5 January 1993 Income Tax Severed Letter 9230805 - Principal Business—Transport of Persons or 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.

• c. c. T1 Programs Division

[SUBJECT: PRINCIPAL BUSINESS- TRANSPORT OF PERSONS OR GOODS(7970)

SECTION: 219(2)(b)(i)]

923080
XXXXXXXXXX K. B. Harding
957-2111

Attention: XXXXXXXXXX

January 5, 1993

Dear Sirs:

Re: Corporations Eligible for Exemption from Branch Tax

This is in reply to your letter of October 7, 1992 wherein you requested our opinion whether subparagraph 219(2)(b)(i) of the Income Tax Act (the "Act"), which provides for an exemption from the imposition of the Branch Tax in Canada for those corporations whose principal business is the transportation of persons or goods, in the following fact situation.

XXXXXXXXXX

In your letter you outlined an actual fact situation related to an ongoing transactions and events. The review of such situations is the responsibility of the District Taxation Office in the area where the branch office is located and it is generally our practice not to comment thereon. However, we prepared to provide the following general comments which may be of assistance to you.

The determination of whether or not the "principal business" of the corporation is the transportation of persons or goods, for purposes of subparagraph 219(2)(b)(i) of the Act, is a question of fact and you have provided insufficient facts for our Department to make such a determination. Paragraph 2 of Interpretation Bulletin IT-290, outlines some of the criteria that should be considered in making a determination as to what constitutes a "principal business". In order for a particular taxpayer to qualify for the exemption provided in subparagraph 219(2)(b)(i) of the Act it would, in our view, be necessary for the taxpayer to provide information that substantiates the fact that the principal business is involved in the direct transportation of persons or goods rather than merely being involved with the arranging of such transportation.

XXXXXXXXXX
it would be necessary for you to provide the appropriate District
Taxation Office with a more detailed description of the activities of
the company and its Canadian branch if you require that office to make
a final determination on the matter. The District Taxation Office may
also wish to know the nature of the relationship betweenXXXXXXXXXX and
the clients, such as whether they are acting as principal and agent
etc. or in some other manner.

In should be noted that before the Department, including our District Offices, can discuss the file of a particular taxpayer with its representative, the latter must provide written evidence that he is authorized to act on behalf of the taxpayer.

We trust the above comments will be helpful in preparing for your discussions with the appropriate District Taxation Office.

Yours truly,

for Director
Reorganizations and Foreign Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch