28 October 1997 External T.I. 9719085 - M&P

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

is there a need to amend def of cost of capital in Reg 5202?

Position:

Yes

Reasons:

Def of canadian investment income(repealed) and acummulated investment income are different in 129(4)

	                             	971908
XXXXXXXXXX	                              S.Tevlin

Attention: XXXXXXXXXX

October 28, 1997

Dear Sirs:

Re: Manufacturing and Processing Tax Credit

We are writing in response to your letter dated July 11, 1997 wherein you asked for our opinion with respect to the above noted subject.

In particular you have asked if:

i)the definition of "aggregate investment income" in subsection 129(4) of the Income Tax Act (the "Act") replaces the definition of "Canadian investment income", which has been repealed, and

ii)for the purpose of Regulation 5202 of the Income Tax Act Regulations, does subsection 129(6) of the Act modify the definition of "aggregate investment income" in subsection 129(4) of the Act?

In this regard we offer the following comments.

i)Subsection 129(4) of the Act formerly defined "Canadian investment income" for purposes of subsection 129(3) of the Act. The amendment to subsection 129(4) to add the definition of "aggregate investment income" was made in order to replace the repealed definition "Canadian investment income" and to have the new definition apply to section 129.

ii)It is noted that paragraph (d) in the definition of "cost of capital" in Regulation 5202 still contains the reference to the definition of "Canadian investment income" which was repealed and replaced as described in (i) above. We have made a recommendation that an amendment be made to paragraph (d) to replace the term "Canadian investment income" with the term "aggregate investment income". This would allow subsection 129(6) to have application to subsection 129(4), for purposes of Regulation 5202.

The foregoing comments are given in accordance with the practice referred to in paragraph 22 of Information Circular 70-6R3 dated December 30, 1996 and are not binding on Revenue Canada, Taxation.

Yours truly,

for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch