Chartier v. The Queen, docket 97-959-IT-I (Informal Procedure)

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Date: 20010419

Docket: 97-959-IT-I

BETWEEN:

SUZANNE CHARTIER,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Rip, J.T.C.C.

[1] The appeal of Suzanne Chartier from the assessment for the 1995 taxation year, notice of which is dated April 15, 1996, concerns the interest calculated on the instalments that Ms. Chartier did not pay during the 1995 taxation year.

[2] Ms. Chartier was represented by her husband, Jules Chartier. No one testified for the appellant.

[3] In the notice of appeal, the appellant alleged that the Minister of National Revenue ("Minister") had charged interest in advance, without acknowledging the payment made to the account under subsection 156(1) of the Income Tax Act ("Act"). In the appellant's opinion, the increased interest rates provided for in sections 4300 and 4301 of the Income Tax Regulations ("Regulations") do not apply in the instant case.[1] The Act, she noted, does not provide for computation of interest on unpaid advance income tax.

[4] In making the assessment, the Minister considered the following facts:

[TRANSLATION]

(a) for the 1995 taxation year, the appellant's total income was $19,742;

(b) the appellant's chief source of income was neither farming nor fishing;

(d) the income tax payable for the 1995 taxation year was $2,967.12;

(e) the income tax payable for the 1993 and 1994 taxation years was respectively $2,562.59 and $1,536.55;

(f) the appellant was required to pay instalments of $1,536 for the 1995 taxation year but failed to do so.

[5] It is not disputed that in 1995, the appellant was required to pay instalments of $1,536 under section 156 of the Act. Since the payments were not made within the time periods provided for section 156, the Minister, by notice of assessment dated April 15, 1996, required the appellant to pay $134.44 in interest under subsection 161(2) of the Act and sections 4300 and 4301 of the Regulations. What is at issue is the computation of the interest required by the Minister.

[6] The appellant also argued that the notice of assessment dated April 15, 1996, is incorrect since it indicates that a $2,867.12 payment, post-dated to April 30 of that same year, was made by the appellant, whereas the appellant in fact made a payment of $2,967.12. Since this error was acknowledged by the witness René Davidson of the Canada Customs and Revenue Agency, the issue relates solely to the computation of the interest required by the Minister as a result of the unpaid instalments.[2]

[7] The appellant's first argument concerns the interest computed by the Minister between the date of the notice of assessment and the date of the payment made on April 30, 1996. According to the appellant, the interest that was computed when the notice of assessment was prepared should have included only the interest owed on the date of the notice of assessment. The appellant having made no payment before April 30, 1996, she was not adversely affected as a result of that computation. Had a payment been made between April 16, 1996, and April 30, 1996, it would have been necessary to adjust the interest payable in order to reflect that payment. No such payment was made however. As was argued by the respondent, the appellant would in fact have been adversely affected had the Minister informed her only after April 30, 1996, of the interest accrued between April 16, 1996, and April 30, 1996, since additional interest would have accrued before the appellant could make her payment. Accordingly, the appellant's argument cannot succeed.

[8] The appellant's second argument involves the rate to be used in computing interest payable. In the appellant's opinion, the additional two percent increase is applicable only to the unpaid amounts of tax and should therefore not be applied to instalments since they constitute not unpaid tax but rather advance tax. In my view, this argument cannot be accepted. Under paragraph 4301(a) of the Regulations, the increased rate remains applicable under every provision of the Act requiring interest at a prescribed rate to be paid to the Receiver General. Under paragraph 4301(b), the rate to be paid prior to the amendments is applicable to every provision of the Act requiring interest at a prescribed rate to be paid or applied on an amount payable by the Minister to a taxpayer. The interest at issue in the instant case is provided for by subsection 161(2) of the Act, which states that a taxpayer who has failed to pay all or any part of an instalment that was required to be paid shall pay to the Receiver General interest at the prescribed rate on the amount that the taxpayer failed to pay. Based on the wording used in subsection 161(2) of the Act and paragraph 4301(a) of the Regulations, the applicable rate is the increased rate. It is also worth noting the following passage from the Budget Plan, under "Tax measures: supplementary information", at page 177, issued when section 4301 of the Regulations was amended. It clearly shows that the appellant's position cannot be supported:

Interest on Unpaid Taxes

. . .

Effective July 1, 1995, it is proposed that the rate currently charged on overdue taxes be increased by 2 percentage points. The new rate will apply to overdue income tax payments, insufficient income tax instalment payments . . ..

[9] The appellant's third argument concerns the interest computation period. The interest was computed from the day following the date on which payment was due until the day on which payment was made, inclusive. The appellant submits that the interest should instead have been computed from the day on which payment was due until the day preceding the day on which payment was made, inclusive. However, she presents no arguments in support of her position other than that the amounts are in fact in the creditor's possession the day payment is made. The respondent relies on the provisions of subsections 27(3) and (4) of the Interpretation Act in asserting that the computation method used by the Minister is the applicable method.[3] Under subsection (3), where a time is to continue to or until a specified day, the time includes that day. It follows that the date on which the payment is made must be included in the period during which interest is payable within the meaning of subsection 161(2). Under subsection (4), where a time is expressed to begin after or to be from a specified day, the time does not include that day. The English version of subsection 27(4) states the applicable rule more clearly than the French version, which reads as follows: « Si le délai suit un jour déterminé, ce jour ne compte pas. » A more accurate translation of the English version into French would read as follows: « Si le délai est stipulé commencer après ou à partir d'un jour déterminé, ce jour ne compte pas. Under this rule, the date on which the instalments were to be paid at the latest is not included in calculating the period during which interest is payable within the meaning of subsection 161(2). The appellant's argument on this point must also be rejected.

[10] The appeal will be allowed but only to calculate interest on the basis that the payment made by the appellant on April 30 amounted to $2,967.12, if necessary. Otherwise, the appeal is dismissed.

Signed at Ottawa, Canada, this 19th day of April 2001.

"Gerald J. Rip"

J.T.C.C.

Translation certified true on this 4^th day of November 2002.

Sophie Debbané, Revisor

[OFFICIAL ENGLISH TRANSLATION]

97-959(IT)I

BETWEEN:

SUZANNE CHARTIER,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on January 29, 2001, at Winnipeg, Manitoba, by

the Honourable Judge Gerald J. Rip

Appearances

Agent for the Appellant: Jules Chartier

Counsel for the Respondent: Denyse Côté

JUDGMENT

The appeal from the assessment made under the Income Tax Act for the 1995 taxation year will be allowed, without costs, and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment but only to calculate interest on the basis that the payment made by the appellant on April 30 amounted to $2,967.12, if necessary. Otherwise, the appeal is dismissed.

Signed at Ottawa, Canada, this 19th day of April 2001.

"Gerald J. Rip"

J.T.C.C.

Translation certified true on this 4^th day of November 2002.

Sophie Debbané, Revisor

[OFFICIAL ENGLISH TRANSLATION]

[1] On June 13, 1995, the Governor General in Council amended the Regulations, C.R.C., c. 945:

1. Section 4301 of the Income Tax Regulations is replaced by the following:

4301. Subject to section 4302, for the purposes of

(a) every provision of the Act that requires interest at a prescribed rate to be paid to the Receiver General, the prescribed rate in effect during any particular quarter is the total of

(i) the rate that is the simple arithmetic mean, expressed as a percentage per year and rounded to the next higher whole percentage where the mean is not a whole percentage, of all amounts each of which is the weekly average equivalent yield, expressed as a percentage per year, of Government of Canada Treasury Bills that mature approximately three months after their date of issue and that are sold at a weekly auction of Government of Canada Treasury Bills during the first month of the quarter preceding the particular quarter, and

(ii) 4 per cent;

(b) every provision of the Act that requires interest at a prescribed rate to be paid or applied on an amount payable by the Minister to a taxpayer, the prescribed rate in effect during any particular quarter is the total of

(i) the rate determined under subparagraph (a)(i) in respect of the particular quarter, and

(ii) 2 per cent; and

(c) every other provision of the Act in which reference is made to a prescribed rate of interest or to interest at a prescribed rate, the prescribed rate in effect during any particular quarter is the rate determined under subparagraph (a)(i) in respect of the particular quarter.

2. Section 1 applies to interest that is calculated in respect of periods after June 1995.

The Minister of Finance prepared a regulatory impact analysis statement:

Section 4301 of the Income Tax Regulations provides rules for determining the prescribed rate of interest to be charged on overdue income tax payments and to be paid on refunds of overpayments. Before this amendment to that section, the prescribed rate of interest during a quarter of a calendar year has been the average rate on 90-day Treasury Bills sold during the first month of the preceding quarter, rounded up to the nearest whole percentage, plus 2 per cent.

This amendment reflects the February 27, 1995 Budget announcement that effective July 1, 1995, the prescribed rate of interest payable on overdue income tax payments will be increased by 2 per cent. The formula for determining the prescribed rate of interest payable on refunds of overpayments will remain unchanged.

[2] The respondent also acknowledged the failure to consider a payment of $128.51 made by the appellant on April 11, 1996, which was used to reduce the principal amount owed by her. As a result of that payment, the interest payable by the appellant would have been $133.78 instead of $134.44. Given the payment of $2,967.12 made on April 30, 1996, and an additional payment of $3.49 made on May 17, 1996, the appellant's outstanding balance came to $2.44. That balance, which would have been $1.78 had the payment of April 11, 1996, been considered in computating the interest, was cancelled by the Minister on August 28, 1997. Accordingly this error is irrelevant to the instant case.

[3] Section 27 of the Interpretation Act provides as follows:

27. (1) Where there is a reference to a number of clear days or "at least" a number of days between two events, in calculating that number of days the days on which the events happen are excluded.

(2) Where there is a reference to a number of days, not expressed to be clear days, between two events, in calculating that number of days the day on which the first event happens is excluded and the day on which the second event happens is included.

(3) Where a time is expressed to begin or end at, on or with a specified day, or to continue to or until a specified day, the time includes that day. [Emphasis added]

(4) Where a time is expressed to begin after or to be from a specified day, the time does not include that day. [Emphasis added]

(5) Where anything is to be done within a time after, from, of or before a specified day, the time does not include that day.

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Chartier v. The Queen, docket 97-959-IT-I (Informal Procedure)

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