Words and Phrases - "used directly or indirectly"

Meaning of used directly or indirectly

1.52 The phrase used directly or indirectly...includes any ancillary equipment such as furniture and fixtures, repair and maintenance equipment, and fire extinguishing equipment, which is acquired for use in those activities. Although such equipment is generally located in the manufacturing or processing plant, it may also qualify if located elsewhere. Furniture and equipment acquired by the taxpayer for use by the taxpayer or lessee primarily in activities such as selling, distribution, and administration, which are not manufacturing or processing, are not eligible for the accelerated write-off.

1.53 Direct or indirect use of a computer in manufacturing or processing is considered to include direct manufacturing and processing applications. It can also include ancillary activities such as maintaining inventory records, production scheduling, engineering design, and production control. It would not include the maintenance of financial and accounting information such as accounts receivable and payable records, general ledger accounts, payroll records, customer lists, and sales invoices and analyses.

Meaning of principal business in (a)(ii)

1.56 In determining the nature of a taxpayer's principal business as described in [(a)(ii)], the following factors will be considered:

• the number of employees engaged in each branch or phase of a company's operations;
• the amount of gross revenue from each phase of operations; and
• the amount of capital employed in each phase of operations.

1.57 Ordinarily, the above factors will be considered in relation only to a specific year. However, when a company's normal activities have ceased or substantially decreased, the pattern of operations over several years may be considered in determining whether there has been only a temporary break in the normal activities of the company or an actual change in the principal business.