Citation: 2012 TCC 119
ALLEN D. GALLANT,
HER MAJESTY THE QUEEN,
REASONS FOR JUDGMENT
At the end of 2005, Allen Gallant
had tuition, education and textbook amounts under the Income Tax Act
that were available to be carried forward to future taxation years. The amount
of the carry forward was $32,479. The question to be determined is how this
amount should be applied to the 2006 and 2007 taxation years.
The appellant submits that he should be entitled to apply $25,780.47
in 2006 and $6,698.53 in 2007. The respondent submits that the appellant
must apply $29,521.31 in 2006 and $2,957.69 in 2007.
The issue has no effect on the tax
payable for the 2006 taxation year since there is no tax payable for that year under
either scenario. The issue only affects tax payable for the 2007 taxation year.
The relevant legislative provision
is section 118.61 of the Act, which is reproduced below as it was in
effect for 2007.
tuition, textbook and eduction tax credits. In this section, an individual’s unused
tuition, textbook and education tax credits at the end of a taxation year is
the amount determined by the formula
A + (B -
C) - (D + E)
the amount determined under this subsection in respect of the individual at the
end of the preceding taxation year;
the total of all amounts each of which may be deducted under section 118.5 or
118.6 in computing the individual’s tax payable under this Part for the year;
the lesser of the value of B and the amount that would be the individual’s tax
payable under this Part for the year if no amount were deductible under this
Division (other than an amount deductible under this section and any of
sections 118, 118.01, 118.02, 118.03, 118.3 and 118.7);
the amount that the individual may deduct under subsection (2) for the year;
the tuition, textbook and education tax credits transferred for the year by the
individual to the individual’s spouse, common-law partner, parent or
(2) Deduction of carryforward. For the purpose of computing an
individual’s tax payable under this Part for a taxation year, there may be
deducted the lesser of
amount determined under subsection (1) in respect of the individual at the end
of the preceding taxation year, and
amount that would be the individual’s tax payable under this Part for the year
if no amount were deductible under this Division (other than an amount
deductible under this section and any of sections 118, 118.01, 118.02,
118.03, 118.3 and 118.7).
tuition and education tax credits at the end of 2000. [Repealed, 2007, c. 2, s. 24(3).]
(4) Change of appropriate percentage. For the purpose of determining the
amount that may be deducted under subsection (2) or 118.6(2.1) in computing an
individual’s tax payable for a taxation year, in circumstances where the
appropriate percentage for the taxation year is different from the appropriate
percentage for the preceding taxation year, the individual’s unused tuition,
textbook and education tax credits at the end of the preceding taxation year is
deemed to be the amount determined by the formula
A/B × C
A is the appropriate
percentage for the current taxation year;
B is the appropriate
percentage for the preceding taxation year; and
the amount that would be the individual’s unused tuition, textbook and
education tax credits at the end of the preceding taxation year if this section
were read without reference to this subsection.
The interpretation of the above provisions is not in
dispute in this appeal. The representative of the appellant, who prepared the
income tax returns, acknowledges that the assessments are in accordance with
The appellant’s concern is not
with the legislation but with a form (Schedule 11) that is required to be used
by taxpayers to calculate the deduction and is to be appended to the income tax
The problem is that Schedule 11
provides a greater deduction to the appellant than the deduction provided by
The appellant calculated the
deduction in accordance with the form. The calculation was initially accepted,
but it was subsequently rejected when the appellant requested an amendment to
the income tax return in 2009. A reassessment was issued so that the deduction
conformed to the legislation.
The appellant submits that it is
inappropriate for the Canada Revenue Agency (CRA) to reassess on a different
basis that the CRA’s own forms.
The problem with Schedule 11 is
that it provides a greater deduction where a taxpayer’s marginal tax rate is
above the minimum. The problem is described below in an extract from a letter
to the appellant from the appeals officer.
11 calculates the amount to be applied on the assumption that the tuition
credits and the tax payable are calculated at the same tax rate. It does not
take into account that a greater amount may be required where the tuition
carryforward is applied to a tax year in which the taxpayer is subject to tax
on a portion of his income at a higher rate. Your client required $29520.00 of
the tuition carryforward to reduce his 2006 federal tax payable to nil.
I would first comment
that I agree with the appellant that it is unfair for the CRA to require a
taxpayer to calculate a deduction in accordance with a form, and then to
reassess on a different basis. Taxpayers should be able to rely on forms that
are required to be included with income tax returns. No suggestion was given
that taxpayers were warned about the problem with Schedule 11.
The circumstances are
exacerbated in this case because the CRA did not pick up on the problem until
fortuitously the taxpayer requested a change to the income tax return.
Accordingly, most taxpayers may have been assessed in accordance with the form.
It is not enough,
however, that a taxpayer has been unfairly dealt with by the CRA. Normally,
this is not grounds for relief in this Court.
In this case, the
representative of the appellant suggests that the equitable grounds of estoppel
should be applied on the basis that there has been a misrepresentation of fact.
It is clear that
estoppel cannot bind the Crown in respect of the law: Goldstein v The Queen, 96 DTC 1029 (TCC). However, principles of estoppel can be applied in
respect of misrepresentations of fact: Rogers v The Queen,
98 DTC 1365 (TCC).
The argument in support
of the application of estoppel in this case is that the CRA wrongly represented
to the appellant that it would administer section 118.61 in accordance with the
form. As far as I am aware, the form has never been changed.
The difficulty that I have with
giving relief is the overriding principle that estoppel cannot be invoked to
preclude the exercise of a statutory duty. The principle was described by
Chevalier D.J. in Ludmer v The Queen, 95 DTC 5311 (FCA), at p. 5314:
In Canada v. Lidder,  2
F.C. 621, Marceau, J.A. wrote (at 625):
The doctrine of estoppel
cannot be invoked to preclude the exercise of a statutory duty -- here, the
duty of the officer to deal with the application as it was presented -- or to
confer a statutorily defined status on a person who clearly does not fall
within the statutory definition. Indeed, common sense would dictate that one
cannot fail to apply the law due to the misstatement, the negligence or the simple
misrepresentation of a government worker.
It was suggested in the
course of the argument that, if the doctrine of estoppel could not apply, maybe
the related doctrine of 'reasonable or legitimate expectation' could. The
suggestion was to no avail because this doctrine suffers from the same
limitation that restricts the doctrine of estoppel. A public authority may
be bound by its undertakings as to the procedure it will follow, but in no case
can it place itself in conflict with its duty and forego the requirements of
the law. As was repeated by Sopinka, J. recently in writing the judgment of
the Supreme Court in Reference Re Canada Assistance Plan (B.C.), 2 S.C.R. 525, at pages
There is no support in
Canadian or English cases for the position that the doctrine of legitimate
expectations can create substantive rights. It is a part of the rules of
procedural fairness which can govern administrative bodies. Where it is
applicable, it can create a right to make representations or to be consulted.
It does not fetter the decision following the representations or consultation.
It is not open to this
Court to revisit this principle. I would also note that the statutory duty
to assess in accordance with the legislation was recently confirmed by the
Federal Court of Appeal in CIBC World Markets Inc. v The Queen, 2012 FCA
3. At paragraph 22, Stratas J. stated:
22 This Court is bound by its decision
in Galway v. Minister of National Revenue,  1 F.C. 600 (C.A.). In that decision, Jackett C.J., writing for the
unanimous Court, stated (at page 602) that "the Minister has a statutory
duty to assess the amount of tax payable on the [facts] as he finds them in
accordance with the law as he understands it." In his view, "it
follows that he cannot assess for some amount designed to implement a
compromise settlement." The Minister is obligated to assess "on the
facts in accordance with the law and not to implement a compromise
settlement." See also Cohen v. The Queen,
 C.T.C. 318 (F.C.A.).
I must dismiss the
appeal, but it is with considerable regret that I do so. In light of the unfair
situation in which the appellant is now placed, I would urge the respondent to
refer the matter to the appropriate department for consideration of
Finally, I would note
that the appeal with respect to the 2006
taxation year would be dismissed in any event because the assessment is a nil
assessment: The Queen v Interior Savings Credit Union, 2007 FCA 151,
2007 DTC 5342.
Signed at Toronto,
Ontario this 11th day of April 2012.
“J. M. Woods”