High-Crest v. R. – TCC: Taxpayer not entitled to ITC’s

High-Crest v. R. – TCC:  Taxpayer not entitled to ITC’s


High-Crest Enterprises Limited v. The Queen (October 20, 2017 – 2017 TCC 210, Jorré J.).

Précis:  The taxpayer operated a nursing home in Springhill, Nova Scotia.  Most of the beds were underwritten by the Nova Scotia Department of Health (“NS Health).  The taxpayer agreed with NS Health to build an extension for 20 additional beds.  It received payments from NS Health that were to be used both for construction and to provide services to the residents of the facility.  Since the taxpayer did the construction work it was regarded as a self-supply.  It claimed input tax credits based on the value of the completed property. The input tax credits exceeded the amount of the output tax reported by the Appellant on the selfsupply.  CRA denied the claim on the basis of section 191.1 of the Excise Tax Act which “prevents an overall net tax refund on the selfsupply by increasing the value of the addition for the purpose of computing the tax on the selfsupply” [para. 10].  The amount at issue was roughly $300,000.

The Tax Court held that section 191.1 applied on the facts and dismissed the appeal, with costs to the Crown.

Decision:   The applicable portions of section 191.1 were reproduced by the Court as follows:

[19]         The legal question in this matter thus turns on limited portions of section 191.1. For convenience, I reproduced those portions below after removing text that is inapplicable in these circumstances:


191.1(1) The definitions in this subsection apply in this section.

government funding, in respect of a residential complex, means an amount of money . . . paid or payable by

(a) a grantor, or

. . .

to a builder of the complex or of an addition thereto for the purpose of making residential units in the complex available to individuals referred to in paragraph (2)(b). . . .

. . .

Subsidized residential complexes

(2) For the purposes of subsections 191(1) to (4), where

. . .

(c) . . . the builder, at or before that time, has received or can reasonably expect to receive government funding in respect of the complex,

. . .

The Court summarized the question before it as follows:

[22]         The critical question to be decided can be stated as:

Whether, at the time of the self‑supply, High‑Crest could expect to receive an amount of money from the government of Nova Scotia “for the purpose of making residential units in the [20‑bed addition] available to individuals” (emphasis added).

[Footnote omitted]

The payments made by NS Health were both for the purpose of constructing a new 20 bed facility and also for providing care to the residents:

[57]         As we have seen, the purpose of the government of Nova Scotia was to have new facilities constructed in order to provide new nursing home beds in Springfield and in other parts of the province and, as well, to arrange for the continuing provision of residential accommodation as well as various care and nursing services in those new facilities.

[58]         These related objectives are reflected in the contractual arrangements which require not only that HighCrest construct and operate the new facility with 20 nursing home beds but also that it provide services including “accommodation, programs, dietary goods, social work services, physical, and occupational therapy, and personal and skilled nursing care”.

[Footnote omitted]

The appellant’s main argument was that section 191.1 could not apply where there was a mixed purpose for the governmental payments:  

[64]         The Appellant submits that section 191.1 cannot apply. First, the Appellant takes the position that the use of the words “for the purpose” suggests that an all or nothing approach applies with respect to the payments and, consequently, section 191.1 cannot apply unless the payments are solely for the purpose of making available residential units.

The Court rejected this interpretation as too strained:

[76]         There is no case law on point but the scheme of the section indicates a clear purpose. On its face the section seeks to deny a net tax refund on the selfsupply by bumping up the output tax where there is government support for the provision of residential accommodation to the groups of individuals described in the section. It does so without regard to the extent of the support; in relation to the costs of the accommodation, the support can be modest or it can be the entire cost or anything in between.

[77]         It would not make sense to read this as not applying to government support simply because, there were, as is the case here, combined payments providing government support both for the provision of residential accommodation together with government support for additional services such as nursing services. Government support for residential accommodation is not diminished by the payment of additional amounts in support of other purposes.

[78]         The requirements of section 191.1 are met so long as part of the amounts received are for the purpose of making residential units available.


[79]         Accordingly, at the time of the selfsupply the Appellant could reasonably expect amounts of money for the purpose of making residential units in the addition available to individuals referred to in the section.

Accordingly the appeal was dismissed with costs to the Crown.