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.
We are writing in reply to your memorandum of August 1, 1989 in which you requested our comments related to a claim for an Investment Tax Credit ("ITC") on computer equipment used in a textile business.
In your letter you state that the taxpayer XXX.
Our Comments
Based on the limited information supplied and assuming that XXX comments are as follows:
- 1) We agree with you that the asset has been correctly set up in Class 29 for capital cost allowance purposes.
2) XXX. As subparagraph 127(11)(b)(v) of the Act states that the purposes referred to in paragraph (c) of the definition of "qualified property" in subsection 127(9) of the Act, does not include date processing, the computeer cannot be considered to be "qualified property" for purposes of the ITC. In addition, as paragraph (h) of the definition of "qualified activities" in section 5202 of the Income Tax Regulations (the "Regulations") states that M & P does not include data processing, the computer cannot be included in the cost of manufacturing capital when calculating deduction related to M & P profits in section 125.1 of the Act. This opinion is supported by the following:
- a) Paragraph 30 of Interpretation Bulletin IT-145R and paragraph 6 of Interpretation Bulletin IT-147R2 identify three possible uses of a computer by a taxpayer who is involved in M & P, the uses are as follows:
- 1) Direct uses: - computer control of M & P equipment. - computer direction of M & P equipment, - other direct M & P applications.
- 2) Indirect uses; - compilation of cost records, - maintenance of inventory records, - production scheduling and control, - engineering design.
- 3) Non-M & P uses: - payroll record keeping, - accounts receivable and payable records, - customer lists, - sales invoices and analysis.
- The definition of "data processing" contained in paragraph 30 of IT-145R states that the only computer activities which will not be considered to be "data processing" are direct uses of the computer in M & P activities.
- b) The taxpayer's representations XXX
- c) The Interpretation Bulletin which covers ITC's is IT-331R, paragraph 14 of the IT confirms that paragraph 127(11)(b) of the Act provides for greater certainty that manufacturing and processing does not include data processing for purposes of determining the ITC.
We trust that our comments will be of assistance.
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1989
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1989
Email this Content