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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
What is the tax treatment of the purchase of the rights to a particular XXXXXXXXXX variety which is registered under the Plant Breeders Rights Act?
Position TAKEN:
Not a property included in classes 14 and 44. Could, depending on the circumstances, be an eligible capital expenditure.
Reasons FOR POSITION TAKEN:
The effect of the Breeders Act is to give to the holder of a plant variety the exclusive rights in respect of certain actvities described under 5(1) of the Breeders Act which could nevetheless be carried on by the holder without the granting of plant breeders rights. Accordingly, cannot be a franchise, concession or licence. Clearly not a patent because not subject to Patent Act.
November 9, 1994
WINNIPEG DISTRICT OFFICE HEAD OFFICE
Large Case Files Rulings Directorate
Robert Gagnon
Attention: Michael Cudjoe (613) 957-8953
7-942518
XXXXXXXXXX
We are writing in response to your memorandum of September 27, 1994, wherein you requested our opinion concerning the tax treatment under the Income Tax Act ("Act") of the proposed purchase by XXXXXXXXXX of the rights to a particular XXXXXXXXXX variety which is registered under the Plant Breeders Rights Act ("Breeders Act").
At the outset, we wish to mention that your request involves a specific proposed transaction by XXXXXXXXXX As indicated in information Circular 70-6R2, we do not express opinions on specific proposed transactions other than as a reply to an advance income tax ruling. Where a taxpayer request a ruling, it should be submitted in the manner set out in Information Circular 70-6R2.
While an advance income tax ruling has not been submitted and all the relevant facts and documents are not available, we are providing you with the following general comments to assist you in responding to XXXXXXXXXX However, in certain circumstances, these comments may not be appropriate to XXXXXXXXXX specific situation.
The plant breeder's rights with respect to a plant variety granted by the government pursuant to the Breeders Act is not a patent and accordingly can not be treated as a patent for the purposes of classes 14 and 44 of schedule II of the Income Tax Regulations.
Interpretation Bulletin IT-477 provides in paragraph 11 that the words "franchise, concession or licence" must generally be given the meaning or sense in which they are normally employed by businessmen on this continent and they extend to certain rights, privileges or monopolies conferred by or pursuant to legislation or by government authority (see also Mandrell Industries Inc. 65 DTC 5142 (Ex. Ct.) and The Investor Group 65 DTC 5120 (Ex. Ct)).
In our view, rights granted by the government pursuant to the Breeders Act do not constitute a franchise, concession or licence for the purposes of class 14, because the effect of the Breeders Act is to give to the holder of a plant variety the exclusive rights in respect of certain activities described under subsection 5(1) of the Breeders Act which could nevertheless be carried on (but without the exclusion of other parties) by the holder without the granting of plant breeders rights.
Accordingly, the purchase by a taxpayer from another taxpayer of all the rights in respect of a particular XXXXXXXXXX variety can not be a franchise, concession or licence.
The expenses incurred to purchase from another taxpayer all the exclusive rights available under the Breeders Act in respect of a plant variety could, depending on the circumstances, be an eligible capital expenditure under subsection 14(5) of the Act.
Chief
Financing, Leasing
and Plans Section
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch
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