Date: 19971113
File: A-1025-96
Ottawa, Ontario, Thursday, November 13, 1997.
Present: DENAULT J.A.
DÉCARY J.A.
LÉTOURNEAU J.A.
Between:
2955-4201 QUÉBEC INC.,
Applicant,
- and -
HER MAJESTY THE QUEEN,
Respondent.
JUDGMENT
The application for judicial review is dismissed.
Pierre Denault
J.A.
Certified true translation
Stephen Balogh
Date: 19971113
File: A-1025-96
Coram: DENAULT J.A.
DÉCARY J.A.
LÉTOURNEAU J.A.
Between:
2955-4201 QUÉBEC INC.,
Applicant,
- and -
HER MAJESTY THE QUEEN,
Respondent.
Hearing held at Montréal, Quebec on Wednesday, October 29, 1997.
Judgment delivered at Ottawa, Ontario on Thursday, November 13, 1997.
REASONS FOR JUDGMENT BY: DÉCARY J.A.
CONCURRED IN BY: DENAULT J.A.
LÉTOURNEAU J.A.
Date: 19971113
File: A-1025-96
Coram: DENAULT J.A.
DÉCARY J.A.
LÉTOURNEAU J.A.
Between:
2955-4201 QUÉBEC INC.,
Applicant,
- and -
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
DÉCARY J.A.
[1] The applicant corporation 2955-4201 Québec Inc. (the applicant) has applied for judicial review of a decision of the Tax Court of Canada that dismissed its appeal for the purpose of obtaining either an input tax credit or a goods and services tax (GST) rebate under sections 169 and 261 of the Excise Tax Act1 (the Act).
[2] The facts are quite simple. On October 30, 1992, 2532-4450 Québec Inc., which was doing business as Suprem Automobile Enr. (the vendor), sold the assets of its automobile sales and distribution business to the applicant. The following assets were sold: goodwill ($1.00), fleet of new vehicles ($547,409.86), capital property ($21,784.83), parts inventory ($131,789.16) and immovable property ($643,132.01), for a total price of $1,344,116.86. It can be seen from the record that the price the applicant paid the vendor for the fleet of new vehicles ($547,409.86) included a goods and services tax amount of $35,811.86, which the vendor claims to have itself paid when it purchased the said vehicles.
[3] As section 167 of the Act permitted them to do, the parties to the contract made a joint election that no tax be payable with respect to the supply. I will now reproduce the relevant provisions of the Act:
| Imposition of tax
165. (1) Subject to this Part, every recipient of a taxable 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.
. . .
|
Assujettissement
165. (1) Sous réserve des autres dispositions de la présente partie, l'acquéreur d'une fourniture taxable effectuée au Canada doit payer à Sa Majesté du chef du Canada une taxe égale à 7% de la valeur de la contrepartie de la fourniture.
. . .
|
| 167. (1) Where a supplier makes a supply of a business or part of a business that was established or carried on by the supplier or that was established or carried on by another person and acquired by the supplier, and, under the agreement for the supply, the recipient is acquiring ownership, possession or use of all or substantially all of the property that can reasonably be regarded as being necessary for the recipient to be capable of carrying on the business or part as a business,
| (a) for the purposes of this Part, the supplier shall be deemed to have made a separate supply of each property and service that is supplied under the agreement for consideration equal to that part of the consideration for the supply of the business or part that can reasonably be attributed to that property or service; and |
| (b) except where the supplier is a registrant and the recipient is not a registrant, the supplier and the recipient may make a joint election in prescribed form containing prescribed information to have subsection (1.1) apply to those supplies. |
[As amended by S.C. 1993, c. 27, subsection 32(1), in order to apply, according to subsection 32(3), to any supply of a business occurring "after September 1992".]
(1.1) Where a supplier and a recipient make a joint election under subsection (1) in respect of a supply of a business or part of a business and the supplier, if a registrant, files the election with the Minister not later than the day on or before which the return under Division V is required to be filed for the supplier's first reporting period in which tax would, but for this subsection, have become payable in respect of the supply of any property or service made under the agreement for the supply of the business or part, or on such later day as the Minister may determine on application of the supplier. . . .
[As added by S.C. 1993, c. 27, subsection 32(1), and amended with respect to any supply of a business occurring "before 1993", by subsection 32(3), and amended by S.C. 1994, c. 9, subsection 8(2).]
|
167. (1) Lorsqu'une personne fournit tout ou partie d'une entreprise qu'elle a établie ou exploitée, ou qu'elle a acquise après qu'une autre personne l'a établie ou exploitée, et que la convention portant sur la fourniture prévoit que l'acquéreur acquiert la propriété, la possession ou l'utilisation de la totalité, ou presque, des biens qu'il est raisonnable de considérer comme nécessaires à l'exploitation par lui de l'entreprise ou de la partie d'entreprise, les règles suivantes s'appliquent:
| a) pour l'application de la présente partie, le fournisseur est réputé avoir fourni séparément chacun des biens et services fournis aux termes de la convention pour une contrepartie égale à la partie de la contrepartie de la fourniture de l'entreprise ou de la partie d'entreprise imputable au bien ou au service; |
| b) sauf si le fournisseur est un inscrit alors que l'acquéreur ne l'est pas, le fournisseur et l'acquéreur peuvent faire un choix conjoint, en la forme déterminée par le ministre et contenant les renseignements requis, pour que le paragraphe (1.1) s'applique à ces fournitures. |
(1.1) Lorsqu'un fournisseur qui est un inscrit et une partie au choix visé au paragraphe (1) présente le choix au ministre au plus tard le jour où il est tenu de produire aux termes de la section V la déclaration visant sa première période de déclaration au cours de laquelle une taxe serait, sans le présent paragraphe, devenue payable relativement à la fourniture d'un bien ou d'un service effectuée aux termes de la convention portant sur la fourniture de l'entreprise ou la partie d'entreprise visée par le choix, ou à la date ultérieure fixée par le ministre sur demande du fournisseur, les règles suivantes s'appliquent. . . .
|
| Input tax credits
169. (1) Subject to this Part, where property or a service is acquired or imported by a registrant for consumption, use or supply exclusively in the course of commercial activities of the registrant, the input tax credit of the registrant in respect of the property or service for a reporting period of the registrant is the amount of any tax that became payable or, if it had not become payable, was paid by the registrant in that period in respect of the acquisition or importation by the registrant of the property or service.
. . .
Collection
221. (1) Every person who makes a taxable supply shall, as agent of Her Majesty in right of Canada, collect the tax under Division II payable by the recipient in respect of the supply.
. . .
|
Crédit de taxe sur les intrants
169. (1) Sous réserve de la présente partie, le crédit de taxe sur les intrants relatif à un bien ou à un service pour la période de déclaration de l'inscrit qui l'acquiert ou l'importe pour consommation, utilisation ou fourniture exclusive dans le cadre de ses activités commerciales correspond au montant de la taxe devenue payable ou, si elle n'est pas devenue payable, payée par lui au cours de cette période relativement à l'acquisition ou à l'importation.
. . .
Perception
221. (1) La personne qui effectue une fourniture taxable doit, à titre de mandataire de Sa Majesté du chef du Canada, percevoir la taxe payable par l'acquéreur en vertu de la section II.
. . .
|
| Rebates
. . .
261. (1) Where a person has paid an amount
| (a) as or on account of, or |
| (b) that was taken into account as, |
tax, net tax, penalty, interest or other obligation under this Part in circumstances where the amount was not payable or remittable by the person, whether the amount was paid by mistake or otherwise, the Minister shall, subject to subsections (2) and (3), pay a rebate of that amount to the person.
. . .
|
Remboursements
. . .
261. (1) Dans le cas où une personne paie un montant au titre de la taxe, de la taxe nette, des pénalités, des intérêts ou d'une autre obligation selon la présente partie alors qu'elle n'avait pas à le payer ou à le verser, ou paie un tel montant qui est pris en compte à ce titre, le ministre lui rembourse le montant, indépendamment du fait qu'il ait été payé par erreur ou autrement.
. . .
|
[4] The applicant submits that this amount of $35,811.86 was included in the sale price by mistake and that in paying this amount to the vendor, it actually paid GST for which the Minister of National Revenue (the Minister) must grant it a credit under section 169, or a rebate under section 261 due to a mistake.
[5] Judge Lamarre-Proulx of the Tax Court of Canada held that neither section 169 nor section 261 is applicable since both these sections presuppose that tax was paid or payable by the applicant, whereas no tax was paid or payable by the applicant in the case at bar. The Tax Court Judge stated that in her opinion the real issue in the case is not a payment of tax made by the applicant to the Minister but the actual value of the sale price the applicant should have paid the vendor; she concluded that this issue does not concern the Minister.
[6] In my view, Judge Lamarre-Proulx's decision is well founded in law.
[7] The transaction at issue in this case is the contract for the supply of a business between the vendor and the applicant. The goods and services tax at issue is that imposed in respect of this transaction. The vendor and the applicant made the election provided for in section 167. At the hearing, counsel stated that this election cannot be retracted or, if it can be, that the Act is silent on this point; whatever the case, counsel for the applicant no longer argued on appeal that this election or a part of this election (in the event that the election could relate to only a part of the transaction, which is not obvious) was made by mistake.
[8] In making this election, the parties to a transaction create a number of rights and duties for themselves and the Minister. Thus, GST is not payable in respect of the supply of the business; as an exception to the requirements under subsection 165(1) of the Act, the recipient (the applicant) is not required to pay GST in respect of this supply; as an exception to the requirements under subsection 221(1), the vendor is not required to collect tax as agent of Her Majesty in respect of that supply; and the Minister has no action to enforce the payment of tax in respect of that supply against either the applicant or the vendor, since no tax is payable.
[9] Since the election by the parties to the transaction means that no tax is payable, and even less paid, the applicant is hardly in a position, in respect of that transaction, to claim an input tax credit under section 169 or a rebate of tax paid by mistake under section 261.
[10] It must be concluded that if a mistake has been made, it cannot be raised against the Minister and would rather be a ground for litigation in contract, in another forum, between the applicant and the vendor.
[11] I would therefore dismiss the application for judicial review.
Robert Décary
J.A.
I concur.
Pierre Denault, J.A.
I concur.
Gilles Létourneau, J.A.
Certified true translation
Stephen Balogh
FEDERAL COURT OF CANADA
APPEAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
FILE NO.: A-1025-96
STYLE OF CAUSE: 2955-4201 QUÉBEC INC. v. HER MAJESTY THE QUEEN
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: October 29, 1997
REASONS FOR JUDGMENT OF THE COURT: (Denault, Décary & Létourneau JJ.A.)
DELIVERED FROM THE BENCH BY: Décary J.A.
APPEARANCES:
Yves St-Cyr FOR THE APPLICANT
Pierre Séguin FOR THE RESPONDENT
SOLICITORS OF RECORD:
Laverly, De Billy
Montréal, Quebec FOR THE APPLICANT
Veillette & Associés
Montréal, Quebec FOR THE RESPONDENT
__________________
1 R.S.C. 1985, c. E-15, as amended.
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