Date: 19980521
Docket: 97-2906-GST-I
BETWEEN:
SPECTRA DEVELOPMENT CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor
Judgment
Bowman, J.T.C.C.
[1]
This appeal is from an assessment made under the Excise Tax
Act by which the Minister of National Revenue disallowed a
claim for input tax credits in the amount of $10,467.29.
[2]
It is alleged that the appellant paid the sum of $160,000 to
Sunny Coast Investments Ltd. ("SCI") for a number of
expenses incurred by SCI. The appellant therefore contends that
it is entitled to an input tax credit ("ITC") of
$10,467.29 being the amount of the GST component in $160,000
($160,000 ¸ 1.07 x .07).
[3]
Section 169 of the Excise Tax Act permits a registrant to
recover GST that it has paid in respect of a supply of goods or
services. Essentially the process of payment, collection and
recovery of GST occurs at each stage as goods or services move
down the line to the ultimate consumer where, in effect, the buck
stops.
[4]
Among the conditions that must be met before a registrant is
entitled to claim an ITC is that the registrant have received a
supply of goods and services and that it have paid GST in respect
thereof. Subsection 169(4) imposes strict requirements on a
claimant to provide information and documentation relating to a
claim for an ITC, and the Input Tax Credit Information
Regulations go even further.
[5]
The evidence in this case falls far short of establishing the
appellant's entitlement to the ITC claimed, even on the
most lenient interpretation of the rules of evidence that I
permitted under the informal procedure. No shareholder or officer
of the appellant testified. The evidence was given by two
accountants and it never became particularly clear to me just
what the legal relations were between the various entities.
[6]
An agreement dated July 23, 1993 (Exhibit A-1) between SCI and
Canada Asia Entrepreneurs Inc. ("CAE") was put in
evidence relating to the development of some lands in Vancouver.
SCI had a line of credit of $5,500,000 with Hongkong Bank of
Canada and it borrowed money from the bank for the project.
[7]
Exhibit A-2 is an authorization to the bank and to its solicitors
McCarthy Tétrault, to pay out to various persons some
portions of the loan, including $160,000 to SCI and the balance
of the first advance to the appellant Spectra Development
Corporation ("SDC") on behalf of the borrower.
[8]
It is at this stage that the evidence becomes even murkier. It is
alleged that SDC took over the function of CAE to manage the
project and that it paid the bills. A cheque for $160,000 was put
in evidence (Exhibit A-4). It was drawn on the McCarthy
Tétrault trust account and was payable to SCI.
[9] A
letter of April 13, 1994 from SDC to SCI (Exhibit A-5) appears to
enclose a cheque payable to SCI for $160,000 and the witnesses
said that they thought that this was probably the McCarthy
Tétrault cheque.
[10] Also, a
group of invoices totalling $158,249.19 including GST of
$5,825.68 were put in evidence. These appear to have been paid by
SCI.
[11] It is on
this basis that SDC claims an ITC of $10,467.29.
[12] Even
stretching all the rules of evidence to the breaking point, I do
not see where the evidence establishes any right in SDC to an ITC
of $10,467.29 or even $5,825.68 It is not even clear on what
basis SDC can say it paid $160,000 to SCI. That money came from
the Hongkong Bank of Canada through the trust account of McCarthy
Tétrault and formed part of SCI's borrowings. In
short, it has not been established that SDC ever paid, on its own
behalf, any GST and that it ever fell heir to whatever ITCs SCI
might have been entitled to.
[13] The
problems are, of course, exacerbated by the fact that the project
foundered and the numerous players are all suing each other.
[14] In
conclusion, therefore, the appellant has not met the onus of
making out even a prima facie case for its claim to an
ITC. I need hardly add that the evidentiary requirements of
subsection 169(4) and the ITC Information Regulations have not
been met.
[15] The
appeal is dismissed.
Signed at Ottawa, Canada, this 21st day of May 1998.
"D.G.H. Bowman"
J.T.C.C.
COURT FILE
NO.:
97-2906(GST)I
STYLE OF
CAUSE:
Spectra Development Corporation and
Her Majesty The Queen
PLACE OF
HEARING:
Vancouver, British Columbia
DATE OF
HEARING:
May 13, 1998
REASONS FOR JUDGMENT BY: D.G.H.
Bowman
DATE OF
JUDGMENT:
May 21, 1998
APPEARANCES:
Agent for the
Appellant:
Julius Pataki
Counsel for the
Respondent:
David R. Poore, Esq.
COUNSEL OF RECORD:
For the
Appellant:
Name:
--
Firm:
--
For the
Respondent:
George Thomson
Deputy Attorney General of Canada
Ottawa, Canada
97-2906(GST)I
BETWEEN:
SPECTRA DEVELOPMENT CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on May 13, 1998 at Vancouver,
British Columbia, by
the Honourable Judge D.G.H. Bowman
Appearances
Agent for the
Appellant:
Julius Pataki
Counsel for the Respondent: David R.
Poore, Esq.
JUDGMENT
The
appeal from the assessment made under the Excise Tax Act,
notice of which is dated November 12, 1996 and which bears No.
11BU0401823, is dismissed.
Signed at Ottawa, Ontario, this 21st day of May 1998.
J.T.C.C.
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