Israel agency loses tax exemption. (General).

OTTAWA -- The Middle East conflict entered the fund raising scene in Canada.

The Canada Customs and Revenue Agency has revoked the tax exempt status of donations made to the Magen David Adom organization, because funds raised are used for the emergency medical service ambulances that operate in the occupied territories.

Answering a question in the Commons, Foreign Minister Bill Graham stated that the government would not block the fund raising activities of the Hezbollah as long as it raises money for its health and social service programs only. In the U.S. fund-raising for any Hezbollah activity is banned as the organization is considered a terrorist group.

The MDA and its supporters in Canada have tried to reverse the decision. MDA'S directors in Israel delivered a letter to the Canadian government saying that ambulances supported by Canadian citizens will not operate in the territories. However, the pledge has not persuaded the authorities to re-institute the organization's tax-exempt status.

The Federal Court of Appeals ruled in principle that the authorities cannot revoke tax exempt status on donations to organizations that operate in the territories. The court said it sees "no logic in the pro position that the provision of emergency medical assistance can be a charitable activity in downtown Tel Aviv but not in the occupied territories." However, the court did not overturn the CCRA decision to revoke tax exempt status on donations to MDA.