Few areas of Canadian tax law catch honest businesses off guard as often as the documentary requirements for claiming GST/HST input tax credits (ITCs). A registrant pays tax to a supplier, holds an invoice that shows a GST/HST registration number, and reasonably assumes the credit is safe. The Tax Court of Canada's decision in Comtronic Computer Inc. v. The Queen, 2010 TCC 55, shows why that assumption can be expensive. The Court denied roughly half a million dollars in ITCs because the registration numbers printed on the supplier invoices, while genuine numbers, did not belong to the companies that actually billed Comtronic. The case remains a leading authority on how strictly the documentary rules are applied, and why a purchaser's honesty does not rescue a non-compliant claim.
If your business has had ITCs disallowed on a GST/HST audit, this decision explains the legal framework the auditor is working from, and where the real fight usually lies.
The facts
Comtronic Computer Inc. was a computer-hardware reseller. Like many businesses in that trade, it bought product from a series of suppliers, paid the GST/HST those suppliers charged, and claimed the corresponding input tax credits on its returns. The invoices it received looked ordinary: they named a supplier and set out a GST/HST registration number, as the rules require for purchases of $30 or more.
The difficulty surfaced later. On audit, the Canada Revenue Agency determined that the registration numbers appearing on certain invoices were not the numbers assigned to the businesses that had supplied the goods. The numbers were real in the sense that they had been validly issued under the Excise Tax Act, but they had been assigned to third parties, not to Comtronic's actual suppliers. In effect, the invoices carried somebody else's registration number. Whether through fraud upstream or sloppy paperwork, the documents did not tie the GST/HST charged to a supplier that was genuinely registered for that account.
The CRA disallowed the affected input tax credits, totalling in the order of $500,000. Comtronic appealed to the Tax Court of Canada, arguing in substance that it had acted in good faith: it had paid the tax, it held invoices that showed registration numbers, and it had no reason to suspect the numbers were not the suppliers' own.
The issue
The legal question was narrow but consequential. To claim an input tax credit, a registrant must satisfy subsection 169(4) of the Excise Tax Act, which requires the registrant to have obtained, before filing the return, sufficient evidence in the prescribed form and containing prescribed information. That prescribed information is set out in the Input Tax Credit Information (GST/HST) Regulations (SOR/91-45). Among the mandatory items, for purchases above the relevant dollar thresholds, is the registration number assigned to the supplier under the Act.
The issue was therefore whether a registration number that is genuine, but belongs to a person other than the actual supplier, satisfies the requirement to show "the registration number assigned to the supplier." And, if it does not, whether the purchaser's good faith and lack of knowledge could nonetheless preserve the credit.
What the Court decided (and why)
The Tax Court dismissed the appeal and upheld the denial of the input tax credits. The reasoning turned on the text of the documentary rules and on their mandatory character.
The Regulations do not call for just any registration number, or for a number that looks valid. They call for the registration number assigned to the supplier. A number assigned to some other registrant does not meet that description, even if it is a real number in the CRA's system. Because the invoices did not carry the registration numbers of Comtronic's actual suppliers, the prescribed information was missing, and the precondition in subsection 169(4) was not met. Where that precondition fails, the credit is simply not available.
The Court was candid that this outcome could operate harshly. A purchaser who genuinely pays GST/HST and is misled by a supplier's paperwork can lose the credit through no moral fault of its own. But the documentary requirements are framed as mandatory conditions, not as guidelines to be relaxed where a taxpayer is sympathetic. The Court took the view that it had no discretion to waive the prescribed-information requirement on fairness grounds. In short, good faith is not a defence to a documentary shortfall. The risk that a supplier's registration number is wrong, or borrowed, falls on the registrant claiming the credit.
The practical message that has been drawn from Comtronic in the years since is that the obligation runs in one direction: it is the purchaser claiming the ITC who must ensure that the documents in hand carry a registration number actually assigned to the supplier. The CRA operates a registry that allows a business to confirm whether a given GST/HST number is valid and whom it belongs to. A registrant who relies only on what is printed on the invoice, without testing it, bears the consequences if the number turns out to belong to someone else.
Why this decision matters / practical takeaways
Comtronic is not an exotic fact pattern. Invoice-of-accommodation schemes, dormant or revoked registrations, and simple clerical errors all produce the same audit result: the number on the page is not the supplier's number, and the ITC is denied. Several practical points follow for businesses that claim significant input tax credits.
- Verify supplier registration numbers, and keep the proof. Confirming a supplier's GST/HST number against the CRA registry at or near the time of the transaction, and retaining a record of that check, is the most direct way to address the very failure that sank Comtronic's appeal.
- Honesty alone will not save the claim. The decision makes clear that paying the tax in good faith does not cure a documentary defect. The legal question is whether the prescribed information was obtained, not whether the taxpayer behaved reasonably.
- The dollars add up quickly. ITC denials are typically assessed across multiple periods, and the CRA may add arrears interest and, in some cases, penalties. A pattern of invoices from one problematic supplier can produce a six-figure reassessment.
- The documentary requirements have nuance worth using. Later decisions have confirmed that the prescribed information need not all appear on a single document, need not be on a document issued or signed by the supplier, and may be gathered from several sources before the return is filed. That flexibility can sometimes be marshalled on objection or appeal, where the underlying transactions were real and the missing detail can be properly established from the record.
- Distinguish a documentary problem from a sham. Cases where the credit is denied because the paperwork is non-compliant are different from cases where the CRA alleges the supply never happened. The evidence and the strategy differ, and so does the role of burden of proof at the Tax Court.
For most businesses, the lesson of Comtronic is preventive: build a habit of checking registration numbers before claiming the related credits. For businesses already facing an assessment, the lesson is that the analysis is technical, and the strongest opportunities often lie in carefully reconstructing what information was actually obtained and when, rather than in arguing fairness.
How Barrett Tax Law approaches GST/HST input-tax-credit files
When a GST/HST input-tax-credit denial lands on our desk, our tax lawyers start with the documents the CRA actually relied on. We work through each disputed supplier and each period to see whether the prescribed information under subsection 169(4) and the ITC Regulations was, in fact, obtained, even where it is spread across more than one record, and whether the registration numbers can be matched to the true suppliers. From there we map the realistic options: responding during audit representation before positions harden, pursuing a notice of objection, or carrying the matter to the Tax Court of Canada. Where unreported amounts or unfiled returns are part of the picture, we also assess whether voluntary disclosure belongs in the strategy, and in source-deduction and GST/HST collection matters we consider any director's liability exposure. If you want to understand your position, you can arrange a free, confidential consultation, and we will walk you through it. Our guide to the Tax Court appeal process is a useful starting point if litigation may be on the horizon.
This article is commentary on a public court decision, Comtronic Computer Inc. v. The Queen, 2010 TCC 55 (CanLII), available at canlii.org. It is general information only, not legal advice, and outcomes depend on the specific facts of each case.
Frequently asked questions
What is an input tax credit (ITC) and why was Comtronic's denied?
An input tax credit lets a GST/HST registrant recover the GST/HST it pays on purchases used in its commercial activities. In Comtronic Computer Inc. v. The Queen, 2010 TCC 55, the Tax Court denied roughly $500,000 in ITCs because the registration numbers shown on the supplier invoices, although genuine numbers, were assigned to third parties rather than to the businesses that actually supplied the goods. The prescribed documentary requirement was therefore not met.
What documents do I need to claim a GST/HST input tax credit?
Subsection 169(4) of the Excise Tax Act requires you to obtain prescribed information before filing your return, with the details set out in the Input Tax Credit Information (GST/HST) Regulations. Depending on the dollar amount of the purchase, this can include the supplier's name, the date, a description of the supply, the amount of tax, and the registration number assigned to the supplier. For larger purchases, the supplier's correct registration number is mandatory.
Is acting in good faith a defence if a supplier gave me a wrong GST number?
No. Comtronic confirms that good faith does not cure a documentary defect. The Court treated the prescribed-information requirement as a mandatory condition and held it had no discretion to waive it on fairness grounds. If the registration number on your invoice is not the one actually assigned to your supplier, the credit can be denied even if you paid the tax honestly and had no reason to suspect a problem.
How can I protect my business from this kind of ITC denial?
Verify each supplier's GST/HST registration number against the CRA's registry at or near the time of the transaction, confirm the number belongs to the business actually invoicing you, and keep a record of that verification. Retaining complete invoices and gathering any missing prescribed information before you file your return are the most direct ways to avoid the failure that defeated Comtronic's appeal.
Can a denied input tax credit ever be recovered on objection or appeal?
Sometimes. Later decisions confirm that the prescribed information does not all have to appear on a single document, does not have to be on a document issued or signed by the supplier, and can be assembled from multiple sources before the return is filed. Where the underlying transactions were genuine, it may be possible to establish from the broader record that the required information was in fact obtained. The analysis is technical and fact-specific, so legal advice on your particular file is important.
Does Comtronic apply only to fraud, or also to honest mistakes?
It applies to both. The principle is about the documents, not the intent. Whether a wrong registration number results from an upstream fraud, a revoked or dormant registration, or a simple clerical error, the result on the documentary analysis is the same: if the number assigned to the actual supplier is not on your records, the input tax credit is at risk. That is why the case matters for ordinary, well-meaning businesses, not just those caught up in invoice-of-accommodation schemes.