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Citation: 2004TCC201
Docket: 2002-4932(IT)I
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BETWEEN:
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KEITH ANSTEAD,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
(delivered orally from the Bench at
Regina, Saskatchewan on February 27, 2004)
Margeson, J.
[1] The matter before
the Court at this time is the decision and the reasons for judgment in the
matter of Keith Anstead and Her Majesty the Queen, 2002‑4932(IT)I.
[2] In computing income
for the 2000 taxation year the Appellant deducted $45,000 as support payments.
In assessing the Appellant for that year the Minister of National Revenue
("Minister") allowed a deduction for support payments of only
$28,800. The Appellant filed an objection, but the assessment was confirmed by
Notification of Confirmation dated September 19, 2002. From this confirmation
of assessment the Appellant filed a Notice of Appeal to this Court.
Evidence
[3] Keith Anstead
testified that he and Sylvia Clara Anstead were divorced and a judgment was
granted on the 30th day of April, 1997. This judgment required him to pay $800
per month for each child and $1,350 per month for the support and maintenance
of his former spouse. The payments for his former spouse were to be for a
period of 24 months only or until his spouse should remarry or live in a
common-law relationship, whichever event first occurred.
[4] The order further
provided that the maintenance paid for the wife and children should be included
in the income of Sylvia Clara Anstead and deducted by the Appellant. The first
of these payments was to be made on May 1, 1997, in the amount of $675 and a
further identical payment on the 15th day of May and thereafter on the 1st and
15th days of each month.
[5] The Appellant's
former spouse requested that these payments for her support continue after the
period provided for in the judgment and up to the end of the year 2000. This
was agreed upon and the lawyer for the former spouse agreed to the provision
previously in effect, that the payments be included in the income of the former
spouse and deductible by the Appellant.
[6] To that end an
order was obtained, although be it later, dated June 18, 2002, which
amended the original order granted on April 30, 1997, and provided for an
extension of 15 months only as it related to the spousal support. These amounts
were to be deductible by the Appellant and claimable by the former spouse for
income tax purposes. The order provided that the first payment was to be made
on the 1st day of May, 1999, and the 15th day of May, 1999, and on the 1st and
15th days of each month thereafter for a period of 15 months.
[7] The Appellant's
former spouse was reassessed for income tax for the 2000 taxation year and
the spousal support payments that were made, or paid, were added on, as seen in
Exhibit A-4, in the amount of $37,500, as additional support payments. It was
noted that this was an adjustment to her prebankruptcy return. The Appellant
indicated that he had actually paid his former spouse more than that amount
that he was claiming as a deduction.
[8] The Appellant filed
his 2000 income tax return and claimed a deduction of $45,000, and on September
24, 2001, he was advised by letter that his return was under review and he was
asked to forward further documentation to support his claimed deduction of $45,000,
including an amended court order amending the order of April 30, 1997. He was
given 30 days to provide the documentation, after which time the return would
be assessed based upon the information in the Minister's file.
[9] The Appellant
replied on November 6, 2001, and included copies of all cheques -- that would
be cancelled cheques -- supporting his alleged payments of $45,000 (and an
amount in excess of that amount).
[10] On November 21,
2001, the Appellant received a letter indicating that he was only entitled to
claim the child support payments of $28,800 as he was no longer required to pay
support payments for his former spouse, but it was indicated to him that if
they received the subsequent court order his position would be reconsidered.
[11] A Notice of
Assessment was mailed to him under separate cover dated December 3 and was
introduced into evidence as Exhibit A-9. He said that he could not understand
it and asked for an explanation of it, which was received by him. The breakdown
was dated January 25, 2002. According to him it merely gave the figure of
$28,000 as the amount which he was entitled to claim. They told him that they
had denied any deduction for support payments over $28,800.
[12] He then filed an
objection to the assessment. In the objection he indicated that his former
spouse had included in her income the amount of $16,200, the disputed amount.
[13] By way of letter to
the Appellant dated May 13, 2002, the appeals officer asked for a copy of the
amended order again and he set a deadline of June 15, 2002, to
receive that and any other documentation that the Appellant deemed necessary.
[14] A notice of
confirmation was issued on September 19, 2002, in which the deduction sought
was denied and indicating the reason therefore.
[15] In cross-examination
the Appellant admitted that he did not get an order extending the provisions of
the April 30, 1997 order until June 18, 2002.
[16] In redirect he said
that his former spouse was agreeable to having the June 18, 2002
order issued. He received a copy of her 2000 taxation return two days before
the commencement of this trial.
[17] In answer to the
Court's question, he said that he was advised of his former spouse's
prebankruptcy filing and was satisfied that she had claimed as income the
amount that he was seeking to deduct here.
[18] Doug Spencer was the
chief of appeals. Counsel for the Appellant was allowed to cross-examine him.
He said that he was not aware of the Appellant's former spouse's return.
Argument on Behalf of the Appellant
[19] In argument on
behalf of the Appellant counsel said that one of the principles of the Income
Tax Act ("Act") is that there should be no double
taxation. He referred to subsection 248(28) and said that the evidence in this
case indicated that the Appellant's former spouse had already been reassessed
and the amount sought to be deducted by the Appellant was added to her income
in the year in question. Therefore the assessment should be denied, that is the
assessment of him.
[20] He argued that Revenue
Canada has waived its right to rely upon the provisions of the Act,
specifically, 60.1(3), 60(b) and 56.13. These provisions limit the
taxpayer's right to going back only one year from the date of the order to
claim the deduction. His client did not receive enough notice in 2001 in order
for him to obtain the necessary order for the year 2000. That was the reason he
gave for the Court to deny the Minister the right to disallow him the
deduction.
[21] He said that his
former spouse was not willing to sign the court order until 2002. The Minister
did not assess the Appellant in accordance with subsection 152(1) of the Act
and therefore the Appellant did not have enough time to go back and get the
necessary order for the taxation year 2000. This is not fair according to him.
He pointed out that the Appellant has acted honourably throughout, has paid his
taxes, and was treated unfairly.
[22] In essence he agreed
that apart from the fairness argument which he put forward and the effects of
his interpretation of subsection 248(28) the Appellant is prohibited from
claiming the deductions because of the provisions of 60.1(3) and 60(b)
and the Minister is correct that he can only claim deductions for a period of
one year back from the date of the order. Further, he argued that
section 60 does not override subsection 248(28). The appeal should be
allowed.
Argument on Behalf of the
Respondent
[23] According to counsel
for the Respondent, the evidence does not support the position that the
Minister did anything improper. He did not fail to act with due diligence in
accordance with the Act. It was not his fault that the Appellant failed to act
in time and did not receive the order in time, if he had chosen to do so. The
Minister went beyond what he was required to do. He was not required to advise
the Appellant to get a new order, he was simply advising him that the old order
did not cover these payments.
[24] With respect to the
argument under subsection 248(28), there is in fact no double taxation. If
double taxation did result, then there is an avenue open to the Appellant's
spouse to have that issue addressed.
[25] There is no double
taxation here. Subsection 248(28) includes the amount in the hands of one
person and excludes it in the hands of the other. That is the effect of
subsection 248(28). The Minister has not erred in applying the law to the
Appellant. If he did in respect to the Appellant's spouse, that is for her to
establish in another action.
[26] The Minister has
properly applied the provisions of subsection 60.1(3), and sections 60.1 and
60(b) with respect to the Appellant. The appeal should be dismissed.
Rebuttal by Counsel for the
Appellant
[27] In rebuttal, counsel
for the Appellant argued that the Minister never advised the Appellant that he had
to obtain the order before the end of 2001. In the letter written by the
Minister to the Appellant dated May 13, 2002, Exhibit A‑12, the
Minister was suggesting, according to him, that he had until June 15, 2002, to
obtain the order. He suggested that the Minister must advise the Appellant if
there is a limitation period based upon fairness, especially in light of this
letter and the interpretation that the Appellant might reasonably take from it.
The principles of fundamental justice would apply against the actions of the
Minister here to prevent him from denying the deduction since he misled the
Appellant. He referred to section 7 of the Charter of Rights and Freedoms
("Charter") and suggested that the Appellant has been denied
fundamental justice.
Analysis and Decision
[28] In essence, there is
no disagreement about the facts in this case. It is obvious from a
consideration of subsection 60.1(3) that in order for the Appellant to be able
to claim the deductions that he seeks, the amount must have been paid "in
the year or in the preceding taxation year". The taxation year in question
is 2000 and the order that was obtained was not until June 18, 2002.
[29] The evidence was
clear that the Appellant did not seek and was not granted an order before the end
of the taxation year 2001. Indeed, in argument counsel for the Appellant
indicated that the Appellant's former spouse would not agree to such an order
before June 18, 2002.
[30] The Court is
satisfied that the Minister was correct in concluding that the amounts in
question allegedly paid in pursuance of the order of June 18, 2002, in the year
2000 are not considered to have been paid and received thereunder and therefore
are not deductible under paragraph 60(b) of the Act.
[31] With respect to the
argument based upon fairness or section 7 of the Charter, the Court
cannot see where the Appellant was denied fundamental justice or was dealt with
unfairly by the Minister.
[32] The Court is
satisfied that the Minister acted with due diligence and due dispatch in
assessing the taxpayer and in advising him that his claim for deducting the
support payments in question was being reconsidered. This advice was given on
September 24. The Appellant had only filed his return on
June 12, 2001. It was not until November 6, 2001, that the Appellant
responded to this request for more information and a copy of the amended Order.
He did not enclose it as he did not have it at that time.
[33] Whatever delay that
was caused thereafter was the result, not of the actions of the Minister, but
of the Appellant himself, who was obviously attempting to obtain the necessary
order. The fault for being unsuccessful in obtaining this order on time as not
that of the Minister but of the Appellant, possibly of his legal and accounting
advisors, and obviously done due to the fact that his former spouse was not
prepared to consent to the order until later.
[34] As counsel for the
Respondent pointed out, the Minister's letter of May 13, 2002, was
not something which the Appellant could have reasonably assumed was an
undertaking by the Minister that if the Appellant obtained the order by June
15, 2002, his claim would be successful. It was nothing more than an
undertaking by the Minister to do nothing further in consideration of the objection
until June 15, 2002. Indeed, at this time, it was already too late.
[35] The Minister had no
duty to advise the Appellant other than as he did prior to the end of the year
2001 that his 2000 return was being reconsidered and that they required a new
order. In spite of the misgivings that the Appellant had regarding the
interpretation of the reassessment, it is necessary to point out that this did
not come about until the year 2002 and by that time it was too late to obtain
the requisite order. The argument of the Appellant with respect to fairness and
the Charter is therefore rejected.
[36] With respect to the
argument of double taxation under section 248(28) of the Act, the Court
is satisfied that this section and subsection 60.1(3) are stand‑alone sections.
Subsection 248(28) states that there shall not be double taxation, but it does
not operate to override the provisions of subsection 60.1(3) which prevents the
claiming of the deduction because the Appellant has not brought himself within
its provisions.
[37] Subsection 248(28)
cannot make a taxpayer eligible for a deduction that is prohibited by another
provision of the Act. It is at best a remedial section which has the
effect of allowing one party, in this case the former spouse of the Appellant, who
is not otherwise prohibited from doing so to say, you taxed my former spouse
for this because you did not allow him the deduction for the same income, so I
do not have to claim it in my income, and she is entitled to have it removed
from inclusion in her income. Therefore, the relief is available to her and
there is no double taxation. It is not a deduction, it is a non‑inclusive
amount in her income.
[38] This provision was
never intended to allow the taxpayer the right to elect who was to have the remedy,
as that would defeat the purpose of the Act.
[39] In the case at bar,
it would mean that in spite of the Act providing that the Appellant
could not claim the deduction, he would get it anyway.
[40] There is no evidence
before this Court as to whether the Appellant's spouse has asked for relief on
the basis of subsection 248(28), but presumably it is available to her on
application to the Minister under the Act or under the fairness package.
[41] The appeal is
dismissed and the Minister's assessment is confirmed.
Signed at Ottawa, Canada, this 2nd day of
April, 2004.
Margeson,
J.
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