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:
Whether a water cooling system that maintains an optimal temperature range necessary to the operation of a main frame computer and air conditioning equipment can be classified under class 8(b) for capital cost allowance purposes.
Position:
Yes, if does not qualify as a component part of a building.
Reasons:
Could be considered to be property acquired to service machinery or equipment.
5-962551
XXXXXXXXXX C. Chouinard
Attention: XXXXXXXXXX
August 19, 1996
Dear Sir:
Re: CCA - Water Cooling System
We are writing in reply to your letter of July 24, 1996, in which you ask us to confirm that a water cooling system used to provide chilled water to cool the interior of main frame computers and to supply air conditioning equipment qualifies under class 8(b) of Schedule II of the Income Tax Regulations (the "Regulations") as tangible property attached to a building and acquired solely for the purpose of servicing or supporting machinery or equipment.
One of the key words in paragraph (b) of Class 8 is "solely", which is defined as "singly" or "to the exclusion of all else". Note also that the only (sole) purpose of such tangible property must be either to service, support, etc. machinery or equipment or be related to manufacturing or processing. Given the examples set out in paragraph 4 of Interpretation Bulletin IT-472, in our view, the word "support" refers to physical support. Since the water cooling system does not act as a foundation or a brace for the main frame computers and the air conditioning equipment, in our view, it could not be said to support machinery or equipment.
With respect to the word "servicing", property acquired for servicing machinery or equipment is not, in our view, restricted to maintenance and repair, but can include a tangible property, other than a component part of a building, which was acquired solely to enable the machinery or equipment to function more efficiently. A water cooling system as described above could, if not considered to form a component part of a building, represent such a property. However, this could only be conclusively determined by officials of your local Tax Services office, who, with the appropriate facts and technical specifications, should be able to make such a determination.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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