University of Calgary – Tax Court of Canada finds that indirect costs which could not be traced to revenues from taxable supplies were eligible for pro rata ITCs

Before finding that it was fair and reasonable for the University of Calgary to allocate (for input tax credit purposes) its GST costs for its grounds using the same split between taxable and exempt use as was applicable to the floor space of its buildings which was directly used for one (third-party rentals) or the other (e.g., classroom) use, D’Arcy J stated:

The purpose of [a registrant’s] business is to earn revenue, i.e., to make supplies. Therefore, the result of subsection 141.01 (2) is that all costs incurred by a person in the course of the person’s business must be traced to a specific supply or multiple supplies in respect of which the costs were incurred. [emphasis added]

This confirms that, notwithstanding the enactment of s. 141.01(2), the GST costs for property or services whose acquisition cannot be traced to the making of taxable supplies nonetheless may qualify for ITCs (see also BJ Services).

Neal Armstrong. Summaries of University of Calgary v. The Queen, 2015 TCC 321 under ETA s. 141.01(2) and s. 141.01(5).