The appellant sold domain names to a related company for $500,000 plus GST and QST.
The purchaser subsequently experienced financial difficulties and filed a proposal under the Bankruptcy and Insolvency Act, leaving the majority of the purchase price and taxes unpaid.
The appellant sought to adjust its GST return to claim a refund for the uncollected GST, arguing it was a bad debt under section 231 of the Excise Tax Act, or alternatively, a reduction in consideration under section 232.
The Tax Court of Canada dismissed the appeal, finding that section 231 did not apply because the appellant had not remitted the GST on the supply, and section 232 did not apply because no credit or debit note was issued.
The Court also rejected the argument that subsection 225(1) independently permitted the adjustment.
