Docket: 2011-3694(GST)I
BETWEEN:
D-WIN COMPUTER SYSTEMS INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal heard on May
10, 2013 at Ottawa, Canada
Before: The Honourable Justice
Patrick Boyle
Appearances:
|
Counsel for the Appellant:
|
Jonathan P.M. Collings
|
|
Counsel
for the Respondent:
|
Serena Sial
|
____________________________________________________________________
JUDGMENT
The
appeal from the reassessments made under Part IX of the Excise Tax Act
for the periods from April 1, 2004 to March 31, 2005, April 1, 2005 to March
31, 2006, April 1, 2006 to March 31, 2007 and April 1, 2007 to March 31, 2008
is allowed, without costs, and the matter is referred back to the Minister of
National Revenue for reconsideration and reassessment in accordance with the
attached reasons delivered orally at the hearing.
Signed
at Ottawa, Canada this 14th day of June 2013.
"Patrick Boyle"
Docket: 2011-3694(GST)I
BETWEEN:
D-WIN COMPUTER SYSTEMS INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
EDITED VERSION OF TRANSCRIPT
OF ORAL REASONS FOR JUDGMENT
Let the attached edited transcript of the Reasons for
Judgment delivered orally from the Bench at Ottawa, Canada on May 10, 2013 be
filed. I have edited the transcript (certified by the Court Reporter) for
style, clarity and to make minor corrections only. I did not make any
substantive changes.
Signed
at Ottawa, Canada this 14th day of June 2013.
"Patrick Boyle"
Citation: 2013 TCC 187
Date: 20130614
Docket: 2011-3694(GST)I
BETWEEN:
D-WIN COMPUTER SYSTEMS INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
(Appeal heard and decision rendered orally from the
Bench
on May 10, 2013 at Ottawa, Canada)
Boyle
J.
[1]
These are my reasons in D-Win
Computer Systems Inc.'s informal GST appeal heard today in Ottawa regarding the
Appellant's claim for input tax credits in respect of its real estate
development project which was subject to a section 273 joint venture election.
[2]
At the outset, the Respondent
withdrew its preliminary objection to the appeal as it relates to 2005 and
2006. In addition, the Crown conceded that the taxpayer's appeal should be
allowed in respect of $20,730.12 of the input tax credits in issue as the Respondent
is satisfied the inputs, including GST, were paid by D-Win outside the
provisions of the section 273 joint venture.
[3]
The facts in evidence are clear
and straightforward. The Appellant's documents were all relevant and well-organized
and were admitted on consent. The evidence of both of the taxpayer's witnesses
went in very efficiently. The Respondent did not cross-examine Mr. Baldwin, and
had only one question for Mr. McConnell. Both counsel were similarly well-prepared
and focused in their argument; for this and for the concessions, both parties
and counsel are to be commended.
[4]
The Appellant, D-Win Computer
Systems Inc., acquired the property for development from its sole shareholder
and director, Mr. Baldwin. Mr. Baldwin and his wife had originally intended to
build their own home on the property, but their personal circumstances changed.
This was to be the first real estate development project for either D-Win or
Mr. Baldwin. D-Win hired a qualified builder, Eagle Designers and Builders, to
act as its general contractor by written contract drafted by Mr. Baldwin. Mr.
Baldwin had previously hired Eagle on two occasions for foundation-related
work.
[5]
Under the contract, Eagle was to
have the homes built for D-Win on a cost plus basis providing Eagle with a
fixed amount per unit. The contract also dealt with financing and
distributions.
[6]
D-Win and Eagle filed a joint
venture election under section 273 of the Excise Tax Act identifying
Eagle as the operator of the project and D-Win as the co-venturer. In general
terms, the effect of a section 273 election is to deem the transactions between
the electing parties not to create another level of GST and input tax credits.
[7]
For purposes of the transaction in
issue in this case, paragraphs 273(1)(a) and (c) specifically
deem, (i) supplies acquired by Eagle on behalf of D-Win to have been supplies
acquired by Eagle and not by D-Win, and (ii) the supplies by Eagle to D-Win not
to be supplies.
[8]
D-Win's re-development project did
not go as smoothly as Mr. Baldwin had hoped. For purposes of this appeal, it is
sufficient to say that D-Win was not satisfied with Eagle's performance, including
its accounting reporting. However, I have no evidence that Eagle did not claim
the ITCs to which it was entitled as operator by virtue of paragraph 273(1)(a)
in respect of all of the GST paid on the inputs to the houses built.
[9]
Following the disappointing
financial position D-Win was left with in respect of its project, in its appeal
to this Court it is now seeking to claim input tax credits in respect of it
having advanced the money to its general contractor to pay the third party
suppliers. It is the Appellant's position that this ITC entitlement of D-Win is
the effect of subsection 141.01(4) after applying subsection 141.01(7).
[10]
Subsection 141.01(7) applies for
purposes of subsection (4) among others if a provision of the GST legislation
"deems the consideration for a supply not to be consideration for the
supply", or "deems a supply to be made for no consideration", or
"deems a supply not to have been made by a person."
[11]
Counsel for the taxpayer argues
that at least one of these pre-conditions to subsection 141.01(7) is met by
virtue of the section 273 election and specifically paragraph 273(1)(a).
I can not agree. It is clear that paragraph 273(1)(a), for our purposes,
deems the acquisition of an input by Eagle on behalf of D-Win to have been an acquisition
by Eagle not D-Win. That is, it is a deeming rule regarding the person who
acquired the input. It does not deem consideration not to be consideration,
does not deem a supply to have been made for no consideration, and does not
deem a supply not to have been made by D-Win.
[12]
Even if I read on to paragraph
273(1)(c), which was not argued by counsel for the taxpayer, and which
does deem certain supplies made by the operator Eagle to the co-venturer D-Win
not to have been made, I do not see how the taxpayer can succeed in its
position. This is because the next and final step in its argument is to apply
subsection 141.01(4) to establish its ITC entitlement. However, the first pre-condition
to applying subsection 141.01(4) as set out in paragraph (a), is that a
supplier makes the taxable supply of property for no consideration. That can not
be satisfied as regards supplies between Eagle and D-Win. In fact and law,
there was clearly lots of consideration flowing between these two parties as
set out in their contract. Further, even if the taxpayer is correct, that
subsection 141.01(7) provides that section 273 does not apply in applying
subsection 141.01(4), no supply can even be argued to have been deemed to have
been made for no consideration. Finally, even if paragraphs 273(1)(a)
and (c) both apply, as discussed above, they do not deem any supply to
have been made for no consideration. For all of these reasons, subsection
141.01(4) can not be engaged in this case.
[13]
For the above reasons, the
taxpayer's position on the law can not succeed. The appeal will be dismissed
except as regards the amounts conceded by the Respondent noted above.
[14]
I would note that this also seems
to be the appropriate result as regards at least all of the inputs from third
parties. D-Win elected under section 273 to have its operator Eagle be the one
entitled to the ITCs in respect of GST charged by the third party suppliers. There
is no evidence that Eagle did not claim all of the ITCs to which it was
entitled, nor is there any evidence that Eagle charged or collected GST to
D-Win or remitted any GST when D-Win funded Eagle to permit Eagle to pay these
third party suppliers, hence, if D-Win were now to obtain input tax credits in
respect of the GST paid by Eagle to the third party suppliers, there would
clearly be double counting, or at least double counting could not be excluded
as a risk.
[15]
The appeal is allowed in part,
only to the extent of the Respondent's concession of input tax credits
totalling $20,730.12.
Signed
at Ottawa, Canada this 14th day of June 2013.
"Patrick Boyle"
CITATION: 2013 TCC 187
COURT FILE NO.: 2011-3694(GST)I
STYLE OF CAUSE: D-WIN
COMPUTER SYSTEMS INC. AND HER MAJESTY THE QUEEN
PLACE OF HEARING: Ottawa, Canada
DATE OF HEARING: May 10, 2013
REASONS FOR JUDGMENT BY: The
Honourable Justice Patrick Boyle
DATE OF JUDGMENT: June 14, 2013
APPEARANCES:
|
Counsel for the Appellant:
|
Jonathan
P.M. Collings
|
|
Counsel for the Respondent:
|
Serena
Sial
|
COUNSEL OF RECORD:
For the Appellant:
Name: Jonathan P.M. Collings
Firm: Low
Murchison Radnoff LLP
1565 Carling Avenue, Suite 400
Ottawa, Ontario, K1Z 8R1
For the Respondent: William
F. Pentney
Deputy
Attorney General of Canada
Ottawa,
Canada
Email this Content