Date: 20020904
Docket: 2001-4518-GST-I
BETWEEN:
RAIF HOLDINGS LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor Judgment
Little, J.
A. FACTS
[1] The Appellant is a company incorporated under the laws of the Province of British Columbia.
[2] The Appellant purchased a parcel of land located in Winfield, British Columbia on August 27, 1993 (the "Winfield Property"). The Winfield Property was acquired by the Appellant pursuant to an Order Absolute in foreclosure proceedings in the Supreme Court of British Columbia. The previous owner of the Winfield Property, Lake Country Motor Inn Ltd. had declared bankruptcy under the Bankruptcy Act.
[3] On the 25th day of May 1995, Leonard Melnyk commenced a legal action against the Appellant, Raif Fleihan, the principal shareholder of the Appellant, and against other unrelated parties.
[4] In the Statement of Claim Mr. Melnyk claimed that he was entitled to payment of $45,038.70 in connection with the supply of equipment, labour and materials to the Winfield Property. The Statement of Claim indicates that the equipment, labour and materials supplied are summarized in an invoice (the "Invoice") issued by Can Pro Diving Services in 1993 to Heinz Strege (See Exhibit R-1). Heinz Strege was the principal shareholder of Lake Country Motor Inn Ltd.
[5] Mr. Fleihan testified that he and the Appellant had filed a Statement of Defence to the legal action commenced by Mr. Melnyk. Mr. Fleihan also testified that the legal action was heard by a Judge of the Supreme Court of British Columbia within the past four months and that at the conclusion of the hearing the Judge reserved his decision.
[6] Mr. Lotoski, Chartered Accountant, was called as a witness for the Appellant. Mr. Lotoski said that he has prepared tax returns for the Appellant for a number of years. Mr. Lotoski testified that when he prepared the tax returns for the period August 1, 1996 to July 31, 1999 (the "Period") he determined that the Appellant had a Goods and Services Tax liability ("G.S.T.") under the Excise Tax Act (the "Act"). Mr. Lotoski testified that the Appellant's tax returns for the period were filed on the basis that the Appellant was entitled to an input tax credit of $2,946.46 in connection with the Invoice submitted by Can Pro Diving Services. (Note: The amount of $2,946.46 is equal to 7% of the $45,038.70 referred to in the Invoice. Mr. Lotoski also testified that he was under the impression that if he did not record the claim made by Leonard Melnyk as a liability of the Appellant, the Appellant would be precluded from ever claiming an input tax credit in respect of the G.S.T. payable on the Invoice.
[7] The Minister of National Revenue (the "Minister") maintains that the Appellant is not entitled to the input tax credit of $2,946.46 in respect of the Can Pro Diving Services invoice because the Appellant did not pay the G.S.T. or become liable to pay the G.S.T.
B. ISSUE
[8] The issue is whether the Appellant is entitled to an input tax credit of $2,946.46 in relation to the Invoice issued by Can Pro Diving Services.
C. ANALYSIS
[9] Subsection 169(1) of the Act provides, in part, as follows:
169. (1) General rule for input tax credits − 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 . . .
[10] It will be noted that in order for a person to obtain an input tax credit the person must pay the tax or the tax must become payable by the person.
[11] Mr. Fleihan testified that the Appellant did not pay the tax. It therefore follows that the Appellant cannot obtain an input tax credit on the basis that the tax was paid.
[12] We must next examine whether the G.S.T. of $2,946.46 was "payable" by the Appellant. The only evidence available to the Court is the issuance of the Invoice to Heinz Strege, the principal shareholder of the former owner and the commencement of the lawsuit by Mr. Melnyk against the Appellant and Mr. Fleihan. The issuance of the Can Pro Diving Invoice and the commencement of a lawsuit do not make an amount "payable".
[13] The appeal will be dismissed since the Appellant does not qualify for an input tax credit under subsection 169(1) of the Act.
[14] During the appeal Sonja Filipone, an employee of the Canada Customs and Revenue Agency was called as a witness by the Respondent. Ms. Filipone stated that the Minister refused to allow the input tax credits of $2,946.46 claimed by the Appellant because the G.S.T. was not paid by the Appellant. Ms Filipone also stated that the Minister had concluded that the G.S.T. of $2,946.46 was not payable by the Appellant. Ms. Filipone stated that if the Supreme Court of British Columbia concludes that the Appellant must pay the invoice issued by Can Pro Driving to Heinz Strege it would follow that G.S.T. would be payable by the Appellant and the Appellant would therefore qualify for the input tax credit of $2,946.46. Ms. Filipone also confirmed that a claim by the Appellant for the input tax credit must be made within four years of the date of the decision of the Supreme Court of British Columbia. Ms. Sidhu, counsel for the Respondent, confirmed the statement by Ms. Filipone. I trust that the Minister will recognize a claim for input tax credits by the Appellant in the event that the Appellant is unsuccessful in the legal action concerning the Invoice before the Supreme Court of British Columbia.
Signed at Vancouver, British Columbia, this 4th day of September 2002.
|
"L.M. Little" |
J.T.C.C.
COURT FILE NO.: 2001-4518(GST)I
STYLE OF CAUSE: Raif Holdings Ltd. and
Her Majesty the Queen
PLACE OF HEARING: Kelowna, British Columbia
DATE OF HEARING: August 19, 2002
REASONS FOR JUDGMENT BY: The Honourable Judge L.M. Little
DATE OF JUDGMENT: September 4, 2002
APPEARANCES:
Agent for the Appellant: Raif Fleihan
Counsel for the Respondent: Jasmine Sidhu
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-4518(GST)I
BETWEEN:
RAIF HOLDINGS LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on August 19, 2002 at Kelowna, British Columbia, by
the Honourable Judge L.M. Little
Appearances
Agent for the Appellant: Raif Fleihan
Counsel for the Respondent: Jasmine Sidhu
JUDGMENT
The appeal from the assessment numbered 11EU117675157 made under the Excise Tax Act, notice of which is dated October 31, 2001 is dismissed.
Signed at Vancouver, British Columbia, this 4th day of September 2002.
|
"L.M. Little" |
J.T.C.C.