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Citation: 2007TCC142
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Date: 20070312
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Docket: 2006-40(GST)I
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BETWEEN:
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PAUL GAGALKA,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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SUPPLEMENTAL REASONS FOR JUDGMENT
Little J.
A. FACTS
[1] The
appeal filed by the Appellant was heard by me in Vancouver, British Columbia. on August 28, 2006. The appeal concerns Goods and
Service Tax (“GST”) levied under the Excise Tax Act (the “Act”).
[2] At
the conclusion of the hearing I delivered my Reasons for Judgment. In my Reasons
for Judgment I said:
REASONS FOR JUDGMENT
(Delivered Orally in Vancouver, B.C. on August 28, 2006)
This appeal concerns an audit carried out
by officials of the Canada Revenue Agency (“CRA”) relating to the 2001, 2002,
2003 taxation years. When Ms. Kabeya, an auditor with the CRA, reviewed
the records of the Appellant, she concluded that there was some possible income
not reported for income tax purposes and also for GST purposes. We have heard
testimony from the Appellant and his brother that the Appellant has been taking
care of his father for a number of years, and especially since November 2001.
The Appellant testified that he would take
money from his father’s bank account at the Royal Bank, and use this money to
pay his father’s rent and to pay other expenses.
The Appellant said that his father received
approximately one thousand dollars per month, for the years in question, from Old
Age Security (“OAS”. The Appellant also testified that in order to buy an
automobile, he withdrew $5,500 from his personal Registered Retirement Savings
Plan (“RRSP”). The Appellant said that he paid income tax on the amount
withdrawn from the RRSP because it was withheld at source by the Royal Bank.
Having considered the testimony of the Appellant
and his brother, and the documents submitted herein, I will allow the appeal on
the basis that the Appellant will be required to establish the amounts
transferred from his father’s bank account to his account at the Vancity
Savings Credit Union (“Vancity”). The amounts that the Appellant can establish
from the father’s account to his own Vancity account will not attract GST. In
addition, I will accept the Appellant’s testimony about the transfer of the
$5,500 from his RRSP. This amount will not attract GST.
I do not fault Mrs. Kabeya for her efforts,
because she testified that she did not receive the documents that she needed to
sort out the situation while she was doing the audit. I also must say, in
conclusion, that under these circumstances, it is unfortunate that Mr. Gagalka
did not have two separate bank accounts, one for personal items and one for
business items, because it is very easy to confuse the two and it creates
complications.
The appeal will be allowed for the two
items that I mentioned. I would also mention that in making the determination
of the money transferred from the father’s bank account to his Vancity account,
Mr. Gagalka must take in mind the fact that Ms. Kabeya did recognize $2,300 as
being applicable in the category I am talking about. Any further amounts that the
Appellant can establish will not attract GST.
That is my decision. Thank you very much.
[3] When
I heard the appeal Mr. Gagalka stated that he had not been able to obtain his
father’s bank statements from the Royal Bank of Canada.
[4] By
letter dated August 30, 2006 counsel for the Respondent requested that the
Court hold a conference call with the parties to establish a deadline for the
Appellant to submit to the Respondent an itemized list of those amounts that
were transferred from his father’s bank account to his own account at Vancity along
with supporting documents.
[5] On
October 24, 2006 I held a conference call with the Appellant and counsel for
the Respondent.
[6] At
the conclusion of the conference call I issued the following Order:
The Appellant is directed to
obtain the required documents from the Royal Bank of Canada
by October 31, 2006 and to submit the documents to counsel for the Respondent
no later than November 10, 2006.
The parties are to report to
the Court no later than December 1, 2006.
[7] By
letter dated November 13, 2006 the Appellant advised the Court that he had
supplied counsel for the Respondent at the Department of Justice with a copy of
his father’s bank account at the Royal Bank of Canada for the 2001, 2002 and 2003 years.
[8] On
November 20, 2006 counsel for the Respondent wrote to the Court to advise the
Court of the current status of the appeal.
[9] In
her letter of November 20, 2006 counsel for the Respondent stated as follows:
The only matter that remains
outstanding with respect to the appeal is whether or not the deposits that were
made to the Appellant’s bank account were deposits from his father’s Old Age
Security (“OAS”) payments and therefore, would not attract GST. The Appellant testified
that it was approximately $1,000.00 a month, or $12,000.00 per year.
[Transcript of Proceedings, page 13, lines 8‑23.]
[10] Counsel for the Respondent also said in her letter:
The Respondent submits that the
documents provided do not conclusively show which withdrawals from the father’s
bank account were deposited to the Appellant’s bank account.
[11] In her letter Counsel for the Respondent concluded:
In summary, the Respondent submits
that the OAS amounts determined to not attract GST, if any, should be no more
than $1,017.21, $6,015.78 and $3,700.00 for each of 2001, 2002 and 2003,
respectively, calculated as follows:
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2001
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November 2001
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$500.00
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December 2001
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500.00
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Conceded amount
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17.21
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$1,017.21
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2002
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January to December
2002
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12 x $500 =
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$6,000.00
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Conceded amount
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15.78
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$6,015.78
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2003
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January to December
2003
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12 x $500 =
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$6,000.00
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Less: amount already
allowed
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(2,300.00)
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$3,700.00
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Total
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$10,732.99
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RRSP Amount
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5,500.00
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GRAND TOTAL
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$16,232.99
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[12] Counsel for the Respondent also said in her letter:
The Respondent respectfully asks
that the parties return to Court before Mr. Justice Little or convene
by conference call to speak to the terms of the Order prior to a final order
being issued.
[13] On February 26, 2007 I held a conference call with the parties.
[14] At the conclusion of the conference call I stated that I would review
the additional information provided by the parties and provide the parties with
my comments.
[15] I have now had an opportunity to review all of the relevant documents
that have been filed with the Court. In reviewing the statements from the Appellant’s
father’s bank account at the Royal Bank I note that the only deposits in this bank
account from January 1, 2001 to December 31, 2003 were payments made by
the Government of Canada (the OAS deposits) or monthly payments made to the
father by the Province of British Columbia of approximately $50.00 per month or
less (plus a small amount of miscellaneous interest).
[16] I have also noted that every month a cheque in the amount of $580.00
was drawn by the Appellant from the father’s bank account and deposited in the
Appellant’s account at Vancity. The Appellant’s testimony is that the cheque in
the amount of $580.00 was to cover the rent that he paid for his father. (See
transcript of August 28, 2006, page 44, line 3)
[17] There were also a number of miscellaneous cheques drawn on the
father’s bank account. The Appellant testified that the miscellaneous cheques were
drawn by him on his father’s bank account and deposited in his Vancity account.
The Appellant said that he deposited cheques from his father’s bank account to
his account on Vancity to pay for his father’s food plus other living expenses.
(See transcript of August 28, 2006, page 19, lines 17-25 and page 20, lines
1-8)
[18] During the hearing on August 28, 2006 the Appellant called his brother
Mr. Voytek Gagalka as a witness. Mr. Voytek Gagalka filed an Affidavit
which reads in part as follows:
I, Wojciech (Voytek) Gagalka, MAKE
OATH AND SAY THAT: my bother, Paul Jan Gagalka was between years 1990 and 2004
taking care of our now deceased father, Waclaw Gagalka, during which period he
was living together with us at 208-2626 St. Johns St., Port Moody, B.C.;
that particularly between the years
2000 and 2004, with our father’s full knowledge and verbal consent, my brother
solely performed all duties and responsibilities of daily managing of our
father’s personal finances, which task our father was absolutely incapable to
do on his own due of his failing health (suffering heart attacks in 2000) and
then, subsequently, suffering a stroke (in November 2001) which caused his (our
father’s) almost complete aphasia (difficulty or inability to understand and/or
communicate), requiring thus substantial effort, dedication and help for him on
the part of my brother, Paul Jan Gagalka. (Exhibit A-11)
[19] Mr. Voytek Gagalka said:
So he (i.e. the Appellant) was
taking care of his (i.e. our father’s) finances, and whatever it was necessary
to do. We arranged with out father to -- that we were paying rent at that time.
We arranged for that he was loaning money from his (i.e. the father’s) account
and transferring to his (i.e. the Appellant’s) account and the rent was paid.
And the same was done with, whatever necessary to support us food, buying food,
similar. And it was done this way. (See transcript of August 28, 2006, page 68,
lines 6-12)
(Note: Counsel for the Respondent did not ask any questions of Voytek Gagalka
following his testimony).
[20] During the conference call that was held by me with the parties on
February 26, 2007 the following exchange took place:
JUSTICE: Okay, so
the bottom line is that you’re telling me the OAS payments came into the Royal
Bank account of your father. They went out to pay the rent and to pay other
living expenses of your father.
MR. GAGALKA: That’s
correct.
JUSTICE: And they
were transferred to your VanCity account. And that was, as I understand it from
your testimony, that was the account that you used both for personal purposes
and for business purposes. Is that right?
MR. GAGALKA: That’s
correct. (transcript of February 26, 2007, page 7, lines 16-25 and page 8, line
1)
[21] At page 10 of the transcript for February 26, 2007 the following
exchange took place:
JUSTICE: Well,
that’s what I’ve said, I think. I said that it’s your position that the CRA was
incorrect in charging GST on amounts transferred to your bank account from your
father’s bank account.
MR. GAGALKA: I
agree to that, Your Honour. (lines 11-16)
B. CONCLUSION
[22] After a careful examination of all of the relevant documents that have
been filed and the sworn testimony of the parties, I have concluded that the
Minister should recognize that all of the cheques that were issued from
the Appellant’s father’s bank account at the Royal Bank of Canada and deposited
in the Appellant’s account at Vancity, from January 1, 2001 to December 31,
2003, should not be subject to GST.
[23] The Appellant’s appeal is allowed.
Signed at Vancouver, British Columbia,
this 12th day March 2007.
Little
J.
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