Principal Issues: [TaxInterpretations translation] Must a hydraulic punch, which is lent by the taxpayer to window and door manufacturers, be included by the taxpayer in Class 43 of the Income Tax Regulations?
Position: Yes.
Reasons: The hydraulic punches were acquired after February 25, 1992 and, although they are not included in Class 29 of the Income Tax Regulations, would be so included in the absence of subparagraphs (b)(iii) and (v) and paragraph (c) of Class 29.
XXXXXXXXXX 2008-026802 Nancy Turgeon, CGA September 16, 2008
Dear Sir,
Subject: Class 43 property - hydraulic punch
This is further to your letter of February 6, 2008 in which you asked our opinion on the classification of hydraulic punches for capital cost allowance purposes.
Unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
More specifically, you indicated that your client specialises in the manufacture of PVC profiles and the design of door and window systems. It sells its profiles and window and door manufacturing concepts to manufacturers. The latter, in order to be able to manufacture the doors and windows, have the use of a hydraulic punch that they do not own but which is manufactured for your client by a third party.
The situation you have indicated in your mailing appears to relate to an actual situation concerning a specific taxpayer. As explained in Information Circular 70-6R5, when it comes to determining whether a completed transaction has received appropriate tax treatment, the determination is made first by our Tax Services Offices as a result of their review of all facts and documents, which is usually performed as part of an audit engagement. However, we can offer the following general comments that we hope may be helpful to you. These comments may, however, under certain circumstances, not apply to your particular situation.
Based on the information you have submitted to us, it appears that the hydraulic punches are included in Class 43 of Schedule II of the Income Tax Regulations because they are property that would have been included in Class 29 by virtue of subparagraph (a)(i) of that class had it not been for their date of acquisition.
These opinions do not constitute advance rulings and, as stated in paragraph 22 of Information Circular 70-6R5 of May 17, 2002, are not binding on us.
Best regards,
François Bordeleau, LL.B.
Manager
Business and Partnerships Section
Business and Partnerships Division
Income Tax Rulings Directorate.