Principal Issues: [TaxInterpretations translation] Does a Pulstar MIT used by chiropractors qualify as "general-purpose electronic data-processing equipment”?
Position: Our understanding of the information does not allow us to conclude that the property constitutes " general-purpose electronic data-processing equipment” given that we have no indication that the user of the property can modify the registered computer program.
Reasons: It is our view that the property cannot be included in Class 52 of Schedule II to the Regulations because the property is not "general-purpose electronic data processing equipment" as defined in subsection 1104(2) of the Regulations.
XXXXXXXXXX 2009-034086 Anne Dagenais Advocate, M. Fisc. B.A.A. September 7, 2010
Dear Sir,
Subject: Capital Cost Allowance - Class 52
This responds to your letter of September 15, 2009 requesting our opinion as to whether a Pulstar MIT (Multiple Impulse Therapy) device used by chiropractors can be included in Class 52 of Schedule II to the Income Tax Regulations (the "Regulations").
Specifically, this device is a computer with a head that allows repeated pulses to be used to analyze spinal mobility and treat blockages that are detected. The data is collected with each treatment and is kept for future reference and comparison in order to follow the evolution of the patient's condition. Pre-treatment analysis is used in conjunction with the patient's history and other tests such as x-rays to formulate a diagnosis of joint dysfunction that will lead to the treatment plan. Post-treatment analysis is used to confirm the expected results of the treatment performed.
Unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
Our Comments
It appears to us that the situation described in your letter and summarized above could constitute an actual situation involving taxpayers. As explained in paragraph 22 of Information Circular 70-6R5, it is not the practice of this Directorate to provide comments on proposed transactions involving specific taxpayers otherwise than through advance income tax rulings. If your situation involved specific taxpayers and one or more transactions, you should submit all relevant facts and documents to the appropriate Tax Services Office for their opinion However, we are able to offer the following general comments that may be helpful to you.
The question of what particular class in Schedule II to the Regulations a depreciable property falls into is a question of fact that can only be determined after an examination of all the relevant facts of a particular situation.
Subject to certain conditions, property acquired by a taxpayer after January 27, 2009 and before February 2011 that is included in Class 52 of Schedule II to the Regulations is eligible for capital cost allowance at a rate of 100% on a declining balance basis. Class 52 applies, among other things, to general-purpose electronic data-processing equipment and related systems software, including ancillary data-processing equipment, subject to the exceptions in subparagraphs (i) to (iv) of that class.
Subsection 1104(2) of the Regulations defines, among other things, the terms "general-purpose electronic data processing equipment". The definition "general-purpose electronic data processing equipment" means:
electronic equipment that, in its operation, requires an internally stored computer program that
(a) is executed by the equipment,
(b) can be altered by the user of the equipment,
(c) instructs the equipment to read and select, alter or store data from an external medium such as a card, disk or tape, and
(d) depends upon the characteristics of the data being processed to determine the sequence of its execution;
We do not have the information necessary to accurately determine whether the above conditions are met. However, our understanding of the information does not allow us to conclude that the property constitutes "general-purpose electronic data processing equipment" given that we have no indication that the user of the property can modify the computer program stored therein. Accordingly, we are of the view that the property cannot be included in Class 52 of Schedule II to the Regulations.
Furthermore, we are of the view that the device could be included in Class 8 of Schedule II of the Regulations.
These comments do not constitute an advance income tax ruling and are not binding on the CRA in respect of any particular factual situation.
We hope that the above comments will be of assistance and answer your questions.
Best regards,
François Bordeleau, Advocate
Manager
Business and Partnerships Section
Income Tax Rulings Directorate.