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.
December 12, 1985
HEAD OFFICE Audit Directorate
Investment Tax Credit in Respect of Units Mounted on Vehicles - Regulation 4600(2)(e)
The policy of the Department has been that units permanently mounted (i.e. bolted or welded) to a vehicle become a component part of that vehicle. There is, therefore, only one classification of both the mounted unit and the vehicle for capital cost allowance purposes; that of the vehicle. If that vehicle was "a car or truck designed for use on highways and streets" included in class 10(a) or class 22 in Schedule II both the mounted unit and the vehicle would be excluded from the definition of prescribed machinery and equipment for the purposes of investment tax credit by paragraph 4600(2)(e) of the Income Tax Regulations.
A recent Court decision in Haliburton Services Ltd. (plaintiff) v. Her Majesty The Queen cited 85 DTC 5336, the Court ruled that, in the case of units mounted to vehicles, "... the property fits within two categories. The cab and chassis parts, or van as the case may be, are obviously automotive equipment designed for use on a highway. But at the same time to allocate the equipment mounted thereto or therein to the category of automotive equipment is neither logical nor in accord with the common understanding of the function these components play". As a result Haliburton vas allowed the investment tax credit on the mounted equipment, which the Court classified as contractors movable equipment, and was not allowed the investment tax credit on the chassis, cab and power train, as they were classified as automotive equipment excluded by paragraph 4600(2)(e) of the Income Tax Regulations.
Notwithstanding the Court's decision in Haliburton the policy of the Department remains that any equipment permanently mounted to a vehicle becomes a component part of that vehicle. If that vehicle is in class 10(a) or class 22 of Schedule II, and is designed for use on highways and streets, neither the mounted unit nor the vehicle qualifies for the investment tax credit.
If you require further information, please contact Mr. Dan McDonald at (613) 992-9121.
Original Signed by J.R. ROBERTSON
J.R. Robertson Director General Audit Directorate
c.c. Jack Gold Appeals Branch
Jim Daman Chief
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© Her Majesty the Queen in Right of Canada, 1985
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© Sa Majesté la Reine du Chef du Canada, 1985
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