Citation: 2007TCC682
Date: 20071108
Docket: 2007-2106(IT)I
BETWEEN:
NORALYN C. BALUYOT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
V.A. Miller, J.
[1] This motion is for an Order to dismiss the
Appellant’s appeal from a reassessment for the 2005 taxation year on the basis
that this Court does not have the jurisdiction to hear the appeal. The only
issue under appeal involves the calculation of the Ontario Foreign Tax Credit
(“OFTC”) which was reduced from $4,948.63 to $3,433.63. According to the Notice
of Reassessment dated November 6, 2006 there are nil federal taxes
payable.
[2] The Appellant has opposed the motion on
several grounds. The Appellant’s counsel stated that the issue involved the
calculation of the foreign tax deduction under subsection 126(1) of the Income
Tax Act (the “Act”). In this regard, he referred to the appeal of Wencheng
Zhang v. The Queen (2005-3867(IT)I) which, he said, was identical to the
present appeal and had been heard by Justice Sheridan. As a result, my decision
in this motion was not rendered until the Judgment in Zhang, 2007 TCC
634 was issued. I have had the opportunity to read the Reasons for Judgment in Zhang
and I agree with Justice Sheridan’s reasons for dismissing that appeal.
[3] The Appellant’s counsel stated that
generally there is no appeal to the Tax Court of Canada from an assessment
where there are no federal taxes payable. However, he argued that there is an
exception to this rule when there is a tax credit at issue. He relied on the
decisions in Joseph Fontana v. The Queen, 2007 TCC 450 and Joshi v.
The Queen, 2004 TCC 757 (Joshi #2) to support his submissions.
[4] The decision in Fontana does not assist the Appellant. In that appeal the Respondent brought a
motion to quash the appeal on the basis that it was moot. Justice Sheridan
specifically stated that the issue in Fontana did not involve a nil assessment and that the Respondent acknowledged
that the Court had jurisdiction to hear that appeal.
[5] The Federal Court of Appeal in Interior
Savings Credit Union v. Canada, [2007] FCA 151 at paragraphs 28 to 33 has
stated that the decision in Joshi #2 was incorrect:
[28] However,
in Joshi v. The Queen, 2005 DTC 22 (Joshi #2), a case which
apparently involves the husband of the appellant in Joshi #1, the Tax
Court (O’Connor J.) did hold that a nil assessment can be appealed. The
following five decisions were quoted in support of that proposition: Joshi
#1, Martens, supra, Aallcann Wood Suppliers, supra, Liampat
Holdings Ltd. v. Canada, [1995] F.C.J. No. 1621 and Bruner v. Canada,
2003 F.C.J. No. 144 (FCA). We have already seen that Joshi #1 is not
authority for the proposition that a nil assessment can be appealed. In my
respectful view, the same applies to the other cases relied upon by O’Connor J.
[29] In
Martens the Tax Court refused to strike out a nil assessment on the
basis that the subject matter of the appeal came within a statutory exception
to the normal rule. Rip J. (as he then was) explained that although the
assessment did not assess any taxes, it did set out an amount which the
Minister had the duty to determine and with respect to which a special right of
appeal had been created. After quoting the relevant provisions, he said (at p.
1384):
Subsection 127.1(1)
provides the means by which the taxpayer is deemed to pay an amount on account
of tax equal to his refundable investment tax credit for the year. The
Minister, in accordance with paragraph 152(1)(b), determines the amount of tax
deemed to be paid for the year.
If the
taxpayer does not agree with the Minister’s determination of the amount of tax
deemed to be paid he has the right to object to and appeal the determination:
subsection 152(1.2) grants the taxpayer the right to apply the provisions of
Divisions I and J of the Act, which provide, inter alia, for the rights
to object to an assessment of tax and to appeal such an assessment, or a
determination, other than a determination made under subsection 152(1.1).
Amounts to be determined by the Minister include the determination of an amount
of tax deemed by subsection 127.1(1) to have been paid on account of tax under
Part I of the Act for the year.
In the
matter at bar the Minister has determined the amount of the refundable
investment tax credit in 1984 to be $2,366.24 and the appellant wishes to
appeal from this determination.
The
appellant has the right under the provisions of subsection 152(1.2) to contest
the determination of the Minister by filing a Notice of Objection in the manner
provided by section 165 and, if not satisfied with the Minister’s decision in
respect of the objection., file a Notice of Appeal in the manner provided by
section 169. This is what the appellant has done. He need not wait for a future
taxation year to dispute the determination.
[Emphasis
added]
[30] Aallcann
Wood Suppliers is a decision by Bowman J. (as he then was) which stands for
the proposition that in the absence of a binding loss determination by the
Minister pursuant to subsection 152(1.1) of the Act, it is open to a taxpayer
to challenge the Minister’s calculation of a loss for a particular year in an
another year in which the loss impacts on the taxes assessed. The reasoning of
the Court is set out in the following passage (at pp. 1475-76):
The Minister’s
position in the original reply to the notice of appeal that the Minister’s
ascertainment of a loss for a particular taxation year is immutable unless a
loss determination is made under subsection 152(1.1.) is, however, wrong. It is
true that this court cannot make a formal loss determination under subsection
152(1.1.). That is the Minister’s function. If such a loss determination is
made it is valid and binding unless challenged by way of objection or appeal
and, if it is sustained on appeal, it stands. The purpose of subsection
152(1.1.) is to permit a taxpayer to have its loss for a year determined
definitively and, if necessary, to have the Minister’s determination reviewed
by the court. One of the reasons for the enactment of subsection 152(1.1.)
was that no appeal lies from a nil assessment. In the absence of a binding loss
determination under subsection 152(1.1.), it is open to a taxpayer to challenge
the Minister’s calculation of a loss for a particular year in an appeal for
another year where the amount of the taxpayer’s taxable income is affected by
the size of the loss that is available for carry-forward under section 111. In
challenging the assessment for a year in which tax is payable on the basis
that the Minister has incorrectly ascertained the amount of a loss for a prior
or subsequent year that is available for deduction under section 111 in the
computation of the taxpayer’s taxable income for the year under appeal, the
taxpayer is requesting the court to do precisely what the appeal procedures of
the Income Tax Act contemplate: to determine the correctness of an assessment
of tax by reviewing the correctness of one or more of the constituent elements
thereof, in this case the size of a loss available from another year. This
does not involve the court’s making a determination of loss under subsection
152(1.1.) or entertaining an appeal from a nil assessment. It involves merely
the determination of the correctness of the assessment for the year before it.
[Emphasis and
double Emphasis added]
The year in
issue was not a nil assessment year since as is indicated, the taxpayer was
“challenging the assessment for a year in which tax is payable, …”. Bowman J.
simply held that all elements relevant to the determination of the taxes assessed
for that year, including the Minister’s calculation of a loss in another year,
were properly in issue.
[31] In
Liampat Holdings Ltd., Counsel for the taxpayer relied on Aallcann
Wood Suppliers to argue that a nil assessment could be appealed. The
Federal Court (Cullen J.) held that Counsel had misconstrued Aallcann Wood
Suppliers (at para. 8):
I take
Aallcann to mean that this 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; it does not give the Court jurisdiction to consider a
nil assessment directly.
[Emphasis
added]
This is an accurate statement of the rule
set out in Aallcann Wood Suppliers.
[32] Lastly,
O’Connor J. in Joshi #2 indicates that the recent decision of this Court
in Bruner, supra, (at para. 9) “… seems to have broadened the cases in
which the Court may review a nil assessment taxation year …”. However, Bruner
gives effect to the rule that no appeal lies from a nil assessment or from an
assessment where the amounts assessed are not in dispute. The dispositive
portion of the reasons reads (at para. 3):
Consequently,
a taxpayer is not entitled to challenge an assessment where the success of the
appeal would either make no difference to the taxpayer’s liability, […] or
would increase the taxpayer’s liability for tax. When the respondent took the
position that there was no amount in dispute, the Tax Court judge should have
applied the nil assessment jurisprudence and quashed the Notice of Appeal.
[33] There
is therefore no authority for the proposition advanced in Corriveau, Joshi
#2 and in the decision under appeal that a nil assessment can be appealed.
[6] The tax credit at issue in this appeal is
the OFTC, which is a credit against Ontario tax and is
granted under subsection 4(6) of the Ontario Income Tax Act. As a result,
it is a provincial tax and the Tax Court of Canada does not have jurisdiction
to pronounce on the validity of an assessment of provincial income taxes (See Sutcliffe
v. The Queen, [2005] 1 C.T.C. 149 at paragraph 14 and Hennick
v. Canada, [1998] T.C.J. No. 562 at paragraph 9.).
[7] The Appellant’s final ground for opposing
the motion to dismiss was that the issue under appeal involved the calculation
of the amount of tax payable under the Federal Act. Pursuant to subsection
23(2.1) of the Ontario Income Tax Act there is no appeal from an
assessment in respect of the computation of the amount of tax payable under the
Federal Act to the Ontario Superior Court of Justice. He argued that by
implication the Tax Court of Canada has jurisdiction to hear the present
appeal.
[8] I disagree with the Appellant. The Tax
Court of Canada is a statutory Court and its jurisdiction is limited by statute
(See Little v. The Queen, [2007] 2 C.T.C. 2062). Section 12 of
the Tax Court of Canada Act provides for the matters over which this Court
has jurisdiction 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.
Jurisdiction
(2) The
Court has exclusive original jurisdiction to hear and determine appeals on
matters arising under the War Veterans Allowance Act and the Civilian
War-related Benefits Act and referred to in section 33 of the Veterans
Review and Appeal Board Act.
Further
jurisdiction
(3) The
Court has exclusive original jurisdiction to hear and determine questions
referred to it under section 51 or 52 of the Air
Travellers Security Charge Act, section 97.58 of the Customs Act, section 204 or 205 of
the Excise Act, 2001,
section 310 or 311 of the Excise Tax
Act, section 173 or 174 of the Income
Tax Act or section 62 or 63 of the Softwood Lumber Products Export Charge Act, 2006.
[9] The Respondent’s motion is granted and the
Appellant’s appeal for the 2005 taxation year is dismissed.
Signed at Ottawa, Canada this 8th day of November, 2007.
“V.A. Miller”
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