply
flotation
tires
required
by
the
severe
terrain
commonly
encountered.
The
rear
axle
is
similarly
heavy
duty
to
support
the
additional
weight
and
it
is
equipped
with
a
special
suspension
system
to
increase
its
rigidity.
Both
the
engine
and
the
transmission
have
also
been
substantially
modified
to
suit
the
application.
In
fact,
the
evidence
indicated
the
top
speed
of
the
mixers
to
be
between
55
and
60
miles
per
hour,
well
below
that
of
a
normal
highway
truck.
In
addition,
the
mixers
have
a
low
hole
first
gear
which
is
essentially
useless
except
for
the
motion
pours
the
mixer
must
perform.
Therefore,
even
though
the
modifications
do
not
prevent
it
from
being
operated
on
the
highways
and
streets,
they
certainly
demonstrate
that
such
a
use
was
not
its
primary
purpose,
nor
is
it
a
practical
one,
other
than
the
minimum
travel
required
from
the
plant
to
the
job
sites.
Conclusion
I
see
no
reason
to
depart
from
the
common
sense,
business
approach
approved
by
Urie,
J.A.
in
Nowsco,
supra,
and
subsequently
applied
by
Mogan,
J.T.C.C.
in
Terraco,
supra.
The
mixers
have
as
their
primary
purpose
to
be
a
piece
of
prescribed
machinery
or
equipment
in
the
business
of
Cumberland
Ready
Mix
and
therefore
should
qualify
for
the
investment
tax
credits
rejected
by
the
Minister.
The
appeal
from
the
Minister's
reassessment
for
the
plaintiff's
1983,
1984,
1985
and
1986
taxation
years
is
allowed.
The
plaintiff
shall
receive
the
investment
tax
credits
claimed
for
the
mixers
and
stone
slinger
at
issue
as
set
out
in
the
agreed
statement
of
facts,
on
the
basis
of
these
vehicles
being
properly
described
as
qualified
property
within
the
meaning
of
the
Act.
Appeal
allowed.
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