The Assistant Chairman:
1 This is the appeal of Reny Barki from an income tax assessment in respect of the appellant's 1972 taxation year.
2 The issue in this appeal is the assessment by the Minister of National Revenue for the payment by the taxpayer of a 15% non-resident tax in the amount of $70.30 and a penalty and interest charge in the amount of $5.
3 At the request of the appellant, who was unable to attend the hearing in person and who was not represented by counsel, the appeal was heard on the basis of a written statement of the appellant's position. Counsel for the respondent, notwithstanding that he was waiving his right to cross examine, agreed to such a procedure with the understanding that the appellant would set out the facts in as much detail as possible in his written submission.
4 From the facts, as stated by the appellant, it would appear that the appellant, during the year pertinent to this appeal, was not a resident of Canada. However, he allegedly at one time lived in Canada and had borrowed money from the Bank of Montreal to purchase a $5,000 Canada bond yielding interest of 6.25%. The appellant paid interest on his loan from the Bank of Montreal, and it is on record that in 1970 he paid interest in the amount of $468.75 and paid off the loan with an interest payment of $380 in 1971.
5 While resident in Canada, the interest on the loan which was made to earn income was conceivably deductible from the appellant's income in the year in which the interest was paid. The appellant contends that the transaction should be considered as a whole and that the deductions which were permissible to him, as a resident of Canada, should also be permissible as a non-resident. Since the appellant had received and was credited with a gross aggregate amount of $468.75 in 1972, on obligations issued after December 20, 1960 (Exhibit R-1), but had paid that same amount as interest payment on his loan in 1970 and had further paid a final interest payment of $380 on the loan in 1971, the appellant contends he should not now be assessed for the interest he received or was credited with in 1972 from the bonds.
6 Counsel for the respondent holds that no expenses were made by the appellant in respect of earning interest income and, even if such expenses had been incurred, the appellant was not entitled to deduct them. Counsel concludes that the gross aggregate amount of $468.75 received by the appellant as a non-resident of Canada from the bonds is taxable interest income in his hands and not subject to deduction or exemption.
7 In considering the facts of this appeal, I am satisfied that the appellant could have borrowed from the Bank of Montreal an amount with which to purchase interest-bearing bonds, and as long as he was a resident in Canada he could have deducted the interest payment under Part I of the Income Tax Act. Although there is no evidence as to when the appellant became a non-resident of Canada, there is no dispute regarding the fact that in 1972, the year of the appeal, the appellant was definitely not a resident of Canada and that he received interest income or was credited in that year (Exhibit R-1) with interest income of $468.75 originating from Canada, and therefore comes under Part XIII of the Income Tax Act dealing with tax on income from Canada of non-resident persons.
8 Paragraph 212(1)(b) of the Act reads:
212. (1) Every non-resident person shall pay an income tax of 25% on every amount that a person resident in Canada pays or credits, or is deemed by Part I to pay or credit, to him as, on account or in lieu of payment of, or in satisfaction of,
9 It is to be noted that owing to the Income Tax Application Rules, 1971, the 25% rate is reduced to 15% effective until December 31, 1975, and that the bonds in question in this appeal were issued after December 20, 1960, and the appellant falls squarely within that section of the Act.
10 The appellant claims that the issue in this appeal is created because of an erroneous interpretation of the Act.
11 Subsection 214(1) of the Act reads:
214. (1) The tax payable under section 212 is payable on the amounts described therein without any deduction from those amounts whatever.
12 Since the appellant is subject to tax under section 212 of the Income Tax Act, no deductions can be made on the amounts taxable and, since it would appear that the tax has not been paid, the penalty and interest charges are also valid. In my opinion no other interpretation is possible. The appeal must therefore be dismissed.
Email this Content