10 November 1989 Income Tax Severed Letter AC74133 - Investment Tax Credit - Qualified Transportation Equipment

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.

TORONTO DISTRICT OFFICE                      Head Office
Audit Review Section                         Specialty Rulings
Business Enquiries Group                     Roberta Albert
148-2-1                                      (613) 957-2098

G. Cappella

                                             7-4133
Investment Tax Credit
Qualified Transportation Equipment
24(1)

We are writing in reply to your memorandum of July 14, 1989 wherein you requested our interpretation of the wording in subparagraph 4601(c)(i)(E) of the Income Tax Regulations (the "Regulations").

You have requested our comments on what constitutes local transportation for the purpose of subparagraph 4601(c)(i)(E) of the Regulations and on what is meant by "locally" with respect to a taxpayer"

24(1)

Our Comments

As the phrase "hauling freight locally or making local pickups or deliveries" in subparagraph 4601(c)(i)(E) of the Regulations is not defined in the Income Tax Act or Regulations, its meaning must be derived by considering the intent of the legislation, the meaning of the ward "local" assigned to it by dictionaries and common industry usage.

In general, the intent of subparagraph 4601(c)(i)(c) of the Regulations is to ensure that transportation equipment acquired principally for use in any urban or built-up area where there are concentrations of population is not eligible for ITC, but not to deny ITC for such equipment used principally for short-haul trips where there is travel of some distance on highways outside of a built-up area, such as from a city to a town or village. It is not possible to use distance as a determining factor in differentiating local from short-haul trips, as some distances involving local travel in a large built-up area can exceed that of from a city to a village.

Unfortunately, the definition of "local" in various dictionaries is of little use in distinguishing the difference between local versus short-haul trips. However, the concept of local transportation may be addressed in provincial legislation regulating remunerated truck transportation services within a province and it is our opinion chat where a provincial truck transportation act establishes the boundaries surrounding an urban or metropolitan area in that province within which local transportation takes place, that boundary would be an important consideration in the determination of what constitutes "hauling freight locally".

With respect to the province of Ontario, the Truck Transportation Act ("TTA") effective January, 1989, regulates remunerated truck transportation services within the province. The licensing requirements of the TTA do not apply to the carriage of, inter alia, "goods solely within a commercial zone designated under section 14 or an urban municipality". There has not yet been any commercial zones designated under section 14 of the TTA. The TTA replaces the Public Commercial Vehicles Act ("PCVA"), however, the PVCA will apply until July 1990 to licensees under the PVCA until they satisfy the licensing requirements under the TTA. The licensing requirements of the PVCA do not apply to the transportation of, inter alia, "goods within a commercial cartage zone or an urban zone". The PVCA defines an "urban zone" as "an area consisting of one urban municipality and lands adjacent thereto and within a distance of five kilometres therefrom, but does not include any part of any other urban municipality" and it states that "a commercial cartage zone shall not exceed one regional municipality, county or district". Taking into consideration these definitions, in our opinion, for the province of Ontario travel within an urban municipality which can be loosely defined as an incorporated city or town should be considered commercial travel. According to the Canadian Almanac & Directory 1988 Clark Pitman Ltd 24(1) is, not an urban municipality and as a result licenses would be required under the TTA for any transportation service being run out of the community. In 24(1) purpose of carrying or hauling freight locally or making local pickups or deliveries so that none would be excluded from the definition of qualified transportation equipment by virtue of subparagraph 4601(i)(c)(E) of the Regulations.

We trust that these comments will be of assistance.

for Director Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch