26 May 2004 GST/HST Interpretation 49475 - Application of Subsection 272.1(1) of the Excise Tax Act

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your operations. We apologize for the delay in replying to your request for an interpretation.

Interpretation Requested

You asked if subsection 272.1(1) would apply to the following fact situation:

1. D Co. is a special purpose entity set up to act as a general partner in a financial services business.

2. Under the written partnership agreement, D. Co. will provide certain accounting and administrative services to the partnership business.

3. D. Co. will acquire property and services for consumption and use in the partnership's business from a professional firm. The partnership will pay a fixed fee to D. Co. for the services received.

4. D. Co.'s conduct in providing the accounting services and charging a fee for the services is consistent with the related terms of the written partnership agreement.

Interpretation Given

Generally, where a corporation that is a member of a partnership supplies property or services for a fee in the course of its business to the partnership, it is supplying the property or services otherwise than in the course of the partnership's activities. Where that is the case, subsection 272.1(3) would apply, not subsection 272.1(1).

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-4394.

Yours truly,

Doris McMullan
Corporation Reorganizations Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2004/05/20 — RITS 50859 — Definition of Specified Person