Citation: 2010 TCC 608
Date: 20101222
Docket: 2009-3678(IT)I
BETWEEN:
PETER J. FORRESTER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Angers J.
[1]
This is an appeal concerning
the appellant's 2001 taxation year. On March 1, 2007, the Minister of
National Revenue (the "Minister") assessed the appellant for his 2001
taxation year pursuant to subsection 152(7) of the Income Tax Act
(the "Act") since no return had been filed by the appellant
for the taxation year in question.
[2]
In assessing the
appellant for the 2001 taxation year, the Minister included employment income of
$136,000 and interest income of $36.00 and assessed federal tax in the amount
of $30,958, provincial tax in the amount of $12,313, a late filing penalty of
$7,356 and arrears interest in the amount of $21,226. No credit on account of
instalments was allowed.
[3]
On March 27, 2008,
the appellant filed a return of income for the 2001 taxation year. In that
return, he reported gross professional income of $109,355 and net professional
income of $101,999. He claimed a deduction in the amount of $1,496 for Canada
Pension Plan contributions. He calculated his federal tax to be $20,414 and his
provincial tax to be $8,106, but most importantly, he claimed a credit in the
amount of $30,100 for income tax paid by instalments.
[4]
On May 23, 2008,
the Minister reassessed the appellant for his 2001 taxation year as follows:
1)
He deleted employment
income of $136,000.
2)
He included gross
professional income of $109,355 as reported.
3)
He included net
professional income of $101,999 as reported.
4)
He reduced federal tax
assessed by $9,859 from $30,958 to $21,099.
5)
He reduced provincial
tax assessed by $3,400 from $12,313 to 8,913.
6)
He reduced late filing
penalty assessed by $2,254 from $7,356 to $5,102.
7)
He reduced arrears
interest which had accrued to the date of the reassessment by $9,043 from
$29,314 to $20,271.
[5]
The Minister did not
allow a credit for income tax in the amount of $30,100 paid by instalments as
the appellant had not made any instalment payments on account of his income tax
liability for the 2001 taxation year. Nor did the Minister allow the deduction
of Canada Pension Plan contributions payable on self-employed earnings as the
appellant did not file his income tax return for that taxation year within the
four-year time limit, which is not disputed by the appellant.
[6]
The appellant admits
that his 2001 return of income was required to be filed on June 15, 2002
and that he failed to meet that requirement. He did file on March 27, 2008.
The appellant is appealing the assessment on the basis that he did make
instalment payments in 2001 on account of his income tax liability for the 2001
taxation year and that the interest and penalty assessed by the Canada Revenue
Agency ("CRA") were thus improperly assessed as the CRA did not take
the instalment payments made in 2001 into consideration.
[7]
The respondent's
position is that this Court cannot grant any relief with respect to the
assessment of interest and a penalty nor with respect to the issue of whether
the appellant did make any instalment payments on account of his income tax
liability for the 2001 taxation year.
[8]
The appellant is a
lawyer. Prior to 2001, he incorporated Peter J. Forrester Professional
Corporation at the request of a law firm he was about to join. In those years,
his wife did all his bookkeeping and that of his professional corporation until
they were divorced. For the 2001 taxation year, his professional corporation made
payments to the Canada Customs and Revenue Agency (as it was then called) on
what he called the payroll account of his professional corporation, and he
understood those payments to have been on account of his personal income tax
instalments withheld by his professional corporation.
[9]
The appellant's
professional corporation never filed a return of income for the 2001 taxation year
nor did it issue to the appellant a T4 slip for that taxation year indicating
the amount of tax deducted at source. The professional corporation is now
dissolved.
[10]
After having filed his
Notice of Objection to the assessment under appeal, the appellant received a
letter from Revenue Canada (Exhibit R‑3) saying that they
had reviewed his objections, and on the issue of the instalment payments, they
wrote that it appeared that payments of approximately $28,515 for 2001 had been
made to his corporate payroll account. The CRA then went on to write that this
is not an issue normally addressed in the objection process but said that they
would still review the issue on the condition that certain documents be
provided, particularly copies of the instalment cheques, and that if it was determined
that the instalments were clearly on account of payroll, he (the appellant) might
be entitled to claim an amount for taxes deducted at source. They (the CRA)
would only consider such a claim if the professional corporation issued and filed
a T4 Summary and T4 Supplementary (T4 slip) for the period in question, and
once that was done, a reassessment of the appellant's tax return might then be
required in order to recognize the T4 slip showing the tax deducted and to
remove or adjust the net professional income reported in the amended return.
The letter also explains that as things then stood, the interest and the late
filing penalty were to be confirmed as assessed.
[11]
The appellant has
submitted a statement of account (Exhibit A‑1) for his professional
corporation showing that payments were made at different times in 2001, but no
one from the CRA was called to explain the statement. The appellant relies on
this document and submits it as proof that he did make instalment payments on
behalf of his professional corporation on its payroll account and that these
payments were for income tax deducted for him at source.
[12]
The appellant's
accountant testified that he prepared the appellant's 2001 tax return and that
he received from the CRA in March 2008 the information he used to claim the tax
credit of $30,100, namely the amount of the instalments paid by the appellant's
professional corporation.
[13]
The issues before this
Court are whether the Court can grant the appellant any relief with respect to
the assessment of interest and a penalty and whether this Court has
jurisdiction to grant any relief with respect to the tax credit of $30,100, being
the amount paid by his professional corporation on account of his income tax
liability for the 2001 taxation year.
[14]
The last issue could be
worded differently as being whether the determination whether taxes have been
paid is beyond the scope of an assessment and accordingly outside the
jurisdiction of the Tax Court of Canada. The reason, obviously, for posing the
question in that fashion rests on the description of the powers and
jurisdiction of this Court found in paragraph 171(1) of the Act, which
reads as follows:
171(1) The Tax Court of
Canada may dispose of an appeal by
(a) dismissing it; or
(b) allowing it and
(i) vacating the assessment,
(ii) varying the assessment, or
(iii) referring the assessment back to the
Minister for
reconsideration and reassessment.
[15]
It therefore follows
that for this Court to have jurisdiction, the issue must relate to the assessment
and to taxes paid or withheld that form part of that assessment. There are
somewhat contradictory lines of case law leading to different conclusions
regarding whether payments of tax owing form part of an assessment. The
appellant relied on and cited Aallcann Wood Suppliers Inc. v. The Queen,
94 DTC 1475, as authority for the proposition that an appellant is permitted to
challenge the assumptions of the Minister in appealing an assessment. The facts
in Aallcann are not similar to the facts here. In Aallcann, the
taxpayer wanted to appeal the determination of losses for the 1988 taxation
year in order to be able to carry the losses back to previous years, but was
precluded from doing so because 1988 was a nil assessment year. Judge Bowman,
as he then was, held that this Court could determine the amount of losses for
the 1988 taxation year in an appeal with respect to another year to which these
losses were applied. So, Aallcann stands for the proposition that the
Tax Court has jurisdiction to consider a nil assessment year where the
computations from the nil assessment year have an actual impact on another
taxation year (See Liampat Holdings Limited v. The Queen, 96 DTC 6020.
[16]
There is a more recent
line of cases that supports the proposition that an assessment does not include
amounts withheld at source thus issues with respect to such amounts do not fall
within this Court's jurisdiction. In Valdis v. The Queen, [2001] 1 C.T.C.
2827, Judge Hamlyn stated at paragraph 17:
. . . In my view, under subsection
152(1), an "assessment" is stipulated by Parliament to "assess
the tax for the year ... if any, payable" and not to assess the tax for
the year owing by a taxpayer after source deductions withheld by an employer
are subtracted from exigible tax as assessed for the year. I conclude it cannot
be said that income tax withheld by an employer is a constituent element of an
assessment that can be appealed under section 169. . . .
[17]
In Neuhaus
v. The Queen, 2002 FCA 391, the Federal Court of Appeal held that the matter
of amounts paid by way of source deduction is a collection problem and as such
is not part of an assessment. See also Boucher v. The Queen, 2004 FCA
47. Since those two decisions, this Court has consistently held that it does
not have jurisdiction to determine whether tax has been withheld at source. See
Curwen v. Canada, 2005 TCC 226, Pintendre Autos Inc. v.
Canada, 2003 TCC 818, Surikov v. Canada,
2008 TCC 161 and Welford v. Canada, 2009
TCC 464.
[18]
It therefore
follows that any disputes as to amounts paid are collection problems and
section 222(2) of the Act assigns jurisdiction in such matters to the
Federal Court. This Court does not have jurisdiction to grant the relief sought
by the appellant, including the waiver of interest and penalties (see Hardtke
v. The Queen, 2005 DTC 676), such waiver being
entirely at the Minister's discretion.
Signed this 22nd day
of December 2010.
"François Angers"
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