Lise Naud, Serge Naud, Michel Daigle v. Minister of National Revenue, [1993] 1 CTC 2008, [1992] 1 CTC 2760, [1993] DTC 286, [1993] DTC 288

Tremblay, T.C.C.J.:—These appeals were heard on common evidence on October 18, 1991 at Québec, Québec.

1. The point at issue

The point at issue is whether the appellant Serge Naud, a teacher working in a Canadian Armed Forces school outside Canada, is entitled to claim from the respondent a refund of Québec provincial tax deducted at source during the 1986 taxation year.

The respondent argues that the Court does not have jurisdiction to order such a refund.

2. The burden of proof

2.01 The burden of proof is on the appellant to show that the respondent's assessment is incorrect. This burden of proof results from several judicial decisions, including the judgment delivered by the Supreme Court of Canada in Johnston v. M.N.R., [1948] S.C.R. 486, [1948] C.T.C. 195, 3 D.T.C. 1182.

3. The facts

Most of the facts are not disputed.

3.01 By a tripartite agreement (Exhibit 1-4) entered into on December 9, 1985 by the appellant, the commission scolaire régionale Chauveau de Neufchatel, Québec, and the Department of National Defence, the appellant agreed to teach in Germany during 1986 at a Canadian Armed Forces school. This contract was renewable for further years.

3.02 By this contract, the Department of National Defence undertook, inter alia, to refund to the commission scolaire the salary paid to the appellant.

3.03 During those years, the commission scolaire no longer had an agreement with or gave any orders to the appellant in respect of his work. The appellant was, moreover, considered to be an officer of the army and received all his orders from superior officers in the army, both in the area of teaching and in other areas.

3.04 In paying the appellant in 1986, the commission scolaire deducted both federal tax ($6,273.40) and Québec provincial tax ($6,460.01).

3.05 When he left Québec, the appellant had the intention of returning to live in Québec. As well, he kept his residence there.

3.06 When he filed his income tax return for the 1986 taxation year, the appellant reported his province of residence as "other" and in computing his tax claimed a credit for Québec provincial tax deducted at source ($6,460.01), as he did for federal tax ($6,273.40), the two totalling $12,733.41. He is claiming a refund of $3,707.11.

3.07 By assessment, a notice of which was sent to the appellant on July 6, 1987, the Minister of National Revenue established the tax to be paid by the appellant for his 1986 taxation year. In so doing, the Minister of National Revenue assessed the appellant taking for granted that he was a resident of Canada, and more specifically of Québec, throughout the 1986 taxation year. He was given a refund of $530.88, not taking into account the tax credit claimed for Québec source deductions of $6,273.40, and taking into account the refundable Québec abatement ($1,018.41).

3.08 By notice of objection dated August 18, 1987, the appellant objected to the assessment issued on July 6, 1987. He objected primarily to the deletion of the credit for tax deducted for Québec.

3.09 By reassessment, a notice of which was sent to the appellant on September 5, 1989, the Minister of National Revenue established the tax to be paid by the appellant for the 1986 taxation year; in so doing, the Minister of National Revenue assessed the appellant taking for granted that he was a deemed resident of Canada, but of no province in particular, and accordingly imposed payment of the tax surtax provided in subsection 120(1) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the"Act"), refused to allow him a deduction for the Québec abatement and granted a forgiveness of tax equivalent to the amounts of the surtax and of the Québec abatement.

The notice of reassessment reads as follows:

The following appears on the form T7W-C attached to the notice of reassessment:

The reassessment is issued in order to consider you to be a deemed resident of Canada in accordance with the provisions of subsection 250(1) of the Act and your assessed tax has been established in accordance with the provisions of subsection 2(1) and section 3 of the Act.

The above adjustment is in response to your notice of objection and the notice of reassessment is issued under paragraph 165(3)(a) of the Income Tax Act.

[Translation.]

3.10 By his notice of appeal, the appellant is not objecting to being assessed under subsection 120(1) of the Act, but is claiming a refund of the Québec provincial tax deducted at source, in the amount of $6,460.01.

He is arguing that his status as a "deemed resident of Canada" with no province in particular has been taken away. In his view, he should not be subject to Québec tax.

3.11 The evidence on admission, however, showed that the appellant was assessed by the Québec Revenue Minister and that he was even given a refund of a certain amount.

3.12 The facts relating to the appellants Lise Naud and Michel Daigle are similar to those of the appellant Serge Naud described above.

4. Law—Cases at Law—Analysis

4.01 Law

The provisions of the Income Tax Act involved in the instant case are sections 2 and 3 and subsections 120(1), 154(4) and 250(1). These provisions will be quoted in the analysis if necessary.

4.02 Cases at law

The cases at law referred to by the parties are as follows:

1. Dunblane Estates Ltd. v. M.N.R., [1989] 1 C.T.C. 2248, 89 D.T.C. 137 (T.C.C.);

2. Patricia M. Crossley v. M.N.R., Tax Court of Canada, 86-1758 (unreported);

3. Robert Boisvert, René Gibeault v. M.N.R., [1991] 1 C.T.C. 2573, 91 D.T.C. 748;

4. Scarrow's Shoes Ltd. v. M.N.R., [1988] 2 C.T.C. 2027, 88 D.T.C. 1402 (T.C.C.);

5. Harris v. M.N.R. [1964], 2 Ex. C.R. 653; [1964] C.T.C. 562, 64 D.T.C. 5332;

6. J.C. Harel v. The Deputy Minister of Revenue (Québec), [1978] 1 S.C.R. 851, [1977] C.T.C. 2212, 77 D.T.C. 5438.

4.03 Analysis

4.03.1 Although the facts involve several major legal elements (residence, jurisdiction of Québec, and so on), only one element, however, is in issue: whether the respondent must allow the appellant a credit equal to the Québec tax deducted at source, in the amount of $6.460.01.

4.03.2 The appellant argues that paragraph 250(1)(d.1) of the Act considers him to be a resident of Canada only and not a resident of Québec. This provision reads as follows:

250(1) For the purposes of this Act, a person shall, subject to subsection (2), be deemed to have been resident in Canada throughout a taxation year if

(d.1) he was, at any time in the year, a member of the overseas Canadian Forces school staff who filed his return for the year on the basis that he was a person resident in Canada throughout the period during which he was such a member,

This provision does not prevent having residence in a province. It is clear, on the evidence, that the appellant was a resident of Québec within the ordinary meaning of the word resident” according to the tests established in the case law (para. 3.05).

4.03.3 The appellant filed his tax return in Québec, was assessed and even obtained a refund (para. 3.11).

4.03.4 There is no legal basis which could authorize the Tax Court of Canada to order the federal Department of Revenue to credit and refund to the appellant the amount of $6,460.01 deducted at source by the commission scolaire regionale Chauveau under the Québec Taxation Act.

The $6,460.01 deducted at source never went into the coffers of Revenue Canada. How can Revenue Canada credit it and return it to the appellant unless there is a clear statutory provision to that effect?

This amount was paid into the coffers of Revenu Québec, which dealt with it in accordance with the taxation act of that province and refunded to the appellant the amount he had coming to him.

4.03.5 The Crossley decision, referred to by the appellant, cannot apply in this case: in the case at bar, the evidence clearly showed that the appellant was a resident of Québec, there having been no evidence to that effect in Crossley. The same was true in Robert Boisvert with respect to his 1986 taxation year.

In René Gibeault, the period in issue related to the 1985 taxation year. The reason for which the Court allowed the appeal can apply only to facts relating to the 1985 taxation year, and therefore cannot apply to this appeal, in which the taxation year in issue is 1986.

5. Conclusion

For the above reasons for judgment, the appeal is dismissed.

Appeal dismissed.