Date: 19980916
Docket: 96-2348-GST-G
BETWEEN:
CAMP KAHQUAH CORPORATION LIMITED,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Bell, J.T.C.C.
[1]
This is an appeal from an Assessment for the period January 1,
1992 to December 31, 1992 made under Part IX of the Excise Tax
Act ("Act") in respect of Goods and Services
Tax. Sectional references, unless otherwise specified, will be to
this Act.
ISSUE:
[2]
The issue is whether camp programs conducted by the Appellant are
exempt supplies within the meaning of the term "exempt
supply" as defined in section 123(1) of the Act.
FACTS:
[3]
The Appellant is a charity under the Income Tax Act and is
therefore a charity for purposes of the Act by virtue of
section 123(1) which defines "charity" as meaning:
a registered charity ... within the meaning of the Income
Tax Act;
[4]
It operated a bible camp in which, in exchange for a fee, persons
would receive accommodation, religious training and meals, and
participate in educational and recreational activities. The
Minister assessed the Appellant an amount of tax on the basis
that it was providing a supply of taxable services which was not
exempt pursuant to the Act. Specifically, the Minister
alleged in the Notice of Decision (in response to a Notice of
Objection filed by the Appellant) and in the Reply to the Notice
of Appeal, that the Appellant was providing a supply of services
involving instruction or supervision in a recreational or
athletic activity which, pursuant to subsection 2(j) of
Part VI of Schedule V of the Act was specifically excluded
from the general exemption for supplies made by a charity.[1]
[5]
Harvey Ray Sider, the first witness for the Appellant, described
himself as moderator for the denomination of the Brethren in
Christ Church. He stated that the denomination was evangelical in
that it is the scriptural, spiritual or religious pervasiveness
of a setting that it believes leads a person to understand who
God really is. He said there were two aspects making the
Appellant an integral arm of the Church, namely:
First of all, there is that specific religious teaching that
goes on throughout the day, as well as specific times in the day,
and then it's the pervasive atmosphere which, whether
they're playing or fishing or whatever they're doing,
relates a person to the creator and what we are meant to be. So
without that religious atmosphere, there would be no point in
having Camp Kahquah.
[6]
He also said that while the camp provided recreation, people were
there to focus on the spiritual nature of things. He stated that
the camp was not a money-making venture and that it was
subsidized annually. He also stated that:
... the whole issue is to have a time of spiritual renewal,
getting closer to God in a setting that is conducive to that.
What better is there than nature?
[7]
He described family camps as being held three weeks in a row in
the summer time, that there was a camp pastor available 24 hours
of the day and that there were both morning and evening sessions
and sometimes campfires, all adding to the emphasis on the
spiritual nature of the human individual. He stated that the
employees may be members of any denomination but must,
have a personal relationship with the Lord Jesus Christ.
[8]
He said that most employees were volunteers and there were
minimal salaries for the few paid members of staff. He stated
that his denomination viewed these camps as different from
commercial camps or sport camps.
Our Brethren in Christ Church sees it very differently,
because we see it as a religious camp. And while sports are
there, free time is there, we see it as an arm of the church. The
camp is the church, just like Sunday school is the church.
[9]
He also said that the camp is located on a lake with 500 to 1,000
feet of waterfront and a sand beach. He testified that the
campers can swim, use canoes and rowboats, play volleyball and
baseball and use hiking trails.
[10] The
Appellant's second witness, Larry J.Y. Hogg, a chartered
accountant, is also a member of the Brethren in Christ Church. He
stated that his parents were the first resident camp managers
when the camp was run by the church as a ministry of the church.
He stated that he and his brother, as children, both made
personal confessions of faith to Jesus Christ at the chapel
campfire. He served as a counsellor, served on the maintenance
staff, and on the board of directors, having been chairman for a
time. He is presently the treasurer of the denomination. He
testified as to his belief in the importance of a personal
confession of faith in Jesus Christ and dedication to the most
important aspect of living, namely to attain salvation. He said
that:
We believe that our faith should affect our whole life.
It's not a matter of practising our religion at any
particular time or any particular place. For example, it's
not just Sunday morning at church. I take my faith with me
everywhere, every day, all the time. And that's what we
believe God expects of us. He expects us to be a witness for him
wherever we go.
[11] He then
emphasized the need for and importance of fellowship. He said
that the purpose of Camp Kahquah is the evangelism and
discipleship of people of all ages through a Christian camping
program. He said that Jesus commanded his disciples to go into
the world and spread the gospel and teach people about the gospel
and baptise them. He then stated that what goes on at Camp
Kahquah is very much about evangelism, and presenting the claims
of Christ, giving people the opportunity to accept Christ as
their personal saviour. He said it also is "about
discipleship, about teaching campers more about God and about the
teachings of Christ".
[12] Some
objects of the Letters Patent of the Appellant read as
follows:
The Corporation shall establish, operate and maintain a camp
facility for children and/or adults and such other facilities as
may be necessary for the purpose of providing religious
instruction, teaching, ministry and general promotion of the
Christian faith and the maintenance of the doctrines and beliefs
thereof, and in particular, the doctrines and beliefs of the
Canadian Conference of the Brethren in Christ Church.
and
The Corporation shall establish and offer programs for the
purpose of religious instruction, teaching, ministry and general
promotion of the Christian faith ...
and
The Corporation shall be entitled to make its facilities
available to other charitable organizations and special interest
groups for the purpose of providing religious instruction,
teaching, ministry and general promotion of the Christian
faith.
Mr. Hogg said that the corporation was and is not profitable
and ran at a deficit.
[13] The
Notice of Decision relating to the Appellant's Notice of
Objection reads, in part, as follows:
A review of the facts indicates that the camping programs
which you provide are supplies of services involving instruction
or supervision in a recreational or athletic activity pursuant to
subsection 2(j) of Part VI of Schedule V of the ETA and as such
are taxable.
and also:
The fee paid for recreational camp is principally for the
recreation provided.
[14] Mr. Hogg
said that he did not agree with that description and that it did
not reflect what the church camp "is about". He said
that if it was principally for recreation the church would not be
involved with it. He stated that the camp was a very effective
method to implement the church's evangelical policies and
that it was simply one means of many that the church used in
carrying out its work of spreading the gospel. He then said that
in the past year there were 50 campers who "accepted Christ
as their personal saviour". He also said that board meetings
commence with prayer, each person around the table praying and
that they pray that through the work at camp people will
"come into God's kingdom and accept Christ as their
saviour". He stated that that was the most important thing
to them and that the recreation was simply a vehicle that the
church used but that it was not the principal thing.
[15] A
statement of the Camp philosophy dated January, 1980 reads in
part as follows:
... that spiritual benefits will be derived as the claims of
Christ are upheld, as opportunity is given to accept Christ
...
To show the relevance of Christianity in all areas of life to
all age groups through experiences in a setting where campers
live, work, play and worship together.
[16] He stated
that they believe that God created the heaven and the earth and
they talk about it that way with the campers. He then said that
the camp provides an opportunity for people to serve and that
that is part of their discipleship - to share their faith with
others.
[17] Mr. Hogg
then described the different camps including the Junior
Children's Camp, Senior Children's Camp, Teen Camp,
Family Camp, Seniors' Retreat and Off-season rentals. He
stated that there was a tuck shop at the camp where candy, soft
drinks and other things were sold. He said that the sum of
$19,915 would include sales at the tuck shop and meals at the
Family Camp which were paid for directly.[2]
[18] On
cross-examination Mr. Hogg said that any child, not necessarily
children of members of the denomination, could attend the camp.
He stated that these are mostly friends of denomination members
and that some of these children have "accepted Christ".
He referred to the canoeing, swimming, soccer, football,
snorkelling and other recreational activities available at the
camp. Instruction and supervision were available for all such
activities. He said that if the children have fun they will want
to come to the camp and will want to bring their friends and
would want to return the following year. He said that if children
were at the camp they could be taught about the gospel. He said
that they couldn't be successful if they couldn't have
fun and also that Christian camping is a fairly well recognized
method of Christian ministry.
[19] Mr.
Cornell, the third witness for the Appellant described the camp
facilities, including the hiking trail where the hikers have a
God Hunt where they could discover God in different ways as they
travel along the trail through scripture and through the nature
that is around them. He made other comparisons between religious
experience and camping experiences.
ANALYSIS AND CONCLUSION:
[20]The submissions in this case were complex and extended.
Lord Widgery, CJ, in reference to the judgment of Lord Denning,
MR in British Railways Board v. Customs and Excise
Commissioners (1977) 2 All E.R. 873 (U.K.) at p. 876
said:
... that it is to hope when answering Lord Denning, MR's
question in the future in this type of case people do approach
the problem in substance and reality ... I think it would be a
great pity if we allowed this subject to become over-legalistic
and over-dressed with legal authorities when, to my mind, once
one has got the question posed, the answer should be supplied by
a little common sense and concern for what is done in real life
...
I have attempted to employ this wisdom in preparing these
Reasons.
[21] Section
165 of the Act states that:
Subject to this Part, every recipient of ataxable
supply made in Canada shall pay to Her Majesty in right of
Canada a tax in respect of the supply equal to 7% of the value of
the consideration for the supply.
(emphasis added)
[22] A
"taxable supply" is defined in section 123(1) to mean a
supply made in the course of a commercial activity:
"Commercial activity" means a business carried on or an
adventure or concern in the nature of trade except, in each case,
to the extent to which exempt supplies are made.
[23] Section
166 provides that where a person makes a taxable supply and the
consideration or part thereof for the supply becomes due or is
paid when the person is a small supplier and not a registrant,
the consideration shall not be included in calculating tax
payable. At the time in question the Appellant was not a
registrant under the Act.
[24] The term
"exempt supply" is defined in section 123(1) to mean a
supply included in Schedule V. Section 2 of Part VI of that
Schedule includes a supply made by a charity of any
personal property or a service, but not including a supply of
certain enumerated properties and services.
[25]
Respondent's counsel submitted that section 2(j)
applied to the Appellant thereby constituting an exception to the
exemption. It reads as follows:
a service involving, or a membership or other right entitling
a person to, supervision or instruction in any recreational or
athletic activity.
He said that:
Although the camp may have some additional purpose in mind in
operating the camp, that doesn't change the fundamental fact
that what we have here is a camp that is providing supervision or
instruction in recreational or athletic activities .... Just
because there is a religious or spiritual component to the camp
doesn't mean that the activities of swimming and baseball
playing and canoeing and hiking, just to name a few, cease to be
recreational in nature. They are recreational. They may occur in
the context of a camp that has a religious component to it, but
that doesn't mean that the activities themselves ceased to be
recreational or athletic in nature just because they are being
done by Christian people or under the supervision of Christian
people.
[26] He sought
to minimize the religious aspect of the camps and, in so doing,
emphasized the recreational aspect of same. He presented the view
that section 2(j) excepted the Junior Children's Camp,
Senior Children's Camp, Teen Camp, Family Camp and
Seniors' Retreat from the exemption from tax.
[27] I accept
the extensive evidence of the Appellant's witnesses who
emphasized the stated purpose and actual operation of the camp to
that end. In particular, I accept the evidence that the camps in
question would not exist if it were not for the religious
component and the opportunity of extending evangelical exposure
and the conversion of campers. Although the evidence does not
indicate that the recreational activities are, in terms of time,
incidental to the Christian activities taking place, I accept the
testimony indicating that the Appellant's Christian
principles are taught and demonstrated through the activities
available. Further, it is understandable, as the evidence stated,
that children would not be particularly interested in going to a
religious camp which lacked some of the summer sports
opportunities available at this camp. Obviously, an environment
including such opportunities in the summer time would be far more
attractive than one which lacked those facilities. Part of the
mission of the Brethren in Christ Church is to provide religious
instruction and guidance in a happy and attractive environment. A
camp organized in the desert would certainly lack some of the
appeal of Camp Kahquah's facilities.
[28] Paragraph
2(j) uses the word "involving" in referring to a
"service involving ... supervision or instruction in any
recreational or athletic activity". The french version of
this provision reads as follows:
d'un service de supervision ou d'enseignement dans le
cadre d'une activité récréative ou
sportive, ou d'un droit d'adhésion ou autre droit
permettant à une personne de bénéficier
d'un tel service;
It does not use a word equivalent to "involving". It
refers directly to a service of supervision or instruction and,
in so doing, indicates that the supply must be supervision or
instruction and not just a component or an aspect of an overall
supply.
[29] With
respect to paragraph 2(j) I conclude that the five camps
under examination do not fall within the exception to the
exemption.
[30] In
Cosmopolitan Music Society v. The Queen, 1995 G.S.T.C. 19,
Mogan, J. characterized certain activities as both taxable supply
and exempt supply. In so doing, he found that 70 percent of the
Society's time, energy and efforts aimed at providing members
with a recreational activity in music was a taxable supply and 30
percent at performing concerts was an exempt supply. He said, at
19-7:
The primary purpose of the Appellant society is to provide a
meeting place and qualified conductors for those amateur music
lovers who enjoy choral singing or orchestral music as a
recreational activity. That is a taxable supply under para. 2(j)
of Part VI of Schedule V. The secondary purpose of the Appellant
society is to perform in public after achieving an acceptable
level of competence. This is an exempt supply under s. 11 of Part
VI of Schedule V.
[31] My
interpretation of the evidence in this case is that the
Appellant's sole purpose was the conduct of a Christian camp
including evangelising for the conversion of persons to the
religious beliefs it espoused. There was no secondary purpose
such as the public performances that took place in the
Cosmopolitan situation, the provision of recreational
facilities and instruction being part of and incidental to its
purpose.
[32]
Respondent's counsel also submitted that, in the alternative,
the Seniors' Camp and the Family Camp fell within the
exception of section 2(m). It reads as follows:
an admission in respect of
(i) a place of amusement
[33] The term
"place of amusement" is defined to mean:
any premises or place, whether or not enclosed, at or in any
part of which is staged or held any
(a) film, slide show, sound and light or similar
presentation;
(b) artistic, literary, theatrical, musical or other
performance, entertainment or exhibition;
(c) fair, circus, menagerie, rodeo or similar event, or
(d) race, game of chance, athletic contest or other contest or
game,
and includes a museum, historical site, zoo, wildlife or other
park place where bets are placed, and any place, structure,
apparatus, machine or device the purpose of which is to provide
any type of amusement or recreation.
[34] It is
noted that the words "the purpose" are employed. This
indicates that the sole purpose of the "place of
amusement" was to provide amusement or recreation. Words
such as those used in subsection 55(2) of the Income Tax Act,
namely, "one of the purposes of which" are not used in
this definition. The whole context of the "place of
amusement" resists the submission of Respondent's
counsel in this regard.
[35] With
respect to off-season rentals, Respondent's counsel submitted
that such supply was excepted from the exemption by virtue of
section 25(f) of Schedule V which reads as follows:
A supply of real property made by a public service body (other
than a financial institution or a government) but not including a
supply of ...
(f) real property (other than short-term accommodation) made
by way of
(i) a lease, where the term of the lease is less than a month;
or
(ii) a licence,
where the supply is made in the course of a business carried
on by the body.
[36] The term
"public service body" is defined in section 123(1) to
include a charity. The property rented by the Appellant is real
property within the definition of that term in section
123(1).
[37] The term
"short-term accommodation" is defined as follows:
"short term accommodation" means a residential
complex or a residential unit that is supplied by way of lease,
licence, or similar arrangement for the purpose of its occupancy
by an individual as a place of residence or lodging, where the
complex or unit is occupied by the same individual for a period
of less than a month.
[38] The term
"residential unit" is defined as follows:
(a) a
detached house, semi-detached house, row house unit, condominium
unit, mobile home, floating home or apartment;
(b) a
suite or room in a hotel, a motel, an inn, a boarding house, a
lodging house or a residence for students, elderly persons,
infirm persons or other individuals, or
(c) any
other similar premises,
or that part thereof that
(d)
is occupied by an individual as a place of residence or
lodging,
(e) is
supplied by way of lease, licence or similar arrangement for the
occupancy thereof as a place of residence or lodging for
individuals,
(f)
is
vacant, but was last occupied or supplied as a place of residence
or lodging for individuals, or
(g)
has never been used or occupied for any purpose, but is intended
to be used as a place of residence or lodging for
individuals.
[39] The use
of the camp property was provided to persons in the off-season by
way of an arrangement in the nature of a licence. Appellant's
counsel and Mr. Hogg both used the word "rent",
"rentals" and "renting". I agree with
Respondent's counsel that the phrase "any other similar
premises" in the definition of "residential unit"
should be interpreted ejusdem generis to include only
things of the same genus as the items which precede it in the
definition. The use of the campsite premises is not like a
temporary accommodation as is typically the case with a room in a
hotel, motel, inn, boarding house or lodging house. I also agree
with counsel that the supply was made in the course of a business
carried on by the Appellant. The term "business" is
defined in section 123(1) to include an "undertaking of any
kind whatever, whether the activity or undertaking is engaged in
for profit". The Appellant's activities fall within that
definition. Accordingly, the off-season rental activities fall
within an exception to the exemption and are, therefore, a
taxable supply.
[40] Finally,
Appellant's counsel submitted that the revenue from the tuck
shop and family camp meals was not taxable on the basis that the
Appellant was a small supplier. Section 166 of the Act
reads as follows:
Where a person makes a taxable supply, other than a supply of
real property by way of sale, and the consideration or a part
thereof for the supply becomes due, or is paid before it becomes
due, at a time when the person is a small supplier who is not a
registrant, that consideration or part thereof, as the case may
be, shall not be included in calculating the tax payable in
respect of the supply.
As stated above, the Appellant was not a registrant at the
time in question.
[41] By virtue
of subsection 148(1) a person is a small supplier throughout a
particular calendar quarter and the first month immediately
following if:
the total of all amounts each of which is the value of the
consideration ... that became due in the four calendar quarters
immediately preceding the particular calendar quarter, or that
was paid in those four calendar quarters without having become
due, to the person or an associate of the person at the beginning
of the particular calendar quarter for taxable supplies ... does
not exceed the total of ... $30,000.
[42]
Respondent's counsel submitted that there was no evidence
before the Court as to what the total supplies were in the four
calendar quarters that precede any quarter under examination and
no breakdown into the calendar quarters in which the supplies
were made. Because no such evidence exists, the Appellant cannot
escape inclusion of those amounts in taxable supply.
[43] The
appeal is allowed to the extent that the supply of the Junior
Children's Camp, Senior Children's Camp, Teen Camp,
Family Camp and Seniors' Retreat was an exempt supply. The
supply of the off-season rentals and the tuck shop and Family
Camp meals were taxable supplies.
[44] Having
regard to the mixed success, no costs are awarded.
Signed at Calgary, Alberta this 16th day of September,
1998.
"R.D. Bell"
J.T.C.C.
COURT FILE
NO.:
96-2348(GST)G
STYLE OF
CAUSE:
Camp Kahquah Corporation Limited v.
Her Majesty the Queen
PLACE OF
HEARING:
Toronto, Ontario
DATE OF
HEARING:
June 17, 1998
REASONS FOR JUDGMENT
BY:
The Honourable R.D. Bell
DATE OF
JUDGMENT:
September 16, 1998
APPEARANCES:
Counsel for the
Appellant:
David J. Manoochehri
Counsel for the
Respondent:
Eric Noble
COUNSEL OF RECORD:
For the
Appellant:
Name:
David Manoochehri
Firm:
Fraser & Beatty
Toronto, Ontario
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
96-2348(GST)G
BETWEEN:
CAMP KAHQUAH CORPORATION LIMITED,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on June 17, 1998 at Toronto,
Ontario by
the Honourable Judge R.D. Bell
Appearances
Counsel for the
Appellant:
David Manoochehri
Counsel for the
Respondent:
Eric Noble
JUDGMENT
The
appeal from the assessment made under the Excise Tax Act,
notice of which is dated November 19, 1993 and bears number
784670 is allowed to the extent set out in the attached Reasons
for Judgment and the assessment is referred back to the Minister
of National Revenue for reconsideration and reassessment in
accordance with those Reasons.
Signed at Ottawa, Canada this 16th day of September, 1998.
J.T.C.C.
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