CRA accepts ONEnergy, including that “either” ETA s. 141.1(3) or 141.01(2) can be satisfied

ONEnergy found that a company that had already sold all its business could claim input tax credits for the GST/HST on its legal fees in successfully suing its executives for having paid themselves inflated bonuses and option termination payments out of the sales proceeds. In this regard, Webb JA found that ETA s. 141.1(3), which provides for an ITC where the service (or property) is acquired in connection with the disposition or termination of a commercial activity, is more specific than s. 141.01(2), so that a person will not lose its entitlement to claim an ITC solely because it was not making any taxable supplies at the time the service (or property) was acquired.

CRA implicitly accepted ONEnergy (including making a brief reference to “either” s. 141.1(3) or 141.01(2) being satisfied), but stated that the “Domestic Compliance Programs Branch may find that the conditions of subsection 141.1(3) are not met in particular situations where the specific facts are different than those in ONEnergy.”

Neal Armstrong. Summaries of 28 February 2019 CBA Roundtable, Q.16 under ETA s. 141.1(3)(a).