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Docket: 2002-4619(GST)I |
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BETWEEN: |
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FOREVER DANCE INC., |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
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Appeal heard on August 20, 2003 at Toronto, Ontario
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Before: The Honourable Justice Michael J. Bonner |
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Appearances: |
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Agent for the Appellant: |
Nina De Luca-Ford |
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Counsel for the Respondent: |
A'Amer Ather |
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JUDGMENT
The appeal from the assessment under Part IX of the Excise Tax Act is allowed, with costs, if applicable, and the assessment is referred back to the Minister of National Revenue for reassessment on the basis that the tax, penalty and interest were not eligible.
Signed at Toronto, Ontario, this 30th day of September 2003.
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"Michael J. Bonner" |
Bonner, J.
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Citation: 2003TCC661 |
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Date: 20030930 |
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Docket: 2002-4619(GST)I |
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BETWEEN: |
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FOREVER DANCE INC., |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
REASONS FOR JUDGMENT
Bonner, J.
[1] This is an appeal from an assessment of tax and penalty under Part IX of the Excise Tax Act (the "Act"). The assessment relates to the period January 1, 1999 to December 31, 2000.
[2] During the period, the Appellant operated a school providing dance instruction to students. The assessment under appeal is based on the premise that the supply of such instruction was a taxable supply. The Minister assessed tax in the amount of $14,932.44 in respect of the supply, allowed an input tax credit and imposed penalty and interest.
[3] It is the Appellant's position that the supply was an "exempt supply" within the definition of that term in s. 123(1) of the Act because it was a supply included in Schedule V to the Act.
[4] A brief outline of the statutory chain may be helpful:
(a) Section 165 of the Act imposes tax in respect of a taxable supplies.
(b) The term taxable supply is defined in s. 123(1) as a supply that is made in the course of a commercial activity.
(c) Commercial activity is defined in s. 123(1) to mean a business carried on by a person except to the extent that the business involves the making of exempt supplies.
(d) Exempt supply is defined in s. 123(1) as a supply included in Schedule V.
[5] The Appellant relies on s. 8 of part III of Schedule V. Section 8, in the form applicable to the early part of the period covered by the assessment read:
"A supply, other than a zero-rated supply, made by a school authority, vocational school, public college or university of a service of instructing individuals in, or administering examinations in respect of, courses leading to certificates, diplomas, licences or similar documents, or classes or ratings in respect of licenses, that attest to the competence of individuals to practise or perform a trade or vocation where
(a) the document, class or rating is prescribed by federal or provincial regulation;
(b) the supplier is governed by federal or provincial legislation respecting vocational schools; or
(c) the supplier is a non-profit organization or a public institution."
[6] Section 8 was amended in 2001 applicable, broadly speaking, to supplies the consideration for which became due after October 4, 2000. In its post-amendment form it read:
"A supply, other than a zero-rated supply, made by a government, a school authority, a vocational school, a public college or a university of a service of instructing individuals in, or administering examinations in respect of, courses leading to certificates, diplomas, licences or similar documents, or classes or ratings in respect of licences, that attest to the competence of individuals to practise or perform a trade or vocation, except where the supplier has made an election under this section in prescribed form containing prescribed information.
(a) to supplies for which all of the consideration becomes due after October 4, 2000 or is paid after that day without having become due; and
(b) to any supply for which consideration becomes due or is paid on or before that day if no amount was charged or collected as or on account of tax under Part IX in respect of the supply on or before that day, except that, with respect to that supply, s. 8 of Part III of Sch. V shall be read without reference to the words "except where the supplier has made an election under this section in prescribed form containing prescribed information"."
[7] The dispute in this case centres on the question whether the Appellant operated a vocational school. That term is defined in s. 1 of Part III of Schedule V as follows:
"1. In this Part, ...
"vocational school" means an organization that is established and operated primarily to provide students with correspondence courses, or instruction in courses, that develop or enhance students' occupational skills."
The French version reads:
« 1. [Définitions] - Les définitions qui suivent s'appliquent à la présente partie.
« école de formation professionnelle » Institution établie et administrée principalement pour offrir des cours par correspondance ou des cours de formation qui permettent à l'étudiant d'acquérir ou d'améliorer une compétence professionnelle. »
[8] Thus the focus of the dispute is whether the evidence shows that the Appellant's school was established and operated primarily to provide instruction in courses that develop or enhance the students' occupational skills.
[9] At the hearing of the appeal evidence was given by one witness, Brandie Bellavance, president of the Appellant. She testified that the age of students upon arrival at the school ranges from three to eighteen years. Students are placed in courses based on their age and capabilities. The program at the school is not directed exclusively toward the development of the student's skills in dancing. It is also directed toward the development of the student's knowledge and skills in other areas required to qualify the student as a teacher of dancing. The progress of students is measured against grade levels established by the British Association of Teachers of Dance (the Association). The Association appears to serve the function of a professional standards body. Upon reaching the age of sixteen students become eligible to apply to take an examination for a student teacher's certificate issued by the Association. In order to qualify a candidate must not only possess skill as a dancer. The student must also demonstrate knowledge of steps, movements, anatomy and the accommodation of the physical limitations of individual dancers.
[10] After further study and progress students may take examinations for certificates attesting to progressively higher levels of qualification. At the highest level the student receives a teacher's certificate from the Association. A relatively small number of students reach this level. However those who earn certificates at lower levels are able to use their certificates as evidence of qualification as a teacher of dancing. Ms. Bellavance indicated that parents of prospective dance students will normally seek proof of the qualifications of instructors and that certificates issued by the Association are recognized on in such cases. She emphasized that the focus of the school operated by the Appellant is on the education of teachers. She added, during cross-examination, that training at the school is also an "enhancement" for professional dancers.
[11] Counsel for the Respondent directed his argument to the primary objective or goal of the school. He pointed out that, in order to satisfy the statutory definition of the term vocational school, the organization must not only be established but also be operated primarily to provide instruction in courses that develop or enhance the students' occupational skills. Counsel proceeded to argue that, because the great majority of students do not reach the highest (teacher's certificate) level, the operation of the school is directed primarily to the majority of students who ultimately settle for certificates of attainment at a lower level. Thus far I agree. However the argument seemed to assume that courses directed toward the training of students who seek certificates of qualification at lower level are not directed toward the development or enhancement of occupational skills. Here I disagree. In my view the language of the statutory definition encompasses the provision of instruction in courses that develop occupational skills at all levels. It is clear from the evidence of Ms. Bellavance that the Appellant's school provides instruction in courses which develop the occupational skills of potential teachers not only at the "teachers certificate" level but also at lower levels. Ms. Bellavance indicated that persons possessing lower level certificates typically find employment as instructors in dance programs operated by schools and community parks and recreation organizations. The assessment therefore appears to have been based upon a misapprehension of the nature of the courses taught by the Appellant.
[12] The appeal will therefore be allowed and the assessment referred back to the Minister for reassessment on the basis that the tax, penalty and interest were not exigible.
Signed at Toronto, Ontario, this 30th day of September 2003.
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"Michael J. Bonner" |
Bonner, J.
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CITATION: |
2003TCC661 |
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COURT FILE NO.: |
2002-4619(GST)I |
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STYLE OF CAUSE: |
Forever Dance Inc. and H.M.Q. |
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PLACE OF HEARING: |
Toronto, Ontario |
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DATE OF HEARING: |
August 20, 2003 |
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REASONS FOR JUDGMENT BY: |
The Honourable Justice Michael J. Bonner |
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DATE OF JUDGMENT: |
September 30, 2003 |
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APPEARANCES: |
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Agent for the Appellant: |
Nina De Luca-Ford |
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Counsel for the Respondent: |
A'Amer Ather |
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COUNSEL OF RECORD: |
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For the Appellant: |
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Name: |
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Firm: |
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For the Respondent: |
Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada |