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Citation: 2004TCC757
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Date: 20041126
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Docket: 2004-1196(IT)I
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BETWEEN:
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NAVIN JOSHI,
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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
O'Connor, J.
[1] The principal issue in this appeal
relates to determining the correct amounts of deductions for the
Appellant's moving expenses in the 2001 and 2002 taxation
years. The appeal also raises several subordinate issues which
will be discussed later.
Facts
[2] The relevant facts are as
follows:
(a) the Appellant commenced work
for the Government of Ontario (the "New Work Location")
on July 16, 2001;
(b) the Appellant, his spouse and four
children moved from 30 - 40 Fairfax Court, London, Ontario
(the "Old Residence") to 3832 Coachman Circle,
Mississauga, Ontario, (the "New Residence") on August
31, 2001.
(c) The distance between the Old
Residence and the New Work Location is more than 40 kilometres
greater than the distance between the New Residence and the New
Work Location, thus meeting the requirements of the Income Tax
Act ("Act") with respect to the distance
moved.
(d) The Appellant's income at the
New Work Location during 2001 was $14,140 and during 2002 it was
$39,231.00.
(e) For the 2001 taxation year,
the Minister of National Revenue (the "Minister")
allowed the Appellant to deduct $7,960.54 in respect of moving
expenses.
(f) The Appellant claims
$25,203.21 in moving expenses.
[3] The determination of the amounts
of moving expenses to be allowed will be discussed later but I
must first analyze a preliminary issue raised by the Minister
that there can be no appeal from a nil assessment and that
therefore the appeal with respect to the 2001 year should be
quashed as the reassessment for that year is a nil
assessment.
[4] The proposition that a taxpayer
may not appeal from a nil assessment is well founded in caselaw.
In Canada v. Consumers Gas, [1987] 2 F.C. 60, the Federal
Court of Appeal ("FCA") stated at paragraph 13:
...What is put in issue on an appeal to the courts under the
Income Tax Act is the Minister's assessment. While the word
"assessment" can bear two constructions, as being
either the process by which tax is assessed or the product of
that assessment, it seems to me clear, from a reading of sections
152 to 177 of the Income Tax Act, that the word is there employed
in the second sense only. This conclusion flows in particular
from subsection 165(1) and from the well established principle
that a taxpayer can neither object to nor appeal from a nil
assessment.
[5] However, caselaw has also
enunciated various exceptions to that general proposition. In
Martens v. M.N.R., 88 DTC 1382
("Martens"), Justice Rip considered the correct
assessment of refundable investment tax credits in a nil
assessment year. The respondent argued in Martens that no
appeal lies from a nil assessment and that if the Minister and
the taxpayer dispute the determination of the refundable
investment tax credit in 1984, then in a future year, when tax is
assessed because the Minister's determination of the amount
of credits being less than that of the taxpayer results in
income, the dispute can be resolved by the Courts at that later
time. Justice Rip held at page 3 that "the Appellant
has the right under the provisions of subsection 152(1.2) to
contest the determination of the Minister by filing a Notice of
Objection in the manner provided by section 165 and, if not
satisfied with the Minister's decision in respect of the
objection, file a Notice of Appeal in the manner provided by
section 169. This the Appellant has done. He need not wait for a
future taxation year to dispute the determination".
[6] Likewise, in Joshi v.
Canada, 2003 DTC 1550, Justice Hershfield noted that the line
of nil assessment cases did not deal with tax credit issues. He
held that if there was an issue dealing with tax credits, the Tax
Court of Canada has jurisdiction.
[7] Moreover, in Aallcann
Wood Suppliers Inc. v. Canada, 94 DTC 1475, Justice Bowman
held that the determination of capital losses in a nil assessment
may be considered by the Court if they affect the taxpayer's
position in subsequent years (i.e., loss carry-forwards). He
stated at paragraph 4:
...One of the reasons for the enactment of subsection 152(1.1)
was that no appeal lies from a nil assessment. In the absence of
a binding loss determination under subsection 152(1.1), it is
open to a taxpayer to challenge the Minister's calculation of
a loss for a particular year in an appeal for another year where
the amount of the taxpayer's taxable income is affected by
the size of the loss that is available for carry-forward under
section 111. In challenging the assessment for a year in which
tax is payable on the basis that the Minister has incorrectly
ascertained the amount of a loss for a prior or subsequent year
that is available for deduction under section 111 in the
computation of the taxpayer's taxable income for the year
under appeal, the taxpayer is requesting the court to do
precisely what the appeal procedures of the Income Tax Act
contemplate: to determine the correctness of an assessment of tax
by reviewing the correctness of one or more of the constituent
elements thereof, in this case the size of a loss available from
another year. This does not involve the court's making a
determination of loss under subsection 152(1.1) or entertaining
an appeal from a nil assessment. It involves merely the
determination of the correctness of the assessment for the year
before it.
[8] In Liampat Holdings Ltd.
v. Canada, [1995] F.C.J. No. 1621, the Federal Court of
Canada - Trial Divison stated at page 6:
...I take Aallcann to mean that this Court has jurisdiction to
consider a nil assessment year where the computations from the
nil assessment year have an actual impact on another taxation
year; it does not give the Court jurisdiction to consider a nil
assessment directly.
[9] Finally, in Bruner v.
Canada 2003 FCA 54 ("Bruner"), the FCA seems
to have broadened the cases in which the Court may review a nil
assessment taxation year:
The respondent is appealing from an assessment in which there
is no amount in dispute. The provisions of the Income Tax Act
relating to assessments and appeals are mirrored in the Excise
Tax Act and we see no reason why the principles relating to
appeals from nil assessments under the Income Tax Act should not
apply to appeals under the Excise Tax Act... Consequently, a
taxpayer is not entitled to challenge an assessment where the
success of the appeal would either make no difference to the
taxpayer's liability for tax or entitlement to input tax
credits or refunds, or would increase the taxpayer's
liability for tax. When the respondent took the position that
there was no amount in dispute, the Tax Court judge should have
applied the nil assessment jurisprudence and quashed the Notice
of Appeal.
[10] In the present case, the Appellant
argued that 2001 was only a nil assessment year because the
Minister, of his own volition, applied the Appellant's
education and tuition tax credits, similar to the Minister's
action in Joshi v. Canada, supra. However, the
Respondent denied this claim, and the Respondent is correct. The
1991 year is a nil assessment year without considering the
education and the tuition tax credits.
[11] Accepting, then, that 2001 was a
'valid' nil assessment taxation year, the issue remains:
whether the taxpayer's appeal in respect of the 2001 taxation
year should be quashed. In my view, the appeal ought not to be
quashed because a determination with respect to the 2001 taxation
year impacts the Appellant's tax liability in respect of the
2002 taxation year. This is so because moving expenses are
deductible in the year in which they are incurred and in the
subsequent year.
[12] Nil assessment years are generally not
subject to the Court's review because in most cases no
practical consequence would result from the review - the taxpayer
owes no money and hence cannot be put in a superior position.
However this theory does not hold in cases such as the present
where there is a chance that a taxpayer's liability may be
affected (speaking broadly to include years subsequent to the nil
assessment year). In my opinion therefore, based on the facts of
this case, I may review the 2001 taxation year. In the present
case, to employ the language of the FCA in Bruner, the
determination as to what moving expenses were deductible in the
nil assessment year (2001) may 'make a difference to the tax
liability of the taxpayer' in 2002. As a result, this is a
proper case in which to review a nil assessment taxation
year.
[13] What is the proper amount of the moving
expense deduction? Subsection 62(1) of the Act
states:
Moving Expenses - There may be deducted in computing a
taxpayer's income for a taxation year amounts paid by the
taxpayer as or on account of moving expenses incurred in respect
of an eligible relocation, to the extent that
(a) they were not paid on the taxpayer's behalf in
respect of, in the course of or because of, the taxpayer's
office or employment;
(b) they were not deductible because of this section in
computing the taxpayer's income for the preceding taxation
year;
(c) the total of those amounts does not exceed
(i) in any case described in subparagraph (a)(i) of the
definition "eligible relocation" in
subsection 248(1), the taxpayer's income for the year
from the taxpayer's employment at a new work location or from
carrying on the business at the new work location, as the case
may be, and
(ii) in any case described in subparagraph (a)(ii) of
the definition "eligible relocation" in subsection
248(1), the total of amounts in computing the taxpayer's
income for the year because of paragraphs 56(1) and (o); and
(d) all reimbursements and allowances received by the
taxpayer in respect of those expenses are included in computing
the taxpayer's income.
Subsection 62(3) of the Act states:
Definition of "moving expenses" - In
subsection (1), "moving expenses" includes any expense
incurred as or on account of
(a) travel costs (including a reasonable amount expended
for meals and lodging), in the course of moving the taxpayer and
members of the taxpayer's household from the old residence to
the new residence,
(b) the cost to the taxpayer of transporting or storing
household effects in the course of moving from the old residence
to the new residence,
(c) the cost to the taxpayer of meals and lodging near
the old residence or the new residence for the taxpayer and
members of the taxpayer's household for a period not
exceeding 15 days,
(d) the cost to the taxpayer of cancelling the lease by
virtue of which the taxpayer was the lessee of the old
residence,
(e) the taxpayer's selling costs in respect of the
sale of the old residence,
(f) where the old residence is sold by the taxpayer or
the taxpayer's spouse as a result of the move, the cost to
the taxpayer of legal services in respect of the purchase of the
new residence and of any tax, fee or duty (other than any goods
and services tax or value-added tax) imposed on the transfer or
registration of title to the new title,
(g) interest, property taxes, insurance premiums and the
cost of heating and utilities in respect of the old residence, to
the extent of the lesser of $5,000 and the total of such expenses
of the taxpayer for the period
(i) throughout which the old residence is neither
ordinarily occupied by the taxpayer or by any other person who
ordinarily resided with the taxpayer at the old residence
immediately before the move nor rented by the taxpayer to any
other person, and
(ii) in which reasonable efforts are made to sell the
old residence, and
(h) the cost of revising legal documents to reflect the
address of the taxpayer's new residence, of replacing
drivers' licenses and non-commercial vehicle permits
(excluding any cost for vehicle insurance) and of connecting or
disconnecting utilities,
but for greater certainty, does not include costs (other than
costs referred to in paragraph (f)) incurred by the taxpayer in
respect of the acquisition of the new residence.
Subsection 248(1) defines "eligible relocation" as
follows:
"eligible relocation" means a relocation of a
taxpayer where
(a) the relocation occurs to enable the taxpayer
(i) to carry on a business or to be employed at a
location in Canada (in section 62 and this subsection referred to
as "the new work location", or
(ii) to be a student in full-time attendance enrolled in
a program at a post-secondary level at a location of a
university, college or other educational institution (in section
62 and in this subsection referred to as "the new work
location"),
(b) both the residence at which the taxpayer ordinarily
resided before the relocation (in section 62 and this subsection
referred to as "the old residence") and the residence
at which the taxpayer ordinarily resided after the relocation (in
section 62 and this subsection referred to as "the new
residence") are in Canada, and
(c) the distance between the old residence and the new
work location is not less than 40 kilometres greater than the
distance between the new residence and the new work
location...
Subsection 248(1) defines "amount" as follows:
"amount" means money, rights or things expressed in
terms of money or the value in terms of money of the right or
thing...
[14] Clearly, the Appellant's move from
his Old Residence to his New Residence is an "eligible
relocation" for the purposes of the Act. The issue,
then, is what deductions pursuant to subsection 62(1) of the
Act are to be allowed.
[15] The moving expenses claimed by the
Appellant and those allowed by the Minister of National Revenue
(the "Minister") in the October 14, 2003 reassessment
and subsequently (at and subsequent to the hearing) as well as an
additional amount allowed by this judgment are as follows:
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Claimed by Appellant
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Allowed in
October 14, 2003 reassessment
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Allowed subsequently
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Additional amount allowed by this judgment
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Packaging materials,
(storage)
$500
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328.78
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Packing and moving Household Effects:
$9,500
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NIL
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Temporary Lodging and Meals for 15 Days:
$6,715
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198.00
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Old Residence Selling Fees
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[Real Estate Commission:
$3,416.20]
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3,416.20
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[Legal
Fees:
$515.74]
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515.74
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New Residence Purchase Fees:
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[Taxes Paid for the Registration of Title:
$1,754.10]
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1,754.10
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[Execution Search Fee:
$33.00]
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33.00
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[Title Insurance Fee:$170.00]
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170.00
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[Conveyancer's Closing Fee:
$58.85]
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58.85
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[Mortgage Registration and Transfer
Fee:
$140.00]
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140.00
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[Hudac Enrolment Fee:
$598.00]
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598.00
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[Legal
Fees:
$792.87]
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792.87
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Utilities Connection Fees:
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[Hydro and Water Meter:
$642]
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642.00
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[Bell Canada Telephone:
$ 95]
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55.00
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[Rogers Cable Vision:
$ 59.95]
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59.95
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Household Travel Expenses:
$212.50
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106.25
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106.25
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Totals
$25,203.21
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7,960.54
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908.00
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106.25
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The total of the last three amounts, ie. $7,960.54 + $908 +
$106.25 is $8,974.79.
[16] The Appellant should not be allowed to
deduct $500 in respect of the first item, "Packaging
materials", with the exception of the amount allowed by the
Minister, namely, $328.78. The Appellant testified that Packaging
materials included items that a person would normally use to
store and transport household items. Although such items would
normally be deductible by virtue of sub-paragraph 62(3)(b), which
states: "the cost to the taxpayer of transporting or storing
household effects in the course of moving from the Old Residence
to the New Residence", the Appellant has failed to present
the Court with any evidence as to his actually incurring any
costs in excess of the $328.78 allowed.
[17] The Appellant seeks to deduct $9,500 in
respect of the labour provided by the Appellant's wife and
family in moving their possessions from the Old Residence to the
New Residence. The Appellant did not hire professional movers to
transport his possessions; rather, his spouse and family moved
the possessions. The Appellant describes how he arrived at the
amount of $9,500 in respect of moving and packing expenses as
follows: "...I added all the labour, the time and everything
that would have really cost my family, in the amount of $9,500
for putting together, packing and moving and unpacking in
Mississauga..." In addition, the Appellant called various
moving companies and obtained estimates from them of the cost to
move his household from the Old Residence to the New Residence.
The estimates factored into his determination that it would have
cost $9,500 to move.
[18] The Appellant provided neither his
spouse nor the other family members that helped him move any
consideration in exchange for their help. Subsection 62(1)
states that "There may be deducted in computing a
taxpayer's income for a taxation year amounts paid by
the taxpayer as or on account of moving expenses..."
[emphasis added]. "Amount" is defined in subsection
248(1) as "money, rights or things expressed in terms of
money or the value in terms of money of the right or
thing..." In the present case, the Appellant did not pay to
his spouse or family money, rights or things expressed in terms
of money.
[19] Essentially, the Appellant seeks to
ascribe a value to the time and energy exerted by his spouse and
family in moving. The Appellant implicitly argues that that the
expending of one's energy and labour, or having energy
expended on one's behalf is the equivalent, for the purposes
of deducting moving expenses under the Act, to
paying professional movers. However, section 62(1) does
not recognize imputed value as a deductible expense: it requires
an amount to be paid before a deduction may be taken. In the
present case, no money was spent, so no deduction may be
taken.
[20] With respect to Temporary Lodging and
Meals for 15 days, the Appellant seeks to deduct $6,715. Of this
amount, the Minister has allowed $198, representing the cost of
meals for six people for one day (at $33 per person). Although
subparagraph 62(3)(c) allows the deduction of meals and
lodging near the Old Residence or New Residence for the taxpayer
and members of his or her household for a period of up to 15
days, the Appellant has not produced any evidence substantiating
that he actually incurred expenses in the amount claimed. At
trial the Appellant asserted that he and his family resided with
friends near the New Residence and that he paid these friends for
the lodging and ate most meals at restaurants. However, no
receipts were produced and in my opinion the amount of $198 for
temporary lodging and meals allowed by the Minister is
correct.
[21] The Minister properly allowed the item
"Old Residence Selling Fees", to be deducted in the
full amount claimed, namely $3,931.94 (ie. $3,416.20 plus
$515.74).
[22] In respect of New Residence Purchase
Fees, the Minister has correctly allowed a full deduction.
[23] The Minister has correctly allowed the
Appellant to deduct expenses cited under Item 6, Utilities
Connection Fees in full with the exception that the Bell
Telephone amount has been reduced (in my opinion correctly) from
$95 to $55 owing to a lack of complete and adequate receipts.
[24] In my opinion the Appellant may deduct
Household Travel Expenses, in full. Section 62(3) allows the
deduction of "travel costs ... in the course of moving the
taxpayer and members of the taxpayer's household from the Old
Residence to the New Residence". The Minister allowed the
Appellant to deduct $106.25 for household travel expenses (1 car
at 42.5 cents x 250 km). The Appellant seeks to deduct $212.50,
as his household owns two vehicles. In light of the fact that the
Appellant travelled to his New Work Location prior to the rest of
his family, he should be allowed to deduct $106.25 in respect of
each car. The assumption is that he and his family travelled to
the New Work Location in separate cars. Given the evidence, I
believe that this is a reasonable assumption to make.
[25] At trial, the Appellant also mentioned
deducting the costs of tree planting, of putting a shed on his
new property, and of a driveway apron. None of these expenses are
deductible moving expenses.
[26] In the final result, the Appellant
should be allowed to deduct, for the 2001 taxation year,
$8,974.79 for moving expenses. Because this amount is less than
the income earned by the Appellant at his New Work Location in
2001 ($14,140), there is no amount to carry over to the 2002
taxation year and therefore the Appellant is not entitled to any
deductions in respect of moving expenses for the 2002 taxation
year.
[27] Moreover, the Appellant's tax
liability with respect to the 2001 taxation year remains
undisturbed - it is nil.
[28] The following subordinate issues were
also raised. The Respondent alleges that the Appellant may have
been in receipt of an allowance or reimbursement by the employer
at the New Work Location, in respect of some or all of the moving
expenses claimed. The Respondent did not put forth any evidence
on this point. Even if the Appellant did receive an allowance it
would not be directly material in this case. Subsection 62(1)
simply directs a taxpayer to include a moving allowance in
income. It does not affect the deductibility of moving expenses.
As for the possibility that the Appellant was reimbursed for some
of his moving expenses, there is no evidence before the Court to
that effect.
[29] A point raised by the Appellant was
that the Court should order the Minister to pay interest on the
late mailing of a tax rebate, unrelated to the moving expenses
issue. The Court does not have jurisdiction to order the Minister
to pay interest because the Act does not confer such
jurisdiction. Therefore any claim by the Appellant in this
respect cannot be granted.
[30] There was also some reference to
Ontario Tax Credits and related interest. It is clear that this
Court has no jurisdiction to hear an appeal with respect to
Ontario Tax Credits and cannot entertain any claim in this
respect.
[31] In conclusion:
1. The appeal in respect
of the 2001 taxation year should not be quashed as a result of it
being a nil assessment year.
2. The Appellant is
entitled to deduct moving expenses of $8,975.19 for the 2001
taxation year.
3. The Appellant is not
entitled to deduct moving expenses in respect of the 2002
taxation year.
4. The Appellant should
not be prevented from deducting a certain portion of moving
expenses because he purportedly received a moving allowance or
reimbursement from the employer at his New Work Location.
5. This Court cannot order
the Minister to pay to the Appellant interest because the
Minister was late remitting a tax refund cheque.
6. This Court has no
jurisdiction with respect to Ontario Tax Credits.
Signed at Ottawa, Canada, this 26th day of November, 2004.
O'Connor, J.
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