September 4, 2015

Humane Society of Canada v. R - FCA: Personal benefits conferred on director results in loss of registration

Andrew Skodyn's article appeared in Bill Innes on Current Tax Cases on September 4, 2015.

"Précis: This case is interesting due to the variety of novel arguments raised by the Appellant concerning the interpretation of various subsections of the Income Tax Act (the "Act") relating to charities and the application of other sections by the Court, including 149.1(1), 165(3), 168(1)(b), 168(4)(a), 172(3)(a.1), 188.1(4), 189(7) and 230(2)(a).

For example, one argument raised by the Appellant was that under subsection 188.1(4), if the Minister found that the Appellant had conferred an undue benefit, a penalty could be imposed, but revocation of the charitable organization registration was precluded. The Court summarily rejected this submission, by reference to subsection 189(7).

In the event, the Court rejected all of the Appellant's statutory interpretation arguments and the case turned instead on the Appellant's admission that personal benefits (of up to $70,000) had been provided to its director (Michael O'Sullivan), in contravention of the Act and that its books and records could not prove otherwise. These personal benefits included meals, purchases at the LCBO, expenses at Disneyland, movies and comic books. The Court found that it was reasonable for the Minister to revoke the Appellant's charitable organization registration in these circumstances..."