Citation: 2007TCC508
Date: 20070905
Docket: 2006-2283(GST)I
BETWEEN:
CHRIS OLSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Sheridan, J.
[1] The Appellant,
Chris Olson, is appealing the Notice of Decision of the Minister of National
Revenue disallowing an Input Tax Credit for the Goods and Services Tax paid on a
Chevrolet Silverado truck purchased on December 30, 2005.
[2] The facts are
essentially as set out in the assumptions in paragraph 6 of the Reply to the
Notice of Appeal[1]:
(a) the Appellant had a farm operation in the period;
(b) at all material times the Appellant was a registrant for
the purposes of the Excise Tax Act (the "ETA");
(c) the Appellant purchased the Truck on December 30, 2005;
(d) the Appellant purchased the Truck for $47,982.93 plus tax
of $3,358.81;
(e) the Appellant claimed an input tax credit of $3,358.81 for
the tax paid/payable on the Truck in his return filed for the period;
(f) the Truck is an extended cab truck;
(g) at all material times the Truck was a passenger vehicle;
(h) the Truck was not used for business purposes in 2005;
(i) the Appellant obtained physical possession of the Truck on
January 3, 2006;
(j) the Truck was first used in the course of the Appellant's
commercial activities in the first week of 2006;
(k) the Truck was not used all or substantially all for the
transportation of goods, equipment, or passengers in the course of gaining or
producing income in 2005, which is the year in which the Truck was acquired;
(l) the Appellant intended to use the Truck more than 90% in
the course of his commercial activities.
[3] The Minister
disallowed the Appellant's claim for an ITC equal to the full GST paid on the
basis that the Silverado had not been used in the Appellant's business until
2006. The Minister's position is that in 2005, the Silverado was a "passenger
vehicle" within the meaning of subsection 123(1) of the Excise Tax Act.
As such, its capital cost is deemed, by the applicable provisions of the Income
Tax Act and Excise Tax Act, to be $30,000 rather than the actual
purchase price of $47,982.93. Accordingly, the allowable ITC's must be likewise
reduced from $3,358.81 (the GST actually paid) to $964.81[4].
[4] Whether the
Silverado was a "passenger vehicle" in 2005 depends on the
interpretation of the relevant provisions in the Excise Tax Act and Income
Tax Act. The starting point is the definition of "passenger vehicle"
in subsection 123(1) of the Excise Tax Act which adopts the meaning
assigned to that term by subsection 248(1) of the Income Tax Act:
"passenger
vehicle" means an automobile acquired after June 17, 1987 (other
than an automobile acquired after that date pursuant to an obligation in
writing entered into before June 18, 1987) and an automobile leased under a
lease entered into, extended or renewed after June 17, 1987; [Emphasis added.]
[5] The word "automobile"
is defined in subsection 248(1) as:
"automobile"
means
(a) a motor
vehicle that is designed or adapted primarily to carry individuals on
highways and streets and that has a seating capacity for not more than the
driver and 8 passengers. [Emphasis added.]
[6] The term "motor
vehicle" is defined in subsection 248(1) as:
"motor
vehicle" means an automotive vehicle designed or adapted to be used on
highways and streets but does not include
(a) a trolley bus, or
(b) a vehicle designed or adapted
to be operated exclusively on rails;
[7] To
this point, there is no question that the Silverado comes within the meaning of
"automobile" and is, therefore a "passenger vehicle". To
succeed in his appeal, the Appellant must show that the Silverado satisfies the
criteria in any of the three subparagraphs of paragraph (e) which exclude from
the definition of "automobile" a "motor vehicle" that is:
...
(i) of
a type commonly called a van or pick-up truck, or a similar vehicle, that has a
seating capacity for not more than the driver and two passengers and that, in
the taxation year in which it is acquired or leased, is used primarily
for the transportation of goods or equipment in the course of gaining or
producing income, [Emphasis added.]
(ii) of
a type commonly called a van or pick-up truck, or a similar vehicle, the use
of which, in the taxation year in which it is acquired or leased, is
all or substantially all for the transportation of goods, equipment or
passengers in the course of gaining or producing income, or [Emphasis added.]
(iii) of
a type commonly called a pick-up truck that is used in the taxation year
in which it is acquired or leased primarily for the transportation of goods,
equipment or passengers in the course of earning or producing income at one or
more locations in Canada that are [Emphasis added.]
(A) described, in respect
of any of the occupants of the vehicle, in subparagraph 6(6)(a)(i) or (ii), and
(B) at
least 30 kilometres outside the nearest point on the boundary of the nearest
urban area, as defined by the last census dictionary published by Statistics
Canada before the year, that has a population of at least 40,000 individuals as
determined in the last census published by Statistics Canada before the year.
[8] Because paragraph
(e) is written disjunctively, the Appellant need only satisfy the criteria in
one of the three subparagraphs to exempt the Silverado from the definition of "automobile"
and thereby, from the definition of "passenger vehicle". The
Silverado does not meet the criteria in subparagraphs (i) because as an "extendicab"
truck, it can accommodate more than two passengers; subparagraph (iii) does not
apply because the Silverado was not used in the locations contemplated by the
paragraph 6(6)(a)(i) and (ii) of the Act. The issue, then,
is whether the Silverado is caught by the criteria in subparagraph (ii).
[9] The Appellant represented himself. His argument was
essentially one of common sense: that in 2005 he paid GST on the Silverado. At
the time of its purchase he intended to use it in his business and upon taking possession
of it on January 3, 2006, did use it for that purpose. Although the Silverado was
in a usable state when purchased on December 30, 2005, the Appellant chose to
leave it with the dealership over the holiday period to have the equipment from
his trade-in vehicle transferred to the new one. According to the Appellant,
this interval ought to be irrelevant to the determination of the status of the
Silverado as a "passenger vehicle".
[10] Counsel for the Respondent submitted that the Appellant's
situation was not excluded from the definition of "passenger vehicle"
by subparagraph (ii) because the Silverado had not actually been used in his
commercial activities in 2005. In support of her argument, counsel
referred to McKay v. Her Majesty the Queen
in which Rip, J. (now A.C.J.) interpreted subparagraph (ii)
as follows:
[19] The
phrase "the use of which..." (or in the French language "l'utilisation
...") in the definition of "automobile" in subsection 248(1) of
the ITA suggests the act of employing the motor vehicle, or putting it
into service, for any purpose, in particular the purpose for which it is to be
used. [footnote shown in original] Common sense would dictate that during the
time a motor vehicle is parked in a garage or in a yard, the vehicle is not
being used. Thus, the time the motor vehicle is parked (and not used) does not
enter into the formula or calculation determining whether the use of the motor
vehicle "is all or substantially for the transportation of goods ... in
the course of gaining or producing income." It is the actual use of the
motor vehicle that is relevant, even though the vehicle may be stored in a yard
more than 90 per cent of the time the taxpayer owned it. The definition of
"automobile" is not concerned whether or not the motor vehicle is
"available for use".
[Emphasis added.]
[11] In the present
case, there is no question that when the Appellant purchased the Silverado on
the second-last day of December 2005, he intended to use it in his business
operations[8]. The oilfields where he worked as an environmental
consultant are located within an 80‑mile radius from his farm; the farm
is located some 35 miles from the major center of Rosetown, Saskatchewan
and approximately 8 miles from his local town of Plenty. I accept his evidence
that at the time of its acquisition in December 2005, the use of the Silverado
was "for" the transport of "goods" and "equipment"
such as his computer, environmental testing equipment and materials used in the
oilfields; and in his farming business for the transport of agricultural goods
and equipment such as tools, farm fuel and machinery parts. The one factor in
subparagraph (ii) that the Appellant is unable to satisfy, however, is the "use"
of the truck in the year it was "acquired". As he freely admits, the
Appellant did not actually use the Silverado for that purpose in 2005 because
he left it at the dealership to have equipment from the trade-in vehicle
transferred to the new one. This procedure was preparatory to its actual "use"
transporting goods and equipment in his businesses which, unfortunately, did
not occur until 2006. Accordingly, subparagraph (ii) does not apply to his situation
and the Silverado is not excluded from the definition of "passenger
vehicle". While it may seem a harsh result, the relief provided in
subparagraph (ii) is only available if the taxpayer can satisfy all aspects of
the exclusionary provision. Common sense does not come into it. The appeal must
be dismissed.
Signed at Ottawa,
Canada, this 5th day of September, 2007.
"G. A. Sheridan"
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