BBM Canada v. The Queen, 2008 TCC 341, is a surprise, not because of the result but because of the novel position advanced by the Crown in support of the assessment in question. The organization assessed had taken the position that it was exempt from tax under paragraph 149(1)(l) of the Income Tax Act because it was a not-for-profit. The CRA thought otherwise.
The Court, in allowing the organization’s appeal, summarized the dispute between it and the CRA as follows:
[4] Specifically, the only issue between the parties is whether BBM was organized and operated exclusively “for any other purpose except profit”. Prior to the hearing CRA and the Crown had also been of the view that (i) the Appellant’s surpluses were, at the time in question, unreasonably high and thus evidenced an unstated profit purpose of the Appellant, and (ii) that there had been indirect distributions to at least one of the Appellant’s members. However, the Crown abandoned these two arguments completely at the outset of trial. Simply put the Crown’s position is that an organization cannot be considered to be organized and operated exclusively for a purpose other than profit if the establishment or operations of the entity are related to the commercial or business activity of its members or of others. This is not how this provision has been applied (by CRA and the courts) to date. In its written submissions the Crown says that time has come for the Court to recognize such an objective requirement.
