Date: 19990723
Docket: 98-289-GST-I
BETWEEN:
ALGONQUIN COLLEGE OF APPLIED ARTS AND TECHNOLOGY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
O'Connor, J.T.C.C.
[1] This appeal was heard at Vancouver, British Columbia on June 14, 1999 pursuant to the Informal Procedure of this Court. The facts are set forth in the Agreed Statement of Facts which reads as follows:
Agreements
1. The parties hereby agree that the facts in paragraph 4 through 18 hereof are true.
2. The parties hereby agree that the documents attached as Appendices hereto are true copies of the documents they represent, that these documents were executed by the persons stated to have executed them and that these documents were executed on the dates stated.
3. These agreements are only for purposes of this Appeal and any appeals therefrom. No evidence inconsistent with the facts hereof or documents attached hereto may be adduced, but evidence not inconsistent with the facts or documents may be adduced.
Facts
4. At all material times, the Appellant operated a public college, as defined in Section 123 of the Excise Tax Act (the "Act").
5. The Appellant filed a Goods and Services Tax registration form dated May 20, 1990 and was registered under Part IX of the Act effective January 1, 1991.
6. Up until November 19, 1996, the Appellant filed its returns on the basis that it was a public college making exempt supplies as defined in paragraph 6 of Part III of Schedule V of the Act.
7. Pursuant to ss. 259(3) of the Act, up until November 19, 1996, the Appellant applied for and received a rebate of its GST paid on purchasers as allowed by that subsection to a public college not claiming input tax credits, which rebate was equal to 67% of the amount of GST paid.
8. On November 19, 1996, the Appellant signed and filed an election pursuant to paragraph 6 of Part III of Schedule V of the Act to elect not to be a supplier of exempt supplies and to retroactively apply the election back four years to take effect November 19, 1992.
9. In its return for the period March 1, 1997 to March 31, 1997, the Appellant applied for input tax credits of $83,581.34, which sum is equal to 33% of the GST it paid on purchases for the period November 19, 1992 to November 19, 1996 with respect to the apprenticeship programs it offered.
10. At all times prior to November 19, 1996, the Appellant was a supplier of exempt supplies pursuant to section 123 and paragraph 6 of Part III of Schedule V of the Act.
11. The Appellant filed a return with the Minister of National Revenue pursuant to Section 238 of the Act seeking input tax credits in the sum of $185,227.64 for the reporting period March 1, 1997 to March 31, 1997.
12. On July 15, 1997, the Minister issued Notice of Assessment Number 971211285129P-12 allowing input tax credits for the period March 1, 1997 to Mach 31, 1997 in the amount of $96,061.52 and disallowed input tax credits in the amount of $89,166.12 which amount includes $83,581.34 related to apprenticeship programs for the period November 19, 1992 to November 19, 1996.
13. The Appellant filed a Notice of Objection on September 15, 1997 in respect of that portion of the assessment concerning the apprenticeship programs and the claim for input tax credits in the sum of $83,581.34.
14. On October 28, 1997, the Minister of National Revenue issued a Notice of Decision with respect to the Appellant's Notice of Objection pursuant to which the Minister confirmed its original assessment denying the input tax credits claimed in the sum of 83,581.24.
15. On January 22, 1998, the Appellant filed a Notice of Appeal in respect of the Notice of Decision.
16. The Minister agrees that if the Appellant is entitled to claim input tax credits from November 19, 1992 as a result of the election made on the prescribed form pursuant to Schedule V, Part III, Section 6 of the Act, then it is entitled to the amount claimed in the sum of $83,581.34.
17. Attached to this Agreed Statement of Facts as Appendix No. 1 is a true copy of the prescribed GST 29 form dated November 19, 1996.
18. The Apprenticeship programs offered by the Appellant and which are the subject of this appeal were paid for by the Province of Ontario and as such no GST is payable.
[2] No evidence was led and counsel for the parties made their submissions on the basis of the Agreed Statement of Facts.
SUBMISSIONS OF THE APPELLANT:
[3] The Appellant submitted that with respect to the election provided for in paragraph 6 of Part III of Schedule V no date is fixed for its filing. Counsel contrasted that to several other election provisions in the Act where specific dates for filing of the election are set forth. He referred in particular to the elections provided for in section 167(1) dealing with the supply of assets of a business, section 211(1) dealing with an election for real property of a public service body, section 225.1(1) dealing with simplified accounting for charities and section 225.2(1) dealing with elections by selected financial institutions. Counsel also referred to the Form GST29 which contemplates the election in issue and points out that there is a blank for the date of signing of the election and further a blank for the effective date of the election. He argues principally from the foregoing that the Appellant was entitled to establish the effective date of the election as it did, namely November 11, 1992.
SUBMISSIONS OF THE RESPONDENT:
[4] The Respondent submits that the very wording contemplating the election indicates that the supply of the educational services in question remain exempt supplies until the supplier actually makes the election. He refers in particular to the specific wording in paragraph 6 of Part III of Schedule V which states:
... except where the supplier has made an election under this section in prescribed form containing prescribed information.
(emphasis added)
In other words, the changing of the exempt supplies to taxable supplies with the consequential advantage of being able to claim full input tax credits only takes effect after the supplier has made the election. He referred to Her Majesty the Queen v. Miller [1993] 1C.T.C. 269 (F.C.A.) where the Federal Court of Appeal stated as follows at page 271:
The intention of Parliament is, in my view, clear; the taxpayer was entitled to make the election on the basis of his circumstances as they existed, and as only he could know, at the time he filed his return. The Act did not contemplate the election being made on the basis of changed circumstances which might result from an assessment or reassessment of the return.
To allow amendment of the election, either by the Minister as part of the assessment process or the taxpayer after assessment, would, in my opinion, require an inadmissible reading into the Act of words that were not there. ...
Counsel also referred to Nassau Walnut Investments Inc. v. Her Majesty the Queen [1998] 1 C.T.C. 33 (F.C.A.) where the Federal Court of Appeal distinguished between a designation and an election. The Court stated as follows at page 46:
In my view, there is little doubt that the restrictive approach adopted by the courts with respect to the Act's election provisions is prompted by the possibility of taxpayers engaging in retroactive tax planning . This is one of the rationales under the decision of this Court in Miller, supra, one of the principal cases relied on by the Minister. In that case, the taxpayer made a forward averaging election in respect of his 1982 taxation year. The Minister disallowed the taxpayer's RRSP deduction for the year but refused to increase the amount of income that the taxpayer had elected to forward average. At 5036 Mahoney J.A. writing for the Court (Linden and Robertson JJ.A concurring), declined to accord to the taxpayer the advantage of hindsight in making a genuine election:
...
Reference was also made to Visser v. Her Majesty the Queen [1994] G.S.T.C. 75 (TCC) where Lamarre Proulx, J. of this Court dealt with an election by a supplier of real property which was only made and filed after the supply had taken place. Lamarre Proulx, J. stated as follows:
The wording is unambiguous. The election should be filed before the supply of real property takes place. This appears logical.
She stated in particular at page 75-3:
... At any rate, an essential element, in order to be entitled to the rebate scheme, was not accomplished, that is the filing of the election required by subpara. 9(b)(ii) of Part I of the Act before the supply of real property was made.
The wording in Visser was almost identical to the wording of the election provision in this case, namely that the provision only took effect when the individual "has filed an election with the Minister in prescribed form and manner and containing prescribed information".
[5] Counsel for the Respondent also pointed out that the administration of the Act would be made extremely difficult if persons could make elections and back-date them, especially after that person has specifically filed returns over a considerable period of time indicating that the taxpayer was making an exempt supply and consequently pursuant to ss. 259(3) of the Act was entitled to a rebate of 67 percent of the GST paid.
ANALYSIS AND CONCLUSION:
[6] In my opinion the submissions of counsel for the Respondent are sound. The very provision providing for the election uses the words "has filed" thus indicating that the effect of the election can only be obtained after the election has been filed. As to the form GST29 providing a blank for the effective date of the election it should be noted that many election forms contain a blank for the effective date and in many cases the Minister establishes that date based on the provisions of the Act. In any event, a form cannot overrule the Act and in the present case the Act is clear that the election had to have been made prior to the time of its desired effect.
[7] Consequently, the appeal is dismissed with costs.
Signed at Ottawa, Canada this 23rd day of July, 1999.
"T.P. O'Connor"
J.T.C.C.