Docket: 2006-590(GST)G
BETWEEN:
PAUL GUSTAV FRIGSTAD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal
heard on January 21 and 28, 2008
at Vancouver, British Columbia
By: The Honourable
Justice Judith Woods
Appearances:
|
Counsel for the Appellant:
|
Jack
A. Adelaar
|
|
Counsel for the Respondent:
|
Karen A. Truscott
|
____________________________________________________________________
JUDGMENT
The appeal with respect to an assessment
made under the Excise Tax Act for the period from January 1, 2000 to
December 31, 2001 is allowed, and the assessment is referred back to the
Minister of National Revenue for reconsideration and reassessment on the basis
that net tax should be reduced by a further amount of $1,665.
The
parties shall bear their own costs.
Signed at Toronto, Ontario
this 4th day of February,
2008.
"J. Woods"
Citation: 2008TCC81
Date: 20080204
Docket: 2006-590(GST)G
BETWEEN:
PAUL GUSTAV FRIGSTAD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
(Delivered orally from the Bench on January 30, 2008.
Addition noted in parentheses.)
Woods J.
[1] These are reasons delivered orally in the matter of
Paul Frigstad and Her Majesty the Queen.
[2] The appeal
relates to a goods and services tax assessment for a period encompassing two
calendar years, 2000 and 2001. The tax that is at issue has been provided for
each year separately. It is $3,713.52 for the 2000 calendar year and $5,269.55
for 2001.
[3] At the outset, I
would comment that I do not intend to go into a lot of detail in these reasons.
The facts and issues were confusing and unfortunately counsel did not clarify
matters much. Much of the difficulty appears to stem from inadequate pleadings.
Based on the notice of appeal I could not really tell what the issues were, and
based on the reply I did not have a good understanding of how the assessment
was arrived at.
[4] In any event I
have tried to sort this mess out as best I could. If my decision results in an
inequity to one side or the other, I would simply say that the fault lies with
counsel in not clearly communicating their position to me during the hearing.
[5] The first issue
relates to an alleged $50,000 settlement received by the appellant in 2001. The
appellant submits that the assessment should be adjusted to remove GST with
respect to this amount. In support of this position, the appellant’s counsel
submits that the Canada Revenue Agency accepted that the settlement amount was
not taxable for income tax purposes. He suggests that this supports the view
that it is not taxable for GST purposes either.
[6] The first
question that needs to be considered with respect to this issue is whether the
assessment did in fact impose GST on the settlement amount, or a portion of it.
Counsel for the respondent suggested near the end of her argument that the
appellant might not have been taxed on this amount. This came as a surprise to
me because my reading of the respondent’s reply seems to suggest otherwise
because it states that the respondent has no knowledge of a settlement.
[7] I tried to find
an answer to this question in the material before me but was unable to do so. I
decided therefore to review the pleadings that were filed in a related income
tax appeal. (The related appeal had been withdrawn and was not before me.) Based
on a comparison of the replies filed in both matters, I concluded that the same
calculations of revenue were used by the Minister in both the income tax
assessment and the GST assessment. The reply filed by the Minister in the
income tax matter provides a more detailed explanation of how the purported
taxable revenues were determined. Based on this, I concluded that the GST
assessment does not include GST on the settlement amount. The same numbers were
used as the basis for the income tax and GST assessments. If the settlement
amount was backed out of income tax assessment, as the appellant suggests, then
it appears that it was backed out of the GST assessment as well.
[8] I find,
therefore, that the appellant’s position regarding the settlement should be
rejected. If I am wrong in this conclusion, then the appellant has only himself
to blame for not providing me with the relevant information.
[9] I turn now to a
second issue, which concerns GST on revenues from a spiritual healing business.
[10] The appellant
suggests that these revenues are not subject to GST because most of his
customers reside in the United States.
[11] The respondent on
the other hand submits that the assessment has already factored in an exemption
for U.S. customers. Specifically, the reply states that in making the
assessment the Minister assumed that GST had been deducted in reference to
spiritual healing revenues received from non-residents. The following amounts
were stated to have been deducted: $1,520.86 for 2000 and $4,607.84 for 2001.
[12] My conclusions
with respect to this issue are as follows.
[13] First, the
appellant has not established to my satisfaction that most of the customers of
the spiritual healing business are non-residents. The evidence presented by the
appellant is far too weak to establish this, even on a prima facie
basis. I would note that taxpayers are required to maintain books and records
that are sufficient to enable the Canada Revenue Agency to determine the
correct amount of tax payable. In reference to the spiritual healing revenues,
the appellant’s records should include details such as names of customers and
their addresses so that the GST exemption can be computed and verified. Nothing
of that sort was tendered into evidence before me. Accordingly no adjustment to
the assessment is warranted on that ground.
[14] That is not the
end of the matter, however.
[15] As I mentioned
earlier, the reply states by way of an assumption that a portion of the
spiritual healing revenues were treated by the Minister as non-taxable. These
amounts are $1,520.86 for 2000 and $4,607.84 for 2001. I have difficulty with
this assumption because I am not able to reconcile it with the other
assumptions that were made. For example, it is assumed that the appellant had
zero-rated or exempt supplies totalling only $45,000 in 2001. This amount is
not large enough to account for the alleged GST adjustment of $4,607.84.
[16] The bottom line
is that I am not able to reconcile the assumptions that are stated in the
reply. It is certainly possible that there are explanations. For example, I
suppose it is possible that timing differences account for the inconsistencies.
But if that is the case, the respondent has failed to provide adequate
disclosure in the reply. It is certainly not obvious from the reply how these
calculations were made by the Minister.
[17] Where does that
leave us? Under the relevant legal principles regarding onus of proof, the
appellant has the burden to demolish the assumptions of the Minister. I
conclude that the Minister’s assumption concerning the GST adjustment for
non-resident revenues, which is found in paragraph 10(l) of the reply, has been
demolished. I would note though that the appellant played little part, if any,
in the demolition.
[18] With this
assumption being successfully refuted, it remains to be considered what
adjustment should be made for GST with respect to non-resident revenues. I have
no way of determining from the material before me what adjustment is
appropriate. In these circumstances, one approach would be to send the matter
back to the Minister for a further determination. I have decided against this
because I think that it is in everyone’s interest to have finality in this
matter. Accordingly, I have decided that it is appropriate to make an
adjustment that is favourable to the appellant.
[19] The adjustment
that I propose to make is that there be an additional adjustment for GST for
2001. The adjustment would be on the assumption that the Minister only made an
adjustment for the GST on the zero-rated or exempt supplies of $45,000 which is
stated in the reply. I have calculated this to be $2,943. The other assumption
is that the Minister should have made an adjustment for the amount stated in
paragraph 10(l) of the reply. This amount is $4,607.84. The difference is
$1,665 and I conclude that this is an adjustment that the Minister should have
made but did not. There is considerable arbitrariness in the approach that I am
taking, but it is the best that I can do to bring some finality to this matter.
As I said at the beginning of these reasons, if this result gives an inequity
to one side or the other, I think that the fault lies with that party for not
clearly communicating their position.
[20] That concludes my
findings on the second issue. The third issue does not relate to specific
revenues. Rather, the appellant suggests that the assessment should be reversed
in its entirety because the revenues were adequately reported. I do not think
that it is appropriate to make any further adjustments to the assessment than
what I have already proposed. The appellant’s position was based almost
entirely on very brief explanations that were not corroborated. I did not find
any of this testimony to be reliable.
[21] This concludes my
reasons in this appeal. In the result, the appeal will be allowed, and the
assessment will be referred back to the Minister of National Revenue for
reconsideration and reassessment to reduce net tax by a further amount of
$1,665.
[22] As for costs, I
have decided to decline to exercise my discretion to award costs in this
matter. The reason for this should be clear from my reasons.
Signed at Toronto, Ontario this 4th day of February, 2008.
"J. Woods"
CITATION: 2008TCC81
COURT FILE NO.: 2006-590(GST)G
STYLE OF CAUSE: PAUL GUSTAV FRIGSTAD AND
HER
MAJESTY THE QUEEN
PLACE OF HEARING: Vancouver, British Columbia
DATES OF HEARING: January 21 and 28, 2008
REASONS FOR JUDGMENT BY: The
Honourable Justice Woods
DATE OF JUDGMENT: February 4, 2008
APPEARANCES:
|
Counsel for the
Appellant:
|
Jack A. Adelaar
|
|
Counsel for the
Respondent:
|
Karen A. Truscott
|
COUNSEL OF RECORD:
For the Appellant:
Name: Jack A. Adelaar
Firm: Jack
A. Adelaar Law Corporation
Vancouver, British Columbia
For the
Respondent: John H. Sims, Q.C.
Deputy
Attorney General of Canada
Ottawa, Canada
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