Date: 20010312
Docket: 98-563-IT-G; 98-565-IT-G; 98-566-IT-G; 98-567-IT-G
BETWEEN:
OGDEN PALLADIUM SERVICES (CANADA) INC., HAMILTON ENTERTAINMENT AND CONVENTION FACILITIES INC., THE CORPORATION OF THE CITY OF VICTORIA, THE CORPORATION OF THE CITY OF SAINT JOHN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Lamarre, J.T.C.C.
[1] These are appeals from assessments for the 1996 taxation year made pursuant to subsection 227(10) of the Income Tax Act ("Act") for failure to withhold amounts from payments to a non-resident pursuant to paragraph 153(1)(g) of the Act and section 105 of the Income Tax Regulations ("Regulations").
[2] At the outset, the parties filed an Agreed Statement of Facts without providing further evidence. That Statement reads as follows:
1. The Parties wish to set out the facts which are agreed upon and which apply as well to the following appeals: Hamilton Entertainment and Convention Facilities Inc. (Court File 98-565(IT)G); The Corporation of the City of Victoria (Court File 98-566(IT)G); and The Corporation of the City of Saint John (Court File 98-567(IT)G).
2. The Appeals arise out of circumstances related to the 1996 Elvis Stojko figure skating show, known as the "1996 Canon Elvis Tour of Champions" (the "Show").
3. The Show was produced by a company, resident in the United States of America, named Marco Entertainment, Inc. ("Marco").
4. In each city that the Show appeared in, Marco contracted with the owner of a stadium facility. Although the contracts in each city differed in form and in some particulars, the substance was the same. In each case, the contract was termed a "Licence Agreement". Marco obtained a licence to use the stadium facility for the day of the Show and contracted for services to be performed by the owner of the facility. These services included, production and sale of tickets, providing of ticket takers, ushers, maintenance staff, sale of food and beverages and sale of souvenirs, programmes and novelties.
5. Pursuant to each Licence Agreement, Marco agreed to pay a licence fee for the use of the facility and the provision of the services set out in paragraph 4. (In the case of the Ogden Palladium agreement, the fee payable by Marco would be increased by $5,000 if sales exceeded a particular threshold.) Marco further agreed to pay additional amounts for the provision by the owner of each facility of credit card facilities and agreed to reimburse the owner of each facility in each case for certain other expenses incurred.
6. Each Appellant controlled ticket sales with respect to the Show to be performed in its respective facility. Tickets were sold to members of the general public who wished to attend and view the Show, and the proceeds of such sales were received by the Appellants.
7. The Show took place, as contemplated by the several License [sic] Agreements, in the facilities of each of the Appellants.
8. In anticipation of the receipt of funds from the Appellants, Marco applied to the Minister for a waiver of the withholding required pursuant to section 105 of the Regulations. This request for a waiver was denied. A similar request for a waiver was granted to Marco in 1995.
9. After the conclusion of the Show in each city, each Appellant prepared a document called a "Settlement Sheet", in which it set out the revenues generated by the Show and by other activities such as the sale of souvenirs. The Settlement Sheet also totalled the charges incurred by Marco for the use of the facility and for the other fees agreed to. A calculation was then made of the amount due to Marco, and that sum was remitted to Marco.
10. There is no dispute as to the amounts remitted by each Appellant to Marco, which are as set out in the Respondent's Reply to each Notice of Appeal.
11. None of the Appellants withheld any amount pursuant to paragraph 153(1)(g) of the Income Tax Act or Section 105 of the Regulations.
12. The Appellants believed, and still believe, that Marco did not provide services to the Appellants and therefore they, as payors, had no obligation to withhold taxes. The Appellants believe that the sale of a ticket to a member of the public is a grant of a license [sic] to the ticket holder to attend at the facility and to occupy a reserved seat for the purpose of viewing the Show. The Respondent believed, and still believes, that the Show consisted of the provision of entertainment services, that the amounts paid to the Appellants by the ticket holders were paid to view those services, and that the payments made by the Appellants to Marco were, therefore, payments in respect of services.
13. The Minister of National Revenue assessed each of the Appellants pursuant to paragraph 153(1)(g) of the Income Tax Act and Section 105 of the Regulations, in the amounts set out in the Respondent's Reply to each Notice of Appeal, and assessed penalties pursuant to subsection 227(8) of the Income Tax Act.
[3] The basic provisions upon which the Minister of National Revenue ("Minister") relied to assess the appellants read as follows:
Income Tax Act, Part I, Division I – Returns, Assessments,
Payment and Appeals
Payment of Tax
SECTION 153: Withholding.
(1) Every person paying at any time in a taxation year
. . .
(g) fees, commissions or other amounts for services,
. . .
shall deduct or withhold therefrom such amount as is determined in accordance with prescribed rules and shall, at such time as is prescribed, remit that amount to the Receiver General on account of the payee's tax for the year under this Part or Part XI.3, as the case may be, and, where at that prescribed time the person is a prescribed person, the remittance shall be made to the account of the Receiver General at a financial institution . . .
Income Tax Act, Part XV – Administration and Enforcement
227(8)
(8) Penalty. Subject to subsection (8.5), every person who in a calendar year has failed to deduct or withhold any amount as required by subsection 153(1) or section 215 is liable to a penalty of
(a) 10% of the amount that should have been deducted or withheld; or . . .
Income Tax Regulations – Part I – Tax Deductions
NON-RESIDENTS
105. (1) Every person paying to a non-resident person a fee, commission or other amount in respect of services rendered in Canada, of any nature whatever, shall deduct or withhold 15 per cent of such payment.
[4] The issues are twofold:
(1) What was the nature of the payments made by the appellants to Marco? Were the payments to Marco in respect of services rendered in Canada?
(2) Are the penalties charged under subsection 227(8) exigible from the appellants?
Appellants' Argument
[5] According to counsel for the appellants, Marco did not provide services to the appellants in Canada. He submitted that it was rather the appellants that provided services to Marco by virtue of the Licence Agreements. Counsel argued that for there to be a withholding tax exigible on payments made to Marco, there would have to have been a payment for services provided by Marco.
[6] Counsel referred to the decision of the Ontario Court (General Division) in Livent Inc. (Re), 42 O.R. (3d) 501, [1998] O.J. No. 5268 (Q.L.), affirmed by the Court of Appeal of Ontario 46 O.R. (3d) 458, in arguing that the contract entered into between the ticket holder (the public) and the owner of the facility (Marco through the appellants) is not a contract for the purchase of services. The issue before the Court in that case was whether the ticket holders were entitled under the terms of the Consumer Protection Act to reimbursement for purchased tickets when Livent Inc. cancelled scheduled performances of Livent Inc. productions and events that were to be presented by the renters of a theatre. If there were a contract for the purchase of services between the ticket holders and Livent Inc., the ticket holders would be entitled under the Consumer Protection Act to priority over general contractors for the refund of the price of their tickets.
[7] The Ontario Court (General Division) held that the nature of a contract between the purchaser of a ticket and the seller is simply the giving of a right to the ticket holder to attend and watch a performance and not the obtaining of services by the ticket holder. The Court was of the view that the services of the performers who were in fact providing the entertainment were provided to the producer not to the ticket holders. This is expressed in the following terms at page 4 (Q.L.) of the decision:
. . . I am not satisfied that the contract entered into between the ticket holder and Livent is a contract for the purchase of services. It seems to me that the nature of the contract is a contract whereby the ticket holder acquires the right to attend a theatre and to occupy a particular seat for a particular performance to watch and hear the performance where the services of the performers are provided but that such services are provided to the producer not to the ticket holder. . . . In the context of a performance at the Ford Centre, the ticket holder does not contract with the performers and has no direction or control over when the services will be performed or how they will be performed and, in fact, the services will be performed whether or not the ticket holder exercises his or her right to attend the theatre and occupy a seat at the performance.
[8] Counsel for the appellants submitted, relying on the Livent case, that in the present case services were being provided to Marco by the entertainers-skaters in the show. Services were also provided by the appellants in respect of the show, but Marco, which was acting as the producer did not, as such, provide any services in Canada.
[9] Counsel for the appellants also suggested that Marco was not carrying on business through a permanent establishment in Canada. It was only renting facilities in Canada for a few days. According to counsel, by virtue of the Canada-US Tax Convention, Marco was not liable to pay tax in Canada with respect to the show. Therefore, he submitted, the appellants did not have to withhold any amount of tax at source. On that point, counsel referred to Information Circular 75-6R, Required Withholding from Amounts Paid to Non-Resident Persons Performing Services in Canada, dated January 15, 1988, which states the following at paragraph 10:
Applications for Waiver or a Reduction of Regulation 105 Withholding Based on Tax Treaty Protection or Estimated Income and Expenses
10. The Regulation 105 withholding does not represent a definitive tax, rather the withholding is considered a payment on account of the non-resident's overall tax liability to Canada. Where the non-resident can adequately demonstrate, based on treaty protection or estimated income and expenses, that withholding normally required is in excess of the ultimate Canadian tax liability, the Department may reduce withholding accordingly.
[10] Counsel also submitted that the penalties should be cancelled whatever the decision on the appellants’ obligation to withhold. He invoked the due diligence defence based on the fact that Marco was granted a waiver for the previous year and based on a common-sense reading of the Licence Agreements, which indicate that the services were being provided to Marco and not by Marco.
Respondent's Argument
[11] Counsel for the respondent submitted that there was a payment made by the appellants to Marco. The question to be asked therefore is: was that payment made for or in respect of services rendered in Canada?
[12] Counsel submitted that the expression "in respect of" has a broad meaning. He referred to the Supreme Court of Canada decision in The Queen v. Savage, [1983] 2 S.C.R. 428, where the following was stated at page 440:
. . . In Nowegijick v. The Queen, [1983] 1 S.C.R. 29 this Court said, at p. 39, that:
The words "in respect of" are, in my opinion, words of the widest possible scope. They import such meanings as "in relation to", "with reference to" or "in connection with". The phrase "in respect of" is probably the widest of any expression intended to convey some connection between two related subject matters.
[13] In counsel's view, it is not relevant to determine to whom the services were rendered. As long as funds were remitted to a non-resident (Marco) in connection with entertainment services rendered in Canada (the show), there was an obligation to withhold pursuant to paragraph 153(1)(g) of the Act and section 105 of the Regulations. It is the payment of the funds which triggers the obligation to withhold; that obligation has nothing to do with the matter of whom the services were performed for.
[14] Commenting on the Livent case, counsel for the respondent submitted that that case was decided within the ambit of the Consumer Protection Act only. Counsel argued that the ticket holders would not have bought tickets if entertainment services were not going to be provided.
[15] In the absence of services performed, there would have been no sale of tickets. According to counsel, it would be pedantic to submit that because the ticket holder did not purchase services (as contemplated in the Livent case), the payment of funds from the ticket holder to the appellants and then to Marco was not done in connection with or "in respect of" those services which were to be performed, as contemplated by the Act.
[16] Counsel referred to the decision of the Federal Court, Trial Division in Mollenhauer Limited v. The Queen, 92 DTC 6398, in which it was held that an employee does not have to be performing services as an employee of the payor in order to trigger the payor's obligation to withhold. Teitelbaum J. said the following at pages 6401-02:
It is very clear that s. 153(1) of the Act does not speak of whether persons doing the paying are employers or not. I am satisfied that if a person or company is paying "salary or wages or other remuneration" it must deduct or withhold the required amount pursuant to the Income Tax Act.
. . .
I adopt, for the purposes of the case at bar, the words of Mr. Justice Berger in the case of In re Bankruptcy of G. & G. Equipment Co. Ltd. (supra) where at page 6408 he states:
The question then is whether G. & G. was a "person paying . . . wages . . . to an . . . employee". . . .
I think the Department must succeed. Section 153 says that every person paying wages to an employee must withhold tax, it doesn't say that only employers must. The language must be taken to have been deliberately chosen, and to have been intended to encompass the kind of situation that exists in the case at bar.
[17] Counsel drew an analogy with paragraph 153(1)(g) of the Act and section 105 of the Regulations which state that "every person paying" amounts for or in respect of services must withhold the required amount pursuant to the Act, and this includes, in counsel's view, the appellants.
[18] In regard to the appellants' alternative argument that Marco did not have a permanent establishment in Canada, thus bringing the treaty into play, counsel submitted that there was no evidence before the Court as to the scope of Marco's activities in Canada in 1996, so that that issue could not be properly addressed. Besides, that argument was not originally pleaded by the appellants and the appellants did not refute the allegation in the Replies to the Notices of Appeal to the effect that Marco was carrying on business in Canada in 1996. Counsel submitted however that, even if it were decided that Marco was not carrying on business in Canada, the assessment would still be valid under Part XIII of the Act on the basis of paragraph 212(1)(d). Arguably, the amount paid to Marco was an amount paid in respect of property or a licence relating to real property (indeed, the appellants rented a facility to Marco which in turn, through the appellants, sold to the public a licence to enter). In that case, the appellants would still have had an obligation to withhold an amount at source from any payment covered by paragraph 212(1)(d) of the Act that was made to a non-resident not carrying on business in Canada.
[19] With respect to penalties, counsel suggested that there was no evidence concerning the steps taken by the appellants to satisfy themselves that they had no obligation to withhold. On the contrary, Marco requested a waiver for 1996 and it was denied. The appellants could not take it upon themselves not to make the withholdings. Therefore the penalties are justified.
Analysis
[20] I will deal first with the alternative argument raised by the appellants, that is, that the appellants had no obligation to withhold given that Marco might not have any Canadian tax liability in 1996. I am of the opinion that these appeals concern the appellants' obligation to withhold, not Marco's tax liability. Section 105 of the Regulations is in my view intended to cover precisely the type of case that we have here. Indeed, where a payment is made to a non-resident in respect of services provided in Canada, section 105 of the Regulations requires the payor to deduct or withhold 15 per cent of the payment, and the amount thus withheld is to be remitted to the Receiver General on account of the payee's tax for the year under Part I of the Act. If by virtue of a tax treaty (in the present case the Canada-US Tax Convention) the payee is not liable for tax under Part I, as, for example, where the payee does not have a permanent establishment here in Canada, the amount so paid on account of tax may be recovered by the payee by filing an income tax return in Canada.
[21] In a recent article, entitled "Non-Residents Rendering Services in Canada: Regulation 105 and Other Issues", (1999), Vol. 47, No. 5 Canadian Tax Journal 1321-1341, Shannon L. Baker and Dale S. Meister state the following at pages 1323 and 1330:
In effect, the withholding under regulation 105 is an instalment in respect of the non-resident's potential Canadian tax liability.
. . .
Many non-residents may expect that payments to them should not be subject to withholding because they do not have a permanent establishment in Canada. Revenue Canada does not agree, taking the position that
[t]he Regulation 105 withholding does not represent a definitive tax, rather the withholding is considered a payment on account of the non-resident's overall tax liability to Canada. . . .
Although most tax treaties between Canada and other countries provide for some relief from Canadian tax, Canada normally does not relinquish its right to withhold pursuant to the provision of section 153 of the Income Tax Act and subsection 105(1) of the Income Tax Regulations.31
If the non-resident is not subject to Canadian tax, it must apply for a refund by filing a Canadian tax return. If Revenue Canada is satisfied that the non-resident does not have a permanent establishment and is not subject to Canadian tax, the withheld amount will be refunded. However, if Revenue Canada contends that the non-resident carries on business in Canada through a permanent establishment and is therefore subject to Canadian tax, it can apply the amount withheld to the non-resident's Canadian tax liability.
. . .
Whether or not the non-resident is subject to tax in Canada, the required remittance under regulation 105, along with the requirement to file a Canadian tax return, will provide Revenue Canada with an opportunity to examine the non-resident’s activities in Canada. At a minimum, it ensures that Revenue Canada has a portion of the non-resident’s gross revenue to compensate for any taxes not properly remitted.
____________________
31 Information Circular 75-6R, "Required Withholding from Amounts Paid to Non-Resident Persons Performing Services in Canada," January 15, 1988, paragraphs 10-11.
[22] So even if Marco did not have a permanent establishment in Canada in 1996 – which, I agree with counsel for the respondent, is a claim unsupported by any evidence – that would not have changed the appellants' obligation to withhold at source, for the onus remains on the non-resident to prove to Revenue Canada that he or she is not subject to Canadian tax. If successful in so proving, the non-resident must apply for a refund by filing a Canadian tax return.
[23] There now remains the main question as to whether the payment made by the appellants to Marco was for or in respect of services rendered in Canada. In the affirmative, the appellants had an obligation under the Act to withhold an amount at source. The appellants put great emphasis on the matter of who performed services for whom in the present case. They stressed the fact that Marco did not provide any services in Canada. I agree with counsel for the respondent, however, that the legislation does not specify who has to render the services in Canada. I am of the view that, as long as services are rendered, section 105 of the Regulations applies if a payment is made to a non-resident in respect of those services.
[24] Indeed, the way section 105 is drafted leads to that broad interpretation. As the Supreme Court of Canada said in the Nowegijick case, the phrase "in respect of" is probably the widest of any expression intended to convey some connection between two related subject matters.
[25] The appellants claim that there were no services rendered in Canada for which they paid Marco. Among the definitions of the word "service" found in The New Shorter Oxford English Dictionary are the following:
service IV 18 Provision of a facility to meet the needs or for the use of a person or thing. ME. † 19 A person's interest or advantage. LME-M18. 20 Assistance or benefit provided to someone by a person or thing;
. . .
27a The organized system of providing labour, equipment, etc., to meet a public need such as health or communications; . . . c The supply of programmes by a broadcasting organization, esp. on a specific wavelength. E20. d Econ., in pl. The sector of the economy that supplies the needs of the consumer but produces no tangible goods, as banking or tourism.
[26] In Taylor v. M.N.R., [1988] 2 C.T.C. 2227, Judge Rip of this Court interpreted the word "services" as follows at page 2234:
Even accepting the appellant’s characterization of the matter, the term “services” refers not to the final product or end result of a transaction, but rather to the process by which this is achieved.
[27] In Revesby Credit Union Co-Operative Ltd. v. Federal Commissioner of Taxation, (1965) 112 C.L.R. 564, the High Court of Australia stated the following at page 577:
The Shorter Oxford Dictionary defines “service” as “the act of helping or benefiting”, and in the plural, “friendly or professional services”. This is a broad definition. It would include all the things contemplated by the word “services” in the common phrase “goods and services”. It would include any consideration given in the performance of any ordinary commercial contract, as well as all those activities more specifically called services, which do not actually involve the production or processing of goods, for instance, banking and financing, transportation, and insurance.
[28] The appellants argued that Marco was a producer and as such did not render services. The New Shorter Oxford English Dictionary defines the word "produce" as follows:
produce 1 . . . b Introduce (a person or thing) to. Now spec. bring (a performer or performance) before the public (cf. sense 3e below). . . . 3 . . . e Administer and supervise the making of (a play, film, broadcast, etc.); supervise the making of (a record), esp. by determining the overall sound. L19.
[29] In my opinion, a producer of a show can be viewed as rendering services. Indeed, the producer can be defined as the one who administers and supervises the making of the show that will be presented to the public. He is part of the process by which the show can be brought about (this meets the definition of “services” given in the Taylor case, supra). In my view, the producer is providing assistance in presenting the show for the benefit of another (the public).
[30] As Strayer J. stated in Kraft Ltd. v. Registrar of Trade Marks (1984), 1 C.P.R. (3d) 457 (F.C.T.D.) at pages 461-62:
[W]hen faced with an absence of any definition in the [Trade Marks] Act and any binding jurisprudence, I can see no reason why the Registrar should impose a restrictive interpretation on the word “services” as added to the Trade Marks Act in 1953.
The same can be said for the interpretation of the word “services” for the purposes of the Act, which does not define “service”.
[31] In Xerox of Canada Ltd. v. Ontario Regional Assessment Commissioner, Region No. 10 (1980), 17 R.P.R. 72 (C.A.), it was said, at page 96:
[The Assessment] Act [R.S.O. 1970, c. 32] deals with the assessment of businesses and it therefore follows that the words “goods” and “services” are used in their ordinary commercial sense. . . . As distinguished from “goods”, “services” are intangibles; they are the work of the hand or the brain, valuable to the purchaser or user but not in themselves articles of trade or commerce.
The extended definitions of service . . . are inapplicable and the word “services” must bear its ordinary meaning of being the product of the work of the person supplying it.
[32] The show is an intangible; it is the final product of the work of the person supplying it, that is, it is the final product of the combined work of the performers and the producer, and of the process by which the show is brought about. Without the producer, the show would not take place except if the performers acted as their own producer.
[33] It might be argued that Marco did not provide services to the appellants (the licence agreements were not filed in evidence, which rendered detailed analysis difficult in the circumstances). But even if that were so, it would not change the fact that Marco, as producer, was providing services for the benefit of the public.
[34] In the Livent case, the nature of the contract entered into between the ticket holder and Livent was analyzed from the perspective of the ticket holder’s right under the Consumer Protection Act.
[35] It was held that the ticket holder was not purchasing services but rather a right to attend a theatre and to occupy a particular seat for a particular performance to watch and hear the performance where the services of the performers were provided. The Court also stated that such services were provided to the producer not to the ticket holder.
[36] I note that in the Livent case it was accepted that the performers were providing services. The Court however specified that those services were provided to the producer not to the ticket holder. The Court seems to have relied on the fact that the ticket holder did not contract directly with the performers and had no direction or control over when or how the services were to be performed, and on the fact that the services would be performed whether or not the ticket holder exercised his or her right to attend the theatre and to occupy a seat at the performance. The Court is not saying that the producer was not providing services. It is saying that what the ticket holder was purchasing was not the services provided but rather a right to attend a theatre for a particular performance.
[37] In my view, this interpretation, given in the Livent case, does not alter the fact that the producer is providing services for the benefit of the public as a whole. Indeed, the public would not buy tickets if no services were provided. As a matter of fact, Ground J., who gave the reasons for the Ontario Court (General Division) in the Livent case, does not appear to have been certain that what the ticket holder purchased was in fact a licence and not services. He says at page 5 (Q.L.):
Accordingly, even if the contract between Livent and the ticket holder is interpreted to be a contract for the purchase of services, it is not in my view a proposed purchase in that the purchase is completed at the time the ticket is obtained because at that time the ticket holder has purchased or acquired an enforceable right to attend a future performance or failing performance, to claim rescission of the contract and repayment of the ticket price.[1]
[38] In any event, it was recognized at least that the performers were providing services and in the present case those entertainment services were undoubtedly rendered in Canada. It is obvious in my view that the payment to Marco was in respect of services performed in Canada. If the performers had not performed services in Canada, no tickets would have been sold and no money would have been remitted to Marco.
[39] In the circumstances, I am of the view that the appellants made payments to Marco for or in respect of services rendered in Canada. Accordingly, the appellants had an obligation to withhold the proper amounts pursuant to paragraph 153(1)(g) of the Act and section 105 of the Regulations.
[40] With respect to the penalties, there is no dispute between the parties that a defence of due diligence is available to the appellants if they can make out that defence (this is supported by the Federal Court of Appeal's decision in Canada (Attorney General) v. Consolidated Canadian Contractors Inc. [1999] 1 F.C. 209).
[41] The issue then becomes one of whether the appellants can positively prove that all reasonable care was exercised to ensure that errors not be made (see Pillar Oilfield Projects Ltd. v. The Queen, [1993] G.S.T.C. 49 (T.C.C.)). This Court has said that a taxpayer is expected to comply with the requirements of the Act with a high degree of diligence, using the sources of information, facilities and resources available to that taxpayer. (See Bennett v. The Queen, 96 DTC 1630 and Somnus Enterprises Ltd. v. The Queen, [1995] G.S.T.C. 4.)
[42] In the present case, I agree with counsel for the respondent that the appellants did not produce any evidence as to the steps they took with respect to their withholding obligation. Counsel for the appellants contended that the appellants had obtained advice from their professional advisors and that the appellants were justified in believing that no tax was payable by Marco just on a common sense interpretation of the Licence Agreements.
[43] I wonder why those agreements were not filed in evidence if counsel wanted to rely on them to invoke the due diligence defence. Certainly, without having those agreements in evidence it is very difficult for me to evaluate the correctness of the interpretation put forward by counsel for the appellants.
[44] Furthermore, no evidence was adduced other than the Agreed Statement of Facts. I do not see in that Statement anything to the effect that the appellants consulted professional advisors before making their decision not to withhold any amount on the payments made to Marco. There is no evidence before me regarding what the appellants did once Marco's request for a waiver was denied.
[45] The appellants, as payors, had a duty to ensure that they had fulfilled all their obligations under the Act. I see no evidence showing that the appellants took any action in that regard. The fact that Marco had obtained a waiver in the previous year is not a valid defence, as a non-resident is required to make such a request in advance of the payment to be received. It is the Minister who has the authority, pursuant to subsection 153(1.1) of the Act to reduce the required withholding under section 105 of the Regulations.
[46] It is only upon receipt of a waiver that a payor is released from the obligation of withholding an amount from payments made to a non-resident. Without such a waiver, the payor’s obligation must stand. The burden remains on the non-resident to show that no tax is payable in Canada and to request a refund, if any is due.
[47] For all these reasons, I am of the opinion that the appellants did not discharge their burden of showing that they exercised due diligence. The penalties shall therefore be maintained.
[48] The appeals are dismissed, with costs.
Signed at Ottawa, Canada, this 12th day of March 2001.
"Lucie Lamarre"
J.T.C.C.
[1] It should be noted that the Ontario Court of Appeal did not form any definite opinion on the first matter as to whether the ticket holder had entered into a contract for the purchase of services, preferring rather to confirm Ground J.’s decision on the basis of his second conclusion that what was involved was not a “proposed” purchase of services.