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Citation: 2005TCC643
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Date: 20051003
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Docket: 2005-538(IT)I
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BETWEEN:
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NANCY ROSS,
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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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REASONS FOR JUDGMENT
Little J.
A. FACTS:
Re: 2001
[1] In the 2001 taxation year the Appellant had net income of $61,492.00.
[2] In the 2001 taxation year the income from which amounts were deducted at source was NIL.
[3] The tax payable by the Appellant for the 2001 taxation year was $10,258.00.
Re.: 2002
[4] In the 2002 taxation year the net income of the Appellant was $117,875.00.
[5] In the 2002 taxation year the income from which amounts were deducted at source was $65,245.00.
[6] The tax payable by the Appellant for the 2002 taxation year was $24,964.42.
Re.: 2003
[7] In the 2003 taxation year the net income of the Appellant was $191,911.00.
[8] In the 2003 taxation year the income from which amounts were deducted at source was $163,864.00.
[9] The tax payable by the Appellant for the 2003 taxation year was $45,492.00.
[10] In February 2003 the Minister of National Revenue (the "Minister") sent the Appellant Instalment Reminders for the 2003 taxation year. The Instalment Reminders indicated that the Appellant was required to make the following instalment payments:
March 15, 2003 $4,388.00
June 15, 2003 $4,388.00
[11] In August 2003 the Minister sent the Appellant Instalment Reminders for the 2003 taxation year indicating that the Appellant was required to make the following instalment payments:
September 15, 2003 $4,164.00
December 15, 2003 $4,164.00
[12] The Appellant made no instalment payments in respect of taxes payable for the 2003 taxation year.
B. ISSUES:
[13] The issue is whether the Appellant is obliged to pay instalment interest for the 2003 taxation year pursuant to subsection 161(2) of the Income Tax Act (the "Act").
[14] Subsection 156(1) of the Act provides that individuals (other than those whose chief source of income is from farming or fishing) shall pay tax by instalments.
[15] The tax under this provision is payable in five instalments. The first four instalments are payable on the following dates:
March 15
June 15
September 15
December 15
[16] Each instalment is equal to one-quarter of either:
1. The estimated tax payable for the year; or
2. The taxpayer's instalment base for the immediately preceding taxation year. The final instalment is the remainder of the tax as estimated under section 151 on the actual income for the year and is payable on the "balance due" date. For individuals the balance due date is April 30 of the following year.
[17] Subsection 161(4.01) of the Act reads as follows:
For the purposes of subsection 156(2) where an individual is required to pay a part or instalment of tax for a taxation year computed by reference to a method described in subsection 156(1) the individual shall be deemed to have been liable to pay, on or before each day referred to in subsection 156(1) a part of instalment computed by reference to four items:
[18] The Agent for the Appellant filed a copy of the Appellant's Pay Statement for the 2003 taxation year (Exhibit A-3).
[19] On page 24 of Exhibit A-3 (the page covering the pay period ending 2003-12-14) it is stated that the Appellant received a bonus in the amount of $38,000.00 (the bonus is referred to as STI bonus).
[20] The Pay Statement also indicates that Federal Tax in the amount of $11,795.63 was withheld for this Pay Period. Note - for most of the other Pay Periods in 2003 the amount of $1,489.65 was withheld for Federal Tax from the Appellant's salary. I have therefore concluded that the amount of $10,305.98 was withheld as Federal Tax re. the bonus of $38,000.00 paid to the Appellant.
[21] The Appellant maintains that because deductions were made at source and remitted to the Receiver General by the employer under subsection 153(1) of the Act and because these deductions exceeded the amounts required to be paid by instalments under subsection 156(1) of the Act, the requirement to make payments by instalments does not apply in this situation.
[22] A similar argument was considered by Associate Chief Judge Christie in Strain v. The Queen, [1998] 2 C.T.C. 2136. In the Strain case the issues were whether the Appellant is liable for interest under subsection 161(2) and whether the Appellant was liable to a penalty under section 163.1 of the Act. Christie A.C.J. referred to the exceptions contained in subsection 156(1) and said:
6. It will be noted that the requirement prescribed under subsection 156(1) of the Act that every individual is required to make instalment payments is subject to these exceptions:
(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 theshold 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) 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 fundament 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.
[23] I agree with the comments of Christie A.C.J. in Strain and I have concluded that the Appellant is not within any of the exceptions contained in subsection 156(1). The Appellant should have made the instalment payments as indicated by the Minister. Since the Appellant did not make the required instalment payments the Minister was correct in imposing interest under subsection 161(2) of the Act.
[24] The appeal is dismissed, without costs.
Signed at Vancouver, British Columbia, this 3rd day of October 2005.
Little J.
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