| 19(1) | File No. 900369 |
| John Chan | |
| (613) 952-9019 |
April 30, 1990
Dear Sirs:
Re: Request for Technical Interpretation - Paragraph 66(15)(h) of the Income Tax Act (the "Act")
We are writing in reply to your letter dated April 6 wherein you requested a copy of our reply to your letter dated December 3, 1982. In this respect we enclose a copy of our letter dated February 21, 1983.
Our position is unchanged from that stated in the February 21, 1983 letter in which we opined that a corporation deriving its income primarily from the provision of services would not be considered a "principal business corporation" within the meaning of paragraph 66(15)(h) of the Act, notwithstanding that the services provided are in respect of activities described therein.
Paragraph 66(15)(h) of the Act provides the criteria for determining whether a corporation qualifies as a principal business corporation ("PBC"). In order to so qualify, the corporation's principal business operations must consist of the activities and purposes described in that paragraph which includes, inter alia, exploring and drilling for petroleum or natural gas.
The determination would be one of fact which must be considered by reference to the various activities in which the corporation is engaged. All activities of the corporation throughout the relevant taxation year must be considered.
The activities included in exploring and drilling for petroleum or natural gas are described at paragraph 9 of Interpretation Bulletin IT-400. It is our view that where a corporation is not engaged in exploring and drilling for petroleum or natural gas but instead is primarily performing particular services involved therein, that corporation would not have satisfied the criteria for qualifying as a PBC.
The above comments are merely the expressions of opinion of those Revenue Canada officials named herein and as such should not be construed as advance income tax rulings, nor are they binding on the Department. Our practice is to make this specific disclaimer in all instances in which we provide an opinion. We refer you in this respect to paragraphs 21 and 24 of Information Circular 70-6R.
Yours truly,
J.T. GauvreauChiefResource Industries SectionBilingual Services & Resource Industries DivisionRulings Directorate
Enclosure