An operation of the taxpayer consists of taking products, received in bulk in boxes, and dividing them up by category according to specific customer instructions, such as size, colour and quantity, then packaging the products for sale and distribution to consumers. After noting its position in IT-145R that “the execution of orders from bulk stock is not considered a processing activity where the activities involved consist solely of counting or measuring and repackaging” and the position in Tenneco that “the goods must undergo a change in form, appearance or nature” in order for there to be processing, CRA stated:
[A]lthough the taxpayer's processing activities have the effect of making … [the] products more marketable, we do not believe that there has been any change in the form, appearance or other characteristics of the products. Therefore, the activities carried on by the taxpayer would not be eligible for the manufacturing and processing profits deduction …