Date:
20090706
Docket:
T-655-08
Citation:
2009 FC 698
Ottawa,
Ontario, July 6, 2009
PRESENT:
The Honourable Max M. Teitelbaum
BETWEEN:
SERGE
CÔTÉ FAMILY TRUST
Applicant
and
ATTORNEY
GENERAL OF CANADA
Respondent
REASONS FOR JUDGMENT AND
JUDGMENT
INTRODUCTION
[1]
The
applicant requested the cancellation of a penalty imposed by the Canada Revenue
Agency for late filing of Form T2062. The Assistant Director of the Audit
Division at the Eastern Quebec Tax Services Office refused the request. The
applicant is now seeking
judicial review of that decision.
THE FACTS
[2]
The
applicant is a foreign trust established in Florida on May 23, 2000,
by Serge Côté, its sole trustee. Through a transaction performed on January 31,
2005, it disposed of assets by rollover to 6287182 Canada Inc., a Canadian
company incorporated by Mr. Côté in September 2004. That corporation is taxable
within the meaning of the Income Tax Act. The
transaction was related to a $625,000 debt as well as 710 class "A"
shares of a third party.
[3]
On
March 6, 2006, relative to that transaction, the applicant filed with the CRA
Form T2057 entitled "Election on Disposition of Property by a Taxpayer to
a Taxable Canadian Corporation" along with the rollover contract that it had
signed with the numbered company. However, it failed to file Form
T2062 entitled "Request by a Non-Resident of Canada for a Certificate of
Compliance Related to the Disposition of Taxable Canadian Property".
That was what caused the complications now before the
Court.
[4]
Pursuant
to subsection 116(3) of the Income Tax Act, every non-resident
person who disposes of any taxable Canadian property must send to the Minister,
within ten days following the disposition, a notice containing certain
prescribed information, including Form T2062. In case of failure to produce the
information prescribed by the Act, penalties are imposed under
subsection 162(7) of the Act. Those provisions read as follows:
Income Tax Act, R.S.C. 1985, c.1 (5th Supp.)
|
116.
(3) Every non-resident person who in a taxation year disposes of any taxable
Canadian property of that person […] shall, not later than 10 days after the
disposition, send to the Minister, by registered mail, a notice setting out
(a)
the name and address of the person to whom the non-resident person disposed
of the property (in this section referred to as the “purchaser”),
(b)
a description of the property sufficient to identify it, and
(c)
a statement of the proceeds of disposition of the property and the amount of
its adjusted cost base to the non-resident person immediately before the
disposition,
unless
the non-resident person has, at any time before the disposition, sent to the
Minister a notice under subsection 116(1) in respect of any proposed
disposition of that property and
(d)
the purchaser was the proposed purchaser referred to in that notice,
(e)
the estimated amount set out in that notice in accordance with paragraph
116(1)(c) is equal to or greater than the proceeds of disposition of
the property, and
(f) the amount set out in that
notice in accordance with paragraph 116(1)(d) does not exceed the
adjusted cost base to the non-resident person of the property immediately
before the disposition.
…
162.
(7) Every person (other than a registered charity) or partnership who fails
(a)
to file an information return as and when required by this Act or the
regulations, or
(b)
to comply with a duty or obligation imposed by this Act or the regulations
is
liable in respect of each such failure, except where another provision of
this Act (other than subsection 162(10) or 162(10.1) or 163(2.22)) sets out a
penalty for the failure, to a penalty equal to the greater of $100 and the
product obtained when $25 is multiplied by the number of days, not exceeding
100, during which the failure continues.
|
116.
( 3) La personne non-résidente qui dispose de son bien canadien imposable […]
au cours d’une année d’imposition est tenue d’envoyer au ministre, dans les
dix jours suivant la disposition, sous pli recommandé, un avis contenant les
renseignements suivants :
a) les nom et adresse de la
personne en faveur de qui elle a disposé du bien (appelée l’« acheteur » au
présent article);
b) une description du bien
permettant de le reconnaître;
c) un état indiquant le
produit de disposition du bien ainsi que le montant du prix de base rajusté
du bien, pour elle, immédiatement avant la disposition,
sauf
si la personne non-résidente a envoyé au ministre, à un moment donné avant la
disposition, et conformément au paragraphe (1), un avis concernant toute
disposition éventuelle de ce bien, et si, à la fois :
d) l’acheteur est l’acheteur
éventuel mentionné dans cet avis;
e) le montant estimatif
mentionné dans cet avis conformément à l’alinéa (1)c) est égal ou
supérieur au produit de disposition du bien;
f) le montant mentionné dans
cet avis conformément à l’alinéa (1)d) ne dépasse pas le prix de base
rajusté du bien, pour la personne non-résidente, immédiatement avant la
disposition
…
162. (7) Toute personne
(sauf un organisme de bienfaisance enregistré) ou société de personnes qui ne
remplit pas une déclaration de renseignements selon les modalités et dans le
délai prévus par la présente loi ou le Règlement de l’impôt sur le revenu
ou qui ne se conforme pas à une obligation imposée par la présente loi ou ce
règlement est passible, pour chaque défaut, sauf si une autre disposition de
la présente loi (sauf les paragraphes (10) et (10.1) et 163(2.22)) prévoit
une pénalité pour le défaut — d’une pénalité égale, sans être inférieure à 100
$, au produit de la multiplication de 25 $ par le nombre de jours, jusqu’à
concurrence de 100, où le défaut persiste.
|
[5]
In
October 2006, a CRA auditor noticed that the applicant still had not filed
Form T2062 regarding the transaction of January 31, 2005, and requested
that the form be filed. The applicant followed up and submitted a duly
completed Form T2062 to the CRA on November 2, 2006.
[6]
On
August 30, 2007, that is, almost a year later, the applicant received from the
CRA a Notice of Assessment requesting that it pay a $2,500.00 penalty and
interest for failing to file Form T2062 within the prescribed time limit,
in accordance with subsection 162(7) of the Act.
[7]
The
applicant then submitted a request for cancellation of the penalty alleging
confusion in regard to the obligation to file the form in question. In a letter
addressed to the CRA, dated August 30, 2007, counsel for the
applicant claimed that [Translation] "upon
reading Interpretation Bulletin 72-17R4, we had understood that filing the form
was not obligatory and that the only consequence of not filing it was that the
purchaser became responsible for the tax resulting from the transaction. Since
no tax resulted from the rollover transaction of January 31, 2005, that
consequence did not apply to us at all, so we did not file
Form T2062". He added that it was not until March 2005, that is,
after the transaction in question, that the CRA revised its Interpretation
Bulletin to say that penalties set out in subsection 162(7) of the Act will be
imposed in case of failure to file Form T2062 on time.
[8]
The
CRA first replied to the request for cancellation with a letter dated
February 13, 2008, as follows:
[Translation]
Subsection 220(3.1) of the Income
Tax Act gives the Minister the discretion to cancel all or part of the
penalties and interest payable in a case where the taxpayer was prevented from
complying with a requirement of the Income Tax Act as a result of
extraordinary circumstances beyond the taxpayer's control (flood, fire, postal
strike, serious illness or accident, serious mental distress such as death in
the immediate family).
[9]
Unsatisfied
with that response, the applicant sought to have its request reassessed. Pierre Boutin,
Assistant Director of the Audit Division, proceeded to reassess the applicant's
circumstances and allegations. In a letter dated March 27, 2008, he confirmed
the refusal to cancel the penalty and repeated that the CRA was unable to note [Translation] "any extraordinary
circumstances beyond your representative's control or any actions of the Canada
Revenue Agency that would have prevented you from fulfilling that obligation or
from complying with a requirement of the Act". The
reasonableness of that decision is at issue here.
ISSUES AND SUBMISSIONS OF THE
PARTIES
[10]
In
support of its application for judicial review, the applicant submits that [Translation] "for unknown reasons,
the Minister of National Revenue based his decision on extraordinary
circumstances, thus exercising his discretion erroneously and
unreasonably" and that [Translation] "the
Minister erred in finding that the applicant's request for relief was
inadmissible". The applicant refers to Information Circular IC 07-1, which
states that one of the times that relief from a penalty may be granted is when
the CRA's actions caused the taxpayer not to file a form as part of an
obligation to report and argues that the CRA should not have analyzed its
request based on "extraordinary circumstances", but rather on
"actions of the CRA" and the publication of administrative material
containing errors. The applicant submits that it was in fact misled by the
information in Information Circular 72-17R4. According
to the applicant, the Circular led it to believe that it was acceptable to
provide documentation equivalent to Form T2062, which it did on March 6, 2006,
by submitting a copy of the assignment agreement dated January 31, 2005, along
with Form T2057. It also claimed that the Circular in question suggested that
the taxpayer was required to file Form T2062 only when the underlying
transaction produced taxable income, which was not so in this case, because the
transfer of the applicant's assets was done by rollover pursuant to subsection
85(1) of the Act. In these circumstances, the applicant submits that its
request for cancellation of the penalty at issue was admissible and repeats
that it should have been analyzed based on "actions of the CRA" and
not "extraordinary circumstances".
[11]
In its argument, the
applicant also submitted that, in order to decide whether a penalty should be
imposed on it, the respondent should consider whether he had suffered any type
of prejudice.
[12]
After
hearing the submissions of the parties to the litigation, I am satisfied that
the respondent suffered no prejudice and that Form T2062 was filed. It is clear
that the applicant owed no taxes after filing the form.
[13]
The
respondent submits that the document entitled [Translation] "Analysis of the Application" reproduced at pages 45-47
of its file showed that the Minister's delegate had considered all the facts
relevant to the request, including the clarity of the requirements in
subsections 116(3) and 162(7) of the Act as well as the fact
that Information Circular 72-17R4 explicitly stated that non-resident vendors
are required to notify the Minister within ten days after they dispose of
taxable Canadian property.
According to the respondent, it follows that the
Assistant Director's decision is reasonable with respect to administrative law
and should not be set aside.
CONSIDERATIONS
[14]
In
regard to situations like this one, we must recall that it is not the role of a
reviewing court to reweigh the evidence. In this case,
it is clear from reading the report prepared by the CRA after the applicant's
second request for relief (pages 39–42 of the respondent's file) that all of
the arguments presented before the Court today, except for the fact that the
respondent suffered no prejudice, were duly analyzed and considered by the CRA
at the time of the second request for relief. Therefore,
the applicant's claim that its application was not analyzed based on the
"actions of the CRA" is without merit. In fact, the author of the report recommended that the
penalty be upheld precisely because the applicant's explanations that it was
led astray by Circular 72-17R4 were found unsatisfactory.
[15]
Having
reviewed Circular 72-17R4, I agree with the author of the report that nothing
in that document could reasonably lead a taxpayer in the applicant's situation
to conclude that it was not necessary to comply with the requirement set out in
subsection 116(3) of the Act.
The fact that the consequence of failure to comply
with that provision is not explicitly stated in the Circular does not justify
the applicant's actions, since the Income Tax Act itself was very clear
on that point. The applicant's position is to
equate the fact that the consequence of non-compliance with an explicit
provision of the Act was not explicitly stated in an information circular with
a misdirection. I cannot agree with that
position.
[16]
For
these reasons, I
dismiss this application for judicial review.
JUDGMENT
THE COURT ORDERS AND ADJUDGES that the application for
judicial review be dismissed without costs.
“Max M. Teitelbaum”
Certified
true translation
Margarita
Gorbounova, Translator
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