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Docket: 2003-1595(GST)I |
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BETWEEN: |
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R171 ENTERPRISES LTD., |
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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 December 16, 2003, at Kelowna, British Columbia
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Before: The Honourable Justice L.M. Little |
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Appearances: |
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Counsel for the Appellant: |
Stephen W. Turner |
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Counsel for the Respondent: |
Gavin Laird |
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JUDGMENT
The appeal from the assessment made under the Excise Tax Act, notice of which is dated January 28, 2003 and bears number 118581388-11EU, is dismissed, without costs, in accordance with the attached Reasons for Judgment.
Signed at Vancouver, British Columbia, this 10th day of June 2004.
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"L.M. Little" |
Little J.
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Citation: 2004TCC36 |
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Date: 20040610 |
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Docket: 2003-1595(GST)I |
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BETWEEN: |
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R171 ENTERPRISES LTD., |
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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
Little J.
A. FACTS:
[1] The Appellant was engaged in the business of fabricating steel structural truck parts. The truck parts were sold to Western Star Trucks Inc., a manufacturer of large trucks.
[2] On January 1, 1994 the Appellant and a number of other parties entered into a Joint Venture Agreement (Exhibit A-1). The Joint Venture Agreement provided that the named parties would operate as a joint venture under the name of Torner West Steel Fabricators ("Torner Joint Venture").
[3] Because of a dispute between the parties to the Joint Venture, Torner Joint Venture ceased operations on July 31, 1997. A lawsuit was commenced by some of the Joint Venture parties.
[4] A Settlement Agreement was concluded by the Joint Venture parties on June 18, 1998 (effective on June 20, 1997 (the "Settlement Agreement") (Exhibit A-2)).
[5] The Settlement Agreement provided that the amount of $2,850,000.00 would be paid to the Plaintiffs (R203 Enterprises Ltd. ("R203") Mr. Schmitz, Ms. Torner and Torner Enterprises Ltd.).
[6] Paragraph 5 of the Settlement Agreement specifically stated that the amount of $2,850,000.00 to be paid to the Plaintiffs was "... exclusive of any G.S.T. ...".
[7] The Settlement Agreement provided that the Plaintiffs would transfer a 1/3 undivided interest in the assets of the Torner Joint Venture to the various parties (the "Purchasers").
[8] The Purchasers determined that a proper allocation of the 1/3 undivided interest in the Torner Joint Venture which had belonged to R203 would be $400,000.00 of the total purchase price being paid for the assets.
[9] The Purchasers signed an agreement which provided that the Appellant would acquire 50% of the undivided interest that R203 had owned in the Torner Joint Venture and that R204 Enterprises Ltd. ("R204") would acquire the other 50% interest that R203 had owned in the Torner Joint Venture.
[10] A new Joint Venture consisting of the Appellant and R204 acquired the assets sold by R203. The new Joint Venture operates a steel fabrication business under the name of Crown West Steel Fabricators Joint Venture (the "New Joint Venture"). The Appellant acts as the agent of the New Joint Venture.
[11] Subsequent to the filing of the GST Return the parties to the Settlement Agreement reduced the amount owing to the Plaintiffs by paying a lump sum amount of $1,070,000.00 (see Exhibit A-5). The Appellant maintains that the settlement payment included all amounts owing including the GST.
[12] In filing the GST Return the Appellant claimed Input Tax Credits ("ITCs") in the amount of $58,975.00.
[13] The Minister of National Revenue (the "Minister") agreed that the Appellant and R204 were entitled to claim ITCs in the amount of $18,780.00 in respect of the acquisition. A Notice of Assessment was issued which provided the Appellant and R204 with ITCs in the amount of $18,780.00.
B. ISSUES:
[14] The issues to be decided are:
1. Whether the Minister has properly assessed the Appellant for net tax, interest and penalties.
2. Whether the Appellant is entitled to claim additional ITC amounts with respect to the acquisition of various assets, including goodwill.
C. ANALYSIS:
[15] Counsel for the Appellant argued that the Minister had reassessed the wrong taxpayer.
[16] Counsel for the Respondent stated that there is only evidence of one registrant in this situation and that registrant is the Appellant. Counsel for the Respondent advised that the numbers RT0001 and RT0002 used on the assessments were merely used as an "accounting facilitation". Counsel for the Respondent said:
It's not a different registrant. There is but one registrant here and that is R171. (Transcript, p. 7, l. 8-10)
[17] I accept the argument of counsel for the Respondent on this issue and I find that there is no valid basis to the argument that the Minister reassessed the wrong taxpayer.
[18] Counsel for the Appellant argued that the Appellant is entitled to additional ITCs and the Respondent maintains that the Appellant is not entitled to additional ITCs.
[19] Subsection 169(1) of the Excise Tax Act (the "Act") reads 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: ...
[20] I have also considered subsection 169(4) of the Act:
(4) A registrant may not claim an input tax credit for a reporting period unless, before filing the return in which the credit is claimed,
(a) the registrant has obtained sufficient evidence in such form containing such information as will enable the amount of the input tax credit to be determined, including any such information as may be prescribed; and
(b) where the credit is in respect of property or a service supplied to the registrant in circumstances in which the registrant is required to report the tax payable in respect of the supply in a return filed with the Minister under this Part, the registrant has so reported the tax in a return filed under this Part.
[21] In Johnston v. The Minister of National Revenue, 3 DTC 1182 the Supreme Court of Canada held that the onus was on the taxpayer to show that the assessment was incorrect.
[22] Counsel for the Respondent maintains that when the Appellant purchased the assets there was no proof that any amount was paid for GST.
[23] I have carefully considered the evidence of the witnesses and I have analysed the various documents submitted by counsel for the Appellant and counsel for the Respondent. I have concluded that there is no acceptable proof before the Court that the Appellant paid any GST with respect to the assets that were purchased.
[24] In my opinion the Appellant has not satisfied the onus to establish that the assessment was incorrect.
[25] The appeal is dismissed without costs.
Signed at Vancouver, British Columbia, this 10th day of June 2004.
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"L.M. Little" |
Little J.
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CITATION: |
2004TCC36 |
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COURT FILE NO.: |
2003-1595(GST)I |
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STYLE OF CAUSE: |
R171 Enterprises Ltd. and Her Majesty the Queen |
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PLACE OF HEARING: |
Kelowna, British Columbia |
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DATE OF HEARING: |
December 16, 2003 |
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REASONS FOR JUDGMENT BY: |
The Honourable Justice L.M. Little |
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DATE OF JUDGMENT: |
June 10, 2004 |
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APPEARANCES: |
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Counsel for the Appellant: |
Stephen W. Turner |
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Counsel for the Respondent: |
Gavin Laird |
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COUNSEL OF RECORD: |
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For the Appellant: |
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Name: |
Stephen W. Turner |
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Firm: |
Salloum & Company Kelown, British Columbia |
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For the Respondent: |
Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada |