Bridgeway Auto Mart Ltd v. The Queen, 2004 TCC 605 (Informal Procedure)

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Appeal heard on July 20, 2004 at Winnipeg, Manitoba

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JUDGMENT

The appeal from the assessment made under the Excise Tax Act, notice of which is dated February 7, 2002 and bears number 00000000036, is dismissed, without costs, in accordance with the attached Reasons for Judgment.

Signed at Vancouver, British Columbia, this 10th day of September 2004.

Little J.

REASONS FOR JUDGMENT

Little J.

A.       FACTS:

[1]      The Appellant was carrying on the business of an automobile broker in the City of Winnipeg.

[2]      The Appellant was a registrant under the Excise Tax Act ("the Act") for Goods and Services tax purposes.

[3]      Mr. Wayne Dare is the President and principal shareholder of the Appellant.

[4]      Wayne Dare in his personal capacity entered into an agreement with Transcona Motors ("Transcona").

[5]      Pursuant to the Agreement Mr. Dare agreed to act as an independent agent brokering automobiles for Transcona.

[6]      Pursuant to the Agreement Mr. Dare was to receive 65% of any net income earned by Transcona. The Agreement also provided that Mr. Dare was to pay Transcona 65% of any net losses suffered by Transcona.

[7]      Mr. Dare's share of the losses suffered by Transcona was $149,981.00.

[8]      The Appellant paid $93,800.00 of the amount that Mr. Dare owed to Transcona. The payments made by the Appellant to Transcona were:

B.       ISSUE:

[9]      The issue to be decided is whether the Appellant is entitled to input tax credits with respect to the payments that were made to Transcona.

C.       ANALYSIS:

[10]     In the Notice of Appeal filed by the Appellant reference was made to business arrangements with Auto Perfection. However, during the hearing the agent for the Appellant stated that the only issue in dispute was whether the Appellant was entitled to input tax credits on the payments that were made by the Appellant to Transcona.

[11]     Based upon the evidence that was presented in Court I have concluded that the payments that were made by the Appellant to Transcona were paid to satisfy a debt that was owed by Wayne Dare personally to Transcona. The payments were not made by the Appellant to acquire supplies of property and services that were consumed or used by the Appellant in the course of its commercial activities.

[12]     On the basis that the amount paid by the Appellant to Transcona was a personal debt of Wayne Dare it follows that the Appellant was not required to pay GST to Transcona pursuant to subsection 165(1) and section 221 of the Act.

[13]     I have therefore concluded that the Appellant did not satisfy the conditions in subsection 169(1) of the Act and is not entitled to claim input tax credits with respect to the amounts paid to Transcona.

[14]     The appeal is dismissed without costs.

Signed at Vancouver, British Columbia, this 10th day of September 2004.

Little J.