Perley v. R, [1999] 3 CTC 180, 99 DTC 5176

Létourneau J.A.:

We are of the view that the learned Tax Court Judge erred when he concluded that, on an appeal against reassessments made by the Minister of National Revenue (Minister), he has jurisdiction to consider, apply and give effect to the Remission Order mechanism established by Government De- cree in 1993 [1] and amended in 19942. [2]

The Decree was adopted by the Governor in Council on the recommendation of the Minister pursuant to subsection 23(2) of the Financial Administration Act* [3] (Act). The said subsection stipulates that the Governor in Council may remit any tax or penalty where he considers that the collection of the tax or the enforcement of the penalty is unreasonable or unjust or that it is otherwise in the public interest to remit the tax or penalty.

Subsection 23(1) of the Act defines tax as any tax, import, duty or toll payable to Her Majesty, imposed or authorized to be imposed by any act of Parliament, (my underlining)

As it appears at page 7 of his decision, the Tax Court Judge in coming to his conclusion erroneously assumed that a Remission Order under the Decree precedes the reassessments made by the Minister. The overall effect of this assumption is twofold. First, it erroneously links the notion of tax remission with that of tax liability and, second, it improperly transforms what is a tax remission into a tax exemption.

It is clear to us that the concept of tax remission under the Act requires as a condition precedent to its application that there be a determination of a taxpayer’s liability and an ascertainment of the amount of tax owed by that taxpayer. This is obvious from the definition of tax in subsection 23(1) which refers to an amount owed and payable to Her Majesty. It is also obvious from the very terms and conditions of subsection 23(2) which state that a remission order is only possible and appropriate when the collection of the tax would be unjust or unreasonable. Such terms and conditions first postulate an assessment by the Minister of the amount owed by the taxpayer, which assessment ought to take into account any tax exemptions that the taxpayer is entitled to. Otherwise, how can one conclude that collection of the tax would be unjust or unreasonable if the amount of such tax is not beforehand determined and assessed? Whatever amount is then found to be owed by the taxpayer is the tax that can be remitted pursuant to the Remis- sion Order mechanism if collection of such tax would, at that stage, create injustice or be unreasonable.

To put it in different words, we are of the view that while a tax exemption claim relates to the issue of a taxpayer’s liability and is, therefore, properly before a Tax Court Judge on an appeal from a reassessment which allegedly fails to take into account such exemption [4] , a tax remission claim comes into play only after the tax liability of a taxpayer and the amount of such tax liability have been ascertained. Consequently, upon an appeal from the Minister’s assessment of a taxpayer’s liability, the Tax Court Judge has no jurisdiction to embark upon a determination of, and proceed to determine, the correctness and appropriateness of such assessment by referring to the possible injustice or unreasonableness that could result from an attempt to enforce payment of the tax owed and payable. Otherwise, according to the Tax Court Judge’s approach, one would have to conclude that, at the time of the Minister’s assessment, no tax would be owed or payable every time collection of it would be unjust or unreasonable. Consequently, there would never be anything left to be remitted because through the concept of remission, a taxpayer would in effect have been exempted from liability prior to or at the time of the reassessments.

We agree with Lamarre-Proulx J.T.C.C. in Pachanos v. Minister of National Revenue^ [5] that a Remission Order relates to procedures for collecting taxes that are owing and unpaid and not to the assessment of income tax. This is made clear by subsection 23(4) of the Act which enumerates methods by which the remission may be granted [6] . They all presuppose a tax owing and unpaid and none of the methods refers to the possibility of re- ducing the amount of the tax to be assessed by the Minister. Subsection 23(4) reads:

(4) A remission pursuant to this section may be granted

(a) by forbearing to institute a suit or proceeding for the recovery of the tax, penalty or other debt in respect of which the remission is granted;

(b) by delaying, staying or discontinuing any suit or proceeding already instituted;

(c) by forbearing to enforce, staying or abandoning any execution or process on any judgment;

(d) by the entry of satisfaction on any judgment; or

(e) by repaying any sum of money paid to or recovered by the Receiver General for the tax, penalty or other debt.

(4) Ces remises peuvent être accordées sur:

a) abstention de toute action en recouvrement des sommes en cause;

b) ajournement, suspension ou abandon de l’action;

c) abstention, suspension ou abandon de toute voie d’exécution forcée:

d) constat judiciaire d’acquittement de I’ obligation;

e) remboursement de sommes payées au receveur général ou recouvrées par lui au titre des taxes, pénalités ou autres dettes.

For these reasons, the appeal will be allowed with costs throughout and the determination made by the Tax Court Judge, pursuant to paragraph 58(1 )(a) of the Tax Court of Canada Rules, that it had jurisdiction to consider, apply and give effect to the Remission Order mechanism will be set aside.

Appeal allowed.