Citation: 2010 FCA 1
CORAM: BLAIS C.J.
EXXONMOBIL CANADA LTD. AND
EXXONMOBIL CANADA RESOURCES COMPANY
O/A EXXONMOBIL CANADA PROPERTIES PARTNERSHIP
HER MAJESTY THE QUEEN
REASONS FOR JUDGMENT
 These are two appeals brought by ExxonMobil Canada Ltd. and ExxonMobil Canada Resources Company O/A ExxonMobil Canada Properties Partnership (the appellants) against decisions of Little J. of the Tax Court of Canada (the Tax Court Judge) holding, on the basis of common evidence, that the appellants were not entitled to input tax credits (ITCs) claimed pursuant to section 174 of the Excise Tax Act, R.S.C. 1985, c. E-15 (the ETA) with respect to moving allowances paid to their employees.
 The Tax Court Judge held that although the ITCs claimed by the appellants relate to allowances within the meaning of section 174, they are barred by the operation of paragraph 170(1)(b) of the ETA since the allowances in question were intended for “the exclusive personal use or consumption” of the employees. He further held that the allowances did not meet the reasonability requirement set out in subsection 170(2).
 The appellants maintain that in so holding, the Tax Court Judge committed a legal error in failing to recognize that paragraph 170(1)(b) and subsection 170(2) cannot apply in circumstances where section 174 applies.
 The two appeals were consolidated by order of this Court dated April 28, 2009. Consistent with this order, these reasons will be filed in the lead file (A-114-09) and a copy thereof will be filed as Reasons for Judgment in file A-113-09.
 The statutory provisions relevant to the disposition of the appeals are set out in Appendix A to these reasons.
 The relevant facts are set out in an Agreed Statement of Facts which is reproduced in full in the reasons of the Tax Court Judge (2009 TCC 25). It suffices for present purposes to provide a brief summary.
 The appellants carry on business in the oil and gas industry. Domestically, their business extends to nearly every province and territory in Canada. As part of their business, the appellants are required to relocate their employees to different locations across the country, some of which are remote. There is no issue that the ongoing relocation of employees, particularly skilled professionals, is an essential component of the appellants’ business operations and that the relocation policy adopted by the appellants was intended to facilitate employee transfers by allowing such transfers to take place with minimal disruption to the employees (Appeal Book, Vol. II, pp. 286 and 287; Transcript of Evidence, Appeal Book, Vol. I, pp. 154, 218 to 226).
 According to this relocation policy, the appellants, in addition to paying and/or reimbursing direct moving expenses incurred by relocated employees, paid the employees a moving allowance of up to a maximum of 15% of their salary. The moving allowance was intended to compensate relocated employees for incidental expenses related to the move that were not reimbursable as moving expenses.
 The appellants suggest, and the respondent accepts, that such expenses would include for example: “draperies, blinds and carpeting for the new premises; removal and installation of lighting fixtures; disconnection and reconnection of utilities (e.g., hydro, water, and gas), computers, antennae and satellite dishes; penalties for early cancellation of service contracts (e.g., cell phones, pagers, home security systems, Internet service providers), initial house cleaning, redirection of mail, the cost of registering vehicles or obtaining licenses in a new province; children’s school uniforms and books; disassembly and reassembly of items for shipment; replacement of items that cannot be shipped (e.g., dangerous goods, frozen goods, plants); and additional insurance costs for valuable items shipped” (Notices of Appeal, Appeal Book, Vol. I, pp 41 and 51, para. 8; Replies to the Notices of Appeal, Appeal Book, Vol. I, pp 62 and 75, para 5c)).
 With the exception of the first $650 of the allowances paid (with respect to which the actual use of the funds had to be demonstrated on request) the relocated employees could use the allowance as they pleased and were not required to produce receipts. As such, the allowances were at the complete discretion of the employees, and therefore taxable as a benefit from employment pursuant to paragraph 6(1)(b) of the Income Tax Act, R.S.C, 1985, c. 1 (5th Supp.) (the ITA). As a result, the part of the moving allowance above $650 was included by the appellants in the relocated employee’s T-4 statement.
 The appellants obtained the ITCs claimed on all payments and/or reimbursements by them of direct, actual moving expenses incurred by the employees who receive the allowances, including the first $650 of the allowance for which the employee had to be in a position to show actual use. Only the discretionary portion of the allowance is at issue in these appeals.
 The total amount of ITCs claimed by the appellants with respect to the moving allowances, exclusive of the first $650, was $122,443.13 (Agreed Statement of Facts, paras 16 and 29). These ITCs related to moving allowances paid from 1998 throughout 2002 (Appeal Book, Vol. II, pp. 511 and 580 to 582).
 The appellants deducted the allowances in computing their income pursuant to the relevant provisions of the ITA. Although this is not reflected by the pleadings, the respondent admitted during the hearing that it does not take issue with the propriety of these deductions.
 The Minister of National Revenue (the Minister) denied the claimed ITCs. At the assessment stage, the Minister took the position that the moving allowances were not reasonable within the meaning of paragraph 174(c) of the ETA (Replies to the Notices of Appeal, para. 24, Appeal Book, Vol. I, pp. 68, 81 and 82). Before the Tax Court, the Attorney General, on behalf of the Minister further asserted that paragraph 170(b) of the ETA applied to deny the ITCs claimed by the appellants (Replies to the Notices of Appeal, para. 27, Appeal Book, Vol. I, pp. 69 and 82).
DECISION OF THE TAX COURT
 The Tax Court Judge first notes the difference between an “allowance” and a “reimbursement”. He then finds that the payments in issue bear the legal characteristics of an allowance (Reasons, para. 23).
 The Tax Court Judge then rejects the appellants’ contention that section 174, which deals specifically with allowances, is dispositive. According to the Tax Court Judge, section 174 “simply places the appellants in the shoes of the employees” (Reasons, para. 25). The Tax Court Judge recognizes that under section 174, the appellants [are deemed to have] paid the GST (Reasons, para. 27). However, in his view the application of section 174 does not preclude the application of sections 169 and 170 (ibidem).
 The Tax Court Judge notes that pursuant to paragraph 170(1)(b), no ITCs may be claimed in respect of any supply acquired by an employer for the exclusive personal use or consumption of an employee, if a taxable benefit ensues under the ITA. As a taxable benefit did ensue in the present case (because the allowances are taxable), the Tax Court Judge holds that paragraph 170(1)(b) applies to deny the ITCs claimed by the appellants (Reasons, para. 28).
 In any event, he finds that the allowances were not “reasonable” within the meaning of subsection 170(2) of the ETA (Reasons, para. 30) as no evidence was adduced to prove they were based on the distance of the move, the number of family members or any other relevant fact. According to the Tax Court Judge, “the arbitrary provision of the allowances, based on the employees’ annual salary was unreasonable under subsection 170(2) …” (Reasons, para. 31).
 The Tax Court Judge then notes the decision of Campbell J. in 3859681 Canada Inc. v. The Queen, 2003 TCC 501 (Zellers) who held that Zellers was entitled to ITCs on moving allowances paid in circumstances that are identical to those here in issue. However, the Tax Court Judge distinguishes Zellers because in that case the parties agreed that the allowances were reasonable, and for “all or substantially all” taxable supplies (Reasons, paras 33 and 34(1) and (2)). In any event, the Tax Court Judge notes that Zellers is not a binding precedent since it was decided pursuant to the informal procedure (Reasons, para. 34(3)).
 Finally, the Tax Court Judge refers to CRA’s policy P-075R according to which a moving allowance, which is required to be included in income as a taxable benefit, does not give rise to an entitlement to ITCs pursuant to section 174 of the ETA. The Tax Court Judge also refers to a comment in Canada GST Service, C3, to the same effect, which he attributes to David Sherman (Reasons, para. 35) [Mr. Sherman has since indicated that the comment in question reflects CRA’s views rather than his own (see GST Case Notes, No. 164, May 2009, Carswell, at p. 8)].
POSITION OF THE PARTIES
 In support of their appeal, the appellants maintain that the Tax Court Judge, having found that the payments made were “allowances” within the meaning of section 174 of the ETA, was bound to apply this provision. In their view, the Tax Court Judge erred in law by importing into section 174 the requirement set out in paragraph 170(1)(b). He further erred in applying the reasonability test set out in subsection 170(2) rather than the one provided for with respect to allowances in paragraph 174(b).
 The respondent Crown supports the conclusion reached by the Tax Court Judge. It contends that the Tax Court Judge properly rejected the appellants’ contention that section 174 was dispositive. Applying section 174 without regard to the requirement set out in paragraph 170(1)(b) would give rise to an absurd result. The respondent further contends that the Tax Court Judge properly applied subsection 170(2) in assessing the reasonability of the allowances.
 In any event, the Tax Court Judge found that the allowances were not intended to fund the acquisition of taxable supplies, with the result that an essential requirement for the operation of section 174 is missing. The respondent submits that the appeals can and should be summarily dismissed on this basis.
ANALYSIS AND DECISION
 In support of its submission that the appeals should be dismissed summarily, the respondent points out that section 174 only applies if the supplies of property or services which the allowances are intended to fund are “all or substantially all … taxable supplies (other than zero-rated supplies)” (“… dont la totalité, ou presque, sont des fournitures taxables, sauf des fournitures détaxées …”) (subparagraph 174(a)(i)). According to the respondent, it has not been shown that the Tax Court Judge made a palpable or overriding error in finding that this condition was not met (Memorandum of the respondent, para. 11).
 However, a review of the reasons shows that the Tax Court Judge made no such finding. The only statement made by the Tax Court Judge that relates to this issue is found at paragraph 34 of his reasons where he states that Zellers can be distinguished on three grounds, the second being that:
In Zellers the parties agreed that the allowance was for “all or substantially all” taxable supplies. In the present appeal, Counsel for the Minister argued that the appellants were not entitled to claim ITCs as the allowance is not for supplies that are all or substantially all taxable supplies.
Beyond noting this distinction, the Tax Court Judge makes no finding as to whether the allowances in this case were for “all or substantial all” taxable supplies. Indeed, there was no need to do so given his earlier conclusion that the conditions set out in paragraph 170(1)(b) and subsection 170(2) were applicable and had not been met.
 The Minister in assessing the appellants did not assume that the supplies were not taxable supplies or were zero-rated. The argument was raised for the first time in the Replies to the Notices of Appeal. The evidence on this narrow point is that the allowances were intended to compensate relocated employees for incidental expenses related to their move, other than reimbursable moving expenses. A list of the expenses contemplated by the allowances was set out in the Notices of Appeal (see paragraph 9, above).
 The respondent submits that amongst the items listed, four would be tax exempt and one would be zero-rated (e.g., registering vehicles and obtaining new drivers license in another province, connecting to a water distribution system, acquiring additional insurance for valuable items shipped, replacing frozen food).
 In my respectful view, this does not establish that the contemplated property or services are not “all or substantially all” taxable supplies. First, as the appellants point out, the items that would be tax exempt or zero-rated are low ticket items. More importantly, the list provided by the appellants is not exhaustive (the respective Notices of Appeal state: “Examples of such expenses include: etc.”). Amongst the immense variety of supplies which the allowances are potentially aimed at, the fact that four are tax exempt and one is zero-rated, does not establish that the “all or substantially all” requirement has not been met.
 I therefore reject the respondent’s preliminary contention for denying the appeals.
Question in issue
 The main issue which calls for resolution is one of statutory construction: does the requirement set out in paragraph 170(1)(b) apply to a claim for ITCs made pursuant to section 174? The Tax Court Judge answered this question in the affirmative. Given the nature of this question, the Tax Court Judge had to come to the correct conclusion on this point.
 In reaching his conclusion, the Tax Court Judge recognized that the amounts paid by the appellants to their employees were “allowances” rather than “reimbursements” for purposes of the ETA (Reasons, para. 21) and therefore subject to the application of section 174. However he held, based on paragraph 170(1)(b), that since the allowances gave rise to a taxable benefit in the hands of the employees, no ITCs could be claimed by the appellants under section 174.
 The gist of the Tax Court Judge’s reasoning is set out at paragraph 28 of his reasons:
Section 169 determines who is eligible to claim ITCs. However, it is stated in section 169 that it is expressly subject to other provisions of Part IX of the ETA. One of these provisions is found in paragraph 170(1)(b) of the ETA. Paragraph 170(1)(b) provides that no ITCs may be claimed in respect of any supply acquired for the exclusive personal use or consumption of an employee unless there would have been no taxable benefit and that the employee had paid nothing for the benefit. In this situation the portion of the moving allowance over $650 was a taxable benefit. It therefore follows that paragraph 170(1)(b) applies to deny the ITCs that were claimed by the Appellants.
 This reasoning would in effect read section 174 out of the ETA. Section 174 is premised on the payment of an “allowance” which has the same meaning under both the ETA and the ITA, i.e., a predetermined amount paid for a certain purpose in circumstances where the use of the amount remains at the complete discretion of the recipient and there is no requirement to account (as to the ITA, see Canada. v. Pascoe, 1975 CTC 656 at paragraph 7; as to the ETA, see CRA policy P-075-06). Under paragraph 6(1)(b) of the ITA, an allowance paid by an employer, whether to fund personal or living expenses “or for any other purpose”, is always treated as income in the hands of the employee (subject to the exceptions stated in subparagraph 6(1)(b)(i) to (ix) (see Appendix A), none of which are relevant to the analysis). It follows that the fact that an allowance is taxable under the ITA cannot in and of itself rule out the application of section 174. It is trite that Parliament cannot be presumed to speak for nothing.
 The respondent appears to recognize as much. It submits that paragraph 170(1)(b) should not be construed as ruling out all allowances, but only those which are destined to fund the acquisition of property intended “exclusively for the personal consumption, use or enjoyment” of an employee (i.e., the “benefit”) within the meaning of paragraph 170(1)(b) (Memorandum of the respondent, para. 31).
 The respondent reasons that in enacting this requirement, Parliament was obviously of the view that no ITCs should be available to the employer with respect to property acquired by the employer and provided to employees exclusively for their personal consumption, use or enjoyment. If no ITCs are to be allowed with respect to such property when provided directly by the employer, why should the employer be able to claim ITCs when paying an allowance that is intended to fund the acquisition of the identical property. Relying on this reasoning, the respondent contends that ITCs should be available with respect to allowances aimed at funding such things as travel allowances (when travel is for business purposes) or office supplies, but not supplies that are intended for the exclusive personal use and enjoyment of the employees such as rugs, draperies and the like (ibidem).
Construction of section 174 of the ETA
 As all statutory provisions, section 174 must be construed in its entire context, the words thereof given their grammatical and ordinary sense harmoniously with the scheme of the ETA, the object of the ETA, and the intention of Parliament (Rizzo & Rizzo Shoes Ltd. (Re),  1 S.C.R. 27 at para. 21).
 Subsection 169(1) which sets out the eligibility requirements for claiming ITCs begins with the words “[s]ubject to this part, ...”. Both section 170 and section 174 fall under Part IX of the ETA. These provisions deal with the entitlement to claim ITCs in distinct but related situations. Section 170 deals with ITCs that may be claimed with respect to benefits in kind provided to employees and section 174 deals with ITCs that may be claimed with respect to allowances paid to employees.
 Paragraph 170(1)(b) provides that no ITCs may be claimed with respect to property or services acquired “exclusively for the personal consumption, use or enjoyment” of an employee (the benefit), unless the employee has paid adequate consideration or the benefit does not otherwise result in an income inclusion pursuant to section 6 of the ITA (i.e., it is not a taxable benefit). Paragraph 170(2)(a) further requires that “the consumption or use of the property or services of such quality, nature or costs [be] reasonable in the circumstances, having regard to the nature of the commercial activities of the registrant; …”.
 Section 174 deals with a person’s entitlement to ITCs with respect to allowances paid to employees to fund the supply of identifiable property or services. Subparagraph 174(a)(iv) was drafted on the assumption that the employees have “acquired” the property or services contemplated by the employer in paying the allowance (although as we have seen there can never be any certainty in this regard) and the only requirement as to the type of property or services is that they be “in relation to activities engaged in by [the employer]”.
 The other relevant requirement for our purposes is aimed at insuring that the allowances are reasonable. In this respect, paragraph 174(b) imports into the ETA the conditions for recognizing an expense in the computation of a taxpayer’s profit under section 9 of the ITA, including the requirement that the amount be incurred for the purpose of gaining or producing income (para. 18(1)(a) of the ITA), and that the amount claimed be “reasonable in the circumstances” (section 67 of the ITA).
 Paragraph 174(c) also requires that where an allowance comes within subparagraphs 6(1)(b)(v), (vi), (vii) or (vii.1) of the ITA, it must be reasonable for the purpose contemplated. Although the respondent did rely on this provision when issuing the assessments, it now concedes that it has no application since none of the relevant provisions of the ITA are applicable on the facts of this case.
 When the conditions set out in section 174 of the ETA are met, the employer is deemed to have received a supply of the property or services for which the allowance was paid; any consumption or use of the property or services by the employee is deemed to be that of the employer; and the employer is deemed to have paid, at the time when the allowance was paid, tax of an amount determined by the formula set out in paragraph 174(f).
 Although sections 170 and 174 deal with situations that can be seen as analogous, it seems clear from the distinct schemes under which they operate, that they were intended to apply separately by reference to their own conditions. It follows in my view that the requirements set out in section 170 do not apply to a claim made pursuant to section 174 any more than the requirements set out in section 174 could apply to a claim made pursuant to section 170. This does not mean however that these provisions ought to be construed in isolation or without regard to one another.
 In this respect, the position of the respondent evolved during the course of the hearing. As I understood counsel, she no longer contends that the requirement set out in paragraph 170(1)(b) applies to a claim made pursuant to section 174, as held by the Tax Court Judge. Rather she maintains that section 174 can, and should be construed in a manner that is consistent with paragraph 170(1)(b).
 In support of her position that these provisions can be read harmoniously, counsel drew our attention to the specific wording of subparagraph 174(a)(iv) and insisted that what must be “in relation to the activities” of the employer pursuant to this provision are the supplies of property and services which the allowance is intended to fund, and not the allowance itself. The relevant words are as follows:
174. For the purposes of this Part, where
(a) a person pays an allowance
(iv) supplies … of property or services acquired … by the employee, … in relation to activities engaged in by the person,
174. Pour l’application de la présente partie, […]
a) la personne verse une indemnité,
(i) […] pour des fournitures […], de biens ou de services que le salarié, […] a acquis […] relativement à des activités qu’elle exerce,
 The distinction is significant. Although there is no doubt that the allowances in this case relate to the activities of the appellants given their purpose (i.e., facilitating the ongoing relocation of their employees), the same cannot be said about the property or services which the allowances were intended to fund.
 Relying on this distinction, the respondent submits that the property or services contemplated by the allowances, such as carpets, rugs, house cleaning services etc. which are intended for the exclusive personal use of the employees, do not relate to the appellants’ activities and therefore do not qualify. On the other hand, allowances for supplies of property or services that are in relation to the activities of the employer such as travel allowances and office supplies would qualify.
 In Zellers, the distinction which counsel for the respondent now urges upon us was brought to the attention of the Court as evidenced by the following passage (Zellers, para. 6):
… the respondent argued that there must be a relation or connection test which would directly connect the supply for which the tax is paid to the commercial or business activities of Zellers. Respondent argued that items such as internet hook up, cable connection or window dressings are clearly not related to Zellers' business activities but are for the exclusive personal use and enjoyment of the relocated employees of Zellers. …
However, the Court in Zellers did not confront this argument. The issue is not discussed and the conclusion reached is that the relationship test was met on the sole basis that the allowances were in relation to the activities in which Zellers was engaged (Zellers, paras 16, 17 and 18).
 Confronted with this argument, counsel for the appellants insisted on the fact that the words “in relation to” have the widest possible ambit. He argued in effect that since the allowances in issue are in relation to the activities of the appellants, the property or services which they are intended to fund also meet this requirement (see also Memorandum of the appellants, para. 50). I respectfully disagree.
 In my view, the fact that an allowance is in relation to the activities of the employer (and deductible pursuant to the ITA), does not necessarily mean that the supplies of property or services which it is intended to fund meet this requirement. If meaning is to be given to the words of subparagraph 174(a)(iv), regard must be had to the particular property or services contemplated and their intended use. Applying these criteria, property or services which are intended by the employer for the exclusive personal use of the employees and which lend themselves to such a use bear no relationship with the employer’s activities. In contrast, property or services which can be used by the employees in the course of their employment activities, and which are intended for such a use, are in relation to the employer’s activities.
 This reasoning gives effect to the words used by Parliament in framing the entitlement to ITCs with respect to allowances. It also provides for a result that is consistent with an employer’s entitlement to ITCs pursuant to section 170 when the same property or services are acquired directly by the employer and provided to the employees. The Explanatory Notes to Bill C-62, as passed on April 10, 1990, indicate that section 174 was intended to be so limited (Explanatory Notes, p. 63):
Section 174 Travel and other allowances
This section deals with allowances paid by a person to employees for expenses incurred in Canada for supplies all or substantially all of which are taxable (such as travel expenses). To the extent that the allowance is (or would be) deductible in computing the income of the person for a taxation year for the purpose of the Income Tax Act, the person is treated as having received a taxable supply and to have paid, at the time the allowance is paid, GST in respect of the supply equal to 7/107ths of the allowance. The effect is to permit the employer to recover by way of an input tax credit the GST paid by the employee on expenses which, if incurred directly by the employer, would be recoverable as input tax credits. The same rule applies where the registrant is a partnership with respect to allowances paid to members of the partnership.
This view was reiterated seven years later in the Technical Notes issued by the Department of Finance in July 1997, when the last amendment to section 174 was made (Technical Notes, p. 269):
… [s]ection 174 was enacted to enable an employer to claim ITCs in respect of allowances paid for certain expenses to the same extent as would have been the case if the person had incurred the expense directly. Section 174 is amended to achieve this result more directly by deeming, in new paragraph 174(e), the use of the property or service by the employee … to be that of the employer … New paragraph 174(f) is added to clarify that the time at which the person is considered to have paid tax in respect of the supply is the time at which the allowance is paid.
Although not determinative, these passages provide a compelling indication of parliamentary intent and, to the extent that the words of subparagraph 174(a)(iv) can be read in a manner which achieves this intent, effect must be given to them.
 I therefore conclude that the requirement set out in subparagraph 174(a)(iv) was not met on the facts of this case given that the supplies of property or services which the allowances were intended to fund (as they appear in the respective Notices of Appeal) were for the exclusive personal use of the employees and therefore do not relate to the appellants’ activities. It follows that I agree with the Tax Court Judge that there was no entitlement to ITCs pursuant to section 174, but for reasons different from those which he gave.
In any event, was the allowance reasonable?
 Relying on his view that the requirements of section 170 are applicable to a claim made pursuant to section 174, the Tax Court Judge went on to hold that the reasonability test set out in subsection 170(2) had not been met. For the reasons already given and those which follow, it was not open to the Tax Court Judge to disallow the claim by reference to requirements other than those set out in section 174.
 Section 174 deals with payments which come within the legally accepted meaning of the word “allowance”. As noted, a person receiving an allowance is under no duty to account and remains free to use the allowance as he or she pleases. As a result, it is not possible to assess the reasonability of the actual “consumption” or “use” of the property or services in the manner contemplated in paragraph 170(2)(a). It is also impossible to determine whether the amount of the tax that an employer is deemed to have paid with respect to an allowance pursuant to section 174 is calculated on a consideration or value that is reasonable in the circumstances, as contemplated by paragraph 170(2)(b), given that such “consideration” or “value”, if any, is unknown.
 That is why the test under paragraph 174(b) of the ETA is framed by reference to the reasonability of the allowance as a deductible expense in the hands of the employer (pursuant to the ITA) and not by reference to the actual consumption, use or value of the property or services which the allowance is intended to fund. Similarly, paragraph 174(c) assesses reasonability by reference to the purpose of the allowance (i.e., is the allowance reasonable for the purpose contemplated?) and not by reference to the actual consumption, use or value of the supplies.
 In the present case, the respondent concedes that as between the two tests set out in section 174, paragraph 174(b) is the only one applicable. The respondent also concedes that this last test has been met since it does not take issue with the appellants’ contention that the allowances were properly deductible pursuant to the relevant provisions of the ITA and therefore “reasonable in the circumstances” pursuant to that statute. Given this concession, the Tax Court Judge was bound to conclude that the reasonability test set out in section 174 had been met.
 For these reasons, I would dismiss the appeals on the sole basis that the appellants have failed to demonstrate a relation between the supply of property or services which the allowances were intended to fund and their activities, as required by subparagraph 174(a)(iv). Given that the appeals were heard on a consolidated basis, the respondent should be entitled to only one set of costs in file A-114-09.
Pierre Blais C.J.”
Carolyn Layden-Stevenson J.A.”