Date: 19991110
Docket: A-883-96
CORAM: STRAYER J.A.
ROBERTSON J.A.
ROTHSTEIN J.A.
BETWEEN:
WORLD RELIEF CANADA
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
Heard at Toronto, Ontario, on Wednesday, November 10, 1999
Judgment Delivered from the Bench at Toronto, Ontario on Wednesday, November 10, 1999
REASONS FOR JUDGMENT BY: ROTHSTEIN J.A.
Date: 19991110
Docket: A-883-96
CORAM: STRAYER J.A.
ROBERTSON J.A.
ROTHSTEIN J.A.
BETWEEN:
WORLD RELIEF CANADA
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
(Delivered from the Bench at Toronto, Ontario on
Wednesday, November 10, 1999)
ROTHSTEIN J.A.:
[1] This appeal and the appeal in A-882-96 are from the October 18, 1996 judgment of Hamlyn J.T.C.C. and involve the interpretation of section 260 of the Excise Tax Act. Section 260 provides that a charity is entitled to a rebate of 100% of the amount of Goods and Services Tax ("GST") paid in respect of property or services received by the charity and which are exported for charitable purposes.
[2] Section 260 provides:
| 260. (1) Where a charity (a) has paid tax in respect of a supply of property or a service received by the charity, (b) has not claimed and is not entitled to claim an input tax credit in respect of the property or service, and (c) has exported the property or service for charitable purposes outside Canada, subject to subsection (2), the Minister shall pay a rebate to the charity equal to the amount of tax paid in respect of the supply. (2) A rebate shall not be paid under subsection (1) to a charity in respect of a supply unless the charity files an application for the rebate within four years after the end of the fiscal year of the charity in which tax in respect of the supply became payable. |
260. (1) Le ministre verse un remboursement à un organisme de bienfaisance, égal au montant de la taxe payée par l'organisme relativement à la fourniture d'un bien ou d'un service qu'il a reçu si l'organisme: a) d'une part, n'a pas demandé le crédit de taxe sur les intrants relatifs au bien ou au service, et n'y a pas droit; b) d'autre part, a exporté le bien ou le service pour qu'il serve dans des oeuvres de bienfaisance à l'étranger. (2) Le remboursement n'est versé que si l'organisme de bienfaisance en fait la demande dans les quatre ans suivant la fin de l'exercise au cours duquel la taxe relative à la fourniture est devenue payable. |
| The appellants had claimed that as all their charitable work was for causes outside Canada, they should be entitled to invoke section 260 and obtain a refund of 100% of the GST paid on services they acquired. By notice of assessment, the Minister of National Revenue denied their claims. |
| [3] Notices of objection were filed but the Minister confirmed the assessments. On appeal to the Tax Court of Canada, Hamlyn J.T.C.C. dismissed their appeals on the basis that to consider that the supply of services received by the appellants as being indirectly exported was beyond the scope of the legislation. |
| [4] Before this Court, the burden of the appellants' submission is that, read literally, as it relates to the export of services received by a charity, section 260 is impossible of application. They say that once a service is received by a charity in Canada, it is impossible that it be exported by the charity in its same form. This is in contrast to property received by the charity which can be exported in its same form. Thus, in respect of services, the appellants say that section 260 must be given a broader meaning to comport with the overall scheme of the GST legislation which is to tax consumption of goods and services in Canada and not goods and services acquired for export. If this argument is accepted, the appellants would be entitled to a rebate of 100% of GST paid on all services received by them including all services pertaining to the overheads of the charities, e.g. fundraising activities. |
| [5] In the alternative, the appellants argue that at the least, they should be entitled to invoke section 260 to claim a 100% rebate on GST paid for services received that are directly related to their overseas activities. These would include GST paid on postage and mailings to addresses outside Canada, on long distance telephone services for calls to locations outside Canada, on services to obtain visas for individuals sent outside Canada, on the domestic portion of the transportation of people and goods which are ultimately destined for locations outside Canada, on services of consultants advising on the shipment of goods to foreign countries, on couriers and customs brokers services, and on consulting services performed outside Canada. |
| [6] For the appellants to succeed on either their primary or alternative arguments, they must establish that section 260 is ambiguous and that reference to other portions of the Excise Tax Act or other interpretive aids lead to a broader interpretation of the section. |
| [7] Despite the able argument of counsel for the appellants, like Hamlyn J.T.C.C., we are not persuaded that section 260 is ambiguous or impossible of a literal application. As the learned judge noted, while the application of section 260 in respect of services may be narrow, it is not meaningless or impossible of application. One example of its application arose during oral argument. Where services are performed outside Canada for charitable purposes, the service provider, pursuant to section 142 of the Excise Tax Act, need not include GST on its invoice. However, according to counsel, where services are provided both for domestic consumption and for export, and one invoice is provided for both, GST will be charged on the entire invoice. In such case, the charity will have paid GST in respect of the supply of services that it has, in part, exported for charitable purposes outside Canada. In such case, the charity would appear to be entitled to a rebate of 100% of the GST paid in respect of the services that were exported. Thus, section 260 is not impossible of application on its literal reading. |
| [8] As the appellants have failed to establish that section 260 is ambiguous, it is not open to the broader interpretation sought by them. Therefore, as to the appellants' primary argument, GST paid on all the services obtained by them in Canada is not subject to rebate under section 260 even though their charitable work takes place exclusively outside Canada. |
| [9] Nor on the evidence in this case can they succeed in their alternative argument. While mail, telephone and other services listed by the appellants in their alternative argument are services received by the appellants on which they have paid GST, they themselves are not exporting those services. Thus, while they are, for example, receiving telephone service in respect of long distance telephone calls to other countries, the telephone services are simply inputs and are not exported by the charities themselves, as required by paragraph 260(1)(c). |
| [10] The services that come closest to being eligible for a rebate of GST under section 260 are consulting services for which GST has been paid because the services were performed both in Canada and in other countries. However, there is no evidence that the consulting services performed outside Canada in this case were for charitable purposes outside Canada as required by paragraph 260(1)(c). On the contrary, it seems these services were in respect of reviewing and reporting on activities outside Canada to the Canadian charities. |
| [11] While we are sympathetic to the charitable purposes of the appellants, we are obliged to apply the law according to its terms. In doing so, we would note that while section 260 of the Excise Tax Act is not applicable to the services received by the appellants in this case, section 259 does provide for a rebate of 50% of the GST paid on services received by them. Therefore, the appellants are provided some relief from the GST although not a rebate of 100% thereof. |
| [12] In spite of the able submissions of counsel for the appellants, the appeal must be dismissed. |
| "Marshall Rothstein" |
| J.A. |
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
DOCKETS: A-883-96
| STYLE OF CAUSE: WORLD RELIEF CANADA |
| - and - |
HER MAJESTY THE QUEEN
DATE OF HEARING: WEDNESDAY, NOVEMBER 10, 1999
PLACE OF HEARING: TORONTO, ONTARIO
| REASONS FOR JUDGMENT BY: ROTHSTEIN J.A. |
Delivered at Toronto, Ontario
on Wednesday, November 10, 1999
APPEARANCES: Mr. Patrick Boyle
Ms. Grace Pereira
| For the Appellant |
Mr. Harry Erlichmann
Mr. Michael Esrey
| For the Respondent |
| SOLICITORS OF RECORD: Fraser Milner |
| Barristers & Solicitors |
| 1 First Canadian Place |
100 King Street West
| Toronto, Ontario |
| M5X 1B2 |
| For the Appellant |
Morris Rosenberg
| Deputy Attorney General of Canada |
| For the Respondent |
FEDERAL COURT OF APPEAL
Date: 19991110
Docket: A-883-96
BETWEEN:
| WORLD RELIEF CANADA |
Appellant
| - and - |
HER MAJESTY THE QUEEN
Respondent
| REASONS FOR JUDGMENT |