The Federal Court of Appeal had previously allowed the appeal of Northbridge from a Tax Court finding that it was making only exempt supplies in relation to its issuances of around 5,000 insurance policies each year to trucking companies operating in Canada and the US, and referred the matter back to the Tax Court to determine Northbridge's entitlement to input tax credits (ITCs). The Tax Court then decided that Northbridge was not entitled to any ITCs for the GST/HST on its general head office and overhead costs since Northbridge had not determined the extent to which each of its policies was zero-rated pursuant to s. VI-IX-2 and instead only had “global evidence” bearing on its ITC entitlements.
Webb JA stated (at para. 26):
[T]he general head office and overhead costs are incurred as part of the overall business being carried on by Northbridge. Any property or service acquired as part of the general head office and overhead costs is not acquired solely to be consumed in relation to a particular insurance policy, but rather such property or service is acquired to be consumed or used in relation to all insurance policies issued by Northbridge.
Accordingly, Webb JA did not agree that the determination of the Northbridge entitlement to ITCs regarding such costs could only be made if there was a determination to the extent to which each and every policy issued by Northbridge was zero-rated. Webb JA referred the matter back to the Tax Court to determine the amount of ITCs to which Northbridge was entitled in relation to the GST/HST paid by it on the acquisitions of such property and services, in accordance with s. 141.02.