FTI Consulting - Quebec Court of Appeal finds that an ITC claim arising under ETA s. 182 after a CCAA filing could not be set off by the ARQ against a pre-filing tax debt
The ARQ, along with CRA, were owed approximately $13.4 million of tax by a corporation immediately before it was placed into protection under the CCAA. Over three years later, the monitor for the corporation made partial payment of damages claims which generated input tax credit claims of approximately $7.5 million as a result of the deemed supplies occurring pursuant to ETA s. 182 and the Quebec equivalent. Whether the ARQ could set off the ITC claims against the amount of tax owing to it (which clearly was a pre-CCAA filing claim) turned principally on whether the ITC claims were pre-filing claims (set-off available) or post-filing claims (set-off likely unavailable).
The ARQ essentially argued that, since the contracts to which the damages related had been entered into before the filing, the damages themselves should be treated as a pre-filing claim. In rejecting this and other ARQ submissions and in finding that the ITC claims were post-filing claims, Kalichman JA stated:
[I]t was only when the interim distribution was made three years after the initial CCAA filing, that payment for the supply of a taxable service was deemed to have been made and the taxes due in respect of that payment were deemed to have been collected. …
The set-off was not permitted.
Neal Armstrong. Summaries of Agence du revenu du Québec v. FTI Consulting Canada Inc., 2022 QCCA 1740 under ETA s. 182 and Statutory Interpretation - Similar Statutes/ in pari materia.