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.
Quèbec District Office Head Office Richard Cloutier Resource Industries Mining Specialist Section
Major Expansion of a Mine - Class 28
This is further to your enquiry of October 29, 1993 regarding whether a corporation, which had no mill and which processed its ore at another unrelated custom processor's mill, would be eligible for Class 28 treatment with respect to the corporation's mine expansion to build its own mill.
Whether the above expansion of a mine would fit into Class 28 as a "major expansion" would depend on the interpretation of the words used in Class 28, based on the plain meaning of the words, with respect to all of the facts of the particular situation. Since, as you indicated, all of the facts of the particular situation are not yet available, we are unable to provide any comments regarding whether the particular relevant major expansion which you summarized above would be eligible for Class 28 treatment.
However, we offer the following general comments regarding our interpretation of Class 28 which we hope will be of assistance to you.
Paragraph (b) of Class 28 of Schedule II to the Income Tax Regulations provides as follows:
Property situated in Canada that would otherwise be included in another class in this Schedule that
(b) was acquired by the taxpayer principally for the purpose of gaining or producing income from one or more mines operated by the taxpayer and situated in Canada and each of which
(i) came into production in reasonable commercial quantities after November 7, 1969, or
(ii) was the subject of a major expansion after November 7, 1969 whereby the greatest designed capacity, measured in tons of input of ore, of the mill that processed the ore from the mine was not less than 25 per cent greater in the year immediately following the expansion than it was in the year immediately preceding the expansion, (Underlines added)
There is no ambiguity in the requirement in subparagraph (b)(ii) above that a major expansion for the purposes of Class 28 is one that is measured by input of ore processed in a mill. Also, there is no requirement, express or implied, in these words that the mill be owned by the taxpayer. Regardless of the owner of the mill, there must be at least a 25 percent increase in the greatest designed capacity of the mill that processed the ore from the mine in order for Class 28 to apply.
Should you wish us to consider whether Class 28 would apply to your particular situation, we would be pleased to do so once all of the details become available. In the meantime, if you have any questions, please contact the writer.
for Director Manufacturing Industries, Partnerships and Trusts DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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