[1] Despite the excellent oral arguments and commendable efforts by counsel for the appellants, I am not satisfied that Mr. Justice Angers of the Tax Court of Canada (the judge) erred in his interpretation of subsection 153(4) of theExcise Tax Act, R.S.C. 1985, c. E-15 (the Act) dealing with payment of the goods and services tax (GST).

[2] Subsection 153(4) deals with transactions in which the consideration for the transaction is used tangible personal property. It reads as follows:

Used tangible personal property trade-ins

153. (4) Where, at the time a supplier makes a supply of tangible personal property to a recipient, the supplier accepts, in full or partial consideration for the supply, other property (in this subsection and subsection (5) referred to as the "trade-in") that

(a) is used tangible personal property or a leasehold interest therein, and

(b) is acquired for consumption, use or supply in the course of a commercial activity of the supplier,

and the recipient is not required to collect tax in respect of the supply of the trade-in, the value of the consideration for the supply made by the supplier is deemed, for the purposes of this Part, to be equal to the amount, if any, by which the value of the consideration for that supply (as otherwise determined under this Part) exceeds

(d) where the supplier and the recipient are not dealing with each other at arm's length at the time the supply is made and the amount credited to the recipient in respect of the trade-in exceeds the fair market value of the trade-in at the time ownership thereof is transferred to the supplier, that fair market value.

Contrepartie constituée de biens meubles corporels d'occasion

153. (4) Sous réserve du paragraphe (5), dans le cas où un fournisseur, au moment où il fournit un bien meuble corporel, accepte en contrepartie, même partielle, un autre bien - bien meuble corporel d'occasion ou droit de tenure à bail y afférent - (appelé « _bien repris_ » au présent paragraphe et au paragraphe (5)) qu'il acquiert pour consommation, utilisation ou fourniture dans le cadre de ses activités commerciales et que l'acquéreur n'est pas tenu de percevoir la taxe relative à la fourniture du bien repris, la valeur de la contrepartie de la fourniture effectuée par le fournisseur est réputée, pour l'application de la présente partie, être égale à l'excédent éventuel de la valeur de la contrepartie de cette fourniture, déterminée par ailleurs selon la présente partie, sur le montant suivant_:

a) sauf en cas d'application de l'alinéa b), le montant porté au crédit de l'acquéreur au titre du bien repris;

b) dans le cas où le fournisseur et l'acquéreur ont entre eux un lien de dépendance au moment de la fourniture et que le montant porté au crédit de l'acquéreur au titre du bien repris dépasse la juste valeur marchande de ce bien au moment du transfert de sa propriété au fournisseur, cette juste valeur marchande.

[Emphasis added.]

[3] According to the circumstances surrounding the transactions with which we are concerned, this concurrence required under subsection 153(4) did not exist because, when the client returned the property that he had purchased, he was simply given a credit note for the future purchase of some unidentified property, while the statute stipulates that the supplier must, at the time of the trade-in by the client, supply designated or identified tangible personal property that the client purchases or has undertaken to purchase, even if its delivery must be deferred.

[4] In support of its claim that no such concurrence is required under subsection 153(4) and that a credit note, supported by the supplier's undertaking to honour it, is sufficient to meet the requirements of the Act, counsel for the appellants relied on the authority of three judgments of the Nova Scotia Court of Appeal concerning a similar provision under provincial tax legislation: Minister of Finance v. McCurdy, (N.S.C.A.) 2001-03-02; A.G. (N.S.) v. Oxner, [1993] 5028 ETC and Robinson Plymouth Chrysler Ltd. v. Nova Scotia (Minister of Finance), (N.S.C.A.) 1998-10-30.

[5] With respect, I believe that these judgments can, and must, be distinguished from the situation in this case in terms of the facts.

[6] The first and second judgments dealt with the sale of one sailboat and the purchase of another, smaller in the first case and larger in the second, as a replacement. It is clear from the two decisions that the purchaser made a firm commitment to buy a new boat, and a broker was retained for that purpose. At paragraphs 2 and 3 of McCurdy, supra, we read:

There is no dispute as to the facts. The respondent decided to sell his sailboat, a Cheoy Lee 41, and to buy a smaller one. In 1996, he hired Sunnybrook Yacht Brokers (Sunnybrook). In August 1997, the broker located a purchaser and the Cheoy Lee was sold for $101,250 . . . . Sunnybrook then searched for a suitable replacement sailboat for the respondent.

[Emphasis added.]

[7] In Oxner, supra, it is equally clear from the first paragraph of the reasons that the purchaser intended and made a commitment to obtain a replacement property whose delivery would be deferred:

The respondent is a school teacher who in 1987 purported to trade in his "Mirage 30" sailboat for a $50,000 credit and ordered a new one, a "Westcoast 34", for $64,139.30 in anticipation of cruising the Caribbean . . . .

[Emphasis added.]

[8] The debate in Robinson Plymouth Chrysler Ltd., supra, revolved around an aspect of the transactions in question that was quite unlike the issue before us. That case involved sales and trade-ins of motor vehicles. The consumer sold his vehicle to Robinson Plymouth Chrysler Ltd. and bought another from the dealer. However, the trade-in received and accepted by the dealer was not actually delivered to it. Instead, it was shipped to another dealer located in Moncton, New Brunswick. The issue was therefore whether it was necessary for Robinson to take physical delivery of the trade-in received and accepted by Robinson. On this point, the Court of Appeal wrote:

The focus of the auditor's concern in disallowing the trade-in credit was the fact that the dealer did not have physical control of the trade-ins . . . .

"Acceptance" or "control" of the trade-in can be established in a number of ways of which actual delivery to the dealer is only one . . . .

In requiring actual delivery of the trade-in vehicle, the Board, here, applied the wrong legal test . . . .

The Board should have asked whether, in fact, there had been a trade-in credit allowed by Robinson to the purchaser on the sale of the new vehicle, not whether the trade-in vehicle had been delivered to the dealer.

[9] I note that the excerpt from Nova Scotia Tax Bulletin No. 10-80: Trade-in Policy supplied by counsel for the appellants contains, as the first of four conditions that must be fulfilled in order to tax the difference between the selling price and the trade-in price, the requirement that there be a firm commitment by the purchaser to purchase a new unit. The interpretation bulletin for Quebec legislation on sales involving trade-ins draws a similar conclusion: see B-084, Treatment of Used Goods, July 29, 1997, Collection fiscale du Québec - Taxes à la consommation - March 2003, pages 5 and 6.

[10] Interpretation bulletins are not binding on the Court as to how a legislative provision is to be interpreted. When the interpretation suggested in the bulletin is the right one, however, there is no reason to disregard it.

[11] I am also of the opinion that the judge did not commit an error warranting the intervention of our Court when he found it unnecessary to assess the partnership in order to assess a member of the partnership.

[12] Subsection 272.1(5) of the Act, reproduced below, imposes joint and several liability on a partnership and its members (unless the member is a limited partner and not a general partner) for the payment or remittance of "all amounts that become payable or remittable by the partnership . . . before or during the period during which the member is a member of the partnership":

Joint and several liability

272.1 (5) A partnership and each member or former member (each of which is referred to in this subsection as the "member") of the partnership (other than a member who is a limited partner and is not a general partner) are jointly and severally liable for

(a) the payment or remittance of all amounts that become payable or remittable by the partnership under this Part before or during the period during which the member is a member of the partnership or, where the member was a member of the partnership at the time the partnership was dissolved, after the dissolution of the partnership, except that

(i) the member is liable for the payment or remittance of amounts that become payable or remittable before the period only to the extent of the property and money that is regarded as property or money of the partnership under the relevant laws of general application in force in a province relating to partnerships, and

(ii) the payment or remittance by the partnership or by any member thereof of an amount in respect of the liability discharges the joint liability to the extent of that amount; and

(b) all other obligations under this Part that arose before or during that period for which the partnership is liable or, where the member was a member of the partnership at the time the partnership was dissolved, the obligations that arose upon or as a consequence of the dissolution.

Responsabilité solidaire

272.1 (5) Une société de personnes et chacun de ses associés ou anciens associés (chacun étant appelé « _associé_ » au présent paragraphe), à l'exception d'un associé qui en est un commanditaire et non un commandité, sont solidairement responsables de ce qui suit_:

a) le paiement ou le versement des montants devenus à payer ou à verser par la société en vertu de la présente partie avant ou pendant la période au cours de laquelle l'associé en est un associé ou, si l'associé était un associé de la société au moment de la dissolution de celle-ci, après cette dissolution; toutefois_:

(i) l'associé n'est tenu au paiement ou au versement des montants devenus à payer ou à verser avant la période que jusqu'à concurrence des biens et de l'argent qui sont considérés comme étant ceux de la société selon les lois pertinentes d'application générale concernant les sociétés de personnes qui sont en vigueur dans une province,

(ii) le paiement ou le versement par la société ou par un de ses associés d'un montant au titre de l'obligation réduit d'autant l'obligation;

b) les autres obligations de la société aux termes de la présente partie survenues avant ou pendant la période visée à l'alinéa a) ou, si l'associé est un associé de la société au moment de la dissolution de celle-ci, les obligations qui découlent de cette dissolution.

The tax debt arises not from the assessment but from the Act: see, by analogy under the Income Tax Act, Canada v. Riendeau, [1991] F.C.J. No. 559; The Queen v. Simard-Beaudry Inc. et al., 71 DTC 5511 (F.C.T.D.).

[13] Furthermore, subsection 299(2) states that "liability under this Part to pay or remit any tax, penalty, interest or other amount is not affected by . . . the fact that no assessment has been made":

Liability not affected

299. (2) Liability under this Part to pay or remit any tax, penalty, interest or other amount is not affected by an incorrect or incomplete assessment or by the fact that no assessment has been made.

Obligation inchangée

299. (2) L'inexactitude, l'insuffisance ou l'absence d'une cotisation ne change rien aux taxes, pénalités, intérêts ou autres montants don't une personne est redevable aux termes de la présente partie.

[Emphasis added.]

The notice of assessment merely states the amount of the debt and informs the tax debtor of that amount. In the present case, through the operation of subsection 272.1(5), the tax debtor is both the partnership and its partners. In this case, paragraph 296(1)(e) gives the Minister the power to make an assessment "pour déterminer un montant qu'une personne est tenue de payer ou de verser en vertu du paragraphe 177(1.1) ou des sous-sections a ou b.1 de la section VII" [emphasis added]. The very wording of the French version of the paragraph clearly illustrates the legal existence of the tax debt by operation of law and the role played by the assessment, that is, to determine the amount of the debt.

[14] For these reasons, I would dismiss the appeals in A-231-04 and A-230-04 with a single set of costs in favour of the respondent, whose disbursements I would, however, grant in each of the cases.

[15] I would order that the appellants pay equal shares of the costs and disbursements.

[16] In accordance with the order rendered by Mr. Justice Nadon on August 19, 2004, a copy of these reasons will be entered in docket A-230-04.

"Gilles Létourneau"

J.A.

"I concur

Robert Décary J.A."

"I concur

J.D. Denis Pelletier J.A."

Certified true translation

Michael Palles

FEDERAL COURT OF APPEAL

SOLICITORS OF RECORD

DOCKET: A-231-04

STYLE OF CAUSE: DIMENSION J.M.M. INC. v. HER MAJESTY THE QUEEN

PLACE OF HEARING: Montréal, Quebec

DATE OF HEARING: May 3, 2005

REASONS FOR JUDGMENT BY: LÉTOURNEAU J.A.

CONCURRED IN BY: DÉCARY J.A.

PELLETIER J.A.

DATED: May 10, 2005

APPEARANCES:

Richard Généreux

FOR THE APPELLANT

Louis Cliche

FOR THE RESPONDENT

SOLICITORS OF RECORD:

Généreux Côté

Drummondville, Quebec

FOR THE APPELLANT

Veillette, Larivière

Sainte-Foy, Quebec

FOR THE RESPONDENT

FEDERAL COURT OF APPEAL

SOLICITORS OF RECORD

DOCKET: A-230-04

STYLE OF CAUSE: CHARLES BEAUPRÉ v. HER MAJESTY THE QUEEN

PLACE OF HEARING: Montréal, Quebec

DATE OF HEARING: May 3, 2005

REASONS FOR JUDGMENT BY: LÉTOURNEAU J.A.

CONCURRED IN BY: DÉCARY J.A.

PELLETIER J.A.

DATED: May 10, 2005

APPEARANCES:

Richard Généreux

FOR THE APPELLANT

Louis Cliche

FOR THE RESPONDENT

SOLICITORS OF RECORD:

Généreux Côté

Drummondville, Quebec

FOR THE APPELLANT

Veillette, Larivière

Sainte-Foy, Quebec

FOR THE RESPONDENT

Date: 20050510

Docket: A-230-04

Ottawa, Ontario, May 10, 2005

CORAM: DÉCARY J.A.

LÉTOURNEAU J.A.

PELLETIER J.A.

BETWEEN:

CHARLES BEAUPRÉ

PLAINTIFF - Appellant

and

HER MAJESTY THE QUEEN

DEFENDANT - Respondent

JUDGMENT

The appeal is dismissed in A-231-04 and A-230-04 with a single set of costs in favour of the respondent, whose disbursements are granted in each of the cases. The appellants shall pay equal shares of the costs and disbursements.

"Robert Décary"

J.A.

Certified true translation

Michael Palles

Date: 20050510

Docket: A-231-04

Ottawa, Ontario, May 10, 2005

CORAM: DÉCARY J.A.

LÉTOURNEAU J.A.

PELLETIER J.A.

BETWEEN:

DIMENSION J.M.M. INC.

PLAINTIFF - Appellant

and

HER MAJESTY THE QUEEN

DEFENDANT - Respondent

JUDGMENT

"Robert Décary"

J.A

Certified true translation

Michael Palles

Summaries

Summary Under

Tax Topics - Excise Tax Act - Section 153 - Subsection 153(4)

not available where only a credit note issued

A partnership of which the appellant was a member permitted customers to return a video game purchased from the business and receive a credit...

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Summary Under

Tax Topics - Excise Tax Act - Section 299 - Subsection 299(2)

assessment of partnership before assessment of partner not required

A partnership of which the appellant was a member was liable for unremitted GST given its improper reliance on the trade-in rule in s. 153(4). In...

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Summary Under

Tax Topics - Excise Tax Act - Section 272 - Subsection 272.1(5)

direct assessment of partner was valid

A partnership of which the appellant was a member was liable for unremitted GST given its improper reliance on the trade-in rule in s. 153(4). In...

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Dimension J.M.M. Inc. v. Canada, 2005 FCA 168

Citations2005 FCA 168

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2005 FCA 168