Citation: 2011 TCC 121
HER MAJESTY THE QUEEN,
REASONS FOR JUDGMENT
The appellant, Cheryl Lans, has
appealed assessments relating to excess contributions that were made to
registered retirement savings plans (RRSPs) in 2004 and 2005.
The Minister assessed tax in
respect of the excess contributions under section 204.1(2.1) of the Income
Tax Act, as well as penalties and interest. The assessed tax and penalty
for the 2004 taxation year are $1,039.88 and $176.78, respectively. The tax and
penalty for the 2005 taxation year are $1,098.72 and $186.78, respectively.
The appellant acknowledges that
she contributed more to RRSPs than she was entitled to. However, she submits
that it is inappropriate to impose the tax, penalty and interest in her
Should tax be vacated?
The appellant submits that the tax
under subsection 204.1(2.1) should not be imposed because she reasonably
thought that the Canada Revenue Agency (CRA) would not issue an assessment since
she had no taxable income in the relevant years.
In addition, the appellant submits
that the tax should be vacated because the CRA required her to include
post-doctoral grants in her income. She submits that this policy has not been applied
evenly across the country and that some taxpayers have not been required to
include such grants in their income. The uneven application of the law results
in unfairness, it is submitted, which justifies the excess contributions tax to
Subsection 204.1(2.1) provides:
at the end of any month after December, 1990, an individual has a cumulative
excess amount in respect of registered retirement savings plans, the individual
shall, in respect of that month, pay a tax under this Part equal to 1% of that
cumulative excess amount.
This tax is a special tax levied
under Part X.1 of the Act. It applies regardless of whether or not a
taxpayer has taxable income.
The arguments raised by the appellant
are essentially based on grounds of fairness. This Court is not able to provide
relief on these grounds alone: Chaya v The Queen, 2004 FCA 327; 2004 DTC
6676. Parliament has clearly provided for a tax on excess RRSP contributions in
subsection 204.1(2.1). The assessments cannot be vacated by this Court on
grounds that the legislation provides an unfair result in the appellant’s
It is worth noting that subsection
204.1(4) of the Act gives the Minister of National Revenue a limited
power to waive the tax on grounds of fairness.
Subsection 204.1(4) provides:
Where an individual would, but for this subsection, be required to pay a tax
under subsection (1) or (2.1) in respect of a month and the individual
establishes to the satisfaction of the Minister that
(a) the excess amount or cumulative excess amount on which the
tax is based arose as a consequence of reasonable error, and
(b) reasonable steps are being taken to eliminate the excess,
the Minister may waive the tax.
This Court has no jurisdiction to
interfere with Ministerial decisions made pursuant to the above provision. That
jurisdiction lies with the Federal Court: Neubauer v The Queen, 2006 TCC
457; 2006 DTC 3252. Accordingly, the remedy that the appellant seeks has been
brought in the wrong forum.
It is unfortunate that the
jurisdiction issue was not raised by the respondent in the reply. I do not
fault the respondent, however, as the notice of appeal did not clearly set out
the appellant’s position on this issue. In fact, at the commencement of the
hearing the appellant confirmed to me that she did not intend to dispute the
tax. She corrected her position during the course of the hearing.
For these reasons, the assessment
of tax under subsection 204.1(2.1) will be upheld.
Should penalties be
Penalties were assessed in respect
of the failure of the appellant to timely file a special return that is
required when excess RRSP contributions have been made. The return requirement
in subsection 204.3(1) is reproduced below.
Within 90 days after the end of each year after 1975, a taxpayer to whom this
Part applies shall
(a) file with the Minister a return for the year under this
Part in prescribed form and containing prescribed information, without notice
or demand therefor;
(b) estimate in the return the amount of tax, if any, payable
by the taxpayer under this Part in respect of each month in the year; and
(c) pay to the Receiver General the amount of tax, if any,
payable by the taxpayer under this Part in respect of each month in the year.
The provisions under which penalties
were assessed are subsection 162(1) and subsection 204.3(2) of the Act.
Every person who fails to file a return of income for a taxation year as
and when required by subsection 150(1) is liable to a penalty equal to the
(a) an amount equal to 5% of the person’s tax payable under
this Part for the year that was unpaid when the return was required to be
(b) the product obtained when 1% of the person’s tax payable
under this Part for the year that was unpaid when the return was required to be
filed is multiplied by the number of complete months, not exceeding 12, from
the date on which the return was required to be filed to the date on which the
return was filed.
Subsections 150(2) and (3), sections 152 and 158, subsections 161(1) and (11), sections
162 to 167 and Division J of Part I are applicable to this Part with such
modifications as the circumstances require.
I would first observe that there
are several different types of penalties in section 162. The section that was
applied, subsection 162(1), applies only where there is a failure to file a
return of income. The return that is required for excess RRSP
contributions is not a return of income.
Subsection 162(1) can be modified
to fit the circumstances, however, pursuant to subsection 204.3(2). The penalty
under subsection 162(1) can therefore be applied to this type of return. Counsel
for the respondent referred me to other decisions of this Court which upheld
the application of subsection 162(1) in similar circumstances: Pereira-Jennings
v The Queen, 2009 TCC 330; 2009 DTC 1193; McNamee v The Queen, 2009
TCC 630; 2010 DTC 1033.
The appellant submits that
subsection 162(1) does not apply in her circumstances because she was not
liable for tax in 2004 and 2005. She relies on Exida.com Limited Liability
Co. v The Queen, 2010 FCA 6935; 2010 DTC 5101.
The appellant has misinterpreted
the decision in Exida.com. That decision concerned an interpretation of
the phrase “liable to a penalty” in subsection 162(2.1) of the Act. This
provision has no relevance to this appeal and the particular phrase that was
considered in Exida.com is not found in the provision that is at issue
The appellant also submits that
the penalties should be vacated because she acted reasonably in the
circumstances. In particular, the appellant asserts that she reasonably
believed that the excess contributions tax would not be imposed where there is
no taxable income.
The question is whether this
constitutes sufficient due diligence to justify the penalty being vacated. In
my view, it does not.
In order to take advantage of a
due diligence defence to vacate a penalty, a taxpayer must establish that she
took appropriate steps to determine her obligations under the Act.
The appellant states that, after
undertaking research, she came to the conclusion that the tax would not be
The evidence in this appeal does
not satisfy me that the appellant’s research constituted reasonable steps. For
example, the appellant did not point me to a particular reference upon which
she relied to reasonably come to this conclusion. I am not satisfied that
appropriate steps were taken.
Should interest be
The appellant also requests that
interest be vacated on grounds of fairness. There is no legislative basis upon
which this Court can provide this relief.
Before concluding, I would mention
that the appellant had been notified by the CRA of the requirement to pay the
excess RRSP contribution tax in 2007. However, she did not file the required
form until February 2009. I am not satisfied that there was a reasonable excuse
for this delay. My conclusion is that the Minister properly imposed tax,
penalty and interest in this case.
The appeal will be dismissed.
Signed at Toronto,
Ontario this 23rd day of February 2011.
“J. M. Woods”