Words and Phrases - "maintain"
31 July 2023 Internal T.I. 2021-0876331I7 - SR&ED ITC Recapture Rules
The taxpayer harvests trees, transforms then into logs, and feeds the logs into a new machine being tested for SR&ED purposes. The logs so used in the SR&ED testing are then transformed into finished lumber, which is sold at market prices to an arms-length party. The cost of materials for such SR&ED purposes consists of stumpage fees, harvesting fees, delimbing fees, transportation fees and in-house manufacturing salary and overhead expenses.
After noting that the “the term ‘cost’ includes the full cost of acquiring the property and incorporates all costs that are necessary to put the property into a position to be used,” and that “In general, for a property to be considered to be acquired, an element of beneficial ownership must exist (possession, use, risk, and control,” the Directorate noted that, having regard to s. 127(32), the particular property that was acquired from a transferor appeared to be the trees, for which a stumpage fee was paid and that, conversely, the logs did not appear to so qualify as they were obtained (out of the trees) “as a result of third-party services rendered in respect of the trees.” In addition, since no acquisition of property occurs in connection with manufacturing salary and overhead costs, these amounts cannot be considered an amount paid by the taxpayer to acquire the particular property from a transferor of the particular property.
However, for property manufactured in-house, the cost of each component part and raw material input might qualify as a separate property that was subject to the ITC recapture rules.
Brandon (City) v. Canada, 2010 FCA 244
The City of Brandon (the City), the Province of Manitoba and Maple Leaf Meats Inc. (Maple Leaf) agreed that the latter would establish a hog processing plant (the Plant) within the City. The Plant would produce wastewater in quantities that could not be accommodated by the City’s existing wastewater treatment facilities. As a result, it was agreed that the City would construct a new wastewater treatment facility, at no cost to Maple Leaf, to process the wastewater produced by the Plant. The operating costs (plus a fee for overhead and administration) would initially be borne by the City, to be charged back to Maple Leaf on a cost recovery basis.
Pelletier JA first noted (at para. 39) that “no matter how one reads the sentence [in s. 22 of the English version], it is ungrammatical and ambiguous,” but then stated (at paras. 41, 44-45), before finding that the supply made by the City was exempted under s. 22:
The primary sense of the verb [“entrenir”] is sufficiently broad to include and, in my view, does include, the operation of a thing or a system. …
As for the meaning of the verbs “to maintain” and “entretenir”, there is an overlap between the two versions, with the French verb emphasizing a meaning which is present in English, though not as the primary meaning. … As a result, I would conclude … that section 22 is broad enough to include the “operation” of the wastewater disposal facility by the City.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Schedules - Schedule V - Part VI - Section 21 | s. 21 inapplicable because private company was not contractually obligated to provide its wastewater to the City plant | 304 |
| Tax Topics - Statutory Interpretation - French and English Version | French version brought out the secondary meaning of “maintain” in ungrammatical English version | 240 |
2 March 2015 External T.I. 2014-0527281E5 F - Tenir un établissement domestique autonome
In affirming the position taken in 2013-0484781E5 F, CRA stated:
[I]f an individual is not the owner or the tenant of a self-contained domestic establishment (or the co-owner or the roommate) but pays the expenses of the self-contained domestic establishment on a regular basis because the establishment is under his or her responsibility…[then] the individual maintains a self-contained domestic establishment. …
Furthermore, if [the] individual… [instead] only contributes to certain expenses of another person who maintains a self-contained domestic establishment, in a random and irregular manner,…[then] the individual does not maintain a self-contained domestic establishment.
In… 2013-0484781E5…the individual contributed only randomly and irregularly to the expenses of the person maintaining the self-contained domestic establishment.
Spannier v. The Queen, 2013 TC 40
The taxpayer lived in a house in Kelowna from 2005 to 2011, except for a period in 2007 and 2008 where she stayed 20 out of every 28 days in Fort McMurray for work at a job site there (she spent most of the balance in Kelowna). The Minister assessed her for an employee benefit on her housing allowance for Fort McMurray, on the basis that she had not satisfied the conditions of s. 6(6) - in particular, that her Kelowna accommodation:
- was not a self-contained domestic establishment;
- was not her principal place of residence; and
- was not maintained by her.
Graham J. found that the conditions had been satisfied and granted the taxpayer's appeal.
The Minister's arguments relating to the first two points were based chiefly on the eight days spent at the taxpayer's alleged principal residence to her 20 days spent near her job site. In rejecting these arguments, Graham J. stated (at para. 24):
The purpose of subsection 6(6) is to ensure that taxpayers who are forced to incur expenses because of temporary work away from their homes are not taxed on a reasonable allowance provided by their employer to cover such expenses. Taxation on such an allowance would leave the taxpayer worse off for having traveled for work as they would have to pay for their temporary accommodations with after tax dollars.
He found that the purpose of s. 6(6) would be frustrated if the taxpayer's appeal were denied.
Regarding the third point, Graham J. stated (at para. 43):
I find that in the context of subsection 6(6), "maintain" means "preserve for use" or "keep available". ... The intention of the subsection is that the relief is only available to taxpayers who keep a residence available for their use while they are away on work. A taxpayer who does not keep such a residence available has, in essence, moved to the remote work site.
Under that interpretation, it was clear that the taxpayer had maintained her Kelowna accommodations for the purpose of s. 6(6), notwithstanding that the house belonged to a family friend and she stayed there free of charge.