Citation: 2010 TCC 281
Date: 20100525
Docket: 2009-1413(GST)I
BETWEEN:
HOLLANDER LAYTE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Hogan J.
[1]
The Minister of
National Revenue (the “Minister”), in assessing the Appellant’s net goods and
services tax (“GST”) liability for the period from January 1 to
December 31, 2004 (the “relevant period”) on February 25, 2008, disallowed
a refund claim with respect to input tax credits (“ITCs”) in the amount of $9,603.50.
[2]
In determining the net
tax liability of the Appellant for the relevant period, the Minister made the
following assumptions of fact:
8. a) the appellant and her spouse operated a retail
specialty food store under the trade name of L’Ange (the “L’Ange”);
b) the appellant and her spouse operated another
business under the trade name The Marvellous Mustard Shop (the “Mustard”);
c) the operations of L’Ange and Mustard were in Ottawa, Ontario;
d) the appellant and her spouse became GST
registrants on May 12, 2000;
e) the appellant filed a GST return on
August 28, 2007 claiming a total of $9,603.50 in ITCs;
f) $8,129.06 of the ITCs claimed relate to
expenses that were incurred prior to January 1, 2003;
g) the appellant did not pay GST in the amount
of $123.41 on an expense for insurance;
h) the appellant paid for chimney services on
her personal residence in the amount of $4,322.80 (GST of $282.80);
i) in relation to paragraph (g) the appellant
claimed ITCs in the amount of $282.80, which were not used in the course of
commercial activities;
j) ITCs in the amount of $1,457.43 were already
claimed in prior reporting periods and;
k) the appellant did not incur ITCs in the
amount of $0.73.
[3]
The Appellant testified
that both businesses opened in September 2001. At that time, they were owned
and operated by the Appellant and her husband. The Appellant’s husband died in
2006 and she inherited his interest in the businesses.
[4]
The Appellant testified
that the initial start-up cost of both businesses was $275,000, which exceeded
the Appellant’s original budget estimate by approximately $250,000.
[5]
The sizeable cost
overrun meant that the Appellant did not have sufficient financial resources to
hire skilled accounting personnel to help her with the filing of the businesses’
GST and other tax returns. The Appellant advanced other reasons which allegedly
led to her filing her request for a GST refund beyond the four‑year time
limit provided for by law. During the initial phase, the Appellant devoted all
of her working hours to operating the businesses, which she did with reduced
staff, to ensure that the businesses did not fail. To make matters worse, the
Appellant’s husband was diagnosed with cancer in 2005 and from that point on he
could no longer work in the businesses. The Appellant testified that, due to a
computer failure, she lost all of the accounting data necessary for filing a
return and this obliged her to engage in a lengthy accounting process in order to
reconstruct the accounting data necessary for filing the GST refund claim. She
also suffered health problems.
[6]
On cross-examination,
the Appellant admitted that ITCs in the amount of $1,457.43 had already been claimed
by her in a prior reporting period. In addition, she admitted that she did not
pay GST in the amount of $123.41 on an insurance expense.
[7]
Both parties agree that
an amount of $282.80 of the total ITCs claimed by the Appellant relates to GST
paid on expenses for repairs to the chimney on the Appellant’s personal
residence. The cost of the repairs was $4,322.80, GST included. It is
incontrovertible that these repairs were capital in nature. While the Appellant
used the kitchen in her personal residence to prepare some of the food items for
her businesses, the repairs related to the upkeep of her personal residence and
were not incurred in the course of a commercial activity as required by section
169 of Part IX of the Excise Tax Act (the “ETA”).
[8]
Therefore, the only
issue remaining to be decided is whether the Appellant is entitled to a refund
with respect to ITCs in the amount of $8,129.06 that relate to expenses
incurred prior to 2003. The Respondent argues that this amount was not claimed
within the four-year time limit provided for in paragraph 225(4)(b) of
the ETA and that, as a result, the Appellant’s appeal should be
dismissed. The Appellant is requesting that this Court allow her refund claim on
compassionate grounds.
[9]
The relevant portion of
subsection 225(4) of the ETA reads as follows:
225(4) Limitation [period for ITC claims] — An input tax credit of a person for a particular reporting period
of the person shall not be claimed by the person unless it is claimed in a
return under this Division filed by the person on or before the day that is
. . .
(b) where the person is not a specified person during the
particular reporting period, the day on or before which the return under this
Division is required to be filed for the last reporting period of the person
that ends within four years after the end of the particular reporting period . . .
[10]
Under this rule, ITCs
must be claimed by a registrant in a return filed by the registrant on or
before the due date of the return for the last reporting period that ends
within four years after the end of the period in which the ITCs could have
first been claimed. The Appellant filed an amended GST return for the relevant period
on August 28, 2007, increasing the amount of ITCs claimed to $9,603.50.
When faced with a request for an adjustment to a GST return which pertains to
ITCs that are subject to the limitation period provided for in subsection
225(4), the Canada Revenue Agency (the “CRA”) uses for the purpose of computing
the limitation period the later of the date on which the request for an
adjustment is filed or the date on which the return was due. This practice is
consistent with the wording of subsection 225(4), which requires that the ITCs
be claimed in a return. Here, the ITCs were not claimed in the original return
filed by the Appellant. They were claimed much later, when the amended return
was filed. As a result, paragraph 225(4)(b) bars the Appellant from
claiming a refund with respect to GST on expenses incurred prior to 2003.
[11]
While I agree that the
Appellant’s failure to claim the ITCs was due in large part to circumstances
beyond her control, the ETA does not grant the Court the authority to
allow a refund for ITCs claimed beyond the four-year limitation period. In Chaya
v. The Queen, 2003 TCC 688, the taxpayer was unable to benefit from the
wholly dependent person tax credit and requested relief from the Court on
compassionate grounds. At paragraph 4, the Court indicates that, while the law may
be unfair, it is not open to the Court to make exceptions to statutory
provisions on the grounds of fairness or equity and that, if the appellant considered
the law unfair, his remedy lay with Parliament and not with the Court. Applying
that principle to the case at bar, I note that Parliament has prescribed a
four-year limitation period for claiming ITCs. Presumably, the legislator felt
that this period was long enough to deal with any unforeseen events that could
cause a registrant to delay filing a claim for ITCs. The ETA confers no
discretion on this Court to extend the four-year period.
[12]
It should be noted that
the unclaimed ITCs of $8,129.06 could be used by the Appellant to offset any
additional GST assessed by the CRA for reporting periods that fall within the
four-year limitation period. I suspect, though, that this is small consolation
to the Appellant as both businesses were in a refund position over the relevant
period.
[13]
For the reasons set out
above, the appeal is dismissed.
Signed at Ottawa, Canada, this 25th day of May 2010.
"Robert J. Hogan"
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