Docket: A-201-14
Citation:
2016 FCA 49
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CORAM:
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RYER J.A.
WEBB J.A.
RENNIE J.A.
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BETWEEN:
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JAAMIAH AL
ULOOM AL ISLAMIYYAH ONTARIO
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Appellant
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and
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MINISTER OF NATIONAL REVENUE
(CANADA REVENUE AGENCY)
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Respondent
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REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench at Toronto, Ontario, on
February 10, 2016).
RYER J.A.
[1]
This is an appeal by Jaamiah Al Uloom Al
Islamiyyah Ontario (the “Charity”), pursuant to subsection 172(3) of the Income
Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (the “Act”), from a decision of the
Minister of National Revenue (the “Minister”) acting through the Canada Revenue
Agency Appeals Division (the “Appeals Division”), dated March 11, 2014 (the
“Confirmation Decision”), confirming a decision of the Minister, acting through
the Canada Revenue Agency Charities Directorate (the “Charities Directorate”),
dated August 2, 2012, in which the Charity was advised of the Minister’s
decision to issue a Notice of Intention to Revoke the registration of the
Charity (the “NIR”) under the Act. In these reasons, unless otherwise
indicated, all statutory references are to the corresponding provisions of the
Act.
[2]
The NIR arose out of an audit of the Charity for
its 2007 and 2008 taxation years. After considering a number of submissions
from the Charity, the Minister issued the NIR on the basis that the Charity had
failed to comply with the requirements that were necessary to maintain its
registration under the Act, and in particular, that it failed to maintain
adequate books and records, issued receipts for gifts otherwise than in
accordance with the Act and the Income Tax Regulations, C.R.C., c. 945
(the “Regulations”) and failed to file information returns as and when required
under the Act and the Regulations. The NIR contained detailed explanations of
the Minister’s concerns in these areas.
[3]
The Charity objected to the NIR and made further
submissions to the Appeals Division in support of its objection. The Appeals
Division was unpersuaded and confirmed the NIR. In the Confirmation Decision,
the Appeals Division concluded that the Charity:
•
failed to filed an information return as and
when required under the Act or a regulation by not preparing and issuing proper
statements of remuneration (T4 of T4A) to individuals who received payments
that were claimed as salaries, subcontractor or commission expenditures [paragraph
168(1)(c)];
•
issued donation receipts not in accordance with
the Act and the Regulations 3501 or that contain false information by lending
its receipting privileges to a non-charitable entity and by not including all
the required elements to its donation receipt [paragraph 168(1)(d)]; and
•
failed to comply with subsection 230(2) of the
Act because of its failure to keep information in such form in order to
determine whether there are any grounds for the revocation of its registration.
The Organization was unable to provide proper books and records in relation to
its revenue, expenditures and liabilities and did not provide proper source
documents to support its revenue, expenditures, liabilities, donation receipts,
allocated donation amount for school fees and reimbursement claims [paragraph
168(1)(e).
[4]
The Charity appeals this decision.
[5]
The standard of review in an appeal from a
confirmation of a NIR, pursuant to subsection 172(3), has been determined by
this Court in Prescient Foundation v. Canada (National Revenue), 2013
FCA 120 at paragraph 12. Questions of law are reviewed on the standard of
correctness while questions of fact, mixed fact and law in respect of which
there are no extricable questions of law and the exercise of discretion by the
Minister, based upon the facts and law as correctly interpreted, are reviewed
on the standard of reasonableness.
[6]
In essence, the Charity does not deny the
failures on its part that are specified in the Confirmation Decision. Moreover,
these failures were brought to the Charity’s attention by written
correspondence dated January 6, 2011. Nonetheless, the Charity now asserts
that:
a) It has never failed to file an annual information return as required
by the Act or the Regulations, even though it has been late in making the
required filings, and that it intends to make timely filings in future;
b) It has, at times, failed to prepare and issue T-4s and T-4As in
respect of payments made to certain of its employees and contractors, but that
such failures will not occur again;
c) To the extent that its engagement with Fiysabiylillah could be
construed as an improper rental of its charitable donation receipt issuing
function, that was a one-time occurrence that will not occur again;
d) The shortcomings in relation to the preparation of charitable
donation receipts have now been understood and will not recur; and
e)
The shortcomings in its books and records in
relation to the recordation of its revenue, expenditures and liabilities and
the need to produce source documents to support those items, donation receipts
and allocations of donation amounts for school fees and reimbursement claims,
have now been understood and will not recur.
[7]
The Charity thus contends that the sanction of
revocation of its registration is too extreme and fails to address the remedial
steps that it has undertaken, in particular, the retention of experienced and
qualified accountants.
[8]
Subsection 180(3) directs the Court to hear and
determine this appeal in a summary way. In keeping with this admonishment, the
outcome of this appeal will depend upon the reasonableness of not only the
Minister’s findings of non-compliance on the part of the Charity, but also the
Minister’s choice of revocation as the sanction that results from such
non-compliance.
[9]
In the circumstances, the Charity basically
accepts the Minister’s non-compliance findings but asserts that the Minister
has failed to establish the reasonableness of the revocation sanction. The
argument is not that the Minister cannot resort to revocations when lesser
sanctions are available. Rather, the argument is that the Minister must offer a
reasonable explanation for the decision to choose this extreme sanction.
[10]
The Crown refers to this Court’s decision in International
Pentecostal Ministry Fellowship of Toronto v. MNR, 2010 FCA 51, in which
the Court concluded that the Minister may choose revocation where the record
establishes “serious” non-compliance on the part
of the charity in question. Thus, the question is whether the record before us establishes
that the virtually uncontested acts of non-compliance on the part of the
Charity can be regarded as “serious” or “aggravated”, as this Court stated in World Job and
Food Bank Inc. v. Canada, 2013 FCA 65.
[11]
These authorities lead me to conclude that the
seriousness of the non-compliance must be apparent from the record upon which a
Ministerial decision to revoke is based. In this regard, we agree with the
Crown’s assertion that this Court should not intervene and overturn the
Confirmation Decision where serious or aggravated non-compliance is evident in
the record. However, it is equally clear that a mere Ministerial assertion of
serious or aggravated non-compliance will not be sufficient.
[12]
Before addressing whether the threshold of
serious non-compliance on the part of the Charity has been met, it should be
noted that the Minister’s revocation decision will stand if that threshold is
demonstrably met with respect to any of the grounds contained in the
Confirmation Decision.
[13]
Registered charities have the privilege of
issuing charitable donation receipts which entitle taxpayers to reduce their
income tax payable under the Act on the basis of such receipts. This privilege
carries with it important responsibilities.
[14]
One of the key responsibilities of the Charity
is to maintain proper books and records that will enable that Minister to
verify the accuracy and appropriateness of the income tax deductions and
credits that the Charity makes available to those who receive charitable
donation receipts from it. In the circumstances of this appeal, the Charity
failed to provide the Minister with books and records that would allow the
Minister to determine if the appropriate amount of income tax relief was being
provided by the Charity to its donors at the expense of the fisc.
[15]
In our view, this basic requirement is foundational
in the sense that the absence of proper books and records places the Minister
in the position of being unable to meet her basic obligation to verify the
accuracy and validity of the charitable donation receipts that the Charity has
issued. Thus, it is apparent that this non-compliance on the part of the
Charity is serious and justifies the Minister’s conclusion that the extreme
sanction of revocation is warranted.
[16]
Given this conclusion, and in light of the
requirement in subsection 180(3) to hear and determine this appeal in a summary
way, there is no need to consider whether any of the other grounds for the
Confirmation Decision is also serious enough to justify the revocation of the
registration of the Charity.
[17]
For these reasons, the appeal will be dismissed
with costs.
"C. Michael Ryer"
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