4 June 2009 Internal T.I. 2009-0314631I7 - Taxation & Insolvency

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether an assessment under s. 296(1)(b) of the Excise Tax Act predates the filing of a proposal under the Bankruptcy and Insolvency Act

Position: Yes.

Reasons: The combined effect of paragraph 152(1)(a) and subsection 168(1) of the Excise Tax Act makes an assessment under paragraph 296(1)(b) of the Excise Tax Act a provable claim in a proposal. Since it is a provable claim, the assessment must be placed in a reporting period prior to the filing of a proposal.

 		June 4, 2009

	Hamilton Tax Services Office	HEADQUARTERS
			Income Tax Rulings
	Attention:  	Jim Fitzgerald, Team Leader	   Directorate
		Appeals Division		Lindsay Frank
		613-948-2227

		2009-031463
	
XXXXXXXXXX

This is in reply to Joe Poletto's email of March 19, 2009, wherein he asked whether an assessment issued pursuant to paragraph 296(1)(b) of the Excise Tax Act ("ETA"), pertains to the period prior to when the registrant filed a proposal under the Bankruptcy and Insolvency Act ("BIA").

XXXXXXXXXX ., a quarterly remittance filer for GST, filed a notice of intention to file a proposal under the BIA on XXXXXXXXXX . The company subsequently filed the proposal, which its creditors accepted on XXXXXXXXXX . The terms of the proposal were performed on XXXXXXXXXX . On XXXXXXXXXX , prior to the performance of the proposal, the Minister assessed the company, pursuant to paragraph 296(1)(b) of the ETA in respect of the period ending XXXXXXXXXX

Liability for GST arises from the operation of the ETA and not from the assessment. Based on the combined effect of subsection 168(1) and subsection 152(1) of the ETA the assessment related to the period prior to the filing of the proposal ("the pre-filing period"). Subsection 168(1) required the company to pay the GST on the earlier of the day that the consideration for the supply was paid, and the day that the consideration for the supply becomes due. Subsection 152(1) deems consideration for a taxable supply to become due on the earliest of three events. In the instant case, the provisions of paragraph 152(1)(a) apply to the extent of the earlier of the day that the supplier first issued an invoice in respect of the supply for that consideration or part and the date of that invoice.

Since the assessment related to a pre-filing period, its description as pertaining to the period ending XXXXXXXXXX , is incorrect. Given that the taxable supply was transacted between XXXXXXXXXX , and XXXXXXXXXX , the assessment must relate to a period falling within those parameters.

Since this was a pre-filing assessment, the amount assessed would have been provable in the proposal proceedings, but for the fact that a claim was not filed. It is important to note that section 65.3 of the BIA provides that once the terms of a proposal have been performed, the trustee will issue a certificate so stating. The certificate has the same effect as a discharge in bankruptcy whereby the debtor is released from all provable claims, whether filed or not. Should you have any questions or require additional clarification on this matter, please do not hesitate to contact Lindsay Frank at the number provided above.

B.J. Skulski
Manager
Insolvency and Administrative Law Section
Business and Partnerships Division
Income Tax Rulings Directorate

c.c. Patricia Taylor
Manager
General Operations Section
General Operations and Border Issues Division
GST Rulings Directorate

Joe Poletto
Appeals Officer
Hamilton Tax Services Office