Adélard Soucy – Quebec Court of Appeal finds that a movable structure for warming a soldering operation was not Class 29 property

The taxpayer custom-fabricated pieces of heavy specialized equipment at the northern mining site of one of its mining customers. In order for its soldering work not to fracture (which required that the soldering be carried out at close to room temperature), it needed to house its operation in a pre-assembled movable shelter (an “Econox”), which it placed on a concrete foundation on land at the mining site that it leased at a nominal rent from the mining company. 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(a) or (b) rather than Class 1(q).

The Court found that the Econox was a Class 1 property. Focusing on its comments regarding Class 8(a), it stated:

Here, however, the words "a building or other structure, or a part of it" appear to be a far more accurate description of the reality of the Econox than the phrase "a structure that is manufacturing or processing machinery or equipment” [in 8(a)]. One would have to do violence to the words to accept that the terms "machinery" or "equipment" more accurately convey what the Econox actually consists of and what it is actually used for than the terms "a building or other structure". …

After noting that the Court below (which it reversed) had dwelt on there being a close linkage of the Econox to the manufacturing and processing activity because it allowed it to be carried out under ideal thermal conditions, the Court went on to state:

Would one claim that a building inside which welding is done in Montreal in January becomes, by that very fact, "a structure that is manufacturing or processing machinery or equipment "? …. The respondent's Econox serves primarily … to shelter the respondent's operations from the weather … . The intent of the legislature here cannot have been that any structure or building within which machining and processing activities of the type engaged in by the Respondent are conducted ipso facto satisfy the principal requirements to qualify as "qualified property" … .

Neal Armstrong. Summary of Agence du revenu du Québec c. Adélard Soucy (1975) Inc., 2021 QCCA 1050 under Schedule II – Class 8.