|
Citation: 2004TCC782
|
|
Date: 20041209
|
|
Docket: 2003-3037(IT)I
|
|
BETWEEN:
|
|
SUSHMA MARWAHA,
|
|
Appellant,
|
|
and
|
|
|
|
HER MAJESTY THE QUEEN,
|
|
Respondent.
|
REASONS FOR JUDGMENT
O'Connor, J.
[1] These appeals for the 1998, 1999
and 2000 taxation years raise many issues. After the hearing, as
requested by the Court, counsel for the Respondent filed with the
Court written submissions dated October 7, 2004 and the Appellant
by letter to the Court dated October 20, 2004 filed submissions.
Both submissions related to this appeal of Sushma Marwaha, file
number 2003-3037(IT)I and to the appeals of Yash Marwaha,
file number 2003-4125(IT)I and to Premwati Marwaha, file
number 2003-3613(IT)I. A further letter to the Court dated
November 25, 2004 from counsel for the Respondent made further
submissions related to the issue of nil assessments but that is
not an issue in these appeals of Sushma Marwaha.
[2] The following is intended to
summarize the issues in the appeals of Sushma Marwaha and their
resolution:
1. In each of the years
1998, 1999 and 2000 there was a question as to how a support
amount of $8,400.00 in each year was to be treated. Counsel for
the Respondent has, by the written submissions dated October 7,
2004, agreed, with the consent of the Appellant and her husband
that although the Appellant, Sushma Marwaha was living in the
same residence with her husband, Yash Marwaha, they were
nevertheless to be considered as living separate and apart and
pursuant to a written agreement, with the result that the said
amount of $8,400.00 in each of said three years is to be included
in the income of Yash Marwaha and deducted from the income of the
Appellant Sushma Marwaha as contemplated in sections 56 and 60 of
the Income Tax Act ("Act"). This judgment
confirms this result.
2. As agreed between the
Appellant Sushma Marwaha and her husband Yash Marwaha at the
hearing and accepted by counsel for the Respondent in the written
submissions dated October 7, 2004, the Appellant Sushma Marwaha
and not her husband, Yash Marwaha, is entitled to deduct
child support expenses of $2,987.50 in the 1998 taxation year,
$3,100.00 in the 1999 taxation year and $3,900.00 in the 2000
taxation year, the whole in accordance with section 63 of the
Act. This judgment confirms the foregoing.
3. Non-refundable tax
credits for an equivalent to spouse amount provided for under
paragraph 118(1)(b) of the Act in the amounts of
$5,380.00 for the 1998 taxation year, $5,718.00 for the 1999
taxation year and $6,140.00 for the 2000 taxation year claimed by
the Appellant were disallowed by reassessments dated February 1,
2002; however, counsel for the Respondent in the written
submissions dated October 7, 2004 confirmed and conceded that, on
the basis of new factual evidence adduced at the hearing
establishing that Sushma Marwaha and her husband Yash Marwaha,
resided separate and apart, therefore Sushma Marwaha was entitled
to the said non-refundable tax credits for the said three years.
This judgment confirms that entitlement.
4. In the 1998 taxation
year the Appellant Sushma Marwaha claimed a non-refundable
medical expense credit in respect of medical expenses claimed for
Premwati Marwaha, the mother-in-law of Sushma Marwaha
in the amount of $9,460.00. The credit is calculated in
accordance with a formula provided in subsection 118.2(1) of the
Act which is based upon various components involving the
amount of the medical expenses, the income of the person for whom
the medical expenses are incurred and certain percentages and
fixed amounts that vary, generally from year to year. This
subsection, so far as material and as applicable to the 1998 year
provides:
118.2(1) For the purpose of computing the tax payable under
this Part by an individual for a taxation year, there may be
deducted an amount determined by the formula
A (B-C) - D
where
A is the
appropriate percentage for the year;
B is the
total of the individual's medical expenses that are proven by
filing receipts therefor with the Minister, ....
C is the
lesser of $1,500 and 3% of the individual's income for the
year; and
D is 68% of
the total of all amounts each of which is the amount, if any, by
which
(a) the income for
the year of a person (other than the individual and the
individual's spouse) in respect of whom an amount is included
in computing the individual's deduction under this section
for the year
exceeds
(b) the amount used
under paragraph (c) of the description of B in subsection 118(1)
for the year.
For 1998 the appropriate percentage in A was 17%. There was no
dispute that Premwati Marwaha's medical expenses were
$9,460.00 and that her income was $11,722.00 for the 1998
taxation year. As a result:
C = 3%
of $11,722.00 = $351.66
D =
68%($11,722.00 - $6,456.00) = $3,580.88
(note
that $6,456.00 is the 1998 amount used under paragraph (c) of the
description of B in paragraph 118(1)) of the Act.
The formula reveals that the Appellant is not entitled to a
medical expense credit in respect of Premwati Marwaha
because:
A
B
C
D
17% ($9,460.00 - $351.66) - $3,580.88 = -$2,032.46
Since applying the formula results in a negative figure, the
Appellant, Sushma Marwaha is not entitled to a non-refundable
medical expense credit in the 1998 taxation year.
5. In the 1998 taxation
year the Appellant, Sushma Marwaha claimed a non-refundable tax
credit for an amount of $2,353.00 for an infirm dependant over 18
years of age, namely Premwati Marwaha, the mother-in-law of
Sushma Marwaha. This credit is provided for in paragraph
118(1)(d) of the Act and was available in the 1998
year unless the income of the dependant in that year exceeded
$6,456.00. Since Premwati Marwaha's income in 1998 was
$11,722.00, the Appellant Sushma Marwaha is not entitled to the
credit.
6. With respect to the
rental losses claimed and rental income declared, the Appellant,
Sushma Marwaha claimed amounts of $2,900.00 and $110.00 in the
years 1998 and 2000 respectively and declared net rental income
of $255.00 in the year 1999 in respect of the alleged renting of
a room to the Appellant's mother-in-law, Premwati Marwaha and
a basement room to the Appellant's husband, Yash Marwaha at
1207 Killaby Drive, Mississauga, Ontario which is co-owned
with the said Yash Marwaha. Based on the evidence submitted, in
my opinion there was no activity of a commercial nature carried
on in the rental operation and there was no expectation of
profit. The rental operation was essentially of a personal nature
to reduce the costs of living in the common residence and
consequently the Appellant is not entitled to deduct the alleged
rental losses in 1998 and 2000 nor is the Appellant obliged to
include the net rental income in 1999 referred to above.
7. The Appellant claimed a
non-capital loss carry forward in the 2000 taxation year from the
Appellant's 1994 taxation year in the amount of $7,868.18
described in the Appellant's return as "(Office in
the-home expense carry forward from 1994 return)". No
evidence was submitted in support of this claim and the
assumption contained in paragraph 24(dd) of the Reply to the
Notice of Appeal has not been demolished nor has any evidence
been submitted to contradict that assumption. Consequently, the
said claim for the non-capital loss carry forward is not
allowed.
Signed at Ottawa, Canada, this 9th day of December, 2004.
O'Connor, J.
Email this Content