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.
Principal Issues: What CCA classes do the taxpayer's mining claims and mining leases belong to?
Position: Could belong to Regulation 1100(1)(g) - subject to Sch. V of the Regulations. General comments provided.
Reasons: Appear to be industrial minerals (other than mineral resource).
XXXXXXXXXX
2013-050664
Lata Agarwal, CMA, MBA
February 3, 2014
Dear XXXXXXXXXX:
Re: Mineral claims and mining leases
We are writing in response to your correspondence of September 27, 2013, wherein you request our view on the method of calculating the capital cost allowance ("CCA") for your client's mineral claims and mining leases.
You mention that your particular client is in the mining industry and has purchased XXXXXXXXXX mineral claims and XXXXXXXXXX mining leases in XXXXXXXXXX. During our telephone conversation (Agarwal/XXXXXXXXXX) and in your email on October 31, 2013, you also indicated that the quarry operated by your client produces volcanic aggregate to be sold for various construction purposes. In your view, the minerals extracted from the quarry should be considered as industrial minerals.
Our Comments
This technical interpretation provides general comments about the provisions of the Income Tax Act and related legislation. It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, Advance Income Tax Rulings.
Archived Interpretation Bulletin IT-492, Capital Cost Allowance Industrial Mineral Mines (the "IT Bulletin") provides information on industrial minerals. In particular, paragraph 3 states as follows:
"The term "industrial mineral" means a non-metallic mineral capable of being used in industry, and the word mineral has its ordinary meaning of any chemical or compound occurring naturally as a product of inorganic processes."
This paragraph also lists some common industrial minerals including gravel, limestone, clay, sand and stone, etc. Pursuant to paragraph 1100(1)(g) of the Income Tax Regulations, a taxpayer may claim an amount calculated in accordance with Schedule V thereof in respect of the capital cost of a property that is an industrial mineral or a right to remove industrial minerals from an industrial mineral mine. Paragraphs 5 through 8 of the IT Bulletin contain an explanation of the method of calculating CCA under Schedule V.
We trust our comments will be of assistance.
Yours truly,
Fiona Harrison, C.P.A., C.A.
Manager
Resources Section
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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