Citation: 2010TCC486
Date: 20101008
Docket: 2010-1338(IT)APP
BETWEEN:
ASOGAN GOVENDER,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
AMENDED REASONS FOR ORDER
Webb J.
[1]
The Applicant has made an
application to extend the time within which he may institute an appeal of the
reassessment of his liability under the Income Tax Act for his 2004
taxation year.
[2]
The Applicant is a truck driver
and in 2004 he incorporated his business. He indicated that he relied entirely
on his accountant in relation to all of the accounting and income tax matters
related to his business and the transfer of assets to his corporation in 2004.
[3]
The Applicant was reassessed in
relation to his liability for income taxes for 2004 on June 29, 2007. He filed
a notice of objection and the confirmation of the reassessment was mailed on
June 20, 2008.
[4]
By letter dated February 13, 2009
(which was more than 90 days after the notice of confirmation was mailed to the
Applicant) the accountant for the Applicant wrote a letter addressed to this
Court at the address for this Court in Vancouver. However for some unexplained reason this letter was
actually delivered to the Canada Revenue Agency (the “CRA”) in Surrey, British
Columbia.
[5]
This letter was not forwarded by
the CRA to this Court until October 29, 2009, which was more than one year and
90 days from the date that the notice of confirmation was mailed to the
Applicant.
[6]
The Applicant filed this
application to extend the time within which an appeal may be instituted on
April 22, 2010.
[7]
Subsections 167(1), (3) and (5) of
the Income Tax Act provide as follows:
167 (1)
Where an appeal to the Tax Court of Canada has not been instituted by a
taxpayer under section 169 within the time limited by that section for doing
so, the taxpayer may make an application to the Court for an order extending the
time within which the appeal may be instituted and the Court may make an order
extending the time for appealing and may impose such terms as it deems just.
…
(3) An
application made under subsection (1) shall be made by filing in the Registry
of the Tax Court of Canada, in accordance with the provisions of the Tax Court
of Canada Act, three copies of the application accompanied by three copies of
the notice of appeal.
…
(5) No
order shall be made under this section unless
(a) the
application is made within one year after the expiration of the time limited by
section 169 for appealing; and
(b) the
taxpayer demonstrates that
(i) within
the time otherwise limited by section 169 for appealing the taxpayer
(A) was
unable to act or to instruct another to act in the taxpayer's name, or
(B) had a bona fide
intention to appeal,
(ii) given
the reasons set out in the application and the circumstances of the case, it
would be just and equitable to grant the application,
(iii) the
application was made as soon as circumstances permitted, and
(iv) there are reasonable
grounds for the appeal.
[8]
Justice Sharlow of the Federal
Court of Appeal in Dewey v. The Queen, 2004 FCA 82, 2004 DTC
6159, [2004] 2 C.T.C. 311 stated that:
3 Section
167 of the Income Tax Act permits the Tax Court to extend the time for
commencing an appeal to the Tax Court, if a number of the conditions are met. A
failure to meet any one of the conditions is fatal to the application.
[9]
Counsel for the Respondent focused
on the condition that the application must be made within one year and 90 days
from the date of the mailing of the notice of confirmation.
It is clear that no application was filed with this Court until well after this
time period had expired. The letter dated February 13, 2009 was addressed
correctly but was not delivered to this Court until after this time period had
expired. The application to extend time that was filed directly with this Court
was filed on April 22, 2010 which was long after this time period had expired.
While the failure of the Applicant to file with this Court an application as
contemplated by section 167 of the Income Tax Act within the time period
as provided by paragraph 167(5)(a) of the Income Tax Act is a valid
reason to dismiss the application, I would also like to focus on the issue that
the Applicant is trying to appeal.
[10]
The letter dated February 13, 2009
from the Applicant’s accountant stated as follows:
Re: Asogan Govender SIN …
2004 Tax return
Attached you will find the following documents:
1.
Required filing fee
2.
Copy of the original Notice of Objection filed
3.
Copy of the revised T2057 election with
applicable payment filed on or about September 28, 2007
4.
Amended 2005 and 2006 T2 returns
We have been made aware of the change made to ITA Sec. 14(1.01)
which replaced ITA Sec 14(1) sometime in 2004. This change made goodwill
ineligible to be treated as a capital gain.
As this change in law will produce unintended tax consequences for
the taxpayer, the taxpayer seeks to utilize ITA Sec 85(7) to amend the original
election filed on or about September 28, 2007, in conjunction with the original
Notice of Objection.
The taxpayer request the Minister amend his original reassessment to
account for the reduced eligible capital expenditure income inclusion in 2004,
and this file be referred to Mr. David McKay, Audit Division, at the Burnaby
Fraser Appeals Division.
Should this appeal not appear to be filed in time, the registrant’s
representative kindly requests the Minister use his discretion to grant an
extension of time for filing the Notice of Objection pertaining to the
reassessment for the year 2004, as this was paperwork filed incorrectly due to
an administrative error at the representative’s office, and therefore was
unnecessarily delayed.
I trust this will resolve the issue at hand. Please contact the
writer directly with your questions or comments.
[11]
The accountant referred to
subsection 85(7) of the Income Tax Act. However, it appears that this should
have been a reference to subsection 85(7.1) of the Income Tax Act since
it is this subsection that relates to amended election forms filed under
section 85 of the Income Tax Act, not subsection 85(7) of the Income
Tax Act.
[12]
Subsections 85(7) and (7.1) of the
Income Tax Act provide as follows:
(7) Where the
election referred to in subsection (6) was not made on or before the day on or
before which the election was required by that subsection to be made and that
day is after May 6, 1974, the election shall be deemed to have been made on
that day if, on or before the day that is 3 years after that day,
(a) the election is made in prescribed form; and
(b) an estimate
of the penalty in respect of that election is paid by the taxpayer or the
partnership, as the case may be, when that election is made.
(7.1) Where,
in the opinion of the Minister, the circumstances of a case are such that it
would be just and equitable
(a) to permit
an election under subsection (1) or (2) to be made after the day that is 3
years after the day on or before which the election was required by subsection
(6) to be made, or
(b) to permit
an election made under subsection (1) or (2) to be amended,
the election or
amended election shall be deemed to have been made on the day on or before
which the election was so required to be made if
(c) the
election or amended election is made in prescribed form, and
(d) an estimate
of the penalty in respect of the election or amended election is paid by the
taxpayer or partnership, as the case may be, when the election or amended
election is made,
and where this
subsection applies to the amendment of an election, that election shall be
deemed not to have been effective.
[13]
It seems clear that the accountant
is trying to amend the election form that was filed under section 85 of the Income
Tax Act in relation to the elected amount for goodwill. He is not objecting
to the assessment of income tax based on the amount that was elected but rather
is trying to change the tax consequences by changing the elected amount. Since
the amount of taxes were assessed correctly based on the amount that the
accountant had elected as the proceeds of disposition for the goodwill, there
is no basis to appeal the assessment (or the reassessment) of the Applicant’s
income tax liability for 2004 to this Court.
[14]
If the Applicant is questioning
whether the Minister exercised his discretion (as provided in subsection
85(7.1) of the Income Tax Act) properly, then that is not a
matter for this Court. This Court only has jurisdiction to deal with appeals as
provided in the Income Tax Act.
[15]
This Court was formed by an Act of
Parliament, the Tax Court of Canada Act. The jurisdiction of this Court is
set out in section 12 of that Act and in particular subsection 12(1) of
this Act provides as follows:
12. (1) 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.
(emphasis added)
[16]
The right to appeal to this Court
is provided in subsection 169(1) of the Income Tax Act which provides as
follows:
169. (1)
Where a taxpayer has served notice of objection to an assessment under section
165, the taxpayer may appeal to the Tax Court of Canada to have the assessment
vacated or varied after either
(a) the
Minister has confirmed the assessment or reassessed, or
(b) 90 days
have elapsed after service of the notice of objection and the Minister has not
notified the taxpayer that the Minister has vacated or confirmed the assessment
or reassessed,
but no appeal
under this section may be instituted after the expiration of 90 days from the
day notice has been mailed to the taxpayer under section 165 that the Minister
has confirmed the assessment or reassessed.
[17]
The remedies that this Court may
grant in relation to appeals arising under the Income Tax Act are set
out in section 171 of this Act which provides that:
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.
[18]
This Court has the jurisdiction to
deal with appeals arising from assessments or reassessments and whether such
assessments or reassessments are correct. This Court does not have the
jurisdiction to review the decision of the Minister to not permit the Applicant
to amend the section 85 election form that was filed in relation to the
transfer of assets to his corporation.
[19]
The application to extend the time
to appeal that was filed on April 22, 2010 did not raise any other issue in
relation to the reassessment of the Applicant. This application stated that:
An extension of time is required because:
1.
The applicant’s 2004 re-assessment was confirmed
by the Minister on June 20, 2008.
2.
An adjustment request under ITA subsection
85(7), relating to the unintended tax consequences to the appellant, was not
processed during the appeals process. This adjustment was not followed up on by
the taxpayer’s representative.
3.
This unprocessed adjustment request went
unnoticed by the appellant until February, 2009, who was still expecting a
reassessment for 2004 to take place. Accordingly, the appellant filed an appeal
to the Tax Court of Canada on February 13, 2009 to allow the amended T2057
under ITA subsection 85(7).
4.
The appeal was incorrectly hand-delivered to the
Canada Revenue Agency (CRA) at 9755 King George Highway, Surrey, BC on or
about February 13, 2009. The appeal was not returned to the appellant, nor was
it forwarded to the Tax Court of Canada until late October or early November
2009 after a delay of nearly nine months, by which time normal extension for
time are no longer allowed.
[20]
The only matter to which the
Applicant referred was the “unprocessed adjustment request”. This is not a
matter over which this Court has jurisdiction.
[21]
The application made by Asogan Govender to extend the time within which the appeal of the
reassessment of his liability under the Income Tax Act for his 2004
taxation year may be instituted, is dismissed.
This Amended Order and Amended Reasons for Order is
issued in substitution for the Order and Reasons for Order dated October 1,
2010.
Signed at Halifax, Nova Scotia, this 8th
day of October, 2010.
“Wyman W. Webb”
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