REASONS FOR JUDGMENT
Lafleur J.
[1]
This is an appeal by Marilena Menzies
(the “Appellant”) from an income tax reassessment by the Minister of National
Revenue (the “Minister”) pursuant to
a Notice of Redetermination for the 2001 fiscal period of Grosvenor Services
2001 Limited Partnership (“Grosvenor”) dated
April 2, 2012, by Notice of Reassessment dated
November 13, 2012. In reassessing the Appellant, the Minister reduced
the deduction previously allowed in respect of the limited partnership loss in
Grosvenor to an amount of $67,610. In computing her income for the 2001 taxation
year, the Appellant originally claimed a limited partnership loss in respect of
Grosvenor in the amount of $88,745. By Notice of Assessment dated
May 6, 2002, the Minister allowed said deduction.
[2]
The Appellant filed a Notice of Appeal for her
2001 and 2003 taxation years to this Court beyond the time limit prescribed by
subsection 169(1) of the Income Tax Act, R.S.C., 1985, c. 1 (5th supp.),
as amended (the “Act”) and
applied to this Court for an order to extend the time to appeal in respect of
both taxation years. By order dated May 28, 2015, Justice Jorré
of our Court granted the application to extend the time to appeal for the 2001
taxation year but dismissed the application for the 2003 taxation year –
accordingly, this appeal is restricted to the 2001 taxation year of the
Appellant.
THE FACTS
[3]
In determining the Appellant’s liability to tax
for the 2001 taxation year, the Minister assumed the following facts:
a)
at all relevant and material times, the
Appellant was a limited partner in Grosvenor, a limited partnership of which
1444932 Ontario Limited (“1444932 Ontario”) was
the general partner;
b)
at all relevant and material times, the fiscal
period of Grosvenor ended on December 31;
c)
Grosvenor claimed and was allowed a net business
loss in the amount of $255,788,405 for the 2001 fiscal period;
d)
by Notice of Determination dated
March 30, 2005, the Minister determined a net business loss amount of
$134,913,329 for the 2001 fiscal period of Grosvenor, and reduced the “at‑risk” amounts of all limited partners of Grosvenor and the production
services limited partnerships carrying on business (the “pslps”) by an amount of $222,563,102;
e)
by Notice of Objection dated
June 22, 2005, and under the authority of Grosvenor, 1444932 Ontario
objected to the determination referred to in subparagraph d) above;
f)
pursuant to the Notice of Objection, the
Minister, 1444932 Ontario, and the pslps entered into Minutes of Settlement
dated November 15, 2011, to allow a net business loss in the amount
of $194,882,215 for the 2001 fiscal period of Grosvenor;
g)
by Notice of Redetermination dated
April 2, 2012, the Minister redetermined a net business loss in the
amount of $194,876,572 for the 2001 fiscal period of Grosvenor pursuant to and
in accordance with the Minutes of Settlement referred to in
subparagraph f) above.
[4]
At the hearing, the Appellant was represented by
her spouse and agent, Mr. Alexander R. Menzies. The Appellant
and her agent testified. The Appellant recognized that she was a limited
partner of Grosvenor in 2001.
[5]
The Appellant and her agent admitted that all
assumption of facts relied upon by the Minister to reassess the Appellant for
her 2001 taxation year were true.
[6]
However, the Appellant declared before this
Court that she did not receive the Letter from the Canada Revenue Agency Appeal
Officer dated April 3, 2012 (the “Letter”) to
which was attached the Notice of Determination dated March, 30, 2005,
and the Notice of Redetermination dated April 2, 2012 (referred to
above).
[7]
At the hearing, the Respondent filed
Exhibit R‑1 – Confidential Offering Memorandum. Schedule “A” to
this document entitled Subscription and Power of Attorney Form was recognized
by the Appellant. She admitted that she had signed it.
[8]
The Respondent also filed Exhibit R‑2
– Affidavit by Colette Poisson, auditor at the Tax Services Office of the
Canada Revenue Agency (the “CRA”) in Windsor. In
this Affidavit, Ms. Poisson testified as follows:
i)
the Notice of Determination dated
March 30, 2005 in respect of Grosvenor was issued by the Minister and
is dated March 30, 2005;
ii)
the Notice of Redetermination dated
April 2, 2012 in respect of Grosvenor was issued by the Minister and
is dated April 2, 2012;
iii)
the Appellant’s Notice of Reassessment dated
November 13, 2012 was issued by the Minister.
[9]
At paragraph 5 of the Affidavit,
Ms. Poisson also declares:
My examination of the records indicates that the Canada Revenue
Agency sent copies of the Notices of Determination and Redermination to
Marilena Menzies by letter dated April 3, 2012. Attached as
Exhibit “C” to my Affidavit is a true copy of the letter sent by
Mark Okonski, Team Leader Appeals, Canada Revenue Agency on
April 3, 2012.
[10]
Ms. Poisson did not testify at the hearing.
[11]
The Appeal Officer who signed the Letter is no
longer employed by the CRA.
THE
ISSUES
[12]
I have to determine whether this Court has
jurisdiction under the fairness provisions of the Act and whether the
Appellant was properly reassessed for her 2001 taxation year by Notice of
Reassessment dated November 13, 2012 in respect of Grosvenor’s
limited partnership loss.
THE APPELLANT’S POSITION
[13]
The Appellant argued that since she did not
receive the Letter and the Minister cannot prove that it sent the Notice of
Determination and Notice of Redetermination to her as required under
subsection 152(1.5) of the Act, the reassessment of the Appellant
by Notice of Reassessment dated November 13, 2012 is invalid.
Furthermore, the Appellant stated that she did not give the general partner of
Grosvenor the authority to negotiate with the Minister and enter into the Minutes
of Settlement dated November 15, 2011 on her behalf and that gives
rise to a conflict of interest. In addition, the Appellant is asking for a
reduction of interest charges because, in her view, the Minister did not act in
a timely fashion and that resulted in interest being charged for 7 years
(the Minister having exercised its discretion to reduce interest for
3 years only).
THE
RESPONDENT’S POSITION
[14]
The Respondent submitted that this Court does
not have equitable jurisdiction and that its jurisdiction is limited by
section 12 of the Tax Court of Canada Act, R.S.C., 1985, c. T‑2
(the “TCC
Act”). Accordingly, this Court does not have
jurisdiction to render decisions based on fairness and hence, it may not grant
a reduction of the interest charged.
[15]
The Respondent took the position that the Letter
was sent to the Appellant and accordingly, pursuant to subsection 152(1.7)
of the Act, the redetermination of the net business loss for the 2001
fiscal period of Grosvenor is binding on the Appellant and within the time limitation
set out in paragraph 152(1.7)(b) of the Act.
DISCUSSION
A.
JURISDICTION OF THIS COURT
[16]
Since the jurisdiction of this Court under
section 12 of the TCC Act is statutory, limited and specific, this
Court is not able to grant the relief sought by the Appellant, that is, a
reduction of the interest charged on the basis that the Minister did not act
properly and in a timely fashion:
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12(1) Jurisdiction — The Court has
exclusive original jurisdiction to hear and determine references and appeals
to the Court on matters arising under the Air Travellers Security Charge
Act, the Canada Pension Plan, the Cultural Property Export and
Import Act, Part V.1 of the Customs Act, the Employment
Insurance Act, the Excise Act, 2001, Part IX of the Excise
Tax Act, the Income Tax Act, the Old Age Security Act, the Petroleum
and Gas Revenue Tax Act and the Softwood Lumber Products Export Charge Act,
2006 when references or appeals to the Court are provided for in those
Acts.
. . .
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12(1) Compétence — La Cour a
compétence exclusive pour entendre les renvois et les appels portés devant
elle sur les questions découlant de l’application de la Loi sur le droit
pour la sécurité des passagers du transport aérien, du Régime de
pensions du Canada, de la Loi sur l’exportation et l’importation de
biens culturels, de la partie V.1 de la Loi sur les douanes,
de la Loi sur l’assurance-emploi, de la Loi de 2001 sur l’accise,
de la partie IX de la Loi sur la taxe d’accise, de la Loi de
l’impôt sur le revenu, de la Loi sur la sécurité de la vieillesse,
de la Loi de l’impôt sur les revenus pétroliers et de la Loi de 2006 sur
les droits d’exportation de produits de bois d’œuvre, dans la mesure où
ces lois prévoient un droit de renvoi ou d’appel devant elle.
[…]
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[17]
The case law has largely confirmed that
principle.
[18]
In Canada (National Revenue) v JP Morgan
Asset Management (Canada) Inc., 2013 FCA 250,
2014 DTC 5001, the Federal Court of Appeal held that:
[83] The Tax Court does not have jurisdiction on an appeal to
set aside an assessment on the basis of reprehensible conduct by the Minister
leading up to the assessment, such as abuse of power or
unfairness . . . If an assessment is correct on the facts
and the law, the taxpayer is liable for the tax. . . .
[19]
Also, in Ereiser v Canada,
2013 FCA 20, 2013 DTC 5036, Justice Sharlow stated
that:
[31] [T]he role of the Tax Court of Canada in an appeal of an
income tax assessment is to determine the validity and correctness of the
assessment based on the relevant provisions of the Income Tax Act and
the facts giving rise to the taxpayer’s statutory liability. Logically, the
conduct of a tax official who authorizes an assessment is not relevant to
the determination of that statutory
liability. . . . [Emphasis added]
B. INCOME TAX REASSESSMENT OF THE
APPELLANT FOR THE 2001 TAXATION YEAR
[20]
Before examining the tax liability of the
Appellant, I wish to address the argument raised by the Appellant to the
effect that she did not give the general partner of Grosvenor the authority to
negotiate with the Minister and enter into the Minutes of Settlement dated
November 15, 2011 on her behalf. In my opinion, that argument is not
sound. As indicated in Schedule “A” to the Confidential Offering
Memorandum filed as Exhibit R‑1 which was executed by the Appellant, the
Appellant had irrevocably constituted and appointed the general partner of
Grosvenor (namely, 1444932 Ontario) “with full power of substitution, as his or
her true and lawful attorney and agent, with full power and authority in his or
her name, place and stead and for his or her benefit to:”
. . .
3.01(iii) execute, deliver and file all elections,
determinations, or designations under the Tax Act or any other taxation or
other legislation or laws of Canada or any other jurisdiction in respect of the
affairs of the Limited Partnership or a limited partner’s interest in the
Limited Partnership or the dissolution of the Limited Partnership, including
any appropriate tax election forms which are, in the opinion of the General
Partner, appropriate in the circumstances;
[21]
Given the power of attorney executed by the
Appellant, the Appellant cannot argue that the general partner did not have
authority to negotiate with the tax authorities on her behalf. It is the usual
practice when investments are made as a limited partner that the general
partner be given vast powers to deal with the tax authorities on behalf of the
limited partners.
[22]
I will now examine the tax liability of the
Appellant for the 2001 taxation year.
[23]
The relevant provisions of the Act read
as follows:
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152(1.4) Determination
in respect of a partnership — The Minister may, within 3 years
after the day that is the later of
(a) the day on or before
which a member of a partnership is, or but for subsection 220(2.1) would
be, required under section 229 of the Income Tax Regulations to
make an information return for a fiscal period of the partnership, and
(b) the day the return is
filed,
determine any
income or loss of the partnership for the fiscal period and any deduction or
other amount, or any other matter, in respect of the partnership for the
fiscal period that is relevant in determining the income, taxable income or
taxable income earned in Canada of, tax or other amount payable by, or any
amount refundable to or deemed to have been paid or to have been an
overpayment by, any member of the partnership for any taxation year under
this Part.
(1.5) Notice
of determination — Where a determination is made under subsection 152(1.4)
in respect of a partnership for a fiscal period, the Minister shall send a
notice of the determination to the partnership and to each person who was a
member of the partnership during the fiscal period.
(1.6) Absence
of notification — No determination made under subsection 152(1.4)
in respect of a partnership for a fiscal period is invalid solely because one
or more persons who were members of the partnership during the period did not
receive a notice of the determination.
(1.7) Binding
effect of determination — Where the Minister makes a
determination under subsection 152(1.4) or a redetermination in respect of a
partnership,
(a) subject to the rights of
objection and appeal of the member of the partnership referred to in
subsection 165(1.15) in respect of the determination or redetermination,
the determination or redetermination is binding on the Minister and each
member of the partnership for the purposes of calculating the income, taxable
income or taxable income earned in Canada of, tax or other amount payable by,
or any amount refundable to or deemed to have been paid or to have been an
overpayment by, the members for any taxation year under this Part; and
(b) notwithstanding
subsections 152(4), 152(4.01), 152(4.1) and 152(5), the Minister may, before
the end of the day that is one year after the day on which all rights of
objection and appeal expire or are determined in respect of the determination
or redetermination, assess the tax, interest, penalties or other amounts
payable and determine an amount deemed to have been paid or to have been an
overpayment under this Part in respect of any member of the partnership and
any other taxpayer for any taxation year as may be necessary to give effect
to the determination or redetermination or a decision of the Tax Court of
Canada, the Federal Court of Appeal or the Supreme Court of Canada.
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152(1.4) Montant
déterminé relativement à une société de personnes — Le ministre peut
déterminer le revenu ou la perte d’une société de personnes pour un exercice
de celle-ci ainsi que toute déduction ou tout autre montant, ou toute autre
question, se rapportant à elle pour l’exercice qui est à prendre en compte
dans le calcul, pour une année d’imposition, du revenu, du revenu imposable
ou du revenu imposable gagné au Canada d’un de ses associés, de l’impôt ou
d’un autre montant payable par celui-ci, d’un montant qui lui est
remboursable ou d’un montant réputé avoir été payé, ou payé en trop, par lui,
en vertu de la présente partie. Cette détermination se fait dans les trois
ans suivant le dernier en date des jours suivants :
a) le jour où, au plus tard, un
associé de la société de personnes est tenu par l’article 229 du Règlement
de l’impôt sur le revenu de remplir une déclaration de renseignements
pour l’exercice, ou serait ainsi tenu si ce n’était le
paragraphe 220(2.1);
b) le jour où la déclaration est
produite.
(1.5) Avis
de détermination — Le ministre envoie un avis de la détermination
effectuée en application du paragraphe (1.4) à la société de personnes
concernée et à chaque personne qui en était un associé au cours de
l’exercice.
(1.6) Absence
d’avis — La détermination effectuée en application du
paragraphe (1.4) pour un exercice n’est pas invalidée du seul fait
qu’une ou plusieurs personnes qui étaient des associés de la société de
personnes concernée au cours de l’exercice n’ont pas reçu d’avis de
détermination.
(1.7) Ministre
et associés liés — Les règles suivantes s’appliquent lorsque le
ministre détermine un montant en application du paragraphe (1.4) ou
détermine un montant de nouveau relativement à une société de
personnes :
a) sous réserve des droits
d’opposition et d’appel de l’associé de la société de personnes visé au
paragraphe 165(1.15) relativement au montant déterminé ou déterminé de
nouveau, la détermination ou nouvelle détermination lie le ministre ainsi que
les associés de la société de personnes pour ce qui est du calcul, pour une
année d’imposition, du revenu, du revenu imposable ou du revenu imposable
gagné au Canada des associés, de l’impôt ou d’un autre montant payable par
ceux-ci, d’un montant qui leur est remboursable ou d’un montant réputé avoir
été payé, ou payé en trop, par eux, en vertu de la présente partie;
b) malgré les paragraphes (4),
(4.01), (4.1) et (5), le ministre peut, avant la fin du jour qui tombe un an
après l’extinction ou la détermination des droits d’opposition et d’appel
relativement au montant déterminé ou déterminé de nouveau, établir les
cotisations voulues concernant l’impôt, les intérêts, les pénalités ou
d’autres montants payables et déterminer les montants réputés avoir été
payés, ou payés en trop, en vertu de la présente partie relativement à un
associé de la société de personnes et à tout autre contribuable pour une
année d’imposition pour tenir compte du montant déterminé ou déterminé de
nouveau ou d’une décision de la Cour canadienne de l’impôt, de la Cour
d’appel fédérale ou de la Cour suprême du Canada.
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[24]
The sole issue I have to decide is whether
the Minister has sent to the Appellant the Notice of Determination and Notice
of Redetermination with the Letter in accordance with subsection 152(1.5)
of the Act. It is common ground between the parties that the Notice of
Determination dated March 30, 2005 and the Notice of Redetermination
dated April 2, 2012 were sent to Grosvenor and that the time limits
provided by subsections 152(1.4) and 152(1.7) of the Act were met
in the case at bar. The Appellant submits that since she did not receive the
Letter and the Minister cannot prove that it had sent the Letter to her, the
reassessment which is under appeal is invalid.
[25]
Subsection 244(20) of the Act is a
deeming provision; it reads as follows:
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244(20) Members
of partnerships — For the purposes of this Act,
(a) a reference in any notice
or other document to the firm name of a partnership shall be read as a
reference to all the members thereof; and
(b) any notice or other
document shall be deemed to have been provided to each member of a
partnership if the notice or other document is mailed to, served on or
otherwise sent to the partnership
(i) at its latest known address or
place of business, or
(ii) at the latest known address
(A) where it is a limited
partnership, of any member thereof whose liability as a member is not
limited, or
(B) in any
other case, of any member thereof.
[Emphasis added]
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244(20) Associés — Les règles
suivantes s’appliquent dans le cadre de la présente loi :
a) la mention de la dénomination
d’une société de personnes dans un avis ou autre document vaut mention de
tous les associés de la société de personnes;
b) un avis
ou autre document est réputé remis à chaque associé de la société de
personnes si l’avis ou le document est posté, signifié ou autrement envoyé à
la société de personnes :
(i) à sa dernière adresse connue ou
à son dernier lieu d’affaires connu,
(ii) à la dernière adresse connue :
(A) s’il s’agit d’une société de
personnes en commandite, de l’un de ses associés dont la responsabilité, à titre d’associé, n’est pas
limitée,
(B) dans les
autres cas, de l’un de ses associés.
[Notre
soulignement]
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[26]
The technical notes issued by the Minister of
Finance (May 1991 TN) on subsection 244(20)
read as follows:
New subsection 244(20) provides that every member of a
partnership is to be treated as having been named in any notice or document
which contains a reference to the firm name of the partnership. This
subsection also provides that all notices or documents mailed, served or sent
to a partnership at the last known address or place of business of the
partnership or any member thereof (or, in the case of a limited partnership, of
any member thereof whose liability is not limited) shall be considered to have
been provided to each member of the partnership. This amendment provides a
more efficient manner in which to administer and enforce the Act, especially in
cases where a partnership has a large number of members [emphasis added].
[27]
I am of the view that the presumption found
in subsection 244(20) of the Act is conclusive on the basis of the
reasoning of this Court in H and L Kushnir v MNR,
[1985] 1 CTC 2301 (TCC) (para 15), and in The Queen v
Shafer, 2000 DTC 6542, a case decided by the Federal Court of
Appeal. In Shafer, the Court decided that the deeming provision found in
subsection 334(1) of Part IX of the Excise Tax Act, R.S.C.,
1985, c. E‑15, is absolute and does not create a rebuttable
presumption, since inter alia, the Minister has to be provided with
efficient tools to administer the fiscal legislation.
[28]
The Notice of Determination dated
March 30, 2005 and the Notice of Redetermination dated
April 2, 2012 were sent to the general partner, namely 1444932
Ontario (see Exhibit R‑2). Pursuant to clause 244(20)(b)(ii)(A)
of the Act, each limited partner of Grosvenor, including the Appellant,
is deemed to have been provided with said Notices.
[29]
Subsection 152(1.5) of the Act
provides that the notice shall be sent by the Minister and does not provide
that it has to be mailed; accordingly, in view of the applicable presumption,
I conclude that the Notice of Determination dated March 30, 2005
and the Notice of Redetermination dated April 2, 2012 have indeed
been provided to the Appellant since they were sent to 1444932 Ontario, the
general partner of Grosvenor. Accordingly, it is clear that the argument of the
Appellant cannot stand and her appeal shall be dismissed.
[30]
However, even if I were to conclude that
the above‑noted presumption is rebuttable, I am of the view that the
reassessment under appeal is valid and the appeal shall be dismissed, for the
following reasons.
[31]
I am not persuaded by the allegation of the
Appellant to the effect that she did not receive the Letter. She admitted that
she had received the Notice of Reassessment dated November 13, 2012;
the address indicated in the Notice of Reassessment is the same as the one
indicated in the Letter. Furthermore, the Notice of Reassessment referred to
the Letter. In my view the Appellant is not credible when she declared that she
did not receive the Letter.
[32]
As Justice Valerie Miller held in Nicholls
v The Queen, 2011 TCC 39, 2011 DTC 1063, in a case
where an applicant had filed an application for an extension of time to appeal,
the Crown “only
has the onus to prove the assessments were sent if the Applicant alleges that
he has not received the assessments and that allegation is credible.” (para 15). I am of the view that these principles should
apply in this case.
[33]
Since I do not find the allegation of the
Appellant to be credible, the Respondent does not have to prove that the Letter
(together with the Notice of Determination dated March 30, 2005 and
the Notice of Redetermination dated April 2, 2012) were sent to the
Appellant.
[34]
Furthermore, the language of subsection 152(1.6)
of the Act is clear – whether one or more limited partners have received
the notice of determination or not is not relevant for the validity of a notice
of determination issued in accordance with subsection 152(1.4) of the Act.
[35]
Finally, all the assumption of facts relied upon
by the Minister to reassess the Appellant were admitted by the Appellant and
her agent. The real issue in this appeal is the time it took the Minister to
reassess the Appellant – fairness is an issue which is not within the
jurisdiction of this Court.
[36]
For all these reasons, the appeal is dismissed,
without costs.
Signed at Ottawa, Canada, this 22nd
day of March 2016.
“Dominique Lafleur”
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