Madore v. The Queen, docket 97-220-IT-I (Informal Procedure)

Date: 19980331

Docket: 97-220-IT-I

BETWEEN:

GILLES MADORE,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Tardif, J.T.C.C.

[1] This is an appeal for the 1992 taxation year.

[2] It essentially relates to the amount of interest claimed from the appellant following a review of his file.

[3] The appellant argued that the interest should be cancelled since he, like a number of other people, was a victim of a project that was seemingly legitimate and consistent with the provisions of the Income Tax Act (“the Act”) and that provided those who became part of it with a tax break.

[4] Audits and investigations by the Minister of National Revenue revealed that the project in question did not meet the requirements of the Act for reasons that had nothing to do with the appellant’s intentions; he was, so to speak, a victim rather than a protagonist or architect. Moreover, no penalty was imposed on him. The Department claimed only interest from him, as it was authorized to do by law.

[5] The appellant refused to pay the interest claimed and instituted this appeal without asking the Department to cancel or reduce it.

[6] The respondent argued that under the Act, only the Department has the discretion to reduce or cancel interest. Subsection 220(3.1) reads as follows:

Waiver of penalty or interest. The Minister may at any time waive or cancel all or any portion of any penalty or interest otherwise payable under this Act by a taxpayer or partnership.

[7] The respondent, referring to several judgments, also argued that this Court has no jurisdiction to reduce or cancel the interest being claimed from the appellant.

[8] This Court’s jurisdiction in tax matters is clearly defined in section 171 of the Act:

SECTION 171: Disposal of appeal.

(1) The Tax Court of Canada may dispose of an appeal by

(a) dismissing it, or

(b) allowing it and

(i) vacating the assessment,

(ii) varying the assessment, or

(iii) referring the assessment back to the Minister for reconsideration and reassessment.

[9] A number of decisions by this Court, some of which were cited in support of the respondent’s arguments, clearly state that this Court has no jurisdiction over interest imposed by the Department.

[10] In his testimony, the appellant stated that a friend of his on whom interest had been imposed in similar circumstances had been successful in court.

[11] The judgment in question is by the Honourable Judge Jacques Pagé of the Court of Quebec, Small Claims Division, in Gilles Lemieux v. Le sous-ministre du Revenu du Québec, No. 450-32-000064-873.

[12] The Honourable Judge Pagé did rule in favour of Mr. Lemieux, the taxpayer, finding that he did not have to pay the interest being claimed (in circumstances quite similar to those of the instant case) since he had always acted in good faith and had not provided inaccurate or incomplete information. The Honourable Judge Pagé stated the following:

[TRANSLATION]

In this case, a notice of assessment was mailed to Mr. Lemieux on May 30, 1986. The additional tax was payable as of May 30, 1986, since the excess amount of tax refunded or allocated had been refunded or allocated on the basis of inaccurate or incomplete information provided not by the person (the taxpayer, Mr. Lemieux), but rather by a third party, the Daperlie company, a real estate developer and condominium builder in Mont Tremblant. In 1981, Mr. Lemieux had invested money for which he obtained a tax deduction that was supposedly valid, as long as Daperlie met its income tax obligations. However, it turned out that the company went bankrupt three years later, around 1984, and that it had not used the money various people had contributed, for which they had obtained tax deductions, to invest in real estate. The people who had invested money in Daperlie Condominium, including Mr. Lemieux, were informed of the situation by the Government and reassessed. They were no longer allowed the deduction they had claimed in good faith with the necessary papers.

For this reason, the taxpayer must pay the additional tax for 1981, but he does not have to pay a penalty for interest between 1981 and May 30, 1986, the date the notice of assessment was mailed.

[13] The Tax Court of Canada is not bound by that decision of the Small Claims Court. Moreover, the applicable legislation was the provincial Act rather than the federal Act.

[14] The appellant, relying on the judgment of the Honourable Judge Pagé, is wrongly likening a claim for interest to a sanction or penalty. In the case at bar, there is no penalty and the appellant’s good faith is not in issue; what is essentially involved is how the provisions of the Act are to be applied, and the question of good or bad faith has nothing to do with the claim for interest.

[15] In these circumstances, the appellant must understand that the judgment to which he referred is not binding on this Court. Although the facts are similar, the applicable legislation is not the same; the two departments are not subject to the same statute, since each is governed by its own.

[16] The powers granted to judges of this Court are defined in the Canadian Income Tax Act. This Court has also, on a number of occasions, explained the meaning of the provisions dealing with jurisdiction over interest.

[17] The Act provides for discretion to be exercised, but only by the Minister. The facts of this case may be what Parliament had in mind when it created that discretion; the appellant should perhaps ask the Department rather than this Court to cancel or reduce the interest.

[18] I have no authority to order cancellation of the interest, since only the Minister has that power. Nor do I see any reason not to follow the consistent line of cases holding that the Tax Court of Canada has no jurisdiction to cancel interest relating to an assessment.

[19] In these circumstances, I must set aside the Notice of Appeal on the ground that this Court has no jurisdiction.

Signed at Ottawa, Canada, this 31st day of March 1998.

“Alain Tardif”

J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]

Translation certified true on this 14th day of December 1998.

Kathryn Barnard, Revisor