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Citation: 2004TCC388
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Date: 20040528
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Docket: 2003-3986(GST)I
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BETWEEN:
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764845 ALBERTA LTD. O/A DIAMOND S.
CONSULTING,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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____________________________________________________________________
REASONS FOR JUDGMENT
Beaubier, J.
[1] This appeal pursuant to the
Informal Procedure was heard at Grande Prairie, Alberta on May
21, 2004. Michael Skrynyk, President of the Appellant, was the
only witness.
[2] Paragraphs 7 to 15 inclusive of
the Reply to the Notice of Appeal outline the matters in dispute.
They read:
7. In
reporting net tax for the reporting period of May 1, 2002 to July
31, 2002 (the "Relevant Period"), the Appellant claimed
input tax credits of $3,235.40 and $3,217.00 with respect to the
purchase of two quad-cab trucks, a 2002 GMC Sierra (the
"GMC") and a 2002 Chevrolet Silverado (the
"Chevrolet") respectively.
8. By Notice
of Assessment dated November 27, 2002 (the
"Assessment"), the Minister assessed the Appellant net
tax of $698.15 for the Relevant Period. In assessing the
Appellant's net tax the Minister did not allow the full input
tax credits claimed by the Appellant on the GMC and the Chevrolet
quad-cab trucks. The Minister disallowed inputs tax credits above
$2,100.00 for each truck and made additional adjustments as
follows:
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net tax reported on returns
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-1,657.65
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adjustments to net tax
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input tax credits claimed on the GMC above $2,100.00
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1,135.40
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***
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input tax credits claimed on the Chevrolet above
$2,100.00
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1,117.00
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***
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input tax credits claimed on personal items
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54.54
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clawback 50% of allowable meals expense
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27.27
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input tax credits claimed on exempt supply
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21.59
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net tax as assessed
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698.15
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*** input tax credits at issue in this appeal
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9. The
Appellant filed by a Notice of Objection, received on January 22,
2003, to the Assessment. The Appellant objected to the reduction
of input tax credits with respect to the purchase of the GMC and
the Chevrolet quad-cab trucks.
10. The Minister confirmed
the Assessment by a Notice of Decision dated May 28, 2003.
11. In so assessing the
Appellant and confirming the Assessment, the Minister relied on
the following assumptions of fact:
(a) the Appellant
was a corporation carrying on business in Alberta;
(b) at all material
times the Appellant was engaged in commercial activities;
(c) at all material
times the Appellant was a registrant for the purposes of the
Excise Tax Act (the "ETA");
(d) Mike Skrynyk was
the president and director of the Appellant at all relevant
times;
(e) the Appellant
was required to file its returns on a quarterly basis, with a
year end of January 31;
(f) the
Appellant purchased the GMC quad-cab truck in May 2002;
(g) the GMC has a
seating capacity for the driver and at least 3 passengers;
(h) during the
Relevant Period the GMC was driven a total of 8,279
kilometres;
(i) during the
relevant period the GMC was not used at all or substantially all
for the transportation of goods, equipment or passengers in the
course of gaining or producing income;
(j) the
Appellant purchased the Chevrolet quad-cab truck on May 16,
2002;
(k) the Chevrolet
has a seating capacity for the driver and at least 3
passengers;
(l) during the
Relevant Period the Chevrolet was driven a total of 11,555
kilometres;
(m) during the Relevant
Period the Chevrolet was used 5,401 kilometres by Mike Skrynyk or
a person related to him for purposes of attending meetings in
Edmonton, picking up files and travel to golf courses in
Stetler;
(n) the GMC and the
Chevrolet were not used all or substantially all for the
transportation of goods, equipment or passengers in the course of
gaining or producing income in the Appellant's taxation year
of February 1, 2002 to January 31, 2003, which is the taxation
year in which the GMC and Chevrolet were acquired.
(o) for the
reporting period ending July 31, 2002, the Appellant filed a
return claiming full input tax credits of $3,235.40 with respect
to the purchase of the GMC and $3,217.00 with respect to the
purchase of the Chevrolet;
B.
ISSUE TO BE DECIDED
12. The issue to be
decided in this appeal is whether the Minister, in assessing the
Appellant's net tax for the Relevant Period, properly
disallowed input tax credits in the amount of $1,135.40 with
respect to the GMC and $1,117.00 with respect to the
Chevrolet.
C. STATUTORY
PROVISIONS RELIED ON AND RELIEF SOUGHT
13. The Deputy Attorney
General relies on subsection 123(1), specifically the definition
of "passenger vehicle", 225(1) and 235(1) and sections
165, 169, 201, 221, 228, 280, 286, and 296 of the Excise Tax
Act, R.S.C. 1985, c. E-15, as amended and subsection 248(1),
specifically the definition of "automobile",
"motor vehicle" and "passenger vehicle", of
the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.)
("ITA").
14. He submits that the
GMC was a passenger vehicle within the meaning of subsection
248(1) of the ITA and subsection 123(1) of the ETA. It is
therefore submitted that the Minister correctly disallowed input
tax credits in the amount of $1,135.40 with respect to the GMC as
the Minster allowed the maximum input tax credits, $2,100.00,
permitted under sections 169 and 201 of the ETA.
15. He submits that the
Chevrolet was a passenger vehicle within the meaning of
subsection 248(1) of the ITA and subsection 123(1) of the ETA. It
is therefore submitted that the Minister correctly disallowed
input tax credits in the amount of $1,117.00 with respect to the
GMC as the Minister allowed the maximum input tax credits,
$2,100.00, permitted under sections 169 and 201 of the ETA.
[3] Assumptions 11 (a) to (g)
inclusive and (j) to (l) inclusive were not refuted. Respecting
the remaining assumptions:
11(h) During the period the GMC was driven a total of
8,289 kilometres.
11(i), (m), (n) and (o) are the subject of the dispute.
[4] The Appellant and his wife are the
directors and operators of the Appellant. Its business was
conducted out of their home office at Widewater, Alberta, a town
on the south shore of the Lesser Slave Lake, east north-east of
Grande Prairie in northern Alberta. The Appellant does on site
oilwell completion supervision as a contractor to oil companies
in Alberta. Its area of operations is wherever oil and gas wells
need that work, essentially in Alberta.
[5] The Appellant previously had only
one truck, which was similar to these two. It purchased two at
once so that one would always work and more particularly so that
it would not be so worn that it had to be traded off for a new
one at a low value within two years. Mr. Skrynyk is on the road
and Mrs. Skrynyk does the books, records and banking. Their
home-office is 17 kilometres from Slave Lake, where the Appellant
banks. The corporation also had an interest in a travel agency
which was involved in amalgamation talks with another travel
agency in St. Albert, Alberta, adjacent to Edmonton (which is 300
kilometres from Widewater) during the period and was doing oil
work near Vermilion, 250-300 kilometres from its office during
the period. It put on an annual golf tournament for its
customers at Stettler, Alberta, 465 kilometres away, during the
period. Stettler is about half-way between Edmonton and Calgary
and south of Vermillion in the eastern Alberta oilfields.
[6] Mrs. Skrynyk uses a truck left at
Widewater for banking and business. They also have a personal
vehicle.
[7] Mr. Skrynyk proved, with logs
filed as evidence, that the two vehicles use during the period is
as follows:
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GMC
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Business
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7,743 km
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Total
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8,289 km
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Chevrolet
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Business
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10,481 km
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Total
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11,555 km
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Thus the business use for each truck was over 90 per cent
during the period. (See Exhibit R-1). He also filed photographs
to prove that the trucks are an on the road office which
contained an instrument, a hardhat, a cell phone, radio, and a
number of large, loose-leaf reference texts and office supplies
in large plastic holders on its seats. They are four-wheel drive,
heavy duty pickups designed and used for off-road and on-road
work. The pictures filed of one of them does not have a luxury,
leather power-seat type of interior. It appears to be what Mr.
Skrynyk described - a working truck which, after its working
life, is expected to have a reasonable trade-in value. The front
window appears to have a couple of severe horizontal stone cracks
in it (Exhibit A-1).
[8] Mr. Skrynyk's testimony is
believed.
[9] The evidence has established that
both trucks were used all or substantially all of the time for
commercial activities in the course of the Appellant earning
business income.
[10] The appeals are allowed. The Appellant
had to travel from Widewater to Grande Prairie and incurred
postage and copying expenses to proceed with this appeal. It is
awarded $350 on account of out-of-pocket disbursements incurred
for that purpose.
[11] This matter is referred to the Minister
of National Revenue for reconsideration and reassessment allowing
the appeal.
Signed at Ottawa, Canada, this 28th day of May 2004.
Beaubier, J.
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COURT FILE NO.:
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2003-3986(GST)I
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STYLE OF CAUSE:
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764845 Alberta Ltd. o/a Diamon S. Consulting v. The
Queen
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PLACE OF HEARING:
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Grande Prairie, Alberta
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DATE OF HEARING:
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May 21, 2004
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REASONS FOR JUDGMENT BY:
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The Honourable D.W. Beaubier
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DATE OF JUDGMENT:
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May 28, 2004
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Agent for the Appellant:
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Mike Skrynyk
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Counsel for the Respondent:
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John-Paul Hargrove
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For the Respondent:
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Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
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