A registered pension plan agreement provides that the fees and expenses related to the administration of the pension plan and incurred by the employer in carrying on its business will be paid from the plan trust funds, unless the employer chooses to pay them directly. Can the employer deduct its payments to the plan trust of the amounts of ITCs and ITRs it has received in respect of those fees and expenses? After referring to s. 18(1)(a), CRA stated:
The courts have interpreted this paragraph as requiring, inter alia, a legal obligation to pay an amount in the year. This principle has been invoked … [in] Burnco Industries … Wawang Forest … and Newfoundland Light… .
The payment by the employer of an amount to the pension plan trust equivalent to ITCs and ITRs received could, in our view, be deductible to the employer by virtue of paragraph 18(1)(a) to the extent that the employer can demonstrate that it has a legal obligation to pay that amount to the pension plan trust.