http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/107862/index.do 
Miedzi Copper Corporation v. The Queen (February 3, 2015 – 2015 TCC 26, Paris J.).
Précis: Miedzi Copper Corporation’s sole function was holding the shares of a Luxemburg subsidiary (“Luxco”) which in turn held the shares of six Polish companies engaged in mineral exploration. CRA denied ITCs in the amount of $47,909.07. The disallowed ITCs included various management, legal and accounting fees, convention expenses and domain registration expenses. Section 186 of the
Excise Tax Act provides a look-through rule which entitles holding corporations to ITCs for expenses incurred for “consumption or use in relation to the shares” of its subsidiaries. Miedzi had no activities other than owning the shares of Luxco and lending it money. Since the phrase “in relation to” requires a broad interpretation it extends to the type of expenses with respect to which CRA disallowed ITCs. The appeal was allowed.
Decision: Miedzi was involved in mineral exploration in Poland through subsidiaries. The Minister disallowed a portion of the ITCs it claimed during the period under appeal:
[1] This is an appeal from a reassessment under Part IX of the Excise Tax Act (“ETA”) by which the Minister of National Revenue (“Minister”) disallowed $47,909.07 of input tax credits (ITCs) claimed by Miedzi Copper Corporation (“Miedzi”) for its reporting periods ending March 31, 2011 through September 30, 2012.
[2] Miedzi is a holding company that carries on a mineral exploration business through a number of foreign subsidiaries. It owns all of the shares of a Luxembourg company which, in turn, holds all of the shares of six mineral exploration companies in Poland.
[3] In the relevant periods, Miedzi claimed ITCs of $165,708.18 by virtue of subsections 186(1) and (3) of the ETA for HST that it paid on management, professional and geological services.
The disallowed ITCs covered a mixed bag of corporate functions:
[13] Miedzi had no employees or office premises of its own. All of its operations were carried out in Vancouver by individuals and certain consulting firms whose services were provided to Miedzi on a contract basis by Lumina Asset Management Inc. (“LAM” ) from LAM’s premises.
[14] LAM billed Miedzi on the basis of time spent by the individuals providing services to Miedzi, and charged Miedzi for consulting services provided to Miedzi and for expenses incurred on Miedzi’s behalf.
[15] Miedzi also incurred certain expenses on its own behalf, including:
– legal fees incurred by Miedzi for its own incorporation, for the private placement, for corporate reporting and filing services, for advice relating to the HST issue in this appeal, for advice concerning a shareholder’s agreement, a stock option plan and related amendments to articles;
– accounting fees incurred for the preparation of Canadian tax returns, for the audit of financial statements, for advice concerning Miedzi’s tax reporting obligations and advice relating to the HST audit;
– miscellaneous cell phone, parking, meal and courier charges;
– charge for web domain name registration; and
– charges for hotel accommodation at the Prospector’s and Developer’s Association of Canada conference.
[16] Miedzi claimed ITCs in respect of all HST it paid for the periods in issue on the basis that all of the services and property it acquired were for use or consumption in relation to the shares or indebtedness of Luxco.
[17] The Minister disallowed a portion of the ITCs claimed in respect of the management services provided by LAM, as well as all of the ITCs claimed in respect of the items set out in paragraph 15.
The Crown’s position, in a nutshell, was that the expenses at issue had not been demonstrated to relate to the shares of Luxco:
[25] The respondent argues that the costs in dispute are Miedzi’s own corporate costs which were not related to holding the shares and cannot reasonably be regarded as related to the shares in the Luxco. Counsel maintained that Miedzi would have incurred those expenses regardless of the exempt activity it was involved in.
The taxpayer relied upon subsections 186(1) and (3) of the Excise Tax Act which permit a holding corporation to claim ITCs for expenses incurred in relation to the shares or indebtedness of its subsidiaries:
186.(1) Related corporations [ITCs for holding companies] — Where
(a) a registrant (in this subsection referred to as the “parent”) that is a corporation resident in Canada at any time acquires, imports or brings into a participating province particular property or a service that can reasonably be regarded as having been so acquired, imported or brought into the province for consumption or use in relation to shares of the capital stock, or indebtedness, of another corporation that is at that time related to the parent, and
(b) at the time that tax in respect of the acquisition, importation or bringing in becomes payable, or is paid without having become payable, by the parent, all or substantially all of the property of the other corporation is property that was last acquired or imported by the other corporation for consumption, use or supply by the other corporation exclusively in the course of its commercial activities,
except where subsection (2) applies, for the purpose of determining an input tax credit of the parent, the parent is deemed to have acquired or imported the particular property or service or brought it into the participating province, as the case may be, for use in the course of commercial activities or the parent to the extent that the parent can reasonably be regarded as having so acquired or imported the particular property or service, or as having so brought it into the province, for consumption or use in relation to the shares or indebtedness.
. . .
(3) Shares, etc., held by corporation — Where at any time all or substantially all of the property of a particular corporation is property that was acquired or imported by it for consumption, use or supply exclusively in the course of its commercial activities, all shares of the capital stock of the particular corporation owned by, and all indebtedness of the particular corporation owed to, any other corporation that is related to the particular corporation shall, for the purposes of this section, be deemed to be, at that time, property that was acquired by the other corporation for use exclusively in the course of its commercial activities.
The Court held that the term “in relation to” found in subsection 186(1) required a broad interpretation:
[32] In
Stantec, this Court held that the phrase “in relation to” in subsection 186(1) should be given a broad interpretation and that the link between the consumption or use of the service or property and the shares of the subsidiary corporation need not be direct or substantial.
Since the only activity of Miedzi was the holding of shares of Luxco and loaning money to it the expenses in question were in relation to those shares and that debt:
[35] In this case, Miedzi exists to hold the shares of Luxco. Apart from that share ownership and the lending of money to Luxco, it has no other activity. In this sense, everything Miedzi does can be said to be done in relation to the shares or indebtedness of Luxco. Therefore, there is a clear nexus between the administrative, management and legal services in issue and the shares or indebtedness of Luxco. But for its ownership of the Luxco shares and its funding of Luxco by debt, Miedzi would not have acquired those services.
[36] I agree with counsel for the appellant’s submission that subsection 186(1) was intended by Parliament to be a look-through rule and that this purpose would not be served by the narrow reading of the provision suggested by the respondent.
The appeal was accordingly allowed in full.