Case information

Taxation - Income tax - Assessment - Annual capital cost allowance rate - Master recording as depreciable property under the provincial tax legislation - Tangible or intangible property - Whether a master recording falls under class 8 (j) of Schedule B of the Regulation respecting the Taxation Act, CQLR c. 1 3, r. 1 as tangible depreciable property and as such, providing an annual capital cost allowance rate of 20% for the taxation years 2010, 2011, 2012 and 2013- Regulation respecting the Taxation Act, CQLR c. 1 3, r. 1 -Taxation Act, CQLR c. I 3, s. 130.

Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

Unidisc Music Inc. is a company operating in the music industry. Between 2010 and 2013, Unidisc acquired multiple master recordings and their rights. The master recordings allow the best possible reproduction of a song to later put on a CD or sell it in an electronic format; the company owns thousands of these masters. For its tax declaration of 2010 until 2013, Unidisc treated them as tangible property falling under class 8 (j) of Schedule B of the Regulation respecting the Taxation Act, CQLR c. I 3, r 1 with a depreciation rate of 20%. In 2014, the Agence du revenu du Québec (« ARQ ») refused to give the master recordings a depreciation rate of 20%, representing a value of 3 890 737 $, and instead granted a depreciation rate of 7%, representing 1 297 330 $, under s. 130 (b) of the Taxation Act, CQLR c. I 3. The ARQ considered the master recordings as intangible property. The company received four tax assessments for the years 2010, 2011, 2012 and 2013. In 2015, it challenged the said tax assessments, but the ARQ decided to maintain its assessments. Unidisc appealed the decision before of the Quebec Court. The Quebec Court allowed the appeal from tax assessments issued by ARQ for the years 2010, 2011, 2012 and 2013 and deferred the tax assessment to the minister for a new evaluation and assessment. The Quebec Court of Appeal allowed the appeal and reinstated the original tax assessments.