Citation: 2011 TCC 129
Date: 20110228
Docket: 2010-1699(GST)I
BETWEEN:
9180-2801 QUÉBEC INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Lamarre J.
[1]
The appellant is
appealing though its majority shareholder and president David Jondeau from an
assessment made August 31, 2009, by the Ministère du Revenu du Québec (MRQ)
for the Canada Revenue Agency, requiring a net goods and services tax (GST) of
$822.16 (including interest) from the appellant for the period of January 1, 2009,
to March 31, 2009. This net tax corresponds to the amount of the input tax
credit (ITC) the MRQ denied the appellant on the purchase price of
$18,758.48 for a 2009 Mazda motor vehicle on February 19, 2009.
[2]
The respondent relies
on subsection 199(2) of the Excise Tax Act (ETA) to deny these ITC.
Subsections 199(2) and 199(3) of the ETA state:
199
…
(2)
Where a registrant acquires or imports personal
property or brings it into a participating province for use as capital
property,
(a) the tax payable by the registrant in respect of the acquisition,
importation or bringing in of the property shall not be included in determining
an input tax credit of the registrant for any reporting period unless the
property was acquired, imported or brought in, as the case may be, for use
primarily in commercial activities of the registrant; and
(b) where the registrant acquires, imports or brings in the property for
use primarily in commercial activities of the registrant, the registrant is
deemed, for the purposes of this Part, to have acquired, imported or brought in
the property, as the case may be, for use exclusively in commercial activities
of the registrant.
(3)
For the purposes of this Part, where a registrant
last acquired or imported personal property for use as capital property of the
registrant but not for use primarily in commercial activities of the registrant
and the registrant begins, at a particular time, to use the property as capital
property primarily in commercial activities of the registrant, except where the
registrant becomes a registrant at the particular time, the registrant shall be
deemed
(a) to have received, at the particular time, a supply of the property
by way of sale; and
(b) except where the supply is an exempt
supply, to have paid, at the particular time, tax in respect of the supply
equal to the basic tax content of the property at the particular time.
[3]
The respondent claims
that the appellant did not establish that the motor vehicle was purchased for
the purpose of being used primarily in its commercial activities.
[4]
For the audit,
Mr. Jondeau completed a form in which he indicated he used the appellant's
motor vehicle 60% for business and 40% for personal reasons. More specifically,
in the form submitted as Exhibit I‑2, he indicates a total annual
business use of 8,000 to 9,000 km and 6,000 km for personal use. To calculate
the distance travelled for business purposes, he used the number of kilometres
between his personal residence, which is the appellant's head office, and the
premises rented for the company (the office) or the appellant's laboratory,
which was at another location.
[5]
The appellant operates
a company that makes and exports natural products and processes herbs.
According to the form submitted (Exhibit I-2), the auditor found that almost
all the kilometres indicated for business purposes were for travel between
Mr. Jondeau's residence and his workplace (see paragraph 6(k) of the Reply
to the Notice of Appeal (Reply)). These trips were for personal reasons, so the
auditor found that the majority of Mr. Jondeau's travel with the appellant's
vehicle was personal (see paragraph 6(l) of the Reply).
[6]
In the objection,
Gilles Gravel, objections officer for the MRQ, reviewed the monthly travel
records for the months of March to December 2009. He explained in court that he
received the objections file on January 27, 2010. Since the vehicle was
acquired on February 19, 2009, he analyzed the vehicle's period of use from
March 2009 (first full month of real use) to December 2009 (last month of use
in the calendar year and also the last full month of use before the objection
review). In his opinion, it was a representative period of Mr. Jondeau's use of
the motor vehicle. According to the analysis of the travel records provided by
Mr. Jondeau, he calculated the number of personal kilometres driven during this
period, including travel from the residence to the workplace, for a total of
7,548 km and for business purposes, 7,502 km, for a total distance of
15,050 km. This results in a percentage of 50.15% for personal purposes
and 49.85% for professional purposes. In the kilometres allocated for business
purposes, he allowed all the travel costs for trips outside the region for
training activities and courses offered by the Fédération des médecines
alternatives and the École des médecines alternatives, despite the fact he did
not have all the documentary evidence in support of these trips (see Memorandum
on Objection, Exhibit I-1, Tab 1).
[7]
In court,
Mr. Gravel explained that in January and February 2009, there was almost
no business travel (since the vehicle was only acquired in mid-February 2009).
[8]
The appellant is not
challenging the personal nature of the travel between Mr. Jondeau's
residence and the workplace. It claims that Mr. Gravel should have analyzed the
travel over a full year, from March 2009 to March 2010, not only for a period
of 10 months. Mr. Jondeau claims that the use of the vehicle for business
purposes increased progressively and if the travel in January and February 2010
is taken into consideration, according to his calculations, there would be a
proportion of 54.08% for business and 45.92% for personal use. He submitted to
evidence documents showing that during January 2010, he travelled to Montreal to purchase a range of natural products
(Exhibits A‑4, A‑5 and A‑6). He also submitted an
invitation from the École de formation M.K.O. for Mr. Jondeau to give training
courses in Quebec City, Saguenay and Trois-Rivières in January and February
2010, and invoices for M.K.O. from Mr. Jondeau for these three training periods
(Exhibits A‑7 and A‑8). The appellant also submitted gas receipts
for January and February 2010, (without, however, clarifying which trips they
were related to) and an invoice for products he had to go pick up in Quebec City, in January 2010.
[9]
In summary, the
appellant claims that the summer months are less active for the business and it
is penalized if the percentage of use of the motor vehicle is not calculated
over a full 12-month period. In fact, the appellant feels that the months of
January and February 2010 were active months and if they are taken into
consideration, the percentage representing the business portion increases to
more than 50%.
[10]
Although I understand
the appellant's concern, I feel that the MRQ conducted a sufficiently complete
analysis of Mr. Jondeau's travel to conclude on the facts that he did not use
the appellant's vehicle primarily for business purposes. The new data presented
in court by Mr. Jondeau may be analyzed again in a new claim by the appellant
to establish that, from January 2010 the use of the vehicle changed to such an
extent that it became used primarily for business purposes. This is possible
under subsection 199(3) ETA.
[11]
The fact the period
analyzed was 10 months and not 12, as the appellant noted, is not a sufficient
element to warrant a review of the MRQ decision in my opinion. The MRQ
confirmed the assessment based on the elements it had at the time of the
objection and even accepted trips without all the documentary evidence, which
was not in the appellant's favour. The test imposed by subsection 199(2)
ETA, as such, does not specify an evaluation period. This legislative provision
requires that the vehicle be acquired for the purpose of being used primarily
for commercial purposes. Therefore, the appellant would have had to show that
this was the intention at the time of acquisition.
[12]
In Coburn Realty
Ltd. v. R., 2006 TCC 245, 2006 CarswellNat 1091, Chief Justice Bowman,
as he was then, stated the following in regard to subsection 199(2) ETA,
at paragraph 9, et seq.:
9 The words in subsection 199(2) "... for use primarily in
commercial activities..." imply purpose or intent. The French version of
the provision is consistent with this interpretation:
"... en
vue d'être utilisé principalement dans le cadre de ses activités
commerciales."
10 Statements by a taxpayer of his or her subjective purpose and intent
are not necessarily and in every case the most reliable basis upon which such a
question can be determined. The actual use is frequently the best evidence of
the purpose of the acquisition. In 510628 OntarioLimited v. The Queen,
[2000]G.S.T.C. 58, 2000 GTC 877 (T.C.C. [Informal Procedure]), the
following was said:
[11] It should be noted
that the expression "for use primarily ..." (en vue d'être utilisé)
requires the determination of the purpose of the acquisition, not the actual
use. Nonetheless, I should think that as a practical matter if property is in
fact used primarily for commercial purposes it is a reasonable inference that
it was acquired for that purpose.
11 I shall turn then to the actual use that was made of the boat. Mr. Coburn testified that the boat was used for
entertaining clients and for rewarding his sales staff. He stated that the
appellant was seeking to expand its business to cottage country. I accept that
he wished to expand the appellant's business but I am not persuaded that the
boat was used or was intended to be used primarily for business purposes.
Although I think there was probably an element of business in some of its use,
the evidence of its actual use does not support the conclusion that the primary
purpose of its acquisition was for use in the appellant's business.
12 The word "primarily" is generally taken to mean over 50%.
The problem is, however, to determine what one should apply the 51% to: time,
number of trips, distance travelled, number of passengers, length of voyage,
the amount of business generated, the number of potential sales locations
visited? All of these factors may have a bearing but they illustrate the
difficulty in applying a mechanical sort of test. Ultimately, it boils down to
a question of judgement and common sense.
…
17 In the event that the business use
increases to the point at which it can be said to be the principal use, there
is some relief available in a subsequent year to the appellant under subsection
199(3) of the ETA. That point had not been reached in 2003. The evidence
would have to be more persuasive and complete than it has been here.
[13]
In the present case,
the evidence does not show that based on the actual use of the motor vehicle,
the intention at the beginning was to use it primarily for commercial purposes.
Nor did the appellant submit sufficient evidence establishing that this was the
primary reason for the purchase at the time of acquisition. In fact a careful
review of the use of the vehicle indicates that in the months following its
purchase, for all intents and purposes, it was used solely for personal
reasons. It was only in April, May and October 2009 that the business use
significantly surpassed the personal use. In all the other months, except for
November when the commercial use slightly exceeded the personal use, personal
use predominated (see summary of travel records, Exhibit I-1, Tab 6).
[14]
I therefore conclude
that the appellant did not show, on a balance of probabilities, that it
acquired the 2009 Mazda motor vehicle to be used primarily for its commercial
activities in order to be eligible for the input tax credit on the acquisition
price of this vehicle during the period in question, pursuant to
subsection 199(2) ITA.
[15]
For these reasons, the
appeal is dismissed.
Signed at Ottawa, Canada, this
28th day of February 2011.
"Lucie Lamarre"
Translation certified
true
on this 29th day
of March 2011.
Elizabeth Tan,
Translator
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