The appellant school boards paid GST charges of independent bus companies for their busing services, and were compensated with a Quebec government subsidy (which was not subject to GST due to provincial government immunity).
In finding that the school boards were making taxable supplies to the Quebec government, so that they were entitled to full input tax credits, Noël J.A. stated (at paras. 19, 28):
[I]n order for a payment to constitute consideration, it must have been made pursuant to a legal obligation (contractual or otherwise) and must be closely enough linked to a supply that it may be regarded as having been made "for" that supply… . That is why a direct link is required.
… It is therefore apparent that the purpose of the subsidy is unequivocal and that the link with the supply in question is equally unequivocal; the service must be provided, failing which the subsidy may be cancelled. Given that this situation is outside the realm of contracts, it is difficult to imagine a more direct link between the payment and the supply of the student transportation service.