10 June 1991 Ruling 910943 F - Manufacturing and Processing 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.

Dear Sirs:

Re:  Section 125.1 of the Income Tax Act

This is in reply to your letter of March 22, 1991 concerning the manufacturing and processing tax credit ( the "M&P tax credit").

You note that meat processing by a grocery store involving the cutting, packaging and freezing activities will qualify for the M&P tax credit assuming that all the conditions of section 125.1 are met.

You have asked us to confirm when the Department first received inquiries about this matter and whether such inquiries were from District Offices or from taxpayers and their advisors.  You also ask if after the initial inquiries there were many other inquiries from taxpayers and their advisors.  Finally, you ask if any statements, press releases, information to trade associations or others have been issued to clarify this matter.

We understand that a legal action is at issue.  The action is against a professional advisor who had not informed a client that the M&P tax credit might be available to a grocery store operation.

We have checked our Branch research files for section 125.1 of the Act and find that we answered a District Office inquiry on this matter in mid-1980 and that a similar issue was considered in a 1991 letter to a person in the private sector.

The Department issued Interpretation Bulletin IT-145 dated February 5, 1974.  This bulletin did not mention grocery stores but gave general guidance on the activities that qualified as processing. It included comments on breaking bulk and packaging and mentioned the 10% of gross revenue (from qualified activities) test that must be met for the M&P tax credit to be available.

Although the results of our research disclosed little correspondence on the subject, please note that our search was limited to research files in our Branch.  There may have been consideration given to this subject in other areas of the Department.  In addition, in view of the number of years and volume of correspondence involved, we are unable to provide assurance that the search of Branch correspondence was complete.

We trust these comments will be of assistance.

for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch