Citation: 2011 TCC 147
Date: 110308
Docket: 2008-3962(IT)G
BETWEEN:
REESE McINTOSH,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
D'Arcy J.
[1] On March 17,
2010, the Respondent filed a motion pursuant to paragraph 58(3)(a) of
the Tax Court of Canada Rules(General Procedure) (the "Respondent's
Motion") for an order dismissing the appeal. It is the Respondent’s position that the Tax Court of Canada does not have
jurisdiction over the subject matter of the appeal. The motion was originally
scheduled to be heard on March 25, 2010. However, at the request of counsel for
the Appellant, the Court adjourned the Respondent's motion to June 9, 2010.
[2] On June 2, 2010,
the Appellant filed a motion (the “Appellant's Motion”) for the following:
1.
An Order […] allowing the appeal of [the]
assessment of tax based on the ground that the Tax Court of Canada has
jurisdiction over the subject matter of this appeal pursuant to section 169 of
the Income Tax Act 1985, c.1 (5th Supp.) (the “Act”);
2.
The Court to apply its equitable jurisdiction
and to strike out the Respondent's Notice of Motion and Affidavit […] because
it discloses no reasonable grounds for opposing the appeal pursuant to Rule 58(1)(b)
of the Tax Court of Canada Rules (General Procedures) (SOR/90-688a) (the
“Rules”);
3.
That in the alternative, the Appellant be
allowed to present his full case with regard to the subject Notice of
Reassessment and the availability of precise, proper and allowable deductions
and credits before [this] Court; or such other direction[s] that is just, with
costs to the Appellant;
4.
Leave of the Court to admit the following
evidence under Rule 58(2)(a) for the purpose of this motion:
a.
The
pleadings filed herein;
b.
The
affidavit of REESE MCINTOSH sworn on June 1, 2010;
c.
Such
further and other material[s] as [the] Court may allow.
The Appellant's Motion
[3] At the
commencement of the hearing, counsel for the Appellant informed the Court that
the Appellant was withdrawing the Appellant's Motion.
[4] The hearing of the Respondent's Motion was
delayed for three months to accommodate the Appellant's counsel. Further, the
Appellant first became aware of the new hearing date for the motion on March
22, 2010, nearly two and a half months before the motion was scheduled to be
heard. Notwithstanding these facts, the Appellant did not file his Motion until
six days before the Motion date and then, after the Respondent filed its reply,
chose to withdraw the motion. As a result of these facts, I have decided to
award costs to the Respondent with respect to the Appellant's Motion.
The
Respondent's Motion
Background
[5] The Appellant has
filed a Notice of Appeal in which he argues that the Minister of National
Revenue (the “Minister”), when
reassessing the Appellant, understated his employment income and the amount
withheld by his employer in respect of income taxes.
[6] Both parties
acknowledged that the Minister, when reassessing the Appellant, used the
amounts reported on a T4 slip (the “T4”) issued by the Appellant's former employer,
Crystal Ridge Fuels Ltd. (the "Corporation") to determine the
Appellant's employment income.
[7] The Appellant
raised two issues in his Notice of Appeal. First, he argued that he received
more employment income from the Corporation in 2003 than the amount reported on
his T4. Secondly, he argued that the amounts actually withheld by the
Corporation for income taxes exceeded the amount reported on his T4. The
Appellant did not, in his Notice of Appeal, challenge the amounts reported on
his T4 in respect of Canada Pension Plan or Unemployment Insurance
withholdings.
[8] It is the
Respondent's position that the two issues raised in the appeal are beyond the
jurisdiction of this Court.
First Issue
[9] I will first consider
whether this Court has jurisdiction to consider the issue of whether the
Appellant's employment income exceeded the amount reported on the T4 issued by
the Company.
[10] The Respondent
argued that “[t]he relief sought by the Appellant is effectually to increase
the Minister’s reassessment of the Appellant’s taxable income and federal
income taxes owing.” The Respondent's counsel argued that this is beyond this
Court's jurisdiction as it is established case law that such relief is
tantamount to the Minister appealing his own reassessment.
[11] The Appellant's
counsel argued that this Court has the jurisdiction to hear all appeals from
assessments under the Income Tax Act.
[12] I agree with counsel
for the Respondent. The law is clear on this point; this Court has no
jurisdiction to entertain an appeal that seeks a decision that would result in
a higher tax liability for the taxpayer. As Lamarre Proulx J. noted in Millette
v. Her Majesty the Queen [1999] 4 C.T.C. 2621 at para 72:
It is accepted in
the case law that this Court cannot increase the amount of the Minister’s
assessment because that would be tantamount to the Minister appealing the
assessment, which he cannot do. The Minister cannot appeal his own assessment: Harris
v. M.N.R., 64 DTC 5332, at p. 5337; Shiewitz v. M.N.R., 79 DTC 340,
at p. 342; and Abed v. The Queen, 82 DTC 6099, at p. 6103.
Second Issue
[13] I will now consider
the second issue raised by the Respondent: whether this Court has the power to
determine the balance owing by a taxpayer insofar as it relates to the
calculation of amounts withheld by the taxpayer's employer in respect of income
taxes.
[14] The Respondent made
the following two arguments at paragraphs (f) and (i) respectively of its
Motion:
f)
Subsection
152(1) of the [Income Tax] Act defines assessment as calculating “tax
payable”, and does not provide for calculating tax owing after source
deductions; and therefore the Court does not have jurisdiction to credit the
Appellant for the alleged greater amount of source deductions…;
…
i)
…[T]he
Appellant is not appealing an assessment of income tax payable, but
instead is effectually seeking to reduce his tax owing in relation to
amounts he claims have already been withheld at source (but unremitted) by the
Corporation; however, this is in the nature of collections, and not regarding
assessments, and collections is not a subject matter for which the Tax Court
has jurisdiction[.]
[15] The Appellant
argued the following in its written submissions:
14. The
ultimate question before the Court is whether the Minister's assessment of tax
is correct. One of the constituent elements of the assessment is the amount of
credits to which the taxpayer is entitled. The Appellant has appealed the
assessment of tax to this Court on the basis that the Minister has not properly
taken into account the deductions and credits to which he was entitled. The
Court is entitled to make a determination on this point so as to determine
whether the Minister's assessment of tax is correct…
Analysis
[16] Pursuant to section 12 of the Tax
Court of Canada Act, this Court has
exclusive original jurisdiction to hear and determine references and appeals to
the Court on matters arising under the Income Tax Act (the "Act")
(plus other specified Acts).
[17] Subsection 169(1)
of the Act provides that where a taxpayer has served a notice of
objection to an assessment under section 165 of the Act, the
taxpayer may appeal to this Court to have the assessment vacated or
varied.
[18] Subsection 171(1) of the Act
states that the Tax Court of Canada may dispose of the appeal by dismissing it,
or allowing it and
i. vacating the assessment
ii. varying the assessment
iii.
referring the assessment
back to the Minister for reconsideration and reassessment.
[19] It is clear from
these provisions that the jurisdiction of this Court is limited to appeals from
an assessment. It is only appeals from an assessment that arise under the Act
(see the comments of Rip J. (as he then was) in McMillen Holdings Limited v.
The Minister of National Revenue, 87 DTC 585, at pages 591-592).
[20] Under subsection
152(1) of the Act, the Minister is required to assess the tax payable
for the year under the Act. I agree with counsel for the Respondent that
subsection 152(1) of the Act does not provide for calculating “tax
owing” after source deductions and therefore this Court does not have
jurisdiction to credit the Appellant for the alleged greater amount of income
tax source deductions.
[21] My conclusion is
consistent with the decision of this Court in Liu v. Her Majesty the Queen,
[1995] 2 C.T.C. 2971 [Liu] and the decision of the Federal Court
of Appeal in Neuhaus v. R. [2003] 2 C.T.C. 177 (FCA) [Neuhaus].
[22] In Liu above,
the Appellant appealed to this Court on the basis that the T4A slip issued to
him in respect of commissions he had earned as an independent contractor did
not include the income tax withheld by the payor. When dismissing the appeal,
Bowman J. (as he then was) stated the following at paragraph 14:
Even
if I had concluded differently it would not have been within the power of this
court to declare that in determining the balance owing to the Government of
Canada by Mr. Liu there should be taken into account the amount withheld from
his commissions but not remitted. This court's jurisdiction, insofar as it is
relevant to this case, is to hear and determine references and appeals on
matters arising under the Income Tax Act. Essentially, in an appeal under the
Income Tax Act the question is the correctness of an assessment or
determination of loss…
[23] Similarly, the Federal Court of
Appeal stated the following at paragraph 4 of its decision in Neuhaus above:
In this case, the
applicant is not seeking to have the disputed assessments vacated or varied.
Rather, she is claiming that the taxes as assessed by the Minister have already
been paid by way of a deduction at source (see subsection 227(9.4), which inter
alia makes the employer liable for the taxes owing by an employee up to and
including the amounts deducted from the salary and not remitted). In these
circumstances, the judge below rightly held that she did not have jurisdiction
and it was therefore wrong for her to consider the dispute on its merits.
[24] Counsel for the
Appellant relied on decisions of this Court in Ashby v. Her Majesty the
Queen, [1996] 1 C.T.C. 2464 [Ashby], Manke v. Her Majesty the
Queen, [1999] 1 C.T.C. 2186 [Manke] and Ramsay v. Her Majesty the
Queen, [2000] 4 C.T.C. 2397 [Ramsay] to support his argument that
the Court does have jurisdiction to grant relief for source deductions withheld
by an Appellant's employer.
[25] I agree with the
decision in Ashby above, that this Court has jurisdiction to hear
an appeal with respect to amounts withheld under the Employment Insurance
Act and the Canada Pension Plan. As a result of section 118.7 of the
Act, the deduction of such amounts is a constituent element of the
assessment.
[26] However, the Appellant
has not challenged the amounts withheld under the Employment Insurance Act
and the Canada Pension Plan. The Appellant is only disputing the amount
withheld in respect of income taxes. I do not accept that withholdings in
respect of income tax are a constituent element of an assessment under the Act.
[27] I agree with the
following comments made by Hamlyn J. in Valdis v. Her Majesty the Queen,
[2001] 1 C.T.C. 2827 at paragraph 17 with respect to the decisions in Ashby,
Manke and Ramsay:
With respect,
while section 118.7 of the Act specifically makes provision for the calculation
of credits pertaining to EI and CPP amounts which reduce a taxpayer's exigible
tax, income tax deducted at source by an employer does not reduce exigible tax
under the Act. In my view, under subsection 152(1), an “assessment” is
stipulated by Parliament to “assess the tax for the year ... if any, payable”
and not to assess the tax for the year owing by a taxpayer after source
deductions withheld by an employer are subtracted from exigible tax as assessed
for the year. I conclude it cannot be said that income tax withheld by an
employer is a constituent element of an assessment that can be appealed under
section 169. However, I do agree with the decision in Ashby, that to the extent
that there has been an amount withheld for EI or CPP under section 118.7, such
amounts are integral to an assessment, therefore this Court has jurisdiction to
consider these credits in an appeal.
[28] For the foregoing
reasons, the Respondent's Motion to dismiss the Appellant's appeal with respect
to his 2003 taxation year on the grounds that this Court does not have
jurisdiction over the subject matter of the appeal is granted with costs.
Signed at Ottawa, Canada, this 8th day of
March 2011.
“S. D’Arcy”
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