Citation: 2013 TCC 44
Date: 20130327
Docket: 2012-3408(GST)I
BETWEEN:
FP NEWSPAPERS INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AMENDED REASONS FOR JUDGMENT
Pizzitelli J.
[1]
The Appellant, a
corporation that owned 6,902,592 Class A Limited Partnership units in a Limited
Partnership known as FPLP (the “Partnership”) that carried on the business of
newspaper publishing and printing, was denied Input Tax Credits (“ITCs”) of
$15,943.33 pursuant to an Excise Tax Act (the “Act”) assessment
and objected to the denial of only $5,039.77 of such ITCs which was confirmed
by the Minister of National Revenue (the “Minister”). The only issue to be
decided then is whether the Appellant is entitled to claim $5,039.77 in ITCs
for the period January 1, 2011 to March 31, 2011 on the basis that it was a registrant
under the Act who acquired services for consumption, use or supply in
the course of an activity of a partnership of which it was a member pursuant to
section 272.1 of the Act or on the basis it was otherwise engaged in
commercial activities.
[2]
The parties filed an
Agreed Statement of Facts (the “ASF”) immediately before the hearing which was
accepted by the Court. In brief, the ASF sets out that the Appellant was the
corporate successor to an Income Trust that converted to a corporate structure
on December 31, 2010 pursuant to an Advisory Services Agreement that resulted
in the Appellant owning the assets and being liable for all the liabilities of
the Income Trust. As part of this reorganization, the Appellant acquired the
Limited Partnership units above mentioned entitling it to 49% of the
distributable cash of the Limited Partnership. Under the terms of an
Amended Certificate of Limited Partnership for the Partnership dated
November 9, 2010, which of course applied to the Limited Partnership units
later acquired by the Appellant, the Appellant or any limited partner was not
required to provide any property or services besides the initial contribution
of cash at the time the partnership units were purchased. The Appellant was not
a general partner of the Partnership either.
[3]
Pursuant to a brief
Advisory Services Agreement dated December 31, 2010, the Appellant and the
Partnership agreed that the Appellant would give the Partnership advice
regarding capital investments and expenditures, financing options and
opportunities and such other advisory services as mutually agreed upon, in
consideration of a payment of $1,212.75 each calendar quarter; with only two
payments having been made pursuant to invoices applicable to the first two
quarters of 2011. The Appellant charged GST of $60.64 on such fees for each
quarter. Under paragraph 2.2 of the Advisory Services Agreement under the
Heading “Advisor Not Participating in Management”, was the following provision:
It
is the intention of the parties that the Advisor is only providing advice to
FPLP and is in no way participating in the administration, operation,
management or control of FPLP or its business and any action by the Advisor
which purports to take any such prohibited action will be null, void and of no
force or effect.
[4]
In addition, as per paragraph
29 of the ASF, under the Advisory Services Agreement the Appellant was
responsible to pay, without reimbursement by the Partnership, all employment
expenses, rent, other office expenses, miscellaneous expenses, and all other
costs, expenses, and disbursements incurred in connection with providing the
advisory services.
[5]
In addition, paragraph
31 of the ASF provides that the Appellant’s share of equity interest from the
Partnership was $3,865,000 for the first six months of 2011 ending June 30, 2011,
the same period for which is received a total of $2,425.50 for its advisory
services which the parties agreed was a negligible component of the Appellant’s
business activities and a negligible source of income for the Appellant. In
fact, in paragraph 33 of the ASF, the parties agreed: “At all material times,
all or substantially all of the Appellant’s business activities consisted
of its investment in the Partnership”. There is no dispute then that almost all
of the Appellant’s income for that period came from its investment in the
Partnership through its holdings of the limited partnership units.
[6]
It should also be
mentioned that the ASF included agreement as to the invoices containing the GST
paid for which the Appellant claimed ITCs as well as a listing and general
description of the subject matter of those invoices; all in attached Schedule E
to the ASF. Clearly, there is no dispute that these invoices related to
distribution of dividends to the Appellant’s shareholders, news releases
respecting dividends and quarterly results of the Appellant, the listing fee
for the conversion from an Income Trust to a corporation, legal and accounting
fees for consultation and advice pertaining to the trust conversion and related
matters. The only invoice that might be said to be in any way related to the
Partnership was an invoice regarding a news release regarding the acquisition
of a printing business by the Partnership for which GST of $38.40 was paid
although it is in my view clear that such news release issued by the Appellant
was intended to highlight the potential growth of the underlying assets owned
by the Appellant and hence was for its benefit and not that of the Partnership.
Position of the Parties
[7]
The Appellant takes the
position, relying on section 272.1 of the Act, that since it is a member
of the Partnership that it is deemed to be carrying on the commercial
activities of the Partnership, i.e., the newspaper publishing and printing
business and hence since it is engaged in this commercial activity and really
no other, that it can claim the ITCs denied it regardless of whether the
GST or HST payments it made were not otherwise for the direct benefit or
account of the Partnership. Moreover, says the Appellant, since the invoices
admittedly pertain to the set up and reorganization costs of the Appellant
relating to the conversion from an Income Trust to corporate structure above
discussed, or related to incidental financial services that are deemed to be
part of the Appellant’s commercial activities, that these expenses qualify as
relating to the above commercial activities pursuant to subsections 141.1(3)
and 185(1) of the Act. In essence says the Appellant, a partner is
deemed to carry on the commercial activities of the Partnership and all its ITCs
paid, whether pertaining to incidental financial services or start-up costs
relating to the Appellant and not the Partnership, are to be treated as ITCs in
relation to its deemed commercial activities; namely GST and HST paid on costs
incurred by a registrant for consumption, use or supply in the course of
activities of the Appellant deemed to be the commercial activities of the
Partnership.
[8]
The Respondent
disagrees, arguing the Appellant is taking a far too broad interpretation of section
272.1 of the Act, in that the Appellant was not acting as a member of
the Partnership in incurring such charges and that the charges have no link or
connection to the commercial activities of the Partnership and hence were not
for the consumption, use or supply in the course of activities of the
Partnership. In addition, the Respondent takes the position that the Appellant was
primarily providing exempt services for which no ITCs can be claimed and that
where substantially all of the consumption or use for which a person, other
than a financial institution, is in the course of particular activities of a
person that are not commercial activities, all of the consumption or use of the
property or services by the person shall be deemed to be in the course of those
particular activities pursuant to subsection 141(3) of the Act. The Respondent
disputes that the Appellant supplies any exempt supplies and argues receiving
exempt supplies, like interest payments on its partnership units is not the
same as being in a non-commercial activity or supplying exempt supplies.
The Law
[9]
The relevant provisions
of the Act are:
169. (1) Subject to this Part, where a person acquires or imports
property or a service or brings it into a participating province and, during a
reporting period of the person during which the person is a registrant, tax in
respect of the supply, importation or bringing in becomes payable by the person
or is paid by the person without having become payable, the amount determined
by the following formula is an input tax credit of the person in respect of the
property or service for the period:
A × B
where
A is the tax in respect of the supply,
importation or bringing in, as the case may be, that becomes payable by the
person during the reporting period or that is paid by the person during the
period without having become payable; and
B is
(a) where the tax is deemed under
subsection 202(4) to have been paid in respect of the property on the last day
of a taxation year of the person, the extent (expressed as a percentage of the
total use of the property in the course of commercial activities and businesses
of the person during that taxation year) to which the person used the property
in the course of commercial activities of the person during that taxation year,
(b) where the property or service
is acquired, imported or brought into the province, as the case may be, by the
person for use in improving capital property of the person, the extent
(expressed as a percentage) to which the person was using the capital property
in the course of commercial activities of the person immediately after the
capital property or a portion thereof was last acquired or imported by the
person, and
(c) in any other case, the extent
(expressed as a percentage) to which the person acquired or imported the
property or service or brought it into the participating province, as the case
may be, for consumption, use or supply in the course of commercial activities
of the person.
…
123. (1) In section 121, this Part and Schedules V to X,
…
“commercial activity” of a person means
(a) a business carried on by the
person (other than a business carried on without a reasonable expectation of
profit by an individual, a personal trust or a partnership, all of the members
of which are individuals), except to the extent to which the business involves
the making of exempt supplies by the person,
(b) an adventure or concern of
the person in the nature of trade (other than an adventure or concern engaged
in without a reasonable expectation of profit by an individual, a personal
trust or a partnership, all of the members of which are individuals), except to
the extent to which the adventure or concern involves the making of exempt
supplies by the person, and
(c) the making of a supply (other
than an exempt supply) by the person of real property of the person, including
anything done by the person in the course of or in connection with the making
of the supply;
…
“exempt supply” means a supply included in Schedule
V; …
SCHEDULE V
(Subsection 123(1))
EXEMPT SUPPLIES
PART VII
FINANCIAL SERVICES
1. A supply of a financial service that is
not included in Part IX of Schedule VI.
2. A supply deemed under subsection 150(1)
of the Act to be a supply of a financial service.
…
123. (1)
…
“taxable supply” means a supply that is made in the
course of a commercial activity;
…
“financial service” means
…
(d) the issue, granting,
allotment, acceptance, endorsement, renewal, processing, variation, transfer of
ownership or repayment of a financial instrument,
…
(f) the payment or receipt of
money as dividends (other than patronage dividends), interest, principal,
benefits or any similar payment or receipt of money in respect of a financial
instrument,
…
“financial instrument” means
(a) a
debt security,
(b) an
equity security, …
(d) an interest in a partnership, a
trust or the estate of a deceased individual, or any right in respect of such
an interest,
…
141. (1) For the purposes of this Part, where substantially all of
the consumption or use of property or a service by a person, other than a
financial institution, is in the course of the person’s commercial activities,
all of the consumption or use of the property or service by the person shall be
deemed to be in the course of those activities. …
(3) For the purposes of this Part, where
substantially all of the consumption or use of property or a service by a
person, other than a financial institution, is in the course of particular
activities of the person that are not commercial activities, all of the
consumption or use of the property or service by the person shall be deemed to
be in the course of those particular activities.
…
141.1 (3) For the purposes of this Part,
(a) to the extent that a person
does anything (other than make a supply) in connection with the acquisition,
establishment, disposition or termination of a commercial activity of the
person, the person shall be deemed to have done that thing in the course of
commercial activities of the person; and
(b) to the extent that a person does
anything (other than make a supply) in connection with the acquisition,
establishment, disposition or termination of an activity of the person that is
not a commercial activity, the person shall be deemed to have done that thing
otherwise than in the course of commercial activities.
…
185. (1) If tax in respect of property or a service acquired,
imported or brought into a participating province by a registrant becomes
payable by the registrant at a time when the registrant is neither a listed
financial institution nor a person that is a financial institution because of
paragraph 149(1)(b), for the purpose of determining an input tax credit of
the registrant in respect of the property or service and for the purposes of
Subdivision d, to the extent (determined in accordance with subsections
141.01(2) and 141.02(6)) that the property or service was acquired, imported or
brought into the province, as the case may be, for consumption, use or supply
in the course of making supplies of financial services that relate to
commercial activities of the registrant,
(a) if the registrant is a financial
institution because of paragraph 149(1)(c), the property or service is
deemed, despite subsections 141.01(2) and 141.02(6), to have been so acquired,
imported or brought into the province for consumption, use or supply in the
course of those commercial activities except to the extent that the property or
service was so acquired, imported or brought into the province for consumption,
use or supply in the course of activities of the registrant that relate to
(i) credit cards or charge cards
issued by the registrant, or
(ii) the making of any advance, the
lending of money or the granting of any credit; and
(b) in any other case, the property or
service is deemed, despite subsections 141.01(2) and 141.02(6), to have been so
acquired, imported or brought into the province for consumption, use or supply
in the course of those commercial activities.
…
272.1 (1) For the purposes of this Part, anything done by a person as
a member of a partnership is deemed to have been done by the partnership in the
course of the partnership’s activities and not to have been done by the person.
(2) Despite subsection (1), if property or a
service is acquired, imported or brought into a participating province by a
member of a partnership for consumption, use or supply in the course of
activities of the partnership but not on the account of the partnership, the
following rules apply:
(a) except as otherwise provided in
subsection 175(1), the partnership is deemed
(i)
not to have acquired or
imported the property or service, and
(ii)
where the property was
brought by the member into a participating province, not to have so brought it
into that province;
(b) where the member is not an
individual, for the purpose of determining an input tax credit or rebate of the
member in respect of the property or service and, in the case of property that
is acquired or imported for use as capital property of the member, applying
Subdivision d of Division II in relation to the property, subsection (1) does
not apply to deem the member not to have acquired or imported the property or
service and the member is deemed to be engaged in those activities of the
partnership; and
(c) where the member is not an
individual and the partnership at any time pays an amount to the member as a
reimbursement and is entitled to claim an input tax credit in respect of the
property or service in circumstances in which subsection 175(1) applies, any
input tax credit in respect of the property or service that the member would,
but for this paragraph, be entitled to claim in a return of the member that is
filed with the Minister after that time shall be reduced by the amount of the
input tax credit that the partnership is entitled to claim.
Analyses
[10]
I propose to firstly
analyse what the activities of the Appellant were in order to determine whether
the Appellant was engaged in commercial activities regardless of the deeming
provisions of section 272.1 and then consider whether the provisions of section
272.1 would change the Appellant’s entitlement to the ITCs claimed. During such
process, I will consider whether it is necessary to deal with the other
mentioned provisions of the Act above and if so address them
accordingly.
1.
The activities
of the Appellant
[11]
The Respondent takes
the view that the Appellant’s activities consist of non‑commercial
activities, regardless of the application of section 272.1 while the Appellant
disagrees.
[12]
The Appellant in fact
argues that it does not primarily make exempt supplies while the Respondent
argues it does based on the definitions under the Act and so cannot be
entitled to ITCs as it was not primarily engaged in commercial activities
[13]
There is no argument
that subsection 169(1) above set out is the general rule for claiming input tax
credits and effectively states that a registrant can claim as an ITC the GST
that was paid in respect of property or services that was used by the
registrant in the course of its commercial activities.
[14]
In a constitutional
challenge to the Federal Goods and Services Tax by the Province of Alberta in Reference
re: Goods and Services Tax (GST) (Can.), [1992] 2 S.C.R. 445, at
paragraphs 2 to 4 the Supreme Court of Canada set out the scheme of the Act
relating to the claiming of input tax credits, effectively stating that to the
extent a purchaser of a taxable supply uses that good or service in the
production of other taxable supplies, it is entitled to claim input tax credits
and by definition to the extent that taxable supplies are not used by the
purchaser to produce other taxable supplies, they are consumed by the purchaser
and hence it is not able to claim the input tax credit or recover the tax it so
paid. Likewise, the Court explained, exempt supplies and zero-rated
supplies do not attract any tax, however, in exempt supplies, the vendor, while
paying GST on purchases, cannot claim the input tax credit thereon.
[15]
Based on the above
section and the scheme of the Act pertaining to input tax credit, it is
clear that if the Appellant is not buying taxable supplies for use in the
production of taxable supplies, whether goods or services, or sells exempt
supplies, then he cannot claim input tax credits.
[16]
The question then
becomes whether the Appellant is selling taxable supplies. Subsection 123(1) above
defines a “taxable supply” as a supply that is made in the course of a
commercial activity. A “commercial activity” is defined in the same subsection
123(1) as a business carried on by the person except to the extent to which the
business involves the making of exempt supplies. “Exempt supplies” is defined
to include a supply included in Schedule V of Part VII of the Act, which
in turn lists the exempt supplies which includes “financial services”.
Financial Services is in turn also defined in paragraphs 123(1)(d) and (f)
as follows:
d) the
issue, granting, allotment, acceptance, endorsement, renewal, processing, variation,
transfer of ownership or repayment of a financial instrument; …
f) the
payment or receipt of money as dividends (other than patronage dividends),
interest, principal, benefits or any similar payment or receipt of money in
respect of a financial instrument.
[17]
A “financial
instrument” under subsection 123(1) includes (a) a debt security, (b) an equity
security and (d) an interest in a partnership or any right in respect of such
interest.
[18]
The facts in this case
as agreed in the ASF clearly establish that the Appellant’s reason for
existence was to hold the limited partnership units in the Partnership it
acquired as a result of the reorganization of the Income Trust to the corporate
structure discussed earlier. The ASF also establishes that the Appellant’s
share of the Partnership’s income for the six-month period ending June 30, 2011,
was $3,865,000 and that it paid dividends to its shareholders from income it
received from the Partnership. It is clear from the definitions above that the
acquisition of the partnership units, the receipt of interest from the Partnership
as well as the payment of dividends to its shareholders are all exempt supplies
and hence are not commercial activities. The definitions speak of receipt as
well as payment to, and so both transactions are considered exempt supplies and
hence all these activities are not considered a business that would qualify as
a commercial activity of the Appellant and are activities that make up all or
substantially all of the Appellant’s business activities. What then is left?
The Appellant does nothing else other than provide the negligible advisory
services for negligible income, as it so agreed in the ASF, to the Partnership
under the Advisory Services Agreement earlier referred to. It has no other
activities of any kind other than activities not considered commercial
activities by definition. If it has no commercial activity, then the services
it supplies cannot be considered taxable supplies by definition above.
[19]
It is clear from the
facts the Appellant carries on no commercial activities other than self-admitted
negligible advisory activity for which it received a total of $1,212.75 during
the period covered under this appeal and which, as negligible, do not
constitute anywhere near all or substantially all of its business activities as
also admitted. Subsection 141(3) of the Act provides that where all or
substantially all of the consumption or use of property or of a service by the
registrant is in the course of particular activities that are not commercial
activities, then all of the consumption or use of the property or service by
the person will be deemed to be in the course of those activities. As the
Respondent has pointed out, the case law is clear from numerous decisions including
Gamache v. R., 2002 FCA 254, [2002] G.S.T.C. 70 (F.C.A.), a
decision of the Federal Court of Appeal, that “substantially all” means at
least 90% and in the case at hand we are almost at 100% regardless of the
deeming section. Accordingly, the services purchased by the Appellant for which
it claims an input tax credit are deemed to be fully for non‑commercial
activities and the Appellant is thus not entitled to claim ITCs in their
regard.
[20]
It follows as well, as
the Respondent has pointed out, that if the Appellant has no commercial
activities then it cannot be providing any taxable supplies and so accordingly
it cannot claim any ITCs based on the above definitions as alluded to in the Supreme
Court of Canada’s decision in Reference re: Goods and Services Tax above.
[21]
I believe that save for
any exception to the above rules, the Appellant cannot be said to be conducting
any business involving commercial activities for the purposes of the Act.
The Appellant of course argues there is such an exception to the general rules
and law above in the manner that section 272.1 applies.
2.
Section 272.1
applicability
[22]
The Appellant relies on
a combination of subsections 272.1(1) and (2) to justify its position that the
activities of the Partnership are the activities of the Appellant who is a
partner and hence it carries on the commercial activity of publishing
newspapers and printing and is entitled to all ITCs as earlier stated.
[23]
The Appellant argues in
paragraphs 12 and 13 of its written submissions that for GST/HST purposes, subsection
123(1) of the Act defines a “person” so as to include a partnership whereas
pursuant to common law the partnership is not a separate legal entity and the
business of the partnership is one and the same as the business of the partners.
This results in a duality of two “persons” carrying on the same business hence
an anomaly unique to GST/HST matters.
[24]
Subsection 272.1(1),
argues the Appellant, removes the threat of double taxation of the business
transaction due to the above anomaly by providing that anything done by a
person as a member of a partnership is deemed to have been done by the
partnership and not by the partner, effectively aligning the responsibility for
GST /HST reporting to only one person, the partnership, who is the taxpayer for
purposes of the GST/HST Part IX of the Act. Indeed, the provision reads:
272.1
(1) For the purposes of this Part, anything done by a person as a
member of a partnership is deemed to have been done by the partnership in the
course of the partnership’s activities and not to have been done by the person.
[25]
The Appellant however,
in paragraph 15 of its written submissions also argues that subsection 272.1(2)
however is an exception to the rule aligning reporting to only the partnership “to
address the problem of reporting a separate action by any one of the partners
on account of partnership business”.
[26]
The Appellant himself
acknowledges that the provision deals with separate actions by any one of the
partners “on account of the partnership business”. It is clear that even in its
argument the Appellant accepts that the action must be on account of the
partnership business, in this case the business of publishing newspapers and
printing.
[27]
Notwithstanding this
acknowledgment the Appellant seeks to hold out that the provisions should be
interpreted so as to mean that any activity undertaken by a partner, regardless
of whether it be related to the partnership business, should be considered an
activity of the partnership. Frankly, this is not a position I can agree with
and do not feel it is contemplated either by the provisions of subsections 272.1(1)
or (2) nor the above admission by the Appellant himself.
[28]
While I do not disagree
with the Appellant’s statement that subsection 272.1(2) allows an individual
partner to report a separate transaction on account of partnership business, it
is clear from the wording of those provisions that two conditions must be met,
as the Respondent has stated.
[29]
The first condition is
that the individual partner must be acting in his capacity as a member of the
Partnership. Clearly, an individual member may have multiple other business
interests and undertake transactions that are subject to GST/HST reporting
requirements that have nothing to do with the business of the Partnership, hence
the logical need to tie the activities undertaken by the partner to the
partnership for which he acts. To suggest otherwise would yield a ridiculous
result. Clearly this interpretation is supported by both the wording in
subsections 272.1 (1) and (2). Subsection 272.1(1) says that the thing done
must be done “as a member of a partnership”. The capacity in which the person
carries out the act is spelled out and subsection 272.1(2) also references that
the property or service must be acquired or imported by a member of the
partnership, in my view referencing the same meaning of member in subsection
(1). Any act done in a capacity outside of acting as a member of the
partnership is not caught and presumably would be subject to the normal rules dealing
with eligibility for ITCs discussed in the first part of this analyses and in
which I concluded the Appellant would not be eligible to claim his ITCs.
[30]
Based on subsection
272.1(1) then, when a person acts in a capacity as a member of a partnership,
his acts are those of the partnership, effectively making the partnership the
filing taxpayer unless the person falls within any exceptions. Subsection
272.1(2) is one of those subsections and starts off as reading:
272.1
(2) Notwithstanding subsection (1), where property or a service is
acquired or imported by a member of a partnership for consumption, use or
supply in the course of activities of the partnership but not on account of the
partnership, the following rules apply: …
[31]
Those following rules
of course provide that the partnership is not the party that is deemed to have
acquired or imported the property for GST/HST purposes which permits the
transaction to be shifted back to the Partner level, thereby reversing the
shift to the Partnership level that subsection 272.1(1) had effected. Then under
paragraph (b) of subsection 272.1(2) the Partner who is not an
individual, such as a corporation, is allowed to claim the ITC by being treated
as if he acquired the property or service, again reversing the effect of subsection
(1) and then treated as if he was engaged in the activities of the partnership
to ensure he has a commercial activity which is deemed to be the same
commercial activity that the partnership had.
[32]
Clearly, the Appellant
must be acting in his capacity as partner in carrying out these transactions
for which he claims an input tax credit and I agree with the Respondent’s
argument that one can look to any evidence relating to acting in such capacity
including as to whether he has the capacity to so act and the nature of the
transactions for which an ITC is claimed to determine whether the member is
acting as a partner of the partnership, in effect on its behalf or for its
benefit.
[33]
In this case, it is
abundantly clear that the Appellant is only a limited partner and not a general
partner and generally cannot legally bind the partnership under the laws
applicable to limited partnerships which is also clear from the Amended
Certificate of Limited Partnership above discussed which provides that a
limited partner is not required to provide any property or service beyond the
ordinary contribution for its Partnership unit. Moreover, under the Advisory Services
Agreement executed between the Partnership and the Appellant, it is clear that
aside from providing those limited advisory services, the Appellant, pursuant
to the specific wording of such agreement “is in no way participating in the
administration, operation, management or control of FPLP or its business and
any action by the Advisor which purports to take any such prohibited action
will be null, void and of no force or effect”. Clearly, the Appellant has no
legal capacity to act on behalf of the Partnership nor required to provide any
property or services other than the negligible advisory service contracted for
and discussed above and any such purported acts would be considered invalid;
thus the first condition is not met.
[34]
In analysing the ITCs
claimed by the Appellant, it is also abundantly clear that none of the
transactions described in the invoices were for the benefit of the newspaper
and printing business of the Partnership but were solely for the benefit of the
Appellant whose sole purpose of existence is admittedly to hold partnership
units. In no way can I find that the activities described in the invoices,
including consulting services relating to the conversion of the Income Trust to
a corporate structure or news releases regarding its dividends declared or fees
in relation to such dividends, to be activities of the Partnership and hence it
follows that one cannot act in a capacity as a member of a partnership
involving transactions that have nothing to do with the partnership’s business.
[35]
The second condition
set out in subsection 272.1(2) is that the property or service acquired or
imported by such member must be “for the consumption, use or supply in the course
of the activities of the partnership”. An analyses of the invoices in respect
of which the Appellant claimed GST/HST as ITCs above clearly show none of the
services mentioned were for the consumption, use or supply in the course of the
Partnership’s newspaper publishing and printing businesses. They were
exclusively for the consumption, use and supply of the Appellant’s Financial
Services activities which as above indicated are exempt supplies.
[36]
Clearly, the supply
must be in some way used by the Partnership in its commercial activities. This
is not only consistent with the general scheme of the Act that allows an
ITC for taxable supplies used to produce taxable supplies earlier discussed,
but is consistent with the Canada Revenue Agency GST\HST Policy Statement
P-216 relied upon by the Appellant, which utilized a sample ruling to
demonstrate that a partner will be eligible to claim ITCs in respect of
property and services acquired or imported for consumption, use or supply in
the course of the commercial activities of the partnership. The sample ruling
itself required that connection consistent with the wording of subsection
272.1(2) above.
[37]
The Appellant relied on
the case of B.J. Northern Enterprises Ltd. et al. v. Her Majesty The Queen,
[1995] 2839 ETC, in arguing that a partner was granted ITCs in relation to
consulting services it hired its parent corporation to provide for use in the
business activity of a partnership of which it was a member. In that case, Rip J.
(as he then was) found as a matter of fact that the services paid for by the
partner were a service for consumption, use or supply in the course of the
partnership’s activity and hence the partner qualified for the ITC on GST paid
to supply that service pursuant to former subsection 145(2), the predecessor to
section 272.1 herein. In that case, the service was consumed by or for the
benefit of the activities of the partnership and so should have been allowed.
In the case at hand however, as I have stated, none of the services in respect
of which the Appellant claims an ITC were provided for the newspaper publishing
and printing business of the Partnership. They instead are directly related
only to the exempt activities of the Appellant. In short, the above case
supports the Respondent’s position.
[38]
It is clear that the Appellant
does not qualify for the exception in subsection 271.1(2) on the basis the two
requirements above described have not been met.
Conclusion
[39]
I find that the Appellant
has not established that it incurred ITCs in relation to any commercial
activity, neither one carried on by itself as I find it carried on no
commercial activities, nor any commercial activity of a partnership that would
be deemed to be carried on by it as a member. Accordingly, there being no
commercial activity carried on by the Appellant, other than the negligible
commercial activity of providing advisory services to the partnership that I
have already determined would be deemed to be non-commercial activities pursuant
to subsection 141(3) above, it follows that I cannot find that it acquired any
property or services to be used to provide financial services related to any of
its commercial activities pursuant to subsection 185(1) or that it incurred any
start-up costs related to commercial activities as contemplated by subsection
141.1(3) of the Act either. Even if the Appellant’s advisory services
were more than negligible, the ITCs claimed do no appear in any way related to
the Partnership activities and would be denied in any event. The Appellant’s
appeal is dismissed. There shall be no order as to costs.
This Amended Reasons for Judgment is issued
in substitution of the Reasons for Judgment dated February 5, 2013.
Signed at
Ottawa, Canada, this 27th day of March 2013.
“F.J. Pizzitelli”
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