Date: 20060608
Docket: A-13-05
Citation: 2006 FCA 211
CORAM: SEXTON J.A.
SHARLOW J.A.
MALONE J.A.
BETWEEN:
QING HUA ZHOU
Appellant
and
HER MAJESTY THE QUEEN
and
MR. SIMON PETIT
Respondents
REASONS FOR JUDGMENT
SHARLOW J.A.
[1] This is an appeal of a judgment of the Tax Court of Canada (2005TCC28) allowing, but only in part, the appeal of the appellant Dr. Zhou from her income tax appeals for the taxation years 1999, 2000 and 2001. Most of the grounds of appeal are based on Dr. Zhou's honest but mistaken view of the relevant law and principles. In particular, Dr. Zhou appears not to have understood that the onus was on her to present evidence in the Tax Court that was capable of establishing that the tax assessments were based on incorrect facts.
[2] It appears that Dr. Zhou is a principal shareholder and employee of a corporation, Francis Enviro Biotek Inc., which conducts scientific work. During the years under appeal, Dr. Zhou reported receiving income from employment from that corporation, but at the same time claimed deductions totalling approximately $6,000 in 1999, $18,000 in 2000 and $16,000 in 2001, as expenses for advertising and promotion, lodging and travel, the costs of assistants and substitutes, and rent. She also claimed loan expenses approximately $18,000 in 1999, $26,000 in 2000, and $26,000 in 2001.
[3] The Judge dismissed most of Dr. Zhou's appeal because her claims were not substantiated by relevant documentation and because he found her evidence to be inconsistent and confusing on key points. He allowed $1,000 as travel expenses in each of 1999 and 2000.
[4] Dr. Zhou argues that the decision of the Judge dismissing her appeal does not accord with certain comments the Judge made at the hearing. Dr. Zhou interpreted those comments as an indication that the Judge had accepted her version of the facts. That interpretation is not correct. Comments made by a judge during the proceedings do not necessarily represent conclusions the judge has reached. Rather they are part of the discussion in which the judge engages in order to understand and perhaps challenge the position taken by the parties or counsel. The decision of the Judge must be found in his judgment and in his reasons, not in comments he made during the proceedings.
[5] Dr. Zhou based part of her argument on settlement discussions that she says were part of the history of this case, but which the Judge did not permit to be made part of the record. The Judge was correct on this point. The task of the Judge was to determine, based on the evidence presented to him, whether the tax assessments under appeal are correct. The correctness of the assessments depends upon the facts relating to the transactions entered into by Dr. Zhou and her corporation, which must be determined based on evidence relating to those transactions. A tax official may have been prepared to discuss or even compromise a particular point, but such discussions cannot change the facts. For that reason, settlement discussions generally are not relevant in determining the correctness of a tax assessment.
[6] Dr. Zhou submitted a number of complaints about the conduct of the auditors in this case, and also counsel for the Crown. None of those complaints have any bearing on the correctness of the tax assessments in issue in this case. For example, the fact that Dr. Zhou received one or more unsigned letters from an auditor does not assist the Court in determining whether or not her tax assessments are correct.
[7] It appears that at least part of the disputed amounts (it is not clear how much) relate to payments that Dr. Zhou made to the corporation to help it cover its own expenses. The deduction of those amounts, according to Dr. Zhou, is justified by the combined effect of sections 3, 4, 5, 6 and 8 of the Income Tax Act, because from her point of view, the amounts in question are lost to her, as she will not be able to recover them. That is a mistaken reading of the statutory provisions. None of those provisions authorize a deduction by an employee of amounts paid to a corporation to cover its costs. In certain circumstances, amounts paid to a corporation might be treated for income tax purposes as an advance or loan to the corporation, in which case tax relief might be available if the corporation was unable to repay the advance or loan. However, the record discloses no basis for concluding that the statutory conditions for that kind of relief is met. While there seems to have been some attempt on the part of Dr. Zhou to fit herself within those provisions, the Judge did not accept her evidence on that point. I am unable to conclude that he erred in not accepting it.
[8] The portion of Dr. Zhou's appeal that was allowed related to travel expenses. The Judge allowed a deduction of $1,000 in each of 1999 and 2000 for travel to China, and nothing in 2001. Dr. Zhou pointed to a document in the record indicating that reservations were made for return air travel from Montreal to Taipei and Bangkok, for which the fare would have been U.S. $1,300. However, it is not clear whether that particular trip was taken, or for what purpose, or what was finally paid for it. The Judge found that Dr. Zhou made three trips to China during the years under appeal, but that the cost of one of the trips was covered by the corporation. I am unable to conclude that the Judge erred in failing to allow more for travel expenses than he did.
[9] A careful review of the submissions of Dr. Zhou and the documentary record discloses no error of law or fact that would warrant the intervention of this Court. For that reason, I would dismiss this appeal with costs.
[10] In addition to a judgment reversing the decision of the Judge, Dr. Zhou seeks from this Court an award of damages, and relief from interest on her tax debt. This Court has no legal authority, in an income tax appeal, to consider either of those requests.
"K. Sharlow"
"I agree.
J. Edgar Sexton"
"I agree.
B. Malone"
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-13-05
(APPEAL FROM A JUDGMENT OF THE TAX COURT OF CANADA DATED JANUARY 4, 2005, NO. 2004-2301(IT)I).
STYLE OF CAUSE: QING HUA ZHOU -and-
HER MAJESTY THE QUEEN ET AL.
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: June 6, 2006
REASONS FOR JUDGMENT BY: SHARLOW J.A.
CONCURRED IN BY: SEXTON J.A.
MALONE J.A.
DATED: June 8, 2006
APPEARANCES:
|
Qing Hua Zhou
(on her own behalf)
|
FOR THE APPELLANT
|
|
Martin Gentile
|
FOR THE RESPONDENT
|
SOLICITORS OF RECORD:
|
John H. Sims, Q.C.
Deputy Attorney General of Canada
Montréal, Quebec
|
FOR THE RESPONDENT
|
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