Citation: 2014 TCC 29
Date: 20140128
Docket: 2012-912(GST)I
BETWEEN:
LYLE BRAITHWAITE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Favreau J.
[1]
This goods and services
tax appeal was heard on common evidence with the appellant’s income tax appeal (2012-911(IT)I).
[2]
The issue to be decided
in this appeal is whether the appellant is entitled to claim input tax credits
(“ITCs”) for the period from January 1, 2005 to December 31, 2006 (the “Period”)
in excess of the amounts allowed by the Minister of National Revenue (the
“Minister”) by way of the reassessment dated October 25, 2010, made under Part
IX of the Excise Tax Act, R.S.C. 1985, c. E-15, as amended (the “ETA”).
[3]
By way of the October
25, 2010 reassessment, the Minister:
(a) disallowed ITCs in the amount of
$1,168.72 for the period from January 1, 2005 to December 31, 2005 (the “Year
2005”);
(b) disallowed ITCs in the amount of
$1,002.83 for the period from January 1, 2006 to December 31, 2006 (the “Year
2006”);
(c) assessed arrears of interest in
the amount of $510.59 for the Period; and
(d) assessed late remitting and failure
to file penalties of $19.15 for the Period.
[4]
In determining the
appellant’s liability for the Goods and Services Tax (the “GST”) for the
Period, the Minister made the following assumptions of fact, set out in
paragraph 11 of the Reply to the Notice of Appeal:
a) the Appellant was carrying on business as a real estate
agent and consultant (the ”Business Activity”); (admitted)
b) in the course of his Business Activity, the Appellant was
a commercial real estate agent operating out of the office of Sutton group
Resource Realty in Duncan, BC; (admitted)
c) in the course of his Business Activity, the Appellant
also operated Braithwaite & Co. Real Estate Consulting out of his home;
(admitted)
d) the
Appellant was a registrant for GST purposes; (admitted)
e) the Appellant was required to file GST returns on an
annual basis; (admitted)
f) the
Appellant made taxable supplies in his Business Activity; (admitted)
g) from January 1, 2005 to June 30, 2006, the Appellant’s
supplies were taxable at the rate of 7 percent; (admitted)
h) from July 1, 2006 to December 31, 2006, the Appellant’s
supplies were taxable at the rate of 6 percent; (admitted)
Advertising
Expenses
i) the
Appellant claimed ITCs in respect of advertising services in the Period;
(admitted)
j) the
Appellant claimed ITCs in 2006 in respect of advertising services that were
obtained in 2004 and 2005, and for which ITCs had already been claimed in 2004
and 2005; (denied)
Interest Expenses
k) the Appellant claimed ITCs in the interest
expense category in respect of payments made to the Royal Bank during the
Period; (denied)
l) the
Appellant failed to provide supporting documents for ITCs claimed in respect of
payments made to Royal Bank during the Period; (denied)
Motor Vehicle
Expenses
m) the
Appellant claimed ITCs in respect of motor vehicle expense in the Period;
(admitted)
n) during
the Period, the Appellant operated a Buick Rendezvous (the “Vehicle”);
(admitted)
o) the
Appellant claimed ITCs for expenses in the motor vehicle category that were not
related to his Business Activity, including payment of a speeding ticket,
membership fees at the Union Club in Victoria, and the Appellant’s personal use
of the Vehicle; (denied except for the speeding ticket only which is admitted)
p) the
Appellant did not maintain a mileage or vehicle log in respect of the usage of
the Vehicle; (admitted);
q) the
Appellant was unable to provide sufficient documentation to fully support the
ITCs claimed on the use of his vehicle and for maintenance of his vehicle in
the Period; (denied)
Travel Expenses
r) the Appellant claimed ITCs for
travel expenses in the Period; (admitted)
s) the
Appellant claimed ITCs in the Period for travel expenses that were not related
to his Business Activity, including:
i) Christmas
dinner purchases;
ii) wine purchases;
iii) airplane and train
tickets for his children;
iv) expenses for the
Appellant’s personal travel to Ontario and Quebec;
v) expenses for boarding the
Appellant’s dog in a kennel;
vi) clothing purchases in Toronto; and
vii) fees at a golf course;
(all denied except for the dog boarding
in a kennel which is admitted)
t) the
Appellant was unable to provide sufficient documentation to fully support the
ITCs claimed on his travel expenses in the Period;
Office, Telephone and Other Expenses
u) the
Appellant claimed ITCs on office, telephone and other expenses for the Period;
(admitted)
v) the
Appellant claimed ITCs on expenses in the office, telephone and oher expenses
category that were not related to his Business Activity, including:
i) purchases
at the University of Toronto for the Appellant’s son;
ii) expenses
for a graduation party;
iii) medications;
iv) home
telephone and internet bills; and
v) personal
cellular phone bills;
(all denied)
w) the
Appellant was unable to provide sufficient documentation for ITCs claimed on
several items in the telephone, office, and other category; (denied)
Capital Cost
Allowance Additions
x) the
Appellant claimed ITCs on a computer purchased for his son in 2005; (denied)
Summary of ITCs
Disallowed in the Period
y) the
Appellant claimed ITCs of $2,592.98 for 2005; (admitted)
z) in
2005, $1,168.72 of the ITCs claimed by the Appellant were either not incurred
in acquiring properties and services respecting the supplies he made through
the Business Activity, or were not supported by documentation, as set out in
the attached Schedule “C”; (denied)
aa) the
Appellant claimed ITCs of $2,885.10 for 2006; (admitted)
bb) in
2006, $1,002.83 of the ITCs claimed by the Appellant were either not incurred
in acquiring properties and services respecting the supplies he made through
the Business Activity, or were not supported by documentation, as set out in
the attached Schedule “C”. (denied)
Analysis and Conclusion
[5]
The adjustments to ITCs
made by the Canada Revenue Agency (the “CRA”) in respect of the appellant’s
2005 and 2006 taxation years are as follows:
|
|
2005
|
2006
|
|
|
$
|
$
|
|
Advertising
|
—
|
219.32
|
|
Interest
|
246.40
|
—
|
|
Telephone/office/other
|
385.13
|
360.51
|
|
Travel
|
286.58
|
347.23
|
|
Motor Vehicles
|
116.52
|
75.77
|
|
CCA Addition
|
134.09
|
—
|
|
|
________
|
_________
|
|
Total:
|
$1,168.72
|
$1,002.83
|
[6]
The ITC adjustments
resulted from adjustments to the appellant’s business expenses for the 2005 and
2006 taxation years. All income tax audit adjustments regarding the business
expenses claimed by the appellant in the Year 2006 were also made in respect of
the business expenses claimed by the appellant in the Year 2005 on the
same basis and for the same reasons (either the expenses were not incurred in
the course of commercial activities or were not corroborated by sufficient
documentation).
[7]
Considering my reasons
and decision in the appellant’s income tax appeal (2012-911(IT)I), the appeal
is allowed and the reassessment is referred back to the Minister for
reconsideration and reassessment on the basis that the appellant is entitled to
an additional ITC in the amount of $219.32 for the period from January 1
to December 31, 2006, with adjustments to interest and penalties.
Signed at Ottawa, Canada, this 28th day of January 2014.
"Réal Favreau"
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