Environnement Sanivac Inc. v. ARQ, 2016 QCCQ 9461

Some of the trucks in the fleet of trucks of the taxpayer (“Sanivac”) were non-customized trucks used to pump out used oil from customers’ facilities, and drive back to the Sanivac facilities, where they would be stationary for about 12 hours, during which time the oils were allowed to settle in the trucks’ tanks – after which they were transferred to other tanks at the facility for further processing. Sanivac thereafter sold the recovered and purified oils.

In finding that these trucks were qualified properties for purposes of the Quebec investment tax credit under s. 1029.8.36.166.40 of the Taxation Act (an approximate equivalent of ITA s. 127(9) – qualified property – (c)(i)), Guimond JCQ stated (at paras. 43-45, 50):

[I]t has been demonstrated the combination of the processes were necessary inter alia in order to ensure the traceability of PCBs when identified.

In recognizing that the combination of the steps was necessary, the Court concludes that the time devoted to the transformation was much more important that that devoted simply to transportation so that the criterion of 50% plus 1 is amply satisfied.

Furthermore, it has been demonstrated that the modifications made to the equipment were necessary in order to obtain oil of a better quality for business use and in order to lend itself to sale at a higher price. …

One fact remains, which is that the equipment was purchased and modified for the specific purpose of acquiring contaminated, diluted and snarled materials for their purification and resale as a finished product.

He then quoted Démolition A.M. with approval.

A company used somewhat modified trucks to collect dirty oils from customers. On the trucks’ return to the company premises, they would sit there for 12 hours in order to permit the oils to settle out in their holding tanks – before the now, somewhat separated oils, were pumped out for further processing at the company’s premises with a view to their sale.

Guimond JCQ found that, as this settling-out process was part and parcel of the process for purifying the oils and was more significant than the use of the trucks in transporting the oil, the trucks qualified as processing equipment under the Quebec equivalent of ITA s. 127(9) – qualified property – (c)(i). In so concluding, he quoted the Démolition A.M. case extensively.