Citation: 2010 TCC 295
Date: 20100603
Docket: 2009-930(IT)I
BETWEEN:
KERRY SUFFOLK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Paris J.
[1] This is an appeal
from a reassessment of the Appellant’s 2003 taxation year by which the Minister
of National Revenue (“Minister”) included $6,415 in her income as a benefit
from employment. The reassessment relates to an amount the Appellant received
from her employer at the time, Placer Dome Inc., to reimburse her for certain
household items she purchased when she was transferred by Placer Dome from
Sydney, Australia to Vancouver.
[2] The Appellant
disputes the reassessment on two grounds. Firstly, she challenges the sufficiency
of the notice of reassessment. Secondly, she argues that the reimbursement in
issue did not give rise to any taxable benefit to her.
Background
[3] The Appellant is an
Australian citizen and a Chartered Accountant. In 2002, the Australian mining
company she was working for in Sydney was taken over that same year by Placer Dome. The Appellant
accepted a job at Placer Dome’s head office and moved with her spouse to Vancouver in April 2003.
[4] In 2006, Placer Dome
was taken over by Barrick Gold Corporation (“Barrick”). The Appellant was
offered a position with Barrick in Toronto but chose not to stay on after the takeover. Her
employment with Placer Dome therefore ended in the Spring of 2006.
First Issue: Sufficiency of the
Notice of Reassessment
[5] The notice of reassessment
in issue was dated April 27, 2007. The Appellant received it a few days later. The
notice indicated an increase of $6,415 to her income for 2003, and a corresponding
increase to federal tax payable. The notice provided the following explanation
for the change:
We have adjusted your return
to correspond with the amount reported by Barrick Gold Corporation as per
amended T4 information slip.
[6] The Appellant
testified that she did not understand the basis of the reassessment from
reading the notice, and did not understand that she was being taxed on a
benefit from employment. She said she had never worked for Barrick and had not
received any amended T4 slip for her 2003 taxation year.
[7] Soon after
receiving the notice she contacted the Canada Revenue Agency (“CRA”). On May
14, 2007, the CRA sent her a copy of the amended T4 slip in her name issued by
Barrick, which caused her more confusion.
[8] In late May 2007,
she phoned the CRA and told the officer she spoke to that she was unaware of
why she was issued the amended T4 slip. The officer said that he would look
into the matter. The Appellant also told the officer that she “would try to
contact Placer to seek additional answers”.
[9] In early August, a
CRA officer left a message for the Appellant. The Appellant’s spouse called the
CRA on August 29, 2007 to follow up and was asked to provide an authorization
from the Appellant for the CRA to discuss her tax affairs with him, which he
did.
[10] On September 6,
2007, the CRA provided details of the reassessment to the Appellant’s spouse. The
Appellant said that it was only at this point that she understood that she had
been reassessed to include the reimbursement from Placer Dome in 2003 in her
income as a benefit from employment.
[11] By the time the
Appellant received the explanation for the reassessment, the 90-day period for
filing a notice of objection had expired, so she applied for and was granted an
extension of time by the Minister to file a notice of objection. The Minister
confirmed the reassessment in December 2008 and the Appellant appealed to this
Court.
[12] The Respondent filed
an affidavit sworn by Ken Lum, an auditor with the CRA. In early 2007, after
Barrick had taken over Placer Dome, Mr. Lum had conducted an audit of Placer
Dome’s 2003 taxation year. As a result of the audit, he prepared amended T4
slips for a number of employees (including the Appellant) to include previously
unreported taxable benefits in their income. Mr. Lum provided the amended
slips to Barrick’s director of human resources and gave him written
instructions to send them to affected employees with an explanation of the
adjustment to income. On the amended T4 slip for the Appellant prepared by the
auditor, the employer was listed as “Barrick Gold Corporation, formerly Placer
Dome Inc.”.
[13] No evidence was provided
to show whether Barrick had in fact sent the amended T4 slip to the Appellant.
Appellant’s Position
[14] The Appellant’s
counsel contends that the notice of reassessment did not provide sufficient
notice to the Appellant because it gave no indication that employment benefits
were at issue. Furthermore, since Barrick Gold Corporation was not the
Appellant’s employer in 2003, the reference to an amended T4 information slip issued
by Barrick was misleading. He says, therefore, that the notice was defective,
and that without proper notice of the reassessment, no reassessment can be said
to have occurred.
[15] Counsel maintains
that notice was not “perfected” until September 7, 2007 which was outside the
normal reassessment period provided for in subsection 152(4) of the Income
Tax Act (the “Act”) and the reassessment was, therefore,
statute-barred. The Appellant relies on the decision of The Exchequer Court in Scott
v. The Minister of National Revenue
wherein Thorson J. said:
I am accordingly of the opinion that the
giving of notice of assessment is part of the fixation operation referred to as
an assessment in the statute and that an assessment is not made until the
Minister has completed his statutory duties as an assessor by giving the prescribed
notice. See Y.M.C.A. v. Halifax, [1993] 1 D.L.R.
713.
(Emphasis added)
[16] In counsel’s view,
the notion of “prescribed notice” would include a requirement to provide the basis
for the reassessment. He says, therefore, that the failure of the notice in
this case to refer to the employment benefits was not a minor error or defect,
but “goes to the notice itself”. He submits that, as a matter of procedural
fairness, a taxpayer is entitled to know the reasons for the reassessment from
the notice sent out by the Minister.
Analysis
[17] Contrary to the position
taken by the Appellant, the Federal Court of Appeal in Stephens v. The Queen has held that
there is no prescribed form for a notice of assessment issued under the Act:
Subsection 152(2) requires the Minister
to “send a notice of assessment” to the taxpayer. Nowhere in the Act do
we find prescriptions relating to the form of that notice. It follows, in our
view, that the form of the notice does not matter and that the subsection
merely requires that the notice be expressed in terms that will clearly make
the taxpayer aware of the assessment made by the Minister. …
[18] The same conclusion
was reached by the Exchequer Court in Laurin v. The Minister of National Revenue. In that case, one of the objections
raised by the taxpayer was that the notices of assessment did not set out the
basic elements of the assessments, therefore, depriving him of information
needed to dispute them. The Court referred to subsections 42(1), (2), (3) and
(7) of the 1948 and 1952 Income Tax Acts which, for the purposes of this
appeal, are substantially similar to subsections 152(1), (2), (3) and (8) of
the present Act. These sections read as follows:
42(1) The Minister
shall, with all due dispatch, examine each return of income and assess the tax
for the taxation year and the interest and penalties, if any, payable.
46(2) After examination
of a return, the Minister shall send a notice of assessment to the person by
whom the return was filed.
46(3) Liability for
tax under this Part is not affected by an incorrect or incomplete assessment or
by the fact that no assessment has been made.
…
46(7) An assessment
shall, subject to being varied or vacated on an objection or appeal under this
Part and subject to a re-assessment, be deemed to be valid and binding
notwithstanding any error, defect or omission therein or in any proceeding under
this Act relating thereto.
152(1) The Minister shall, with all due dispatch, examine a
taxpayer's return of income for a taxation year, assess the tax for the year,
the interest and penalties, if any, payable and determine
(a) the
amount of refund, if any, to which the taxpayer may be entitled by virtue of
section 129, 131, 132 or 133 for the year; or
(b) the
amount of tax, if any, deemed by subsection 120(2) or (2.2), 122.5(3),
122.51(2), 122.7(2) or (3), 125.4(3), 125.5(3), 127.1(1), 127.41(3) or 210.2(3)
or (4) to be paid on account of the taxpayer's tax payable under this Part for
the year.
. . .
152(2) After examination of a return, the Minister shall
send a notice of assessment to the person by whom the return was filed.
152(3) Liability for the tax under this Part is not affected
by an incorrect or incomplete assessment or by the
fact that no assessment has been
made.
...
152(8) An assessment shall, subject to being varied or
vacated on an objection or appeal under this Part and subject to a
reassessment, be deemed to be valid and binding notwithstanding any error,
defect or omission in the assessment or in any proceeding under this Act
relating thereto.
In light of the clear language of these sections, the Court in Laurin held
that there was no provision in the Act which would compel the Minister
to set out in detail the revision of the tax in the notice itself nor a
provision which, should that procedure not be followed, would render the
assessment void. At page 1145, the Court also held that “only fundamental and
substantial errors in an assessment are sufficient to vitiate an assessment”.
[19] In Riendeau v.
The Queen,
the Federal Court of Appeal confirmed that since “liability for tax is
created by the Income Tax Act, not by a notice of assessment” and that “a
taxpayer’s liability to pay tax is just the same whether a notice of assessment
is mistaken or is never sent at all”.
[20] In assessing the
taxpayer in Riendeau, the Minister had relied on a section of the Act
that had been repealed. The Minister corrected the error in the notices of
confirmation, relying on other provisions of the Act to support the
assessments. The taxpayer brought an application in the Federal Court Trial
Division for the determination of a question of law, arguing that the Minister
could not confirm the assessments because the assessments were invalid and a
nullity.
[21] After a careful
review of the applicable case law, Cullen J. held that the Minister was
entitled to confirm the assessments, and that the initial reliance on the repealed
section was not fatal. In arriving at this conclusion, the Court referred both to
the Stephens case (supra) and to The Minister of National
Revenue v. Minden
where Thorson J. stated at page 1050:
. . .In considering an appeal from an
income tax assessment, the Court is concerned with the validity of the
assessment, not the correctness of the reasons assigned by the Minister for
making it. An assessment may be valid although the reason assigned by the Minister
for mailing it may be erroneous. This has been abundantly established.
[22] The question of the
notice required to be given by the Minister in assessing a taxpayer was also raised
in Leung v. Canada. The
taxpayer had been assessed as a director of a corporation for the amounts of
source deductions of income tax, employment insurance premiums and Canada
Pension Plan contributions which the corporation had failed to withhold and
remit. The notice of assessment set out an aggregate liability under the
relevant statutes but did not identify the amounts owing under each statute,
and the taxpayer argued that the assessment was, therefore, incomplete.
[23] This argument was
accepted by the Tax Court of Canada, but later rejected on appeal to the Federal
Court Trial Division. The Federal Court held that an overly formalistic
approach to the notice of assessment should be avoided and that:
It may be assumed that Parliament
had a purpose in enacting subsections 152(3) and 152(8). That purpose, in my
view, was to ensure that in the process of issuing millions of assessments
yearly, many of these involving complex statutory provisions and equally
complex calculations, technical accuracy or a peremptory level of disclosure,
reference and source would not be imposed on the assessor. The notice of
assessment is an administrative procedure and reliance on technical rules applicable
to other processes to defeat it ab initio is not necessarily warranted.
[24] In my view, the
notice in this case was sufficient to make the Appellant aware of the
reassessment that had been made. It set out the amount of the increase to her
income and to her tax payable and referred to an amended T4 information slip
that the Appellant understood to relate to income from employment. While it was
argued that the Appellant was confused by the reference to Barrick Gold
Corporation as the issuer of the amended T4 slip, it appears to me that she
understood the likely connection to her employment with Placer Dome. According
to the evidence, she herself thought of contacting Placer Dome to investigate,
although she did not follow through on this plan. To the extent that the notice
of reassessment erroneously made reference to Barrick Gold Corporation as the
Appellant’s employer, I find that this was not a substantial or fundamental
error. It was an error that was remedied by the curative provisions set out in subsections
152 (3) and (8) of the Act.
[25] In this case, the
Appellant here was provided with a complete explanation for the reassessment
within a reasonable period. Had she contacted Barrick as she had planned, she
may have been able to obtain the reasons underlying the reassessment sooner. In
any event, it appears that the CRA took all necessary steps to have Barrick
inform the Appellant of the amended T4 slip, and later to provide this
information to her after the notice was issued.
[26] Overall, I am
satisfied that the notice of reassessment meets the requirements of the Act,
and that sufficient notice of the reassessment was given to the Appellant prior
to her 2003 year becoming statute-barred.
Second Issue: Did the Appellant Receive a Benefit?
[27] When the Appellant
was transferred to Vancouver in 2003, Placer Dome paid certain amounts in relation to her move,
including $6,415 to reimburse her for the purchase of the following household
goods:
|
4-head Hi-Fi VCR
|
$264.97
|
|
|
Hairdryer, shaver, deluxe grill, toaster, storeway
grill
|
636.52
|
|
|
Panasonic micro system, Sony , micro system
|
374.88
|
|
|
Costco membership
|
53.50
|
|
|
Power blender, kettle
|
196.80
|
|
|
Clock radio
|
34.29
|
|
|
Floor lamp, duvet & pillow
|
690.07
|
|
|
TV, home theatre, coffee maker, microwave food processor,
wok, digital video, Honeywell fan
|
3,295.53
|
|
|
D-link router
|
80.10
|
|
|
Panasonic 2.4 GHZ phone
|
236.49
|
|
|
Iron
|
183.20
|
|
|
2 table lamps, 1 floor lamp, light bulbs
|
395.35
|
|
|
Total
|
|
6,415.70
|
[28] The Appellant
testified that these items (except for the duvet, pillows and a wok) replaced
items that she and her husband owned in Australia, but which would not work on the
voltage supplied by the Canadian electrical system. Australia’s household
electrical system operates at 240 volts and 50 Hertz whereas Canada uses 110 volts and 60
Hertz.
[29] Prior to the move,
the Appellant and her husband had been living in a three bedroom house which
they had recently purchased in Sydney. When they moved, they put some of their furniture and
household items, including their electrical goods, into storage. The Appellant
stated that she had been told by a colleague at work that the electrical goods
would not work in Canada. She replaced these items in Vancouver and was reimbursed for them by Placer Dome.
[30] The Appellant said
she preferred to store rather than sell her Australian electrical goods because
she had recently purchased them and she did not want to part with them. The
evidence also showed that the goods were stored rather than sold because the
Appellant and her spouse anticipated returning to Australia at some point. At the time of the
hearing, these items were still in storage.
[31] The Appellant was
also reimbursed for the purchase of a duvet, which the Appellant bought because
she found it cold in Canada, and for a Costco membership similar to one she had
in Australia, and for two pillows. The electric wok she cooked with in Australia was replaced with a
non-electric one in Vancouver.
Appellant’s Position
[32] The Appellant’s
counsel submitted that the reimbursement from Placer Dome did not constitute a
benefit to the Appellant because it did not result in an improvement to her
economic position. Counsel said that even though the Appellant did not dispose
of the goods she owned in Australia, they were lost to her in a practical sense
because she could not use them in Canada. The reimbursement she received from Placer Dome
merely offset her loss of the use of the Australian goods, and was not a
benefit that should be added to her income.
[33] The Appellant
conceded at the hearing that the reimbursement for the cost of two pillows was
a benefit that should be included in her income.
Analysis
[34] The amount in issue
has been included in the Appellant’s income under paragraph 6(1)(a)
of the Act which reads as follows:
6(1) There shall be included in computing the income of a
taxpayer for a taxation year as income from an office or employment such of the
following amounts as are applicable:
(a) the value of board, lodging and
other benefits of any kind whatever received or enjoyed by the taxpayer in the
year in respect of, in the course of, or by virtue of an office or employment, …
[35] In The Queen v. Savage,
the Supreme Court of Canada adopted the following comments made by Evans J. in R. v. Poynton, in relation to benefits received or enjoyed in
respect of, in the course of, or by virtue of an office or employment:
I do not
believe the language to be restricted to benefits that are related to the
office or employment in the sense that they represent a form of remuneration
for services rendered. If it is a material acquisition which confers an
economic benefit on the taxpayer and does not constitute an exemption, eg, loan
or gift, then it is within the all-embracing definition of s 3.
[36] In this case there
is no dispute that the Appellant received the payment of $6,415 by virtue of
her employment. The only question is whether the payment resulted in an
economic benefit to her. In my view, it did.
[37] The Appellant was
better off economically and enjoyed an increase to her net worth because she
obtained goods valued at $6,415 at no cost to her. I infer from the evidence
that the Appellant’s ownership of those goods was unconditional and that she
was not under any obligation to transfer the goods to her employer if her
employment ended. I also find that the Appellant has not shown that she
suffered an economic loss with respect to the electrical goods she left in storage
in Australia. She has retained
ownership of the goods throughout the time she has lived in Canada, and by not selling
them, has not chosen to incur a loss on them. As such the Appellant’s net worth
has been enhanced by her acquiring goods in addition to what she owned prior to
her move.
[38] I agree with counsel
for the Respondent that the situation here is analogous to the situation in M.N.R.
v. Phillips which
dealt with the taxability of payment received from his employer with respect to
a work‑related move. In that case, the taxpayer was relocated by his
employer from Moncton to Winnipeg. He sold his house in
Moncton without incurring a loss on it, and he purchased a more expensive house
in Winnipeg. His employer paid him
$10,000 to offset the higher cost of housing in Winnipeg. The Federal Court of Appeal held
that the $10,000 payment was a benefit to the taxpayer because it increased his
net worth by $10,000.
[39] In Phillips the
Court drew a distinction between payments made by an employer to an employee in
relation to expenditures in the new location and payments made to reimburse
losses incurred by the employee as a result of the move. Only in the latter
case are the payments non-taxable. Like
the payment in Phillips, the reimbursement received by the Appellant was
to offset the cost of acquiring property in the new work location to replace
what she owned in the old work location.
[40] At the point when
the Appellant moved to Canada, the goods left in Australia still had significant economic
value. The Appellant’s spouse testified that this was the case, and this conclusion
is also supported by the fact that the goods were stored rather than thrown
out. Therefore, the reimbursement from Placer Dome for the purchase of similar
items in Canada cannot be said to have
been compensation for a loss incurred by the Appellant as a result of her move.
[41] To reiterate, in the
absence of a disposition of the Australian goods, the Appellant did not suffer
an economic loss and the payment of $6,415 was not a reimbursement of a loss.
The Appellant’s argument on this point therefore cannot succeed.
[42] For these reasons,
the appeal is dismissed.
Signed at Ottawa, Canada, this 3rd
day of June, 2010.
“B. Paris”
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