Shadee-Lane Ranch Ltd. v. R., [1997] 2 CTC 2142, 97 DTC 893

Beaubier T.CJ.:

This matter was heard at Victoria, British Columbia on December 2, 1996 pursuant to the General Procedure. Charles Moore, C.A., the Appellant’s chartered accountant, testified for the Appellant. Laurie MacDougall Dettrich and Barbara English, C.G.A., employees of Revenue Canada, testified for the Respondent.

The Appellant was assessed for penalties and interest pursuant to subsection 227(8) of the Income Tax Act for failing to deduct amounts as required by subsection 153(1).

At all material times the Appellant’s fiscal year end was January 31. Dr. and Mrs. Lane owned controlling or majority shares in six other corporations. Some had January 31 and others March 31 fiscal year ends. In July of each year the corporations’ chartered accountants were able to complete the statements of all seven corporations. In July of each of 1990, 1991 and 1992 the chartered accountants of the Appellant T-4’d the following amounts from the Appellant to its employees Dr. and Mrs. Lane:

The total income tax remitted by August 15 in each year was $54.48, $87.68 and $200 respectively. Paragraphs 3 and 4 of the Reply read:

3. By Notice of Assessment dated January 6, 1994, the Minister of National Revenue (the “Minister”) assessed the Appellant for Federal income tax note deducted at source not remitted and for penalties and interest relating thereto as follows:

Year	Federal Tax	Penalty	Interest
1990	$ 14,285.85	$ 1,428.58	$ 2,882.00
1991	$ 14,164.23	$ 1,416.42	$ 2,193.00

	Year	Federal Tax	Penalty	Interest
	1992	$ 144,042.28	$ 14,402.22	$ 17,257.00
4.	In so assessing the Appellant, the Minister relied on, inter alia, the fol
	lowing assumptions:
	(a)	at all material times Arnold Lane (“Arnold”) owned 100% of
		the shares of Shadee-Lane Holdings Ltd. (“Holdings Ltd.”);
	(b)	at all material times Holdings Ltd. owned 100% of the shares of
		the Appellant;
	(c)	at all material times Arnold was a director, the President and
		Secretary of Holdings Ltd.;
	(d)	at all material times Arnold was the President and Secretary of
		the Appellant;
	(e)	Arnold controlled the Appellant through his ownership of Hold
		ings Ltd.;
	(f)	the Appellant employed Arnold and Edith Lane (“Edith”) for
		the 1990, 1991 and 1992 taxation years;
	(g)	the Appellant paid wages to Arnold and Edith for the 1990,
		1991 and 1992 taxation years;
	(h)	the Appellant was required to deduct and remit tax on behalf of
		Arnold and Edith as outlined in Schedule A of this Reply;
	(i)	the Appellant failed to deduct sufficient tax for Arnold and
		Edith as required by paragraph 227(8) of the Income Tax Act;
		and
	(j)	the Appellant failed to remit sufficient tax for Arnold and Edith
		as outlined in Schedule A of this Reply.

The Appellant’s position is that the allocations in each July were “salary bonuses” which the Appellant did not pay during the respective fiscal years. Subsection 153(1) states:

153(1) Every person paying at any time in a taxation year

(a) salary or wages or other remuneration,

(g) fees, commissions or other amounts for services, ...

shall deduct or withhold therefrom such amount ... [Emphasis added.]

In assumption 4(g), the Respondent states that the Appellant paid wages to Arnold and Edith. In Exhibit R-l, Tab 4, pages 36, 44 and 45, Mr. Moore’s staff’s working papers describe the amounts as management salaries. These amounts were T-4’d by the Appellant to Dr. and Mrs. Lane who reported them and paid income tax on the amounts on April 30 of the respective subsequent years. The Appellant reported the amounts in its T-2s for each respective fiscal year. They were applied to each recipient’s shareholder’s loan account.

Bonuses T-4’d by the Appellant, referred to in working papers as “management” salaries and booked in shareholders’ loans on the last day of each fiscal year are part of salary or wages or other remuneration paid in that taxation year on the basis of the ejusdem generis principle of statutory interpretation. On the basis of the Appellant’s own T-2s and T-4s, they were paid on January 31 in each respective year in accordance with the assumptions. Therefore, interest is due and owing as it was assessed by the Respondent.

Furthermore, the Appellant knowingly remitted an amount less than the amount required under subsection 153(1). It is clear that the Appellant, by its directors and accountant, made its interpretation of the Income Tax Act and decided not to remit withholding of income tax on the basis that each amount was not paid in its fiscal year and did not fall within paragraphs 152(l)(a) or (g). In the Court’s view, applying ejusdem generis to those paragraphs, that interpretation was wrong. The interpretation adopted by the Appellant and its acts of not remitting were deliberate. Therefore the penalties are also owed in the amounts assessed.

The appeal is dismissed. The Respondent is awarded its party and party costs.

Appeal dismissed.