Munn v. The Queen, 2003 TCC 110 (Informal Procedure)

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Appeal heard on March 5, 2003 at Toronto, Ontario,

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JUDGMENT

The appeal from the assessment made under Part IX of the Excise Tax Act, is dismissed.

Signed at Toronto, Ontario, this 17th day of March 2003.

T.C.J.

REASONS FOR JUDGMENT

Bonner, T.C.J.

[1]      This is an appeal from an assessment of tax under Part IX of the Excise Tax Act (the "Act"). By that assessment the Minister of National Revenue (the "Minister") disallowed a deduction of $7,654.50 claimed by the Appellant as an input tax credit in respect of Goods and Services Tax (GST) paid on the supply of a truck.

[2]      The Appellant is an individual registered for purpose of s. 240(1) of the Act. He is engaged in the supply of trucking services. For purposes of that activity he arranged to acquire a new 1998 Western Star truck.

[3]      The following transactions took place:

a)          the truck was purchased by ABN Amro Leasing from Hillman's Truck Service on May 22, 1998 at a cost of $109,350.00 plus $7,654.50 in GST for a total of $117,004.50; - and -

b)          the truck was leased by Equipment Express Inc. to the Appellant on May 25, 1998.

[4]      The evidence does not make clear how title to the truck moved from ABN Amro Leasing to Equipment Express but I gather from the Appellant's testimony that the two organizations work together.

[5]      The terms of the lease to the Appellant were:

[6]      The Appellant testified that the $118,000.00 capital cost named in the lease included the $7,654.50 in GST paid by ABN Amro on the purchase of the truck from Hillman's Truck Service. That may well be so but the Appellant produced no evidence to support what is essentially an assumption made by him. Moreover there is no rule which prevents a lessor from loading any amount into the figure he uses as the capital cost of property which is to be leased. Capital cost, like any other element of the lease, is an amount which the parties to the lease must negotiate. In any event, it is in respect of the tax so paid that the Appellant claimed the input tax credit.

[7]      The input tax credit which the Appellant seeks is governed by s. 169(1) of the Act which reads in part as follows:

Subject to this Part, where a person acquires or imports property or a service or brings it into a participating province and, during a reporting period of the person during which the person is a registrant, tax in respect of the supply, importation or bringing in becomes payable by the person or is paid by the person without having become payable, the amount determined by the following formula is an input tax credit of the person in respect of the property or service for the period:

A X B

where

A          is the tax in respect of the supply, importation or bringing in, as the case may be, that becomes payable by the person during the reporting period or that is paid by the person during the period without having become payable; and

B           is ...

[8]      Because the $7,654.50 neither became payable by the Appellant nor was paid by him as tax in respect of the supply of the truck, the "A" figure in the s. 169 formula is zero and the credit is also zero.

[9]      The appeal must therefore be dismissed.

Signed at Toronto, Ontario, this 17th day of March 2003.

T.C.J.