Tax Court of Canada


Goods and Services Tax

Special rules

Taxpayer reassessed as no evidence of consent to act as agent of third party

N, who was sole shareholder of P Inc., incorporated P Inc. to carry out renovations on hotel owned by numbered company owned by N’s friend A. In February 2011, numbered company granted power of attorney to P Inc. and gave P Inc. power to act for numbered company in all matters pertaining to hotel. A signed direction to pay authorizing disbursement of CMHC funds to P Inc. and specifying that P Inc. was appointed to act for A in matters pertaining to mortgage and to manage and finish renovations. N paid renovations out of own pocket on each floor, and, once floor passed inspection, CMHC advanced funds which would be disbursed to P Inc. in accordance with direction to pay. No management agreement existed between N and A and P Inc. did not invoice A or numbered company for work. P Inc. was reassessed for net harmonized sales tax (HST) of $47,314.05 for reporting period from January 1, 2011 to March 31, 2011. In November 2012, Minister assessed P Inc. in respect of making of taxable supplies, and HST collectible was $69,492, input tax credits were $25,992.07 interest was assessed of $3,168.17 and failure to file penalty was $1,739.98. In March 2014, Minister reassessed P Inc. disallowing input tax credits previously allowed. In 2015, Minister further reassessed P Inc.’s ITCs of $22,177.95 resulting in net tax liability of $47,314.05. P Inc. appealed as to Minister’s finding of its net tax liability. Issue for determination was whether numbered company consented to P Inc. acting as its agent regarding renovations. Appeal dismissed. P Inc. was not acting as agent for numbered company for renovations since numbered company did not consent, explicitly or implicitly, to P Inc. acting in that capacity. Evidence did not establish that A expressly consented to agency relationship with P Inc. for renovations or that it gave implicit consent to do so. Only evidence submitted with respect to renovations was that P Inc. performed functions that general contractor would normally do. P Inc. failed to show that it was acting as agent for numbered company in performing these functions.

Persepolis Contracting Inc. v. The Queen (2017), 2017 CarswellNat 2477, 2017 TCC 89, Sylvain Ouimet J. (T.C.C. [Informal Procedure]).

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