Date: 20020903
Docket:
2000-1045-IT-I
BETWEEN:
KEN
TILDEN,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
____________________________________________________________________
For the
Appellant: The Appellant himself
Counsel for
the Respondent: Lesley King
____________________________________________________________________
Reasonsfor Judgment
(Delivered
orally from the Bench
at Toronto,
Ontario, on January 15, 2001)
Bowie
J.
[1]
The taxation years initially put in issue here are 1993, 1994,
and 1995. During the course of the hearing, the Appellant advised
me that he has no complaint with the assessment for 1993 except
perhaps insofar as it bears on a late penalty applied to him in
1994, to which I shall come back.
[2]
For 1995, the Appellant initially put two items in issue: One is
a claim of some $3,339.38 claimed as a business loss in 1995.
That amount came about in the following way. The Appellant was
employed by the government of Ontario for many years up to and
including 1995, and in May 1995, he was given notice that his
employment would be terminated in November 1995, as in fact it
was. He then began a landscape consulting business, and, not
surprisingly, that business generated no revenues in November and
December 1995. It did, however, incur some expenses. I was given
a summary of those expenses, along with expenses for later years,
but no vouchers to establish their exact validity. However,
during the course of the appeal, the Appellant advised me that he
would abandon the claim with respect to the 1995 loss, on the
understanding, which he said had been arrived at with a
representative of Revenue Canada during the day, that those
expenses would be allowed against his 1996 income from the
landscaping business.
[3]
Insofar as the lump sum award that he received in 1995 is
concerned, there is no dispute between the parties as to the
amounts received by the Appellant as employment income in 1995.
The total of employment income received by the Appellant in 1995
was $105,960, of which approximately $40,000 was in the form of a
lump sum award. The Appellant's position with respect to this
amount was that on the basis of some tax notes that he had seen,
the origin of which is somewhat uncertain, he was entitled to a
special tax calculation in respect of the award. That publication
indicated that this special calculation would be available -
and I am quoting here - for:
Employment
income payments if they are received under a court judgment, an
agreement to terminate a lawsuit, or under an arbitral award
(other than as a result of arbitration under normal collective
bargaining).
The origin
of the $40,000 lump sum payment lies in a memorandum of
settlement entered into between the Crown in right of Ontario and
the Ontario Public Service Employees Union, which says in its
first five lines:
The
parties hereto have agreed to the following terms as full and
final settlement. In respect of the salary negotiations in
accordance with Article 5.8 of the Ontario Public Service
Collective Agreement for the classification of coordinator,
landscape architectural services in the administrative bargaining
unit. ...
The
Appellant, in his submissions, took the position that as he was
the only person to whom these minutes of settlement applied they
could not be said to arise out of arbitration under normal
collective bargaining.
[4]
I do not see how the memorandum of settlement could be read as
having originated from anything other than normal collective
bargaining. Quite apart from the legal status of the tax notes
and the ways and means motion to which they refer, it is evident
that this lump sum payment cannot be brought within
them.
[5]
The only item remaining to be dealt with is the 1994 taxation
year, where the Appellant raises an issue as to the application
to him in respect of that year of a late filing penalty in the
amount of $52.21. With respect to that late filing penalty, the
following are the relevant facts: The Appellant failed to file
returns for 1993 and 1994 taxation years as required by the
Act. As a result, he was assessed, without the benefit of
a return, on December 16, 1996, for both of these years as well
as for 1995. The 1995 assessment, however, is not relevant to the
question of the 1994 late filing penalty.
[6]
For 1993, the Appellant was initially assessed on December 16,
1996. According to that assessment he owed $2,967.64. It is
unclear to me from the evidence whether that amount includes
interest or whether it does not. It most likely includes both
interest and the 1993 late filing penalty. In any event, the
Appellant objected to that assessment, and he was reassessed on
May 28, 1999, as a result of that objection, following which a
credit of $4,706.71 was applied to his account or, to put it
another way, his assessment was changed such that he was then
entitled to a refund of approximately $1,750. While there may be
some minor variations as a result of interest, the fact is that
had he been initially assessed for 1993 on the basis of the 1999
reassessment, he would have had a substantial refund, somewhere
in the order of $1,700, payable to him.
[7]
For 1994, his initial assessment on December 16, 1996, without
benefit of a return, showed him owing $3,439.93. He objected to
this assessment as well, and it was reassessed on May 28, 1999,
such that a credit of $2,999.40 was applied, with the net result
being that he owed for that year some $440 after the
reassessment. For 1994, he was initially assessed a late filing
penalty of $913.50, and his late filing penalty was based upon
subsection 162(2), which provides an increased scale of penalties
for those who fail to file income tax returns on time for the
second time within a period of four taxation years.
[8]
Following the reassessment in May 1999, however, his 1993 return,
having been reassessed to show that he was entitled to a refund,
the 1994 penalty was reduced to a subsection 162(1) penalty, and
recalculated to the amount of $52.21. The Appellant's
position is that as he had a refund coming to him for the 1993
taxation year which exceeded his arrears for the 1994 taxation
year after both those years had been reassessed, he was not in
the position described in subsection 162(1) of being "a
person who failed to file a return for 1994 and having tax
payable for the year that was unpaid when the return was required
to be filed". I see some merit in this position, because
when the return for 1994 was required to be filed, which was
presumably in April 1995, the Appellant's situation was that
he was entitled to a refund of income tax in the amount of
approximately $1,700 in respect of 1993, and this was
approximately four times the amount that he owed for
1994.
[9]
It is trite to say that the obligation to pay income tax does not
arise out of the assessment; it arises out of the receipt of
income or the earning of income, as the case may be, although its
quantum is crystallized by assessment from time to time.
Nevertheless, the Appellant's liability for income tax in
1993 was in the order of $1,700 less than the amount he paid, and
his liability for income tax in 1994 was in the order of $440
more than he had paid. That being the case, it is difficult to
see how he was liable to pay any income tax or had any income tax
unpaid in respect of 1994 at the end of April 1995,
notwithstanding that it was not until May 28, 1999, that this
state of affairs was established by the reassessments following
the objections.
[10] I should
say that I attribute no fault to the Minister and his officials
for whatever confusion surrounds the amounts owing from time to
time by the Appellant, or for any confusion surrounding the
computation of the late filing penalties. There is no doubt that
the Appellant filed his returns for 1993, 1994, and 1995 late.
Had he filed them accurately and on time, none of this would have
arisen. That said, however, it seems to me that on a proper
construction of subsection 162(1), and on the facts as very
lucidly explained by Mr. Hall in his evidence, the Appellant
is entitled to be relieved of the late filing penalty for 1994.
So the appeal for 1994 is allowed, and the assessment will be
referred back for reconsideration and reassessment on the basis
that the Appellant is not liable for the late filing penalty. The
appeals for 1993 and 1995 are dismissed.
Signed at
Ottawa, Canada, this 3rd day of September, 2002.
J.T.C.C.
COURT FILE
NO.:
2000-1045(IT)I
STYLE OF
CAUSE:
Ken Tilden and Her Majesty the Queen
PLACE OF
HEARING:
Toronto, Ontario
DATE OF
HEARING:
January 15, 2001
REASONS FOR
JUDGMENT BY: The Honourable Judge E.A.
Bowie
DATE OF
JUDGMENT:
January 22, 2001
APPEARANCES:
For the
Appellant:
The Appellant himself
Counsel
for the
Respondent:
Leslie King
COUNSEL OF
RECORD:
For the
Appellant:
Name:
N/A
Firm:
N/A
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
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