1 November 1991 Income Tax Severed Letter 91M11262 F - Minerals Extracted from a Mineral Resource and Minerals from Producing Industrial Minerals not Finished Goods

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.

QUESTION

6.        Section 127 of the Income Tax Act and Regulation 5202 are relevant for  determining a taxpayer's investment tax credit and manufacturing and processing deduction, respectively. Subparagraph 127(11)(b)(i) and paragraph (d) of the definition of qualified activities" in Regulation 5202 refer to the storing, shipping, selling and leasing of finished goods.  Generally, these precluded activities restrict the amount of a taxpayer's investment tax credit     and manufacturing and processing deduction.  For these purposes, do minerals extracted from a mineral resource and the minerals from producing industrial minerals constitute "finished goods"?

ANSWER

6.        It is our view that minerals extracted from a mineral resource and the minerals from producing industrial minerals which have not yet been subsequently manufactured or processed would not constitute finished goods for purposes of subparagraph 127(11)(b)(i) of the Act and paragraph (d) of the definition of "qualified activities" in Regulation 5202.  This is not to say that processing the unprocessed minerals to any stage that is before or after the prime metal stage would not yield a finished product.  This would be a question of fact that could only be determined after examining all of the relevant facts of each particular situation.