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.
Dear Sirs:
Re: Paragraph 12(1)(b) of the Income Tax Act (the "Act") and IT-92R
This is in reply to your letter dated March 22, 1991, requesting a technical interpretation of paragraph 12(1)(b) of the Act as it applies to paragraph 3 of IT-92R.
In order for holdbacks to be included in income they must be considered "receivable" pursuant to paragraph 12(1)(b) of the Act. Holdbacks are not considered receivable until two conditions are met: the architect or engineer has issued the necessary certificate of job completion as required by the contracts and the lien period has expired. Therefore, such amount is not really a "receivable" pursuant to paragraph 12(1)(b) of the Act notwithstanding that the amount of the holdback may be set out or included in a progress billing which is a receivable. Generally speaking receivable means that there is a legal right to enforce payment.
The comments regarding holdbacks in paragraph 3 of IT-92R2 reflect the Department's concurrence with the Courts' interpretation of the word receivable. When the lien period of an outstanding holdback expires and the final certificate of job completion is issued, the holdback receivable must be included in income as the taxpayer will be legally entitled to receive that revenue.
It is the policy of this Department to follow a position set out in an Interpretation Bulletin until such time as the public is informed otherwise or the legislation is amended.
We trust our comments will be of assistance to you.
Yours truly,
for DirectorBusiness and GeneralLegislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1991
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© Sa Majesté la Reine du Chef du Canada, 1991
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