The appellant (Bell Canada) was required as a result of ETA s. 236.01 and Part 6 of the New Harmonized Value-added Tax System Regulations, No. 2 (the “Recapture Regulations”) to recapture 100% of the input tax credits that it claimed in respect of the 8% tax that it paid under s. 165(2) on the consideration for the supplies to it in Ontario of electricity. The suppliers to it of such electricity (the “Local Distributors”) were required, pursuant to s. 79.17(1) of the Ontario Energy Board Act, 1998 to itemize charges on their invoices to show four categories of items: electricity, delivery, regulatory charges and debt retirement charge. Bell Canada submitted that, rather than receiving a single supply of electricity, it received multiple supplies of electricity, delivery services and regulatory services, so that the electricity component (subject to recapture) was reduced.
In rejecting this submission, D’Arcy J stated (at paras. 123-125):
In substance and reality, the alleged separate supplies of the delivery services and regulatory services are integral parts, integrants or components of the overall supply of electricity. The supply to the Local Distributors of the transmission services and the regulatory services is work of a preparatory nature to the supply of the electricity. Similarly, the costs that the Local Distributors incur in distributing the electricity relates to work of a preparatory nature to the supply of electricity. As … noted in City of Calgary, such supplies are parts or components of the single overall supply of electricity.
… To paraphrase [O.A. Brown], the alleged separate supplies cannot be realistically omitted by the Local Distributors from the overall supply and in fact are the essence of the overall supply.
…[T]he fact that the Local Distributors itemize certain items on their invoices has no bearing on whether a Local Distributor made a single supply or multiple supplies.
Regarding a submission that Bell Canada (at para. 131) that it “could have purchased the electricity from a retailer and the transmission and distribution services from a Local Distributor,” he stated (at para. 132) that the “Court must make its decision based upon the supplies actually made … .”
He also did not find any indication that the word “electricity” in s. 26 of the Recapture Regulations referenced something narrower than the single supply of electricity to Bell Canada (para. 146, et seq.).