19 June 1990 Ruling 5900871 F - Capital Cost Allowance on Pollution Control Additions after Amalgamation

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.

June 19, 1990

19(1)

We are writing in reply to your letter of May 10, 1990, wherein you requested our views regarding the interpretation of certain clauses in class 24 and class 27 in schedule II to the Income Tax Regulations as they relate to corporate amalgamation.

Our understanding of the situation set out in your letter is as follows:

1.     A taxpayer corporation (A), operated a plant prior to 1974.

2.     Subsequent to 1974, A transferred the plant to a subsidiary corporation (B).

3.     A then amalgamated with another corporation (C), to form  AC.

4.     AC then amalgamated with B to form corporation ACB.

You have requested that we confirm your view that, where corporation ACB undertakes pollution control additions in 1990 to a plant the construction of which was commenced prior to 1974 by a predecessor corporation, these additions could be included in either class 24 or class 27, as the case may be.  On the assumption that all other requirements of classes 24 and 27 have been met, it is your view that the specific wording in clause (b)(iii)(D) of class 24 and subparagraph (c)(iv) of class 27 would permit such asset clarification.

Our Comments

We are unable to confirm your views in this regard.

It is our opinion that, by implication, the use of the words "by him" in clause (b)(iii)(D) of class 24 and subparagraph (c)(iv) of class 27 refers to both the commencement of construction and the execution of an agreement in writing prior to 1974.  This is consistent with the intent of the regulation, which was to ensure that these incentive provision applied only to the original taxpayer.  This is also consistent with the wording in clauses (b)(iii)(C) and (E) of class 24 and subparagraphs (c)(iii) and (v) of class 27 which require continual operation by the taxpayer from before 1974. 

We trust that our comments will be of assistance to you.

Yours truly,

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch