Hossein Shahbazi brings this appeal under the Income
Tax Act to dispute the disallowance of tax credits in respect of donations
for the 2006 and 2007 taxation years in the amounts of $20,000 and $15,000,
It is sufficient to provide a brief summary of
Mr. Shahbazi’s evidence.
For a period of time in 1983, Mr. Shahbazi found
himself in dire financial straits. He was a student in Windsor at the time, and
had been financially assisted by his parents, who lived in Iran. The parents’
financial support ended in 1983 as the transfer of funds to Canada from Iran
In Mr. Shahbazi’s time of need, a Presbyterian
church in Windsor housed him for a few months. In gratitude, Mr. Shahbazi
determined at that time to help others when he was able.
In 2006, Mr. Shahbazi became aware of the
possibility of making in-kind charitable donations. Mr. Shahbazi’s accountant,
Sam Owuzu, told him that a charitable organization was taking in-kind donations
which also provided a tax benefit. The accountant was aware that Mr. Shahbazi
had amassed large amounts of household goods as a result of forfeitures from
rental units that he owned. Mr. Shahbazi also testified that he acquired
other goods from yard sales.
The charity, International Farm and Relief
Mission, then contacted Mr. Shahbazi and arranged to pick up the goods
from two storage locations. Mr. Shahbazi stated that the goods filled a
cube type U-haul truck. This occurred in November 2006.
Mr. Shahbazi testified that the charity told him
that it had the goods appraised at $20,000 and the charity issued a tax receipt
for this amount. Mr. Shahbazi testified that this was a reasonable
valuation. The tax receipt that was entered into evidence indicates that the
donation was made on December 20, 2006. The receipt does not mention that the
donation was in property and not cash.
In 2007, a similar arrangement was made with
another registered charity. Mr. Shahbazi testified that his accountant informed
him about donations being accepted by Triumphant Church of Christ Int’l.
The 2007 donation worked the same way. The
charity picked up the goods and appraised them at $15,000, which Mr. Shahbazi
said was a reasonable valuation. The tax receipt for the donation stated that
it was issued on February 5, 2008. The receipt also indicated that the donation
was received during January to December. This would have put the date of the
donation sometime in 2007.
Mr. Shahbazi stated that he became aware in 2009
that the Canada Revenue Agency (CRA) was not accepting these tax receipts. He
testified that this came as a surprise to him because prior to this the CRA had
informed him that the claims had been allowed. A letter from the CRA that was
entered into evidence confirmed that the donation for the 2007 taxation year had
been allowed after review.
Mr. Shahbazi entered into evidence a list of the
types of goods that he gave to the two charities. The list, which contains 31
types of property, had recently been prepared at the suggestion of Mr.
There are three issues in this appeal.
(a) Did Mr. Shahbazi donate property to the two charities with a value
of $20,000 in 2006 and $15,000 in 2007?
(b) Should the tax credits be disallowed on the basis that the tax
receipts were deficient?
Should the appeal be allowed for the 2006
taxation year on the basis that the Reply does not mention the relevant
charity, International Farm and Relief Mission?
Before discussing these issues, I would comment
concerning the reliability of Mr. Shahbazi’s evidence. It is not necessary for
me to make a credibility finding in this appeal because the appeal should be
dismissed even if Mr. Shahbazi’s evidence is accepted. I choose to make no
finding on credibility, but I would mention that the Crown took the position that
Mr. Shahbazi’s evidence was credible.
Are tax receipts
In order for the tax credits claimed by Mr.
Shahbazi to be allowed, tax receipts must be provided to the Minister that
contain prescribed information. The necessity for the prescribed information is
provided for in s. 118.1(2) of the Income Tax Act.
The prescribed information that is relevant in
this appeal is set out in subsection 3501(1) of the Income Tax Regulations. The
Crown takes the position that the tax receipts fail to comply with this
provision in three ways.
First, the receipts do
not contain both the date that the donation was made and the date that the
receipts were issued.
Second, the receipts do
not contain a brief description of the property, as required for non-cash
Third, the receipts do
not contain the name and address of the appraiser, which is required when the
property is appraised.
It is clear from the tax receipts that were
entered into evidence that these requirements are not satisfied.
It is sufficient to focus only on the second
requirement above that the tax receipts contain a brief description of the
property donated. The tax receipts in this case do not contain any description
of the property donated, and do not even mention that the donations are in property
and not cash. This is a clear failure to comply with one of the necessary
requirements to claim the tax credits.
Mr. Shahbazi’s counsel submits that it should
not be necessary to have absolute compliance with these Regulations. No judicial
authority was provided.
Even if some flexibility in interpreting the
necessary requirements is appropriate, it is not possible in my view to completely
overlook the requirement that a tax receipt for a donation of non-cash property
must contain a brief description of the property donated. I would note that the
language in s. 118.2(1) of the Income Tax Act is mandatory. This
conclusion is also supported by the recent decision in The Queen v. Castro,
2015 FCA 225.
In light of the conclusion above, it is not
necessary that I decide whether Mr. Shahbazi donated property with the values
that are reflected on the tax receipts. I will not consider this issue.
I would comment, however, on a procedural issue
that was raised by counsel for Mr. Shahbazi at the commencement of the hearing.
Counsel suggested that the appeal for the 2006 taxation year should be allowed
because the Reply does not mention the 2006 charity, International Farm and
This issue comes down to a matter of fairness.
Upon a detailed review of the Reply after the hearing, I have concluded that
the Reply adequately provides notice to Mr. Shahbazi of the case that he has to
meet. There is no unfairness.
Although the Reply does not mention the
International Farm charity by name, the Reply does raises the issue as to
whether donations were made to any registered charity in the 2006 and 2007
taxation years and whether proper tax receipts were issued by any registered
charity. This is clear in the Reply from the statement of facts and grounds
Accordingly, I conclude that the failure of the
Reply to mention the name, International Farm and Relief Mission, is not
grounds to allow the appeal for the 2006 taxation year.
In light of the conclusions above, the appeal
will be dismissed.
at Toronto, Ontario this 25th day of May 2016.