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: The proper CCA classification of computer hardware and software and electrical generating equipment..
Position: Question of fact.
Reasons: The type of property and the use of the property will be relevant in the determination of the appropriate class.
XXXXXXXXXX A. Seidel
(613) 957-8974
990229
February 26, 1999
Dear XXXXXXXXXX:
Re: Capital Cost Allowance
This is in reply to your letters dated January 20 and 25, 1999 concerning the appropriate rate of capital cost allowance for a computer hardware and software system.
The equipment described in your letter and the attachments thereto describe a specific computer hardware and software system. To the extent that you require confirmation of the tax consequences of proposed transactions involving this specific product, we bring to your attention Information Circular 70-6R3 dated December 30, 1996 issued by Revenue Canada. Confirmation with respect to proposed transactions involving specific taxpayers should be the subject of a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling for particular taxpayers with respect to specific contemplated transactions, a written request for an advance income tax ruling should be submitted in accordance with the Information Circular. Although we cannot provide any comments with respect to the computer hardware and software system described in your letter, the following general comments may be of assistance.
Generally, the appropriate classification of depreciable property for purposes of Schedule II of the Income Tax Regulations (the “Regulations”) is determined by reference to the particular property and all of the relevant facts applicable to a specific situation. Interpretation Bulletin IT-285R2 provides an overview and general comments relating to capital cost allowance.
Computer hardware and software may be classified in various classes pursuant to Schedule II of the Regulations. Paragraph (o) of Class 12 of Schedule II of the Regulations includes certain computer software other than systems software. “Systems software” is defined in subsection 1104(2) of the Regulations. Paragraph (f) of Class 10 of Schedule II of the Regulations includes certain general-purpose electronic data processing equipment and systems software therefor. “General-purpose data processing equipment” is also defined in subsection 1104(2) of the Regulations. If the general-purpose data processing equipment falls within the exclusions in subparagraphs (f)(i), (ii), (iii), or (iv) of Class 10 of Schedule II of the Regulations, then this equipment would fall into Class 8 of Schedule II of the Regulations pursuant to paragraph (i) thereof.
In circumstances where electrical generating equipment is a component part of a building, it would be included in Class 1 of Schedule II of the Regulations by virtue of paragraph (q). In those situations where electrical generating equipment is not a component part of a building and meets the requirements of subparagraphs (f)(i), (ii) and (iii), the electrical generating equipment would generally be included in Class 8 of Schedule II of the Regulations.
Whether or not any particular property that otherwise qualifies for inclusion in Class 8 of Schedule II of the Regulations is property acquired to be used by the purchaser directly or indirectly in Canada primarily in the manufacturing or processing of goods for sale or lease such that it would qualify for inclusion in Class 43 of Schedule II of the Regulations is a question of fact which would be determined by an examination of all of the circumstances of a particular taxpayer and the particular situation. Interpretation Bulletin IT-147R3 provides a general discussion of property that may qualify as manufacturing and processing machinery and equipment.
These comments are provided in accordance with the guidelines set out in paragraph 22 of IC 70-6R3 and are therefore not binding on Revenue Canada.
Yours truly,
for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch
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