Excavations Marchand et Fils Inc. v. Agence du revenu du Québec, 2025 QCCQ 378

The taxpayer (“EMF”), which was a construction company engaged in large civil engineering projects such as roads, bridges and natural gas networks, contracted with Hydro-Quebec (“HQ”) for the furnishing, installation and operation of an on-site portable concrete-producing facility for the provision of the concrete in the installation of a large hydro-electric dam at a remote location. In finding that such a contract should be characterized for as the manufacturing of goods (the concrete) for sale, rather than as a contract of service, Trudel JCQ stated (at paras. 48, 59, TaxInterpretations translation):

[T]he evidence shows that the true intention of the parties to the contract was more to ensure, in the construction of the dam, that HQ could obtain supplies of concrete-cement for the purposes of its project to construct “La Romaine 3” power station at all times and continuously, taking into account the challenges linked to the unique conditions of this project. …

The Court cannot consider the control measures and contractual requirements of the client as intrinsic characteristics of a service contract, but must rather considers them as representative of HQ's desire to ensure that its supplier would be able to manufacture in sufficient quantity and supply it with concrete-cement in time and place, taking into account the remoteness of its construction site and the extreme geographical and meteorological conditions of a normal construction site.

He went on to find that the exclusion from a manufacturing operation for “construction” did not apply given the distinctness and separation of this operation from the construction business of the company.

The taxpayer (“EMF”), which was a construction company engaged in large civil engineering projects such as roads, bridges and natural gas networks, contracted with Hydro-Quebec (“HQ”) for the furnishing, installation and operation of an on-site portable concrete-producing facility for the provision of the concrete in the installation of a large hydro-electric dam at a remote location. Trudel JCQ found that such contract should be characterized as for the manufacturing of goods (the concrete) for sale, rather than as a contract of service, given that the predominant intention was to provide for the supply of cement to Hydro-Quebec.

In further finding that the exclusion from a manufacturing operation for “construction” did not apply, he stated (at para. 75, TaxInterpretations translation):

The Court finds the following from the relevant evidence:

- EMF used the ice machine and silos exclusively for the operation of the portable concrete plant and they were therefore of no use to the company's other business lines;

- The concrete produced was sold almost entirely to third parties, primarily to HQ as part of the Romaine 3 and 4 hydroelectric power plant construction projects;

- With a few exceptions, EMF did not use the concrete produced in its other construction business lines;

- The portable plant was moved according to customer needs;

- With rare exceptions, the employees who operated the concrete plant had specific skills and were generally not assigned to the company's other operations;

- The company maintained separate accounting records to determine the respective revenues and expenses of its construction activities and those of its concrete manufacturing and sales.

Accordingly, an ice maker and silos used in the operation qualified as Class 29 property that was qualified property for Quebec investment tax credit purposes.