Meuse v. The Queen, 94 DTC 6640, [1995] 1 CTC 21 (FCTD)

Jerome A.C.J.:-This is an appeal from a judgment of the Tax Court of Canada dated April 3, 1992. The issue is whether the plaintiff validly elected, pursuant to subsection 15(5) of the Income Tax Act, R.S.C. 1952,

c. 148 (am. S.C. 1970-71-72, c. 63) (the ’’Act”) to reduce the amount of automobile standby charges which would otherwise be included in computing his income for those years.

During the 1984 and 1985 taxation years, the plaintiff was the sole shareholder and the president of John Meeuse Limited, a corporation carrying on a farming business in the province of Ontario. During the years in question, the company made three cars available to Mr. Mceuse for his own personal use.

In accordance with the relevant provisions of the Income Tax Act, as they read at the material time, an amount was required to be included in computing a shareholder’s income for a taxation year, where his corporation made an automobile available to him for personal use. Subsection 6(2) of the Act provided the formula for computing that amount, which was, in turn, based on the presumption the shareholder used the automobile an average of 1,000 kilometres per month for personal purposes. This statutory presumption could be rebutted if the shareholder established, in prescribed form, that his personal use of the automobile in the year averaged less than 1,000 kilometres per month. In particular, paragraph 6(2)(d) of the Act provided that "for the purposes of this subsection, it shall be assumed, unless the taxpayer establishes otherwise in prescribed form, that the aggregate number of kilometres referred to in subparagraph (c)(i) is not less than the product obtained under subparagraph (c)(ii)."

During the 1984 and 1985 taxation years, form TD-5 was the form prescribed by the Minister of National Revenue pursuant to subsection 6(2) of the Income Tax Act. The instructions in the form stated that unless it was filed, the maximum standby charge must be calculated. It also provided if the operative portion of the form was not completed and returned to the employer by January 31 of the immediately following year, the maximum standby charge would be calculated by the employer. Employers were instructed to retain all TD-5 declarations so filed for inspection by officers of Revenue Canada, Taxation.

The plaintiff did not file a TD-5 form for either the 1984 or 1985 taxation years by January 31 of the following year. He did not file the forms at all until July 30, 1991, the date on which his appeals were to be heard in the Tax Court of Canada, and more than five and six years, respectively after the dates by which each of them were to be filed in accordance with instructions prescribed therein.

As a result, the Minister of National Revenue reassessed income tax to the plaintiff for his 1984 and 1985 taxation years, wherein he included in the plaintiffs income, automobile benefits on three cars, pursuant to subsection 15(5) of the Income Tax Act. The plaintiff objected to the reassessments by notices of objection dated December 2, 1987, and the Minister confirmed the reassessments by notice dated November 8, 1988.

The plaintiff filed an appeal to the Tax Court of Canada ([1992] 1 C.T.C. 2470, 92 D.T.C. 1549) on the grounds paragraph 6(2)(d) of the Act was ambiguous with respect to any requirement for timely filing of a form TD-5 and such ambiguity should be resolved in favour of the taxpayer. Kempo J.T.C.C. rejected that argument stating at pages 2476 (D.T.C. 1553-54):

I find no ambiguity within paragraph 6(2)(d) under review. It provides in clear and unambiguous language that an assumptive position is to be taken unless the taxpayer establishes otherwise in prescribed form. The language is expressed in mandatory terminology....

To follow through with the appellant’s position would, however, invite a finding either that a filing of the form would be redundant and therefore unnecessary or alternatively that, given its omission in the statute, the filing time requirement could be interpreted as meaning at anytime before the trial.

The plaintiff now appeals from that decision on the basis the Act does not require the TD-5 forms to be filed at any particular time, and in any event, they have been filed, as required, with the Tax Court of Canada, on July 30, 1991.

The plaintiffs appeal must be dismissed. The language of paragraph 6(2)(d) of the Income Tax Act, as it read at the time, is clear. Unless a taxpayer elected to rebut the statutory presumption in prescribed form, he was obliged to include in computing his income for the year, the full standby charge. The jurisprudence has established the word ’’shall” is to be construed as mandatory. In Re Manitoba Language Rights, [1985] 1 S.C.R. 721, 19 D.L.R. (4th) 1, the Supreme Court of Canada stated at page 737 (D.L.R. 13-14):

As used in its normal grammatical sense, the word "shall" is presumptively imperative. See Odgers’ Construction of Deeds and Statutes (5th ed. 1967) at page 377; The Interpretation Act, 1867 (Can.), 31 Vict., c. 1, s. 6(3); Interpretation Act, R.S.C. 1970, c. I-23, s. 28 ("shall is to be construed as imperative"). It is therefore incumbent upon this Court to conclude that Parliament, when it used the word "shall" in section 23 of the Manitoba Act, 1870 and s. 133 of the Constitution Act, 1867, intended that those sections be construed as mandatory or imperative, in the sense that they must be obeyed, unless such an interpretation of the word "shall" would be utterly inconsistent with the context in which it has been used and would render the section irrational or meaningless.

The present case is not one where a taxpayer has, in a timely manner, filed a prescribed form which contains some defect or error. Here, the facts are indisputable Mr. Meeuse simply did not file the TD-5 form within the required time period. His position, that he is nevertheless entitled to a reduction in the amount of automobile standby charges, is untenable. As stated in Re Public Finance Corp. and Edwards Garage Ltd. (1957), 22 W.W.R. 312 (Alta. S.C.) at page 317:

[W]hen powers, rights or privileges are granted with a direction that certain regulations or formalities shall be complied with, it seems neither unjust nor inconvenient to exact a rigorous observance of them as essential to the acquisition of the right or privilege or authority conferred, and it is therefore probable that such was the intention of the legislature....

It is neither inequitable, unreasonable, nor in any way inconsistent with the Income Tax Act to require a taxpayer to strictly adhere to the procedure prescribed for rebutting the statutory presumption contained in subsection 6(2). Failure to do so entitles the Minister to include the entire amount of standby charges in computing the taxpayer’s income. The learned Tax Court Judge committed no error in fact or in law in so finding.

For these reasons the plaintiffs appeal is dismissed. No order as to costs.

Appeal dismissed.