1997 Ruling 9722483 - : Investment Tax Credit

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:

Ruling requested as to (i) whether XXXXXXXXXX would be manufacturing and processing, and if so, (ii) whether a building used to carry out such activities would qualify for the investment tax credit (ITC).

Position:

Rulings given.

Activities described in (i) would be manufacturing and processing. However, the activity of XXXXXXXXXX would not so qualify.

Subject to certain provisos, the building, as described in (ii), would qualify for the ITC at 10% applicable to qualified property, in accordance with the meanings of "qualified property", "investment tax credit" and "specified percentage", as defined in the Act or the Regulations, as the case may be.

Reasons:

The activities of XXXXXXXXXX are in accordance with our position regarding the meaning of "manufacturing and processing", as described in IT-145R. Based on the facts and proposed transactions and on the provisos mentioned, the ITC would be available to a building used in respect of the particular activities.

XXXXXXXXXX XXXXXXXXXX
XXXXXXXXXX

Attention: XXXXXXXXXX

Dear Sirs:

Re: Advance Ruling Request Investment Tax Credit

This is in reply to your letter of XXXXXXXXXX in which you requested an advance income tax ruling in connection with the proposed transactions described below. We also acknowledge receipt of your letter confirming our understanding of the facts and proposed transactions described in our letter of XXXXXXXXXX. We understand that to the best of your knowledge, none of the issues described herein is:

(a) being considered by a Tax Services Office or a Taxation Centre in connection with any tax return already filed, and

(b) the subject of any notice of objection or is under appeal.

Our understanding of the facts, proposed transactions and purpose of the proposed transactions is as follows:

Facts and Proposed Transactions

1. In this letter:

(a) "Act" means Income Tax Act (Canada);

(b) "Regulations" means the Income Tax Regulations;

(c) "Canco" means XXXXXXXXXX.

2. Canco is a Canadian corporation incorporated under the laws of XXXXXXXXXX and is a taxable Canadian corporation within the meaning of subsection 89(1) of the Act.

3. Canco is engaged in the business of XXXXXXXXXX. Because of the growth in Canco's business, Canco will construct a new building in the province of XXXXXXXXXX which will include a factory for XXXXXXXXXX.

4. XXXXXXXXXX
XXXXXXXXXX

5. It is estimated that XXXXXXXXXX% of Canco's total cost XXXXXXXXXX would be for the manufacturing activity of XXXXXXXXXX while XXXXXXXXXX% of such cost would represent the cost XXXXXXXXXX. Similarly, approximately XXXXXXXXXX of the total revenue earned by Canco would be derived from its XXXXXXXXXX activities, respectively.

Purpose of the Proposed Transactions

6. The purpose of the proposed transactions described herein is to satisfy the demand for Canco's products and the growth of Canco's business of XXXXXXXXXX.

Rulings Given

Provided that the above statements of facts and proposed transactions and purpose of the proposed transactions are accurate and constitute complete disclosure of all of the relevant facts and proposed transactions, and that the proposed transactions are carried out as set forth herein, the following rulings are given:

(1) We confirm that the activities of XXXXXXXXXX, would qualify as "manufacturing and processing", as the term is used in subsection 127(11) of the Act.

(2) Provided that the new building constructed for Canco:

(a) is erected on land owned or leased by Canco in XXXXXXXXXX, and

(b) more than fifty percent of the area of which is used for the purpose of manufacturing or processing of goods for sale or lease,

we confirm that the building will qualify for the investment tax credit at the rate of 10% applicable to qualified property, in accordance with (i) the definitions of the terms "investment tax credit", "specified percentage" and "qualified property" contained in subsection 127(9) of the Act and, (ii) the meaning of "prescribed building" under subsection 4600(1) of the Regulations.

The above rulings are given subject to the general limitations and qualifications set forth in Information Circular 70-6R3 issued by Revenue Canada on December 30, 1996 and are binding on Revenue Canada, provided that the construction of the building is completed not later than XXXXXXXXXX.

These rulings are based on the Act in its present form and do not take into account the effect of any proposed amendments. Except as expressly stated, our Rulings do not imply acceptance, approval or confirmation of any income tax implications of the facts or proposed transactions. In particular, nothing in this letter should be interpreted as confirming, either expressly or implicitly, the reasonableness of any of Canco's costs, outlays or expenses for Canco's property or otherwise.

Yours truly,

for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch