Citation: 2009TCC156
Date: 20090319
Docket: 2007-3942(IT)G
BETWEEN:
PAUL C.J. BAREL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
V.A. Miller, J.
[1]
This appeal is from the
assessment of the appellant’s 2006 taxation year. The issue as stated in the
Notice of Appeal is whether this court will allow the appellant to make a
contribution to a Registered Retirement Savings Plan (RRSP) for the year in
issue.
[2]
As explained below,
this court does not have the jurisdiction to grant the remedy requested by the
appellant.
[3]
The parties submitted
an Agreed Statement of Facts as follows:
The parties to this appeal, for the purposes only of this appeal,
agree to the following facts. The parties agree that each party is free to
adduce in evidence additional facts not inconsistent with this Agreed Statement
of Facts:
1.
The Appellant was born on March 15, 1936 and in
the year 2006, he was 70 years of age.
2.
During the years 1998 to 2003, the Appellant
worked for The Austin Company in the United States of America (the US). During that same period, the Appellant
was only a resident of the US.
3.
The Austin Company had set up the Austin
Employees’ Saving Plan which was designed as a long term savings plan to
establish a financially secure retirement for its employees.
4.
The Austin Employees’ Saving Plan offered
employees the option to contribute to an account qualifying under s. 401(k) of
the US Internal Revenue Code (the 401(k) Plan). When employees made
contributions to the 401(k) Plan, The Austin Company was also making
contributions to the plan according to a predetermined formula.
5.
The 401(k) Plan was not a retirement savings
plan or a retirement income fund accepted by the Minister of National Revenue
for a registration under the Income Tax Act.
6.
Employees contributing to the 401(k) Plan would
do so by deduction from their income and the amounts contributed by employees
and the Austin Company would not be taxed in the year of contribution under the
US tax law. US tax law provided
for a tax deferral not only on the amounts contributed but also on the
investment income generated by the 401(k) Plan.
7.
During his employment at The Austin Company in
the US, the Appellant and The
Austin Company contributed to the Appellant’s 401(k) Plan.
8.
In February 2003, the Appellant retired working
from The Austin Company and returned to Canada where he regained his Canadian resident status. At the end of the
year 2005, the Appellant transmitted the required form for the withdrawals of
funds from the 401(k) Plan to the plan’s trustee, The Vanguard Group.
9.
From February 2006 to July 2006, the Appellant
received 6 monthly payments for the 401(k) Plan of US $500 less withholding
made in respect of US taxes.
10. During the year 2006, The Vanguard Group advised the Appellant that
the 401(k) Plan was being terminated and that the funds in the plan could not
be transferred to a US Individual Retirement Account or a Canadian Registered
Retirement Savings Plan (RRSP).
11. The Appellant decided to withdraw his funds from the 401(k) Plan and
received on November 2, 2006 a lump sum of US $68,309, less withholding made in
respect of the US taxes, which
was deposited in the Appellant’s bank account at the branch of the Bank of
Montreal in London, Ontario.
12. On November 7, 2006, the funds received from the 401(k) Plan were
transferred to BMO Nesbitt Burns and subsequently used to acquire stocks and
bonds.
13. During March 2007, the Appellant was advised that the funds
received from the 401(k) Plan could have been transferred to a RRSP if it had
been done within two months of receiving the said funds. To this day, the funds
received by the Appellant from the 401(k) Plan have not been invested in a RRSP
or a Registered Retirement Income Fund.
[4]
In addition to the
Agreed Statement of Facts, it was the appellant’s evidence that in 2003,
TD-Waterhouse informed him that it was no longer possible to transfer funds
from a 401(k) plan to a Registered Savings Plan (RSP). In mid-March 2007, he
again spoke to his TD-Waterhouse contact who now informed him that transfers
from United States (U.S.) retirement plans to Canadian RRSPs were still
possible. He was advised by them that he should have transferred the funds to a
RRSP within two months after the end of 2006, i.e. by March 1, 2007.
[5]
When he filed his 2006
income tax return, the appellant included a letter in which he requested that
the age limit for contribution to an RRSP be increased and the time limit for a
rollover of the 401(k) funds to a RRSP be extended. In his letter he also
stated:
It would be a shame if the RSP principle would be defeated by a
combination of a US bankruptcy,
US laws and misinformation given by specialists on both sides of the US/Canada
border. Without the bankruptcy my 401-K plan was perfectly fine and operating.
If the March 21 information had been supplied early November, there would have
been ample time to arrange the transfer.
It was never my inten(t) to collapse the 401-K plan as a lump sum
unit.
[6]
The appellant was upset
that no one at the Canada Revenue Agency “reacted” to or addressed his letter.
He stated that the law is not fair and there should be someone who could adjust
it to make it fair.
[7]
At the hearing it was
the respondent’s position that the appellant was over the age limit to make
contributions to a RRSP when he received the funds from his 401(k) plan and
when the legislation changed, the appellant did not contribute the funds to a
RRSP within 60 days after the end of the year.
[8]
The evidence is clear
that in 2006 the appellant was 70 years old and he could not contribute to a
RRSP as the age limit was 69[1].
The relevant statutory provision is paragraph 146(2)(b.4) which reads:
146. (2)
Acceptance of plan for registration [ -- conditions] -- The Minister shall
not accept for registration for the purposes of this Act any retirement savings
plan unless, in the Minister's opinion, it complies with the following
conditions:
[…]
(b.4) the
plan does not provide for maturity after the end of the year in which the
annuitant attains 69 years of age; (emphasis added)
[9]
This paragraph was
amended by S.C. 2007, c.29 (Bill C-52), so that the Minister could accept a
retirement savings plan for registration up to the end of the year in which the
annuitant attained 71 years. This amendment applied after 2006 and the
appellant had to contribute the funds from his 401(k) plan within 60 days after
the end of 2006 in accordance with subparagraph 60 (j)(iv) which reads:
60. Other
deductions -- There may be deducted in computing a taxpayer's income for
a taxation year such of the following amounts as are applicable:
[…]
(j) transfer
of superannuation benefits [to RRSP] -- such part of the total of all
amounts each of which is
(i)
a superannuation or pension benefit (other than any amount in respect of
the benefit that is deducted in computing the taxable income of the taxpayer
for a taxation year because of subparagraph 110(1)(f)(i) or a benefit
that is part of a series of periodic payments) payable out of or under a
pension plan that is not a registered pension plan, attributable to services
rendered by the taxpayer or a spouse or common-law partner or former spouse or
common-law partner of the taxpayer in a period throughout which that person was
not resident in Canada, and included in computing the income of the taxpayer
for the year because of subparagraph 56(1)(a)(i), or
(ii)
an eligible amount in respect of the taxpayer for the year under section 60.01,
subsection 104(27) or (27.1) or paragraph 147(10.2)(d),
as
(iii)
is designated by the taxpayer in the taxpayer's return of income under this
Part for the year, and
(iv)
does not exceed the total of all amounts each of which is an amount paid by
the taxpayer in the year or within 60 days after the end of the year
(A) as a contribution to or under a registered pension plan for the
taxpayer's benefit, other than the portion thereof deductible under paragraph
8(1)(m) in computing the taxpayer's income for the year, or
(B) as a premium (within the meaning assigned by subsection 146(1))
under a registered retirement savings plan under which the taxpayer is the
annuitant (within the meaning assigned by subsection 146(1)), other than the
portion thereof designated for a taxation year for the purposes of paragraph
(l),
to the extent
that the amount was not deducted in computing the taxpayer's income for a
preceding taxation year; (emphasis added)
[10]
Unfortunately, it was not until
sometime in mid-March that the appellant learned that he could make the
contribution. This was too late.
Jurisdiction of the Tax
Court to grant the remedy
[11]
The Tax Court of Canada
derives its jurisdiction from statute. Its exclusive jurisdiction over income
tax appeals stems from subsection 12(1) of the Tax Court of Canada Act
which provides:
12. (1)
The Court has exclusive original jurisdiction to hear and determine references
and appeals to the Court on matters arising under [inter alia] the Income
Tax Act when references or appeals to the Court are provided for in
those Acts.
[12]
Subsection 12(1) limits
this court’s jurisdiction, given that it clearly specifies that the right to
appeal must emerge from within the statutes themselves. Thus, in income tax
appeals, one must look to the Income Tax Act (the “Act”) to further
define this court’s jurisdiction. The relevant sections are 169 and 171 which
read:
169. (1)
Appeal -- 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.
171. (1)
Disposal of appeal -- 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.
[13]
Although the TCC may dispose of an
appeal by allowing it and varying the assessment, it must do so by determining
whether the assessment is correct in law and in fact. In Addison & Leyen
Ltd. v. Canada[2],
Justice Sharlow stated the following:
A
taxpayer who is not satisfied with the Minister's disposition of a notice of
objection has the right to appeal the assessment to the Tax Court of Canada,
subject to certain time limits (section 169 of the Income Tax Act; an
extension of time may be permitted under section 167). The Tax Court may
dispose of an income tax appeal by dismissing the appeal or allowing it. If the
appeal is allowed, the Tax Court may vacate or vary the assessment, or refer it
back to the Minister for reconsideration and reassessment (section 171 of the Income
Tax Act). The decision of the Tax Court of Canada may be appealed to the
Federal Court of Canada pursuant to section 27 of the Federal Courts Act.
In an
income tax appeal, the Tax Court is required to determine whether, in relation
to the issues stated in the notice of appeal and the Minister's reply, the
assessment under appeal is correct in law and in fact. Because the primary tax
liability of a person for a particular year is a function of the relevant
events that occurred in that year, unreasonable delay or other improper
conduct on the part of a tax official in the assessment or objection process
cannot be relevant to the correct determination of that liability: see, for
example, Bolton v. R. (1996), 200 N.R. 303, [1996] 3 C.T.C. 3, 96 D.T.C.
6413 (Fed. C.A.), Ginsberg v. R., [1996] 3 F.C. 334 (Fed. C.A.)
(application for leave to appeal dismissed, S.C.C. File No. 25520).[3] (emphasis added)
[14]
In a situation like the
present appeal, where the assessment was calculated in accordance with the
provisions of the Act as they existed in 2006, then the assessment must be
upheld and the appeal dismissed. This court does not have jurisdiction to allow
an appeal on equitable grounds or on grounds of fairness as requested by the
appellant. As stated by Sobier, T.C.J. in Sunil Lighting Products v. Canada[4]
The
jurisprudence clearly affirms that the Tax Court of Canada is not a court of
equity and its jurisdiction is based within its enabling statute ... In
addition, the Court cannot grant declaratory relief given that such relief is
beyond the jurisdiction of the Court ... In an income tax appeal, the Court's
powers are spelled out in subsection 171(1) of the Income Tax Act. Consequently,
these powers essentially entail the determination of whether the assessment was
made in accordance with the provisions of the Income Tax Act…
[15]
The appeal is dismissed.
Signed at Ottawa,
Canada, this 19th day of March 2009.
“V.A. Miller”
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