Judge Eric Bowie of the Tax Court of Canada allowed, on September 4, 2003, an appeal by The Colleges of Applied Arts and Technology (CAAT) Pension Plan from an assessment, made under the Excise Tax Act, denying CAAT a GST refund it had paid on services provided by investment managers. The central issue before the court was the proper application of para. (q) of the definition of “financial service” found in subs. 123(1) of the Act. Absent the application of para. (q), the services of the investment managers would clearly be exempt financial services and GST would not be payable by CAAT. Whether para. (q) applied turned on whether the “principal activity” of CAAT was the investing of funds, as asserted by the Canada Customs and Revenue Agency, or something other than the investing of funds, specifically the paying of pensions or collection of contributions, as asserted by CAAT.
The judge found that the two activities, without which CAAT could not operate, were the collection of employee/employer contributions and the payment of benefits, and that the principal activity of CAAT was not the investing of funds. The provision of services by investment managers to CAAT therefore was not within para. (q) of “financial service” and CAAT therefore was entitled to a refund of GST paid to the investment managers.
Despite the fact that para. (q) has subsequently been amended so that the impact of the decision will be a limited case is significant because it impacts on claims made by other pension plans, by insurance corporations and charities.
CAAT was represented by Susan Van Der Hout, Sean Aylward and D’Arcy Schieman of Osler, Hoskin & Harcourt LLP. The Attorney General of Canada was represented by justice counsel John McLaughlin and Suzanne Bruce.