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.
XXXX
May 12, 1983
R.B. Day (613) 995-1723
This is in reply to your letter of April 20, 1983 wherein you requested our opinion regarding a company's eligibility for the manufacturing and processing profits deduction (M&P).
Our understanding of the situation set out in your letter is as follows:
XXXX
It is your view that the production of X-ray film qualifies as M&P because:
(a) The activities are essentially the same as film processing as described in paragraph 43 of IT-145R ,
(b) The X-ray film is tangible, moveable property and
(c) The X-ray film is the product being sold by the company to the Partnership.
We are unable to agree with your views in this regard, the reasons for our disagreement are as follows:
When a patient is directed to a radiologist's facility by a physician, the primary reason for the referral is to obtain information which will assist in the diagnosis and treatment of a particular medical condition.
Although an X-ray film is produced as a means of providing the diagnostic service, the film itself is incidental to the services provided in the taking of the X-ray. In other words, the X-ray film is the means to an end (i.e. diagnosis) and not an end in itself.
An authority for this position can be found on page 14 of the text book entitled "Sale of Goods in Canada" by G.H.L. Friedman. Following a discussion dealing with several court cases, the following conclusion is reached.
"In other words, if the primary object of the contract is the transference of property in something which was not originally the property of the "buyer", the contract will be one of sales of goods: but if the primary purpose of the parties is the performance of certain work, or the provision of services, incidentally to which property in goods is to pass from one party to the other, the contract will not be one of sale of goods."
In conclusion, it is our view that in X-ray filming the primary purpose is the provision of a service incidentally to which goods pass, this activity is not related to the sale of goods and the profits from it do not meet the definition of Canadian manufacturing and processing profits in paragraph 125.1(3)(a).
It follows therefrom, that the X-ray equipment and other related equipment would not be eligible for inclusion in Class 29 and would not qualify for the Investment Tax Credit.
Yours truly,
for Director Corporate Rulings Division Legislation Branch
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