7 May 2002 External T.I. 2002-0129525 - Class 43.1 Classification

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.

RINCIPAL ISSUES: Whether air compressors qualify for class 43.1 treatment?

Position: No

Reasons: The compressor does not meet conditions set out in Class 43.1 of schedule II to the Income Tax Regulations

									2002-012952
XXXXXXXXXX 								Mohamud Jivraj
(613) 957-9796
May 7, 2002 

Dear XXXXXXXXXX:

Re: XXXXXXXXXX Compressor - Reference to the Class 43.1 Tax Incentive

This is in reply to your memorandum dated March 13, 2002 concerning classification of XXXXXXXXXX air compressors under Class 43.1 of Schedule II to the Income Tax Regulations.

Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where transactions are proposed and are the subject matter of an advance income tax ruling request. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Service Office. However, we are prepared to provide the following general comments. All references are to the Income Tax Act.

Generally speaking, the following types of systems and equipment may qualify for inclusion in class 43.1 as stipulated in paragraph a) to e) of Class 43.1 of Schedule II to the Income Tax Regulations:

1. Cogeneration (generate both electricity and useful heat) and specified-waste fuelled electrical generation systems,
2. Active solar systems,
3. Small scale hydroelectric installations,
4. Heat recovery systems,
5. Wind energy conversion systems,
6. Photovoltaic electrical generation systems,
7. Geothermal electrical generation systems, and
8. Specified waste-fuelled heat production equipment,

The above qualifying systems conserve energy by recovering and re-using thermal waste; using specifies waste fuel; generating both electricity and useful heat; and using renewable energy sources, including solar, wind, and small hydro. Information provided to us with respect to the XXXXXXXXXX air compressors, does not indicate that the primary purpose of the compressors is to assist in any one of the systems or processes listed above. The XXXXXXXXXX air compressor is powered by electricity and produces compressed air for various commercial applications. The compressors, do not therefore, meet the conditions set out in Class 43.1 of Schedule II to the Income Tax Regulations and cannot be included Class 43.1.

We hope our comments will be of assistance. If you have any questions concerning this matter, please contact the writer.

Yours truly,

for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Legislation Branch

2