P.K. Tang (613) 957-2103
XXXX
January 14, 1987
Dear Sirs:
This is in reply to your letter of December 5, 1986, wherein you request our view as to whether or not your client's business activities are "manufacturing and processing" and therefore would qualify for the "manufacturing and processing profits deduction" for purposes of the Income Tax Act (the "Act"). You inform us that your client
XXXX
Specifically, your concern is whether your client is in the business of "manufacturing" or in the business of "construction".
Our Comments
The term "manufacturing or processing" is not defined in the Act. Paragraph 125.1(3)(b) of the Act specifically provides that it does not include "construction". Based on the limited information provided, we are unable to advise if your client's business is "manufacturing" or "construction" for purposes of the "manufacturing and processing profits deduction" under the Act. We are, however, prepared to offer the following comments for your reference.
As stated in paragraph 5 of Interpretation Bulletin IT-145R the manufacture of goods normally involves the creation of something or the shaping, stamping or forming of an object out of something. The meaning of "construction" is discussed in Interpretation Bulletin IT-411 . Generally, construction refers to those activities normally associated with the on-site fabrication and erection of buildings, roads, bridges, etc. which are intended to be permanently affixed to the land on which they are built. This term does not apply to the manufacture of building products and structures which are transported from the place of manufacture to the place where they are intended to be permanently affixed. Where a corporation enters into a supply and erect contract, the off-site manufacturing of building products is not considered to be construction, whereas the activities of erecting and installing these products at the construction site are considered to be "construction".
We trust the above will be of assistance to you.
Yours truly,
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch