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.
Edmonton District Office Resource Industries Section
Attention: Marlene White
Large Case File Manager
XXXXXXXXXX
Class 10 Misclassifications
This is in reply to your request dated January 5, 1993 concerning the classification for Capital Cost Allowance purposes of certain automotive and electronic data processing equipment related to XXXXXXXXXX.
Generally, the appropriate CCA classification of property is primarily a question of fact dependent upon the nature, characteristics and the purpose for which the property being classified is acquired. The date of acquisition is also relevant to Class 41.
We note that the preamble for Class 10, applicable to property described in paragraphs (a) to (f.2) inclusive, includes the phrase, "Property not included in any other class...". According to IT-285R, paragraph 8, the presence of this phrase indicates that the property is only included in 10(a) to (f.2) when it is not described in another class. The mid-amble applicable to property described in Class 10(g) to (w) includes the phrase, "...property that would otherwise be included in another class in this Schedule, other than Class 41...". Thus, a property must meet the description of a class other than Class 10 or 41, in order for it to be included in 10(k).
In contrast, we note that the preamble for Class 28, which is also relevant to Class 41 includes the phrase, "Property...that would otherwise be included in another class in this Schedule...". Class 41 requires that the property would otherwise be included in Class 28 (disregarding the requirement that the property must be acquired before 1988) or would otherwise be included in Class 10(k). According to IT- 285R, paragraph 7, where the phrase "...that would otherwise be included in..." appears in the description of the class, the general rule is that the property described is included in that class regardless of the fact that it is also described in another class. As a result, property described in Class 10(k) will qualify to be included in Class 28 or 41 as the case may be. We stress, the property must first qualify for inclusion in Class 10(k) before it satisfies the description for Class 28 or 41.
Whether or not property qualifies for inclusion in Class 10(k) is primarily a question of fact. This is particularly relevant to property that has a broad range of uses. For example, electronic data processing equipment that may qualify in either of Class 10(f) if the equipment is general-purpose electronic data processing equipment or 10(k) if the equipment is acquired principally for the purpose of gaining or producing income from one or more mines operated by the taxpayer. In other words, if the data processing equipment is to be used for general purposes, then 10(f) applies and the Class 10 mid- amble is not satisfied which precludes inclusion in 10(k). On the other hand, if the equipment is not for general purposes so that Class 10(f) does not apply, some other class (possibly 8) would be applicable. As a result, if acquired for the purpose of gaining or producing income from a mine, the data processing equipment would qualify for inclusion in Class 10(k). Automotive equipment may qualify in either Class 10(a) or 10(k). In order for automotive equipment to be included in Class 10(k) it must be described in a class other than 10(a). Class 22 (38) power operated movable equipment designed for the purpose of excavating, moving earth or rock is one such example. Where the property qualifies for inclusion in a class other than 10(a), and where it is acquired for the purpose of gaining or producing income from a mine, it would qualify for inclusion in 10(k).
After giving full consideration to the facts and circumstances, it is very unlikely that property will qualify for inclusion in both 10(f) and 10(k) or 10(a) and 10(k). However, should this be the case, we are guided by the decision for Lindwest Holdings Ltd. v. Her Majesty the Queen (88 DTC 6482). In the decision, the Court indicates first, that the order in which property descriptions appear in the class is not determinative. Secondly, the Court directs that the taxpayer is allowed to choose between relevant classifications only when the property descriptions are equally applicable.
If you have any questions or would like to discuss our comments further, please feel free to contact the rulings officer.
A/Chief Resource Industries Section Manufacturing Industries, Partnerships and Trusts DivisionRulings Directorate
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© Her Majesty the Queen in Right of Canada, 1993
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