Dear Sirs:
Re: Paragraph 20(1)(cc) of the Income Tax Act (the "Act")
This is in reply to your letter of April 10, 1991, requesting our views on whether the expenditures incurred in making representations before the Copyright Board and the expenditures incurred in making representations to the Federal Court on appeal are deductible under paragraph 20(1)(cc) of the Act.
Our Comments
Generally, the capital cost of a limited period copyright (class 14 property) includes the purchase price, if any, and any legal fees and disbursements, registration fees and representation expenses laid out to acquire the property. However, expenses paid in a year in making a representation, relating to a business being carried on by a taxpayer, a government, government agency or other body referred to in paragraph 20(1)(cc), including any representation for the purpose of obtaining a licence, permit, franchise or patent, are deductible under paragraph 20(1)(cc) (or if an election is made, under subsection 20(9)). Subsection 13(12) deems the amount deducted under paragraph 20(1)(cc) or subsection 20(9) to have been allowed a capital cost allowance. In the case of such expenses of representations having been incurred with respect to a copyright, our general position on expenditures of representation fees is stated in paragraph 7 of Interpretation Bulletin IT-99R3.
As the Copyright Board appears to have the power to make rules relating to the business carried on by a taxpayer, we presume that expenses incurred in making representations to the Board would generally be deductible pursuant to paragraph 20(1)(cc) of the Act. Expenses incurred to appeal a decision of the Board to the Federal Court would not be deductible pursuant to paragraph 20(1)(cc) of the Act, although, depending on the circumstances, such expenses could be deductible pursuant to subsection 9(1) of the Act.
Generally, the costs to protect such a copyright and any payments made to some other person to refrain from contesting the copyright are allowable deductions in computing income pursuant to subsection 9(1) and Generally Accepted Accounting Principles. It is important to note, however, that each case of this nature is to be decided on its own facts.
We trust our comments will be of assistance to you.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch