| 24(1) | File No. 5-9115 |
| V. Plant | |
| (613) 957-4796 |
April 6, 1990
Re: Investment Tax Credit - Qualified Transportation Equipment
This is in reply to your letter of November 17, 1989 requesting a "ruling" on whether certain equipment qualifies as qualified transportation equipment under paragraph 4601(e) of the Income Tax Regulations (the "Regulations") and thereby qualifies for the investment tax credit.
You have referred to an opinion letter written by this Department June 24, 1983, with which you are not in agreement. The response to the letter was based on the Income Tax Act (the "Act") as written in French at the time. Subsequent to the date the opinion was issued the wording of the relevant Regulation was changed but only in French, not in English. You wish us to look at the same facts to see if our response will not change due to the change in the wording of the Act.
The facts we looked at in 1983 are the following:
24(1)
24(1)
At the time we originally examined this issue, sub-paragraph 4601(e)(ii) of the Regulations in the French Act, referred to:
"des machines ou du materiel compris dans la categorie 7 all 8 de l'annexe II qui sont des elements accessoires qui font partie dun bien vise..."
Based on this wording of the Act our conclusion was that the cranes would not be qualified transportation equipment because they were not "part" of" property that is qualified transportation equipment such as a truck, a tractor, a trailer or a ship.
Regulation 4601(e)(ii) of the Act, in French was amended applicable to 1985 and subsequent years, to read "...des elements accessories utilises avec des biens vises...". There was no change to the wording of the Act in English and the relevant sub-paragraph" has always read "ancillary to and used as part of...".
OUR COMMENTS
We agree that the machinery or equipment does not have to be attached to the vessel, truck, tractor or trailer. However, per sub-paragraphs 4601(c)(ii) and 4601(e)(ii) of the Regulations the vessel, truck, tractor or trailer must itself be qualified transportation equipment as defined in subsection 127(9) of the Act. We assume that this is in fact the situation. It therefore is necessary to determine whether the crane is "ancillary, to and used as part of" the vessel, truck, tractor or trailer. Since these terms are not defined in the Act, we must look to their ordinary meaning. Based on the definition of the term "ancillary" in various dictionaries, it is our view that in order for the cranes to be considered to be ancillary to a vessel, trucks, tractor, or trailer, they must serve in a subsidiary, subservient or auxiliary role-that is they must be accessories or of secondary importance.
In addition to being "ancillary to", the cranes must be "used as part of" the vessel, truck, tractor or trailer. We must again turn to the dictionary meaning. Per the Standard Oxford Dictionary, a part is "an essential or integral portion; something essentially belonging to a larger whole; a constituent, element." This suggests that the cranes must be used as though they were part of the larger whole, which would be the ship, tractor, truck or trailer.
We hope these comments will be of assistance. However, they represent an opinion, and not an advance income tax ruling and accordingly are not binding on Revenue Canada, Taxation.
Yours truly,
for DirectorBilingual Services and ResourceIndustries DivisionRulings Directorate