Citation: 2006TCC94
Date: 20060215
Docket: 2005-1618(IT)I
BETWEEN:
KEVIN MICHEAL FETTERLY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
McArthur J.
[1] These appeals are from assessments of the Minister of National Revenue for the 2002 and 2003 taxation years. The Minister submits that with respect to the 2002 taxation year, the appeal is not valid because the Appellant did not comply with subsection 169(1) of the Income Tax Act and did not file for an extension of time under subsection 167(1) to file the appeal. Before dealing with this issue some background is helpful. Basically the Appellant contends that with respect to both years, he does not entirely understand the Minister's complex calculations and feels he has been unfairly charged interest.
[2] The Appellant had been with the Canadian Armed Forces in Laar, Germanyin 1990 when he suffered from post traumatic stress syndrome, and returned to Canada. He has not worked since that time. In 2002, he received a lump sum pension payment from the Federal Government of $78,611. In 2003, he received $179,334 from the Wage Loss Replacement Plan Benefits with Maritime Life Insurance Company. The amount received in 2002 represented a specified portion for the years 1990 to 2002 inclusive. The amount received in 2003 represented a specified portion for the years 1990 and 1992 to 2002 inclusive.
[3] A lump sum payment representing the replacement of earned income retroactively is generally included in computing a taxpayer's income in the year it is received. As a partial relieving measure, subsection 110.2(2) of the Act provides for a deduction in computing taxable income for the year in which the qualifying amount was received. Briefly, taxable income is reduced by the principal portion of the payments relating to the previous years in which the individual was eligible to receive them. An adjustment resembling interest is also calculated under section 120.31 of the Act in respect to payments in previous years. The tax adjustment under these sections must be examined together.
2002 taxation year
[4] I agree with the Minister for the following reasons. The Minister reassessed the Appellant's income tax return for the 2002 taxation year. The Appellant served on the Minister a Notice of Objection received on December 29, 2003. By letter dated April 27, 2004, the Minister confirmed the Notice of Reassessment. The Appellant served on the Minister a further Notice of Objection dated October 21, 2004. By letter dated November 10, 2004, the Minister advised the Appellant that the second Notice of Objection was invalid as the reassessment dated November 24, 2003, had previously been confirmed. The letter further stated that the Appellant could file an extension of time to file a Notice of Appeal with the Tax Court of Canada which the Appellant did not do.
[5] In conclusion, the Notice of Appeal with respect to the 2002 taxation year is not valid as the Appellant did not file the Notice of Appeal within 90 days of the Confirmation date of April 27, 2004, as required by subsection 169(1) of the Act, nor did he apply for an extension of time for the said taxation year in accordance with subsection 167(1) of the Act.
2003 taxation year
[6] The Appellant reported total income of $28,182 for the 2003 taxation year. The Minister reassessed him by adding $179,334 and plus $270 interest. The Minister concluded that in applying the provisions of sections 110.2 and 120.31, the Appellant's tax payable would be reduced by $4,026. The Minister's calculations are detailed in Schedule A attached to these Reasons. The Reply to the Notice of Appeal with respect to the 2003 taxation year provides as follows:
11. In computing income for the 2003 taxation year, the Appellant reported income totalling $28,182 as shown at the top of the attached Schedule A.
12. By Notice of Assessment dated April 26, 2004, the Minister assessed the Appellant's income tax return for the 2003 taxation year.
13. By Notice of Reassessment dated August 27, 2004, the Minister reassessed the Appellant's income tax return for the 2003 taxation year by including other income of $179,334 and additional interest of $270. The Minister further determined that the provisions of sections 110.2 and 120.31 of the Act were beneficial to the Appellant and computed federal tax in the amount of $35,457.82 by applying said sections.
14. The Appellant served on the Minister a Notice of Objection received by the Minister on November 2, 2004, in regard to the Notice of Reassessment referred to in paragraph 13 herein.
15. By Notice of Reassessment dated March 22, 2005, the Minister varied the reassessment referred to in paragraph 13 herein and increased the amount of federal tax to $44,977.55 determined pursuant to sections 110.2 and 120.31 of the Act.
16. In so varying the reassessment of the Appellant's income tax return for the 2003 taxation year, the Minister relied on the following assumptions of fact:
(a) during the 2002 taxation year, the Appellant received a lump sum payment of $78,611 from the Government of Canada;
(b) of the amount of $78,611 referred to in subparagraph 16(a) herein, a total of $73,075 applied to the years 1990 to 2001 and the amount applicable to each of the said taxation years is stated on the attached Schedule A;
(c) the Minister considered the provisions of sections 110.2 and 120.31 of the Act in calculating tax payable with respect to the lump sum payment of $73,075 referred to in subparagraph 16(b) herein and determined that the application of said sections were beneficial to the Appellant;
(d) the Appellant was in receipt of Wage Loss Replacement Plan Benefits (the "Benefits") from "The Maritime Life Assurance Company" as a result of an illness and was issued a T-4A slip in the amount of $179,335 with respect to said Benefits for the 2003 taxation year;
(e) the entire amount of Benefits was paid with respect to the year 1990 and period 1992 to 2002 as show on the attached Schedule A;
(f) the amount of federal tax computed as reflected in the Notice of Reassessment dated August 27, 2004 for the 2003 taxation year as referred to in paragraph 13 herein did not take into account the lump sum payment of $73,075 with respect to the 2002 taxation year as stated in subparagraph 16(a) to 16(c) herein; and
(g) the application of sections 110.2 and 120.31 of the Act in calculating tax payable with respect to the lump sum payment of $179,335 referred to in subparagraph 16(d) was determined to be beneficial to the Appellant as computed in accordance with the Notice of Reassessment dated March 22, 2005 referred to in paragraph 15 herein and stated on the attached Schedule A.
[7] The Appellant's predominant request is with respect to the tax adjustment or interest calculated under section 120.31. I believe he is asking that I make a recommendation that he receive a favourable ruling pursuant to the Fairness Package under section 220 of the Act.
[8] The Appellant has been dealing with the Minister, primarily on his own, for a number of years although he spoke to a lawyer at some point and had a chartered accountant assist him prior to the relevant reassessment for 2003. The calculations under subsection 110.2(2) and section 120.31 of the Act are complex and CCRA has made mistakes resulting in several reassessments that have been understandably upsetting to the Appellant. He states that these mistakes led to unfair decisions. His primary position is that the interest charges are unreasonable. He added that he has left 30 telephone messages with the "Fairness Committee" with receiving a reply.
[9] He acknowledges that this Court is not one of equity and does not have the power to make an exception for him on the grounds of fairness or equity. What he does request is that I recommend that the fairness committee decide in his favour upon his application to it. Given the many delays and corrections he experienced without fault on his part and the complexity of his assessments, I support his fairness application. During the hearing, a good deal of time was spent with the Respondent's witness, Judith Marie Woodley, in attempting to understand the Minister's calculations. Her personal knowledge of the file was limited but she was an impressive witness who was able to clarify many of the assessments' ambiguities. She has twenty years experience with CCRA and its predecessors. The calculation of notional tax is beyond the reach of most taxpayers and the assessments are far from being self-explanatory.
[10] The Minister describes the 2003 reassessment as speaking for itself in paragraph 3 of the Reply to the Notice of Appeal I question that statement. The reassessment reads as follows:
Statement of Account - 2003
|
Payments received this year
|
$0.00
|
|
Amount reassessed
|
$68,251.47
|
|
Previous assessment
|
$62,145.33
|
|
Increase or decrease this year
|
$6,106.14 INC
|
|
Interest adjustment (DR. or CR.)
|
$376.77 DR
|
|
Adjustment to tax deducted
|
$0.00
|
|
Revised balance
|
$6,482.91 DR
|
[11] There was no mention of how or why the amount reassessed was increased from $62,145 to $68,251. It would appear this reassessment comes as a result of the Appellant questioning an added surtax. Apparently, the surtax was deleted but $6,106 was added. Up to this point, he had the services of a chartered accountant who apparently abandoned the file perhaps in frustration.
[12] After several hours of evidence the issue the Appellant asks me to focus on is the interest totalling $15,475.72 as set out in the last column of Schedule A for the 2003 taxation year. Counsel for the Respondent refers to it as interest in some instances and as additional tax in others. In the Reply it is referred to as interest and similarly in paragraph 120.31(3)(b) of the Act. It meets the definition of interest. The Minister charged a rate of interest on the amounts of tax deemed to have been paid annually through the 1990 and 2000, 2001 and 2002 taxation years. The importance as to whether it is interest may arise with respect to the Fairness Committee. The Appellant believes that the Committee may take the position that it is not interest and not within its jurisdiction. In the Reply to the Notice of Appeal, the Respondent refers to it as interest in paragraph 13(c), as well as in Schedule A.
[13] While it is not open to me to decide for the Committee, the $15,475.72 amount that the Appellant wishes to have the Committee consider, has all the indicia of interest. As Mogan J. in Sanfordv. The Queen, [2000] T.C.J. No. 801 stated "If a two-legged creature with feathers waddles like a duck, quacks like a duck, and looks like a duck, it must be a duck". In as much as I am empowered to do so, I suggest that the amount is in fact interest and recommend that the Appellant's application under the fairness package be given careful consideration.
[14] In conclusion, the 2002 taxation year is not properly before the Court and the purported appeal is quashed, With respect to the 2003 taxation year, I accept the evidence of the Respondent's witness and have been given no reason not to conclude that Schedule A is accurate. I have no power to reverse the interest charged provided it is properly calculated.
[15] During the hearing, I asked the Respondent's counsel whether the Minister had considered that all or part of the lump sum amounts could be considered capital. This had not been taken into consideration and the Appellant made no representations. From the limited information available, I cannot comment one way or the other.
[16] In general, the Appellant is looking to me to reduce his tax load which he believes is not fair. I cannot do so if it is properly calculated and there was no evidence that the final reassessment was incorrect.
[17] The appeal from the assessment for the 2002 taxation year is quashed, and the appeal from the assessment for the 2003 taxation year is dismissed.
Signed at Ottawa, Canada, this 15th day of February, 2006.
"C.H. McArthur"
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