RBC was a qualifying institution which for its 2012 and some prior fiscal years had followed a method, which had been pre-approved pursuant to s. 141.02(20), of claiming input tax credits, in respect of pools of costs which varied in proportion to the levels of credit card interchange fees generated by it, on the basis of the ratio of its foreign interchange revenues (treated by it as zero-rated) to its total (foreign and domestic) interchange revenues. In finding that CRA’s acceptance of this ITC methodology did not preclude it from now denying ITC claims made by RBC in accordance with this method on the basis that such foreign revenues in fact were not zero-rated, Smith J stated (at paras. 44, 48):
[T]he pre-approval process does not involve a determination of the tax status of an input nor preclude the Minister from later concluding that an activity involves an exempt, and not a zero-rated supply. …
Consistent with the statutory scheme, the Minister reserved the right to conduct an audit of the claimed ITCs to determine whether they related to an exempt or zero-rated supply, and to reassess accordingly.