Armand Guay Inc. (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Pratte J.—Quebec, December 3;
Ottawa, December 11, 1973.
Income tax—Capital cost allowance—Classification of
machinery—Income Tax Regulations, Schedule B, classes
10, 22.
A crane used for lifting was classified by the Minister of
National Revenue as being in class 10 of Schedule B of the
Income Tax Regulations and accordingly plaintiff was en
titled to deduct only 30 per cent of the capital cost of these
items from its income. The plaintiff claimed to be entitled to
have the crane classified under class 22 of Schedule B in
that the crane was designed to perform other tasks such as
excavation, referred to in class 22.
Held, the appeal is allowed. A piece of machinery may be
intended for several uses, and as long as the wording of
Schedule B does not require that the crane be used exclu
sively for the purposes mentioned in class 22, it can be
placed in this class.
APPEAL.
COUNSEL:
Jean Marier and Pierre Boulanger for
plaintiff.
Réal Favreau and Louise Lamarre-Proulx
for defendant.
SOLICITORS:
Létourneau, Stein, Marseille, Delisle and
LaRue, Quebec, for plaintiff.
Deputy Attorney General of Canada for
defendant.
PRATTE J.—Plaintiff is appealing from an
assessment, dated May 9, 1972, determining the
amount of income tax payable by it for the year
1970.
In making this assessment the Minister of
National Revenue considered that the mobile
cranes owned by plaintiff should be placed in
class 10 of Schedule B of the Income Tax
Regulations, and accordingly that plaintiff was
entitled to deduct 30 per cent of the capital cost
of these items from its income. Plaintiff claims
to be entitled to deduct from its income 50 per
cent of the cost of this machinery, which it
submits should be placed in class 22 of
Schedule B.
The appeal therefore raises one question only,
as to whether these mobile cranes should be
placed in class 10 or class 22 of Schedule B.
At the hearing plaintiff submitted as Exhibit
P-2 a list of the mobile cranes owned by it in
1970. It admitted that the three cranes men
tioned at the beginning of this list should be
placed in class 10. The case is therefore con
cerned only with the manner in which the other
cranes mentioned in Exhibit P-2 should be
classified.
Under Schedule B the items falling within
class 10 are:
[a] contractor's movable equipment (including portable
camp buildings), other than a property included in class 22.
Class 22 includes:
Property acquired after March 16, 1964, that is power-
operated movable equipment designed for the purpose of
excavating, moving, placing or compacting earth, rock, con
crete or asphalt, but not including a property that is included
in class 7.
It is established that plaintiff's cranes are
mobile, that they are power-operated and that
they were acquired after March 16, 1964.
Defendant contends, however, that they were
not intended for the uses referred to in class 22.
The evidence indicated that although plain
tiff's mobile cranes are primarily lifting ma
chinery, they were sold with accessories ena
bling them to be used for other purposes,
including excavation.
Defendant does not dispute that plaintiff uses
its cranes regularly for the purposes mentioned
in class 22. However, she argues that the cranes
were designed for lifting, and the fact that they
might be used for other work does not change
their intended use.
Plaintiff does not deny that its cranes are
lifting machinery, but maintains that they were
also designed to perform many of the tasks
referred to in class 22. As the wording of
Schedule B does not require that property in
class 22 be intended exclusively for the pur
poses mentioned, plaintiff concludes that its
cranes should be placed in this class.
In my view plaintiff is correct. A piece of
machinery may be intended for several uses.
This is true of plaintiff's cranes, which are sold
with accessories enabling them to be used inter
changeably as excavators and as lifting and han
dling machinery. When one of plaintiff's cranes
has on it the required accessory equipment to be
used for excavation, I think it must be regarded
as machinery "designed for the purpose of
excavating ..."; and the fact that with other
accessory equipment the machine can perform
other tasks in no way changes this.
It is my opinion, therefore, that plaintiff's
mobile cranes should have been placed in class
22, not in class 10.
The appeal is allowed with costs and the
assessment referred back to the Minister of
National Revenue for a new assessment to be
made based on the assumption that the mobile
cranes of plaintiff mentioned in Exhibit P-2 are,
with the exception of the first three, to be
placed in class 22 of Schedule B of the Income
Tax Regulations.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.