Date: 20020319
Docket: 2001-2238-IT-I
BETWEEN:
RAMESH K. KALIA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
__________________________________________________
For the Appellant: The Appellant himself
Counsel for the Respondent: Meghan Castle
___________________________________________________
Reasons for Judgment
(Delivered orally from the Bench at
Toronto, Ontario, on February 6, 2002)
Sarchuk J.T.C.C.
[1]
This is an appeal by Ramesh Kalia from assessments of tax
with respect to his 1989, 1990 and 1995 taxation years. In
computing income for the 1989 taxation year, the Appellant
reported employment income from Ontario Hydro in the amount of
$61,811 and claimed a business loss in the amount of $4,770. In
computing income for the 1990 taxation year, he reported
employment income from Ontario Hydro in the amount of $59,604. In
the 1995 taxation year, the Appellant received the amount of
$194,675 from Ontario Hydro as an award or agreement received by
him as a result of a settlement reached between the Appellant and
Ontario Hydro under which the parties agreed to terminate a
lawsuit. In assessing the Appellant's tax payable for the
1995 taxation year pursuant to subsection 152(7) of the Income
Tax Act, the Minister included the amount of $183,075
received from Ontario Hydro in income.
[2]
In reassessing the Appellant for the 1989 taxation year, Notice
of Reassessment thereof mailed on March 23, 1998, the Minister
disallowed business expenses in the amount of $3,583. In
reassessing the Appellant for the 1990 taxation year, Notice of
Reassessment thereof mailed on March 23, 1998, the Minister
reduced employment income reported by the Appellant from Ontario
Hydro by the amount of $16,303, which represented that portion of
the said income already included in income in 1995.
[3]
Subsequently, the Minister reassessed the Appellant for the 1989,
1990 and 1995 taxation years, concurrent Notices of Assessment
thereof mailed on June 19, 2000 which had the effect of
allowing additional business expenses in the amount of $639 in
the 1989 taxation year, allowing carrying charges in the amount
of $1,777 in the 1990 taxation year and increasing employment
income by the amount of $11,600 in the 1995 taxation year. In
addition, the reassessment to the 1995 taxation year also had the
effect of treating the payment received from Ontario Hydro in
1995 as Qualifying Retroactive Lump Sum Payment.
[4]
The Appellant's position is that:
(i)
Since the income for the years 1990 to 1994 was not carried over
to the respective years, I do not have RRSP room for these years.
My employer is committed to contributing to my pension plan for
the years in question. Revenue Canada would not allow my employer
to contribute to my pension plan because I do not have enough
RRSP room. This alone would result in a loss of retirement income
of $7,000 per year in today's dollars. This loss becomes even
more significant because due to continuing illness I have been
unable to work and contribute to CPP.
(ii)
Due to consolidation of my Federal Taxes from the years 1990 to
1994 to the year 1995, my Federal Taxes payable are higher 1995.
As a result I have been charged Federal Surtax of over $3,300 in
1995 although my income for all the years in question (1990 to
1995) is too low to trigger Federal Surtax.
(iii)
Provincial taxes were higher in 1995 than in previous years but I
end up paying higher rate of Provincial Taxes for the years 1990
to 1994 due to consolidation of Federal Taxes of these years to
1995.
(iv)
Because the provincial taxes are calculated on consolidated
Federal Taxes of the years 1990 to 1995 in 1995, I have been
charged provincial surtax of over $6,700 in 1995. Otherwise my
income in all these years is not large enough to trigger
provincial surtaxes.[1]
[5]
More importantly, a further result of the lump sum payment and
the settlement created a situation where the parties, in an
effort to provide the Appellant with the appropriate employer
pension contributions for the period August 1990 to
January 3, 1995, reached an agreement but it was subject to
Revenue Canada approval. The Minister refused to give his
approval and given the circumstances of this particular case the
result was that the Appellant did not have sufficient RRSP room
for those years. As the Appellant put it, as a further direct
result of the manner in which the Minister assessed, he suffered
a loss of retirement income.
[6]
Now that may be so. However, I am dealing with the totality of
the taxpayer's position and what we have before the Court
today is the result of the application of retroactive legislation
which swept the Appellant into the net, if I may put it that way.
However, on balance there is no question that the Minister
assessed the Appellant for the taxation year in issue correctly.
I do not propose to restate the analysis put forward by counsel
for the Respondent. I would only say that she correctly outlined
the various sections of the Act relevant to the taxability
of the lump sum payment received by Mr. Kalia. There is
nothing before me to suggest that the Minister made an error in
applying the relevant sections as he did.
[7]
The Appellant also raised the issue of fairness and the lack of
equity arising as a result of the application of those sections.
My only comment on that issue is that on the face of it, it does
appear that there may have been a certain degree of unfairness
created by the legislation, not by the Minister. However, this
Court's jurisdiction is limited to hearing appeals by
taxpayers and to determining whether or not the assessment is in
conformity with the law, that is, whether the assessment conforms
with the relevant sections of the Act. I have no authority
beyond that. If I conclude that the tax was imposed properly
pursuant to a section of the Act, no matter how unfair
that might be, I do not have the equitable jurisdiction to say to
the Minister, "Look, you may have applied the law correctly
but it is unfair and therefore I want you to re-adjust the
assessment in favour of the Appellant". I simply do not have
that authority.
[8] I
do not know whether the Minister has any right to deal with a
fairness submission with respect to anomalies such as this. I do
know that the Minister does have certain administrative authority
to consider such requests by taxpayers.
HIS
HONOUR:
Counsel, I am not sure if you can provide any more information, I
do know that the Minister has, for example, the right to waive
the payment of interest. What limits there are on the
Minister's administrative authority to do things like that, I
frankly do not know, but it is something that you may wish to
make further enquiries about Mr. Kalia. Counsel, do you have
any information that you can pass on?
MS.
CASTLE:
I don't believe that this is a circumstance that the Fairness
Committee can deal with.
HIS HONOUR: I'm
sorry?
MS.
CASTLE:
I don't believe that this is the kind of circumstance that
the Fairness Committee can deal with.
HIS
HONOUR:
I know, but the Minister's authority must come from some
statute or some --
MS.
CASTLE:
To waive interest and penalties and extend certain deadlines. But
it comes from the Income Tax Act.
HIS HONOUR: Specifically from
the Act, and there is nothing further?
MS. CASTLE: Not that
I'm aware of.
HIS
HONOUR:
I'm not sure Mr. Kalia. I frankly have never bothered
checking into it, but you may make some enquiries. You might want
to make an enquiry through your Member of Parliament because that
is the form in which administrative remedial action might be
available. I'm not saying it is because I don't know. It
might be available but this Court does not have the authority to
get involved in that sort of issue.
I have a great deal of sympathy for your position. I think it is
an awkward situation where somebody gets caught by retroactive
legislation. I won't express my views as to whether it's
fair or not, but I think you can read between the lines.
[9]
Having said all that, I think it is obvious that my conclusion is
that the appeal cannot succeed.
Signed at Ottawa, Canada, this 19th day of March, 2002.
"A.A. Sarchuk"
J.T.C.C.
COURT FILE
NO.:
2001-2238(IT)I
STYLE OF
CAUSE:
Ramesh K. Kalia and
Her Majesty the Queen
PLACE OF
HEARING:
Toronto, Ontario
DATE OF
HEARING:
February 6, 2002
REASONS FOR JUDGMENT BY: The
Honourable Judge A.A. Sarchuk
DATE OF
JUDGMENT:
February 14, 2002
APPEARANCES:
For the
Appellant:
The Appellant himself
Counsel for the
Respondent:
Meghan Castle
COUNSEL OF RECORD:
For the
Appellant:
Name:
N/A
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
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