CUSTOMS AND EXCISE |
Excise Tax Act |
Midland Hutterian Brethren v. Canada
A-183-99
Malone J.A. (Evans J.A. dissenting)
21/12/00
27 pp.
Application for judicial review of T.C.C. decision dismissing applicant's appeal from assessment denying applicant input tax credit (ITC) in respect of cost of certain durable and hard-wearing cloth purchased to make into work clothing for use by members in farming operations--Under scheme of Act, registrant, such as applicant, engaged in commercial activity not producing exempt supplies, entitled to recover GST paid on any goods or services acquired for consumption, use or supply in course of commercial activities of person--Applicant carrying on commercial activity, farming, and produces non-exempt supplies--Whether cloth used in course of commercial activities--Issue one of remoteness--How closely tied to output does expense have to be to qualify for ITC?--Applicant communal colony, members of which work without monetary compensation, receiving shelter, education, food and clothing by Colony--Colony operating active farming business--In accordance with constitution members allotted cloth to be made into church and work clothes--75% used for farm work clothes--Colony claimed ITCs for 50% of GST incurred on work cloth--Minister denied ITC for work cloth as purpose considered personal use, regardless of whether or not used for farming--Appeal allowed (Evans J.A. dissenting)--Per Malone J.A. (Linden J.A. concurring): T.C.J. found as fact work cloth used, in part at least, to make work clothes for use in farming operation--T.C.J. held cloth not used by registrant's members in production of taxable supplies as commercial activities farming, not making clothes--Words "in the production" in Act, s. 169(1) not making distinction between goods acquired and used directly in production and goods acquired and used to facilitate production, or as part of production process--Scheme of Act allowing business to claim refund or credit or any tax paid on purchase of goods or services connected to its sale of taxable supplies: Metropolitan Toronto Hockey League v. Canada (1995), 184 N.R. 371 (F.C.A.)--Supplies must contribute to production of taxable articles or provision of taxable services--Act, s. 169(1) not requiring use be exclusively commercial; property may be acquired and altered before its use in commercial activities of GST registrant and item directly or indirectly contributing to production of taxable articles or provision of taxable services, then ITC available using formula in Act, s. 169(1)--As Crown witness has admitted Minister allowing ITCs for work gloves and boots acquired by other farm registrants for use by their employees, connection for work cloth herein not too remote--Per Evans J.A. (dissenting): Majority's interpretation of terms "in the course of commercial activities" permitting ITC to be claimed for expenditure with too tangential connection with production of taxable supplies, and insufficiently attentive to important considerations of fiscal fairness--Colony cannot claim ITC in respect of cloth as acquired for use satisfying personal need for members for warmth and decency, and to discharge obligation to provide members and families with necessities of life, including clothing--When made into work clothes, cloth not sufficiently functionally related to colony's commercial activities to justify permitting appellant to pass on to general body of taxpayers GST paid in respect of members' non-church clothing--No evidence clothes made from cloth had any properties making them especially suitable for farm work--To extent design of clothes served to identify wearers as Hutterites, identification with colony as religious community, not with its commercial activities--Colony's first object religious, not commercial--"In the course of commercial activities" not sufficiently precise and unambiguous as to preclude interpretation drawing on particular statutory context in which they appear--Goods used by person while engaged in commercial activities will not generally qualify for ITC if registrant likely to have bought them, or goods like them, as item required for everyday living--Similarity between ITA, s. 18 and Excise Tax Act, s. 169(1) in that "personal or living expenses" of taxpayer or GST registrant may not be deducted--Not purpose of ITC to enable those engaged in commercial activities to call upon taxpayers generally to subsidize personal expenses or, as herein, to help colony defray cost of meeting its obligations to clothe members, whether or not engaged in commercial activities of colony--Majority's interpretation of "in the course of commercial activities" would open such large gap in GST legislation that corrective legislation would be necessary--Might be possible to claim ITC on GST paid on business suits--Excise Tax Act, R.S.C., 1985, c. E-15, s. 169 (as enacted by S.C. 1990, c. 45, s. 12; 1993, c. 27, s. 35; 1997, c. 10, ss. 19, 161)--Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, s. 18 (as am. by S.C. 1994, c. 7, Sch. II, s. 13; Sch. VIII, s. 8; c. 21, s. 11; 1995, c. 3, s. 6; c. 21, ss. 5, 48; 1996, c. 21, s. 5; 1997, c. 25, s. 4).