Strain v. R., [1998] 2 C.T.C. 2136

Christie A.C.J.T.C.:

1 This appeal is governed by the informal procedure provided for under section 18 and following sections of the Tax Court of Canada Act. The year under review is 1994.

2 The issues are whether the appellant is liable for interest under subsection 161(2) and to a penalty under section 163.1 of the Income Tax Act (“the Act”).

3 There is no disagreement of any substance about the facts. Paragraph 8 of the Reply to the Notice of Appeal reads:

8. In so assessing the Appellant, the Minister made the following assumptions of fact:

• (a) during the 1994 taxation year, the Appellant's net income was $787,333.00;

• (b) the Appellant's chief source of income was neither farming nor fishing;

• (c) during the 1994 taxation year, the Appellant's income from which amounts were deducted at source was $562,333.04;

• (d) the Appellant's tax payable for the 1994 taxation year was $223,238.12;

• (e) the Appellant's tax payable for the year prior to the 1994 taxation year was $177,216.02;

• (f) the Appellant was required to pay instalments of tax in respect of the 1994 taxation year in the amount of $60,284.00 and failed to do so.

4 In a brief cross-examination the appellant said that he paid $83,862.00 on April 30. But he made no payments in 1994 directly to the Receiver General. Direct deductions on account of tax were made at source by his employer and remitted to the Receiver General. Further, the appellant's Notice of Objection to the assessments was entered as exhibit A-1. The facts contained therein were confirmed by the appellant under oath as true at the hearing. Paragraph 5 reads: “Total tax payable for 1994 amounted to $361,958. Income tax deducted at source for 1994 amounted to $276,329. The Quebec abatement was $2,600. A balance of $83,682 was paid on filing before April 30, 1994.” The reference to 1994 is obviously intended to be 1995. This is confirmed by the appellant's return of income for 1994. It is dated April 30, 1995.

5 Subsections 161(1) and (2) of the Act provide:

161. (1) Where at any time after the day on or before which a taxpayer is required to pay the remainder of the taxpayer's tax payable under this Part for a taxation year (or would be so required if a remainder of such tax were payable),

(a) the total of the taxpayer's taxes payable under this Part and Parts I.3, VI and VI.1 for the year

exceeds

(b) the total of all amounts each of which is an amount paid at or before that time on account of the taxpayer's tax payable and applied as at that time by the Minister against the taxpayer's liability for an amount payable under this Part or Part I.3, VI or VI.1 for the year,

the taxpayer shall pay to the Receiver General interest at the prescribed rate on the excess, computed for the period during which that excess is outstanding.

(2) In addition to the interest payable under subsection (1), where a taxpayer who is required by this Part to pay a part or instalment of tax has failed to pay all or any part thereof on or before the day on or before which the tax or instalment, as the case may be, was required to be paid, the taxpayer shall pay to the Receiver General interest at the prescribed rate on the amount that the taxpayer failed to pay computed from the day on or before which the amount was required to be paid to the day of payment, or to the beginning of the period in respect of which the taxpayer is required to pay interest thereon under subsection (1), whichever is earlier.

Section 163.1 provides:

163.1 Every person who fails to pay all or any part of an instalment of tax for a taxation year on or before the day on or before which the instalment is required by this Part to be paid is liable to a penalty equal to 50% of the amount, if any, by which

(a) the interest payable by the person under section 161 in respect of all instalments for the year

exceeds the greater of

(b) $1,000, and

(c) 25% of the interest that would have been payable by the person under section 161 in respect of all instalments for the year if no instalment had been made for that year.

Subsection 156(1) provides:

156. (1) Subject to section 156.1, every individual, other than one to whom subsection 153(2) or section 155 applies, shall pay to the Receiver General in respect of each taxation year[FN1: <p>These opening words were amended by subsection 23(1) of S. of C. 1994 c. 8 the effect of which was to delete the reference to subsection 153(2). The amendment applied to amounts payable after June 1994.</p>]

(a) on or before March 15, June 15, September 15 and December 15 in the year, an amount equal to1/4of

(i) the amount estimated by the individual to be the tax payable under this Part by the individual for the year, or

(ii) the individual's instalment base for the preceding taxation year, or

(b) on or before

(i) March 15 and June 15 in the year, an amount equal to1/4of the individual's instalment base for the second preceding taxation year, and

(ii) September 15 and December 15 in the year, an amount equal to1/2of the amount, if any, by which

(A) the individual's instalment base for the preceding taxation year exceeds

(B)1/2of the individual's instalment base for the second preceding taxation year,

and, on or before the individual's balance-due day for the year, the remainder of the individual's tax estimated under section 151.[FN2: <p>The words “and, on or before the individual's etc.” were repealed by subsection 23(2) of S. of C. 1994 c. 8. The amendment applied to 1994 and subsequent years. It should also be noted that subsection 21(3) of S. of C. 1994 c. 8 provides:<blockquote><ul>21. (3) In its application to the 1994 taxation year, subsection 153(2) of the Act shall be read as follows:<li><p>(2) Subject to sections 155, 156 and 156.1, where amounts have been deducted or withheld under this section from the remuneration or other payments received by an individual in a taxation year, if the total of the remuneration and other payments from which such amounts have been deducted or withheld and which the individual had received in the year is equal to or greater than3/4of the individual's income for the year, the individual shall, on or before the individual's balance-due day for the year, pay to the Receiver General the remainder of the individual's tax for the year as estimated under section 151.</p></li></ul></blockquote></p>]

• (a) if an individual's chief source of income for the year is fishing or farming and the individual's net tax owing does not exceed specified amounts (para. 156.1(2)(a));

• (b) if an individual's net tax owing for the particular year, or for each of the 2 preceding taxation years, does not exceed the individual's instalment threshold for that year (para. 156.1(2)(b));

• (c) the individual dies and the circumstances stated apply (ss. 156.1(3));

• (d) where amounts have been deducted at source if at least 75% of the individual's income for the year consists of income from which tax has been deducted at source (ss. 153(2)); or

• (e) the individual's chief source of income for a taxation year is farming or fishing in which case (subject to para. 156.1(2)(a)) special payments by instalment are provided for (ss. 155(1)).

7 The appellant is not within any of these exceptions. With respect to (c) 75% of his 1994 income of $787,333.00 is $590,500.00. The appellant's income for that year from which amounts were deducted at source was $562,333.00

8 In enacting subsection 156(1) Parliament has decreed that every individual except those coming within the exceptions described in the subsection shall pay tax by instalments to the Receiver General. The appellant's basic contention is that deductions having been made at source and remitted to the Receiver General in 1994 by his employer under subsection 153(1)[FN3: <p>153(1)(<em>a</em>) provides:<blockquote><p>(1) Every person paying at any time in a taxation year<blockquote><ul>(<em>a</em>) salary or wages or other remuneration,<li><p>shall deduct or withhold therefrom such amount as is determined in accordance with prescribed rules and shall, at such time as is prescribed, remit that amount to the Receiver General on account of the payee's tax for the year...</p></li></ul></blockquote></p></blockquote></p>] of the Act which exceeded the amounts required to be paid by instalments under subsection 156(1) the requirement to make payments by instalments no longer applies.

9 Such an exception not having been included in subsection 156(1) the appellant can succeed only if he can point to some other provision or provisions in the Act or regulations made thereunder that spells this out or from which an exception of that kind is to be necessarily inferred, and I emphasize the word necessarily. That has not been done.

10 The appellant referred the court to Gill v. Minister of National Revenue (1975), 75 D.T.C. 278 (T.R.B.)and Lalonde v. Minister of National Revenue (1982), 82 D.T.C. 1772 (T.R.B.). In these cases the appellant's employer had made deductions at source, but failed to remit the funds to the Receiver General. It was held that in the circumstances the appellants were absolved of the liability to tax to the extent of the deductions. The employers were found to be agents of the Minister of National Revenue in making the deductions. I do not think these cases assist the appellant.

11 The matter of deductions at source and of payments by instalments are different concepts and are only linked to the extent that the legislation may provide.

12 Finally the spectre of possible double taxation was raised. As will have been seen there was no double taxation involved in this case. In my opinion subsections 156(1) and 163(1), if taken alone or in conjunction with each other, cannot properly be construed as purporting to authorize double taxation. In B.S.C. Footwear Ltd. v. Ridgeway (Inspector of Taxes) (1971), [1972] A.C. 544 (U.K. H.L.)Lord Reid said at page 555: “It is a fundamental principle of income tax law that the same sum shall not be taxed twice.” If it should happen that a taxpayer has, by reason of deductions at source, or instalment payments, or both, overpaid tax, this is rectifiable by refund: subsection 164(1) of the Act.

13 The appellant was properly assessed under sections 162 and 163.1 of the Act. It follows that the appeal must be dismissed.